MindShare Communications Ltd v Orleans Investments Pty Ltd

REASONS FOR JUDGMENT 1 MindShare Communications Limited ("MindShare"), the applicant in the present proceeding, is a company incorporated in Hong Kong. For present purposes, it is sufficient to describe MindShare's business as including the buying, in bulk, of advertising time and space in the Taiwanese mass media, and the reselling of such time and space, primarily as a wholesaler (in which case the reselling is to advertising agencies), but also as a retailer (in which case the reselling is to advertisers themselves). 2 MindShare began the present proceeding by application filed on 14 December 1999. In its application, the relief which it nominated as that which it was claiming on a final basis was, in substance, injunctive relief permanently restraining the two respondents to the proceeding, Orleans Investments Pty Limited ("Orleans") and Mr Wayne Gregory Eckett, from making, whether in trade or commerce or by the telephone system, any one of four specified representations or any representations substantially the same as any one of the four specified representations. Although, in breach of O 4, par 3(1)(b) of the Federal Court Rules, the application did not specify the Act and the provision thereof on which the relief being claimed depended, it could easily be inferred that that relief was being claimed under s 80 of the Trade Practices Act 1974 (Cth) and was being claimed in respect of threatened breaches of subs 52(1) of that Act. 3 As to the business of the respondents, Mr Eckett (who is Australian) is a principal of Orleans (which is also Australian) and Orleans offers its services in (relevantly) Taiwan. Among those services is the auditing of the performance of companies like MindShare, although Orleans does offer other services as well. As to its media auditing service, Orleans offers that service both to advertising agencies and to advertisers as a means of, among other things, reducing their cost of buying advertising time and space from companies like MindShare. 4 To describe it crudely but adequately for present purposes, the combined effect, if made, of the four specified representations in respect of which MindShare claimed relief in its application would be that MindShare habitually overstated to its own customers its true cost of buying the advertising time and space which it was reselling to them, so that they then overpaid it for buying that time and space from it. It is apparent from their combined effect that, if made, the four specified representations could be of assistance in the selling by Orleans of its media auditing service. It was not suggested before me by the respondents, however, that, if made, the four specified representations could be of assistance in the selling by Orleans of any of its other services. 5 As well as claiming in its application the final relief which I have mentioned above, MindShare also sought similar relief on an interlocutory basis, pending the determination of its claim for final relief. 6 On 20 December 1999, MindShare's application for interlocutory relief came on for hearing before Hill J, who determined it on that day: see Mindshare [sic] Communications Ltd v Orleans Investments Pty Ltd [1999] FCA 1865 (unreported). 7 It appears from Hill J's reasons for judgment (see [1]) that, on the hearing of its application for interlocutory relief, MindShare did not pursue its application in respect of the first of the four specified representations, although it did do so in respect of the second, third and fourth of the four specified representations. It appears further (see [3]) that the respondents did not oppose the grant of the interlocutory relief claimed in respect of the third and fourth of the four specified representations, nor did they oppose the grant of the interlocutory relief claimed in respect of the second of the four specified representations, provided that that relief was limited to restraining them from making that representation, whether in trade or commerce or by the telephone system, to existing customers of MindShare. (In other words, the respondents wished to be free to make the second of the four specified representations, even in trade or commerce or by the telephone system, to persons who were not existing customers of MindShare.) 8 As to the second of the four specified representations, Hill J decided (see [9]) that any interlocutory relief granted with respect to it should not be limited in the manner submitted by the respondents. 9 Thus, the position, so far as the interlocutory relief claimed by MindShare was concerned, was that Hill J was prepared (conditionally) to grant that relief to MindShare in respect of the second, third and fourth of the four specified representations and in respect of any representations substantially the same as the second, third and fourth of the four specified representations. 10 Having reached that stage in his disposition of MindShare's claim for interlocutory relief, Hill J then said (at [10]), "The applicant proffers the usual undertaking as to damages, however, the respondent points out that the applicant is a company incorporated in Hong Kong carrying on business in Taiwan and that there is no evidence before me which would suggest that should ultimately the injunction be dissolved the applicant could meet from assets in Australia any damages which the respondents might suffer. The applicant responds that the applicant could provide a bank guarantee or other security acceptable to the Registry to provide security for any damages which the respondents might suffer. It is not in dispute between the parties that such a guarantee would … be sufficient to deal with the question. The issue between them is rather the amount of the security." 