CATCHWORDS Trade practices - misleading or deceptive conduct - whether in trade or commerce —- whether reasonable for recipient of representation to rely on it - whether obliged to investigate - whether damage flowed from representation - whether representation misleading or deceptive i1f literally true but needed qualification - whether representation corrected - remedies - declaration that contracts void - damages - interest - whether natural person liable. Trade Practices Act ss. 52, 82, 87, 75B Goods Act 1958 (Vic.) ss. 16, 41, 42 Federal Court of Australia Act 1976 s. SIA Supreme Court Act 1958 (Vic.) s. 79A Judiciary Act 1903 s. 79 Westham Dredging Co. Pty. Ltd. v. Woodside Petroleum Development Pty. Ltd. (1983) 5 T.P.R. 18 Bevanere Pty. Ltd. v. Lubidineuse (1985) 59 A.L.R. 334 Parkdale Custom Built Furniture Pty. Ltd. v. Puxu Pty. Ltd. (1982) 149 C.L.R. 191 Centrepoint Freehoids Pty. Ltd. v. T.N. Lucas Pty. Ltd. (1985) 60 A.L.R. 187 Milner v. Delita Pty. Ltd. (1985) 61 A.L.R. 557 Nella v. Kingia Pty. Ltd. (1985) 61 A.L.R. 603 Yorke v. Lucas (1985) 61 A.L.R. 307 My LTD. AND TULLY CORPORATION PTY. Ve LTD. E.R. SQUIBB & SONS PTY. ANOR. x 1 . = ee oak we Meee tee Sse AD GRAY 3. MELBOURNE 26TH MARCH 1986 IN THE FEDERAL COURT OF AUSTRALIA VICTORTA DISTRICT REGISTRY No. VG 167 of 1984 GENERAL DIVISION BETWEEN: E.R. SOUIBR & SONS PTY. LTD. Applicant AND TULLY CORPORATION PITY. LTD. and JOHN GREEN Respondents JUDGE: GRAY J. DATE: 26TH MARCH 1986 REASONS FOR JUDGMENT The Applicant, E.R. Squibb and Sons Pty. Ltd. ("Squibb"), is a company incorporated and having its principal Place of business in Victoria. Approximately half of its business consists of the manufacture and sale of pharmaceutical preparations for human consumption. It imports raw materials for these preparations, and sells to the wholesale and retail trade. In addition, it carries on a similar business in the manufacture and sale of veterinary medical supplies. It also imports and sells some equipment for hospitals, including ultrasound equipment. The remainder of its business consists of the sale of orthopaedic and similar appliances. This last portion of the business is carried out through a division of Squibb's ee pre erage eee exponen ' ' aa r res een cee ee ae -2- operations, which trades under the business name "Sheer-Eze". Through its Sheer-Eze division, Squibb sometimes deals directly with end-users of products which it sells. The first Respondent, Tully Corporation Pty. Ltd. ("Tully"), is a Western Australian Company. A director of Tully, and its principal Manager and operative, is the second Respondent, Charles John James Green, who is known as John Green. In or about April 1983, negotiations took place between Squibb and Tully with respect to the distribution of a machine known as the Magnetopulse. This is a machine which uses magnetic field therapy in the treatment of tissue injuries in animals (particularly race horses) and humans. On behalf of Tully, the negotiations were conducted by Mr. Douglas Davenport, a consultant engaged by Tully. They culminated in a written agreement dated llth April 1983, whereby Squibb was appointed the sole authorized distributor of Magnetopulse machines in all Australian States except Western Australia, and in New Zealand. The agreement also made provision for Squibb to distribute other equipment which the parties contemplated might be imported by Tully during the currency of the agreement. During or shortly before April 1983, Mr. Green became aware of the existence of two machines, known as "Ovascan" and "Boveg". The first of these machines is designed to enable its operator to ascertain the time of ovulation in female animals, particularly mares and cows, by measuring changes in the electrical conductivity of the vaginal mucus in such animals. It wa epee = tne, ees Kyte a -3- consists of a stainless steel prohe, which is inserted into the vagina of the animal, and manipulated in a certain way. The probe is connected by a cable to a small, portable, battery-operated instrument, which provides a digital readout indicating the degree of resistance encountered by the electrode in the probe. The Boveq machine is designed to enable its operator to determine whether a mare or cow is pregnant, at an early stage of a pregnancy. It consists of an ultrasound sensor, which is applied to the animal externally, and which is connected by a cable to a small, portable, battery-operated instrument, containing a cathode ray tube. The machine is designed so that a pattern of lines is seen on the cathode ray tube screen; lines forming a particular "spike" may indicate pregnancy in the animal. Upon hearing of these two machines, Mr. Green contacted their manufacturer, Animark fInc. ("Animark"), in Denver, Colorado, in the United States of America. In April 1983, he visited the United States. There, he spoke with the principals of Animark, Stellios and Jennine Regas. He underwent a theoretical course in the use of both machines, and some practical training in the use of the Boveq. He also contacted some users of both machines in the United States. As a result, when he returned to Australia, Me. Green had entered into an agreement with Animark whereby Tully would import Ovascan and Boveg machines to Australia. Mr. Green thereafter arranged to discuss with Squibb the distributorship of the two machines outside Western Australia. On 4th May 1983, a meeting occurred at the premises of Squibb, at Noble Park, an outer Melbourne vcr - 4 - suburb. Present were John Joiner, the managing director of Squibb, Dennis Beed, the company secretary and a director of Squibb, and Mr. Davenport and Mr. Green on behalf of Tully. Arising from discussions which occurred at this meeting, Squibb alleges that Tully engaged in conduct that was misleading or deceptive, or was likely to mislead or deceive, in contravention of s. 52 of the Trade Practices Act 1974, and which also constituted contraventions of s. 53(a) and (c) of that Act. Three particular representations are alleged to constitute such conduct. In the amended statement of claim, they are pleaded in the following terms: "(i) By appropriate use by stud masters of the ovascan machine it was possible to mate animals, particularly horses, at such times as would enable predetermination of the sex of the off-spring. (ii) That the ovascan could be used by stud masters to predict ovulation in animals, particularly horses. (iii) That the Boveq could be used by stud masters to detect conception in animals, particularly horses." The Respondents deny that the first of these representations was made, but admit that the second and third representations were made; they contend that these representations were truthful. Mr. Green is alleged by the Applicant to have aided, abetted or procured, or to have been directly knowingly concerned in or party to the contraventions alleged. In and between May and August 1983, Squibb ordered and received from Tully a total of 51 sets of Ovascan and Boveg machines. Each set consisted of one Ovascan and one Boveg. The oe > aro bce ee or -5- price from Tully to Squibb was $7,800.00 per set. Squibb paid to Tully a total of $397,800.00 for these machines. It is alleged that all of the purchases were anduced by the representations, and that the representations were false. There are further allegations of breaches of conditions or warranties implied under legislation relating to the sale of goods. In this respect, certain specific allegations are made of defects or inadequacies in the machines. Further, some reliance is placed on terms of the agreement of llth April 1983, as to obligations of Tully to replace defectively manufactured machines, or those which cracked or broke under normal use, and to guarantee the performance of the machines for one year. Squibb desires to reject all of the machines, to claim repayment of the purchase price, and in addition to claim damages and interest. The trial of the proceeding took twenty-one days, and involved a large number of witnesses and exhibits. Although the pleadings were relatively simple, they concealed several issues which assumed importance at the trial. Both Mr. Fajgenbaum, who appeared for Squibb, and Mrs. Crennan, who appeared for Tully and Mr. Green, gave careful attention to the conduct of the case. It is convenient to discuss under separate headings a number of the issues which arose. Gender Determination To understand the nature of the alleged representation to the effect that use of the Ovascan enabled pre-determination Ser = mae ene ne -6- of the sex of the off-spring of a horse, it is necessary to examine in more detail the method of operation of the Ovascan. The fundamental principle of operation of the machine is that it will disclose a marked drop in the electrical conductivity of vaginal mucus in the days or hours preceding ovulation. The drop is a drop from a level of readings obtained during the oestrus, or heat, period of the animal. It is recommended that the operator establish by observation whether a mare is in oestrus. This is usually done by testing the reaction of the mare to a male animal, known as a pony teaser. If the mare responds to teasing, she should be checked daily with the Ovascan, and the readings should be recorded in the form of a graph. According to the theory, the readings, described as basic oestrus readings, will be within a recognizable range, until such time as ovulation is about to occur, when there will be a marked drop. A theory has been advanced, in relation to both human and animal reproduction, that spermatozoa bearing Y¥ (or male) chromosomes travel faster in the vaginal tract, but have a shorter life span, than do spermatozoa bearing the KX (or female) chromosomes. If this theory is correct, insemination at a time prior to ovulation is likely to increase the chances of female off-spring. This is because male spermatozoa will arrive in the uterus and be spent before the arrival of the ovum, which will ultimately be met by the slower moving but longer lasting female spermatozoa. On the other hand, insemination at or about, or even shortly after, the time of ovulation is more likely ta result in male off-spring, since the ovum will unite with the faster moving male spermatozoa. saya a ay eee ee nee ee me oe et tomers. Q wy 8 Ager yer - ey ryt r accc ee carne we S aeahr dedient aver ican ae) Ties Raa Ane oe " te ? any sha - 7- Applied to the use of the Ovascan, this theory suggests that the mare should be covered "on the drop", or as soon as the Ovascan readings begin their marked decline from the basic oestrus reading range, if female off-spring is desired. If male off-spring is desired, breeding should occur once the readings have passed their nadir, or "on the rise". Ascertainment of what was said on the subject of gender determination at the meeting on 4th May 1983 involves a close examination of the evidence as to that meeting. This is no easy task, as there are considerable differences between the evidence of the various persons who attended the meeting as to what occurred. Mr. Joiner was the first witness to be called at the trial. His account was that the whole transaction, which included a physical examination of an Ovascan machine and a Boveg machine, discussions as to their capabilities, the fixing of both a wholesale price between Tully and Squibb, and a retail price by Squibb, and a placing of an order for ten machines, all