Australian Competition & Consumer Commission v Giraffe World Australia Pty Ltd

Federal Court of Australia|1999-08-26|Before: Lindgren J

REASONS FOR JUDGMENT (No 2) INTRODUCTION 1 I heard these two proceedings together, having ordered that the evidence in one be evidence in the other, subject to all proper exceptions. The proceedings arise out of the marketing of an "ion mat" ("the Mat") by the first respondent ("GW"). The Mat is a mat or mattress on which one lies when it is connected to a source of electricity. 2 The applicant ("the ACCC") alleges that in promoting the Mat, GW made misrepresentations in contravention of ss 52 and 53(c) of the Trade Practices Act 1974 (Cth) ("the TP Act"). The misrepresentations can be broadly described as being to the effect that as a result of its emission of negative ions, the Mat benefits the health of persons who sleep on it. I will call this part of the ACCC's case the "misleading or deceptive conduct" part. 3 The ACCC further alleges that in connection with the promotion and sale of the Mat, GW engaged in a practice of "referral selling" in contravention of s 57 of the TP Act, and promoted a scheme involving membership of a "Giraffe Club" ("GC") and of a "Grow Rich System" ("GRS") which constituted a "pyramid selling" scheme ("the Scheme"), in contravention of s 61 of that Act. 4 The second respondent ("Mr Misuma") founded GW and was at all material times a director of GW. He also appears to have been its "Chairman". GW and Mr Misuma were represented by the same solicitors and counsel. 5 The third respondent ("Mr Han") was a shareholder in GW and, until November 1998, its President and Chief Executive Officer. Initially, the solicitors and counsel for GW and Mr Misuma also represented Mr Han. However, on the first day of the hearing, I was informed that the solicitors had had no contact with him for a considerable period of time and had been unsuccessful in attempts to take instructions from him. They foreshadowed that they would cease to represent him. There was evidence that Mr Han knew of the dates on which the hearing was to take place. On the third day of the hearing, I granted the solicitors leave to file and serve a notice of change of solicitor in respect of Mr Han. Accordingly, the solicitors and counsel afterwards represented only GW and Mr Misuma. 6 The fourth respondent ("Mr Scotte") and the sixth respondent ("Ms Orr") gave "presentations" to persons who were potential buyers of the Mat and were participants in the Scheme. They appeared in person. 7 Pursuant to leave, the ACCC discontinued against the fifth, seventh and eighth respondents. 8 Mr Scotte and Ms Orr adopted the submissions made by counsel for GW and Mr Misuma. As well, they made submissions of their own. For convenience, I shall use the expression, "the respondents", to refer to GW, Mr Misuma, Mr Scotte and Ms Orr, and, in the context of submissions, the abbreviation "GW" to refer to the chief protagonist and to include a reference to Mr Misuma. 9 In the second proceeding, GW sues the ACCC for damages for defamation. The background to the defamation proceeding is found in certain events associated with the ACCC's proceeding. In the ACCC's proceeding, on 6 May 1998 I granted the ACCC ex parte interlocutory injunctions restraining GW in certain respects in the carrying on of its business and by way of an asset preservation order. The next day, 7 May 1998, the ACCC published a media release reporting on that interlocutory proceeding. GW alleges that the media release carried imputations defamatory of it. On 8 and 11 May 1998, GW obtained variations of the orders of 6 May. It alleges that notwithstanding this, as of 13 May, the ACCC was still distributing and publishing the original media release. GW further alleges that in mid-May 1998, in a telephone conversation between Geoffrey Williams of the ACCC and Malcolm Finger of the New South Wales Department of Fair Trading, the ACCC published certain matters of and concerning GW, and that the Department, in its electronic mail and in communications with members of the public, republished those matters, which carried imputations defamatory of GW. 10 I find it convenient to postpone further discussion of the defamation proceeding until I have dealt with the ACCC's proceeding. 11 In relation to the misleading or deceptive conduct part of the case, the ACCC adduced expert evidence directed to establishing that the Mat did not emit negative ions and did not have the therapeutic effects represented. It also led evidence from a small number of persons who bought the Mat and joined the GC and the GRS and who claimed that the Mat did not benefit their health as represented. GW, on the other hand, has led evidence from some sixty "satisfied customers". Each of these users of the Mat has testified to its beneficial effects. More accurately, each has described relevant aspects of his or her health, before and after using the Mat, the latter being an improvement on the former. The ACCC submits that I should treat all that evidence as illustrative of "the Placebo effect" or "autosuggestion". 12 The time set aside for the hearing proved to be inadequate to allow for the making of submissions. Accordingly, directions were given for the filing and service of written outlines of submissions to be followed by brief oral elaboration on a date to be fixed. The ACCC provided its outline. GW provided an outline in relation to the referral selling and pyramid selling parts of the case. Prior to the furnishing of an outline in relation to the misleading or deceptive conduct part, however, GW appointed Steven John Sherman as administrator of the company and the solicitor for Mr Misuma (who had also appeared for GW down to the time of the appointment of the administrator) informed me that he had been instructed to incur no further costs, and sought leave for himself and counsel briefed by him to be excused from further attendance. I granted that leave. The administrator gave his written consent to the continuation of proceeding NG 421 of 1998, against GW for the purposes of s 440D(1)(a) of the Corporations Law, but indicated that he wished to play no further role in either proceeding. In the result, in relation to the misleading or deceptive conduct part of the case and the defamation proceeding, I have had the assistance of submissions from the ACCC alone. OUTLINE OF PLEADING AND FACTS IN RELATION TO REFERRAL SELLING AND PYRAMID SELLING 13 There is little, if any, dispute about the facts relevant to the allegations of referral selling and pyramid selling. The respondents submit that as a matter of law the facts do not fall within the statutory prohibitions. It is convenient to note at once that all of the relevant conduct of GW, a trading corporation, took place in trade or commerce. 14 GW conducted "Happiness Circle" meetings (sometimes referred to simply as "Happiness Circles" or "HC's" within GW, - I will speak of "HC meetings"). At these meetings the health benefits of the Mat were extolled in on-stage "presentations" to prospective buyers in an audience. It was by being invited to attend and attending a HC meeting that a person was introduced to GW, the Mat, the GC and the GRS. Those attending were told that upon paying $2,900 for the Mat, $50 as a "membership application fee" and $300 as a "membership fee", they could become members of the GC. To become a member of the GC they had to sign an application form and their application had to be accepted by GW. It was possible to buy the Mat without joining the GC, but this possibility was not emphasised if it was ever volunteered at all. Persons in the audience were also told that if they joined the GC they were eligible to apply to join the GRS. In order to join the GRS, they had to sign a separate form of application for membership and be accepted by GW. It was also made clear that pre-conditions of their admission to membership of the GRS were that a person had to attend a "Business School" (often referred to within GW as "BS"), attend a two-day "Management Consultant Class" (often referred to within GW as "MCC") and "pass an interview". (Mr Paul Hsu, the Chief Executive Officer of GW, deposed that in practice, attendance at the Management Consultant Class was a precondition, not of membership of the GRS, but of advancement from the rank of "Giraffe Member" to "Giraffe Leader" (see below), however nothing turns on the matter). Membership of the GC gave the right to attend the Business School and the Management Consultant Class as well as to be interviewed with a view to acceptance as a member of the GRS. No additional money beyond the $3,250, necessarily paid in order to attain membership of the GC, was payable for membership of the GRS. Importantly, however, it was membership of the GRS that was the key to entitlement to earn "commissions" (I need not distinguish between "commissions" and "bonuses" and will refer only to "commissions") in the manner referred to below. 15 I need not describe every aspect of the GRS, and, therefore, of the Scheme of which the GRS was the most important part. It suffices that I give an outline at this stage. A member of the GRS was entitled to be paid commission by GW for successfully "introducing" newcomers. The evidence is not clear as to what the notion of "introduction" meant. Ultimately, nothing turns on the point, and I will assume in favour of GW and as it contends, that the commission earning event was the introduction of someone who bought a Mat, whether or not that person also joined the GC or the GRS or both. 16 The commissions earned were calculated according to a formula based on "Business Volume" measured by dollar amount. Each successful introduction had a Business Value of $2,500. There is ample evidence, and it is not and could not be disputed, that an introduction of a person who bought the Mat, joined the GC and joined the GRS, and therefore paid out $3,250, generated a Business Volume of $2,500. There is also some evidence that an introduction of a person who only bought the Mat also did so. But all the promotional activity by and on behalf of GW strongly emphasised the desirability of "going all the way" by joining the GC and the GRS, and does not seem to have drawn attention at all to the possibility of buying the Mat alone. Nonetheless, as stated above, I proceed on the assumption that the introduction of a person who bought the Mat alone generated a Business Volume of $2,500 and that if the person also joined one or both of the GC or the GRS, this did not give rise to the crediting of additional Business Volume beyond the sum of $2,500. Thus, member A of the GRS would earn a direct commission for introducing another person (B) to buy the Mat, and if B became a member of the GRS, A would earn indirect commissions as B introduced others to buy the Mat. 17 In addition to being entitled to be paid commissions by GW in respect of purchases of the Mat by individuals introduced by him or her, a member of the GRS was also entitled to be paid further commissions by GW as his or her "downline agents" introduced further persons. But a downline agent was necessarily himself or herself also a commission earner, that is, a member of the GRS. In sum, a successful introduction generated the earning of commissions only for members of the GRS and it was in the interests of the immediate introducer as well as his or her "uplines", that an "introducee" should not only buy the Mat, but also join the GC and the GRS. 18 Both in the GW literature and in oral statements, references were made to the earning of commissions by "introducing". It is clear that in many instances this non-specific term was being used to refer to the introduction of a person to buy the Mat and to join the GC and the GRS. And it must be remembered that membership of the GRS predicated a purchase of a Mat and membership of the GC. Accordingly, to speak of paying $3,250 to join the GRS was to speak of paying that sum to buy the Mat, join the GC and join the GRS. 19 There were eight classes of membership of the GRS. They were ranged in ascending order beginning with "Giraffe Member" or "GM". As with so much of GW's business, acronyms were used to denote the various classes of membership. The higher one's category of membership, the more "downline" agents one had and the more indirect commissions one could earn. The progression of memberships was as follows: Giraffe Member (GM) Giraffe Leader (GL) Giraffe Retail Assistant (GRA) Giraffe Retail Manager (GRM) GRM 3 Star GRM 5 Star GRM 7 Star GRM Super Star 20 The system was pyramidal: each member of any particular class had more than one member of the class immediately below as a downline, that is, more than one "downline", with GM at the base. A member's progress upwards depended on the "Business Volume" credited to the member, that is, on the number of successful introductions made by the member or, more significantly, by his or her downline agents. For each successful introduction, the direct introducer was credited with a Business Volume of $2,500, while each upline agent of the introducer was credited with an amount determined by reference to his or her position in the pyramid in relation to the introducer. It was in a member's financial interests that his or her downlines should introduce new members. 