Re Hanimex Pty Limited v Kodak (Australasia) Pty Limited [1982] FCA 21; (1982) 74 FLR 447 (3 March 1982)

FEDERAL COURT OF AUSTRALIA

Re: HANIMEX PTY. LIMITED
And: KODAK (AUSTRALASIA) PTY. LIMITED [1982] FCA 21; (1982) 74 FLR 447
No. G182 of 1981
Trade Practices - Practice - Jurisdiction

COURT

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Lockhart J.(1)

CATCHWORDS

Trade Practices - application to stay or dismiss proceeding - applicant commenced proceedings alleging misleading or deceptive conduct, false representation, defamation and injurious falsehood - respondent applies for an order that the proceeding be stayed or dismissed, or that the application and the statement of claim be struck out - principles governing such applications considered.

Federal Court Rules Order 12 Rule 3, Order 20 Rule 2

Trade Practices Act 1974 (Cth.) ss. 52, 53, 80A, 87

Practice - Stay or dismissal of proceedings - Application for - Statement of claim allegedly not disclosing reasonable cause of action - Principles to be applied - Whether plaintiff's claims clearly untenable - Federal Court Rules O. 12, r. 3, O. 20, r. 2.

Jurisdiction - Federal Court - Defamation - Injurious falsehood - Claim for damages - Claims attached to Trade Practices claims - Whether common substratum of facts - Whether Federal Court has jurisdiction - Whether jurisdictional question appropriately dealt with during application invoking summary jurisdiction of the court to stay or dismiss proceedings - Federal Court Rules O. 20, r. 2 - Trade Practices Act 1974 (Cth) ss 52, 53, 80A, 87.

Trade Practices - Misleading or deceptive conduct - False representation in advertisement alleged - Claim for defamation and injurious falsehood attached to Trade Practices claims - Application to dismiss proceedings - Statement allegedly not disclosing reasonable cause of action - Whether summary proceedings appropriate for dealing with jurisdictional question - Whether court has jurisdiction - Whether plaintiff's claims untenable - Principles to be applied - Trade Practices Act 1974 (Cth) ss 52, 53, 80A, 87 - Federal Court Rules O. 12, r. 3, O. 20, r. 2. The applicant (defendant) caused radio stations in several states to broadcast an advertisement of one of the applicant's products whereby, so the respondent alleged in its statement of claim, the applicant had contravened provisions of the Trade Practices Act 1974 (Cth), had defamed the respondent and had committed the wrong of injurious falsehood. The respondent instituted proceedings against the applicant in the Federal Court of Australia seeking damages and other relief. The applicant then applied to the court for an order that the proceedings be stayed or dismissed or that the statement of claim be struck out substantially on the grounds that no reasonable causes of action are disclosed and that the court had no jurisdiction to entertain the claims for damages for defamation and injurious falsehood.

Held, that the proceedings should be allowed to continue because:

(1) In the present case the advertisement is central to all claims of the respondent. This is therefore not such a clear case of absence of a common substratum of facts that the summary jurisdiction of this Court should be invoked to terminate the proceedings based on defamation or injurious falsehood.

Philip Morris Inc. v. Adam P. Brown Male Fashions Pty Ltd [1981] HCA 7; (1981) 55 ALJR 120, followed.

(2) Some of the grounds relied on by the applicant require the determination of questions of law going to the foundation of this Court's jurisdiction and to the proper construction of sections of the Trade Practices Act 1974 (Cth). It is, generally, inappropriate for questions of this nature to be determined on applications invoking the court's summary jurisdiction to stay or dismiss proceedings.

(3) The claims and submissions of the respondent are not so clearly untenable that they cannot possibly succeed.

Dey v. Victorian Railways Commissioner [1949] HCA 1; (1949) 78 CLR 62; General Steel Industries Inc. v. Commissioner for Railways (N.S.W.) [1964] HCA 69; (1964) 112 CLR 125, followed.

HEARING

1982, February 23; March 3. 3:3:1982
APPLICATION.

Application to stay or dismiss proceedings or to strike out the statement of claim.

