Menulog Pty Ltd v TCN Channel Nine Pty Ltd

Supreme Court of NSW|2012-03-27|Before: Hislop J, Davies J

Introduction 1The plaintiff, by summons filed in this court on 16 March 2012, sought an injunction against the defendant inter alia prohibiting the broadcasting or communication to the public of a television broadcast promoted by the defendant under the name "Home delivery food con". 2The summons came on for hearing before Davies J as duty judge on 16 March 2012. The defendant, at short notice, appeared and opposed the making of the orders sought. 3Davies J granted the injunctive relief sought. He noted that the defendant may wish to argue further on an interlocutory basis that the injunction be dissolved. Accordingly he stood the matter over to the duty judge's list on 21 March 2012 to enable further consideration of that matter. 4On 21 March the matter came before me as duty judge. The defendant informed the Court that it wished to argue further on an interlocutory basis that the injunction be dissolved. The matter was stood over to 26 March for that purpose. 5On 26 March 2012 the defendant, pursuant to its notice of motion filed on that date sought that "Orders 2, 3, 4(a)-(i) of the Judgment/Order made in the proceedings on 16 March 2012 be set aside."

Background 6The business operated by the plaintiff was described by Davies J in the following terms: "4 [The plaintiff] operates an on-line business that, among other things, allows members of the public to place on-line orders for food from particular restaurants... 7 In the case of approximately 98% of the orders placed with Menulog, Menulog has direct arrangements with the restaurants which supply the ordered food. In the case of those orders, the customer places an order on the Menulog internet site for the supply of food by a particular restaurant and the restaurant is notified of the order by Menulog. The restaurant, using its own delivery service, then delivers the food ordered directly to the customer, or the customer collects the food from the restaurant (in the case of a take-away order). Menulog earns a commission per order and charges this fee to the restaurant directly. 8 In addition to having direct arrangements with restaurants, Menulog also has, to a limited extent, arrangements with businesses that provide delivery services for restaurants that do not have their own delivery service. One such business is Cuisine Courier. Cuisine Courier is the proprietor of a business called 'Cafe on Wheels'. 9 In respect of approximately 2% of orders placed with Menulog, Cuisine Courier processes the order with the restaurant, collects the order and delivers it to the customer. Menulog earns a commission per order and charges this fee to Cuisine Courier. 10 As a result of the affiliate arrangement with Cuisine Courier, Menulog lists on its website restaurants with whom Menulog has no direct contractual arrangement. Cuisine Courier provides Menulog with a list of restaurants which it purports to represent, and Menulog lists those restaurants as restaurants with which customers may place orders for the supply of food. These restaurants have a direct contractual arrangement with Cuisine Courier, and the placement of orders with restaurants is effected entirely by Cuisine Courier. Further, Menulog relies upon the information provided by Cuisine Courier as to the restaurants with which Cuisine Courier has an arrangement and from which Cuisine Courier can supply food to customers." 7His Honour noted the transcript of a promotional broadcast for the programme was in the following terms: "Tracy Grimshaw: Tomorrow night we expose an elaborate home delivery swindle. Here's a preview. Voiceover: The great home delivery switch-a-roo. [Screen text: Can you turn the camera off please] [Screen image for remainder of broadcast: Home Delivery Food Con ] Voiceover: On A Current Affair. You think you're ordering from your favourite restaurant, but your meal is really being made here. Unknown interviewee: The customers are getting ripped off. Voiceover: Even the delivery driver is part of the scam. [Pixelated image of Dan Katz] Voiceover: We bust Australia's restaurant rebel. Dan Katz:: That cannot be us Tracey Grimshaw: That story tomorrow only on ACA. Thank you for your company, goodnight." 8The only evidence before Davies J was contained in the affidavit of the plaintiff's solicitor, Mr Adelstein sworn 16 March 2012 from which the following evidence was taken. 9The first time the plaintiff knew anything about this programme or its subject matter was on 14 March at about 2:30pm when the Managing Director of the plaintiff (Mr Katz) was confronted outside his office by a male reporter, presumably from the defendant, who asked him whether it was good to rip off a small Brisbane-based family restaurant and rip off customers. 10Mr Katz said that he did not know what the reporter was referring to and asked him to explain. The reporter said that there was a restaurant called Vecchia Roma in Brisbane for whom the plaintiff was taking orders on its website but having the food delivered by a different restaurant. Mr Katz said that he had no knowledge of this restaurant or any such occurrence. He asked for the reporter's contact details so he could investigate and get back to him. Whilst this conversation was going on a cameraman was filming it, and it was the pixelated image of Mr Katz that appeared on the promotional broadcast. 11Investigations were then instituted by the plaintiff. When those investigations were completed a letter was sent by the plaintiff's solicitors to the legal department of the defendant. Davies J, in his judgment, set out the text of the letter which was dated 15 March 2012 as follows: "Dear Sir, MENULOG PTY LTD ('Menulog') We act on behalf of Menulog. We are instructed that your program intends to put to air a story about our client and events concerning a restaurant known as 'Vecchia Roma Italian Restaurant' located in Burleigh Heads Queensland. Menulog has requested us to write to explain the facts of the matter so that should the story go to air there is no confusion as to exactly what has occurred. The facts are as follows:-

