Marlbro Shelving Systems Pty Ltd v A.R.C. Engineering Pty Ltd [1983] FCA 79

IN THE FEDERAT COURT 'OF 'AUSTRALIA )

wens wees wee } " NEW SOUTT WALES" DISTRICT REGISTRY ) No. Gill of 1982

GENERAL? DIVISION )

- BETWEEN: - MARLBRO SHELVING SYSTEMS -Bte LIMITED

Applicant

- AND: - ASRC." ENGINEERING PTY. ° LIMITED

Respondent

~ CORRIGENDA

Amendments to the judgment of The Honourable Mr Justice

f2°_+ - Lockhart of 28 April, 1983: ; =~ - 1. Page 10, 3rd line should read:—

E "Although the evidence on the point is somewhat =, sparse it seems that A.R.C. Dynes..." Le a " - - --

z-. _

iW i

tw

ei:

t

Page 18, the second extract of evidence should read:-

"I just grabbed a single unit which was not a complete product and put that nut underneath our own leg....just propped up in the- photographer's studio...to typify the adjusting mechanism."

Shins 3 Sih

McdQONATLD ASSOCTATY 70 LOCXHAP? o.

CATCHWORDS

TRADE PRACTICES - Consumer protection ~- Misleading or deceptive conduct - Interchangeable coolroom shelving systems - Whether reproduction constitutes a breach of s.52 ~ Whether representation by respondent in photograph of applicant's product as respondent's product is misleading or deceptive conduct under s.52 - Confidential information - Whether confidential

information imparted during negotiations for take-over

was used by respondent.

Trade Practices Act, 1974 as amended s.52.

'

MARLBRO SHELVING SYSTEMS PTY. LIMITED v. A.R.C.

ENGINEERING PTY. LIMITED

No. Glll of 1982

LOCKHART J. SYDNEY

28 APRIL, 1983

a a

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY NO. Glill of 1982

GENERAL DIVISION ; , cs *.

BETWEEN: MARLBRO SHELVING SYSTEMS PTY. LIMITED

Applicant

. AND: A.R.C. ENGINEERING PTY. LIMITED

Respondent

ORDER

JUDGE: LOCKHART J. DATE OF ORDER: 28 APRIL, 1983

WHERE MADE: SYDNEY

THE COURT ORDERS THAT: -—

i

1. The applicant bring in short minutes of orders to give

effect to the Court's reasons for judgment.

2. The matter be stood over to Sra May 1983.

"s

) ) NEW SOUTH WALES DISTRICT REGISTRY ) NO. Glil of 1982 ) )

IN THE FEDERAL COURT OF AUSTRALIA

GENERAL DIVISION

BETWEEN: MARLBRO SHELVING SYSTEMS PTY. LIMITED

Applicant

AND: A.R-C. ENGINEERING PTY. LIMITED

Respondent

CORAM: LOCKHART J.

28 April, 1983

REASONS FOR JUDGMENT

This is a dispute between two manufacturers of shelving systems. Their products are substantially identical in erpearance, form, composition, and function. They are interchangeable. Neither manufacturer has any relevant protection for its product by registered patent, trade mark or industrial design. The applicant, Marlbro Shelving Systems Pty. Limited (to which I shall refer as "Marlbro"), is the proprietor of the registered trade mark "Marlbro" in connection with class 6 goods covering shelving, but the name "Marlbro" does not appear on the product itself and no complaint is made in these proceedings in relation to the

mark.

¢

xe

# if

.

—«

Marlbro sells its shelving system under the name "Marlbro Shelving System". The respondent, A.R.C. Engineering Pty. Limited (to which I shall refer for convenience as "A.R.C. Dynes"), sells its shelving system

under the name "A.R.C. Dynes Shelving System".

The proceedings were brought pursuant to ss. 52 and 53

of the Trade Practices Act, 1974, but Marlbro abandoned its

ease in respect of s.53. Marlbro also asserts that A.R.C. Dynes has used and is using confidential "information of Marlbro relating to its business without the consent of Marlbro, the information having been imparted by Marlbro to it during the course of discussions between them for the

take-over of Marlbro by A.R.C. Dynes which did not eventuate. -

Most of the facts are not in dispute, but there are

scme important areas of conflict.