21 A person was able to buy the Mat for $2,900 without becoming a member of either the GC or the GRS, although, as noted earlier, it is clear to me that this possibility was not emphasised. Apparently, as at 3 April 1999, 330 persons had bought the Mat alone. Obviously it was not in the interests of uplines or even the longer term interests of the immediate introducer that a newcomer should merely buy the Mat and not join the GC or the GRS. 22 Similarly, a person could pay the sum of $3,250 for the Mat and membership of the GC without joining the GRS. No doubt this might happen because the GC member did not apply to join the GRS or did not attend the Business School or the Management Consultant Class or attend or pass the interview. Apparently, as at 3 April 1999, 1,196 persons had bought a Mat and become members of the GC, but had not become members of the GRS. As indicated above, however, a person who did not join the GRS was not entitled to earn commissions. And if such a person introduced others, he or she would not generate indirect commissions for members of the GRS. Again, it was in the interests of the immediate introducer and of his or her upline agents that the introducee should join the GC and the GRS as well as buy the Mat. 23 Apparently as at 3 April 1999, 4,656 persons had bought the Mat, joined the GC and joined the GRS. Apparently of those 4,656 persons, 3,238 had each applied to join the GC and the GRS on the same date, while the remaining 1,418 had each applied to join them on different dates. 24 Against the above background it is convenient now to note the relevant provisions of the TP Act. THE STATUTORY PROHIBITIONS 25 The ACCC relies on ss 51A, 52, 53(c), 57 and 61 of the TP Act which provide, relevantly, as follows (emphasis supplied): "51A (1) For the purposes of this Division, where a corporation makes a representation with respect to any future matter (including the doing of, or the refusing to do, any act) and the corporation does not have reasonable grounds for making the representation, the representation shall be taken to be misleading. (2) For the purposes of the application of subsection (1) in relation to a proceeding concerning a representation made by a corporation with respect to any future matter, the corporation shall, unless it adduces evidence to the contrary, be deemed not to have had reasonable grounds for making the representation. (3) ................................................................................................................. 52. (1) A corporation shall not, in trade or commerce engage in conduct that is misleading or deceptive or is likely to mislead or deceive. (2) Nothing in the succeeding provisions of the Division shall be taken as limiting by implication the generality of subsection (1). 53. A corporation shall not, in trade or commerce, in connexion with the supply or possible supply of goods ... or in connexion with the promotion by any means of the supply or use of goods ... : (a) ... (aa) ... (b) ... (bb) ... (c) represent that goods ... have ... approval performance characteristics, ... uses or benefits they do not have; ..." 57. A corporation shall not, in trade or commerce, induce a consumer to acquire goods or services by representing that the consumer will, after the contract for the acquisition of the goods or services is made, receive a rebate, commission or other benefit in return for giving the corporation the names of prospective customers or otherwise assisting the corporation to supply goods or services to other consumers, if receipt of the rebate, commission or other benefit is contingent on an event occurring after that contract is made." 61 (1) A corporation contravenes this section if: (a) the corporation is the promoter of, or (if there are more than one) one of the promoters of, or is a participant in, a trading scheme to which this section applies; and (b) a person who is a participant in that trading scheme, or has applied or been invited to become a participant in that trading scheme, makes any payment to or for the benefit of the corporation, being a payment that he or she is induced to make by reason that the prospect is held out to him or her of receiving payments or other benefits in respect of the introduction (whether by himself or herself or by another person) of other persons who become participants in that trading scheme. (2) A corporation also contravenes this section if: (a) the corporation is the promoter of, or (if there are more than one) one of the promoters of, is a participant in, or is otherwise acting in accordance with, a trading scheme to which this section applies; and (b) the corporation, by holding out to any person the prospect of receiving payments or other benefits in respect of the introduction (whether by himself or herself or by another person) of other persons who become participants in that trading scheme, attempts to induce that person: (i) if he or she is already a participant in that trading scheme, to make any payment to or for the benefit of the promoter or any of the promoters or to or for the benefit of a participant in that trading scheme; or (ii) if he or she is not already a participant in that trading scheme, to become such a participant and to make a payment of a kind mentioned in subparagraph (i). (2A) A corporation also contravenes this section if the corporation promotes, or takes part in the promotion of, a scheme under which: (a) a payment is to be made by a person who participates, or who has applied or been invited to participate, in the scheme to or for the benefit of the corporation or another person who takes part in the promotion of the scheme or to or for the benefit of another person who participates in the scheme; and (b) the inducement for making the payment is the holding out to the person who makes or is to make the payment the prospect of receiving payments from other persons who may participate in the scheme. (3) For the purposes of subsection (1), (2) or (2A); (a) a prospect of a kind mentioned in that subsection shall be taken to be held out to a person whether it is held out so as to confer on him or her a legally enforceable right or not; (b) in determining whether an inducement or attempt to induce is made by holding out a prospect of a kind mentioned in that subsection, it is sufficient if a prospect of that kind constitutes or would constitute a substantial part of the inducement; and (c) ... (4) For the purposes of this section, a scheme is a trading scheme to which this section applies if the scheme includes the following elements: (a) Goods or services, or both, are to be provided by the person promoting the scheme (in this section referred to as the "promoter") ...; and (b) the goods or services so provided are to be supplied to or for other persons under transactions arranged or effected by persons who participate in the scheme (each of whom is in this section referred to as a 'participant'), being persons not all of whom are promoters. (5) .............................................................................................................. " THE PROPER CONSTRUCTION OF s 57 (REFERRAL SELLING) 26 With respect, I have some difficulty in understanding GW's submission in relation to the construction of s 57. I accept that under s 57 it is necessary to consider in the case of each consumer whether, by making a representation of the kind described in the section, GW in fact induced that consumer to acquire goods or services. But the respondents submit that in the present case, at least typically, the commission was earned at the very time when the relevant contract was entered into, rather than later as contemplated by s 57. According to the submission, the "relevant contract" for the purposes of s 57 is that by which the person introduced buys a Mat. The respondents submit that at the time when that contract is entered into, there is no commission or other benefit yet to be earned contingently on the occurrence of a subsequent event. 27 In amplification, GW submits that there are three contracts to be considered: first, a contract by which A becomes a member of the GC; second, a contract by which A becomes a member of the GRS; and third, a contract which is entered into between A and GW each time A sells a Mat to a consumer (who may or may not at the time of the purchase apply for membership of the GC or of the GRS). Counsel submits that in the concluding words of s 57, " ... if receipt of the ... commission or other benefit is contingent on an event occurring after that contract is made", the words "that contract" refer to the third of these contracts. He says that the words "that contract" should be construed as referring to the third contract because: "1. In terms of wording proximity, the closest referent contract is the contract under which the commission must arise. 2. If the intent were that 'that contract' mean the 'Contract for the acquisition of goods or services' (used earlier in the section), it would have been more usual or natural to expect the same formulation of words to be repeated." Counsel further submits that the result for which he contends is in accordance with "expectations of commercial reality", since sales commissions are paid for selling, not for supplying the names of prospective customers, which may prove to be of no value. Counsel's submission continues: "Thus, the suggested interpretation would not proscribe the offering of payment for mere provision of lists of 'prospective' customers, whether such lists were supplied before or after the consumer makes the original contract or acquisition of the goods. What would be proscribed is the situation where the corporation offers a commission which becomes payable upon any sale made to one of the names of prospective customers which name had been previously provided." 28 I do not accept GW's submission. In my view the expression "that contract" refers to the contract by which the consumer acquires goods or services. 29 For the purposes of the TP Act, a person is a consumer in relation to the acquisition of particular goods or services in the circumstances described in s 4B(1) of that Act. I need not set out the provision. It is not, and could not be, disputed that persons who acquired the Mat and the rights conferred by membership of the GC and the GRS did so as "consumers" for the purposes of the TP Act. (Later I will explain that the membership of each of the GC and the GRS involved the provision of "services" by GW to members.) The cash price for the Mat was $2,900, and $300 was payable as a GC "membership fee" and $50 as a "membership application fee". (Some GW documents referred to the total sum of $3,250 as a "membership fee", even in contexts in which the sum of $300 is also referred to as the membership fee.) Even the total of $3,250 was well below the $40,000 level stipulated in s 4B. The question which s 57 raises here is whether GW induced a consumer to acquire the Mat or the membership rights, or both, by representing that that consumer would afterwards receive commissions in return for assisting GW to supply the Mat or such membership rights to others, if receipt of the commissions was contingent on an event occurring after the consumer made his or her own contract. 30 The section is directed against the evil that a person might be induced to buy goods or services by an expectation that he or she will subsequently receive a rebate, commission or other benefit (after this, simply "commission") for assisting the supplier to supply its goods or services to other consumers, when there is no assurance that the commission will in fact be received because receipt of it is subject to a contingency. The contingency is something over and above the rendering of the assistance or the doing of any other act by the consumer alone. 31 An illustration given in s 57 itself is the giving to the supplier of the names of prospective customers. If a commission were to become payable by reason of nothing more than the giving of the names, the section would not be contravened. In such a case, the earning of the commission would not be contingent on the occurrence of an event which was both later than the acquisition by the consumer and distinct from the giving of the names itself. But, as the respondents' submissions correctly recognise, the typical arrangement would provide for receipt of the commission to be contingent on acquisition of goods or services by one or more of the prospective customers whose names had been supplied. 32 In sum, the expression "that contract" in s 57 refers back to the "contract" expressly referred to in the section, that is, the contract for the acquisition of goods or services made by the original consumer. There will be a contravention of s 57 by GW if GW induced a consumer to acquire any one or more of the Mat, the GC membership rights or the GRS membership rights, by representing that the consumer would, after that contract was made, receive commissions in return for assisting GW to sell any one or more of the Mat and those rights to other consumers, if receipt of the commission was contingent on those other consumers' actually doing one or more of buying the Mat, joining the GC or joining the GRS. 33 GW finally submits that if I should reject its threshold submission (as I do), it remains a question in relation to each consumer whether GW in fact induced that consumer to acquire any one or more of the Mat or the membership rights by a representation of a kind described. I accept the correctness of this submission. Accordingly, it will be necessary for me later to turn to the factual issue of what it was that operated as an inducement on the minds of particular consumers. THE PROPER CONSTRUCTION OF s 61 (PYRAMID SELLING) 34 GW also makes a threshold submission that s 61 does not apply in the circumstances of the present case for the following reasons:

