Sexpo Pty Ltd v Collective Shout Limited

THE APPLICATION 1 This is an application for preliminary discovery under r 7.23 of the Federal Court Rules 2011 (Cth) (the Rules). Relying upon that Rule, Sexpo Pty Ltd (the prospective applicant) said that it believed it may have a right to obtain relief in a claim against Collective Shout (the prospective respondent) for misleading or deceptive conduct in breach of s 18 of the Australian Consumer Law (Schedule 2 to the Competition and Consumer Act 2010 (Cth)) (the ACL). After making what it claimed were reasonable enquiries about Collective Shout's financial affairs and trading activities, Sexpo contended that it did not have sufficient information to decide whether it could establish its possible claim against Collective Shout. In particular, it contended that its claim against Collective Shout largely depended upon whether Collective Shout was acting in trade or commerce when it allegedly published two sets of representations about Sexpo on its website and on various social media platforms. Accordingly, it made this application for preliminary discovery in order to gain access to a number of documents held by Collective Shout which, it claimed, would assist it to make its decision whether to commence a proceeding to pursue its claim. Those documents include, but are not limited to: (a) Collective Shout's bank statements for the financial years 2015 - 2016; (b) Collective Shout's general ledger for the financial years 2015 - 2016; (c) any stock listing for the online store conducted by Collective Shout showing goods stocked and sold for the financial years 2015 - 2016; and (d) any written policies concerning the charging of fees or receipt of funds on account of representatives of Collective Shout speaking at events.

THE BRIEF FACTUAL CONTEXT 2 Mr Dean Williams is the General Manager of the HGC Group of Companies. He said in an affidavit made in support of this application that Sexpo Pty Ltd was a member of that group of companies. Mr Tiplady is the lawyer acting for and advising Sexpo. In an affidavit he made in support of this application, Mr Tiplady said that: (a) Sexpo "operates a health, sexuality and lifestyle expo called Sexpo. It is a consumer exhibition for adult products and services"; and (b) "Sexpo occurs around Australia and is scheduled to take place in Brisbane between 4 August 2017 and 6 April 2017 and in Melbourne between 16 November 2017 and 19 November 2017. Other shows are held annually in other capital cities in Australia and also less frequently in other locations overseas, including in New Zealand, South Africa and Europe". 3 With respect to Collective Shout, Mr Tiplady also said in his affidavit that it described itself on its website as "[A] grassroots campaigns [sic] movement against the objectification of women and the sexualisation of girls."

THE ALLEGED REPRESENTATIONS 4 The first of the two sets of representations mentioned above were described by Sexpo as the "advertising representations". Those representations were alleged to arise out of three articles that Collective Shout published on its website in late June and early July 2017 as follows: 26 June 2017 Sexpo is coming to Brisbane in August and they are bringing their ads for a live sex webcam site to our public transport! Sign the new petition calling on Queensland Premier Annastacia Palaszczuk to take urgent action! As a mum of 3, whose children use public transport for school and sporting activities, I was appalled to hear that Sexpo 2017 was advertising on public buses in Western Australia, promoting their major sponsor: a live sex webcam site. Type in this website and it takes you to a site where numerous prostitutes are advertising their live sex cam sites. Click or hover on any image and you are immediately directed to a live stream of a woman performing various sex acts. 29 June 2017 One of the most crucial issues in our petitions is the fact that Sexpo ads feature a link to a live webcamming porn site. These ads run widely on public transport, including school routes. 5 July 2017 Sexpo is advertising the link to hardcore pornography websites on billboards and public buses, including buses used on school routes. 5 Sexpo alleged that the statements made in these three articles were misleading or deceptive because: (a) the advertisements placed on buses did not contain a link to a pornographic website; and (b) the advertisements placed on billboards contained the words "MyFreeCams", but did not contain ".com", a URL reference, or a website link of any kind. 6 The second set of representations were described by Sexpo as "the child abuse representations". They were alleged to arise from the re-publication by Collective Shout of two tweets originally posted on a Twitter account conducted by Ms Melinda Liszewski in late June 2017. Those two tweets were in the following terms: (a) …"There's something really sick about people who insist on advertising live sex shows to kids. It's called grooming. Those who do it - abusers"; … (d) …"Anyone provides kids xxx porn should be Q'd by police. But when perp @SexpoAustralia we're told visit @Ad_Standards&dismissed #corruption"; 7 Ms Liszewski was a director and part-time employee of Collective Shout until November 2016, when she resigned. She was originally named as a prospective second respondent to this application. However, shortly before the hearing of the application, Sexpo stated that it no longer wished to pursue a claim against her. 8 The second set of representations were also alleged to arise from the following postings made in late June 2017 on an Instagram account conducted by Collective Shout: (a) an image containing what purported to be a quote from [Ms Liszewski] which stated, "If an adult provided a child with access to hardcore pornography, they would be under police investigation. When Sexpo advertises porn sites on school bus routes, our government refuses to act"; (b) a caption on the image which contained the following 'hashtags', "#corporatepedophilia" and "#sexpo". 9 Sexpo claimed that these statements were misleading or deceptive because they represented that it, and those associated with operating it, "were paedophiles, sexual predators or child abusers" and "had committed a serious crime". 10 It should be noted that, based on the contents of the affidavits made by Ms Liszewski and Ms McNally - the current Operations Manager for Collective Shout - and filed in support of Collective Shout's opposition to this application, there did not appear to be any dispute that the various statements attributed to Collective Shout as set out above were made and/or published by it, although there were disputes as to whether other postings made by Ms Liszewski on her Twitter account were made and/or published on behalf of Collective Shout and whether the statements set out above contained the representations alleged.