The modular shelving system manufactured and sold by Marlbro is suitable for general storage and shelving but is

used principally for storage in cool 'rooms. The system was rt "6,

designed in about 1969 by Mr R.W.: Robinson, a director of Marlbro. Mr Robinson commenced to manufacture the shelving system in early 1970 in his ferher's garage at Peakhurst. The system wes -~manufactured and distributed by Mr kobinson

himself at first, then by his brother-in-law and himself in a4

partnership known as "Centenary Productions". After the partners moved into Larger premises in July 1974 they manufactured other products in addition to the shelving system namely, handling containers. The partnership was dissolved in June 1976 and Mr Robinson's brother-in-law continued to manufacture handling containers whilst Mr Robinson continued to manufacture the shelving system. Marlbro was then incorporated to manufacture the shelving system. It was originally known as Centenary Productions

Pty. Lamited, but changed its name to Marlbro Shelving

Systems Pty. Limited on 11 October 1979.

Since March 1973 Lawrence & Hanson Pty. Limited has distributed the Marlbro Shelving System throughout Australia. Marlbro also sells direct to end users and to cool room suppliers. Since March 1979 the Marlbro Shelving System has been manufactured and sold in Queensland by Storage Equipment

Systems in consideration of the payment of royalties to

Marlbro.

In 1979 the respondent, through its division A.R.C. Dynes, commenced to manufacture the six most commonly used

shelf sizes of the Marlbro Shelving System and Marlbro

manufactured the fourteen less commonly used sizes.

In April and May 1980 there were discussions between the parties. The participants on behalf of Marlbro were Mr Robinson and Marlbro's accountant, Mr Salter. The participants on behalf of A.R.C. Dynes were Mr Eldred its manager and Mr Reynolds, a technical sales manager of A.R.C. Dynes. The discussions related mainly to a proposal by A.R.C. Dynes to acquire the issued share capital of Marlbro, making Marlbro a division of the respondent and appointing Mr Robinson to run that division. In the course of those discussions Mr Eldred asked Mr Robinson to furnish a balance sheet of Marlbro, lists of its debtors and creditors, a cash

flow statement and estimates of sales and "future potential".

During a conversation in May 1980 in the office of A.R.C. Dynes, at which Mr Robinson, Mr Salter, Mr Eldred and

Mr Reynolds were present, Mr Robinson or Mr Salter handed to

Mr Eldred:- (a) a copy of the balance sheet of Marlbro as at 31 March 1980; (b) notes to the accounts of Marlbro from 1977 to 31

March 1980;

(c) comparative trading figures of Marlbro from the year ended 30 June 1977 to the nine months ended

31 March 1980 with projections for the year

ended 30 June 1981, giving details of sales, stock, purchases, gross profits, royalties ,

received, expenses and net profit; and

(d) a list of creditors of Marlbro as at 30 April 1980, together with certain details of their accounts and a list of debtors of Marlbro as at 30 April 1980 which gave their names and some

information as to their credit history.

It is these documents which Marlbro asserts contain

confidential information allegedly misused by A.R.C. Dynes. The contents of the documents were discussed during the May

1980 meeting.

A.R.C. Dynes decided not to go ahead with the acquisition of the shares in Marlbro, asserting that it was not prepared to pay the amount of money requested by Mr Robinson for goodwill and "potential" and that it required more "asset backing". The documents the subject of the claim for confidentiality were returned to Mr Salter on 3 June 1980. A-R.C. Dynes denies making any use of the documents or

their contents.

It is admitted that during the May 1980 meeting, before the documents were handed to Mr Eldred, Mr Salter said words to Mr Eldred to the effect that the documents were confidential and that . he should preserve their

confidentiality. It was also admitted that Mr Eldred

acknowledged that he would keep them confidential.

The parties are in dispute as to whether certain things were said during the course of the April/May 1980 discussions and as to the circumstances in which the discussions came about. Mr Eldred gave evidence that the indebtedness of Marlbro to A.R.C. Dynes arising from the manufacture of shelving by A.R.C. Dynes for Marlbro fell outside its normal trading terms of 30 days credit. Mr Eldred gave evidence that he said in effect that one way of overcoming the unsatisfactory state of Marlbro's account would be if A.R.C., Dynes a~ quired the issued share capital of Marlbro or acquired Marlbro''s business from it or formed some association with Marlbro. Marlbro strongly denied this version of events given by A.R.C. Dynes and that its account was substantially overdue. I see no useful purpose in restating the relevant evidence touching these questions. Il have considered 1t carefully and have come to the conclusion that the conversations deposed to by Mr Eldred in which he

related the possible acquisition of the share capital or

business of Marlbro or the formation of, some business

association with Marlbro to the state of Marlbro's account with A.R.C. Dynes is inherently improbable. Where the evidence of Mr Robinson conflicts with the evidence of Mr Eldred I prefer the evidence of Mr Robinson. I refer later to certain evidence of Mr Reynolds, but it is convenient at this stage to say that where his evidence conflicts with the

evidence of Mr Robinson I prefer the evidence of Mr Robinson.

