Australian Competition & Consumer Commission v Pest Free Australia Pty Ltd

THE PROCEEDING 1 The first respondent, Pest Free Australia Pty Limited ('the Company'), carries on business as a manufacturer and supplier of electronic pest control devices for controlling and repelling rats, mice and cockroaches and, possibly, other insects and vermin. The Company, in the course of that business, supplies plug-in devices ('the Devices') to consumers and wholesale purchasers in Australia both for domestic use (' the Domestic Device') and for non-domestic use (' the Commercial Device'). The applicant, the Australian Competition and Consumer Commission ('the Commission'), asserts that, in connection with the supply or possible supply, or, the promotion of the supply of either or both the Domestic Device and the Commercial Device, the Company has published or caused to be published and distributed communications of various kinds in which it has made various representations concerning the Devices in contravention of Part V of the Trade Practices Act 1974 (Cth) ('the Act'). 2 The Commission had some difficulty in formulating its case against the Company. The Commission's case, in its final form, is pleaded in a Seventh Amended Statement of Claim ('the Statement of Claim'). The parties considered that it was desirable that certain issues be tried and determined separately from, and prior to, the determination of all other issues in the proceeding. Accordingly, I made an order under Order 29 of the Federal Court Rules. The order was the result of successive refinements of earlier orders made under Order 29. 3 The general thrust of the Commission's complaints is that the Company has represented that the Devices:

• affect the sensitive metabolism of insects and vermin such as mice, rats and cockroaches, with the result that they cannot eat, sleep or breed;
• cause the death, by dehydration and/or starvation, of insects and vermin such as mice, rats and cockroaches, if they are unable to escape the effects of the Devices. Many other representations are also alleged. They all relate to the operation and effect of the Devices. 4 The Commission says that, by making such representations, the Company has also represented that:
• there is a reasonable foundation in scientific knowledge or testing for the statements so represented; and
• the Devices have certain performance characteristics, uses or benefits. 5 The Commission alleges that, in contravention of s 52(1) of the Act, the Company made representations that were misleading or deceptive or likely to mislead or deceive. The Commission also alleges that, in contravention of s 53(c) of the Act, the Company has made representations that the Devices have performance characteristics, uses or benefits that they do not have.

THE ALLEGED REPRESENTATIONS 6 In the proceeding, the Commission complains about some thirty-six different representations. It asserts that the representations were made in one or other of at least thirty-two different communications. The communications were made, either to individuals or to the public generally, in connection with the supply of the Devices by the Company. The communications consist of:

• nineteen promotional letters;
• two promotional flyers;
• a promotional brochure;
• a label on packaging for Devices;
• an operation and information manual;
• a company profile brochure;
• an internet website;
• three advertisements in the Newcastle Herald Newspaper;
• a radio advertisement on radio station 2HD Newcastle;
• two television advertisements on Channel 10, Newcastle. 7 The Statement of Claim, even in its final form, is not an entirely satisfactory document for the purpose of stating the precise allegations made by the Commission. That is a consequence of what seems to be pleader's misguided attempt to simplify the pleading by rationalising the number of representations that are alleged to arise out of the multifarious communications referred to by the Commission in the Statement of Claim. The Statement of Claim attempts to do so in two different ways. First, it separates out categories of communications making similar, but not identical, representations rather than pleading each representation as it is alleged to arise from the specific communication. Secondly, it asserts that separate combinations of representations arising from different and distinct communications all give rise to the same single implied representation. The unfortunate consequence of rolling up separate allegations concerning different and distinct communications into a compound allegation in that way is that, invariably, the pleaded representation is, at best, an approximation of the various communications and, therefore, runs the risk of being inaccurate. 8 It is necessary to deal with each separate communication individually. In some cases, the Statement of Claim alleges that two or more of the communications were made at the same time. That is to say, in such cases, it is alleged that promotional flyers or brochures were attached to promotional letters. However, it is also asserted by the Commission that the promotional flyers and brochures were also distributed separately from promotional letters. 9 In some instances, the relevant communication is no more than a few sentences long. In another instance, the communication consists of a booklet comprising 24 pages of quite detailed information. However, each combination of representations in each communication is alleged to give rise to the same implied representation. The allegation is that each different combination of representations in a communication gives rise to an implied representation that there was a reasonable foundation in scientific knowledge or testing for the representations alleged to have been made in that communication. It also is alleged that each of the communications contains an implied representation that the Device or Devices to which that communication relates has or have the benefit,within the meaning of s 53(c) of the Act, of having a reasonable foundation in scientific knowledge or testing for the representations alleged to have been made in that communication. 10 The Commission also alleges other contraventions of s 53(c) of the Act. It had particular difficulty in formulating its case in relation to the other alleged contraventions of s 53(c). I consider that each of the of the express representations alleged to have been made is a representation that the relevant Device has performance characteristics, uses or benefits. Curiously, however, the Commission did not allege that the Company made representations of performance characteristics, uses or benefits in the terms of the representations alleged. Rather, it alleged that, by making particular alleged representations, the Company represented that the Devices had performance characteristics, uses or benefits formulated in different terms. 11 Thus, the Commission alleges that, by making the representations contained in the communications, other than the radio commercials and the newspaper advertisements, the Company represented that the Device or Devices in question had one or more of the following performance characteristics, uses or benefits in relation to pests including rats and/or cockroaches:
• the Devices drive away such pests or cause such pests to leave premises;
• the Devices prevent such pests from eating;
• the Devices cause starvation of such pests;
• the Devices rid premises of such pests;
• the Devices make premises a 'no go' zone for such pests. 12 Eventually, the Commission made clear that it does not allege that each of the communications makes all of the alleged representations as to performance characteristics, uses or benefits of the Devices. Rather, the Commission specified the particular representation alleged in relation to each relevant communication that is alleged to give rise to a representation in contravention of s 53(c). It will be necessary to deal separately with the allegations in relation to each communication. 13 Paragraphs 7 to 18 inclusive of the Statement of Claim allege that various communications contain representations that one of the Devices or both Devices, as the case may be, will do certain things in specified circumstances. However, the circumstances vary from communication to communication. Thus, the Statement of Claim alleges representations are as to what the relevant Device will do:
• when plugged into, and utilising electricity from, a normal supply outlet within a person's building premises (paragraphs 7 and 9);
• when operating in a building, home or structure (paragraphs 8 and 10);
• when operating (paragraphs 11, 12, 13, 14 and 17);
• once switched on (paragraphs 15 and 16); · within the premises where it is switched on (paragraph 18).