L. J. Priestly Q.C. and G. K. Downes, for the applicant.

A. R. Castan Q.C., J. A. Strahan and D. D. Levine, for the respondent.
Cur. adv. vult.

Solicitor for the applicant: G. F. Betar.

Solicitors for the respondent: Stephen Jaques & Stephen.
E.F.F.

ORDER

1. Hanimex Pty. Limited give particulars within 21 days from today of the facts on which it relies to support its pleading of malice.

2. Otherwise, the notices of motion of 23 December 1981 and 22 February 1982 are dismissed.

DECISION

This is an application to stay or dismiss the proceeding. Hanimex Pty. Limited, the applicant ("Hanimex"), sells photographic film and other photographic products under various names including "Hanimex" and "Fuji".

Kodak (Australasia) Pty. Limited, the respondent ("Kodak"), sells photographic film and other photographic products under the name "Kodak".

In 1981 an advertisement was broadcast over radio stations in New South Wales and Queensland advertising Kodak film. The advertisement concerns a rather bizarre family known as "The Kodak Kendalls". The transcript of the advertisement reads as follows:-

"ANNCR: AND NOW, "THE KODAK KENDALLS." THE COLOURFUL STORY OF ONE FAMILY'S UNENDING QUEST FOR QUALITY IN ALL THINGS PHOTOGRAPHIC. ONE MORNING MRS. KENDALL IS SOBBING DRAMATICALLY AT THE BREAKFAST TABLE.

DIANNE: BOO HOO, BOO HOO.
GARY: FATHER.
DIANNE: BOO HOO, BOO HOO.
GARY: FATHER - MOTHER'S CRYING, FATHER.
BOB: STOP CRYING DIANNE, YOU'RE UPSETTING GARY.
DIANNE: BOO HOO - OH BOB.
BOB: ALRIGHT DIANNE, WHAT IS IT.
DIANNE: IT'S THE FILM BOB, IT'S NOT KODAK.
BOB: OF COURSE IT'S NOT KODAK DIANNE. KODAK FILM IS IN A YELLOW BOX AND THIS ONE'S BRIGHT GREEN.
DIANNE: I KNOW (SOB) THE PHOTO DEALER GAVE IT TO ME WHEN I LEFT YOUR FILM FOR PROCESSING. AND (SOB) . . . AND (SOB) I JUST ACCEPTED IT. (SOB).
BOB: (COLDLY) WITHOUT A PROTEST DIANNE?
DIANNE: OH BOB, I'M SO ASHAMED.
BOB: CALM YOURSELF DIANNE. WARM UP THE MOTOR CYCLE GARY. WE WILL RETURN THIS OTHER FILM TO THE PHOTO DEALER.
GARY: BUT FATHER]
BOB: DON'T ARGUE GARY. IN OUR UNENDING QUEST FOR QUALITY IN ALL THINGS PHOTOGRAPHIC WE MUST NEVER ACCEPT LESS THAN KODAK.
ANNCR: WILL BOB GET HIS KODAK FILM? WILL DIANNE STOP CRYING? TRUST KODAK TO GIVE YOU ALL THE ANSWERS WHEN NEXT WE SHARE A SPECIAL MOMENT WITH . . . THE KODAK KENDALLS."

Hanimex sells its film and other photographic products in boxes predominately green in colour. No other film or photographic product is sold in boxes of this colour. There is a widespread practice of retailers and agents who process film of giving boxes of Hanimex's film to persons who leave film for processing.

The advertisement incurred the displeasure of Hanimex who complained in vigorous terms to Kodak. Subsequently Kodak agreed to cease broadcasting the advertisement.

Hanimex commenced these proceedings against Kodak alleging that, by causing the broadcast of the advertisement to be made over radio stations, Kodak:-

(a) engaged in conduct that is misleading or deceptive or is likely to mislead or deceive; and thus contravened s. 52 of the Trade Practices Act, 1974 ("the Act");

(b) falsely represented that its goods were of a particular standard, quality, grade or composition; represented that its goods had performance characteristics, uses or benefits they did not have; and made a false or misleading statement concerning the need for its goods; and thus contravened s. 53 (a), (c) and (f) of the Act;

(c) defamed Hanimex; and

(d) committed the wrong of injurious falsehood.