However, it does not follow that I did not find Mr Eldred or Mr Reynolds reliable witnesses in some respects. I accept their evidence on certain matters. Mr Eldred gave evidence that he took no details of the customers of Marlbro

as revealed by the list of debtors and that he made no copies of the documents shown to him by Mr Robinson during the May

1980 meeting. I accept his evidence on these matters.

Development of A.R.C. Dynes Shelving System

A-R.C. Dynes carries on various businesses including

the manufacture and sale of shelving systems. It has been

engaged in this business for about 40 years but, until recently, only by fulfilling special orders from customers and generally to their own design. A.R.C. Dynes has sold its

shelving system, the subject of these proceedings, since

about February 1962.

Soon after Mr Eldred told Mr Robinson (about the middle of 1980) that A.R.C. Dynes was not going ahead with proposals to purchase the business or shares of Marlbro, Mr Robinson Made arrangements with a Queensland firm, Dyne & Company, to produce all the shelf sizes for Marlbro and to

hold them in stock at prices lower than those previously

charged by A.R.C. Dynes. This arrangement was implemented.

In about May or June 1981 Mr Reynolds spoke to Mr Robinson and said that A.R.C. Dynes wished to manufacture Marlbro shelves again and would match the price paid to the

Queensland firm. Mr Reynolds said:-

"TZ we don't get the business back we will set up in Opposition against you. A.R.C. Dynes can afford to

run at a loss on a product for a couple of years to

gain the market. You can't afford to do that. We

will get the whole market and put you out of business."

Mr Robinson said that Marlbro would, remain with the Queensland supplier. Not long after that conversation Mr Eldred and Mr Reynolds decided to manufacture the A.R.C. Dynes Shelving System. A.R.C. Dynes decided that it would enter the market of manufacturing shelf systems primarily for cool room storage as a proprietary line for a number of reasons, including the fact that it would be a profitable operation in due course and would enable full use to be made

of an expensive machine known as a Schlatta' machine which

A.R.C. Dynes had purchased in about 1978, some 12 months

before it commenced to produce some of the shelf units for Marlbro. The-machine was used by A.R.C. Dynes primarily for other purposes but it was thought by it that production of its own shelf units would enable it to reach full capacity. The machine is a somewhat sophisticated and specialised

machine for making pig mesh and other products.

The components of the A.R.C. Dynes Shelving System are made by a sub-contractor, Taren Manufacturing, except the wire shelving which is made by A.R.C. Dynes itself. Mr Reynolds was in charge of the design of the new system. He was also responsible for the pricing of the product. He and others in the organisation of A.R.C. Dynes worked out their own costings for labour, materials, etc. Working papers were produced - gome of which are in evidence - and suitable prices arrived at after allowing for the desired profit margin. A.R.C. Dynes obtained more than one sample of the Marlbro Shelving System and samples of other manufacturers' shelving systems. They were used for the purpose of producing prototypes of what became the A.R.C. Bynes Shelving System. I am satisfied that A.R.C. Dynes set out to substantially

copy the Marlbro Shelving System, and that it did copy it.

There were some delays in preparing for the manufacture of the A.R.C. Dynes Shelving System but, when these were overcome, production commenced in about February

1982. Production has expanded since then. The prices of the

10. A.R.C. Dynes Shelving System are generally substantially cheaper than those of the Marlbro Shelving System but, although the evidence on the point it seems that A.R.C. Dynes business relating to the shelving system is not yet

profitable.

In December 1981 Mr N.R. Douglas was engaged by A.R.C. Dynes as a salesman and it was his responsibility to promote the sale of the proposed shelving system. He sought to establish customers initially by telephoning people and companies listed under various headings in the "Yellow Pages" of the Sydney Telephone Directory for 1982. He got in touch with large numbers of people and on many occasions followed his telephone calls with personal visits. It was not suggested by Marlbro that Mr Douglas used any of the confidential documents handed to Mr Eldred in May 1980 or information contained therein.

: : " ras

Comparison of the two products

There are many shelving systems 'produced in Australia for various purposes. Most of them are for heavy duty storage pallet racking or general storage. MThe shelving systems of Marlbro and A.R.C. Dynes are essentially suitable for coolroom shelving. I said earlier that the two systems are substantially identical in appearance, form, composition

and function and that they are interchangeable. + No other

ll.

system is interchangeable with these two systems. The only

other shelving system that 1s relevantly similar to them is

the Mantova system, but it is different from them in certain

respects and is not interchangeable with either of them.