However, when it comes to dealing with the alleged representation of performance characteristics, uses or benefits of the Devices, no distinction is drawn between the various circumstances in which the Devices are alleged to do things. The allegation is simply that there is a representation that the Devices have the relevant performance characteristics, uses or benefits 'in respect to pests including rats and/or cockroaches'. 14 Section 53(c) of the Act relevantly provides as follows: 'A corporation shall not, in trade or commerce, in connection with the supply or possible supply of goods or … or in connection with the promotion by any means of the supply or use of goods…represent that the goods…have…performance characteristics, uses or benefits they do not have.' 15 Even if a communication contains a representation that there is a reasonable foundation in scientific knowledge or testing for, for example, the statement that a Device, will affect the sensitive metabolism of pests such that they cannot eat, sleep or breed, that representation would not be a representation as to a performance characteristic, use or benefit of the Device within the meaning of s 53(c). A performance characteristic, use or benefit in relation to goods such as the Devices, signifies something that the goods can do or something that can be done with the goods. Alternatively, it might signify some consequence of having or owning the goods. 16 Thus, a statement that one of the Devices, when plugged into and using electricity from a normal power supply outlet within a building, will affect the sensitive metabolism of pests, such that they cannot eat, sleep or breed, is a representation as to a performance characteristic, use or benefit of the Device. However, the statement that there is a reasonable foundation in scientific knowledge or testing for such a statement is a representation that there is some justification or basis for making the representation as to that performance characteristic, use or benefit. Such a statement is not, itself, a representation as to a benefit. 17 There is some inconsistency in the Statement of Claim in describing the 'pests' to which the alleged representations are said to relate. Thus, the Commission alleges, in pars 7 to 10 of the Statement of Claim, that the promotional letters contain representations concerning the effect of the Devices on the sensitive metabolism of pests. There is no specific description of 'pests' in those paragraphs. Paragraph 17 also alleges that the operation and information manual makes representations as to the effect of the domestic device on pests, without any further specificity. 18 Paragraph [14] of the Statement of Claim alleges representations in the radio advertisements as to the effect of the Domestic Device on the feeding and breeding cycles of cockroaches, rodents, spiders and other pests. In par [11], there is an allegation that one of the newspaper advertisements contains a representation concerning the effect of the Domestic Device on the breeding and feeding cycles of such pests. There is, however, no reference elsewhere in par [11] to 'pests'. On the other hand, pars [12] and [13] allege that two other newspaper advertisements contain representations about the feeding and breeding cycles of:

• cockroaches, rodents, spiders and other pests, in one case; and
• cockroaches, mice, rats and other pests, in the other case. 19 There is an allegation that the domestic promotional flyer, the promotional brochure and the label referred to in par [15] of the Statement of Claim make representations about the effect of the Domestic Device on pests, but without any greater specification. However, par [16] makes an allegation about that the commercial promotional flyer makes representations about the effect of the Commercial Device on the breeding cycle of cockroaches and rodents. Paragraph [18] also alleges that the company profile and the website make representations about the effect of the Devices on cockroaches and rodents. 20 Finally, par [19] of the Statement of Claim alleges that the television advertisements make representations as to the effect of the Domestic Device on:
• cockroaches, rats and mice in one case; and
• rodents and cockroaches, in the other case. 21 Additional confusion is engendered in the Statement of Claim by an averment that was taken by both parties to constitute a definition of the word 'pest'. Paragraph 3 of the Statement of Claim contains an allegation that the Company carried on business and engaged in trade or commerce as, inter alia, a manufacturer and supplier of electronic pest control devices: 'for controlling, repelling and killing insects and vermin from household and business premises.' 22 Then, in paragraph 4 of the Statement of Claim, the following is relevantly alleged: '[The Company] supplied, in trade or commerce: a) …pest control devices… for domestic sale and use ("the Plug In Pest Free Domestic Device"); and b) …pest control devices… to consumers and wholesale purchasers in Australia for non-domestic sale and use ("the Plug In Pest Free Commercial Device"): hereinafter collectively referred to as "the Devices" and the "pests" controlled by the Devices were insects and vermin such as mice, rats and cockroaches.' 23 Paragraph 4 does not, in its terms, purport to define the word 'pests' as that word is to be used in the Statement of Claim. Rather, the paragraph contains an allegation about the 'pests' alleged to be 'controlled by' the Devices. There is no limitation to 'mice rats and cockroaches' in para 3. Paragraph 4 follows immediately after paragraph 3 and, accordingly, a reference to the pests 'controlled by the Devices' might fairly be understood as no more than a reference to the subject matter of the 'controlling, repelling and killing' alleged in paragraph 3. 24 Nevertheless, both parties submitted that paragraph 4 should be understood as defining what was meant by the word 'pests' when that word appears in the balance of the Statement of Claim. However, there was a dispute as to just what paragraph 4 means. 25 The Commission said that paragraph 4 should be construed as defining 'pests', when the term appears in the Statement of Claim, as meaning:
• insects; and · vermin, such as mice, rats and cockroaches.