Further evidence 15Additional evidence has been adduced since 16 March 2012 by the solicitors for each party. That evidence, in short, is as follows: 16Mr Arvier, a journalist with A Current Affair, on three occasions utilised the plaintiff's website to place an order by clicking a listing for Vecchia Roma. On the first occasion, after placing the order, a note appeared on the website indicating the food would be delivered by Menulog's partner, Cuisine Courier. The journalist then received a message on his telephone which stated, inter alia, Menulog order confirmed by James at Vecchia Roma. The order was delivered by a delivery person from a restaurant on the Gold Coast unrelated to Vecchia Roma. Similarly, with the second order. On the second occasion, Mr Arvier said he received a phone call from a person with an Indian phone number stating he was from Menulog and inquiring if the order had gone okay. On the third occasion Mr Arvier said he was telephoned by a person who identified himself as Marlon Segal from Cuisine Courier. Mr Segal said the driver for Vecchia Roma was unavailable and inquired if Mr Arvier would be happy for a pizza to come from another restaurant. Mr Arvier agreed and the food was supplied as arranged. 17The proprietor of the Vecchia Roma restaurant said he had operated the restaurant for approximately six years. He had not given permission to the plaintiff or Cuisine Courier to list Vecchia Roma. He apparently was not asked by the defendant if Vecchia Roma had a relationship with Café on Wheels. The menu on the website was not that of Vecchia Roma and was considerably more expensive than Vecchia Roma's. He said there had been a fire at the restaurant on about 20 July 2010. It took six months for the restaurant to be rebuilt and during that time the restaurant did not trade. It would not have sold any meals on either 31 July 2010 or 14 August 2010 by reason of the fire. The restaurant was always closed on Tuesdays and as such would not have sold a meal on Tuesday 4 October 2011. 18An order was passed to a Cuisine Courier restaurant, Cinnamon on the Park, on 9 January 2012 and a possible copy order was received from a Cuisine Courier restaurant on the same evening. 19The rough cut of the proposed broadcast was tendered. It refers to the home delivery scam, an elaborate con where customers think they are ordering food from one restaurant but actually receiving it from another, that customers and Vecchia Roma were getting ripped off, and a network of dodgy deals was being exposed. The programme posed the question of who was responsible for the scam. It depicted a pizza divided in such a way as to suggest the plaintiff and/or Cuisine Courier was in a position of equal or alternate culpability. 20The agreement between the plaintiff and Cuisine Courier Pty Limited dated 22 March 2007 was placed in evidence. It had been formally terminated by the plaintiff in March 2010 but it continued to govern the relationship. It permitted Cuisine Courier to grant the plaintiff access to its database to obtain restaurant and menu information. In practice Cuisine Courier provided to the plaintiff details of the restaurants with which it had a contractual relationship and requested that the plaintiff add them to the plaintiff's website. It was an essential part of the relationship that the plaintiff did not contact Cuisine Courier's restaurants directly to check the information or otherwise. The plaintiff relied on information provided by Cuisine Courier as to the currency of the relationship between Cuisine Courier and the restaurant and as to menu and price information. The plaintiff would pass on all online orders for Cuisine Courier's restaurants to Cuisine Courier who would then take payment, collect the order, deliver the order to the customer, and pay the restaurant and the plaintiff. Once an order was placed on the plaintiff's website for a Cuisine Courier restaurant, the system sends the order to Cuisine Courier by email and it appears in the plaintiff's password restricted interface. Cuisine Courier staff then log into the plaintiff's order processing interface to process their orders from the plaintiff's website in real time. The customer is provided with Cuisine Courier's contact number to call if there are any issues with the order. 21The plaintiff made a search of its database to identify all orders sent to Cuisine Courier between 7 June 2007 and 14 March 2012 and from those orders to identify possible copy orders, that is any orders submitted to the site within two hours of the initial order and potentially to the same customer. These orders were detected by identifying the same telephone number, same name or similar delivery address. The search revealed 44,364 orders in the period from which four anomalies were identified. Two of those anomalies appear to have been the result of orders placed by the journalist, one of the remaining anomalies concerned a restaurant Cinnamon on the Park which had been removed from the website following investigation resulting from cancelled orders and there was no information in respect of the remaining anomaly. 22A search was also run on the database to identify orders placed with Vecchia Roma from the time it was listed on the website in 2009. That search revealed 22 orders, 19 of which were completed, three of which were cancelled. A manual check for any similar orders placed on the website for another restaurant on the same night, the same telephone number, same name or similar delivery address revealed only two anomalies, namely those on 5 March 2012 and 8 March 2012 which were the orders placed by the journalist.