The differences between the two shelving systems may

be summarised as follows:-

(a)

(b)

(¢)

(d)

The Marlbro Shelving System has two shelves on each level of a unit. The A.R.C. Dynes Shelving System has one shelf on each level of a unit.

A.R.C. Dynes manufactures a double-end frame which enables continuous runs to be made of shelving at the same height. Marlbro does not produce a double-end frame as a_ standard

.compo-nt.

The Marlbro end frame has two support bars, whereas the A.R.C. Dynes' end frame has three

support bars.

The slots in the end posts cf the Marlbro frame

are slightly higher than those on the A.R.C.

Dynes' end frame.

12.

(e) The slots on the end posts of each product are the same size, except for one important difference namely, that on the Marlbro slot there is a small radius or curve at its top and bottom, whereas on the A.R.C. Bynes' slot the four corners at the top and bottom are roughly

at right angles.

There are other differences between the two prceducts,

but I have stated the major ones.

rN 7 4

A.R.C. Dynes Brochure.

Between December 1981, when Mr Bouglas was employed by A.R.C. Dynes, and February 1982 A.R.C. Dynes did not have any printed brochures available advertising its shelving system. Mr Douglas made a copy of a diagram appearing in the sales catalogue of Lawrence & Hanson Pty. Limited, tk- distributors of the Marlbro product. That diagram advertised the Marlbro product. Mr Douglas deleted 'all _ reference in the advertisement to Marlbro and substituted the name and address "A.R.C. Bynes Pty. Limited, Box 45 P.O. Kingsgrove, New South Wales." A.R.C. Bynes used this document from Lecember 1961

to mid-February 1962.

13.

Sunce it commenced production of its shelving system in about February 1982 A.R.C. Dynes has produced and circulated a brochure comprising one sheet with photographs and writing on its front and back. On its front it bears in

bold black type the words -

"A.R.C. DYNES. SHELVING SYSTEMS"

and underneath there is a black and white photograph of a complete shelving system. The photograph is reproduced for

convenience below:-~-

my

ARC. Dynes.

shelving Systems

DSS.82

"+

15.

On the back page there are four photographs: the first which appears to be a smaller scale version of the main photograph on the front, the second being of an end frame, the third showing a shelf support and the fourth showing a post with a foot inserted in it. The writing on the back of the brochure describes the general characteristics and advantages of the shelving system and its specifications. Cn both sides the name of the manufacturer, A.R.C. Dynes,

appears. No other brochures are used by A.R.C. Dynes in the

sale of 1ts+products for use in coolrooms.

Mr Robinson gave evidence that the photograph appearing on the front page of the brochure and three of the four photographs on the back depict a Marlibro shelving unit. As to the large photograph on the front page he said that it depicts two shelves on each of three levels, that Marlbro produces two shelves per level, whereas A.R.C. Dynes produces one; shelf p.- level. He said that the top slot or keyhole in the end frame depicted in the brochure 1s about haif an inch down from the top of the frame, again a characteristic of the Marlbro unit, not the A.R.C. Dynes unit, and that the brochure depicts an adjustable foot on the unit which Marlbro has been using for some years consisting of a disc about 25 millimetres in diameter with a 3 inch long thread "and on that we have a nut turned on adjustable foot pressure units within a sleeve on the vertical post." He said that he could

quite clearly see on at least two of the four legs in the

16.

photograph, the appearance of the disc and that it was a lot clearer under magnification. He referred to what he described as some "minor points" which supported his conclusion that the shelf unit depicted on the front page of the brochure was a product of Marlbro, not A.R.C. Dynes, including the

appearance of some welding and the size of the shelves.

Turning to the back page of the brochure, Mr Robinson

said that the photograph depicted in the top right hand

corner was also of a Marlbro unit. He said:-

"I have closely looked at that photo compared to the other and it appears to be exactly the same unit, and in fact taken from probably the same negative. The line of the unit and the way it is sitting and

everything is exactly the same. Therefore everything follows on as it is with the first one excepting that some of the items are a little bit harder to distinguish in the size of the photograph."

As to the right hand photograph of the. three

photographs grouped together a little below the centre of the

"ot

back page of the brochure, Mr Robinson said that 1t too was a photograph of a Marlbro unit because the radius in the top and bottom of the keyhole corresponds with the radius on the Marlbro unit and does not have the "corners nearly run square at the end of the slot" which 1s characteristic of A.R.C. Dynes' unit. Mr Robinson said that the left hand photograph of those three photographs was not manufactured by Marlbro. As to the remaining photograph in the bottom left hand corner of the back page of the brochure, Mr Robinson said that 1t

depicted a post made by Marlbro with a footing that is not

ota

17.