That suggests that the word 'pests' was intended to refer to insects and vermin without limitation. The Commission's construction of paragraph 4 is, in a sense, illogical. There does not appear to be any doubt that a cockroach is an insect. A cockroach may also be vermin. However, if paragraph 4 is to be construed as referring to insects, on the one hand, and vermin such as mice, rats and cockroaches, on the other, it is difficult to see why cockroaches, if already included in the term 'insects', should be specified as examples of 'vermin'. 26 Both parties drew attention to dictionary definitions of 'pest' as including: 'a noxious, destructive, or troublesome thing or person; nuisance' (The Macquarie Dictionary 3rd Edition) 'Any thing or person that is noxious, destructive or troublesome; a bane, curse, plague…' (The Shorter Oxford English Dictionary)

The Commission also sought to introduce dictionary definitions of 'vermin', a word not found in any of the communications in question in the proceeding. Neither party sought to introduce any definition of 'insects'. 27 I consider that, on the proper construction of the Statement of Claim, the reference to 'pests' in paragraph 4 should not be taken as a definition of that word for the balance of the Statement of Claim. The word must be construed in its context in each subsequent paragraph.

THE PROMOTIONAL LETTERS 28 Various promotional letters refer to enclosures or to 'other relevant information pertaining to our product'. There was some dispute as to the nature of the enclosures or information referred to. The Company did not call any evidence and the Commission invited the Court to draw inferences from admissions contained in correspondence between the Commission and the Company as to the identity and nature of the enclosures or information referred to in the promotional letters. 29 By letters of 14 February 2002 and 26 March 2002 the Commission asked a number of questions of the Company, including the following in the letter of 14 February 2002: 'Whether [the Company] has distributed any brochures or promotional material containing representations in relation to the effectiveness of the Plug In Pest Free device. If so, in respect of each brochure or promotional material state the following: a) when the brochure or promotional material was distributed;

b) to whom the brochure or promotional material was distributed;

c) the number of copies of the brochure or promotional material distributed ;

d) whether Pest Free has copies of the brochure or promotional material which have not yet been distributed and if so, how many;

e) the name and position of the person who authorised the content of the brochure or promotional material; and

f) the name and position of the person who authorised the distribution of the brochure or promotional material,

and provide a copy of the brochure or promotional material.' In response to the letter of 14 February 2002, the Company wrote a letter dated 20 March 2002. After referring to sales of the Devices, the Company's letter referred to enclosed copies of several advertisements and then said: 'Enclosed is the brochure that is used when we receive a request for more information on our product and also enclosed is a booklet that is forwarded with each unit sold.' (Emphasis added) The letter then proceeded to describe other promotional activities. 30 The brochure referred to in the Company's letter is a single A4 sheet, folded into three sections, with printed words and pictures on each side. The front of the brochure has a photograph of the Domestic Device and contains a number of statements concerning that Device. The booklet referred to is a 24 page document entitled 'Operation & Information Manual'. 31 On 12 April 2002, the Company wrote again to the Commission, responding to the above question, inter alia, in the following terms: 'Yes we have provided brochures and/or promotional material to companies and Government Departments requesting further information on our product Plug In Pest Free. One copy of both the domestic and commercial is all that is forwarded except if specially directed otherwise. Please find enclosed copies of the letters that have been forwarded to same.' (Emphasis added). Enclosed with the letter, as satisfying the description 'one copy of both the domestic and commercial', were two single page flyers, copies of which are set out in Schedules 1 and 2 to these reasons. 32 The Commission contends that an inference should be drawn, from that correspondence, that the enclosures and 'other relevant information' referred to in certain of the promotional letters are the two promotional flyers and the double sided promotional brochure, referred to above. The Company accepted that some documents were enclosed with the promotional letters but contended that no conclusion could be drawn as to which of the above documents was included. 33 I consider that an inference should be drawn, from the responses of the Company, that the other information or documents referred to in the promotional letters consisted of the two promotional flyers set out in Schedules 1 and 2. The flyer in Schedule 1 ('the Domestic Flyer') describes the Domestic Device and the flyer in Schedule 2 ('the Commercial Flyer') describes the Commercial Device. That inference is the more readily drawn in the absence of any evidence from the Company within whose knowledge the identity of the 'other relevant information' lay. 34 There are four categories of promotional letter, although one category has two subcategories. The parties have agreed that, at this stage, it will be sufficient if the Court deals only with five of the promotional letters, being one letter from each category and subcategory.

THE PASSAS LETTER 35 The first communication presently in question is a letter dated 31 October 2001 addressed to a Mr George Passas ('the Passas Letter'), which was in the following terms: Information concerning the Pest Free Product per our telephone conversation …. Pest Free, when plugged into a normal power supply outlet, utilises the existing electromagnetic field already contained within your building, which is pulsed at predetermined intervals to affect the sensitive metabolism of pests. These pests cannot eat, sleep, drink or breed. If they do not escape the effect of Pest Free, they will eventually die of dehydration and or starvation. Pest Free will cover areas in a building, home or structure where the most modern chemical application methods cannot reach. Pest Free works around the clock, 24 hours a day - 365 days of the year. There is No Smell, No Mess or No Fuss produced by Pest Free. Pest Free comes with a thirty (30) day money back guarantee and is warranted to be free of defects in workmanship and materials for a period of three (3) years from date of purchase. Our company Pest Free Australia Pty Ltd, is totally committed to supplying quality products with the highest levels of quality control, on time to our customers. Pest Free Australia Pty Ltd also prides itself and recognises that it is not only having the best product in the world, it is the people who stand behind that product, and therefore strive to offer the very best in service and support on a continuing basis. We truly believe that it is the people who make a company strong and have therefore acquired the very best people in all areas from our floor personnel through to our section managers to continue our steady growth in the international arena. Pest Free Australia Pty Ltd is proud to announce that we now conduct business in some 21 countries throughout the world. I have enclosed for your perusal other relevant information pertaining to our product. Enjoy! Kind Regards Darren Connell National Manager' 36 The Commission contends that, by sending the Passas Letter, together with the Domestic Flyer and the Commercial Flyer, the Company represented that each of the Devices: 'when plugged into, and utilising electricity from, a normal power supply outlet within the person's building premises, will: (a) affect the sensitive metabolism of pests such that they can't eat, sleep or breed;

(b) cause the death by dehydration and/or starvation of such pests if unable to escape the effects of the devices.

