a JUDGMENT No, 612.7 Su CATCHWORDS {TRADE PRACTICES - Misleading advertising - Application for orders for corrective advertising - Power of Court - Principles upon which power should be exercised - Costs of proceedings. Trade Practices Act 1974 ss.52,80. NSW G.504 of 1987 HOSPITALS CONTRIBUTION FUND OF AUSTRALIA LIMITED v_ SWITZERLAND AUSTRALIA HEALTH FUND PTY LIMITED trading as "HEALTH AUSTRALIA" Wilcox J Sydney 19 November 1987 FEDERAL COURT OF AUSTRALIA PRINCIPAL RSGisiay ey ee ee ee cate IN THE FEDERAL COURT OF AUSTRALIA ) ) NEW SOUTH WALES DISTRICT REGISTRY ) NSW G.504 of 1987 ) ) GENERAL DIVISION CORAM: PLACE: DATE: BETWEEN: HOSPITALS CONTRIBUTION FUND ' OF AUSTRALIA LIMITED Applicant AND: SWITZERLAND AUSTRALIA HEALTH FUND PTY LIMITED trading as "HEALTH AUSTRALIA" Respondent WILCOX J SYDNEY 19 NOVEMBER 1987 MINUTES OF ORDER THE COURT ORDERS THAT: The applicant publish a corrective advertisement in the following form, namely: "Announcement by HCF Hospitals Contribution Fund of Australia ('HCF') in 1ts recent advertising and promotion of its Health Insurance Benefits Scheme claimed that it provided the best value health cover and that it paid higher benefits Note: on major health care items. Having regard to new contributions rates and levels of benefits which became available from another health insurer in October, these claims are no longer correct and are withdrawn by HCF." The publication of the said advertisement to be in accordance with the schedule marked "B" to the Notice of Motion dated 16 November with the addendum of a paragraph (d) under the heading "Manner of publication", reading as follows: "(d) Type in the body of the advertisement to be 4 millimetres or ten points in size." The wording under the heading "number of occasions", in the said schedule "B", be amended to read "commencing within seven days of these orders taking effect, subject to the availability of space". The operation of these orders be suspended until the determination of the appeal to the Full Court or until further order of a Judge of the Court. Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. ae oe er eee ee - tere ee marae + mae ameees eee wae oe oo tee ere IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION BETWEEN: AND: CORAM: WILCOX J PLACE: SYDNEY DATE: 19 NOVEMBER 1987 ) ) ) NSW G.504 of 1987 ) ) HOSPITALS CONTRIBUTION FUND OF AUSTRALIA LIMITED Applicant SWITZERLAND AUSTRALIA HEALTH FUND PTY LIMITED trading as "HEALTH AUSTRALIA" Respondent EXTEMPORE REASONS FOR JUDGMENT There is a Notice of Motion before the Court, taken out by the respondent, seeking an order that the applicant publish correcting advertisements in a form attached to the Notice of Motion, in the manner and on the occasions stipulated in the schedule to the Notice of Motion. On behalf of the applicant, counsel submit that no order for corrective advertising should be made. They submit firstly that there is no power in the Court to make such an order; but this submission is put only formally, by reason of seer prcreye prep ors stt come NS weearpepne = ' -_ Bn ene nee eg ey nr re or a the decision of Burchett J in Janssen Pharmaceutical Pty Limited v Pfizer Pty Limited (1986) ATPR 40654. In that case his Honour considered the power of the Court to make such an order and held that there was power. I respectfully agree with what is there said, and I hold that the Court does have power, in an appropriate case, to make an order requiring a party who has engaged in misleading or deceptive conduct in relation to advertising to publish appropriate corrective advertisements. Counsel for the applicant submit that there is no presumption or rule that corrective advertising shall be ordered, that the power is one to be used protectively and not by way of punishment, and that the sole consideration for the Court, 1n determining whether to make such an order, must be the protection of the consumer. I agree with these submissions. There will be many cases in which it is not appropriate to order corrective advertising and in which it is better to allow the situation to rest where it lies, perhaps with the aid of negative injunctions. However, there will be other occasions in which misleading advertising has been of such a nature as to be likely to inculcate incorrect information into the minds of consumers, and where it is appropriate to take steps to correct the impression which the previous advertisements might have given. I think that this is such a case. The advertising campaign engaged in by HCF, on the "best value" theme, has been an intensive one involving advertising on television and — tre nyt ea ete eee ae iar pO tae ee ee eee + revyo, Mears meee ope - a4 oor ese a radio, in the press, in various posters and displays, in the production of some 300,000 brochures which have been widely distributed, and in the use of the theme on various novelties such as rulers and drink coasters. In the view that I take, the theme 1s built upon a proposition which is incorrect, at least as at the present time and since the entry of the respondent into the health insurance field in this State. One must assume that