Marlbro, because Marlbro makes a disc and the photograph depicts a bolt. He said that the foot in fact used by A-R.C. Dynes appears to him to be "just a standard set screw, half inch width set screw" which is freely available from hardware

stores, bolt suppliers and manufacturers.

Mr Eldred and Mr Reynolds gave evidence that the brochure depicted the A.R.C. shelf unit. It was Mr Reynolds who was primarily responsible for the preparation of the brochure. It was prepared after photographs were taken by a professional photographer of shelf units and their components. One set of photographs was taken in September 1981 of a shelf unit and "oyster tray". The other set of photographs was taken in December 1981 of what the photographer's invoice described as "2 way end piece for

shelf unit. Also new shot of adjustable foot."

Mr Reynolds said that the components of the ~Lelving system depicted in the brochure were manufactured by Taren Manufacturing, A.R.C. Dynes' sub-contractor, except for the

wire shelving itself which was manufactured by A.R.C. Dynes.

He said that having given Taren Manufacturing the order to

make the end frames and cross rails, A.R.C. Dynes obtained samples of them from it which were taken to the professional photographer's studio on the two occasions in September and

December 1981. Different end frames were taken on each

occasion. He said that the footings depicted in the brochure

18.

were footings provided by Cold Forge Products, which

Manufactures footings for A.R.C. Dynes. He said that in one sequence of photographs the footings were those produced by co1a Forge Products (he must have meant the footings depicted on the main photograph on the front page of the brochure) and, in the other sequence of photographs, A.R.C. Dynes changed the system and used ordinary bolts. He could not

think of any reason for the change

"but we did have it in mind to use either system which in our offering of this product we had chosen to do from time to time. We sell it with the rceunded heads

or with the bolts, and the availability is really the

key to changing over".

He said that the foot depicted in the photograph at the bottom of the back page of the brochure is not of a Marlbro unit but was obtained from Cold Forge Preducts who

had them available as a proprietary line, and that as this

was the December series of photographs

"I just grabbed a single unit which was not a complete preduct and put that nut underneath our own leg...just propped up in the photographer's stypify the adjusting mechanism."

Later in cross-examination, Mr Reynolds said that after he gave the oral evidence to which I have just referred he spoke to Mr George, a partner of Cold Forge Products, and ascertained that Cold Forge Products only supplied footings of the type depicted in the photograph at the bottom of the back page of the brochure to A.R.C. Bynes

following the placement cf its first order with them in

19.

August 1982. He conceded that these footings were "not a

proprietary line as such; but you can purchase them readily

if you have got a suitable production quantity." He agreed that A.R.C. Dynes did not have a "suitable production quantity" in 1981 and that A.R.C. Dynes did not have Cold Forge Products manufactured for them in August or September 1981. He then said that he thought it was a reasonable

assumption that the footings in the relevant photograph were

those produced by A.R.C. Dynes.

Mr George was called by counsel for Marlbro and he confirmed that Cold Forge Products had not supplied A.R.C. Dynes with any order for footings before August 1982. He said that he could not identify anything appearing on either page of the brochure as being manufactured by Cold Forge

Products, although the footings could be from their stock

'

items.

Mr Reynolds did not impress' me as a reliable witness on matters relating to the brochure including the photographs depicted therein. It is, of course, possible that Mr

Reynolds did not intend to deliberately portray the Marlbro

product in the brochure and that he simply took from Taren Manufacturing what he assumed were components for the A.R.C. Dynes product. No evidence was called from any representative of Taren Manufacturing, notwithstanding that

the assertion that the brochure depicted photographs of, the

20.

Marlbro product was always part of Marlbro"s case, and A.R.C. Dynes had been on notice of this assertion well before the trial. This was alleged in the points of claim and in Mr Robinson's affidavit of 11 June 1982. No cogent evidence was adduced to rebut the evidence of Mr Robinson as to his reasons for the conclusion that, the brochure depicted the Marlbro product in all but one photograph of the five. My own observation of the brochure and the points of similarity mentioned by Mr Robinson confirm the accuracy of his evidence. It must also be remembered that at'all relevant

times at least one sample of the Marlbro product was in the

possession of A.R.C. Dynes or Taren Manufacturing.

Mr Eldred gave some general evidence that the photographs reproduced in the brochure were of A.R.C. Dynes' product. In my view the evidence of Mr Eldred concerning the brochure was unsatisfactory. However, in fairness to him he did not impress, me as having an first hand knowledge of how"

the brochure came to be prepared.