Determination 23It was accepted by the parties that "The ordinary rule of practice is that an application to set aside, vary or discharge an interlocutory order must be founded on a material change of circumstances since the original application was heard, or on the discovery of new material which could not reasonably have been put before the court on the hearing of the original application" - Brimaud v Honeyset Instant Print Pty Limited (1988) 217 ALR 440 at [46], Sundararajah v Teachers Federation Health Limited (No 3) [2010] NSWSC 471 at [7]. 24The plaintiff's action is in respect of the tort of injurious falsehood. Davies J identified the four elements of that tort as: (i) a false statement of or pertaining to the plaintiff's goods or business; (ii) publication of that statement by the defendant to a third person; (iii) malice on the part of the defendant; and (iv) actual damage as a consequence. Davies J concluded that each of those elements was seriously arguable on the evidence before him. The question for present determination was whether the evidence given after 16 March 2012 established that there had been a material change of circumstances such as to require that the injunction be dissolved or substantially varied. This question is considered hereunder in respect of each of the elements identified by Davies J.

A false statement of or pertaining to the plaintiff's goods or business 25The basis for the programme as presented to Davies J was a single order to one restaurant. Davies J concluded that to describe a single order to one restaurant in the language used by the defendant amounted to such a gross exaggeration as to give rise to the inference that the basis of the programme was arguably false. 26Further, it was false to suggest the plaintiff was involved in, or had knowledge of, the substitution of meals. 27Davies J held that: "Bearing in mind that in a conversation between the reporter and Mr Katz on 14 March all that was referred to was one restaurant and one order, statements such as 'an elaborate home delivery swindle', 'the great home delivery switch-a-roo', 'the customers are getting ripped off' and 'Australia's restaurant rebel' amount to such gross exaggerations of what the reporter suggested was the basis for the program can arguably be inferred to be false. Further, words such as 'swindle', 'ripped off' and 'scam' almost necessarily imply fraud and dishonesty. When one bears in mind the way the Plaintiff's business operates, and bearing in mind the detailed explanation for what was discovered about the order placed with the restaurant Vecchia Roma involving nothing more than hits on the Plaintiff's website, there is a strongly arguable case that what is contained in the promotional broadcast and, therefore, what is likely to be contained in the full broadcast, are false statements pertaining to the Plaintiff's business... ...the Plaintiff, through its website, was the passive recipient of orders placed, which orders were electronically transferred to Cuisine Courier without any knowledge on the Plaintiff's part of what happened thereafter in relation to those orders. The fact that the Plaintiff was entitled to receive a fee by virtue of its contractual arrangements with Cuisine Courier does not elevate the Plaintiff's knowledge or involvement in what happened, nor does it remotely implicate (in the commonly understood meaning of the word) the Plaintiff in any fraud, dishonesty or other turpitudinous behaviour described by the words I have mentioned." 