140 Professor Hibbert also responded to Dr Blackburn's comment on Professor Oda's article. He expressed the opinion that electric fields of the magnitude generated by the Mat would not penetrate to the "internal conducting parts of the body". He also stated that the "polarisation effect" to which Dr Blackburn referred would be negligible and that "single movement of ions in an electrical field will not generate more ions". Professor Hibbert's general conclusions encompass the following: "In my opinion, there should be no argument about the existence of an electrical field associated with the Ion Mat. Any electrical device has such a field. What is in contention is whether the magnitude of the field emanating from the Ion Mat could cause 'generation of negative ions' in a person lying on the mat. In my opinion, this is impossible. The configuration of mat and body that Associate Professor Blackburn states to be that of the Ion Mat, is expressly one that Professor Oda says does not generate ions in the body, and is not one used mainly for electrostatic potential therapy." On the evidence before me, to the extent to which the opinions of Dr Kirkup and Professor Hibbert may be in conflict with those of Dr Blackburn, I prefer those of Dr Kirkup and Professor Hibbert. The expert medical evidence led by the ACCC 141 I turn next to the expert medical evidence led by the ACCC directed to showing that there was no credible research to support the claims that use of the Mat benefited human health. 142 Dr Deborah Claire Saltman, the Head of the General Practice Professorial Unit of the Department of General Practice at the University of Sydney, gave evidence along the following lines. A review of the literature reveals that very little work has been conducted on negative ions and that most of the work done consists of small scale studies with subject numbers under twenty which makes any interpretation of statistical significance impossible. She stated: "No studies could be found which actually show a statistically significant improvement in health effects using negative ions in patients with the range of conditions mentioned in the Ion Mat literature." 143 Dr Saltman referred to certain small size studies that review negative ions and their effect on human physiology, but she identified methodological problems in them and could not recommend any of them "as a significant contribution even to the debate, let alone to the support of negative ions". She also referred to the "mixture of fact and fiction" in GW's written material. 144 Dr David Alexander Bromley Richards, a Consultant Cardiologist at Westmead Hospital, addressed particular claims made for the Mat to the effect that it would: · help with heart murmurs and heart trouble; · help stroke patients, and · help heart attack patients to recover quickly. He expressed the opinion that no body of scientific evidence supports the proposition that negative ions produce these health benefits. He stated: "Potentially therapeutic interventions in cardiology are assessed by prospective randomised double blind clinical trials. I am unaware of any such trial being conducted amongst patients with cardiovascular disease generally, or in particular amongst those with structural or valvular heart disease (heart murmurs and heart trouble), or amongst those with cerebral vascular disease or those with stroke (stroke patients) or amongst those with ischaemic heart disease or myocardial infarction (heart attack)." 145 Dr Edward Maxwell Nicholls, Honorary Visiting Fellow, Department of Safety Science at the University of New South Wales, whose medical background included fourteen years as a general practitioner, thirty-four years as a recognised Medical Geneticist, and, concurrently with the later years of the latter, fifteen years of involvement in occupational health and disease as a lecturer and consultant, provided a detailed report on claims made for the Mat in GW's "Product Manual". He commenced his report as follows: "At first I felt that the way to criticise these claims would be to carry out computer searches of world literature to find support or denial for the claims. However a limited attempt to identify reference to the claims in standard medical sources eg: miscellaneous textbooks, computerised searches, etc, has been fruitless. The claims are mostly diffuse and in some cases totally nonsensical at first reading. However, I will quote various identifiable claims from the text and then give my opinion of them based on nearly 50 years of intense academic and practical experience." The Product Manual is a book which was provided by GW to persons who joined the GRS. It makes many claims as to health benefits to be gained from use of the Mat. These are presented in the Manual as if they have the backing of scientific research. The Manual commences: "Our product the Giraffe Negative Ion Mat has a negative ion producing device which produces 380 volts of negative charge. This voltage is proven to be the safest and most ideal for the human body. The Ion Mat with its super ceramics AZ-P surface has multiple functions of killing bacteria together with anti-bacterial effects and deodorisation, repelling insects, pain relief and heat preservation." The first page also includes the following: "The latest high tech research has shown that negative ion therapy can be effective in the following areas - blood circulation, rejuvenation of body cells, balancing of the involuntary nervous system and building immunity. Negative ion therapy is now receiving increased attention from experts in the preventative medicine industry and research on this therapy is ongoing. Our product has received approval from the Ministry of Health of Japan. It has been proven to be an effective therapeutic device." 146 The following introductory statement is also made: "ABOUT THE PRODUCT UNBEATABLE QUALITY IF YOU ARE ONE WHO APPRECIATES THE FINER THINGS IN LIFE, YOU WILL FEEL PROUD TO HAVE CHOSEN GIRAFFE'S PRODUCT. IT IS PRESENTED TO YOU AFTER AN EXHAUSTIVE SELECTION PROCESS. WE HOPE THAT YOU WILL ENJOY IT AND SHARE IT WITH ALL YOUR FRIENDS." 147 Dr Nicholls denounced the Product Manual's numerous claims as having no foundation in science, and, in many cases, as being simply nonsense. 148 Dr Hugh Francis Molloy is a Consultant Dermatologist in private practice at Edgecliff. He was asked to respond to claims made by GW that the use of the mat benefited the skin in certain respects. Dr Molloy described the database searches he carried out, and concluded as follows: "There would appear to be no easily retrievable scientific evidence confirming the efficacy of a Negative Ion Mattress to support the view that such an apparatus would be helpful in the treatment of skin disorders or injuries. As for the idea that such an apparatus would assure one to maintain a better quality of skin health, my experience over the past forty years of medical practice would lead me to doubt this." 149 Dr Molloy also responded to claims made by Mr Brennan and Mr Minter, GW's expert witnesses referred to earlier, generally to the effect that: "just because some idea or theory is not scientifically proven it cannot be said that that idea or theory will not be successful in a certain percentage of cases." Dr Molloy said: " ... in my opinion any idea of theory which allegedly impacts on the health or welfare of any person should be subject to some form of scientific assessment, if only to assure members of the public that such an idea or theory will not cause harm." .............................................................................................................................. In my opinion the problems which the Giraffe World Australia Pty Ltd negative ion mattress is alleged to improve are probably based on a basket of accumulated problems which would at least partially be resolved by changes in lifestyle and in no way related to the use of the ion mat." 150 Dr Neil William McGill, a Consultant Rheumatologist at the Royal Prince Alfred Hospital, was asked to report on the question whether there is a body of learning to the effect that negative ions relieve acute arthritis and have an anti-rheumatic effect. His conclusion was: " ... in summary, an extensive literature search has provided no suggestion that negative ions can be used to treat arthritis or that there is any data that could be reasonably extrapolated to suggest that negative ions might be of some help for arthritis." Dr McGill was subsequently asked to respond to the affidavits of Rodney Brennan and Wayne Minter. He agreed with Mr Minter that chiropractic manipulation for the treatment of mechanical lesions of the spine has a role for some patients with mechanical spine problems and that such manipulation has been assessed by appropriate scientific studies and, for certain problems, has been demonstrated to be of benefit. 151 Dr McGill stated as follows in response to Mr Brennan's affidavit: "Mr Brennan's affidavit refers in general to 'remedies and strategies used by natural therapists' and more specifically to 'herbal medicine and homoepathy [sic]'. He points out the lack of scientific evidence of benefit for most therapies within that area. The statement 'most of the remedies and strategies used by natural therapists have not been scientifically assessed, yet remain supported by the consuming public who are generally satisfied with the results achieved' I think does not provide any support for the effectiveness of such products. The placebo effect is well recognised and understood, not only by the scientific community but by many of the general community as well. Because of the placebo effect, it can be expected that a significant number of people will be satisfied with results achieved when taking substances that are completely inactive. Similarly, the concept that 'herbal medicine and homeopathy enjoys sustained and growing support in the absence of double blind cross over trials, relying instead of [sic] a wealth of imperical evidence that stands the test of time' does not, in my opinion, offer any support for the validity of such therapy. There are some treatments which are very difficult to study in a blinded fashion. Herbal medicine and homeopathy do not fall into that category and, if they genuinely have a beneficial effect (as has been the case for many medicines which commenced as herbal therapies and have now evolved into purified accepted conventional drug treatments) then appropriate scientifically designed blinded controlled studies will demonstrate the benefit. The fact that a therapy has not been proven to be of benefit by a blinded controlled study does not indicate that the therapy is not of value however, when a range of therapies which are amenable to appropriate control studies, are recommended and the person or body recommending such therapy indicates that they feel appropriate scientific assessment of whether the therapy works or not is not required seems to me to indicate that the body recommending the therapies has no confidence in the capacity of the therapy to do what is claimed." 152 Dr John Stuart Marshall, Consultant Immunologist, who has been in medical practice for thirty-nine years and for the last twenty years in the consultant practice of allergies, clinical immunology and environment medicines, stated that he was aware of the interest in negative ion generators, particularly in the early eighties, but had never come across any literature or evidence suggesting that they had any capacity to alter human immune functions. 153 Dr Julian Lee is a Senior Thoracic Physician at the Royal Prince Alfred Hospital. He was asked to provide an opinion as to the claimed beneficial effect of negative ion generation in the management of bronchial asthma. He said that in the course of his professional career as a Consultant Thoracic Physician for more than thirty years he had been aware of periodic claims made concerning the alleged beneficial effects of negative ion generators in the management of a variety of disorders, including bronchial asthma, but that such claims "remain speculative in the absence of reports in the peer reviewed medical literature providing scientific evidence of such an effect." 