lili le ee lee ik ed 7" anes 1 tsa . 27S Trade Practices - application for interlocutory injunction under s.52 Trade Practices Act 1974 - misleading or deceptive conduct - whether respondent's advertising and promotional material inferred criticism of applicant's product - no express reference to applicant's product - reference to chemicals contained in applicant's product - whether substantial damage likely to be caused to applicant - whether serious question to be tried - prospect of success of applicant's case - genuine attempt by respondent to resolve issue. Trade Practices Act 1974 $3.52,53 ICI AUSTRALTA OPERATIONS PTY. LIMITED v. TERONA NOMINEES PTY. LTD No. WA G58 of 1986 MUIRHEAD J. PERTH 17 JULY 1986 IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION No. WA 058 of 1986 we ewe BETWEEN: ICI AUSTRALIA OPERATIONS PLY. LIMITED Applicant and TERONA NOMINEES PTY. LTD Respondent MINUTE OF ORDER JUDGE MAKING ORDER: MUIRHEAD J. DATE _OF ORDER: 17 July 1986 WHERE MADE: Perth THE COURT ORDERS THAT: 1. That the application be dismissed. 2. The applicant pay the respondent's costs of and incidental to the application. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. oS Wr tee ee So A ee fanmee wr foe ee ae IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION No. WA G58 of 1986 wee ww BETWEEN: ICI AUSTRALIA OPERATIONS PIY. LIMITED Applicant and TERONA NOMINEES PTY. LTD. Respondent CORAM: MUIRHEAD J. 17 July 1986 REASONS FOR JUDGMENT The applicant carries on business throughout Australia as the manufacturer of chemical products. Amongst its products is ethylene glycol commonly used as a base component in motor vehicle radiator coolant and anti-freeze preparations. The applicant is the sole manufacturer of this chemical component in Australia. It is said to contain corrosion inhibitors and is sold to others who retail radiator coolants. The applicant does not market the product in its own name asa retailer but radiator coolants marketed by companies such as Ampol, BP, Caltex. Castrol, Esso, Mobil and Shell are substantially its product. The respondent company manufactures and narkets *Plo-Kleen Coolant', which contains no glycol and which is sold as mone es 2. a radiator coolant. The respondent asserts that its product "has also proven effective in inhibiting corrosion in motor engines". In December last vear Frederick Bolza. an engineer in the applicant's emplov received in his mail a 'promotional broadsheet' containing an advertisement for 'Flo-Kleen' admittedly distributed by or on behalf of the Respondent. He purchased a container of this product, a replica of which is in evidence. The container depicts a car radiator upon which the words "Protects your investment. Does not contain highly corrosive glycol" are prominently displayed. Elsewhere the container depicts the following: "Note.- Flo-Kleen is a superior coolant free of anti-freeze substances which can reduce to acids that cause severe corrosion in multi metal systems in particular to copper solder and aluminium". In this action by statement of claim filed on 6 June last, the applicant seeks a declaration that the above statements are unlawful and in contravention of ss.52 and 53 of the Trade Practices Act 1974. Injunctions to restrain such advertising are sought including injunctions in mandatory form and provision for publication of this Court's order. By application dated the same day the applicant claims interlocutory relief restraining the respondent from such advertising or labelling and requiring the respondent to delete such statements from its labelling or advertising material. The matter was heard by me last week, when I heard counsel for both parties, substantial affidavit material having been tendered. The Pate et ar adtee a ~ a "Mn Se ae applicant which has filed the appropriate undertaking in damages seeks immediate relief. an order opposed by the respondent and this is the sole issue for present determination. I mention that understandably enough the material filed on behalf of the respondent had been hurriedly prepared. The Applicant's arqument is that the reference to highly corrosive glycol is likely to be understood as a reference to its product and is false and misleading in that it suggests that 'Flo-Kleen' is more effective as an anti-corrosive than ICI coolant and in that it fails to differentiate between natural glycol (which contains no corrosion inhibitors) and ICT coolant which contains not glycol. but glycol eathvlene plus corrosion inhibitors which comply with certain Australian Standards. The applicant arques that the expression 'qlycol' has in the trade become generically referable to its product. T revert but briefly to the history of the matter. After Dr Bolza saw the advertisement he carried out certain tests to check the performance of 'Flo-Kleen' against the applicant's product and to measure performance against an Australian Standard AS 2108-1984. He reached certain conclusions and apparently satisified himself that his emplover's product was "far superior" to 'Flo-Kleen' in preventing corrosion to all metal types. His initial report (Exhibit C to his affidavit) was dated 12 February 1986. Correspondence between the parties then ensued. On 21 February 1986 the applicant wrote to the respondent requiring it to cease promotion of its product in this manner, to recall its supplies or alternatively to take steps to ewe ee ~~ Pe ""provent anv people being misled or deceived" and to "circulate to all persons toa whom vou have supplied your said product a notice in agreed terms that states that such product is not superior in its properties to our product". The respondent promptly responded that it had forwarded the applicant's letter to the Director of Consumer Affairs in Perth "for legal opinion". Some telephone discussions apparently took place and on 6 March the applicant aqain wrote to the respondent setting out its requirements to set matters right. In a long and considered reply dated 11 March (which contained technical references) Mr Palmer, a director of the respondent company wrote expressing the belief that the statements made in the advertising material were true and setting out the reasons for his belief. On 21 March the applicant's solicitors wrote to the respondent requiring it to implement ICI's requirements and threatening legal proceedings. On 4 April 1986, the respondent's solicitor replied in what can only be termed a constructive letter. from which I quote: "Our clients have no wish to become involved in unseemingly disputation with a competitor, and are hopeful that this matter can be resolved in a reasonable fashion. To that end, our clients have written to you stating why they believe their promotional statements are true. They have done this in some detail, as they strongly believe in the truth of the statements, and they are inviting you to reply showing why they are in error, if