Hanimex seeks the following relief:-

"1. Damages under s. 82 of the Trade Practices Act, 1974.
2. Damages for defamation.
3. Damages for injurious falsehood.
4. An order that the respondent publish such corrective advertising as to the Court seems proper.
5. An order that the respondent compensate the applicant for the cost of advertising incurred by the applicant to reduce the consequences of the respondent's acts. 6. Interest.
7. Costs.
8. Such further or other relief as the nature of the case may require."

Hanimex commenced this proceeding by filing and serving an application and a statement of claim. Kodak has not yet filed a defence.

Kodak now applies for an order that the proceeding be stayed or dismissed or that the application and the statement of claim be struck out substantially on the grounds that no reasonable causes of action are disclosed and that the Court has no jurisdiction to entertain the claims for damages for defamation and injurious falsehood or the claim for an order that Kodak publish corrective advertising.

Kodak relied on O. 20 r. 2 of the Rules of this Court. The principles governing applications to terminate actions summarily, whether pursuant to Rules of Court such as O. 20 r. 2 or the inherent jurisdiction of a court, appear from many cases. It is sufficient to refer to two of them. In Dey v. Victorian Railways Commissioners [1949] HCA 1; (1949) 78 C.L.R. 62, Dixon J. said at p. 91:-

"A case must be very clear indeed to justify the summary intervention of the court to prevent a plaintiff submitting his case for determination in the appointed manner by the court with or without a jury. The fact that a transaction is intricate may not disentitle the court to examine a cause of action alleged to grow out of it for the purpose of seeing whether the proceeding amounts to an abuse of process or is vexatious. But once it appears that there is a real question to be determined whether of fact or law and that the rights of the parties depend upon it, then it is not competent for the court to dismiss the action as frivolous and vexatious and an abuse of process."

In General Steel Industries Inc. v. Commissioner for Railways (N.S.W.) [1964] HCA 69; (1964) 112 C.L.R. 125, Barwick C.J. said at p. 129:-

"It is sufficient for me to say that these cases uniformly adhere to the view that the plaintiff ought not to be denied access to the customary tribunal which deals with actions of the kind he brings, unless his lack of a cause of action - if that be the ground on which the court is invited, as in this case, to exercise its powers of summary dismissal - is clearly demonstrated. The test to be applied has been variously expressed; ' so obviously untenable that it cannot possibly succeed'; ' manifestly groundless'; ' so manifestly faulty that it does not admit of argument'; ' discloses a case which the Court is satisfied cannot succeed'; 'under no possibility can there be a good cause of action'; 'be manifest that to allow them' (the pleadings) ' to stand would involved useless expense'.

At times the test has been put as high as saying that the case must be so plain and obvious that the court can say at once that the statement of claim, even if proved, cannot succeed; or 'so manifest on the view of the pleadings, merely reading through them, that it is a case that does not admit of reasonable argument'; 'so to speak apparent at a glance'.

As I have said, some of these expressions occur in cases in which the inherent jurisdiction was invoked and others in cases founded on statutory rules of court but although the material available to the court in either type of case may be different the need for exceptional caution in exercising the power whether it be inherent or under statutory rules is the same."

At p. 130, Barwick C. J. poses the relevant test as being whether the plaintiff's case ". . . is so clearly untenable that it cannot possibly succeed."

With these principles in mind, I turn to the submissions of Kodak.

Defamation and injurious falsehood

It was submitted by Kodak that, although this Court plainly has jurisdiction with respect to the claims under ss. 52 and 53 of the Act, it is manifest that it has not jurisdiction with respect to the claims based on defamation and injurious falsehood as they are State or non-Federal in character and are therefore not covered by s. 32 of the Federal Court of Australia Act 1976 and do not arise out of a common substratum of facts.