occurred within the one day, at the meeting of 4th May 1983. It was not put to Mr. Joiner in cross-examination that the meeting had continued on a subsequent day. The second witness called was Mr. Davenport, who was called as a witness for Squibb, although he had negotiated on behalf of Tully. His association with Tully and Mr. Green had ceased shortly after May of 1983. He stated that an initial meeting occurred on 4th May, which was a Wednesday, and a further meeting took place on Friday 6th May 1983. He gave two reasons for the break; the first was that Mr. Joiner left to catch a flight to Sydney on the Wednesday afternoon, and the second was that those present at the meeting ta fre Syosset tenn eae yen cee ef - 8 - desired to have lunch on the Friday. Mr. Davenport's version was that the machines were examined, and the discussions took place on the Wednesday, but no price as between Tully and Squibb was agreed, and no order was placed until the Friday. According to Mr. Davenport, Mr. Green left the lunch early on the Friday, and an order for ten sets of machines was placed after he had Ieft. Mr. Beed recalled being involved in meetings on the two separate days. He was certainly of the view that the decision had been taken to purchase and distribute the machines on the Wednesday, although he and Mr. Joiner apparently did not retire to discuss the question hetween themselves. The indication was that the decision was really that of Mr. Joiner. Mr. Beed confirmed Mr. Davenport's account of the lunch, with Mr. Green departing and leaving the other three still talking. Mr. Green gave two different accounts of the meeting in his evidence in chief. In the first place, he said that the meetings were on consecutive days, and that the second one was occasioned by the fact that only the Hoveq machine was present on the first day, the Ovascan having to be sent by courier from Perth to Melbourne so that it could be inspected on the second day. Subsequently, Mr. Green corrected this to say that the Ovascan had been sent by courier on the Tuesday night, so that both machines were available on the Wednesday, and that the second meeting and the lunch occurred on Friday. He confirmed his early departure on the Friday, and claimed that no price or order had been agreed upon by the time he left. In addition to these differences, there is disagreement amongst. the witnesses as to such matters as starting times. Whatever may have been the true history of the meeting fy - <a i tae toa lol y ne oar ey TT ryt erry oe re oe go eee eee aeheel aay toa aa ~9- or meetings, it is common ground that some conversation occurred about the question of gender determination. As to the precise details of this conversation, there is again much disagreement. Mr. Joiner and Mr. Beed gave firm evidence that Mr. Green stated as a fact the capability of a stud master, using the Ovascan, to determine whether a filly or a colt would be bred. Mr. Joiner claimed that Mr. Green stated that this could be done with a 90% success rate. Mr. Beed's account was that the figure given was 80%. Mr. Davenport remembered two percentages as having been discussed, 75% and 90%, but could not remember which of these was attributed to the success rate of gender prediction. It was put in cross~examination to each of these three witnesses that the gender prediction aspect was raised, not as a fact, but as. an interesting theory which might prove to have some worth. Each of Mr. Joiner, Mr. Beed and Mr. Davenport denied that the claim was made in that fashion. Mr. Green swore that all he had done was to inform those present that certain horse breeders in the United States had tried pre-selecting the sex of the foal, with encouraging results. On his evidence, he spoke of such breeders as having achieved a success rate of 75 or 80%, On the evidence, I find it more probable than not that the subject of gender determination was dealt with by Mr. Green at the meeting on 4th May 1983 as a matter of fact, rather than as a matter of theory, or an interesting new possibility. Having seen and heard Mr. Green in the witness box on four days during the trial, I accept that he would be unlikely to have been as restrained in his dealing with the subject as he claimed. Mr. Green attended the meeting very much as a salesman, with the aye Hae nae v wy. aia ieee eg oe -10- purpose of convincing Squibb that Ovascan and Hoveg would he readily marketable. It is unlikely that he would have dampened the effect of his sales pitch by describing this aspect of Ovascan as being merely speculative. There is evidence that Mr. Joiner became quite excited about the prospects of gender selection, claiming to have ~ had some knowledge of the theory of the relative speeds of movement and life spans of different spermatozoa in humans. Observing this, Mr. Green did not restrain Mr. Joiner's enthusiasm by suggesting that the Ovascan had reached a very limited stage in the practical application of this theory to horses. This conclusion is reinforced by reference to Mr. Green's subsequent conduct. On his evidence, the source of his knowledge was verbal information which he had been given in the United States in April 1983. Shortly after the meeting of 4th May, Mr. Green received a letter from Animark dated 12th May 1983, which he claimed presented this information in written form. The letter contained a chart which purported to show readings taken with an Ovascan from five "normal" mares. The letter explained the readings for each mare, pointing out the time at which breeding should have occurred for the purpose of producing a filly or a colt. The letter included the following statement: "So far, in limited field tests, the success reported is well over 75 percent. In one test done on three farms in New York, 25 of 26 foals turned out as predicted. On a Texas Arabian stud, 12 mares were bred according to this system last year. Eleven foals are now on the ground and 10 are as predicted." fe wT alle rer cae ne eee ar pe ee aay Ye ee SITE A, nee see eld preg rierence mae af. . oy 4S -v¥e wd re ieee 4y ? St tt ma = my - lil - The contents of the chart and the letter were reproduced by Tully as a single sheet glossy pamphlet. This pamphlet was for distribution to potential buyers of Ovascan and Boveg, in conjunction with another pamphlet which Tully also produced. This last-mentioned pamphlet contained a list of points described as "Advantages for Horse Breeders"; one of these was "time serve to determine sex of foal". Beside the list of advantages for horse breeders was a stylized graph described as "typical oestrus pattern". In large letters, at two points on the graph, appeared the word "SERVE" with the words "FOR FILLY" at the earlier point on the curve and "FOR COLT" at the nadir of the readings. These pamphlets were prepared on behalf of Tully in May of 1983. Further, by circular letter dated 23rd June 1983, Tully invited potential purchasers of Ovascan and Bovegq to participate in a seminar on 11th July 1983 at Perth. This letter included the following paragraph describing Ovascan: "Even more remarkable is the fact that for the first time with a simple, totally portable machine, you can with 90% accuracy predict the sex of the foal you desire. This alone revolutionises the entire nature of control of any stud-breeding programme. As can be seen from this accuracy of prediction, the mare need only be covered once as the day and time to serve is indicated by the machine." All of this material was, of course, prepared after the meeting of 4th May 1983. It was prepared in the light of the letter from Animark dated 12th May 1983. Plainly, the advertising material went beyond the claims made in that letter. The substance of that letter does not purport in any way to be a scientific study of mares as a whole, or even of the five allegedly typical mares dealt with. It is for the purposes of illustration only. In the Sr een amnerey © Loe i" vin spe aoe eee Me TE AS Be Pens -12- passage quoted above, only limited claims of success in limited trials are made. If Mr. Green was prepared to disregard the obvious limitations of that letter in the preparation of printed advertising material, it is likely that he was earlier prepared to make positive statements about the gender prediction Capabilities of Ovascan, without being restrained by any limits on the certainty of such use which may have been the subject of conversations to which he was party in the United States. On the evidence hefore me, I have no alternative but to hold that, on 4th May 1983, and even at the present time, to state that the Ovascan was or is capable of being used to select the sex of the progeny of amare could not be regarded as factual. Leaving aside for the present time any difficulties involved in the practical operation of the Ovascan, the evidence discloses that the theory on which the gender determination statement was based did not have a sufficient basis in scientific yesearch to enable it to be stated as a fact. The only truly expert evidence which was called before me was that of Dr. Galloway, a veterinarian of considerable academic qualification and research experience. He had consulted the available literature on the subject, including some concerned with human reproduction. His opinion was that, whilst experimental work tended to show that, in laboratory conditions, Y chromosome bearing spermatozoa did tend to move faster and expire earlier than X chromosome bearing spermatozoa, there was little evidence that the same was true of spermatozoa in the vaginal tract. In Dr. Galloway's view, spermatozoa found their way into the uterus by forces other than their own, particuarly by muscle fla, - 13 - contractions. There was and is no experimental work which suggests with any high degree of certainty that results obtained in test tubes can be assumed to be duplicated in real life. To make representations about gender determination, without making it clear that it was merely a subject for theory or experiment, was to overstate the case for it. It does not necessarily follow from this that Tully is liable under the Trade Practices Act 1974. Section 52(1) requires that conduct that is misleading or deceptive be engaged in "in trade or commerce". Despite the judgment of St. John Jd. in Westham Dredging Co. Pty. Ltd. v. Woodside Petroleum Development Pty. Etd. (1983) 5 T.P.R. 18, to the effect that a privately negotiated contract did not give rise to any breach of s. 52, it seems clearly to be established that such a privately negotiated contract may be "in trade or commerce" for the purposes of the Act. See Bevanere Pty. Ltd. v. Dubidineuse (1985) 59 A.L.R. 334, at pages 341-338. It is also established that the interpretation of s. 52 is not governed by the fact that Part V of the Act, in which the section appears, is headed "Consumer Protection"; accordingly, it is possible for one corporation to bring proceedings under the Act against another corporation in respect of misleading or deceptive conduct engaged in during private negotiations leading to a contract between the two corporations. In the present case, the first Respondent was attempting to sell to the Applicant machines for resale to end~users. It was doing so as part of the ordinary business of the first Respondent. There can be no doubt that the attempted sale was "in trade or commerce" for the purposes of the Act. CPTI ee ST te seer vege