the applicant's campaign will have caused a not insignificant proportion of the public to believe that HCF does offer the best value. If this belief is founded upon misleading advertising, there is a case for correcting the belief. It is true, as Mr Gyles emphasizes, that the HCF campaign commenced well before the entry of the respondent into the New South Wales market and, so far as the evidence before the Court establishes, the statement may have been true until the respondent entered the market. I do not know the truth of the matter in relation to "best value" as between HCF and any other health insurance fund, apart from the respondent. On the evidence before me, if the campaign had ceased when the respondent entered the market, no complaint could have been made, and there would be no case for corrective advertising. However, the fact is that, notwithstanding the entry of the respondent to the market, the campaign continued for a period of about a month; indeed, a little longer than that in relation to some forms of advertising. Although that month was a relatively small proportion of the whole period of the campaign, the advertising in that month alone was both extensive and intensive and it involved the propagation of misleading information amongst potential consumers. It seems to me that it is appropriate that there be some corrective advertising. But this should be kept in proportion. So far as the manner of advertising is concerned, I think that the course proposed by the respondent, namely, newspaper advertisements in newspapers published in New South Wales and the Australian Capital Territory having a circulation of more than 10,000 is appropriate. The list of newspapers is something which I will reserve pending the further consideration of the matter by the applicant's advisers, but, at first blush 1t seems to be an appropriate one. Similarly, in regard to publication, but this is a matter that can be further considered by the applicant's advisers before the final order is made. The submission is put by the applicant that the form of advertisement suggested by the respondent is inappropriate in that it refers to rulings by the Court that HCF has engaged in conduct that is misleading or deceptive. I can envisage circumstances in which a party who is being ordered to insert corrective advertising might prefer to have a statement made as to what the Court has ruled rather than have to publish a statement couched in the language of admission by the advertiser itself. However, this is not the applicant's position. I think that there is substance in the submission that, for the advertisement to refer to HCF having published misleading or deceptive advertising, goes beyond what is necessary simply to state the true position. It may convey to readers some notion of HCF being untrustworthy. In other words, it might have a punitive rather than merely a protective element. I think that it will suffice if the advertisement unequivocally states that HCF does not offer best value health cover or higher benefits on major health care 1utems, having regard to existing contribution rates and benefits. This latter qualification 1s, I think, reasonable to be inserted because the position may change in the future. I prefer to leave it to the parties to endeavour to redraft the advertisement along these lines rather than to do so myself, and I will therefore stand down the matter until this afternoon in the hope that they can come to some agreement. Alternatively, at that time I will settle the form of the advertisement. At that time I will also hear any submissions that may be added regarding the manner and occasion of publication of the advertisement. I should add that, as I indicated to counsel during discussion, I will make an order staying the operation of the order until after the Full Court has had the opportunity of dealing with the matter. I think that if there is to be corrective advertising it is important that it be published at an early date. But it would be inappropriate to order the publication of that advertising at this stage, having regard to the imminence of the appeal. On the other hand it is desirable for me to make the order in order that any party who verve - 9 a y i . ed wt a yee ce ee is unhappy about either the order itself or the form of the corrective advertising can agitate that matter before the Full Court. There has been some debate regarding the matter of costs, I having previously reserved costs, both of the principal proceeding and of the application on 12 November for a stay of the orders. On behalf of the applicant, Mr Gyles submits that, as his Application succeeded in part, his client should have the costs of the Application and that the respondent should have the costs of the Cross-Claim. Mr Esler on behalf of the respondent points out the various claims and the degree of success of each party. He submits that his client should have the costs of the whole of the principal proceeding, together with the costs of the subsequent application for the stay and the costs of the application today. I do not think that I should accede to either