In Phillip Morris Inc. v. Adam P. Brown Male Fashions Pty. Limited [1981] HCA 7; (1981) 55 A.L.J.R. 120 Mason J., with whom Stephen J. agreed, said at p. 140:-

". . . it may appear that the resolution of the attached claim is essential to a determination of the federal question. Likewise, it may appear that the attached claim and the federal claim so depend on common transactions and facts that they arise out of a common substratum of facts. In instances of this kind a court which exercises federal jurisdiction will have jurisdiction to determine the attached claim as an element in the exercise of its federal jurisdiction."

Both parties accepted that this test formulated by Mason J. was the relevant test to apply on that basis that it:-

". . . seems to represent the highest common factor. It is somewhat narrower than that of Barwick C. J. and Murphy J. and is concurred in by Stephen J.":

per Toohey J. in Muller v. Fencott, 2 February 1982, unreported.

It was submitted by Kodak that, for Hanimex to succeed in its claims for defamation and injurious falsehood, proof may be required of elements irrelevant to ss. 52 and 53. For example, in assessing damages in the claim for defamation, the Court is entitled:-

". . . to take into. . . consideration the conduct of the plaintiff, his position and standing, the nature of the libel, the mode and extent of publication, the absence or refusal of any retraction or apology, and 'the whole conduct of the defendant from the time when the libel was published down to the very moment of . . . verdict. . . the conduct of the defendant before action, after action, and in court at the trial of the action,' and also, it is submitted, the conduct of his counsel, who cannot shelter his client by taking responsibility for the conduct of the case."

Gatley on Libel and Slander 7th Ed. paragraph 1358. Also, defences may be available to the claim for defamation which have no relevance to ss. 52 and 53: for example, qualified privilege and fair comment.

As to injurious falsehood, it was submitted by Kodak that malice (in the sense of some dishonest or otherwise improper motive) and special damage are essential elements in the cause of action and therefore may require proof of facts irrelevant to ss. 52 and 53.

It seems plain enough that, to support the claims for defamation or injurious falsehood, proof will be required at the trial of matters not demanded by s. 52; but it does not follow that there is no common substratum of fact. The broadcast of the advertisement is central to all claims propounded by Hanimex in this case.

I am not persuaded that this is such a clear case of the absence of a common substratum of facts that the summary jurisdiction of this Court should be invoked to terminate the proceeding based on defamation or injurious falsehood.
Defamation

It was submitted by Kodak that the claim based on defamation must fail because the statement of claim does not allege that the advertisement is defamatory of Hanimex as distinct from its goods.

In paragraph 5 of the statement of claim, Hanimex alleges that, in the advertisement, Kodak "has suggested" that the advertisement has fourteen possible meanings. I need not repeat them except for the meanings referred to in sub-paras. (h) and (i) namely:-

"(h) that people are coerced into taking the applicant's film;

(i) that people are coerced into taking Fuji's film;".

Hanimex submitted that although the advertisement does not name Hanimex as the coercer, nevertheless it means that Hanimex was itself involved in the practice of coercing people into taking a shoddy film. It was submitted that to say of someone that he sells such poor goods that any ordinary person should be rebuked for accepting them is disparaging, not only of the goods, but of the seller himself. Reliance is placed upon a number of authorities, in particular Griffiths v. Benn (1911) 27 T.L.R. 346 and the statement of principle to be found in Gatley at paragraph 69. In Griffiths v. Benn Cozens Hardy M.R. said at p. 350:-

"To disparage a trader's goods, which is often (though inaccurately) spoken of as a trade libel, does not give ground for an action of libel, although, if special damage is proved, the plaintiff may recover in an action on the case. On the other hand, the words used, though directly disparaging goods, may also impute such carelessness, misconduct, or want of skill in the conduct of his business by the trader as to justify an action of libel."

I am not satisfied that these submissions of Hanimex are so clearly untenable that they cannot possibly succeed. By expressing myself in these terms I do not seek to detract from the submissions. I am merely applying what appears to me to be the apposite test for the purpose of this application.

Next, Kodak submitted that the advertisement is not capable of being construed as defaming Hanimex.