Ot ™~ of copes aes eo - 14 - The facts of this case, coupled with the principles of law to which I have referred, give rise to some disquiet as to the effect of 5s. 52 of the Act. Squibb was, by comparison with Tully, a large corporation with abundant resources. It had considerable experience in the marketing of awide range of products, mostly in the pharmaceutical and medical area. [t had on its staff at the time a qualified veterinarian. It had access to a considerable body of knowledge concerned with horse breeding, in the person of Mr. Brendan McCarthy, the President of the Australian Blood Horse Breeders Association Victorian Division from 1983 to 1985, and a highly successful horse breeder, who was a friend of Mr. Joiner's, and who was subsequently asked by Squibb to test both Ovascan and Hoveq. No doubt, if Mr. Joiner or Mr. Beed had asked Squibb's employee vet, or Mr. McCarthy, for an opinion on the likely capability of an operator of the Ovascan machine to breed a filly or a colt by choice, they would quickly have been told that they should treat such claims with a great deal of scepticism. To what extent can they take advantage of the fact that they declined to make use of resources available to them to check the claim which was made? The words of s. 52(1) of the Trade Practices Act 1974 are pregnant with a question. Conduct is not misleading or deceptive in the abstract; it may have the capacity to mislead or deceive certain persons or classes of persons. If, for instance, Mr. Green had made his gender selection claims to such a person as Dr. Galloway, it would be safe to say that there was no likelihood of any misleading or deception resulting; Dr. Galloway would already be acquainted with the truth. At the rac ake SET MR STUDY Terence weet ee nee ee wt . . . toes -_ ee a 2, se Agere ct ee reine moet Tana as ~ 15 - other extreme, the making of the representation to a class of end-users of Ovascan, such as stud masters, might well be likely to result in at least some of them being misled or deceived. Squibb was in an intermediate position, in the sense that Mr. Joiner and Mr. Beed did not have actual knowledge of the true facts, but had easy access to such knowledge if they had bothered to avail themselves of it. It must be remembered that the Trade Practices Act 1974 makes available claims for damages against a corporation which engages in misleading or deceptive conduct, even where that corporation acts innocently. In those circumstances, it is undesirable that a corporation with the resources to check claims made to it should be entitled to ignore those resources, and to treat 5s. 52 as if it were an inSurance policy against misleading or deceptive claims, an insurance policy for which no premium is paid. Companies in the position of Squibb must be subjected to frequent visits by representatives of other companies desiring to sell goods for resale, The Trade Practices Act 1974 should not be used to encourage companies in such positions to refuse to check any information given to them, on the basis that they can afterwards sue if such information turns out to have been misleading or deceptive. Even more s0 is the checking of information to be encouraged when goods are likely to be resold, and the claims made about them are likely to be repeated, with the recipients of those claims being, in many cases, consumers. To interpret the Act as giving a reseller corporation complete protection where it has failed to investigate easily verifiable claims would be to encourage, rather than discourage the engaging we Pee et 8 gg Ce ee t "3 Spree: sqeer en eer 'e an ws ~~ oes ow ai aeaieeemntee . -f pepe ens eee in of conduct which is misleading or deceptive. In Parkdale Custom Built Furniture Pty. Ltd. v. Puxu Pty. Ltd. (1982) 149 C.L.R. 191, at page 199, Gibbs C.J. said: "Section 52 does not expressly state what persons or class of persons should be considered as the possible victims for the purpose of deciding whether conduct is misleading or deceptive or likely to mislead or deceive. It seems clear enough that consideration must be given to the class of consumers likely to be affected by the conduct. Although it is true, as has often been said, that ordinarily a class of consumers may include the inexperienced as well as the experienced, and the gullible as well as the astute, the section must in my opinion by regarded as contemplating the effect of the conduct on reasonable members of the class. The heavy burdens which the section creates cannot have been intended to be imposed for the benefit of persons who fail to take reasonable care of their own interests. What is reasonable will or course depend onall the circumstances. The persons likely to be affected in the present case, the potential purchasers of a suite of furniture costing about $1,500, would, if acting reasonably, look for a label, brand or mark if they were concerned to buy a suite of particular manufacture." In the present case, the class of persons considered as possible victims for the purpose of deciding whether the conduct of Tully, through Mr. Green, was misleading or deceptive, or likely to mislead or deceive, was a class consisting only of Squibb. In the circumstances, it would have been reasonable for Squibb to have taken some action to verify or refute the accuracy of the claims made to it about the use of the Ovascan for gender selection. Various reasons were given in evidence for Squibb's unquestioning acceptance of Mr. Green's representation about gender determination, Mr. Joiner said that he was content to accept what Mr. Green said because Animark was a reputable manufacturer of electronic instruments for use with animals. Sue err wwe one Te ow ~ _ Ye nat ae . ae ter Sane ww a) agers aoatey le ete at ee @ ' - 7 be eye a rer + ag rep en - i7 - Later in his evidence, however, he revealed that it was Mr. McCarthy who told him of Animark's reputation, and that this was some days or weeks after 4th or 6th May 1983. Mr. Beed said that he believed Mr. Green because Tully had sold the Magnetopulse to Squibb, and the Magnetopulse had been a reliable machine. The agreement relating to Magnetopulse, however, was substantially less than a month old, and it was not until much later that the good qualities of the Magnetopulse were appreciated fully by those at Squibb. There was some suggestion of reliance on Mr. Green because of previous dealings; 4th may 1983, however, was the first occasion on which Mr. Joiner and Mr. Beed had met Mr. Green. All previous dealings had been conducted through Mr. Davenport. In those circumstances, it is my view that I should hold that Tully did not act in contravention of s. 52, with respect to the gender selection representation. Another way of looking at the matter is from the point of view of ss. 82 and 87 of the Act. These sections provide for remedies for persons who suffer loss or damage by the conduct of others done in contravention of, among other provisions, 5s. 52. In the circumstances of this case, Squibb suffered no loss or damage by virtue of the gender selection representation. Certainly, it suffered no loss or damage attributable to that representation separately from the other representations the subject of the proceeding. Insofar as it did suffer loss or damage by being induced to purchase Ovascan and Boveg machines in the belief that Ovascan could be used for gender selection, it did so because Mr. Joiner became unduly carried away by his own enthusiasm for that subject, and he and Mr. Beed failed to make - mpm. "re - 18 - use of readily available opportunities to check the accuracy of the claim. For these reasons, the claim based on the gender selection representation fails. The Admitted Representations It has been admitted by the Respondents that, on 4th May 1983, representations were made to the effect that Ovascan and Boveg were capable of being used by stud masters to predict ovulation and to detect conception respectively in animals, particularly horses. With respect to these representations, the issues are whether they were misleading or deceptive, and if so whether they were corrected, or whether any loss or damage Claimed by Squibb flows from causes other than the misleading or deceptive nature of the representations. In a literal sense, the representations were true. One of the witnesses for the Applicant was a Mr. Richard Robey, who owns and operates a quarter horse stud farm in Oklahoma, in the United States of America. He gave evidence that, in the late 1970's, he became very dissatisfied with the performance of veterinarians in relation to his horse breeding operations. By that stage, it was common in the horse breeding industry to have avet palpate each mare for the purpose of determining the appropriate time to serve the mare, and for the purpose of determining whether a pregnancy had occurred. Palpation involves the insertion of the hand and arm of the vet into the rectum of the mare, enabling the vet to feel each ovary, to determine whether a follicle is developing, and whether it is about to produce an ovum, or to feel the uterus, to determine whether an a, ak sare ar women et eee try eee ' TTI Ta To 77S > v7 -~ 19 - embryo is present in it. There is evidence that conception rates in horses have declined since the practice of palpation became widespread. Mr. Robey believed that this decline had occurred, and had ceased to rely on palpation. In 1981, he became aware of Ovascan, and began to use it. Such was his intense dislike of vets, that he was prepared to persevere with Ovascan, and with Boveq, and to become proficient in their use. In his first season of using the machines, he had frequent occasion to seek help, and was able to do so by telephoning technical experts at Animark's premises in Colorado. In the result, Mr. Robey has achieved such expertise in the use of Ovascan and Boveq, that he was sent by Animark to Australia in July 1983 to assist with the promotion of the machines. The Respondents called as a witness a Mr. Desmond Reed, a breeder of horses for harness racing, whose stud farm is situated in Western Australia. He was presented as a successful user of the Ovascan, but did not make any use of the Boveg. Mr. Reed is a person whose acquaintance with modern technology and its products is slight; to this extent, his ability to use the Ovascan would be of great significance. His evidence, however, aisclosed wide divergences between his practices and the recommended use of the instrument. For instance, as well as taking readings of the electrical conductivity of vaginal mucus, Mr. Reed claimed to use the probe as an inert device for making his own assessment of changes in the consistency of the mucus. He placed reliance upon this assessment, as well as upon readings obtained from the Ovascan in determining when to cover his mares. In addition, as Mr. Reed's stud records show, he has made a ~ 20 - practice of covering mares on more occasions than would be necessary if the Ovascan were as accurate as is claimed. In his evidence, Mr. Reed claimed to average 2.3 serves per mare in order to achieve conception. This rate had not dropped from the 1983 season, during which Mr. Reed was learning to use the Ovascan, to the 1984 season, although Mr. Reed saw some possibility of reducing the number of serves per mare in 1985. An examination of his records, however, discloses that many mares were served on numerous occasions