(c) do (a) and (b) day in and day out continuously into the future.' 37 There is nothing in the Passas Letter that defines what is meant by the term 'pests' when that term is used in it. Having regard to the reference in the letter to 'the existing electromagnetic field already contained within your building' and the statement that 'Pest Free will cover areas in a building home or structure', it is clear that the statement being made about the effect of the Devices related to pests that would be found in buildings, homes or structures. I consider that the Passas Letter contains representations concerning pests of the kind that would habitually be found in buildings, homes or structures where normal power supply outlets are located. Pests such as mice, rats and cockroaches are regularly found in such places. However, other pests are also found in such places. At this stage there has been no evidence directed to the nature of the pests that might be found in any particular place. 38 The Domestic Flyer, after referring to a likely increase in activity after the Device is switched on, then states that the Device 'will not affect insects that fly into your home. Nevertheless it will stop pests from nesting and breeding where chemical sprays, powders, baits and ultrasounds can't reach'. It is not entirely clear what is meant by the reference to 'insects that fly into your home'. The Domestic Flyer does not appear to be saying that the Device does not affect flying insects. Rather, it appears to be saying that the Device will not stop insects from flying into your home but that, if they do fly into your home, the Device will stop them from nesting and breeding. 39 While the Passas Letter refers to pests being unable to 'eat, sleep, drink or breed', the greater includes the lesser. I consider that a statement that 'pests cannot eat, sleep, drink or breed' includes the statement that 'pests can't eat, sleep or breed'. 40 The Passas Letter does not itself refer to Devices. It simply refers to 'Pest Free'. However, the attached flyers clearly describe the Devices. There are photographs of the relevant Device in each flyer. It is clear that the term 'Pest Free' when it is used in the Passas Letter refers to one or other of the Devices. 41 The Passas Letter does not use the phrase 'day in and day out continuously into the future'. However, the statement that the Devices work 'around the clock, 24 hours a day - 365 days of the year' signifies that they do whatever they do day in and day out continuously into the future. That is not to say that they operate indefinitely. Indeed, the Passas Letter contains a statement that the Devices are warranted to be free of defects in workmanship and materials for a period of three years. 42 I consider that the Passas Letter, with the enclosure of the two flyers, contains representations that the Devices, when plugged into, and utilising electricity from, a normal power supply outlet within building premises, will: (a) affect the sensitive metabolism of pests habitually found in a building, home or structure where normal power supply outlets are located such that those pests cannot eat, sleep or breed; (b) cause the death by dehydration and/or starvation of such pests if they are unable to escape the effects of the devices; (c) do (a) and (b) day in and day out continuously into the future. 43 The next question, therefore, is whether it can be said that there is to be implied from those representations, in the context of the Passas Letter in which they are contained, a further representation that there is a reasonable foundation in scientific knowledge or testing for those three statements. 44 In written submissions, the Commission says that such an implication arises from:

• the use of scientific or technical language in the letter;
• the description of a complex sequence of events and consequences in the letter;
• statements in the letter that the devices work in very specific ways;
• references in the letter to the performance of the devices as compared to that of alternative products or methods;
• references to scientific testing or 'rigorous testing' of the devices or to scientific opinion as to the products in comparison with alternatives;
• references to the devices being a 'break through';
• references to research in developing and refining of the devices;
• references to certifications by the New South Wales Office of Energy and the stamp of the HIA Pest Industry Council of Australia; · the fact that devices are electronic and that their operative effect is not readily apparent or observable to the naked eye.

The submission was unhelpful in the way in which it was put. It was not suggested on behalf of the Commission that each of those matters was relevant to every one of the communications. Indeed, it is quite apparent, for example, that certain of those matters have no relevance at all for the Passas Letter. 45 The Commission contends that the use of language such as 'electromagnetic field' and 'metabolism' contribute to the alleged implication. However, the mere fact that technical language is used to describe technical matters does not give rise to any implication that the subject matter of the statements has a reasonable foundation in scientific knowledge or testing. Nor does the mere statement that the Devices work in a specific way imply a representation that there is a reasonable scientific basis for the way in which the devices are said to work. 46 In the absence of any evidence as to what Certificate CS 6455N, referred to in the Domestic Flyer, consists of, the reference to the certification of the Devices by the Office of Energy as meeting Australian electrical safety standards does not promote the implication alleged. Similarly, in the absence of any evidence as to the criteria for membership of 'HIA' and 'Pest Industry Council of Australia', the statement that the Company is a member of those organisations does not assist in the alleged implications. 47 The statement in the Domestic Flyer that 'ultrasonic devices only work when the pests get within their short range' and that the Devices 'work throughout your home or business at all times' may constitute a comparative statement of the effects of the Devices on the one hand and 'ultrasonic devices' on the other hand, whatever ultrasonic devices might be. However, the statements do not add anything to the statements elsewhere in the flyers that the Devices have the represented effect. 48 The statement 'Chemical free protection and it works' in the cartoon balloon within the Domestic Flyer also does not go beyond the statements in the body of the Passas Letter as to the effect of the Devices. The reference to 'this proven breakthrough in pest control' within the Commercial Flyer and the reference to the system having 'proven successful in all types of working environments' do not of themselves travel beyond the statements as to the effect of the Devices. 49 The essence of the Commission's case in this regard appears to be that an implication arises because the reader would assume that such claims would not be made about the Devices if there were not a reasonable foundation in scientific knowledge or testing for such claims. However, the terms of any assumption that might be made by a reasonable reader are by no means certain. A reader might assume that the Company had some foundation for making its claims for the Devices, for example, because it had been given some advice on the subject or by reason of its experience of various kinds in relation to the operation of the Devices. A reader of the Passas Letter, together with the enclosures, might assume that the Company would not make claims unless it had some basis for them. 50 Nevertheless, it does not follow, that a reader of the Passas Letter would understand that the Company was actually making a positive statement that there was some reasonable foundation for the claims. More specifically, it does not follow that a reader would understand that the Company was representing that there was a 'reasonable foundation in scientific knowledge or testing' for its claims. There is nothing in the terms of the Passas Letter, or its enclosures, to give rise to an implication that the Company was intending to say positively to a reader that it had a reasonable foundation in scientific knowledge or testing for its claims. I do not consider that the Passas Letter, together with its enclosures, gives rise to the alleged implication. 51 The Commission also alleges that, by making representations (a) and (b) referred to in par [36] above, the Company expressly represented that the Devices had the performance characteristic, use or benefit 'in respect to pests including rats and/or cockroaches' that the Devices 'prevent them from eating' and 'cause starvation' respectively. 52 There is no mention of rats and cockroaches in the Passas Letter. It may be that the meaning of the phrase 'affect the sensitive metabolism of pests such that they can't eat' is somewhat similar to the meaning of 'prevent pests from eating'. However, they are not the same. It may also be that the phrase 'cause the death by dehydration and/or starvation of such pests if unable to escape the effects of the Devices' means much the same as 'cause starvation'. However, it is clear that the representation alleged carries a significant qualification, namely, that any death by dehydration or starvation will occur only if the pests in question are unable to escape the effects of the Devices. 53 Consequently, while the representation that the Devices, when plugged into and using electricity 'affect the sensitive metabolism of pests such that they can't eat, sleep or breed' and 'cause the death by dehydration and/or starvation of pests if unable to escape the effects of the Devices' are representations that the Devices have performance characteristics, uses or benefits, the Passas Letter does not expressly represent that the Devices have the performance characteristic, use or benefit in relation to rats and cockroaches and that they 'prevent them from eating' and 'cause starvation'. While the Passas Letter contains representations as to performance characteristics, uses and benefits of the Devices, I do not consider that it contains express representations in the terms alleged.