28The defendant submitted there had been a material change as there were now, arguably, four instances of orders being placed for one restaurant and then subsequently being filled by food from another restaurant. Furthermore, there were 22 orders placed with Vecchia Roma from 2009 to the present. Nineteen orders were shown as completed, three cancelled. These included two during the period the restaurant was not functioning due to fire damage and one on a Tuesday when the restaurant did not open. There was thus evidence of an additional nineteen food substitutions. In those circumstances there was no basis to support a finding of gross exaggeration from which falsity could be inferred. 29The plaintiff submitted that in the scheme of things, where the plaintiff was generating $2 million of orders per month and dealing with thousands of orders per year, the change from one to four instances warranting explanation did not evidence a material change from the position before Davies J. The nineteen orders in relation to Vecchia Roma (excluding two which were orders placed by the journalist) did not evidence food substitution there being no copy orders save in respect of the orders placed by the journalist. 30The evidence did not establish a systematic scheme of food substitution. Even if it be assumed that the anomalies were not simply erroneous they did not reflect upon the behaviour of the plaintiff. 31The defendant also asserted that Vecchia Roma had been listed on the plaintiff's website since 2009 without its authority, the plaintiff was paid commission by Cuisine Courier and the prices on the menu were inflated. It submitted it was wrong to say the plaintiff had no knowledge of what happened to orders that went to Cuisine Courier as it had customer service representatives who called customers to whom the Cuisine Courier meals had been delivered. 32The plaintiff submitted there was evidence Vecchia Roma had contracted with Café on Wheels which had been purchased by Cuisine Courier. There was no contract between Café on Wheels and the plaintiff. The agreement between the plaintiff and Cuisine Courier entitled the plaintiff to put Cuisine Courier's restaurants on its website. Cuisine Courier provided the plaintiff with the listing and menu details for Vecchia Roma. There was no evidence the plaintiff was aware the menu price for Vecchia Roma supplied by Cuisine Courier was inflated by reference to the actual prices charged by Vecchia Roma. Knowledge on the part of the plaintiff cannot be inferred merely from the fact that it received a commission from Cuisine Courier. 33There was no evidence before Davies J that the plaintiff had been knowingly involved in food substition or that it had any reason to suspect it or be alerted to the possibility of its occurrence. That remains the position. No material change has been demonstrated.

Publication of the statement by the defendant to a third person 34It was common ground the promotional material was broadcast to third persons and the defendant intended, and intends, in the absence of an injunction, to broadcast the programme to third persons.