11 (I note the absence from Hill J's reasons for judgment of reference to any submission by (let alone evidence from) the respondents that there existed a risk that MindShare would be unable to pay any judgment for damages which might be given against it if it failed to obtain the final relief which it claimed, having obtained the interlocutory relief which it claimed. Indeed, so far as the evidence before Hill J went, that evidence rather suggested that MindShare was a large and profitable concern which would have such an ability.) 12 Hill J then dealt with the issue of the amount of the security. He began by taking an amount of $US20,800 per month, multiplying that amount by three and then treating that multiplied amount as approximating $A80,000. (His Honour had derived the $US20,800 per month amount from the terms of a consultancy agreement which had been entered into on 6 May 1998 between MindShare, on the one hand, and Orleans, on the other. That agreement, which had provided that MindShare should pay to Orleans $US20,800 per month for its consultancy services, had been terminated by MindShare on 26 July 1999. His Honour had derived the multiple of three by estimating that MindShare's claim for final relief could be heard by this Court about three months after 20 December 1999 (the date on which he was determining MindShare's claim for interlocutory relief), in other words, at about the end of March 2000.) His Honour then imposed, as a condition of the grant of the interlocutory relief claimed by MindShare that it undertake to lodge with the Court by the end of 1999 a guarantee or bond in the amount of $A80,000 as security for its undertaking as to damages. 13 In imposing the condition as to security which he did, Hill J recognised (see [14]) the paucity of evidence which he had before him on the issue of the appropriate quantum of that security. That paucity led him to say (see [13]) that, if the respondents were able to demonstrate by evidence that the amount of $A80,000 would be inadequate to deal with their damages if the interlocutory injunction were ultimately dissolved, then they would no doubt make application that that security be increased accordingly. 14 As well as granting to MindShare the interlocutory relief to which I have referred above, on the basis that it had given an undertaking as to damages and had also undertaken to lodge the security for that undertaking to which I have also referred above, Hill J also made orders for the filing and service of affidavit evidence by both sides of the record, such evidence to be complete by 21 February 2000. He then stood the matter over to 25 February 2000 for further directions before me. 15 It appears from the Court's file in the matter that (although perhaps a week late) MindShare lodged with the Court a bank guarantee in the required amount. 16 When the matter came on before me for directions on 25 February 2000, it transpired that the parties had not complied with Hill J's timetable for the filing and service of affidavits and I then gave directions extending until 24 March 2000 the time for completion of the affidavit evidence. As well, I gave directions about mutual discovery, a matter which had apparently not been raised by the parties before Hill J. At the directions hearing, the respondents also foreshadowed a possible application for further security in accordance with the comments of Hill J to which I have referred above. 17 Then, by notice of motion filed 1 March 2000 and made returnable on 10 April 2000, the respondents made the application for further security to which I have referred above. 18 That application, which was opposed by MindShare, was supported by certain affidavit evidence by Mr Eckett, which affidavit evidence was supplemented by further oral evidence given in chief by Mr Eckett. Mr Eckett was cross-examined on his affidavit and oral evidence and an e-mail written by him was admitted into evidence during his cross-examination. Apart from that e-mail, there was no evidence put forward by MindShare. 19 Before referring to the substance of the evidence on the respondents' application, I should set out a framework for its consideration. 20 If MindShare, having obtained interlocutory relief against the respondents, were to fail to obtain final relief against them, it would be fundamental to their obtaining damages from it pursuant to its undertaking as to damages that they were able to establish that any loss for which they were claiming damages had flowed from that interlocutory relief itself and not merely from the existence of the litigation in which that interlocutory relief had been granted: see, for instance, the reasons for judgment of Aickin J in Air Express Ltd v Ansett Transport Industries (Operations) Pty Ltd (1979) 146 CLR 249 at 268. Aickin J's judgment was later affirmed by the Full Court of the High Court of Australia (the various sets of reasons for judgment in the Full Court appearing in the same volume of the Commonwealth Law Reports, beginning at 309) and those members of the Full Court who affirmed Aickin J's judgment (Barwick CJ and Gibbs and Stephen JJ) also accepted the correctness of the distinction to which I have just referred. Of course, if, instead of flowing merely from the existence of the litigation in which the interlocutory relief had been granted, any loss for which the respondents were claiming damages based on MindShare's undertaking had flowed from some other cause entirely, then it would be even more obvious that that claim for damages by the respondents must fail. 21 I turn now to the substance of the evidence on the respondents' application, which evidence it is convenient to divide into a number of topics. 