THE SHOLZ LETTER 54 The second promotional letter in question is a letter dated 17 September 2001 addressed to Hanz Scholz of Fisher Paykel in Mosgiel, New Zealand ('the Scholz Letter'). The Scholz letter is in the following terms: 'Please find enclosed relevant information for the incorporation of our non-chemical pest management system into Fisher Paykel appliances as discussed by telephone on Monday 24 September 2001. Firstly, if I may give yourself some background on the modus operandi of the Pest Free System and secondly, information on our company before discussing specific applications for the Fisher Paykel range. 1. Pest Free operates by utilising the existing electromagnetic field already contained in a building, home, or structure, or in your particular case, whitegoods, which is pulsed at pre-determined intervals to affect the sensitive metabolism of pests. These pests cannot eat, sleep, drink or breed. If they do not escape the effect of Pest Free they will die of dehydration and/or starvation. Pest Free covers areas in a building, home or structure where the most modern chemical application methods cannot reach. This would certainly apply to the internal workings of the Fisher Paykel range of products. Pest Free works around the clock, 24 hours a day/365 days of the year. There is no smell, no mess or fuss produced by Pest Free. 2. Our company Pest Free Australia Pty Ltd, is totally committed to supplying quality products with the highest levels of quality control, on time to our customers. Pest Free Australia Pty Ltd also prides itself and recognises that it is not only having the best product in the world, it is the people who stand behind that product, and therefore strive to offer the very best in service and support on a continuing basis. We truly believe that it is the people who make a company strong and have therefore acquired the very best people in all areas from our floor personnel through to our section managers to continue our steady growth in the international arena. Pest Free Australia Pty Ltd is proud to announce that we now conduct business in some 21 countries throughout the world. Hanz, as I briefly touched on during our telephone conversation, our product has come a long way since our company's inception in 1995, and now look forward [sic] to building strong alliances with other innovative companies who share like-minded ideas such as Fisher Paykel. We would be willing to discuss the possibility of sharing the technology of our Pest Management System further with the Fisher Paykel group, if you would be willing to sign a confidentiality agreement for the purpose of protecting both parties. We believe that with our new compact design that Pest Free can definitely tip the scales in your favour to offer the public yet again the most innovative white good products in the world today. …' 55 The Commission alleges that, by the Scholz Letter, the Company represented that each of the Devices: 'when operating in a building, home or structure will: (a) affect the sensitive metabolism of pests such that they cannot eat, sleep or breed; and (b) cause the death by dehydration and/or starvation of such pests if unable to escape the effects of the Devices; … (c) do (a) and (b) day in and day out continuously into the future.' 56 The Scholz Letter contains language almost identical to the Passas Letter. For the reasons given in relation to the Passas Letter, the Scholz Letter, with the enclosure of the Domestic Flyer and the Commercial Flyer, contains representations that the Devices, when plugged into a normal power supply outlet in a building will: (a) affect the sensitive metabolism of pests habitually found in buildings where normal power supply outlets are located such that those pests cannot eat, sleep or breed; (b) cause the death by dehydration and/or starvation of such pests if unable to escape the effects of the Devices; (c) do (a) and (b) day in and day out continuously into the future. 57 The Commission points to the passage in the Scholz Letter that refers to the areas in a building, home or structure where the most modern chemical application methods cannot reach, which would include the internal workings of the Fisher Paykel range of products. The Commission contends that the passage implies that there has been testing carried out. The Commission also refers to the passage in the Scholz Letter offering the possibility of 'sharing the technology' of the Company's system with the Fisher Paykel group. The Commission contends that the reference to technology implies that there has been testing. Finally, the Commission contends that the passage referring to 'our new compact design' tipping 'the scales in your favour' suggests that the Company's product is a new one with some scientific foundation. 58 For the reasons given above in relation to the Passas Letter, I do not consider that the passages relied upon by the Commission give rise to the representation alleged, namely, that there is a reasonable foundation in scientific knowledge or testing for the representations made in the Scholz Letter. As I have said, a reader might assume that the Company had some foundation for making its claims for the Devices but the passages in question do not give rise to the implication alleged. 59 The same allegations as to representations concerning performance characteristics, uses or benefits are made in relation to the Scholz Letter as are made in relation to the Passas Letter. The observations made in relation to the Passas Letter concerning the alleged representations of performance characteristics, uses or benefits, apply equally to the Scholz Letter.