Malice on the part of the defendant 35Davies J held an intention to broadcast a programme in the terms of the promotional broadcast was arguably malicious by reason of what appeared to be the defendant's reckless indifference to the truth concerning the way the plaintiff operated its business, that transaction and any others that the defendant intended to rely on. If there were other transactions intended to be relied upon, the failure of the defendant to provide any information about those, including providing an advance copy of the programme to the plaintiff, could equally be said to be publishing with reckless indifference to the truth of the way the plaintiff conducted and conducts its business. If there was only the one transaction, words suggesting a continuing or systematic course of wrongful behaviour are arguably malicious. 36The defendant submitted that (a) the plaintiff's case was that the suggestion the plaintiff was involved in a scam in any way was so assuredly false that to permit any suggestion of its involvement in a scam amounted to reckless or wilful blindness as to the truth; (b) this was not the reality as there was evidence of some nineteen substitutions with Vecchia Roma, excessive prices were listed on the Vecchia Roma menu and the plaintiff was aware of Cuisine Courier's involvement in respect of Cinnamon on the Park. 37The plaintiff submitted that Davies J concluded that the intention to publish in the face of the explanations that had been given by the plaintiff was, arguably, tantamount to reckless indifference as to the truth or falsity of the statements that the defendant intended to make about the plaintiff and its business. The evidence of the plaintiff is that subsequently an audit was conducted which revealed no misconduct on the part of the plaintiff, or notice of misconduct. The defendant's maintenance of its intention to publish, in the face of that further evidence, further supports the contention that the defendant remains recklessly indifferent, to the point of wilful blindness, as to truth or falsity. The defendant's own evidence in the rough cut of the programme leads to a conclusion that it is wilfully blind to the truth or falsity of serious allegations of misconduct by the plaintiff. On any view the defendant's evidence does not establish any misconduct on the part of the plaintiff or any knowledge by the plaintiff of any food substition by its affiliate Cusine Courier. The defendant appears not to care whether there is an innocent explanation for the anomalies of the orders that were placed or if the explanation involved some misconduct, who was responsible for it. The defendant bundles together a criticism of the offence and recklessly points the finger at everyone that may have been involved. There is simply no basis on the evidence for such a broadcast. 38I accept this submission. No material change has been demonstrated.

Actual damage 39Davies J held where injunctive relief was sought to restrain a threatened publication it would be sufficient only to establish probability of actual damage. Davies J was satisfied that if this broadcast had gone to air there was a reasonable probability of actual damage to the plaintiff's business through the adverse publicity it would bring by reason of the doubt that would be placed in the minds of those who might avail themselves of the plaintiff's business in the future. The risk of irreparable damage to the plaintiff's business loomed large. 40The defendant submitted that if the plaintiff succeeded in its action it would recover damages to fully compensate it for its loss. Damages would be an adequate remedy and a continuance of the injunction should be refused. 41The plaintiff submitted there was evidence that it had been in business for over four years, the business had grown quickly, approximately doubling in size each year. The plaintiff currently received approximately $2 million of orders each month and was the market leader in the provision of on-line restaurant ordering services. The obvious inference is that damage to a business would result from trenchant criticism by one of the highest rating television shows on Channel 9. The inadequacy of damages arises because of the difficulty in quantification of damage particularly as the business was in growth mode. 42I accept the plaintiff's submission. In my opinion, it is probable that if the programme was broadcast actual damage to the plaintiff would result for which damages would be an inadequate remedy.

Balance of convenience 43Davies J held the balance of convenience favoured the grant of injunctive relief. No prejudice was argued or shown that delaying this broadcast would detrimentally affect the defendant. On the other hand, the risk of irreparable damage to the plaintiff's business loomed large. 44The defendant submitted that considerations of press freedom arise and must be taken into account in assessing the balance of convenience. There is difficulty in crafting an injunction that adequately protects the plaintiff's interest but does not impinge on the defendant's function as a national news broadcaster. 45The plaintiff submitted that the consideration advanced by the defendant was not applicable to a case of injurious falsehood. In my opinion, irrespective of whether regard is had to the defendant's function as a news broadcaster, the balance of convenience favours the continuation of the injunction.

Conclusion 46In my opinion the notice of motion filed by the defendant on 26 March 2012 should be dismissed and the defendant should pay the plaintiff's costs in relation thereto.

Orders 47The orders of the Court are:

Notice of motion filed by the defendant on 26 March 2012 dismissed.
The defendant pay the plaintiff's costs of the notice of motion.
The proceedings be listed for directions before the registrar on 9 May 2012.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 04 May 2012

At a glance

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Judgment (12 paragraphs)

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Cases Cited (2)

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