in periods of oestrus. The more numerous the serves, the greater must be the chances of conception. There is, therefore, very considerable doubt as to the extent to which Mr. Reed actually makes use of the Ovascan in the manner contemplated by its manufacturers. There was some other evidence of the successful use by stud masters in Australia of the Ovascan and Boveq. Brendan McCarthy junior, whose father was called as a witness, was said to have acquired the necessary skill to use the instrument. Mr. McCarthy senior went to Animark's premises in the United States in 1984, with a view to undertaking the distribution of the instruments in Australia himself. The knowledge he acquired was no doubt useful in the acquisition of skill by his' son. In addition, at the McCarthy family stud farm at Tallarook in Victoria, there is a person employed who has veterinary qualifications from Argentina, and who has assisted Brendan McCarthy junior in learning how to use the instrument. Mr. Green claimed to have seen the instruments used successfully in Western Australia. This claim was made with respect to one Malcolm Stewart, who was the stud master at Mr. Green's stud farm, a we Aa . ' eo wn eomenege = - wore =f . Qo en pn rene pene aes ae ms = I, ~~ oyt . - 21 - thoroughbred racehorse stud farm in Western Australia, in the 1983 and 1984 seasons. Mr. Stewart was not called to give evidence; nor were there tendered in evidence any records of his use of the instruments. Mr. Green also claimed that a Mrs. Mitchell, a thoroughbred stud owner in Western Australia, had achieved success in the use of the instruments. There had, however, been a falling out between Mr. Green and Mrs. Mitchell; she had refused to pay for her machines, claiming that they had not worked, although she afterwards claimed the contrary in litigation with another person over stud fees. In addition to these persons, Dr. Galloway used the Ovascan and the Boveq for the purpose of informing himself as to their use, to qualify him to give expert evidence. In his limited use of the machines, he seems to have obtained rational results. He was, of course, not a stud master, but a qualified veterinarian. Dr. Galloway had experience of the personalities and operations of stud masters. His view was that there were only about ten stud masters in the thoroughbred racehorse field in the whole of Australia who would have the level of understanding, the patience and the perserverance to learn to use Ovascan and Bovegq successfully. Called on behalf of the Applicant was a Mr. Layton, stud master at the Glen Appin thoroughbred racehorse stud in Victoria. As well as being a stud master of great experience, and recognized skill, Mr. Layton was academically qualified by a two year part-time course in equine science, equine anatomy and stud management, at Panorama College in South Australia. His vt t reper 7 : eo eee aed os ~ 22 - knowledge and understanding of the anatomy of a mare were very sound. He was an early purchaser of Ovascan and Boveq from Squibb. He attempted to use Ovascan in the 1983 breeding season, which began in early September of that year. His attempts resulted in a complete lack of rational data. It was assumed that the particular machine he was using was faulty, and it was returned and tested. Even with another machine, however, Mr. Layton did not obtain results which he considered to be satisfactory. To some extent, this appears to have been due to his lack of understanding of the manner in which it was intended that the Ovascan should be used. In particular, Mr. Layton's records show that he does not appear to have taken measurements with the Ovascan on each day during the cestrus period of each mare in his care. His evidence was that he used the Ovascan and a pony teaser on alternate days. Even given this error, however, Mr. Layton's results do not seem to have given any reasonable support to the view that the Ovascan was a tool which would be of positive use to a stud master. Mr. Stellios Regas, the former president of Animark, and the person primarily responsible for the development of Ovascan and Boveq, was called as a witness for the Respondent and was naturally enthusiastic as to the capacities of the machines. His evidence, however, provided little assistance on the question of the truth of the admitted representations. As I have already pointed out in relation to Mr. Robey's evidence, Animark provided to purchasers of the machines a substantial technical back-up service, to assist them in learning to use the machines. Technicians and other experts employed by Animark were available pee ree ee ea, paver aM Sioa lll Suir tials neelinctieritate tet tibet bes ont toeiinterenanrtad PO tre este es : ' ee fa TT en ee ee ee ' ewe can - wrens os - 23 - for consultation. Purchasers subsequent to Mr. Robey were provided with his name, and the names of other successful users, from whom they could seek guidance. Animark's total world-wide sales, since the introduction of the machines, are approximately 1100 Ovascans and 800 Boveqgs. Approximately 60% of total sales were in the United States of America. These figures include the machines purchased by the first Respondent. Although claiming that very few customers were unsatisfied, Mr. Regas conceded that these figures indicated a very small penetration of the available market, in horse and cattle breeding. To some extent, the sales figures reflect problems Animark had with a company appointed to be a reseller in the United States, but the picture which emerges is certainly not one of thousands of stud masters, all over the world, acquiring immediate expertise with the machines. Although the statement that Ovascan and Bovegq could be used by stud masters to predict ovulation and ascertain pregnancy was literally true, it was literally true only with respect to a small and rare band of stud masters. On the evidence before me, I am satisified that the proper use of both machines involved a considerable understanding of the anatomy of a mare, extraordinary committment to the successful use of the machines, and consequent perserverance with them, a good deal of understanding of the nature and operation of the machines, which would lead to an ability to interpret results obtained from them, and substantial advice, guidance and encouragement both from those with an understanding of the technology of the machine, and co-operative veterinarians. eo ad Yael 8 spore sperma: a Ro rr He pos se ~ 24 - I accept the evidence of Dr. Galloway that most stud masters would lack sufficient understanding of the anatomy of a mare. The mode of insertion of the Ovascan probe was reasonably easy to learn. It invoived the insertion of the tip of the probe in the lips of the vulva, without allowing any air to enter, and with the probe at an upward angle of about 45 degrees. The probe then required to be pushed in at that angle until it cleared the urethra, with care being taken to avoid contamination with any urine. The probe then required to be levelled and pushed in until it reached the back wall of the vagina, with care heing taken 50 as not to push it through the cervix. It then had to be pulled back about two or three centimetres from the back wall of the vagina, and moved back and forth to stimulate the secretion of mucus. After approximately 30 seconds of this movement, when the probe was coated with mucus, it required to be held flat on the floor of the vagina, where the mucus tended to pool. At that time, the reading stablized, and could be retained on the instrument by pressing a "hold" button. The probe was then withdrawn, and the reading recorded. If the probe were lifted off the floor of the vagina, or if air or urine were present, the reading obtained would be dramatically different. With a little training and some experience, however, a stud master would be able to ensure that these things did not happen. The practical use of the Boveg, however, was a different story. This required the placing of the sensor in precisely the correct position, and the aiming of the ultrasound waves in precisely the correct direction. A quantity of vegetable oil was required to be placed on the skin of the animal, to ensure that — -—r— mo See a a rs + wpe eee = aye ee a ep eee = >: hata 7 ra "7? > on ees a aot - 25 - no air intervened between the face of the sensor and the skin; ultrasound waves do not travel through air. The point at which the sensor was to be placed was ascertained by drawing a horizontal line from the bottom of the vulva along the side of the animal, and a vertical line down from the point of the hip bone. Where these lines intersected, the sensor had to be placed. From there, whilst maintaining proper contact with the side of the animal, it had to be directed slightly backwards so as to pick up the uterus. It was in the interpretation of results that difficulties arose with both instruments. The numbers which showed on the digital readout on the Ovascan were numbers on an arbitrarily chosen scale; they had no objective meaning. As it was explained in evidence, it was necessary for the operator to determine a pattern for each individual mare. Particularly in the early stages, it would not be easy to tell whether a particular reading was within the basic oestrus range, or represented the start of a drop. Nor could it be known with accuracy at what point the nadir of a drop in readings was approaching, or even whether it had been reached, until the readings began to increase. Graphs of actual readings taken by Mr. Reed, in many cases, do not reveal a pattern such as that which would be expected by anyone who had read the material supplied by Animark. As to the Boveg, the position was even more difficult. Boveg is incapable of detecting an embryo or a foetus as such. What it detects is a change in the density of tissue. Such a change registers as a pattern of vertical or near vertical lines, forming a spike or spikes on the screen of the instrument. there \ "poor - 26 - The presence of bone, or organs such as the bladder or a kidney, will provide a change in tissue density which will register as a spike or spikes. A uterus in which there is a live embryo will cause such a spike, whereas the uterus of a mare which is not pregnant will not. The screen of the Boveq has a graduated scale on the bottom so that the "machine will indicate the distance between the sensor and the tissue interface encountered by the ultrasound waves. If a pregnant uterus is detected, the relevant spike should indicate a distance of between 20 and 30 centimetres from the sensor. Mr. Regas, illustrated the kind of pattern to be expected by placing the Boveg sensor against his head, using water instead of vegetable oil to provide a proper connection. He gave evidence that the spike which was shown on the screen of the instrument represented the change in tissue density which was present in the middle ventricle of his brain. The instructing solicitor for the Respondents was unable to duplicate this attempt, although applying the sensor of the same machine to his own head. Mr. Regas claimed that he would be able to teach the instructing solicitor to perform this task in about three minutes. This episode itself illustrates the potential agifficulty of interpretation involved in the Hoveq. If every tissue interface provides a spike of some kind on the screen, it will obviously take considerable experience to learn