THE FORSTER LETTER 60 The third promotional letter in question is a letter of 24 September 2001 addressed to Reinhold Forster of Newcastle West ('the Forster Letter'), which is in the following terms: 'Please find enclosed relevant information for the incorporation of our Commercial Pest Management System into the kitchen areas of the institute. Our core product Plug-In Pest Freeoperates by plugging into any normal power point and when switched on utilises the existing electromagnetic field already contained in a home, building or structure, which is pulsed at predetermined intervals to affect the sensitive metabolism of pests. These pests such as mice, rats and cockroaches cannot eat, sleep, drink or breed. If they do not escape the effect of Pest Free they will die of dehydration and or starvation. Pest Free will cover areas contained in a building where the most modern chemical application methods cannot reach. Our Commercial Unit, which would be the preferred unit, utilises 3 methods of operation: 1. Pest Free utilises the existing electrical wiring within the area being serviced to transmit the vibrations throughout the area penetrating into the recesses and cavities where pests breed, effectively destroying the breeding cycle. 2. Pest Free drives the signal down the earth wire, effectively utilising metal appliances that are plugged into a 240 volt power supply. The pulse is then re-radiated through these items, eg. Refrigerators, freezers, microwaves, photocopiers etc, effectively becoming an antenna for the system. 3. Vibrations are also broadcast from the housing unit in turn being reflected by the metal components of the building. In all cases the vibrations are generated at an intensity and frequency that is offensive to targeted pests. These units come with a 90 day money back guarantee and are warranted to be free of defects in workmanship and materials for a period of 2 years from date of purchase, making our Pest Free Pest Management Systemsan excellent investment for now and the future. The life span of these units is approximately 15 years. Pest Free Australia is a fully Australian owned company with both our domestic and commercial models being fully manufactured in Australia, thus supporting our economy and creating Australian employment. Having recently briefly appraised the areas to be controlled by our Pest Management System, it would be of my opinion that you would require in the vicinity of eight Commercial Units to control the areas mentioned, as they are quite large in area. If interest is shown towards the implementation of our system, then a more detailed observation would be made to acquire exact units required for maximum effect. This number may remain at eight Commercial Units or could also be slightly lower or higher, depending on application. As touched on in our discussions, Pest Free Australia Pty Ltd would be willing to enter into a mutually agreeable payment contract that could span over a two or three year period. We also share the same enthusiasm towards implementing the Pest Free System into the other institutes throughout the region. I hope the information contained meets with your approval and I look forward to making an appointment time with you to discuss this matter further. …' 61 The Commission alleges that the Forster Letter contains the same representations as are alleged in relation to the Scholz Letter, together with the additional representation that each of the Devices: 'when operating in a building, home or structure will: … (d) effectively destroy the breeding cycle of such pests; and (e) generate vibrations that repel such pests.' 62 The first method of operation referred to in the Forster Letter refers to the Devices effectively destroying the breeding cycle of pests. The third method refers to the generation and broadcasting of vibrations that are 'offensive to targeted pests'. No mention is made of vibrations 'that repel' pests. There are subtle differences in meaning. 63 I consider that the Forster Letter contains representations that the Devices, when plugged into any normal power point in a home, building or structure and switched on: (a) affect the sensitive metabolism of pests such as mice, rats or cockroaches, with the consequence that such pests cannot eat, sleep or breed; (b) cause the death by dehydration and/or starvation of such pests if they do not escape the effect of the devices; (c) do and (b) day and day out continuously into the future; (d) effectively destroy the breeding cycle of such pests.

There is no express representation that the Devices will generate vibrations that repel such pests. 64 The Commission points to the passage in the Forster Letter expressing the opinion that in the vicinity of eight commercial units would be required to control areas mentioned. The Commission contends that that passage suggests testing by the Company as to the range of effective operation of the Devices. 65 It may be that a reader of the passage would assume that there was some foundation or basis for the expression of the opinion. However, I do not consider that the Forster Letter contains a representation in the terms alleged as to scientific foundation and testing. 66 The same allegations as to representations concerning performance characteristics, uses or benefits are made in relation to the Forster Letter as are made in relation to the Passas Letter. The observations made above in relation to the Passas Letter concerning the alleged representations of performance characteristics, uses or benefits apply equally to the Forster Letter.

THE FORREST LETTER 67 The next category of promotional letter is represented by a letter dated 8 April 2002 addressed to Rose Forrest of Alpine Health Mount Beauty Campus in Victoria ('the Forrest Letter'). The Forrest Letter is in the following terms: 'Thank you for your enquiry and for allowing me the opportunity to provide you with information concerning our patented Pest Free, non-chemical Commercial Pest Management System. After surveying the plans that you kindly forwarded to me it is my opinion that you would require a minimum of seven (7) Commercial Systems to adequately control the large premisies [sic] that you occupy. Depending on funds, you may wish to only do one section to start, although the system would certainly be more effective being fully installed. Pest Free, when plugged into a normal power supply outlet, utilises the existing electromagnetic field already contained within your building, which is pulsed at predetermined intervals to affect the sensitive metabolism of pests. These pests cannot eat, sleep, drink or breed. If they do not escape the effect of Pest Free, they will eventually die of dehydration and or starvation. Pest Free will cover areas contained within your building where the most modern chemical application methods cannot reach. Pest Free drives the signal into the earth circuit of all appliances which are connected to electrical power so that all your electrical equipment becomes part of the Antenna system. The design of the Pest Freeunit utilises three (3) methods to achieve the objective of setting up this offensive environment. 1. Pest Freeutilises the existing electrical wiring within the area being serviced to transmit the vibrations throughout the area penetrating into the recesses and cavities where pests breed, effectively destroying the breeding cycle. 2. Pest Free drives the signal down the earth wire, effectively utilising metal appliances that are plugged into a 240 volt power supply. The pulse is then re-radiated through these items, eg. Refrigerators, freezers, microwaves, photocopiers etc., effectively becoming an antenna for the system. 3. Vibrations are also broadcast from the housing unit in turn being reflected by the metal components of the building. In all cases the vibrations are generated at an intensity and frequency that is offensive to targeted pests. Our recommended retail price of the Commercial PFSII unit is $1395.00 Inc GST. However for Alpine Health Mt Beauty Campus, your purchase price would be $1100. If you were to look at this cost over a ten year period, which we feel should be the minimum time span for our product, the cost would be as follows:- Cost to You: Purchase Price Cost per Annum Approximate Monthly Cost Commercial Unit $770.00 $64.17 $7700.00