154 Asked to comment on the evidence of Rodney Brennan and Wayne Minter, Dr Lee simply provided copies of two editorials of recent issues of the New England Journal of Medicine. In general terms, they denounced alternative medicine. The "tone" of the editorials can be gleaned from the following passage: "It is time for the scientific community to stop giving alternative medicine a free ride. There cannot be two kinds of medicine - conventional and alternative. There is only medicine that has been adequately tested and medicine that has not, medicine that works and medicine that may or may not work. Once a treatment has been tested rigorously, it no longer matters whether it was considered alternative at the outset. If it is found to be reasonably safe and effective, it will be accepted. But assertions, speculation, and testimonials do not substitute for evidence. Alternative treatments should be subjected to scientific testing no less rigorous than that required for conventional treatments." 155 Despite references in the product Manual to "research findings" and "various doctors [sic] opinions" supporting the claimed health benefits of negative ions, GW led no evidence of substance to counter the strong body of expert medical evidence led by the ACCC. GW did tender a sixty-three page translation of a book written in the Mandarin Chinese language entitled "Achieve Good Health While Sleeping - The King of Modern Health Therapy - Electric Potential Therapy". The book, which was exhibited to the affidavit of the translator, was "compiled" by a person called Shiao Han Li who did not give evidence before me, and does not appear, at least so far as the book reveals, to have any medical qualifications. The book purports to be in "the nature of a home medicine guide" and contains a lengthy discussion about negative ions and numerous "testimonials" from people who claim they have been cured of a range of ailments by an "ion electric potential therapeutic mattress". While it does purport to refer to the "findings" of a number of doctors, I do not think that the book has any evidentiary value in the face of the expert medical evidence called by the ACCC. The evidence as to the falsity of the representations as to official or authoritative approval and use of the Mat 156 Finally, GW represented, in substance, that official bodies supported the claims made by GW for the Mat as a therapeutic device. I refer to representations (f), (zh), (zi), (zj) and (zk). As noted earlier, I find that these representations were made and it remains to address the issue of the falsity of them. But because it is necessary to appreciate that they were intended to convey a message about the health benefits of the Mat, it is appropriate first, to say a little more about the making of them. 157 There was some evidence directed to a Department of Fair Trading certificate which was issued with respect to the Mat, but the ACCC does not plead a representation in relation to the grant or terms of such a certificate. In cross-examination, Ms Ip, was shown a "Certificate of Suitability" which was taken from the box containing the power source, which together with the Mat, constituted an exhibit. The Certificate (Certificate Number 7039) was issued by the Department of Fair Trading and stated: "This is to certify that articles of the same type as the article specified below and variations so specified are acceptable by the DEPARTMENT OF FAIR TRADING as suitable for connection to public electricity supply in NEW SOUTH WALES in accordance with the provisions of AS 3000 subject to the conditions stated." (emphasis supplied) The "article" was specified as: "Ion Mat controller housed in a thermoplastic enclosure Trade Name 'Giraffe' 240V 50Hz 3.2W Class I" Ms Ip could not confirm whether her Mat had come with an identical certificate, and was able to state only that "some certificate" had accompanied the Mat. The Product Manual states: "The Giraffe World Ion Mat is certified by the [D]epartment of Fair Trading NSW Consumer Protection Agency as meeting electrical safety requirements, Certificate Number 7039." 158 The Department had indeed certified that the Mat was appropriate to be connected to the electricity supply but this said nothing as to the effectiveness of the product as a therapeutic device. 159 It was alleged that GW represented that the "ion mat has received approval from the Ministry of Health in Japan and [is] a proven therapeutic device." (representation (f)). 160 In the video presentation shown at HC meetings, it was stated that: " … we can confirm that the - ion mat is helpful to the maintenance of human health. In addition to that, the Giraffe World Negative Ion Mat has received approval from the Ministry of Health of Japan and Taiwan. It is a best product in Japan. It is now available in Australia, Taiwan, Malaysia and USA. This high quality product will definitely receive recognition from those who are health conscious." Although not particularised by the ACCC, the "Product Manual" made a similar representation. It stated, under the heading "Negative Ion Therapy": "Former professor of University Toho in Japan, Dr Takada Maki is a renowned negative ion research scientist. His negative ion therapy (negative electrotherapy) involves charging the human body with negative electricity in order to improve the effectiveness of negative ions in the body. It has a positive effect on the entire body through blood, the cells and the nerves, assisting in the cure of various diseases. The innovative approach therapy will greatly improve human health and will play a significant role in the treatment of many illnesses. The therapy may also help reinvigorate the body's cells and tissues with no harmful side effect. It can be used to improve our physical constitution." 161 At the foot of the page, under the symbol of a pair of wings attached to a pole around which two snakes are coiled, suggesting some kind of association with the practice of medicine, it was stated: "The Appr[o]val No. from the Department of Health in Japan as a medical equipment is 21000BZZ00252000." 162 Martin Cowling, who at the time worked for the AIDS Council of NSW as its Human Resources Co-ordinator of Volunteer Services, visited GW on 10 March 1998 at the invitation of Rosalee K of the Australian Executive Women's Network who also was a member of the GRS. Although Ms K had extended the invitation to him under the auspices of the "Australian Executive Women's Network", subsequently, on Mr Cowling's visiting the premises on 10 March, it became clear that she was connected with GW and had invited Mr Cowling to GW to inform him of its product and business. She wore an identification badge with her name, her photograph and the GW logo. During the course of the conversation, Ms K introduced Mr Cowling to Ms Orr and stated that Ms Orr had been "appointed [by GW] to bring [the] product to the non-Asian market". Mr Cowling affirmed that Ms K and Ms Orr told him that the Mat had the endorsement of the Japanese Health Ministry, and that Ms K also stated that the Mat was used in nearly all hospitals in the Japanese Health System (representation (zk)). I accept Mr Cowling's evidence. 163 Ms Michaela Watson, an investigator with the ACCC, affirmed that during a HC meeting that she attended, a female presenter called "Jennifer", stated the Mat had been approved by the Japanese Health Ministry, and emitted negative ions which "promote good health". Ms Watson made notes of her experiences at GW during a taxi ride home from the meeting. The following day she incorporated those notes into a draft affidavit. 164 In light of the above evidence, I have found that GW represented that the Mat had received the approval of the Japanese Ministry of Health and was a proven therapeutic device. It is true that it was not explicitly stated that the Mat was a "proven therapeutic device", however, several times references to the approval of the Japanese Health Ministry accompanied references to health benefits offered by the Mat in a manner which implied that the Mat was a proven therapeutic device. For example, the HC video stated that GW could "confirm" that the Mat was beneficial to health, and that "in addition", the Mat had received the approval of the Japanese Health Ministry. This representation was misleading and deceptive: as noted in the next paragraph, although the Japanese Ministry of Heath had apparently issued an approval in respect of the Mat, it was only for its manufacture, and was silent on its effectiveness. 165 According to what purports to be a verified translation into English, the Mat was the subject of a certificate dated 9 April 1998 issued by the Japanese Minister of Health and Welfare entitled "Approval of manufacturing a medical equipment". The certificate stated: "The application lodged by the applicant, dated 7 November 1997, to manufacture the medical equipment has been approved, in accordance with the Sub-section 1 of Section 14 of the Pharmaceutical Affairs Law (Law No. 145, 1960)." According to that translation, the applicant for the certificate was the "Yamatomisaki Co. Limited". Apparently, however, the applicant's name can also be translated as the "Daiwa Misaki Co Ltd". 166 The present is an illustration of much of GW's manner of operation: GW takes a neutral fact of no particular significance and derives from it support from the world of science or officialdom for the benefits it claims for its product. 167 In relation, to representation (zh), Mr Cowling affirmed that during his visit to GW, Ms Orr stated: "We are close to finalising approval from the Australian Health Department for the negative ion mat." Ms Orr asserted that the Mat was indeed with the Australian Department of Health awaiting approval, however, apart from this hearsay evidence, the respondents have led no evidence that GW had applied to any Department of Health for any approval in respect of the Mat, let alone evidence of the progress of the application within the Department. 168 The evidence pertaining to representations (zi) and (zj) is found in the evidence of Mr Hendra Tan who affirmed that at a HC meeting, a presenter stated: "The product has been tested in Japan. It has got a health certificate in Japan which is the hardest in the world to get. In Taiwan its got one. The product has been tested and used in Japanese hospitals for 15 years." In cross-examination, Mr Tan conceded that the presenter had qualified the representation by stating that the Mat was being used in certain types of hospitals, however, Mr Tan could not recall the exact type. The substance of the representation was clearly made. 169 I have referred above to the Japanese language certificate in evidence. 170 I infer that representations (f), (zh), (zi), (zj) and (zk) were false. The only evidence of approvals before me do not support them. GW could be expected to have possessed evidence of their truth if that evidence existed, but did not lead such evidence or explain its absence, even though it knew that the allegation was being made and that the documents available would suggest that the representations were not supported; cf Jones v Dunkel (1959) 101 CLR 298. Conclusions on the misleading or deceptive conduct case 171 GW represented that the Mat emitted negative ions or generated them within the body of a person lying on the Mat. It does not. GW should be restrained from making representations to that effect. 172 GW represented that there was scientific support for the proposition that the Mat, by means of negative ions, produced and would produce benefits for human health. There is not. GW should be restrained from making such representations. 173 GW represented that various official bodies supported its claims that the Mat offered the health benefits claimed for it. They do not. GW should be restrained from making representations to that effect. 174 It seems appropriate to caution against a potential misunderstanding. No-one suggests that GW is not entitled to sell its Mat. No doubt if A tells B that a particular therapeutic device, "health food", pharmaceutical product or practice has benefited A's health in a particular way, ordinarily the statement, if honestly made, is not "misleading or deceptive", even if there is no scientific evidence to support a causal connection. The reason is that A and B understand that A is purporting to recount only his or her perceptions. Conversations of that kind in a non-commercial context are matters of daily occurrence. 