to recognize the particular pattern that will indicate a pregnancy. Mr. Regas gave evidence that the application of the Boveg to the correct point on a stallion, instead of a mare, would always result in a spike which resembled closely that which would result from the application of the Boveq to a pregnant mare. RTE pee an en eter "yb ortis ~ 27 - To gain an understanding of the correct interpretation of the results of each machine would require considerable time. It would be unlikely that any stud master could claim great success in the use of the machine in the first breeding season, of three or four months. Some success might be expected in the second season. In all cases, support and encouragement would be needed. As Mr. Robey found the need frequently to telephone Animark for guidance, so any stud master would have frequent need for such assistance. Ideally, when learning to use the machines, a stud master would need the assistance of a vet; each application of one of the instruments could be checked by palpation. This would speed the learning process, but is unlikely to occur in many cases. One of the objects of the instruments is to eliminate the need for palpation in normal cases, and accordingly to eliminate the need for veterinary assistance in such cases. Such assistance involves great expense, often running into tens of thousands of dollars in one breeding season in a commercial stud farm. To the extent that such a stud farm takes in mares from outside, veterinary expenses can be passed on to the owners. To the extent that the stud owner owns mares, the cost is direct. One of the features of Ovascan and Boveq emphasized by Mr. Green at the meeting on 4th May 1983 was the elimination of veterinary expenses. This has not been pleaded separately as a representation. Nevertheless, it is associated with the admitted representations; if stud masters could use Ovascan and Boveg, for their intended purposes, veterinary expenses would at least be reduced. In those circumstances, it is difficult to imagine the occurrence of widespread support among vets for the use of the instruments, and rr creep - 28 - therefore to envisage vets giving willing assistance in the process of learning the operation and interpretation of the instruments. One of the chief difficulties involved in stud masters learning to use Ovascan and Boveq is that such learning must inevitably take place during the breeding season. On the evidence, this is a time when extreme demands are placed on stud Masters. All racehorses in Australia have a notional birthday of lst August. It is desired that they be born as close as possible to this date, but after it. The gestation period of a mare is approximately eleven months. For these reasons, the breeding season begins early in September. At that time, it is common for foaling to take place among those mares whose conception did not take place early in the preceding breeding season. The efforts of a stud master must also be devoted to procuring the earliest conception of the mares under his care. He is also responsible for ensuring that stallions are not used excessively, so that they will be available to cover as many mares as possible. The demands placed on a stud master are very great. It is hard to imagine many of such persons being willing to spend the extra time necessary in the first season to learn the proper use of Ovascan and Boveq. In order to prevent it being misleading, therefore, the statement that stud masters could use Ovascan and Boveq for their intended purposes required to be qualified to ai substantial degree. Mrs. Crennan submitted that the admitted representations were made in the context of an examination of the manual which ahem — Use ee oo; Rope tres ee os edie 2 en evn ae er, te wee kiae we ET a ee iene ~ 29 - accompanied each instrument. A fair reading of each manual, so she submitted, would make it clear that the machines required use by a properly trained operator before they would be effective, and that interpretation of the results was a matter of experience. There are two answers to this submission. The first is that, in the context of the meeting of 4th May 1983, it is unlikely that such reference to the manuals as took place had any real effect in qualifying statements which Mr. Green made. In the second place, the manuals themselves do much less than is necessary to provide potential users with a full understanding of what is involved in learning to operate the machines. One prime example emerges from the Ovascan manual. With the Ovascan there is provided a plastic bottle of test fluid. The manual requires that each of the two probes that comes with the machine be inserted into this test fluid before use each morning. The manual itself advises that a reading of 85 should be obtained from insertion of the probe into the test fluid; if the reading is higher, the probe reguires cleaning to remove oxidization or foreign matter. A separate leaflet included with the manual explains that it is unnecessary to obtain a precise reading of 85, but the operator should look for a consistent reading each day. In many cases, however, readings with the test fluid have been very substantially higher than 85. In the witness box, Mr. Regas obtained test fluid readings in the 120's and 140's with two different probes. To be sure, the state of cleanliness or oxidation of these probes was not fully ascertained, but Mr. Regas was unperturbed by these high readings, saying that consistent readings of that kind each day in the test fluid would be an adequate base from which to use the Ovascan. An operator ed of persone = ere uA qt tee 4 5 ares year Ase pany DT ee ee ene miner are ee - 30 - would not readily understand this to be the case from reading the manual. Consistently high readings in the test fluid did give rise to considerable confusion during field days conducted by Squibb employees whilst attempting to sell the machines. Mr. Regas was concerned to emphasize in his evidence the irrelevance of absolute mumbers, and 'the necessity for ascertaining the pattern of each individual mare. A fair reading of the manual would not, however, bring home to every potential operator the full realization of this fact. Even Mr. Robey, who must be regarded as a successful user of Ovascan, spoke consistently in terms of absolute numbers. His advice to people in Australia was that he always bred a mare when the reading was below 100. Apart from cases of infection, or urine pooling, readings below 100 either did not occur, or occurred only rarely, when Ovascan machines were used by either Mr. Layton or Mr. Reed. I am therefore of the view that the admitted representations amounted to misleading conduct on the part of Tully. In contrast with the representation as to gender selection, the admitted representations were mot such as could reasonably have been checked by Squibb. No real evaluation of their effect could be made by consulting any expert readily available, since no expertise existed in Australia with respect to the machines. The only real evaluation of their success that could be made was from the results of their use during the first stud season following May 1983. As will be seen, the actual evaluation of the performance of the machines during that breeding season was that they were ineffective, and they were withdrawn from the market in November 1983. ay renee Ge me pene tee ae teat Rend a rrr aaa Site we wo . ra are = rice oe very a Tre yen ern erties ait - 31 - The Respondents contended that this withdrawal from the market resulted from inappropriate and inadequate marketing techniques on the part of Squibb, and that Mr. Green's advice to Squibb in this regard was ignored. That advice was said to have corrected any misleading effect which the admitted representations might have had, so that purchases by Squibb of later consignments of the machines were said not to have been induced by any misleading conduct. To evaluate these submissions, it is necessary to examine at some length the events which occurred in and between May and November of 1983 in relation to the marketing of Ovascan and Boveg in Australia. The initial order from Squibb to Tully was for ten sets of instruments. A decision was taken by Squibb to market Boveg and Ovascan through the Sheer-Eze division, rather than through the division which deait with veterinary products. This was because the Sheer-Eze division, in some cases, dealt with end-users of products, whereas the division which sold veterinary products dealt with wholesalers. It was seen as appropriate to market Ovascan and Boveq through the same division as the Magnetopulse machines, and by means of the same personnel. In Charge of marketing was Craig Turner, an experienced marketing executive. On 9th May 1983, Michael Alexander was engaged hy Squibb as a full time salesman. He had already had some involvement in selling Magnetopulse machines to horse trainers, and Mr. Green recommended to Squibb that he be engaged full time. Mr. Alexander was experienced in the horse traaning industry, and was expected to relate well to horse trainers and breeders. He was undeniably successful at all relevant times in selling we rg erg STE SET re pean ween een coe es L 03 ey eee sot eorye ry te a 8, v To eee pre pre pe Nye oe rene gp ere, - 32 - Magnetopulse machines. Mr. Alexander was given the title National Sales Manager, with reference to Magnetopulse, Boveq and Ovascan. Other sales personnel engaged were a Mr. Rooke and a Mr. Wells. In the course of May, Mr. Alexander had a conversation with Mr. Green in which he received some information about Ovascan and Boveq. When the first consignment of the machines arrived at Squibb, Mr. Alexander began what he described as field testing the instruments. This involved visiting stud farms and obtaining readings from mares with the Ovascan and attempting to find pregnancies with the Boveq. The months of May and June, when these field tests were proceeding, were, of course, well outside the breeding season. Few mares have oestrus periods outside the spring-time months. Mr. Alexander obtained Ovascan readings which, to the best of his understanding, were consistent with non-oestrus periods in mares. In other words, all of the readings were high. In addition, the Boveg could not be used for the detection of early pregnancy in the months of May or June, because no mares in early stages of pregnancy were available. On oy about 15th July 1983, Mr. Robey and Dr. Ranjit Fernando arrived in Perth from the United States. Mr. Robey, as T have already said, was a stud farm owner in Oklahoma, and a successful user of Ovascan and Boveq. Dr. Fernando was an expert in the theory behind each of the instruments, particularly in relation to their use with cattle. The air fares of these two men from the United States to Australia were paid by Animark. A couple of days after the arrival of Mr. Robey and Dr. Fernando in coe = tee ener es oe opr oye An ne pee cee = att aay e ~ 33 - Perth, a seminar was held at a mock historic town known as the Pioneer Village. This seminar was recorded on a video tape, made and edited hy a professional camera operator. In attendance were staff of Tully, both sales and stud farm staff, and various stud masters who were invited to attend. Dr. Fernando lectured on the theory behind each of the 'machines, with the accompaniment of slides showing graphs and representations of