IT am satisfied that the brochure produced by A.R.c. Bynes and circulated and used by it since February 1982

depicts on the front page a photograph of a Marlbro unit and

on the back page photographs of a Marlbro unit or of its Ce

components except in the case of the photograph on the left hand side of the middle of the back page and the bolt

depicted in the bottom photograph.

2l.

Section 52

Marlbro asserts that A.R.C. Dynes has engaged and is engaging in conduct that is misleading or deceptive or 1s likely to mislead or deceive in contravention of s.52 of the Act. The conduct relied on by Marlbro is the manufacture and sale by A.R.C. Dynes of its shelving system without distinguishing it' £rom Marlbro's Shelving System. Marlbro does not complain of the fact that the A.R.C. Dynes Shelving System is substantially identical with the Marlbro system, but points to the substantial identity as facilitating the likelihood of confusion in the minds of the public unless the two products are distinguished. Marlbro says that it 1s for

A.R.C. Dynes to distinguish its product from the Marlbro shelving system because Marlbro was established in the field of manufacturing and selling shelving systems essentially for use in coolroom storage for years before tk: A.R.C. Dynes product came on the market in circumstances where it was deliberately copied from the Marlbro system and for the

purpose of making the two systems interchangeable.

Marlbro asserts a separate contravention of s.52 namely, the use by A.R.C. Bynes of the photographic representations of the Marlbro Shelving System on the brochure, produced and distributed to advertise A.R.C. Lynes'

product.

22.

The design of the Marlbro Shelving System was not

registered under the Designs Act 1906 (Cth). Marlbro acquired

no statutory monopoly in the manufacture and sale of shelving

systems of the Marlbro design. It acquired no right to

exclude others from manufacturing shelving systems of the Marlbro design. A.R.C. Dynes was free to apply the design of

:- the Marlbro Shelving System to shelving systems of its own

manufacture. A manufacturer is free to copy the product of another even if that product has been successful and for the purpose of taking advantage of an expanding market for products of that kind, without infringing s.52. These principles were established by the High Court in Parkdale

Custom Built Furniture Pty. Limited v. Puxu Pty. Limited (1982) 42 A.L.R. 1.

In my opinion A.R.C. Dynes was free to 'copy the Marlbro Shelving System to take advantage of the available market for a shelving system of that kind. Cf course, A.R.C. Dynes would not be free to pass off its shelving system as the Marlbro Shelving System and there is no evidence that it did so. Indeed, Marlbro does not assert that A.R.C. Dynes is

passing off its product as the Marlbro product.

The real question is whether any of the conduct of A.R.C. Dynes constitutes a misrepresentation to consumers. That 1s the only basis upon which Marlbro could successfully assert a breach of s.52 by reason of A.R.C. " Dynes'

manufacture and sale of its shelving system.

tomy

23.

Evidence that some one has in fact been misled is admissible and may be persuasive but it is not determinative

of the question. It is for the court to determine the

question of misleading or deceptive conduct for itself:

Hornsby Building Information Centre Pty. Limited v. Sydney Building Information Centre Limited (1978) 140 C.L.R. 216;

Taco Company of Australia Inc. v. Taco Beil Pty. Limited (1982) 42 A.L.R. 177; Parkdale v- Puxu (supra).

Counsel for A.R.C. Dynes read an affidavit of a Mr M.W. Wainwright who had an interest in the Pier One Tavern in the Pier One complex at Walsh Bay, Sydney. Marlbro shelving was installed for him in the Pier One Tavern kitchen coolroom early in March 1982. In April 1982 he decided that the tavern needed more shelving for the beer coolroon. He telephoned several manufacturers of coolroom shelving and asked them to send him information about their products. The only company from which he received a reply was A.R.C. Dynes which sent a salesman to see him about two days later. The salesman showed him a brochure illustrating the A.R.C. Dynes shelving and quoted him prices to supply it. The brochure 1s the same brochure mentioned earlier. Mr Wainwright chose to purchase A.R.C. LDynes' shelving because

the price was lower than the price he had previously paid for

the Marlbro shelving. He swore that he did not believe at

any time that the shelving which he purchased from A.R.C.

24.

Dynes was the shelving manufactured by Marlbro, although he

knew and was fully aware that the shelving manufactured by

A.R.C. Dynes and by Marlbro are similar. He swore that the A.R.C. Dynes salesman did not represent to him that his product was that of Marlbro or that»it'was in any way related

to it.