The advertisement is certainly rather extraordinary. It involves "The Kodak Kendalls" family comprising a weeping mother, a rebukeful father and an argumentative son - all upset about a film for a camera. Hanimex submits that the advertisement conveys the meaning that a person who accepts film in the green pack instead of Kodak in the yellow pack is so lacking in judgment that he or she deserves rebuke and should be ashamed of his or her stupidity; that Hanimex's products are of such shoddy quality that any sensible person would be ashamed to have accepted them even as a gift.

It may be that at the trial, Kodak will succeed on its submission; but then again it may not. All I say at this stage is that it is not so plain or manifest that the advertisement is incapable of bearing the construction contended for by Hanimex that this Court's summary jurisdiction should be invoked.
Injurious falsehood

Kodak submitted that the claim based on injurious falsehood must fail because the advertisement is a mere puffing of Kodak film. It was said that the advertisement was in essence, the same as the statement referred to by Lindley M.R. in Hubbuck & Sons Limited v. Wilkinson Heywood & Clark, Limited 1899 1 Q.B. 86 in these terms at p. 93:-

". . . if the only false statement complained of is that the defendant's goods are better than the plaintiff's, such a statement is not actionable, even if the plaintiff is damnified by it."

See also Gatley, paragraph 319 and the cases there mentioned.

Hanimex relies upon the following passage from the judgment of Walton J. in De Beers Limited v. International Co. Limited 1975 1 W.L.R. 972 at p. 978:-

"Where, however, the situation is not that the trader is puffing his own goods, but turns to denigrate those of his rival, then, in my opinion, the situation is not so clear cut. Obviously the statement: 'My goods are better than X's' is only a more dramatic presentation of what is implicit in the statement: 'My goods are the best in the world.' Accordingly, I do not think such a statement would be actionable. At the other end of the scale, if what is said is: 'My goods are better than X's, because X's are absolute rubbish,' then it is established by dicta of Lord Shand in the House of Lords in White v. Mellin 1895 A.C. 154, 171, which were accepted by Mr. Walton as stating the law, the statement would be actionable.

Between these two kinds of statements there is obviously still an extremely wide field; and it appears to me that, in order to draw the line, one must apply this test, namely, whether a reasonable man would take the claim being made as being a serious claim or not."

Hanimex submitted that the advertisement conveys the impression to the listener that Kodak film was better than Hanimex or Fuji film which are absolute rubbish; that they are of such shoddy quality that any sensible person would be ashamed to accept them even as a gift.

Whatever may be the ultimate fate of these submissions, it is sufficient to say that I am not satisfied that the construction of the advertisement contended for by Hanimex is so clearly untenable that it cannot possibly succeed.

Kodak submitted that for Hanimex to succeed it must prove that the advertisement was published maliciously in the sense that the object of the advertisement was to injure Hanimex and that the advertisement was not broadcast bona fide merely to sell Kodak's own goods: see White v. Mellin 1895 A.C. 154.

Hanimex contended to the contrary. Again, the construction contended for by Hanimex is not so clearly untenable that it cannot possibly succeed.

Kodak submitted that to succeed on the cause of action for injurious falsehood, Hanimex must allege and prove that it has suffered special damage by the broadcast of the advertisement; see Gatley at paragraph 317. Kodak says that special damage has not been pleaded.

Hanimex submits that special damage has been sufficiently pleaded in paragraphs 6 (c) and 8 of the statement of claim. These paragraphs allege:-

"6, The advertisements broadcast and published, and each of them. . .

(c) were calculated to cause pecuniary damage to the applicant in respect of its business and did cause such damage.

. . .

8. As a result of the respondent's acts, the applicant has been injured in its business and has been forced to incur substantial expenditure in seeking to reduce the consequences of the respondent's acts and has suffered other damage."

Although I have some reservations about the matter, I think the submissions of Hanimex are to be preferred; but Hanimex should provide particulars of the damage it claims to have sustained if they are sought by Kodak.

Finally, Kodak submits that 0.12 r. 3 has not been complied with. It provides:-

"3. (1) A party pleading any condition of mind shall give particulars of the facts on which he relies.

(2) In sub-rule (1) 'condition of mind' includes any disorder or disability of mind, any malice and any fraudulent intention, but does not include knowledge."