22 First, Mr Eckett referred in his evidence to three potential customers in Taiwan which, having been contacted by him about using Orleans' media auditing service before the grant of interlocutory relief by Hill J, had, after the grant of such interlocutory relief, declined to engage Orleans. One of those three potential customers was De Beers Hong Kong. As to it, the totality of Mr Eckett's evidence specifically related to it was that he had "received advice … that the company's previous enthusiasm for Orleans' media auditing [service proposal] had changed and De Beers was no longer interested in meeting to discuss services". The second of those three potential customers was Nike Taiwan. As to it, Mr Eckett's evidence was that he had been told, "To be honest, we only have a low level of interest in your service now. There is some doubt regarding your claims and it seems MindShare has some legal action against you. We want our name kept out of it." The third of those three potential customers was KG Telecommunications Ltd. As to it, Mr Eckett's evidence was that he had been told, "[A]pparently you have some problems with MindShare right now and we don't want to get involved". 23 Secondly, Mr Eckett mentioned in his evidence Optimum Media Direction as a potential customer in Taiwan which, having been contacted by him about using Orleans' services before the grant of interlocutory relief by Hill J, had, after the grant of such interlocutory relief, failed to engage Orleans. However, the evidence does not suggest that, like De Beers Hong Kong, Nike Taiwan and KG Telecommunications Ltd, Optimum Media Direction had been offered Orleans' media auditing service, but rather some other service(s), since Mr Eckett described Optimum Media Direction as a competitor of MindShare. As to Optimum Media Direction, Mr Eckett's evidence was merely that he had obtained no custom from it. 24 Thirdly, Mr Eckett mentioned in his evidence two potential customers in Taiwan which, I infer, he first contacted after the grant of interlocutory relief by Hill J. One of those two potential customers was Eastern Television, a cable television operator. As to it, Mr Eckett's evidence was that he had approached an officer of that enterprise to ask whether it was interested in using Orleans' services "to develop sales strategies". The response, according to Mr Eckett was, "Yes, maybe, but now is not a good time. Right now, there is a lot of talk about your legal problem with MindShare. Everybody's talking about it". The second of those two potential customers was Videoland, a group of cable television stations. As to it, Mr Eckett's evidence was (as with Eastern Television) that he had approached an officer of that enterprise to ask whether it could use Orleans' services "to develop sales strategies". In response, he was told, "Yes, perhaps, but now is not a good time…. Now is not the right time…. We should stay in touch…. [A] lot of people in the industry [are] talking about [your] legal problem with MindShare." 25 Fourthly, Mr Eckett mentioned in his evidence McDonald's Restaurants as a potential customer in Taiwan which, I infer, he first contacted after the grant of interlocutory relief by Hill J. As to it, Mr Eckett's evidence was merely that he had sought to interest it in Orleans' media auditing service, but that no custom from it had eventuated. 26 Finally, it was Mr Eckett's evidence, based on his communications with De Beers Hong Kong, Nike Taiwan and KG Telecommunications, that MindShare had been misrepresenting to potential customers of Orleans the effect of the interlocutory relief which had been granted by Hill J and, further, (as I understood his evidence) that those misrepresentations by MindShare had caused potential customers to decline to deal with him. 27 For a number of reasons, I consider that, on the evidence which I have summarised above, the respondents are not entitled to an order requiring MindShare to increase the security thus far provided by it for its undertaking as to damages. 28 First, all other things apart, I am unable to see how an inability in Orleans and Mr Eckett to make certain representations whose only function, so far as I am able to tell, would be in aid of the selling of Orleans' media auditing service could have caused potential customers such as Optimum Media Direction, Eastern Television and Videoland not to deal with Orleans, when those potential customers were not even being offered Orleans' media auditing service. 29 Secondly, as to those potential customers mentioned by Mr Eckett as ones which were being offered Orleans' media auditing service, namely, De Beers Hong Kong, Nike Taiwan, KG Telecommunications Ltd and McDonald's Restaurants, there was no evidence from the respondents demonstrating that it was an inability in Orleans and Mr Eckett to make certain representations to those potential customers in aid of the selling of Orleans' media auditing service which had caused them not to deal with Orleans. 30 Indeed, so far as the second and third of those four potential customers of Orleans' media auditing service were concerned, each, according to Mr Eckett, actually gave an explanation for not dealing with Orleans, which explanation was in substance an unwillingness to deal with Orleans merely because it was in litigation with MindShare. I see no reason to conclude that those two potential customers would have changed their respective attitudes if the respondents had been able to make to them the representations which the respondents were restrained by Hill J's orders from making. (I add (although, for the reason which I have already given, I do not consider it relevant) that the same comment may be made about Eastern Television and Videoland.) Thus, Mr Eckett's own evidence appears to establish that any loss suffered by the respondents as a result of their failing to obtain custom from those two potential customers flowed merely from the existence of the present litigation, rather than from any interlocutory relief granted in it. I see no reason to draw a different conclusion as to those potential customers of Orleans' media auditing service as to which Mr Eckett did not depose to their giving a reason for not engaging Orleans. 