THE RIGHT TO OBTAIN RELIEF 11 The details of Sexpo's right to obtain relief against Collective Shout, insofar as those details were known to it without access to the documents it seeks by this application, were set out in a draft statement of claim which was annexed to Mr Tiplady's affidavit. For present purposes, it will suffice to set out the final three paragraphs of that document. They described: (a) at [25] a claim that Collective Shout had breached s 18 of the ACL as follows: "In the premises of the matters alleged herein, the Respondents have breached s 18 of the ACL"; (b) at [26] a claim that Sexpo had suffered loss and damage as follows: "By reason of the Respondents' breach of s 18 of the ACL, the Applicant has suffered loss and damage by way of damage to its reputation"; and (c) at [27] a claim for the following relief : The Applicant seeks an injunction pursuant to s 232 of the ACL restraining the Respondents from stating or publishing material in any forum which asserts or implies that: (a) the Applicant engages in paedophilia, predatory behaviour or child abuse, or has committed a crime in relation thereto; and (b) the Applicants (sic) advertises links to pornographic websites to children.

RULE 7.23 AND SOME PERTINENT PRINCIPLES 12 Rule 7.23 of the Rules provides: (1) A prospective applicant may apply to the Court for an order under subrule (2) if the prospective applicant: (a) reasonably believes that the prospective applicant may have the right to obtain relief in the Court from a prospective respondent whose description has been ascertained; and (b) after making reasonable inquiries, does not have sufficient information to decide whether to start a proceeding in the Court to obtain that relief; and (c) reasonably believes that: (i) the prospective respondent has or is likely to have or has had or is likely to have had in the prospective respondent's control documents directly relevant to the question whether the prospective applicant has a right to obtain the relief; and (ii) inspection of the documents by the prospective applicant would assist in making the decision. (2) If the Court is satisfied about matters mentioned in subrule (1), the Court may order the prospective respondent to give discovery to the prospective applicant of the documents of the kind mentioned in subparagraph (1)(c)(i). (Emphasis added) 13 A Full Court of this Court recently considered this Rule in Pfizer Ireland Pharmaceuticals v Samsung Bioepis AU Pty Ltd (2017) 351 ALR 103; [2017] FCAFC 193 (Pfizer). The following pertinent principles may be extracted from that judgment: (a) r 7.23 is a beneficial provision and it should be given a broad construction: at [4] per Allsop CJ and at [172(a)] per Nicholas J; (b) an application under r 7.23 should not be conducted as a mini trial: at [2] per Allsop CJ and at [119] per Perram J; (c) in an application under r 7.23, the applicant must establish that it has a subjective and reasonable belief that it may be entitled to relief and the reasonableness of that belief has to be assessed objectively: at [107] per Perram J, approving a line of earlier single judge decisions; (d) the critical question in such an application is whether the applicant "may" be entitled to the relief claimed, not whether it is so entitled: at [8] per Allsop CJ; and (e) in practical terms, a respondent to such an application is only likely to defeat an application by showing: the subjectively held belief does not exist, or there is no reasonable basis for thinking there may be a case for relief - showing the belief is contestable or even arguably wrong will not suffice: at [121] per Perram J.