Mr Wainwright was not cross-examined. I find Mr Wainwright's evidence helpful in resolving the question whether any misrepresentation was made by A.R.C. Dynes because the evidence of Mr Wainwright accords with what I would expect to find from any reasonable member of the

public. : -

'Counsel for Marlbro elicited some evidence from Mr Robinson in chief to the effect that Marlbro received an order from Mr Wainwright towards the end of 1982 for two

additional levels to."srit" a Marlbro shelving unit. Mr

'

Robinson went to the Pier One Tavern, taking two levels with him, and was directed to the low temperature coolroom off the kitchen, where he saw some Marlibro shelving and some A.R.C Dynes' shelving. He said that the additional Maribro shelves were ordered from him to supplement' the ALR.C. Bynes shelving. He said that he installed the Marlbro shelving and it fitted precisely with the A.R.C. Dynes shelving. He spoke to Mr Wainwright on the telephone from the tavern before

installing the shelves because "I did not intend to put the

25.

shelves in that unit until he was quite aware that he in fact

had made an error in thinking that the unit he ordered for was Marlbro shelving and not A-R.C. Dynes'unit." He told Mr Wainwright that the unit was in fact an A.R.C. Dynes unit and not a Marlbro unit. Counsel for Marlbro sought to use this

evidence to found an argument that Mr Wainwright was misled or confused between the two systems of shelving. In my view this evidence does not support the submission and cannot found an argument that Mr Wainwright was misled in any way.

There are many boltless shelving systems manufactured

and sold in Australia for a variety of purposes. Many of the

features and some of the specifications of these systems are

similar. Modular shelving system have been in use for many years for a variety of storage purposes, though not generally in coolrooms, but their use in coolrooms is essentially an

extension of the general principlé of mcdular:«shelving.

Marlbro has no monopoly in its shelving systems.

A.R.C. Dynes has simply reproduced that system. The interchangeability of the two products is beneficial to the public. Indeed, the evidence of Mr Robinson as to Marlbro's sale to Mr Wainwright of the Marlbro shelving system late

last year shows that the sale would not have been made unless

Marlbro was interchangeable with ACR.C. Dynes.

26.

Counsel for Marlbro conceded that if A.R.C. Dynes had distinguished its product from Marlbro by ensuring that it bore the name "A.R.C. Dynes" no complaint could be made. There are cases, of course, where by distinguishing one product from another, any possibility of misleading or

deceptive conduct may be eliminated or reduced, but that is

not this case. There is no room for the suggestion that a

na .

member of the public, on seeing the Marlbro Shelving System, would assume that it was any particular system. A member of the public upon seeing either of the subject shelving systems would, I think, simply regard them as shelving systems without associating them with any particular manufacturer or source of origin. The conduct of A.R.C. Dynes in respect of

its shelving system impugned by Marlbro does not constitute

any misrepresentation and is not a breach of s.52.

I turn to the brochure. I have already held that the' photograph on the front page of the brochure and three of the photographs on the back page are representations of the Marlbro Shelving System, except for the adjustable bolt in the bottom photograph on the back page. The brochure represents that the articles depicted in the photographs are A.R.C. Dynes Shelving Systems. 'This is untrue and in my view is a misrepresentation of the true facts. It matters not that only a discerning or expert eye could readily see that

the photographs depict the Marlbro Shelving rather than the

' 27.

A.R.C. Dynes Shelving. Nor does it matter that, because the

two systems are interchangeable, no false representation 1s conveyed as to the use or function of the shelving system depicted in the brochure. What is misleading or deceptive is that a member of the public, upon seeing the brochure, would necessarily assume that what he is observing is what the printed matter in the brochure says it is namely, an A.R.C. Dynes Shelving System, whereas in truth it is a Marlbro Shelving System. That is misleading or deceptive conduct and, in my view, its future publication or circulation should

be restrained.

Use of Confidential Information.

The law on the use of confidential information

"...depends on the broad principle of equity that he who has received information in confidence shall not take unfair advantage of it. He must not make use of 1t to the prejudice of him who gave it without obtaining his consent"

per Lord Denning M.R. in Seager v. Copydex Limited (1967) R.P.C. 349 at (p.368).

In Coco v. A.N. Clark (Engineers) Limited (1969) R.P.C. 41, Megarry J. said at (p.47):-

-

28.

"In my judgment, three elements are normally required if, apart from contract, a case of breach of confidence is ,to succeed. First, the information itself, in the words of Lord Greene, M.R. in the

Saltman case on p.215, must 'have the necessary quality of confidence about it.' Secondly, that information must have been 'imparted in circumstances

importing an obligation of confidence. Thirdly, there must be an-unauthorised use of that information

to the detriment of the party communicating it..." Taking those three requisites, it is not disputed by A.R.C. Dynes that the information imparted to it by Marlbro in May 1980 had the requisite quality of confidence. It is agreed that the second requisite is establishea. It was imparted in circumstances importing an obligation of confidence. That is shown by the admitted statement by Mr Salter at the May 1980 meeting to the effect that the documents were confidential and that Mr Eldred should preserve their confidentiality, together with Mr Eldred's agreement that he would keep them confidential. Even without these express statements, this second requisite may have been

satisfied, but I do not need to consider this.