31 Thirdly, and in any event, it was Mr Eckett's evidence that MindShare had misrepresented to potential customers of Orleans the effect of the interlocutory relief which had been granted by Hill J and that those misrepresentations by MindShare had caused potential customers to decline to deal with Orleans. Accepting for present purposes the accuracy of that evidence, it could therefore not be said that any loss caused to the respondents in that respect had been caused by the interlocutory relief granted in the proceeding; rather, it would be said that it had been caused by MindShare's misrepresentations as to the effect of that relief. 32 It will be apparent from what I have already said that, in the circumstances, I propose to dismiss the respondents' application that MindShare be required to provide additional security for its undertaking as to damages. However, before concluding these reasons for judgment, there is another matter with which I wish to deal, which matter would, if I had not decided, for the reasons given above, to dismiss the respondents' application, have provided a sufficient reason in itself to do so. 33 In Barton v Minister for Foreign Affairs (1984) 2 FCR 463, Morling J had before him an application by the respondent that the applicant, who was ordinarily resident in the United Kingdom, be ordered to provide security for the costs of the proceeding. Morling J held that the case was one for the ordering of security for costs, but also held that the amount of that security for costs should be no more than the cost of registering and enforcing against the applicant in the United Kingdom any order for costs made against him in the Federal Court proceeding. That was because, "if the respondent goes to the expense of registering in the United Kingdom any judgment for costs he may obtain in this court, he will be in no worse position than if the applicant had been resident in Australia" (see at 469). Although he had no evidence before him as to the cost of registering and enforcing a judgment of this Court in the United Kingdom (see at 470), Morling J took the view that the most generous estimate of doing so would not exceed $A2,000 and so ordered security to be given in that amount. 34 Being unable to see any difference in principle for present purposes between security for costs, on the one hand, and security for an undertaking as to damages, on the other, and assuming also that any judgment for damages given by this Court against MindShare, based on its undertaking as to damages, would be registrable and enforceable in Hong Kong, I enquired of the parties during the hearing of the present application by the respondents: first, whether judgments for damages of this Court could actually be registered and enforced in Hong Kong, given its current political status; and, secondly, if they could, why the respondents' present security of $A80,000 would not be sufficient for that purpose. 35 As to the first of those questions, neither side of the record was in a position at the hearing to provide me with a definitive answer to it. As to the second of those questions, the respondents' response to it was that, if MindShare were to refuse to participate in any inquiry as to damages based on its undertaking as to damages, then, even if this Court's judgments for damages were generally registrable and enforceable in Hong Kong, a judgment for damages against MindShare based on its undertaking as to damages could not, because of MindShare's non-participation in the inquiry, be so registered and enforced. 36 Since reserving my decision in this matter, I have satisfied myself that the answer to the first of the two questions I asked during the hearing is in the affirmative. So much may be inferred from reg 3 of, and item 13 of the Schedule to, the Foreign Judgments Regulations 1992 (Cth) ("the Regulations"), made pursuant to subs 5(1) of the Foreign Judgments Act 1991 (Cth) ("the Act"). Regulation 3 of, and item 13 of the Schedule to, the Regulations together have the effect that Pt 2 of the Act applies to the "Hong Kong Special Administrative Region of the People's Republic of China". Item 13 was added to the Schedule to the Regulations by SR 1997 No 205 (Cth), which commenced on 13 August 1997. The enacting clause of that statutory rule stated that the Governor-General was satisfied in respect of the Hong Kong Special Administrative Region of the People's Republic of China of the matter specified in subs 5(1) of the Act. That matter is that, in the event of the benefits conferred by Pt 2 of the Act being applied to money judgments given in the superior courts of (relevantly) Hong Kong, substantial reciprocity of treatment will be assured in relation to the enforcement in Hong Kong of money judgments given in all Australian superior courts. (I should add now that SR 1997 No 205 (Cth) replaced the former item 13 in the Schedule to the Regulations, which had referred merely to "Hong Kong". That earlier version of item 13 had been inserted by Statutory Rule 1995 No 35 (Cth). The replacement of item 13 had obviously occurred as a result of the change in Hong Kong's political status as of 1 July 1997.) 