Pointon Partners are regularly asked to advise clients as to their prospects of obtaining an urgent interlocutory injunction.
Common examples include:
- preventing a competitor from publishing misleading advertising material;
- preventing former employees or contractors from disclosing sensitive confidential information to competitors or to the market at large; and
- preventing disgruntled contractors from attending business premises and removing items supplied by them.
A recent judgment of the Supreme Court of Victoria helpfully summarises the applicable principles which must be considered by the Court in exercising its discretion to grant such an injunction.
A recent report published by a global telecommunications consultancy stated that after exhaustive testing, Optus had achieved the highest score of all mobile networks in Australia.
The consultancy scored each provider out of 1000, and Optus’ score was 3 points higher than Telstra’s.
Optus subsequently published an advertisement which depicted a phone box, bearing a close resemblance to the previously common Telstra boxes, abandoned in the desert with the copy:
‘Empires End: That’s what they do’
The Optus network has been ranked best overall in voice and data.
By P3 Mobile Benchmark, Dec 2017”
Telstra formed the view that the advertising was misleading and deceptive in that it represented to the observer that:
- there had been a significant and permanent change in the relationship between the Telstra and Optus mobile networks; and
- Optus is now the undisputedly operating a better mobile network than Telstra.
After requests to Optus to pull the advertising were refused, Telstra sought an urgent interlocutory injunction requiring Optus to cease using the advertising or other similar advertisements.
The relevant test
The Court held that in order to obtain the injunction it sought, Telstra had to show:
- that there was a serious question to be tried;
- that it would suffer irreparable injury, for which an award of damages would not be adequate compensation, if the injunction were not granted; and
- that the ‘balance of convenience’ favours the granting of an injunction until the dispute is finally determined.
Element 1 – Serious question to be tried
To determine whether this element was satisfied the Court considered two preliminary questions:
- Would it be open for the Court to find, on the evidence, that the representation alleged by Telstra is conveyed in the advertisement; and
- If yes, is it arguable that representation misleading or deceptive?
In this case, the Court answered both questions in the affirmative, placing significant reliance on the fact that the report cited by Optus described the competing providers as in a ‘neck-and-neck’ race, which was inconsistent with the messaging in the relevant advertisement.
Element 2 – Irreparable Injury for which damages not appropriate
Telstra led evidence that the advertisement was having a significant impact on its customers, and that it was difficult to forecast how many of its customers had switched to Optus, or away from Telstra, as a result of the advertisement.
The Court found that the difficulty in establishing how many customers had left or would leave Telstra meant that damages would be difficult to quantify which, in turn, supporting a conclusion that Telstra would suffer irreparable injury not capable of remedy by damages.
Element 3 – The Balance of Convenience
The Court noted that if the injunction was granted, and Optus ordered to remove the advertising, then Optus will have suffered the expense and inconvenience associated with taking down the advertisement. Optus would also have been deprived of the positive effect of the advertising in the period between the injunction being granted and the dispute being finally determined. Telstra on the other hand faced the prospect of potentially losing customers to Optus.
In weighing up the parties’ respective positions, the Court noted the importance of what is known as an ‘undertaking as to damages’ which is a promise by the party applying for the injunction to pay compensation if they are unsuccessful at final hearing.
The Court found that while there was difficulty in quantifying any damages payable to Optus, the balance of convenience favoured the granting of the interlocutory injunction.
PS: At final hearing Optus was successful, with the Court ultimate finding that the advertising did not convey the representations pleaded by Telstra and was permitted to continue using the impugned advertising. A copy of the relevant final judgment is available for reading here.