This case turns on whether the third requisite is satisfied namely, whether A.R.C. Dynes used the information contained in the documents handed 'over in May 1980. It is Open tO scme question whether detriment to the party communicating the information is essential, but this case turns essentially on whether the information was in fact used

by A.R.C. Dynes.

° 29.

Shortly after Mr Eldred told Mr Robinson that A.R.C. Dynes did not propose to acquire the issued share capital of Marlbro or acquire its business from it, the documents containing the confidential information were returned to Mr Salter who received them on behalf of Marlbro. No decision was made by Mr Eldred and Mr Reynolds to produce the A.R.C. Dynes Shelving System until the expiration of about a year after the return of the documents. Mr Eldred swore that no one else saw the documents except himself, although this statement must be qualified by the fact that the contents of

the documents were discussed at the May 1980 meeting by those

present who included Mr Reynolds.

Mr Reynolds was principally concerned with the design of the A.R.C. Dynes product and for that purpose he obtained a sample of the Marlbro product and products of other manufacturers. The actual manufacturer of the A.R.C. Dynes product was Taren Manufacturi-jy except the wire shelving which was manufactured by A.R.C. Dynes itself. Although

little enquiry appears to have been made by A.R.C. Dynes as

to the potential of the relevant market some enquiry was made

by its product manager. Mr Reynolds was responsible for

pricing the product and he and the costings department of A.R.C. Dynes did the necessary work on pricing and costing. Working papers were produced and they or scme of them are in evidence. Mr Reynolds denied that he paid any regard to Marlbro's profitability in fixing prices and I accept his

denial.

. : 30.

ve

AX

Sr

ir

It is probable that, when the decision was made in about May 1981 by Mr Eldred and Mr Reynolds to produce an A.R.C. Dynes shelving unit, each of them carried a general impression in his mind gathered from a year earlier that the market for coolroom shelving had good potential and that Marlbro's profitability was increasing and its business expanding. They also probably remembered that although Marlbro had not been in a particularly healthy liquid

position about a year before, this would probably improve in

the future with expanding markets. It was not suggested in argument before me that the list of debtors of Marlbro, which forms part of the confidential information, was used by A.R.C. Dynes when marketing its own shelving system. Nor could this be suggested because it is plain from the evidence, especially of Mr Douglas, that_this was not so and that communication with potential customers was in no way assisted by any-of the, confidential information imparted in

May 1980.

I am satisfied that A.R.C. Dynes made no copies of any of the documents containing the confidential information and that it did not embody any of the confidential information in any document prepared by it. One must, however, remember

the words of Cross J. in Printers and Finishers Limited v.

Holloway (1965) R.P.C. 239 (at p.255):-

e . 31.

"The mere fact that the confidential information is not embodied in a document but is carried away by the employee in his head is not, of course, of itself a

reason against the granting of an injunction to prevent its use or disclosure by him."

In some cases a man may use confidential information imparted to him previously even though he does not remember the detail of it, but carries away in his mind a sufficiently precise and firm impression that "...he could not have avoided starting his dive aunto the future from the

springboard of the confidential information acquired..." by

him: fJerrapin Limited v. Builders' Supply Co. (Hayes) Limited (1967) R-P.C. 375 per Roxburgh J. (at p.390).

This is not such a case. It is unreal to say that any general recollection from a year before that the relevant market was expanding and presented good prospects and that this was reflected in scme general way in the finances of Marlbro, could enable A.R.C. Dynes to obtain some unfair advantage over its competitor. What A.R.C. Dynes in fact did was what anybody else would have done who set out to copy the Marlbro product namely, design its own product, prepare its own costings, and have prototypes prepared after purchasing

copies of rival products. .

The only relief to which Marlbro is entitled is an injunction to restrain the publication and circulation of the

brochure. Otherwise I would dismiss the application.

As to costs, as Marlbro has succeeded in part in my view there should be some order for costs in its favour. As much of the time in the case was spent on matters on which

Marlbro failed I think the fair order is that A.R.C. Dynes

pay one-third of Marlbro's costs.

I will make no orders at this stage other than to

direct Marlbro to bring in short minutes to give effect to my

reasons for judgment and will stand the matter over to a date

to be fixed when final orders can be made.

bbe ote Her onc. (31)

Lo5 4 Sup) Oud

Pe" 22 Ape BS

~