Boveq screen readings. Mr. Robey spoke at length about the practical use of the machines. He then demonstrated the practical use of each machine on a mare which had been brought to the Pioneer Village for the purpose. Shortly after the Pioneer Village seminar, Mr. Robey and Br. Fernando flew to Melbourne. Their internal airfares were paid by Tully. On 21st July 1983, at the President Motor Inn, in Queens Road Melbourne, a seminar was held. This was attended by Squibb personnel, and by stud masters invited for the occasion. The format of the seminar was similar to that at the Pioneer Village, with the exception that no mare was available for practical demonstrations. Mr. Robey, Dr. Fernando, Mr. Alexander and the other Squibb salesmen then flew to New South Wales, where a seminar was conducted at Singleton. This seminar was not well attended by stud masters. In the next few days, various field days were held in New South Wales and Victoria, at which Mr. Robey demonstrated to various persons, including Mr. Alexander, the practical application of Ovascan and Boveq. One such field day was held at the McCarthy stud farm, which was then situated at Flowerdale. TF meen es ey te "a Lan fo oar tome SE Ion cnet ope ie sre ue mie r- vem boot af Amos ee tee pene renee wee eae ee atl. Mae ve res Seer me ce ee wat of ~ 34 - Another was held at Berwick in Victoria, to demonstrate the machines to a number of vets who specialized in the horse breeding area. As might be expected, some opposition to the use of the machines, and some doubt as to their effectiveness, were expressed by the vets. Early in August, Mr. Robey and Dr. Fernando returned to Western Australia. There they conducted another field day at Mr. Green's) stud. This was attended by the Tully staff and certain stud masters. It too was filmed on video tape by Mr. Green himself. It involved demonstrations of the practical use of Ovascan, with the stud masters practising on mares. On ofr about 7th August 1983, Mr. Robey and Dr. Fernando flew back to the United States. Their departure was later than had been originally planned, because Squibb sought to extend their stay in . Victoria longer than that planned. The result was that Tully was forced to expend money in adjusting airfares, so as to enable the extended stay to occur. Mr. Robey gave evidence that, at the seminars and field days in which he participated, the Ovascan and Boveq machines were not working satisfactorily. Some of the problems were caused by inadequately charged batteries. Each of the machines is operated by nickel-cadmium batteries, which are capable of being charged by means of a small charger plugged into an ordinary electric power point. When battery charging problems did not occur, Mr. Robey consistently found readings with the Ovascan that were higher than he had expected, and Boveg readings which did not accord with the condition of the mares upon which ENR pen et ee pee Tope t meprr i Se pe eee wo RT pe oe Mele alee, Ton ee a - 35 - the instrument was used, as such condition was explained to hin. On his return to Perth, Mr. Robey told Mr. Green that he was concerned that no one in Australia really understood the machines, and stated that there was a real need to have trained personnel available if the machines were to be sold. On 26th July 1983, Mr. Green sent the following telex to Mr. Turner: "IT WAS SUGGESTED TO MIKE ALEXANDER THAT MR ROBEY AND DR FERNANDO LEAVE PERTH THIS WEEKEND AND SPEND 7 TO 14 DAYS WITH YOU IN VIC. I HAVE NOT HAD A REPLY. I FEEL IT IS IMPERATIVE THAT YOUR STAFF ARE FULLY CONVERSANT WITH THE OPERATIONS OF THE EQUIPMENT. THEY SHOULD ALSO BE TAUGHT HOW TO CALIBRATE THE BOVEQ AND OVASCAN. IF UNTRAINED SALES STAFF ARE PUT OUT IN THE FIELD, THE COMPANY AND THE PRODUCT WILL QUICKLY LOSE CREDABILITYEsic.3. THEREFORE, IT IS ESSENTIAL THAT THEY ARE 110% CONVERSANT WITH THE EQUIPMENT. IN ADDITION, ANY STUD HERE IN WA THAT WE HAVE TAKEN MR ROBEY AND DR FERNANDO TO HAS RESULTED IN SALES FOR THIS COMPANY. THIS WAS DEMONSTRATED BY THE ACCEPTANCE OF THE PRODUCT WHEN FIELD TESTED AT SINGLETON NSW. IF MR ROBEY AND DR FERNANDO HAD NOT BEEN PRESENT THOSE SALES WOULD NOT HAVE BEEN CONCLUDED. MIKE ALEXANDER HAS ALL THE ENTHUSIASM IN THE WORLD AND CHANNELLED IN THE RIGHT DIRECTION HE WILL BE SUPER-SUCCESSFUL. I UNDERSTAND FROM A PHONE CALL I HAVE RECEIVED THAT A DEMONSTRATION HAS BEEN ARRANGED FOR GLEN APPIN STUD, VICTORIA, THIS SATURDAY. IT IS ONE OF THE MOST PROGRESSIVE AND AGGRESSIVE HORSE MERCHANDISERS In AUSTRALIA. IN MY VIEW MIKE IS NOT EXPERTENCED ENOUGH TO APPROACH THESE PEOPLE. I URGE YOU TO POST-PONELsic.1 THE DEMONSTRATION AND HAVE MR ROBEY AND DR FERNANDO ATTEND WITH MIKE. I SINCERELY HOPE YOU ACCEPT MY ADVICE AS IT IS GIVEN FROM A LONG ASSOCIATION WITH THE BLOODSTOCK INDUSTRY. WE NEED TO KNOW FORTHWITH WHAT YOUR ATTITUDE IS AS WE HAVE TO CONFIRM BOOKINGS FOR MR ROBEY AND DR FERNANDO IMMEDIATELY. PLEASE REPLY BY TELEPHONE. COPIES TO DENNIS BEAD AND JOHN JOINER IMMEDIATELY. "" amass en) wea eee SN Lg ' Tere nt ON oe rie ee trae wees ge ~t from Mr. Green to Mr. Turner, with copies to misleading effect of the - 36 - In the course Joiner, Mr. Green said: "I AM UTTERLY DISGUSTED WITH THE UTILISATION THAT HAS BEEN MADE OF DR FERNANDO AND MR ROBEY ON THEIR SECOND TRIP BACK T€sic.1 VICTORIA. IT WAS POINTED OUT TO YOU, CRAIG, THAT I HAD TO CANCEL THEIR RETURN U.S. TICKETS ON WHICH NO REFUNDS ARE FORTHCOMING AND THIS COMPANY HAD TO BEAR THE COST OF RETURNING THEM TO THE USA. YOU WERE ASKED TO ENSURE THAT THE PROSPECTS THEY WENT TO SEE WERE IN FACT WOULD-BE PURCHASERS OF THE PRODUCTS. IN ALL INSTANCES UP UNTIL THURSDAY EVENING THEY WERE NOT TAKEN TO ANY HORSE PROPERTY THAT WAS IN A POSITION TO PURCHASE THE EQUIPMENT. THEY FEEL THAT YOU AND YOUR STAFF HANDLING THESE PRODUCTS QUOTE - ARE THE MOST UNPROFESSIONAL PRESENTERS THEY COULD EVER HOPE TO MEET - UNQUOTE. YOUR SEMINAR IN SINGLETON WAS A FIASCO WITH ONLY 4 PEOPLE ATTENDING WHEN THERE ARE ROUGHLY 200 BREEDERS IN THE AREA. YOUR HANDLING OF MR JOHN CLIFFS OF KIAORA STUD, NSW, LEAVE ALOT TO BE DESIRED AS HE IS A MOST UNHAPPY MAN. YOU WERE INFORMED SOME 5 WEEKS AGO THAT THESE 2 GENTLEMEN WERE COMING FROM THE STATES, YET NO WORTHWHILE ARRANGEMENTS WERE MADE TO ENSURE THAT YOUR SEMINARS WOULD BE SUCCESSFUL. NO EFFORT AT ALL HAS BEEN MADE TO ORGANISE A SEMINAR IN NEW ZEALAND WHICH IS AS BIG A MARKET AS ANY COUNTRY IN THE WORLD. DR FERNANDO AND MR ROBEY FEEL THAT THE ONLY KNOWLEDGABLE PEOPLE THEY HAVE BEEN INTRODUCED TO ON THIS TRIP TO VICTORIA HAVE BEEN MR MC CARTHY AND HIS TRAINED STAFF. IF YOU ARE TO CONTINUE MERCHANDISING THIS EQUIPMENT YOU OUGHT TO PULL YOUR FINGER OUT ANYE€sic.1 LEARN SOMETHING ABOUT IT BECAUSE AT THIS POINT YOU KNOW NOTHING AROUT MAGNETOPULSE, BOVEQ OR OVASCAN OR ANY OTHER PRODUCTS BEING MARKETED. IN MY VIEW YOUR MARKETING STRATEGY IS NON-EXISTENT, YOU HAVE RELIED ON THIS COMPANY TO SUPPLY FINISHED ARTWORK, ADVERTISING BROCHURES, MATERTAL FOR YOUR SEMINARS. IN FACT, NOT ONCE HAVE I SEEN A PIECE OF MATERIAL THAT HAS BEEN PRODUCED BY SHEER-EZE."" One contention on behalf of the Respondents was that any of another telex dated 5th August 1983, Mr. Beed and Mr. conversation on 4th May 1983 was - 37 - corrected by these telexes, and by conversations at about the same time, in which Mr. Green underlined the need for proper training of Squibb personnel in order for the sales of the machines to be successful. In the alternative, the Respondents, in cross-examination and in evidence accused Squibb of having misused Mr. Robey and Dr. Fernando; it was contended that those gentlemen were brought from the United States for the purpose of training Squibb staff, to enable them to provide the necessary back-up for users of Ovascan and Boveq. Instead, it was complained, Mr. Robey and Dr. Fernando had been used simply as salesmen to potential users. Two obvious answers may be made to these contentions. In the first place, there was no difference between the training which Squibb sales personnel received from Mr. Robey and Dr. Fernando, or indeed from anywhere else, and the training which was received by Tully's sales personnel. The attendance at seminars and field demonstrations seems to have been regarded on all sides as sufficient training for personnel who were to deal with users. The second contention is destroyed by the text of the two telexes themselves; in each, Mr. Green made complaints that Mr. Robey and Dr. Fernando had not been adequately used in the sales area. These events only underlined the proposition that, at no time before the commencement of the 1983 stud season was there any realization in Australia, except perhaps on the part of Mr. Robey, of the extent to which purchasers of the machines would need technical support and encouragement. The result of this om BOT er eer ae ae TO TTT rene = Ww Pe ne - 38 - lack of appreciation of the complexities and difficulties of Operation of the machines was that no one in Australia was adequately prepared for what occurred when the 1983 stud season opened. This was, at least in part, so far as Squibb were concerned, a direct result of the representations made by Mr. Green at the meeting of 4th May 1983, to the effect that the machines were capable of being used by stud masters. These representations conveyed the impression that stud masters would learn to use the machines far more easily than they in fact did. Squibb continued to order sets of machines, up to the total of 51 sets ordered and delivered, under the mistaken impression that stud masters would have no real difficulty in learning how to use then. The 1983 breeding season began in early September. Shortly afterwards, the first complaint of inadequacy of the Ovascan was received from a purchaser in New South Wales. Thereafter, complaints came from most of the few persons who had Purchased machines to that date. Mr. Alexander attempted to investigate these problems, but was unable to understand the readings obtained from the Ovascan when it was used on mares which were obviously in periods of oestrus. As a result of complaints received, a machine which had been delivered to Mr. Layton was retaken, and was passed to a firm of electronics engineers specialising in medical ultrasonics, named T.G.S. Electronics. The principal in this firm was a Mr. Daw. He had already reported adversely upon each of the machines. In particular, on 25th August 1983, Mr. Daw — panes we er - 39 - reported in relation to Boveq broken and loose fuse holders, which fuse holders were said to be of poor quality, internal snap connectors which were likely to give trouble, misalignment of cathode ray tubes, battery failure on some machines, and difficulty with calibration. On 24th August 1983, Mr. Daw reported that none of the Ovascan units tested came up to specification, in that all readings were outside those contained in the manufacturer's specifications, at various levels of resistance. In a further report, dated 14th October 1983, Mr. Daw drew attention to the inadequacy of the battery chargers with each of the machines, it being illegal to sell those chargers which were supplied in Australia, the incorrect calibration of all Ovascan machines, defective connectors on the probes of the Ovascan, being both the connectors within the handle of the probe, and the connector between the cable and the instrument itself, and the failure of the test fluid to provide readings anywhere near those referred to in the