of these contentions. In relation to Mr Gyles' submission, to make an order for one party to have the costs of the Application and the other party to have the costs of the Cross-Claim would, apart from anything else, occasion considerable difficulties for the taxing officer. The matters were heard together and the evidence was interwoven, so that it would be extremely difficult to sort out the amount of time expended upon each. But, more fundamentally, I think that this would reflect incorrectly the true balance of success. The fact is that the respondent was substantially successful —— in the principal proceeding. Tt is true that it suffered an order against it in respect of one aspect of its advertising, but this was a relatively minor order in connection with a Matter which was not seriously in dispute and which certainly did not involve any extensive factual material. Indeed it may not have involved anything more than a short reference to the position in some affidavits. The bulk of the hearing related to matters about which the respondent was successful in resisting the attack of the applicant, or alternatively in relation to which it was successful on the Cross-Claim. The respondent succeeded, in relation to two out of the three attacks which it made on HCF's advertising in the Cross-Clain. In relation to the stay application there was some mixture of fortunes. I acceded to the submission of HCF that I should stay the operation of the injunction so as to permit the use of the brochures but this was done simply as a practical measure pending the outcome of the appeal. I took the view that there should be no general stay, as had been sought by HCF. As to today, the respondent has once again had substantial success in obtaining an order for corrective advertising, even though I am against it in regard to the form of the advertisement it proposed. It seems to me that it would reflect the realities of the matter if I were to select an overall percentage of costs covering the principal proceeding and each of the two Notices PR ee pe ee ae mane ae 8 of Motion, and which reflects the fact that, on each occasion, the respondent has substantially, but not wholly, succeeded. Any figure is necessarily a matter of judgment, but it seems to me that it would correctly reflect the position if I ordered that the applicant pay 80 per cent of the respondent's costs of the original proceeding, the Notice of Motion for a stay and the Notice of Motion for corrective advertising. I so order. Mr Gyles has indicated that, in the event that the view prevails that the Court has power to order corrective advertising, his client would wish to seek an order for corrective advertising; or may wish to seek an order for corrective advertising having regard to the view finally taken by the Full Court on the accuracy of Health Australia's advertisements. Having regard to the findings I have made, it is obviously inappropriate for me to make such an order at this stage, but I suggest that the appropriate course is for an application to be made to the Full Court, and I reserve the rights of the applicant in that respect. (The matter was adjourned until the afternoon) This morning I gave reasons for making an order in regard to corrective advertising in the matter of the Hospitals Contribution Fund and Switzerland Australia. I now formally make the following order. rt ee wey ong mew ees wot aye a a ead Cae a rary IT order that the applicant publish a corrective advertisement in the following form, namely: "Announcement by HCF Hospitals Contribution Fund of Australia {'HCF') in its recent advertising and promotion of its Health Insurance Benefits Scheme claimed that it provided the best value health cover and that it paid higher benefits on major health care items. Having regard to new contributions rates and levels of benefits which became available from another health insurer in October, these claims are no longer correct and are withdrawn by HCF." The publication is to be in accordance with the schedule marked "B" to the Notice of Motion dated 16 November with the addendum of a paragraph (d) under the heading "Manner of publication", reading as follows: "(d) Type in the body of the advertisement to be 4 millimetres or ten points in size." So far as the commencement date is concerned, I will amend the material under "number of occasions" in that schedule to read "commencing within seven days of these orders taking effect, subject to the availability of space." The operation of these orders is suspended until the determination of the appeal to the Full Court or until further order of a Judge of the Court. perce ren Re eee wea cpt cee Se prs oF roe as "> " I certify the nine (9) 10. preceding pages to be a true copy of the Reasons for Judgment of his Honour Justice Wilcox. Associates: mn~), Date: 26 November 1987 Counsel for the Applicant: Solicitors for the Applicant: Counsel for the Respondent: Solicitors for the Respondent: Date(s) of hearing: Mr R V Gyles OC with Mr N A Cotman Baker & McKenzie Mr P F Esler Clayton Utz 19 November 1987 "ee v4 crane wre e dp eter pee ce cone nace er -Aqen ey