THE CONTENTIONS 14 In support of this application, Sexpo contended it had met all the qualifying criteria in r 7.23. In particular, it contended that it had made the necessary "reasonable enquiries" (r 7.23(1)(b) above), that it had established it believed it may have a right to obtain relief from Collective Shout, and that it had shown that that belief was reasonable (r 7.23(1)(a) above). It also contended that it had established that the documents the subject of this application were directly relevant to the question whether it had a right to obtain relief against Collective Shout and would assist it to make its decision, specifically going to the question whether Collective Shout had acted in trade and commerce when it made the various statements constituting the alleged representations (r 7.23(1)(c) above). 15 Without elaborating the details, Collective Shout challenged almost all of Sexpo's contentions above. As well, it made a large number of other contentions, including that it had already provided sufficient information to Sexpo's lawyers to enable it to decide whether to commence proceedings; that the statements made and published by it were political commentary rather than commentary made as an industry participant and they were made without any trading or commercial relationship between it and the recipients of the statements; that Sexpo had taken the statements out of context; that the statements comprised opinions that were not devoid of a proper foundation; and that there was no evidence that Sexpo believed it had suffered any loss or damage as a result of the alleged representations. In addition, it submitted that, even if all of these contentions were rejected, the Court should not exercise its discretion to make the discovery order sought because, among other things, Collective Shout was a small organisation with limited financial resources and disclosing the documents in question to Sexpo would provide information about the personal financial affairs of its directors, staff and donors.