manual. In relation to Boveg, Mr. Daw reported on the inadequacy of the battery chargers, on the poor quality fuse holders and connectors, the poor mechanical alignment of the cathode ray tubes, and aifficulties in charging batteries. Mr. Daw gave evidence confirming all of these findings. Mr. Regas dismissed these criticisms, claiming that they were made by someone who had been given the task of finding fault with the machines, and were not related to any alleged inadequacy of the performance in the field of the parts criticised. There was considerable controversy between the parties as to whether adequate information was available as to the integrated circuits in the machines, and as to calibration. In the result, it appears that Animark aegre ar ore rat epee ee fy € feo ve ~ qe ge ech oe "~ a -~ 40 - deliberately withheld information about the integrated circuits, for fear of having its machines duplicated by other manufacturers, In a written report, dated 4th October 1983, Mr. McCarthy gave his evaluation of the machines. He discussed the technical problems raised by Mr. Daw about the Ovascan. He concluded that the Ovascan would only be useful if used by professionally qualified people, and that it was not an instrument of practical application in the field in which it was being promoted. He discussed the practical problems experienced with the Boveq at Glen Appin stud and his own stud, particularly the tendency of the Boveq to give a positive indication of which were not pregnant. Mr. pregnancy when applied to mares McCarthy's report concluded as follows: "In view of the above, and as the problems are encountered over a wide range of machines it is reasonable to assume that the technical capabilities of the machines are not within the makers expectancies. I believe that the From my own point of view have been grossly over capabilities of the products stated and the user's dissatisfaction that has consequently been generated has done much to harm the corporate image of Sheer Eze and obviously Animark. Animark is however less adversely effected{Csic.]J as they are guite removed from the operational problems of the products in this State. recommendation that all products immediately returned to the taken to obtain some It would be my presently in stock he manufacturers and steps compensation." Notwithstanding the contents Mr. doiner requested Mr. instruments for a further month. of Mr. McCarthy's report, McCarthy to persevere with the Mr. McCarthy did this, and at cep we ey one TET oe rere ne, trees cee tes hace Mean een ob in 2 as Pot ee oy re . Cry Mea tee trots mre. ' e i ee ri tro a) Cia ar a toy - 41 - about the end of October, confirmed to Mr. Joiner his view of the efficacy of the machines. Squibb then made the decision that they would withdraw all machines from the market; they refrained from selling any more, and offered to each purchaser a complete refund of the purchase price, upon the machines being returned. In November 1983, Squibb advised Tully that it had withdrawn from the market. A letter of demand, dated 25th November 1983, Claimed the return of the full purchase price, amounts expended on testing by T.G.S. Electronics, loss of profit and loss of reputation. It is worth noting that, in November of 1983, Tully also ceased to sell Ovascan and Boveq in Western Australia. in evidence, Mr. Green blamed Mrs. Mitchell and Squibb for this decision. According to him, rumours were being spread in Western Australia of action by Squibb, and Mrs. Mitchell was adding fuel to these rumours by complaining that the machines did not work. It is plain from these facts that the misleading effect of the admitted representations was not at any relevant time corrected. Although Mr. Green's telexes, from which I have quoted, stressed the importance of training of sales staff, they did not carry with them any clear indication of the true extent of such training, or of the reasons which made it necessary, namely the difficulty which potential purchasers would inevitably have in learning to interpret the results of Boveg and Ovascan. The reality was that the training received by Squibb's sales staff was in no sense different from that received by Tully's sales staff in Western Australia; in each case, staff were ar TT ¥ - 42 - expected to learn from listening to Dr. Fernando and Mr. Robey, and from practical demonstrations by Mr. Robey, and practice under his supervision. To the extent that this was inadequate, it was all that was available, and all that was supplied by Tully. In addition, as I have said, it is inconsistent for Mr. Green now to criticise Squibb for failing to make adequate use of Dr. Fernando and Mr. Robey as trainers of sales staff, when his telexes at the time were vehemently critical of Squibb for failing to make adequate use of Dr. Fernando and Mr. Robey as direct salesmen of the machines. It is also clear that nothing occurred between 4th May 1983 and 25th August 1983, when Squibb was invoiced for the last consignment of the 51 sets of machines, to bring home to Squibb the misleading mature of the admitted representations. It is true that Mr. Alexander had encountered difficulties in the operation of the machines when he had attempted to conduct field days. It is also true that Mr. Robey had problems in obtaining what he regarded as rational results during his demonstrations. These problems, however, were thought to be the result of insufficient charging of the batteries, improper calibration, or minor faults in wiring and connectors. Mr. Daw reported on the failure of some batteries to charge, and on the calibration, wiring and connector flaws, as early as July. It must be remembered, however, that the gist of the admitted representations concerned use by stud masters. It was not possible to test whether stud masters could readily make use of the machines until the 1983 breeding season. Only then did it become clear that stud masters were having and would have real "weer Tee Ine See pe me cree ew Per i hin ae rane ro cee - 43 - aifficulties in interpreting the results of operation of the machines, even if the batteries were fully charged, the calibration was accurate, and the wiring and connectors were sound. In the circumstances, it is not surprising that Squibb sought to have Mr. McCarthy investigate the machines, and attempted to persevere during the 1983 breeding season. Nor was it unreasonable for Squibb to withdraw altogether from the market, when it found that its efforts were to no avail. Had Squibb been acquainted with the true extent of the difficulty of interpretation of the results of Ovascan and Boveg at an early stage, its marketing strategy may well have been different. Whether it would have been more successful is a matter of speculation; the important fact is that Squibb never had the opportunity to make an informed decision as to how to market the machines correctly. The reason for this lack of opportunity is the misleading nature of the admitted representations which were made on 4th May 1983. A subject which became an issue in the course of the trial was that of video tapes. A copy of each of the two video tapes made during the visit to Australia of Mr. Robey and Dr. Fernando was tendered in evidence. Mr. Green claimed that a copy of each had been forwarded toa Squibb, as part of the material to be used in the promotion of the machines, or the training of sales and advisory staff. This claim was supported by evidence from Ms. Leanne Peebles, Mr. Green's former secretary, that on 13th September 1983 she posted to Mr. Beed a copy of the Pioneer ae nent Se eee - 44 - Village video tape. Ms. Peebles produced a book containing a record of items posted, which had been kept by her. The relevant entry for 13th September 1983 was "D. Bead - tape, papers." In ecross-examination, it became clear that Ms. Peebles had no knowledge of the contents of any video tape she may have posted; 50 far as she was aware, the "tape" concerned may have been the one made at the Pioneer Village seminar, the one made at Mr. Green's stud farm, or even a copy of an early video tape dealing with the Magnetopulse. No record appears of the posting to Squibb of any other video tape. It is interesing to note that, for 26th September, there appears in the record of postage an entry "Jeanette Mitchell ~- video of demo. (Tully)". For the same date, there were several other names, followed by ditto marks under the words "video of demo. (Tully)". Mr. Beed gave evidence that he did not receive from Tully any copy of any video tape relating to Ovascan and Bovegq. Squibb did receive one copy of the video tape made at Mr. Green's stud farm, which Mr. Beed swore was given to him by Mrs. Mitchell in 1984. In my view, it is more probable than not that Squibb did not receive any relevant video tape from Tuliy. I accept Ms. Peebles as an honest witness, but her evidence was based heavily on the postage record, and the relevant entry, especially when compared with the more specific entry for 26th September, does not inspire confidence that she is able to give an accurate account of what was sent as "tape, papers". If Iam wrong, and Squibb did receive a copy of a video tape, it arrived too late to have any relevance to any decision of Squibb to order Ovascan and Bovegq Machines, and therefore too late to umdo the effect of the admitted representations. September 13th was well after Squibb "> ae T SOD TDN Ts te nt ten crepe ste = ep ce Se dite intel rte a ae a i x, ct a Horm wre se rte cee - ce meee cee + - 45 - had been invoiced for the last consignment of machines; by that date, the 1983 breeding season had begun. Remedies It follows from what I have said that, on 4th May 1983, Tully engaged in misleading conduct, such conduct being the admitted representations made by Mr. Green to Mr. Joiner and Mr. Beead,. It also follows that Squibb suffered loss as a direct result of that misleading conduct. The question then arises as to the most appropriate remedy in the circumstances of the case. A good deal of argument in the case was concerned with allegations of breaches of implied conditions in the various contracts for the sale of the machines from Tully to Squibb, particularly conditions as to fitness for purpose and merchantable quality. BR good deal was also said about the question whether Squibb had lost the right to reject the goods, and was compelled to treat any breaches of conditions as breaches of warranties, and to sue only in damages. Reference was made to ss. 16(3), 41 and 42 of the Goods Act 1958 (Vic.). In the result, having regard to the greater variety of remedies offered by the Trade Practices Act 1974, there is little point in discussing remedies under State legislation. If I were compelled to do so, I should reach the conclusion that Squibb did lose the right to reject the goods, by selling or attempting to sell then, an act inconsistent with the ownership of the machines by Tully. In that event, damages would be difficult to calculate; I am not satisfied that Ovascan and Boveq had absolutely no value in November 1983, or at any time since, and no evidence was led vee types ~ 46 - which would enable the Court to fix a value. Mr. Daw gave evidence that each set of machines required the expenditure of $320.00, to put them into what he regarded as saleable condition. His evidence was based more on an assessment of parts of the Machines which might cause trouble, than