in fact they are. If you can show that our clients are in fact wrong in their statements. then they will desist in making then. Accordingly, we submit that you should reply in detail with technical supporting data setting out why you believe our clients are wrong. To date. you have demanded that our clients cease their promotions. vet you do not respond setting out why you believe vour proposition is sound rather than theirs. wre id is ae Spee Nee we cad Our clients feel that it is unreasonable for you to expect them to comply with vour wishes simply because of vour threats. when they are doing nothing more than stating what they sincerely believe to be true, and when you fail to reply to their detailed explanation of why thev believe it to be true. Please let us have your detailed and technical analysis of whv you say our clients are wrong. Our clients will consider the same. and if your position is the correct one. then our clients will cease." On 22 April the applicant's solicitors replied stating inter alia:- "We consider the basis of our client's complaint adequately appears from the correspondence which passed between our clients. Paragraph (v) of your client's letter to ours of Jlith March. 1986 asserts that - "taking all these factors into consideration, it is my firm conviction that ethylene glycol does materially assist the process of corrosion in car cooling systems." However this assertion appears to miss the point made quite clearly by our client in its letter to yours of 6th March, 1986 namely that what our client manufactures is not ethylene glycol in its natural state but a formulated glycol product containing anti-corrosion agents. Moreover, as our client has noted, the expression "qlycol" has come to be used generically as referring to anti-freeze and coolants qenerally. Accordingly, we consider that a reasonable motorist on viewing vour client's advertising and packaging would not draw the distinction between uninhibited ethylene glycol in its natural state and the formulated glycol products containing anti-corrosion agents available for purchase in any motoring accessory shop. Your client's references to "highly corrosive glycol" and "anti-freeze substances" would be understood by the reasonable motorist as being a reference to the formulated glycol products on the market. That being the case. your client's advertising and packaging is misleading and deceptive, or is likely to mislead and deceive for the reasons already advanced by our client." As I have said. the statement of claim and application were filed on 6 June last. Ae Fr | LP a tee OTe ~-ae IT observe this is nota case where the applicant's complaints were iqnored. To the contrary there has been what appears to me a genuine attempt by the respondent to rationalise conflicting views (largely technical). The applicant's application is supported by the affidavit of Dr Bolza and of Mr Rauris who holds the position of Market Specialist (Automotive) and its correspondence asserts that the applicant "has suffered and is likely to suffer loss and damage". I have no further evidence concerning such loss but bearing in mind the extent of the applicant's activities as supplier to retailers marketing its product under their own brand it is fair to assume perhaps that the respondent's inroad into this market is currently modest. In opposition to the application the respondent relies on the affidavit of Mr Palmer and alse on a reasonably comprehensive affidavit of Dr Neil North, a Corrosion Chemist, who deals at some length with technical matters, who levels some criticism as to the appropriateness of the tests carried out by Dr. Bolza and who deposes to his own satisfaction "that the statements made by 'Flo-Kleen' on their advertising are essentially correct". The affidavit of Mr Palmer states that "severe prejudice" will be caused to his company if an injunction is now made. which effectively of course would require recall of its products for repackaging or alteration and which in that process would be likely to cause some damage to reputation or goodwill. There is a very large technical component to the dispute between the parties which cannot be resolved at this stage. a i en awe ed dates IT have concluded that the applicant has not proved its entitlement to an interlocutory injunction restraining current advertising, let alone injunctions in the mandatory forms sought. In so far as it is relevant I can make no confident forecast of the strenath of the applicant's case. or its prospects of success. It suffices to say that there is no reference in the advertising material to the applicant's products as such, and its references to glycol and its propensities will require careful examination before a finding could be reached that such references refer to the applicant's product as such, bearing in mind that glycol is but one component. Dr North swears that other companies in Australia produce "pure glycol, some ethylene glycol and some, other forms of glycol". Further evidence would be required to persuade a court that reference to this word, which Dr North describes as "a name which chemically refers to a group of chemicals having a common structure type" is likely to lead consumers to interpret it as a reference to ICI produced coolant. But assuming as I do for present purposes that there is a serious question to be tried I am far from persuaded that the balance of convenience requires or justifies a restraining order. In fact as I have prefaced, it is likely that such an order would cause substantial damage to the respondent and it is thus an order which should not be made before a hearing on the merits has been conducted. It may be that in the meantime 'Flo-Kleen' as a competitor in this market will intrude upon the marketing of ICI products under their various retail branches. Loss thereby caused is not easy to quantify, but on the material before me the 7 te eI awe . 8. inconvenience suffered bv the respondent should a restraining order be made is likely to outweigh any continuing loss suffered by the applicant. In reaching my conclusion I do not ignore the chronology of events, the frank response of the respondent to the initial complaints and its professed wish to rationalise the areas of dispute which mav be proved as largely scientific. The application must be dismissed and the applicant must pay the respondent's costs of and incidental to the application. The applicant also seeks orders and directions to secure prompt determination of the issues. Whilst JI am prepared to give directions immediately, being aware of this Court's commitments, I wish to hear counsel further before directing that an early hearing date be fixed. I certify that this and the seven preceding pages are a true copy of the Reasons for Judgment herein of his Honour Mr Justice Muirhead. Associate Dated: 17 July 1986 en er rm ee a u ot aay vee 2 err ® a aa'