Pest Free works around the clock, 24 hours a day - 365 days of the year. There is No Smell, No Mess or No Fuss produced by Pest Free. Pest Free is by far safer for your staff, visitors and for our environment. Pest Free comes with a ninety (90) day money back guarantee on our commercial model and is warranted to be free of defects in workmanship and materials for a period of two (2) years from date of purchase, making our Pest Freesystems an excellent investment for now and the future. As you can see, Pest Free offers a genuine alternative to chemicals in the aid of controlling pest activity, as governments around the world are legislating to reduce the use of harmful toxic chemicals, which in return are destroying our precious environment. I have included some published information and just a few of the hundreds of testimonials we have received from some of our Pest Free users. A further measure of the products acceptance is the expansion of our successful range into more than eighteen (18) countries around the world. Pest Free is a fully Australian owned company and is manufactured in Australia.' 68 The Commission alleges that the Forrest Letter contains a representation that the Commercial Device: 'when plugged into, and utilising electricity from, a normal power supply outlet within the person's home, building or structure, will:

(a) affect the sensitive metabolism of pests such that they can't eat, sleep or breed;

(b) cause the death by dehydration and/or starvation of such pests if unable to escape the effects of the Device;

(c) effectively destroy the breeding cycle of such pests;

(e) do (a) to (d) day in and day out continuously into the future.' 69 For the reasons given above in relation to the Forster Letter, I consider that the Forrest Letter contains a representation that the Commercial Device, when plugged into a normal power supply outlet contained within a building, will: (a) affect the sensitive metabolism of pests normally found in a building where normal power supply outlets are located such that they cannot eat, sleep or breed; (b) cause the death by dehydration and/or starvation of such pests if unable to escape the effects of the Device; (c) effectively destroy the breeding cycle of such pests; and (d) do (a) to (c) day in and day out continuously into the future. 70 The Commission points to the opinion concerning the minimum of seven commercial systems required to control premises and to the passage that asserts the Device is 'by far safer for your staff, visitors and for our environment'. The Commission contends that the latter passage suggests a comparison that gives rise to an implication of some testing demonstrating a scientific foundation. A reader may assume that the Company has some basis for its assertions. However, for the reasons indicated above, I do not consider that representation in the alleged terms is implied. 71 The same allegations as to representations concerning performance characteristics, uses or benefits are made in relation to the Forrest Letter as are made in relation to the Passas Letter. The observations made above in relation to the Passas Letter concerning the alleged representations of performance characteristics, uses or benefits apply equally to the Forrest Letter.

THE ROGOIANO LETTER 72 The last category of promotion letter is represented by a letter dated 10 January 2002 addressed to Melissa Rogoiano at Midderie, Victoria ('the Rogoiano Letter'). The Rogoiano Letter is in the following terms: 'As discussed by telephone on Wednesday 9 January, please find enclosed relevant information pertaining to Pest Free. Pest Free operates by utilising the existing electromagnetic field contained in a building, home or structure, which is pulsed at pre-determined intervals affecting the sensitive metabolism of pests such as mice, rats and cockroaches. These pests cannot eat, sleep, drink or breed. If they do not escape the effect of Pest Free they will die of starvation and or dehydration. Pest Free works around the clock, 24 hours a day 365 days a year. There is no smell, no mess or fuss produced by Pest Free. Our product is currently retailed by stores such as Retravision, Betta Electrical, Hardwarehouse, selected Mitre 10 and BBC Hardware stores etc. All stores enjoy consistent sales and I have no doubt that the Good Guys Group would also benefit. Starting in early February our company is initialising our television advertising campaign once again, which really increases sales to all stores retailing our product. We would be willing to tag the end of our commercials with the Good Guys logo, which would also give yourself more exposure and community awareness. The Pest Free units are ordered in multiples of twelve (12), with the recommended retail price being $79.95. The Good Guys purchasing price is $45.00 per unit and the units also include an attractive display stand. …' 73 The Commission contends that the Rogoiano Letter represents that the Domestic Device: 'when operating in a building, home or structure will: (a) affect the sensitive metabolism of pests such that they cannot eat, sleep or breed; and

(b) cause the death by dehydration and/or starvation of such pests if unable to escape the effects of the Device; and

(c) do (a) and (b) day in and day out continuously into the future.'

74 For reasons given in relation to the Passas Letter, I consider that the Rogoiano Letter contains a representation that the Devices, when operating in a building, home or structure, will: (a) affect the sensitive metabolism of pests such as mice, rats and cockroaches such that they cannot eat, sleep or breed; (b) cause the death by dehydration and/or starvation of such pests if unable to escape the effects of the Device; (c) do (a) and (b) day in and day out continuously into the future. 75 I do not consider that there is anything in the Rogoiano Letter that gives rise to an implication of a representation that there is a foundation in scientific knowledge or testing for those representations. 76 The same allegations as to representations concerning performance characteristics, uses or benefits are made in relation to the Rogoiano Letter as are made in relation to the Passas Letter. The observations made above in relation to the Passas Letter concerning the alleged representations of performance characteristics, uses or benefits apply equally to the Rogoiano Letter.