Kodak's submission is well founded; but I do not propose to exercise any discretion under the Court's summary jurisdiction unless Hanimex fails within 21 days from today to give particulars of the facts on which it relies to support its pleading of malice.
Sections 52 and 53

I mentioned earlier that Hanimex seeks an order "that the respondent publish such corrective advertising as to the Court seems proper."

Kodak seeks to strike out this claim for relief on the ground that the only source of jurisdiction to make such an order is s. 80A (1) (b) of the Act which provides, so far as relevant:-

"80A
(1) Where, on the application of the Minister or the Commission, the Court is satisfied that a person has engaged in conduct constituting a contravention of a provision of Part V, the Court may make either or both of the following orders:-

. . .
(b) an order requiring that person or a person involved in the contravention to publish, at his own expense, in a manner and at times specified in the order, advertisements the terms of which are specified in, or are to be determined in accordance with, the order."

Kodak submits that only the Minister or the Commission may apply for an order for corrective advertising and, as neither is a party to this proceeding, Hanimex must fail.

Hanimex seeks to answer this submission by relying on s. 87 which, so far as relevant provides:-

"87 (1) Where, in a proceeding instituted under. . . this Part, the Court finds that a person who is a party to the proceeding has suffered, or is likely to suffer, loss or damage by conduct of another person that was engaged in. . . in contravention of a provision of Part. . . V, the Court may, whether or not it grants an injunction under s. 80 or makes an order under s. 80A or 82, make such order or orders as it thinks appropriate against the person who engaged in the conduct or a person who was involved in the contravention. . . if the Court considers that the order or orders concerned will compensate the first-mentioned person in whole or in part for the loss or damage or will prevent or reduce the loss or damage.

. . .
(2) The orders referred to in sub-ss. (1). . . are -

. . .

(f) an order directing the person who engaged in the conduct or a person who was involved in the contravention constituted by the conduct, at his own expense, to supply specified services to the person who suffered, or is likely to suffer, the loss or damage."

Hanimex points to the wide definition of "services" in s. 4 of the Act and asserts that it would support the making of an order for corrective advertising.

Kodak then submits that s. 80A is intended to cover the whole field of orders for corrective advertising so that s. 87 cannot be relied on by Hanimex. Kodak relies on the reference to "an order under s. 80A" in s. 87 itself as supporting its submission.

Again, I am not satisfied that this claim of Hanimex is so clearly untenable that it cannot possibly succeed.

Finally Kodak submits that the case based on s. 53 (a), (c) and (f) must fail because the advertisement is mere puffing in general terms of Kodak film and cannot be construed as a representation that Kodak film is of a particular standard, quality, grade or composition; or a representation that Kodak film has performance characteristics, uses or benefits it does not have; or as a statement concerning the need for Kodak film.

Hanimex submits that the advertisement is really saying that Kodak film is such a fine product that Hanimex's film is shoddy by comparison and that, in truth, any one of the allegations relevant to s. 53 (a), (c) or (f) can be supported upon proper construction of the advertisement.

I am not satisfied that this claim of Hanimex is so clearly untenable that it cannot possibly succeed.

I am not, of course, determining in this application the ultimate strength or weakness of Hanimex's case. All I am deciding is whether this Court's summary jurisdiction to stay or dismiss the proceeding should be invoked. I am not satisfied that its exercise is warranted. The proceedings should be allowed to continue leaving Kodak to raise its points in opposition to Hanimex's claim in the appropriate way.

There is another reason why I do not propose to exercise the Court's summary jurisdiction. Some of the grounds relied on by Kodak to support its application are interwoven and require determination of questions of law going to the foundation of this Court's jurisdiction and to the proper construction of sections of the Act. Much of this territory is still unexplored. This is hardly surprising when it is remembered that the Act is of comparatively recent origin and this Court was only established a short time ago. Generally, it is inappropriate for questions of this nature to be determined on applications to invoke the Court's summary jurisdiction to stay or dismiss proceedings.

I direct Hanimex to give particulars within 21 days from today of the facts on which it relies to support its pleading of malice. Otherwise, the notices of motion of 23 December 1981 and 22 February 1982 are dismissed.