175 An interesting question would have arisen if GW had been careful not to make claims for support in science or officialdom for the therapeutic effects of the Mat, but had merely provided the forum of HC meetings in which several As might make statements to an audience of several Bs about the Mat, of the kind just described, and GW had exploited the conversations by selling its Mat "on the back of them". 176 There is a danger in discussing such hypothetical situations: in the real world, the facts would not, almost certainly, conform to the hypothetical model. If, for example, the As in the illustration derived a financial benefit for recounting their experiences, the model of a private conversation between A and B is immediately betrayed. But more importantly, even if the As did not derive financial benefit, GW would be using, and would be understood to be using, the As' testimonials to promote the sale of the Mat. It may well be that because of that context, GW would still be found to be representing without reasonable grounds that the Mat would, as a matter of objective fact as distinct from perception, produce for them the health benefits related by the As. It is difficult to imagine how, given the context, GW would be able to make an effective disclaimer, that is, to achieve a situation in which it was selling its Mat on the basis of the testimony of the As, without itself being found to be engaging in misleading or deceptive conduct. However, the above represents only my tentative views on the issue raised by me. THE CASE OF ACCESSORY LIABILITY AGAINST MR MISUMA, MR HAN, MR SCOTTE AND MS ORR The relevant claims for relief 177 The ACCC alleges in relation to each of Mr Misuma, Mr Han, Mr Scotte and Ms Orr that "by arranging, participating in and promoting the Scheme", the individual respondent in question has been "directly or indirectly knowingly concerned in or a party to" GW's contraventions of ss 52, 53(c), 57, 61(1) and 61(2) and 61(2A) of the TP Act. I have already concluded that contravention of s 61(2A) by GW is not established and, accordingly, I need say no more of that provision. Since there are thirty-eight pleaded contraventions of ss 52 and 53(c), it is truly remarkable that the ACCC alleges that each of the four individual respondents incurred accessory liability in respect of all contraventions by GW. 178 Against each of Mr Misuma, Mr Han, Mr Scotte and Ms Orr, the ACCC seeks declaratory and injunctive relief. It seeks a declaration that each was "directly or indirectly knowingly concerned in or a party to" contravention of ss 52, 53(c), 57 and 61 of the TP Act and an injunction restraining each of them: "from being in any way, directly or indirectly, knowingly concerned in or a party to [GW's] promotion of or involvement in the [S]cheme or any similar scheme and from being in any way involved in the promotion of, or in the involvement in [sic], any similar scheme by any other corporation." 179 The words "directly or indirectly, knowingly concerned in or a party to" are no doubt taken from s 80(1) of the TP Act. That subsection provides that where, on the application of, inter alia, the ACCC, the Court is satisfied that a person has engaged, or is proposing to engage, in conduct that constitutes or would constitute: "(e) being in any way, directly or indirectly, knowingly concerned in, or party to, the contravention by a person of [a provision of Part V of the TP Act]", the Court may grant an injunction in such terms as the Court determines to be appropriate. 180 When the ACCC's proceeding was a proceeding under Part IVA of the Federal Court of Australia Act 1976 (Cth) ("the FCA Act"), the ACCC also sought an order that GW repay any money paid to it in respect of the Scheme and an order for payment of compensation for loss or damage suffered by persons as a result of participation in the Scheme. It was not made clear whether that order was sought against Mr Misuma, Mr Han, Mr Scotte and Ms Orr. Section 82 of the FCA Act provides that a person who suffers loss or damage by conduct of another person that was done in contravention of a provision of Part V of that Act may recover the amount of the loss or damage by action against that other person "or against any person involved in the contravention". Section 75B(1) of the TP Act provides, relevantly, that a reference in, inter alia, s 82 to a "person involved in a contravention of a provision of [Part V]" is to be read as a reference to a person who: "(c) has been in any way, directly or indirectly, knowingly concerned in, or party to, the contravention; ..." 181 It will be noted that para (c) of s 75B(1) is in substance identical to para (e) of s 80(1). At present I am not concerned with ss 75B and 82, and am concerned only with s 80. 182 The ACCC seeks orders restraining Mr Misuma, Mr Han, Mr Scotte and Ms Orr from: "4(iv) promoting, advertising, holding out or participating in the [S]cheme or any similar scheme. (v) ... (a) publishing, distributing or disseminating any promotional or advertising material in respect of the [S]cheme or any similar scheme; (b) inducing by any means whatsoever persons to participate in the [S]cheme or any similar scheme; (c) disposing, transferring, disbursing, removing from the jurisdiction or otherwise parting with possession of money or other consideration received from persons participating in the [S]cheme. (vi) …being in any way, directly or indirectly, knowingly concerned in or a party to [GW's] promotion of or involvement in the [S]cheme or any similar scheme and from being in any way involved in the promotion of, or in the involvement in, any similar scheme by any other corporation." 183 Finally, the ACCC seeks an order pursuant to s 80A of the TP Act requiring GW, Mr Misuma, Mr Han, Mr Scotte and Ms Orr: "at their own expense and in a manner and a time that the Court deems appropriate, to publish advertisements stating the respects in which [they] have been found to have engaged in conduct in contravention of Sections 52, 53(c), 57 and 61 of the Trade Practices Act, 1974 (Comm.) or to have been knowingly concerned in or a party to that conduct." Accessory liability under the TP Act 184 In Yorke v Lucas (1985) 158 CLR 661, in which the managing director of a vendor's corporate agent was held not liable by reason of s 75B(1) for the vendor's misrepresentation, Mason ACJ, Wilson Deane and Dawson JJ held in a joint judgment (at 670) that: · for a person to be "knowingly concerned in" a contravention, he or she must have "knowledge of the essential facts constituting the contravention"; · The word "knowingly" in para (c) qualifies the expression "concerned in" and not "a party to"; and · "the proper construction of par (c) requires a party to a contravention to be an intentional participant, the necessary intent being based upon knowledge of the essential elements of the contravention." In the same case, Brennan J said that under s 75B, civil liability is imposed only on "those who engage in the conduct prescribed in s 75B with the state of mind … call[ed] mens rea" (at 673). 185 The judgments make it clear that one of the "essential elements" of which the accessory must have known is, in the case of a contravention of s 52 by misrepresentation, at least the facts that render the representation misleading or deceptive. Their Honours were not dissuaded from this view by the fact that such knowledge is not an essential element of primary liability for a contravention of s 52 by the corporate contravener. 186 This approach to accessory liability under para (c) of s 75B(1) of the TP Act (as noted earlier, the same approach is applicable to para (e) of s 80(1)) has been taken in many cases; cf Crocodile Marketing Ltd v Griffith Vintners Pty Ltd (1989) 28 NSWLR 539 at 546 per Cole J; Butt v Tingey, (Davies, Neaves and Beazley JJ, 5 August 1993, unreported) at pp 5-6; Richardson & Wrench (Holdings) Pty Ltd v Ligon No 174 Pty Ltd (1994) 123 ALR 681 (FCA/Burchett J) at 692-695; Westbay Seafoods (Aust) Pty Ltd v Transpacific Standardbred Agency Pty Ltd (Burchett, Whitlam and Sundberg JJ, 6 June 1996, unreported) at p 5 (see also (1996) ATPR(Digest) 46-162); Compaq Computer Australia Pty Ltd v Merry (1998) 157 ALR 1 at 4-5. It is not required that the accessory should have appreciated that the conduct was unlawful. 187 Unfortunately, the ACCC's submissions in relation to the issue of accessory liability have not addressed the critical issue raised by the authorities of the state of mind of the supposed accessory in relation to particular pleaded contraventions. In its submissions the ACCC has, at least generally, simply referred to the evidence of the positions and conduct of the respective alleged accessories without attempting to show that that evidence establishes the intention and knowledge as well as the "involvement" required in respect of any particular contravention. The failure to do so is most obvious in relation to the pleaded contraventions of ss 52 and 53(c) of which, it will be recalled, there are no less than thirty- eight. It is simply absurd to suggest that, for example, Ms Orr was knowingly concerned in, or party to, all thirty-eight pleaded contraventions of those sections, yet this is what is pleaded. 188 In the circumstances, I propose to do no more at present than to express provisional views and to allow the ACCC the opportunity to make supplementary submissions on accessory liability if it wishes to do so. 189 I will consider in turn the positions of the respective alleged accessories. Mr Misuma and Mr Han did not give evidence. As noted earlier, Mr Misuma appeared through his solicitor and counsel while Mr Han did not appear. Mr Scotte and Ms Orr appeared in person and gave affidavit and oral evidence. Mr Misuma 190 Mr Misuma was the founder of GW and its business and remains a director of it. His signature on behalf of GW appears on many of the forms of application for membership of the GC and invoices in respect of the sums of $3,250 and warranties in respect of the Mat. 191 Mr Hsu, GW's Chief Executive Officer, testified that in that capacity he reported to Ms Pauline Chen in Japan who was Mr Misuma's personal assistant. Mr Misuma appears in a GW "Business School" video. Mr Hsu last saw Mr Misuma on the Sydney premises of GW in November 1998. It appears that since that time he has been living overseas, apparently in Japan. A photograph of Mr Misuma and the suggestion that he was Chairman of GW appears in a GW "Career Manual" under the tab "Introduction to the Company". It seems clear that Mr Misuma made a sizeable amount of money from the Scheme. He is a director of a number of companies which were the beneficiaries of large sums of money paid by GW. He has not testified in answer to the claims made against him. 192 I infer that Mr Misuma knew of all the elements of the conduct of GW which I have held constituted a contravention of ss 57, 61(1) and (2) of the TP Act. He was active in promoting that conduct by GW. 193 My preliminary view is that there should be declaratory and injunctive relief against Mr Misuma in respect of contravention of ss 57 and 61 but not of any of the pleaded contraventions of s 52. Mr Han 194 In the GW Career Manual there appears a photograph of Mr Han and the suggestion that he is President of GW. This material appears behind the tab "Introduction to the Company". As well, Mr Han's GW business card, which states he is the President of GW, is in evidence. He appears to be a shareholder in GW. He was actively engaged in promoting GW and the Scheme in March 1998. He achieved GRM 3 Star status in the GRS. He spoke at a number of HC meetings promoting the Scheme. He determined whether refunds would be made to customers. He also gave presentations at the Business School seminar. 195 Mr Han selected presenters to be employed by GW and was closely involved in the promotion of the Scheme and in the Management Consultant Class. It appears that he made substantial amounts of money from his membership of the GRS. 196 The fact that Mr Han failed to appear to respond to the claims made against him and the fact that no evidence was led on his behalf makes it easier for the Court to find that he was directly or indirectly knowingly concerned in or a party to GW's contraventions of ss 57 and 61(1) and (2) of the TP Act. 197 Again, my preliminary view is that there should be declaratory and injunctive relief in respect of contravention of these provisions but not of s 52.