DID SEXPO ESTABLISH THE REQUISITE BELIEF? 16 Without reviewing them in detail, I consider that the vast majority of Collective Shout's contentions above fall into the latter category mentioned by Perram J in Pfizer above: attempting to show that Sexpo's subjective belief was contestable or arguably wrong (see [13(e)]). However, one of its numerous contentions did raise (almost in passing, it must be said) the former category described by his Honour: that Sexpo's subjectively held belief did not exist, or there was no reasonable basis for thinking there may be a case for relief. In my view, it did that with its contention concerning the lack of evidence about Sexpo having a belief that it had suffered any loss or damage. 17 It can be seen from the emphasised part of r 7.23 above (at [12]) that a pivotal factor in an application under that Rule is the prospective applicant's "right to obtain relief". This factor necessarily requires an applicant to identify what relief it seeks and what right it may have to obtain that relief. Because it will often be self-evident, identifying the relief sought will, in most cases, be relatively straightforward. However, where the kind of relief sought, for example damages, is an element of the right to obtain that relief, namely that the applicant has actually suffered loss or damage, closer consideration may be required. 18 It is well-established that damages may be awarded under s 82 of the Competition and Consumer Act 2010 (Cth) and s 236 of the ACL for harm caused to commercial reputation (see Cryeng Pty Ltd v Loyola [2011] FCA 956 at [97] per Stone J (not upset on this point on appeal: see Loyola v Cryeng Pty Ltd [2012] ATPR 42-395; [2012] FCAFC 71 at [71]) and Seafolly Pty Ltd v Madden (No 4) (2014) 320 ALR 763; [2014] FCA 980 (Seafolly) at [57] per Tracey J and the authorities cited). It is equally well-established that actual loss or damage is a necessary element of a claim under s 18 of the ACL (see Wardley Australia Ltd v The State of Western Australia (1992) 175 CLR 514 at 525 and Seafolly at [31]). 19 It follows that, in a case such as this where the loss or damage involves harm allegedly caused to Sexpo's commercial reputation by misleading or deceptive representations made in breach of s 18 of the ACL, the principles that emerge from Pfizer above mean that an appropriate person associated with Sexpo will need to provide evidence that, as a corporate entity, Sexpo reasonably holds a subjective belief that it may have actually suffered that form of harm. 20 As to who that appropriate person should be, in Poole v Australian Pacific Touring Pty Ltd [2017] FCA 424, Bromwich J observed that he or she will differ depending on the legal issues and the circumstances of each application. In particular, his Honour observed at [61] (correctly, in my respectful opinion) that: In some cases the existence of the requisite beliefs may be sufficiently established by inference, having regard to the nature of the allegations against the prospective respondent and the circumstances out of which they arise. In some other cases, the Court may consider it sufficient for evidence to be given by an authorised representative of the prospective applicant, such as a retained solicitor or appropriate corporate officer. Sometimes evidence in person from the prospective applicant may be indispensable. 21 The nature of the harm with respect to which Sexpo proposes to claim relief from Collective Shout in this case, in my view, dictates that this is an instance where the evidence must indispensably come from an officer of Sexpo, or from someone closely connected with its commercial activities, such as Mr Williams. That is to say, I do not consider this evidence relates to a subject matter that can be properly provided by Sexpo's lawyer, Mr Tiplady. In any event, even if that were not so, as appears below, I do not consider Mr Tiplady provided that evidence in his affidavit. 22 Contrary to the principle mentioned above that an application under r 7.23 should not be conducted as a mini trial, more than 500 pages of affidavit material was filed in connection with this application. Notwithstanding this vast quantity of material, only three paragraphs of it were directly devoted to the existence of Sexpo's belief about its right to obtain relief from Collective Shout. The first paragraph of those three paragraphs was contained in Mr Tiplady's affidavit, which I have already mentioned above. In that affidavit, under the heading "The Prospective Applicant reasonably believes it may have the right to obtain relief from the Prospective Respondents", Mr Tiplady said (at [22]): On the basis of the matters set out in paragraphs 15 to 22 herein, I have provided the Prospective Applicant with advice. I am instructed that the Prospective Applicant believes it has a right to obtain an injunction and/or damages against the Prospective Respondents, subject to the issue as to whether the Prospective Respondents were acting 'in trade or commerce' (discussed in more detail in paragraphs 23 to 30 herein). (Emphasis added) 23 Paragraphs [15]-[22] to which Mr Tiplady referred above contained the materials which he claimed supported the various allegations contained in the draft statement of claim annexed to his affidavit, as mentioned above. They included the Australian Securities and Investments Commission searches establishing the description and standing of the parties, the copies of the articles posted on Collective Shout's website and the postings made on its Twitter and Instagram accounts as described earlier in these reasons. Those paragraphs, and indeed the balance of the affidavit, were solely directed to the trade and commerce issue and the representations which were alleged to have caused the harm to Sexpo's commercial reputation. Nowhere in the affidavit did Mr Tiplady address the harm itself. That is, the nature of Sexpo's commercial reputation, and how the representations effected harm to it. This point of distinction is important in this case because the item that it was claimed had been harmed or damaged was the commercial reputation of a corporate entity. 24 The remaining two paragraphs appeared in the affidavit of Mr Williams, which I have already mentioned above. As the General Manager of the HGC Group of Companies, Mr Williams said that he was the person who was ultimately responsible for making the decision whether or not Sexpo would commence proceedings against Collective Shout. Concerning that decision, he said: 3. I have read and considered all of the substantive correspondence which has passed between Russells, Gilbert + Tobin and Steenhof Brothers in this matter in which various parties have expressed views on the overall prospects and merit of any substantive proceedings which may be commenced based upon the factual matters detailed in the Draft Statement of Claim. I have also had the benefit of receiving advice from Mr Tiplady and Mr Russell of counsel on the prospects and merits of any eventual proceeding. 4. Based on the above, I believe that the Applicant may have a right to obtain relief against either or both of the Prospective First and Second Respondents. It should be noted that Russells were the lawyers acting for Sexpo; and Gilbert + Tobin and Steenhof Brothers acted for Collective Shout and Ms Liszewski, respectively. 25 The passage in Mr Tiplady's affidavit emphasised above: "I am instructed that the Prospective Applicant believes it has a right to obtain an injunction and/or damages against the Prospective Respondents"; is the closest any of these three paragraphs comes to expressing a reasonable belief on Sexpo's part that it had suffered harm to its commercial reputation as a consequence of the representations allegedly made by Collective Shout. However, that passage does not, in my view, serve that purpose. Rather, it simply identifies the form of relief Sexpo may be able to obtain against Collective Shout. It does not state a belief in the existence of the harm for which that relief may provide a remedy. Moreover, that passage is based entirely on the instructions which were provided to Mr Tiplady, presumably by Mr Williams. 26 That raises the question whether Mr Williams' affidavit contains any evidence bearing on this question. In considering that affidavit, it is convenient to begin with the instructions to which Mr Tiplady refers above. Despite the fact that his affidavit was made and filed approximately four months after Mr Tiplady's affidavit, nowhere in Mr Williams' affidavit did he mention those instructions. More importantly, even if it were to be inferred from [4] of his affidavit that he did provide those instructions, his affidavit, like Mr Tiplady's affidavit, did not contain a statement to the effect that he believed Sexpo had suffered harm to its commercial reputation as a consequence of Collective Shout's alleged representations. Furthermore, no details were provided which may shed any light on that issue. For example, he provided no details of Sexpo's business and trading activities, its commercial reputation, or the manner in which he believed it may have suffered harm as a consequence of Collective Shout's alleged representations. Nor did his affidavit provide any information from which the fact of that harm could be inferred. This applies to his statement that Sexpo may have "a right to obtain relief" from Collective Shout and Ms Liszewski and his reference to the "factual matters detailed in the Draft Statement of Claim". On the former, he did not provide any information about the harm to which that relief is directed. On the latter, while [26] of that document (see at [11(b)] above) did contain a claim that Sexpo "has suffered loss and damage by way of damage to its reputation", again no information was provided about the "damage to its reputation" to which it referred. This is not to say that, even if such an inference were open to be drawn, it would, in the circumstances of this matter, suffice to satisfy Sexpo's obligation to establish its relevant reasonable belief for the purposes of r 7.23.

CONCLUSION 27 It follows from these reasons that I do not consider Sexpo has established that it held a reasonable belief that it had suffered any harm to its commercial reputation as a consequence of Collective Shout's alleged representations such that it may have a right to obtain relief in a claim against it. Sexpo's application under r 7.23 must therefore be dismissed. I will order accordingly. I certify that the preceding twenty-seven (27) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Reeves.