Re Narhex Australia Pty Limited v Sunspot Products Pty Limited and Another [1990] FCA 1 (4 January 1990)

FEDERAL COURT OF AUSTRALIA

Re: NARHEX AUSTRALIA PTY LIMITED
And: SUNSPOT PRODUCTS PTY LIMITED AND ANOTHER
No. N G882 of 1989
FED No. 4
Trade Practices

COURT

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

CATCHWORDS

Trade Practices - interlocutory proceedings - misleading advertising material - final hearing imminent - balance of convenience in favour of respondent - whether applicant's case so strong as to warrant injunctive relief.

HEARING

SYDNEY
4:1:1990

Counsel for the applicants: R. White

Solicitors for the applicants: Mallesons Stephen Jaques

Counsel for the respondents: B. Knox

Solicitors for the respondents: Mildrens

DECISION

The applicant is a distributor of a range of products under the trade name "Cross-Linked 10/60 Elastin". One such product is an eye cream which is said to assist in the removal of skin wrinkles about the eyes. The second respondent is the managing director of the first respondent which is also a distributor of a range of skin care products under the trade name "John Plunketts".

2. The first respondent has been marketing such products containing a substance known as elastin since 1985. The product which has been most referred to in these proceedings is "John Plunkett's Super Anti-Wrinkle Eye Cream".

3. The applicant, in reliance upon Part V of the Trade Practices Act 1974, seeks orders (inter alia) as follows:-
"1. AN ORDER that the Respondents, by themselves,

their servants, agents or otherwise, be restrained
from representing that the product "John
Plunkett's Super Eye Cream" contains:
(a) 10% Cross-linked Elastin CLR Solution;
(b) 10% cross-linked elastin;
(c) 10% elastin; or
(d) any amount of elastin greater than 0.05%
2. AN ORDER that the Respondents, by themselves,
their servants, agents or otherwise, withdraw from
sale all stocks of "John Plunkett's Super Eye
Cream" pending the repackaging and relabelling of
any such stock so that the representations
referred to in Order 1 above are no longer made.
3. AN ORDER that the Respondents, by themselves,
their servants, agents or otherwise, withdraw from
publication and distribution all promotional
material and information by which any of the
representations referred to in Order 1 above are
made.
4. Interlocutory orders in terms of Orders 1,2 and
3 hereof.

4. The application, as a result of a prior application to the Court, has been entered in the Vacation List as an urgent matter in which interlocutory relief is sought.

5. I have today, after discussion in court with counsel, fixed the final hearing of this matter to commence before me on 5 February 1990, that is in approximately one month's time. This was not, of course, the situation at the time the matter was listed as an urgent matter.

6. The applicant seeks interlocutory relief for this period of time. It seeks the same interlocutory relief as previously sought. There is no dispute that in these proceedings there is, in fact, a serious issue to be tried. However, the applicant submits that, in addition to claims based upon the balance of convenience, it has additionally a clear claim to interlocutory relief based upon the apparent strength of the case it brings.

7. The applicant's complaint relates to advertising material which appears on the box containing the tube of the respondents' product to which I have made reference. It also appears in a brochure to be found within the box. The material says of the respondents' cream that it "contains 10 per cent active cross-linked elastin CLR solution plus collagen CLR, rose hip oil, and an exclusive skin-firming and tightening agent in light deep moisturising natural oils". The applicant submits that a potential purchaser reading this material would take from it that the product contains 10 per cent of the ingredient elastin as an active ingredient.

8. There is no dispute in the case that the product does not in fact contain 10 per cent elastin. It contains only .4 to .5 per cent of that substance.

9. It is therefore claimed by the applicant that the respondents' advertising and promotional material is misleading. It also claims that it operates unfairly to the applicant whose own cream contains 3 per cent elastin and is advertised as such.

10. It is to be noted that the price of the applicant's cream is almost twice as much as that of the respondent. The applicant accordingly fears that it will unfairly lose sales to the respondents if the respondents' advertising is not restrained in the manner sought in these proceedings.

11. The respondents deny these allegations. I am informed that the whole of the matter will be vigorously contested at the hearing. They say that the representations made in the material to which I have just made reference are strictly correct.

12. They say that cross-linked elastin CLR solution is a particular product produced in an overseas laboratory, the Richter Laboratories in West Berlin. The material put before me in these proceedings clearly indicates that that is so.

13. The respondents claim that this solution so described has particular features that facilitate the therapeutic powers of the cross-linked elastin which it contains as an ingredient. They have put before me scientific material in support of this claim. They also submit that the situation is very far from being as black and white as is asserted by the applicant: that the applicant's own advertising material which has been placed before me in these proceedings (exhibit A) describes the elastin component of the applicant's therapeutic cream as being "10/60 elastin" and claims that the cream contains "3% K-Elastin". It is submitted that there is certainly a noticeable degree of lack of clarity in the descriptions adopted by the applicant itself.

14. The respondents' case is simply this, that read sensibly the material complained of cannot and does not contain the misrepresentations relied on.

15. I have considered the evidence which has been placed before me at this stage and the submissions of counsel, which have been most helpful. I find that the evidence in its present state does not enable me to form the view that the applicant's case is apparently very strong. I can go no further than to hold that, as is indeed conceded, it raises a serious issue for trial.

16. The question, then, at this stage falls for determination on the view I take of the balance of convenience. In evaluating that aspect of the case I must, of course, bear in mind the appointed hearing on 5 February this year. Also, although the evidence is far from clear, I am of the impression that the current month cannot be described as one of the busiest months for the sale of these types of product.

17. It is perfectly clear, as has been submitted on behalf of the applicant, that cases of this kind where an applicant's efforts are attendant with ultimate success, present very grave difficulties in the assessment of damages. This particular submission would be of considerably greater weight were it not for the short period of time which is to elapse before the matter comes before the court again. I do not feel, on balance, that that period would significantly increase any difficulty in relation to the assessment of damages.

18. I am not much impressed, on the present state of the evidence, with the argument that the respondents' product if allowed to remain in the market place for the ensuing month will prove so disappointing to its consumers that it will adversely affect the sales of elastin-based products in general and the applicant's products in particular.

19. On the other hand it is quite clear that very considerable difficulties would be occasioned to the respondents if interlocutory orders were now made even in the modified forms which have been suggested in argument. In my view, there would be very considerable difficulty in their implementing such orders in the short space of time yet to elapse before the final hearing. There would be necessary disruption of their own activities and the activities of their agents and customers, and there could be a significant damage to reputation which in itself would produce difficulty when implementing the undertaking as to damages which, of course, has been offered.

20. Upon a consideration of the whole of the material placed before me and the submissions of counsel, I have come to the conclusion that the balance of convenience currently favours the respondents in this matter. Accordingly I decline to make the interlocutory orders that are sought.