Mr Scotte 198 Mr Scotte promoted the Scheme in presentations at HC meetings. That is, he attempted to induce people to join the GC and the GRS. His cross-examination of various witnesses who testified as to things he had said did not suggest otherwise. 199 Mr Scotte had a substantial interest in promoting the Scheme - in the ten months between March 1998 and January 1999 he made about $106,000 as a member of the GRS. 200 I am not persuaded that Mr Scotte appreciated that unlawfulness was involved but knowledge in this respect is irrelevant. 201 My preliminary view is that there should be, at most, declaratory relief against Mr Scotte in respect of contraventions of ss 57 and 61. There is no evidence of a likelihood of repetition: GW has appointed an administrator; it has ceased trading; and (I was informed) it is no longer in possession of the premises which it leased. The case does not seem to be one for an injunction against Mr Scotte. 202 The position in relation to s 52 calls for some discussion. Mr Scotte's presentations were part of GW's attempt to induce people to buy the Mat, join the GC and join the GRS. He made representations concerning the health benefits offered by the Mat as well as the financial benefits offered by membership of the GRS. 203 The ACCC alleges that Mr Scotte made the following representations relating to the Mat: "(g) The ion mat reduces the need for sleep; (h) The ion mat can cure skin problems; (i) Persons using the ion mat will be stronger and healthier within 3 weeks of using it." 204 Mr Adams gave evidence that at the HC meeting which he attended, Mr Scotte invited an audience member to participate in a test involving the Mat. The audience member was asked to lie down on the Mat. Mr Scotte then proceeded to pass a "pen" over the man's body. Before the Mat was connected to the power source, the pen did not make a noise when being passed over the man's body. After that connection was made, it was suggested that the "pen" "beeped" and that this was because negative ions flowed through the volunteer's body. 205 Mr Scotte then asked the volunteer to raise his leg and Mr Scotte pushed down on it while the volunteer, at Mr Scotte's request, resisted. The power to the Mat was turned on and Mr Scotte asserted that "the negative ion mat took the 240 volts from the power source and converted it into negative 380 volts". After several minutes, the "leg test" was again conducted and it was suggested to the audience that the volunteer was exhibiting increased strength. According to Mr Adams, Mr Scotte then said: "It does wonders for a lot of ailments. I have had a problem with my face (acne marks…) for some 25 years. But since I have been using the mat, my face is the best it has ever been. I also find that I need less sleep than I use[d] to using this mat." 206 According to Mr Adams, Mr Scotte also said: "It would take about three weeks to really start to feel the effects of the mat. We have only had it on here for a few minutes." 207 In cross-examination of Mr Adams, Mr Scotte suggested to him that he (Mr Scotte) did not state that the pen beeped when negative ions flowed through the volunteer's body, but that it made a noise showing that the product was operating. Mr Adams did not agree. 208 Ms Kilsby, a witness called by GW, affirmed that after having made a presentation as to the financial benefits of the GRS, Mr Scotte stated: "I have always had acne problems. After a week of using the negative ion mat, my skin improved enormously. More than it had ever improved before. My skin is now the best it has ever been in a long time." Ms Kilsby's evidence was not challenged in cross-examination and accords with that of another witness, Mr Hendra Tan. 209 My preliminary view in relation to s 52, is that there should be no relief against Mr Scotte in that respect. In relation to his skin problem, he was making an honest statement of his perception. In relation to the "strength" and "pen" tests, it is not shown that Mr Scotte knew of facts that falsified the representations that arose from what he did. In any event, there is no threat of repetition. Ms Orr 210 The main evidence relied on by the ACCC against Ms Orr, is that of Mr Cowling who attended GW's premises on 10 March 1998. 211 In March 1998, Ms Orr was engaged by GW as Vice-President of Public Relations and was paid a weekly retainer of $1,000. She worked in that position until on or around 30 June 1998. She is also the founder and President of the "Australian Executive Women's Network". Her role in GW was to improve communication between GW's non-English speaking management and its English-speaking Australian members. Fiona Lawrence, an investigator with the ACCC, affirmed that during a telephone conversation, Ms Orr described her position in GW as "Vice-President of Public Relations" and stated: "I'm responsible for all of Giraffe World's communication with the media, the press and the public because you know it's very difficult for them to communicate sometimes because they're Taiwanese." During the conversation, Ms Orr praised GW and the Mat product. She said to Ms Lawrence: " … [the] product is second to none. It's absolutely fabulous. I can only talk from personal experience but I had arthritis in my hands and they used to get all swollen and sore and I used to get pins and needles at night." (emphasis supplied) She also said to Ms Lawrence: " ... as soon as I used the ion mat it stopped straight away and all the swelling went down. ... It's also cured my acidic blood." In cross-examination, Ms Lawrence maintained that she had used the word "cured". 212 During Mr Cowling's visit to GW on 10 March 1998, the circumstances of which were discussed earlier, there was a lengthy conversation between Ms Orr, Ms K and himself. It included the following: Ms Orr: "I have heard of a person who had a stroke and lay on the mat and overnight they got up. That's why we want them all in hospitals and nursing homes." … Ms Orr: "Giraffe World is a Taiwanese company, a very well established company. They are expanding into Australia. We are close to finalising approval from the Australian Health Department for the negative ion mat. Its [sic] also endorsed by the Japanese Health Ministry. I am directly about to move into China. I have a woman in America who is about to start selling it there. I am just about to fly off to China and America." 213 Ms Orr also made statements to Mr Cowling as to the financial benefits to be gained from the GRS, of which she was a member. I will not set out all the evidence and the following statements by her to Mr Cowling will suffice: "You then get a percentage of every mat they sell. So you may decide to take the easy road. All you do is send the people to a seminar. We will sign them up as a GM, they get their mat and you get (a percentage which [Mr Cowling did] not recall). Then if they sign up other people to become GM's, they move up the ladder. And because you have signed them up, you move up the ladder." … "Let me put it this way Martin. You could get half a dozen, lets say 6 people in the AIDS Council to become your sellers in the AIDS Council. If you sold a mat to all of those people then you would get a percentage of the takings. So you would actually be helping change people's health and become very rich yourself." 214 There was also a conversation between Mr Cowling and Ms Orr as follows: Ms Orr: What we will do today Martin is sign you up as a Giraffe Member. You can take a mat home and see what it is like." Mr Cowling: "How much is the mat?" Ms Orr: "$3000." Mr Cowling: "Would I have to pay all of that today?" Ms Orr: "Well you see, all you have to do is sign up a couple of people at the AIDS council and will get (a percentage figure which [Mr Cowling did] not … recall) back and that will pay for your mat." 215 Mr Cowling did not buy a Mat or, it follows, join the GC or the GRS. My preliminary view is that Ms Orr was knowingly concerned in the contravention of s 61(2) of the TP Act, but not ss 57, 61(1) or 52. As in the case of Mr Scotte, I am not persuaded that Ms Orr was aware of the unlawfulness that touched GW's activities. Her statements as to her own experiences of using the Mat were honest statements of her perceptions. It is not shown that she knew facts which falsified her statements about the "Australian Health Department" or the "Japanese Health Ministry". There is no likelihood of repetition of her conduct for the reasons I gave in relation to Mr Scotte. My preliminary view is that in her case as in his, there should be no more than a declaration in relation to accessory liability in respect of the contravention of s 61(2). RELIEF 216 I will not at present make declarations or orders but will allow an opportunity for the ACCC to bring in short minutes of orders to be made in conformity with these Reasons for Judgment. I note that on 23 April 1999, GW gave a written undertaking to the Court in the following terms: "Without admission, the First Respondent undertakes to the Court that pending the delivery of the judgment of the Court in these proceedings and such further orders that this Court shall make, the First Respondent will not by itself or knowingly by its employees or members make the following representations concerning the Giraffe Ion Mat ('the Mat') that:

The Mat generates or emits negative ions.
The Mat generates or increases negative ions in the human body. 3. The use of a Mat will cure any or any particular ailment or health condition. 4. The use of the Mat will relieve any or any particular ailment or health condition.
The use of the Mat will promote health. 6. Any Australian or other Government approvals of the Mat provide endorsement for the capacity of the Mats to influence health. The First Respondent further undertakes to the Court that the First Respondent will not distribute the Product Manual for the Mats, or show the 'Happiness Circle Video' (which the First Respondent has not used for more than six months)." It may well be that in respect of the misleading and deceptive conduct part of the case, a conversion of these interlocutory injunctions into final ones would be an appropriate course. THE ACCC'S APPLICATION TO RECONSTITUTE ITS PROCEEDING AS A REPRESENTATIVE PROCEEDING 217 The ACCC commenced proceeding NG 421 of 1998 on its own behalf and as a representative party pursuant to s 33C of the FCA Act. Section 33C is in Part IVA of that Act. Part IVA is headed "Representative Proceedings". On 24 July 1998, I made an order under s 33N of the FCA Act that the proceeding no longer continue under Part IVA. On 7 October 1998, the ACCC filed a notice of motion seeking, inter alia, orders permitting it to file a further amended application and a further amended statement of claim for the purpose of "reconstituting" the proceeding as a representative proceeding. I stood over that motion to the final hearing. 218 In my Reasons for Decision of 14 July 1998 (now reported at (1998) 156 ALR 273), I noted my doubt that "on the existing evidence, there [were] even six other persons who [had] a claim against [GW] and Mr Han as required by s 33C (1)(a) of the [FCA] Act" (at 290). I added (at 292-293): "Even if it were possible to say that there were at least six such persons, it is not possible to say whether there were few or many loss sufferers at that time. … The uncertainty touching the issues to which I have referred is a factor which militates in favour of the making of an order under s 33N, in my opinion." I also noted that the ACCC had available to it the procedure provided by s 87 (1A) and (1B) of the TP Act (at 295). 219 The ACCC submits that circumstances have changed since 24 July 1998 and that it is appropriate now that the proceeding be again a representative proceeding under Part IVA of the FCA Act. 220 In my opinion, I do not have power to make the order sought. There is no provision in the FCA Act expressly permitting me to do so. Part IVA contemplates only the commencement of proceedings as representative proceedings: cf ss 33A (definitions of "group member", "representative party" and "representative proceeding"), 33C, 33D, 33G, 33H and 33K. In particular, s 33A defines "representative proceeding" as "a proceeding commenced under section 33C". Of course, proceeding NG 421 of 1998 satisfies the literal terms of that definition. But in my view, the order under s 33N made on 24 July 1998, unless and until set aside, has the effect that the proceeding can no longer be regarded as being within the definition. An order achieving the result now sought by the ACCC would be inconsistent with my order of 24 July 1998. 221 Section 33P of the FCA Act provides as follows: "33P Consequences of order that proceeding not continue under this Part Where the Court makes an order under section 33L, 33M or 33N that a proceeding no longer continue under this Part: (a) the proceeding may be continued as a proceeding by the representative party on his or her own behalf against the respondent; and (b) on the application of a person who was a group member for the purposes of the proceeding, the Court may order that the person be joined as an applicant in the proceeding." This section contemplates as the only relevant "consequences of [an] order that [a] proceeding not continue under [Part IVA]", that if the proceeding is to continue at all, it is to continue otherwise than under Part IVA. 222 In any event, even if I had power to make an order having the effect of "reconstituting" the proceeding as one under Part IVA, I would not, as a matter of discretion, make such an order. The following are my reasons. 223 It must be remembered that of the numerous persons who have given affidavit evidence in the ACCC's proceeding, the vast majority were "satisfied customers" and testified in support of GW. I appreciate that their positions may have changed or may yet change in the light of (a) the fact that GW has now appointed an administrator and no longer carries on its business; (b) the expert evidence led by the ACCC on the issue of the capacity of the Mat to benefit human health; and (c) the content of these Reasons for Judgment generally. But all this serves to emphasise that if there is now a substantial number of individuals who feel aggrieved, it is only in the light of recent events that they do so. Down to recent times, at least, the proceeding has had the odd feature that the ACCC has sought to protect the interests of numerous individuals who, on the evidence, have not wanted its assistance and have been opposed to its interference. 224 The consequence of what I have said earlier in these Reasons for Judgment is that persons who bought the Mat and joined the GC and GRS may be entitled to compensation on the basis that they were misled as to the properties of the Mat, or that, contrary to the assurances given to them, they do not have a lawful opportunity to earn commissions. Those who have such a claim could commence separate proceedings, but, as I noted in my Reasons for Decision of 14 July 1998, "the policy of Pt IVA is that respondents should not benefit from the fact that individual claims are relatively small and that many group members might not consider it worth their while to litigate them on their own initiative" (at 293). 225 Subsections (1A) and (1B) of s 87 of the TP Act are as follows: "(1A) Without limiting the generality of section 80, the Court may, on the application of a person who has suffered, or is likely to suffer, loss or damage by conduct of another person that was engaged in (whether before or after the commencement of this sub-section) in contravention of a provision of Part IVA or V or on the application of the Commission in accordance with sub-section (1B) on behalf of such a person or 2 or more such persons, make such order or orders as the Court thinks appropriate against the person who engaged in the conduct or a person who was involved in the contravention (including all or any of the orders mentioned in sub-section (2)) if the Court considers that the order or orders concerned will compensate the person who made the application, or the person or any of the persons on whose behalf the application was made, in whole or in part for the loss or damage, or will prevent or reduce the loss or damage suffered, or likely to be suffered, by such a person. (1B) Where, in a proceeding instituted for an offence against section 79 or instituted by the Commission or the Minister under section 80, a person is found to have engaged (whether before or after the commencement of this sub-section) in conduct in contravention of a provision of Part IVA or V, the Commission may make an application under sub-section (1A) on behalf of one or more persons identified in the application who have suffered, or are likely to suffer, loss or damage by the conduct, but the Commission shall not make such an application except with the consent in writing given before the application is made by the person, or by each of the persons, on whose behalf the application is made." 226 In proceeding NG 421 of 1998, instituted by the Commission under s 80 of the TP Act, I have found that GW engaged in conduct in contravention of ss 52, 57 and 61, which are provisions of Part V, of that Act. Therefore, the ACCC is entitled to make an application under s 87 (1A) on behalf of any person who has suffered, or is likely to suffer, loss or damage by reason of that contravention, provided that that person gives the ACCC written consent to do so before the ACCC so applies. In these circumstances, the only significant difference now remaining in this case between this procedure and that provided for in Part IVA of the FCA Act is that the former is an "opt-in" procedure whereas the latter is an "opt-out" procedure (see s 33J of the FCA Act). 227 Although, no doubt, some administrative inconvenience and cost will be involved, the ACCC should have no great difficulty in advising all the potential claimants against GW of their potential entitlement to compensation and obtaining written consent from those who wish to give it. It is clear from the evidence adduced by the ACCC that some members do believe that they have been misled by GW and will want to opt in. On the other hand, on the basis of their affidavits, many buyers of the Mat may still not wish to do so. Moreover, as I noted in my Reasons for Decision of 14 July 1998, it may be that some GRS members have earned commission exceeding the amount paid by them to GW and have therefore suffered no loss. Finally, no doubt it will be desirable for the ACCC to inform individuals of what has happened since it commenced the proceeding in order that they will be able to take an informed decision whether or not to consent. 228 For the above reasons, I think that in the unusual circumstances obtaining the opt-in procedure provided in s 87 (1A) and (1B) of the TP Act is more appropriate than the opt-out representative procedure provided in Part IVA of the FCA Act. The ACCC's motion will be dismissed. GW's DEFAMATION CASE 229 As noted earlier, in the defamation proceeding GW complains about a media release issued by the ACCC on Thursday 7 May ("the Media Release") relating to the ex parte relief granted in proceeding NG 421 of 1998 on the preceding day (a copy of the Media Release is Schedule A to the application) and a Department of Fair Trading memorandum on the same subject distributed, apparently among members of that Department, on 19 May (a copy is Schedule B to the application). 230 Schedule A is as follows: "Ex parte injunctions against pyramid selling scheme Ex parte injunctions have been granted against Giraffe World Australia, its directors and other individuals over an alleged pyramid selling scheme after Australian Competition and Consumer Commission Federal Court action.