on tracing actual trouble to specific faults. ' If it were driven to reliance on the legislation relating to sale of goods, Squibb would have great difficulty establishing its entitlement to any damages. As I have said, however, it is unnecessary for me to examine those questions in detail. Section 87 of the Trade Practices Act 1974 provides a range of remedies applicable to cases such as the present. In particular, it empowers the Court to declare void any contract, and to order the refund of money. In my view, in the present case, some form of rescission of the contracts for the sale of Ovascan and Boveq is appropriate. Tf all the machines are returned to Tully, to the extent to which they have a market value, Tully will be able to recoup that value. To the extent to which they do not have a market value, it is appropriate that Tully should bear any loss, as the party which has engaged in misleading conduct. If any recourse against Animark is possible, it is Tully which has that recourse. It seems to be just that the party whose conduct has occasioned the loss should be the sufferer of that loss. Section 87 does not in terms allow the Court to grant the remedy of rescission. There is no express power to order Tully to take back the 51 sets of machines which were delivered. ee re py eng fae . we Seed - 47 - If the contracts for the purchase of those machines are declared void, however, and if Tully is ordered to repay the purchase price, it will follow that Tully will become entitled to the return of the machines. The orders which can be made under s. 87 are not, as is the equitable remedy of rescission, conditioned upon the ability of an applicant to make full restitution. Even though full restitution is not required, the Applicant is in a position substantially to redeliver all 51 sets of machines. True it is that one probe from one Ovascan machine has been pulled apart, by Mr. Daw, for the purpose of examining the connectors. It may also be true that some of the batteries in the machines may have failed by reason of their not having been recharged in the last two years. The destruction of one probe does not affect to any high degree the ability of the Applicant to give back substantially what it received. The loss of any battery power is a consequence of the failure of Tully to accede to Squibb's demand to retake the machines in November 1983, and of the ordinary processes of litigation. It is appropriate that Tully should bear any loss resulting from the failure of batteries. For these reasons, I propose to make an order declaring that each of the contracts between Squibb and Tully for the sale of Ovascan and Boveg instruments, made in and between May and August 1983, is void, and an order that Tully repay to Squibb the sum of $397,800.00, the total of the purchase prices of those instruments. There was also a claim for damages, by way of expenses te mr reas fi Sr ree eee Ge - 4B - incurred by Squibb in attempting to market the machines, and in procuring an investigation of their quality by T.G.S. Electronics. The amounts, which were primarily calculated by Mr. Beed, were not the subject of serious dispute. They are as follows: Advertising $6,508.00 Portion of salaries of staff involved $29,114.00 Portion of workers compensation insurance premiums $1,116.00 Portion of payments to superannuation scheme $2,329.00 Portion of payroll tax $1,747.00 Additional insurance premium on stock in hand $873.00 Entertainment $939.00 Motor car expenses $4,375.00 Airfares and accommodation $4,607.00 Cost of seminar at President Motor Inn $442.00 Cost of seminar at Singleton Motel $468.00 Printing and stationery $780.00 Print graphics $89.00 Telephone $703.00 Brochures $2,300.00 Investigation and report by T.G.S. Electronics $2,205.00 These amounts total $58,595.00. So far as they concern staff, the amounts have been calculated by reference to the estimated percentages of their working time which the various members of staff spent in relation to Ovascan and Boveq over a seven month period. Mr. Beed also calculated an amount of $2,416.00 in respect of holiday pay and sick leave, but I do not regard this as a reasonable claim; it involves duplication of salary. All the amounts which I have listed above are reasonably incurred. Tf therefore propose to order that Tully pay Squibb damages in the sum of $58,595.00. " wT TET > wo Te ne ee ys ce conga ee eee oon rai " vary OTT re ens " ws wore, ' as ree aoe - 49 + In the statement of claim, a claim also appeared for loss of profits. I do not propose to award any damages under this head. The claim was based on the sale price of $14,000.00 which, on the evidence, was fixed as appropriate by Mr. Joiner at the original meeting on 4th May i983. This figure was, in effect, plucked out of the air by Mr. Joiner. The evidence is that it was fixed upon by reference to a statement of Mr. Green that another ultrasound pregnancy detector for animals was on the market at about $20,000.00. At no stage did Squibb ever sell a set of Ovascan and Bovegq for the price of $14,000.00. There is no satisfactory evidence to indicate that sales at that price were likely. Further, there has been no assessment made or attempted of expenses which would have been involved in selling. There is, therefore, no proper basis on which loss of future profits could be calculated. The final monetary claim was one in respect of interest. The cause of action relied upon in this case arose before 22nd November 1984, when s. 51A of the Federal Court of Australia Act 1976 came into operation. That section now deals with the subject of interest up to the time of judgment on claims for the recovery of money. Squibb nevertheless claimed interest, the claim being put in two ways. It was said that the judgment of the majority of the Full Court in Centrepoint Freeholds Pty. Ltd. v. TN. Lucas Pty. Ltd. (1985) 60 A.L.R. 187 obliged the Court when sitting in Victoria to award interest on claims for debt or damages, pursuant to s. 79A of the Supreme Court Act 1958 (Vic.), as imported by s. 79 of the Judiciary Act 1903. In the alternative, reliance was placed on evidence from Mr. Beed FOr rage ce eee ee nee en . ve were nor; soar ter we eee er er nt - 50 - that Squibb borrowed money to finance its purchases of the machines, and paid ordinary commercial rates of interest on that borrowed money. The interest so paid was claimed as damages, pursuant to 5s. 82 of the Trade Practices Act 1974. See Milner v. Delita Pty. Ltd. (1985) 61 A.L.R. 557, at pages 576-581. Counsel for Squibb conceded that the claim could not encompass both interest on money borrowed to purchase the machines, and interest pursuant to 5s. 79A of the Supreme Court Act 1958 (Vic.) on the recovery of the purchase price. In their joint judgment in Centrepoint Freeholds Pty. Ltd. v. T.N. Lucas Pty. Ltd., at pages 196 and 197 Sweeney and Woodward JJ. laid stress on the fact that the judgment which was held to attract interest under Victorian law in that case was a judgment based upon the law of Victoria. If that was the reason, or a major reason, for the applicability of s. 79A of the Supreme Court Act 1958 (Vic.) in that case, it is a reason which does not exist in the present case. Squibb's claim, so far as it is successful, is based on the Trade Practices Act 1974 alone. In my view, there must be serious doubt about the ability of a litigant in this Court to invoke the provisions of State legislation, providing for interest on claims arising under State law, Where the litigant is able to rely only upon a cause of action given by a law of the Commonwealth. Reference should also be made to Nella v. Kingia Pty. Ltd. (1985) 61 A.L.R. 603, at pages 606 and 607. I therefore do not propose to award interest under the Supreme Court Act 1958 (Vic.). The right of an applicant under s. 52 of the Trade ' fu eedaaetat teticameaieed cnn ees od SEU EEnanenaenad lipeainenie' hae ee geen wn er oT ter eee F % oe ote ee - 51 - Practices Act 1974 to recover as damages interest paid on money which it was induced to borrow by reason of misleading or deceptive conduct is well established. The authorities are referred to in the passage I have cited from Milner v. Delita Pty. Ltd. Mr. Beed's evidence on this aspect of the case was not challenged. According to him, Squibb borrowed from its bank, by way of overdraft, the $397,800.00 used to purchase the machines. He calculated interest on this amount, at the rate of 14.5% per annum, from 15th August 1983, the date on which Squibb's last payment for the machines was made. For the first year, this figure was $57,680.00. Mr. Beed then compounded this amount. It is noted that, on the evidence, the bank compounded half-yearly, and not annually. He then calculated interest on the compounded amount at the rate of 14.5% per annum for thirteen months and two days, bringing the calculation to the start of the trial. The amount for this period was $71,910.00. In my view, it is appropriate to compound that figure at the date when the trial started, and to allow another six months' interest, at the same rate, to cover the period between the start of the trial and the entry of judgment. That amounts to $38,236.00. The three amounts for interest total $167,826.00, and I propose to add this amount to the order I will make for damages. It remains to deal with the claim against Mr. Green personally. As I have said, this claim is brought under s. 75Bla) and (c) of the Trade Practices Act 1974. In Yorke v. Lucas (1985) 61 A.L.R. 307, it was held that, because the words of s. 75B adopt the language of the criminal law with respect to parties, no person is made liable without the requisite mental coat) we pan noe er _* Span ye en wire oer ee qe eee -~ 52 - element of the kind which would make him or her liable in the criminal law. The present case has been conducted on the basis that Mr. Green was not acting fraudulently, or even negligently, in making the admitted representations, even though it may have been possible to attribute to him some guilt with respect to the gender determination representation. On the whole of the evidence, IT am not able to find, even on the balance of probabilities, that Mr. Green knowingly or deliberately misled Squibb with respect to the use of Ovascan and Boveq by stud masters. Accordingly, the claim against Mr. Green will be dismissed. Both counsel requested that I hear submissions on the questions of costs after announcing the orders which I propose to make. Those orders will be that judgment be entered for the Applicant against the first Respondent for a declaration that each contract made between the Applicant and the first Respondent, in and between May and August 1983, for the sale and purchase of Ovascan and Hoveq machines is void and of no effect, an order that the first Respondent repay to the Applicant the sum of $397,800.00, and an order that the first Respondent pay to the Applicant damages in the sum of $226,421.00. The Applicant's claim against the second Respondent will be dismissed. I shall direct the Applicant to prepare minutes of the orders, and fix a date for hearing argument on the question of costs, after the parties have had an opportunity to study these reasons for judgment. I certify that this and the Ss! preceding pages are a true copy of the Reasons for oe herein of his Honour Mr. Justice P.R.A. Gray N-ted- ey 56 Associate na epee t at Calera ell Cd sarge po ar