37 It does not appear to me that any confirmation is needed, beyond that given by the legislation to which I have just referred, that Hong Kong does assure, in relation to the enforcement therein of money judgments given in this Court, benefits substantially the same as those conferred by Pt 2 of the Act in relation to the enforcement in Australia of money judgments given in the superior courts of Hong Kong. However, although such further confirmation is not needed, nevertheless it can be found by examining the relevant legislation of Hong Kong itself. That legislation is the Foreign Judgments (Reciprocal Enforcement) Ordinance ("the Ordinance") and the Foreign Judgments (Reciprocal Enforcement) Order ("the Order"). The Ordinance serves the same function in Hong Kong as does the Act in Australia, while the Order serves the same function in Hong Kong as do the Regulations in Australia. Paragraphs 2 and 4 of the Order, read together with Pt 1 of Sch 1 to the Order and in light of s 3(1) of the Ordinance, have the effects that the provisions of the Ordinance extend to Australia and that this Court is deemed to be a superior court of Australia. (If it were necessary to do so, evidence of the terms of the Ordinance and Order could be adduced in the present proceeding by the simple means provided for in s 174 of the Evidence Act 1995 (Cth). I have in any event satisfied myself of their terms by accessing (on 18 April 2000) , which Web page permits one to use the Hong Kong Department of Justice's Bilingual Laws Information System (BLIS). The Ordinance in its current form appears in BLIS as Chapter 319, while the Order in its current form appears as Chapter 319A.) 38 Turning now from the relevant Australian and Hong Kong legislation in the area to the jurisprudence, I note that, in DS Parklane Developments Pty Ltd v Korea First Finance Ltd (SCNSW, 20 August 1997, unreported), Santow J dealt with an application for security for costs against a Hong Kong company. Although Santow J published his reasons after the commencement of SR 1997 No 205 (Cth), he had decided the matter on 31 July 1997, before that statutory rule's commencement, so that the relevant form of the Schedule to the Regulations at the time of his decision was that which it had taken as a result of Statutory Rule 1995 No 35 (Cth). Further, Santow J's decision was made very shortly after the change in Hong Kong's political status. 39 It was that latter matter which led the party seeking security for costs before Santow J to argue that reasoning of the sort used by Morling J in Barton's Case ought not to be applied in those proceedings. It was submitted that there must be a real risk that the Hong Kong laws providing for the registration and enforcement of (relevantly) Australian superior court money judgments would not be applied in practice under the new political system, so that an order for substantial security should be made. Santow J rejected that submission, saying (at 9), "[I]t is not appropriate for this Court to ignore the existence of the reciprocal enforcement legislation in Hong Kong which is recognised by mirror Australian legislation, nor to make a finding in the absence of evidence that such law is likely to be … not enforced in actuality by the present authorities in Hong Kong." His Honour therefore refused to require the provision of any security for costs at all by the Hong Kong company. (I should add that in not requiring the provision of any security for costs, even for the cost of registering and enforcing in Hong Kong any costs order made by the court against the Hong Kong company, Santow J was acting consistently with earlier New South Wales authority governing Barton-like situations. According to that earlier authority, where the cost of registering and enforcing a judgment in another country was likely to be merely one or two thousand dollars, then the relative smallness of the amount involved did not justify the making of any order for security.) 40 If the approach taken by Santow J to the existence of a facility for registering and enforcing in Hong Kong money judgments of Australian superior courts was appropriate on 31 July 1997, as it appears to me to have been, it must be even more appropriate since the amendment to the Regulations which commenced on 13 August 1997 and has remained in force till the present day. 41 I turn now to the second question which I raised during the course of the hearing and to the respondents' response to it. It will be recalled that the respondents submitted that, if MindShare were to refuse to participate in any inquiry as to damages based on its undertaking as to damages, then a judgment for damages against MindShare based on its undertaking as to damages could not, because of MindShare's non-participation in the inquiry, be registered and enforced in Hong Kong. 42 I reject that submission. I see no reason to doubt that, if an attempt were made to register and enforce in Australia an equivalent judgment for damages obtained in, say, Hong Kong, the applicant's failure to participate in any antecedent inquiry as to damages would provide no ground for refusing to register that judgment. That would be because it had been the applicant which had first invoked the jurisdiction of the Hong Kong court and which had given an undertaking as to damages as the price of obtaining the interlocutory relief which, ex hypothesi, had caused the damage to the respondent which had led to the judgment sought to be registered and enforced (compare par 7(3)(a)(ii) of the Act). I also see no reason to doubt that the Hong Kong courts would take the same view (compare s 6(2)(ii) of the Ordinance). 43 For the reasons which I have given above, the ability of the respondents to register and enforce in Hong Kong any judgment for damages which they might obtain against MindShare based on its undertaking as to damages provides a further reason to dismiss the respondents' application that MindShare be required to provide security for its undertaking additional to that which it has already provided. 44 In the circumstances, I dismiss, with costs, the respondents' application that