The ACCC alleged that Giraffe World's conduct contravened the referral selling and pyramid provisions of the Trade Practices Act 1974. The ACCC also alleged Giraffe World made false representations about its negative ion mats.

'The ACCC sought the interlocutory orders after a number of complaints from consumers about the scheme' ACCC Chairman, Professor Allan Fels, said today, 'It is understood more than 5,000 consumers were recruited, with more expected as Giraffe World opened Melbourne and Brisbane premises.

'The scheme is believed to have been operating since July 1997. It involves purchasing a device, an 'ion-mat' for $2,900. For an additional $350 consumers can join a Grow Rich scheme where they get a commission for recruiting new members. The commission increases according to the customers introduced.

'The ACCC plans representative proceedings in behalf of consumers who suffered loss after taking part in the Giraffe World scheme.'

In the Federal Court, Sydney yesterday Justice Kevin Lindgren ordered: · that the other respondents be restrained from inducing any persons to participate in the Giraffe World Grow Rich scheme or any similar scheme; · that the respondents be restrained from promoting, advertising, holding out or participating in the Giraffe World Grow Rich scheme or any similar scheme; and · that the respondents be restrained from removing from the jurisdiction disposing of, mortgaging, assigning, charging or otherwise dealing with their assets other than for specific living business and legal expenses. A directions hearing will be held at the Federal Court, Sydney on 8 May at 9.30 am. For further information about this media release: Professor Allan Fels, Chairman, … Ms Lin Enright, Director, Public Relations … MR 83/98 7 May 1998". 231 Apparently the form of the Media Release was amended, at least by 29 October 1998, by the following addition at the foot of the page: "* The ex parte injunctions have been lifted. Giraffe World is continuing to carry on business. The case is proceeding on an injunction basis and no longer as a representative action. The next directions hearing is set down for 13 October 1998." Schedule B is as follows: "CSD CONSUMER/MARKET PLACE CIRCULAR - MC 98/0/039 SUBJECT - GIRAFFE WORLD AUSTRALIA Recently the Australian Competition and Consumer Commission (ACCC) was successful in gaining an ex parte injunction in the Federal Court against Giraffe World Australia, its directors and other individuals. Among other things, the injunction restrained the respondents from promoting the scheme or similar schemes and effectively froze the company's assets. The ACCC alleged that Giraffe World's conduct contravened the referral selling and pyramid selling provisions of the Trade Practices Act 1974. The ACCC also alleged that Giraffe World made false representations about its negative ion mats that are sold as part of the scheme. The scheme involved purchasing the negative ion mats for $2,900. For an extra $350 consumers can join a Grow Rich scheme where they get a commission for recruiting new members. The latter aspect identifies the scheme as an illegal pyramid scheme. The matter returned to the Federal Court on 8 May 1998 and the respondents were successful in having the injunction … [according to evidence led by the ACCC the word "lifted" appears here in the original] upon giving undertakings to quarantine all monies taken by the business during the Court process. The respondents have also lodged proceedings with the Court, on technical grounds, against ACCC's action. INSTRUCTIONS At the ACCC's request, all consumer complaints and enquiries relating to Giraffe World are to be forwarded immediately to Shane Adams on 9230 9120 or Geoff Williams on 9239 9128 of the ACCC. ACCC fax number for urgent referral is 9223 1092. Saroj Chand Communications Unit For further information regarding this circular please contact Bob Laughton, Fair Trading Investigations on telephone: … This information will be available in CAS." 232 I have the benefit of submissions from the ACCC alone, not from GW, in the defamation proceeding. In its written submissions, the ACCC suggests that the following issues arise: "Meanings (a) does the Release (Schedule 'A' to the Amended Statement of Claim ('ASC')) convey the imputations pleaded in ASC paragraph 23? (b) were such imputations as are conveyed defamatory of Giraffe World? Truth defence (c) were such imputations as are found to be conveyed and defamatory matters of substantial truth? (d) did such imputations relate to matters of public interest? Qualified privilege (e) was the Release published on an occasion of qualified privilege? Protected report (f) did the Release comprise a fair protected report of proceedings in public of a court? This question comes down to the question whether the Release accurately stated what occurred in the ex parte hearing on 6 May 1998. The same issues arise in relation to the second matter complained of, the NSW Department of Fair Trading internal email. In addition, however, there are the following issues which logically precede the remaining issues on this alleged publication: (a) did Mr Williams publish the matter in question during a conversation with Mr Finger of the Department of Fair Trading (ASC paras 21 and 25, Defence paras 10 and 16). (b) is the ACCC liable for the NSW Department's publication?" 233 In relation to the Department's internal e-mail, the ACCC submits that GW's pleading is defective because it pleads no basis on which the ACCC could be liable for the Department's subsequent publication. 234 It is admitted that on 7 May 1998, the ACCC published the Media Release of and concerning GW. GW pleads that the words of the Media Release carried the following imputations defamatory of GW: "i) the Applicant had engaged in a pyramid selling scheme contrary to the Trade Practices Act. ii) the Applicant was reasonably suspected of having engaged in a pyramid selling scheme contrary to the provisions of the Trade Practices Act. iii) the conduct of the Applicant was such as to warrant proceedings being brought against it for having engaged in a pyramid selling scheme contrary to the provisions of the Trade Practices Act. iv) the Applicant had engaged in a referral selling scheme contrary to the Trade Practices Act. v) the Applicant was reasonably suspected of having engaged in a referral selling scheme contrary to the provisions of the Trade Practices Act. vi) the conduct of the Applicant was such as to warrant proceedings being brought against it for having engaged in a referral selling scheme contrary to the provisions of the Trade Practices Act. vii) the Applicant made false representations about its negative ion mats. viii) the Applicant had induced persons to pay money for a worthless ion mat. ix) the Applicant had induced persons to their financial detriment to participate in the Giraffe World Grow Rich Scheme. x) the Applicant by obtaining moneys from more that [sic - than] 5,000 consumers had thereby cheated the Australian public of approximately 15 million dollars. xi) the Applicant had been found by the Federal Court to have engaged in a pyramid selling scheme contrary to the provisions of the Trade Practices Act. xii) the Applicant had been found by the Federal Court to have engaged in a referral selling scheme contrary to the provisions of the Trade Practices Act. xiii) the Applicant had been found by the Federal Court to have made false representations about its negative ion mats. xiv) the Applicant had been found by the Federal Court to have induced persons to pay money for a worthless ion mat. xv) the Applicant had been found by the Federal Court to have induced persons to their financial detriment to participate in the Giraffe World Grow Rich Scheme. xvi) the Applicant had been found by the Federal Court to have obtained moneys from more than 5,000 consumers and thereby cheated the Australian public of approximately 15 million dollars. xvii) the Applicant has been found by the Federal Court to have disposed of or been in the process of disposing of proceeds of moneys obtained pursuant to its business scheme and false representations." 235 As can be seen at a glance, the imputations divide themselves into categories. The first three relate to pyramid selling, the next three to referral selling, the next four are of a general nature, and numbers (xi) to (xvii) allege "findings" by this Court (this last group was added by amendment). The ACCC contends that representations (i), (iv), (vii), (viii), (x) and (xi) to (xvii) are not conveyed by the Media Release. It concedes that the remaining imputations pleaded, that is numbers (ii), (iii), (v), (vi) and (ix), are so conveyed. 236 The conclusions which I have reached earlier in these Reasons in relation to the ACCC's own proceeding make it unnecessary for me to address most of the ACCC's submissions. 237 Even if the pleaded imputations (i) to (vii) were conveyed by the materials complained of, they were all true. They were also undoubtedly matters of public interest. GW was making misleading statements in connection with the sale of the Mat to the public and was attempting to induce members of the public to become participants in what I have held to be an illegal pyramid selling scheme. The ACCC has therefore established the defence provided for in s 15 of the Defamation Act 1974 (NSW). 238 Pleaded imputations (xi), (xii) and (xiii) are similar to imputations (i) to (vii) except that (xi), (xii) and (xiii) inject the element that the Court had found contraventions of the TP Act. While that is now true, it was not true at the time of the publications. The ACCC submits that the "temporal element" is irrelevant. I am not sure that this is correct. However, in my view, s 16 of the Defamation Act 1974 is applicable. That section provides as follows: "16 Truth: contextual imputations (1) Where an imputation complained of is made by the publication of any report, article, letter, note, picture, oral utterance or other thing and another imputation is made by the same publication, the latter imputation is, for the purposes of this section, contextual to the imputation complained of. (2) It is a defence to any imputation complained of that: (a) the imputation relates to a matter of public interest or is published under qualified privilege, (b) one or more imputations contextual to the imputation complained of: (i) relate to a matter of public interest or are published under qualified privilege, and (ii) are matters of substantial truth, and (c) by reason that those contextual imputations are matters of substantial truth, the imputation complained of does not further injure the reputation of the plaintiff." 239 Pleaded imputations (xi), (xii) and (xiii) related to matters of public interest. Pleaded imputations (i) to (vii) were contextual to them. Pleaded imputations (i) to (vii) related to matters of public interest and were matters of substantial truth. In my view, pleaded imputations (xi), (xii) and (xiii) did not further injure the reputation of GW: an imputation that this Court had made a finding that GW had contravened the TP Act, if it arose, was no more injurious than an imputation that GW had in fact contravened that Act. 240 The remaining imputations, (viii), (ix), (x), (xiv), (xv), (xvi) and (xvii), do not so clearly fall within the protection provided by ss 15 and 16 of the Defamation Act 1974. However, even if those imputations were conveyed by the matters complained of (which I do not decide), those matters were published in the course of the giving of a fair and accurate report of court proceedings and are therefore protected by s 24 of that Act which provides as follows: "24 Protected report (1) In this section, protected report means a report of proceedings specified in clause 2 of Schedule 2 as proceedings for the purposes of this definition. (2) There is a defence for the publication of a fair protected report." 241 Clause 2 of Schedule 2 specifies, inter alia, "proceedings in public of a court". 242 GW did not make any submissions on its defamation claim and has therefore not identified any respect in which the matters complained of are not a "fair" report of the proceeding to which it refers. In my view, they are "fair" reports and are protected by s 24. This defence would also, of course, operate to defeat GW's claim in respect of the other imputations which I have held to be true. 243 For the above reasons if for no others, GW's application in the defamation proceeding should be dismissed with costs. CONCLUSION 244 There will be orders and injunctive relief in accordance with my Reasons for Judgment. I direct the ACCC to bring in short minutes on 31 August 1999 at 9.00 am.

I certify that the preceding two hundred and forty-four (244) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lindgren.

Associate: Dated: 26 August 1999 Proceeding NG 421 of 1998 Counsel for the applicant: Mr B R McClintock SC and Mr S T White

Solicitors for the applicant: Australian Government Solicitor

Counsel for the first and second respondents: Mr J G Duncan

Solicitors for the first and second respondents: Blessington Judd The fourth and sixth respondents appeared in person Proceeding NG 711 of 1998 Counsel for the applicant: Mr J G Duncan

Solicitors for the applicant: Blessington Judd

Counsel for the respondent: Mr B R McClintock SC and Mr S T White

Solicitors for the respondent: Australian Government Solicitor

Date last submission received 28 June 1999

Dates of Hearing: 8, 9, 12, 13, 14, 19, 20, 21, 22, 23, 29 April, 8, 10, 15, 18, 22, 29 June, 14 July 1999

Date of Judgment: 26 August 1999

Trade Practices Act 1974(Cth)ss 51A, 52, 57, 61, 75B, 80(1)(e)

Defamation Act 1974(NSW)

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Judgment (19 paragraphs)

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Cases Cited (6)