NEWSPAPER ADVERTISEMENTS 77 An advertisement of 16 November 2001 in the Newcastle Herald contained, relevantly, the following: '… In 1995, we launched the Plug-In Pest Free - a revolution in pest control. Pest Free is a non-toxic electronic unit and does what no other pest solution can do: · it has no harmful effects; · it protects all day every day; · it brakes the breeding and feeding cycles of pests; · its completely family safe; · it carries a three year unconditional guarantee; · pests cannot develop immunity.' The advertisement also contains the symbol indicating that the Company is a member of HIA and the Pest Industry Council of Australia. 78 The Commission alleges in par [11] of the Statement of Claim that, by publishing that advertisement, the Company represented that the Domestic Device:

(a) break the breeding and feeding cycles of such pests;

(b) provide protection from such pests all day every day continuously into the future; and

(c) not cause the pests to develop an immunity against the protective effect of the device'. 79 It is not clear what was intended by the reference to 'such pests'. The word 'pests' did not previously appear in paragraph 11. There is nothing in the advertisement to indicate the nature of the 'pests' to which it refers, other than the photograph of the Domestic Device, which indicates that it is to be plugged into an electrical power point. The reference to it being 'family safe' indicates that the Device is for use in domestic premises. 80 Clearly enough, the advertisement contains a representation that the Device breaks the breeding and feeding cycles of pests. It also contains a representation that pests cannot develop immunity to the effect of the Device. Those representations amount to a statement that the Device protects domestic premises continuously from infestation by pests that are normally found in domestic premises. 81 The Commission contends that the implication of a representation that that statement has a reasonable foundation in scientific knowledge or testing arises from the reference to 'a revolution in pest control' and the statement that the Device does 'what no other pest solution can do', coupled with the symbol indicating membership of HIA and Pest Industry Council of Australia. As is the case with the promotional letters, it may be that a reader of the advertisement would assume that Pest Free had some basis or justification for making its claims. However, I do not consider that the advertisement gives rise to an implied representation in the terms alleged by the Commission. 82 An advertisement in the Newcastle Herald of 8 December 2001 contained, inter alia, the following: 'A Plug In Pest Free in you home will also provide these additional benefits: · it works all day every day; · it breaks the feeding and breeding cycles of cockroaches, rodents, spiders and other pests; · the pests can't develop immunity the way they can with chemicals.' 83 The Commission alleges that, by publishing that advertisement, the Company represented that the Domestic Device: 'when operating, will: (a) break the feeding and breeding cycles of cockroaches, rodents, spiders and other pests;

(b) not cause such pests to develop an immunity against the eliminating effect of the Device; and

(c) work all day every day into the future.' 84 The Commission also claims that an implied representation arises that those statements have a reasonable foundation in scientific knowledge or testing. The same observations made in relation to the previous advertisement and the alleged implied representation arising from those statements - see par [81], apply equally in relation to this advertisement. 85 On 21 December 2001 the Company published an advertisement in the Newcastle Herald containing, relevantly, the following: 'A Plug In Pest Free in your home will also provide these additional benefits: · it works all day every day; · it breaks the feeding and breeding cycles of cockroaches, mice, rats and other pests; · the pests can't develop immunity the way they can with chemicals.' 86 Curiously, while the language of this advertisement is similar to that of the previous one, instead of referring to rodents and spiders, this advertisement refers to mice and rats. The change is more curious having regard to a testimonial set out in the advertisement saying, relevantly: 'Our problem was that despite exhaustive pest control measures including toxic chemicals we could not eliminate spiders from our home. Pest Free proved to be the best thing we have ever done to eliminate pests on a permanent basis.' (emphasis added) 87 The Commission alleges that by publishing that advertisement, the Company represented that the Domestic Device: 'when operating, will: (a) break the feeding and breeding cycles of cockroaches, mice, rats and other pests;

(b) not cause cockroaches, mice, rats and other pests to develop an immunity against the eliminating effect of the Defence; and

(c) work all day every day into the future.' Again, the observations already made in relation to the previous advertisement - see par [81], concerning the alleged implication of a representation as to the foundation for the claims, apply equally to this advertisement.

RADIO ADVERTISEMENTS 88 Between 17 and 21 December 2001, the Company caused the broadcast of an advertisement on radio station 2 HD Newcastle. The commercial included the following statements: '…Despite exhaustive pest control measures, including toxic chemicals he[a consumer] found Plug-In Pest Free proved to be the best thing he'd ever tried to eliminate pests…Plug-In Pest Free works all day, every day… breaking the feeding and breeding cycles of cockroaches, rodents, spiders and other pests….' 89 The Commission alleges that, by broadcasting that advertisement, the Company represented that the Domestic Device: 'when operating will: (a) break the feeding and breeding cycles of cockroaches, rodents, spiders and other pests thereby rendering premises pest free; and

(b) work all day every day into the future.' 90 While the representations alleged can be found in the words used in the advertisement, I do not consider that there is a basis for the implication of a further representation by the Company that there was a reasonable foundation in scientific knowledge or testing for the statements made in the advertisement.

THE PROMOTIONAL BROCHURE 91 The Commission alleges that the promotional brochure circulated by the Company contains a representation that the Domestic Device: 'once switched on will: (a) gradually cause pests to move out of a person's home;

(c) rid pests from premises all year every year continuously into the future so that the premises become a "no go zone"'. 92 The promotional brochure contains, inter alia, the following statements: 'HOW IT WORKS Plug-In Pest Free simply plugs into any household power point. When switched on it alters the existing electromagnetic field in your electrical wiring, reaching deep into the walls, ceilings, cupboards and crevices affecting the sensitive metabolism of pests, making your home a "no go" zone.' …… 'HOW LONG DOES IT TAKE TO WORK? Plug-in Pest Free goes to work as soon as you switch it on. You will most likely see an increase in activity throughout your home initially, but gradually they move out - it will not affect insects that fly into your home, however Plug-in Pest Free will stop pests from nesting and breeding where chemical sprays, powders, baits and ultra sounds can't reach. IS IT DIFFERENT FROM ULTRASONIC DEVICES? Yes, ultrasonic devices only work when the pests get within their short range. Plug-In Pest Free works throughout your home or business all year around. ….. IS IT SAFE? Plug In Pest Free does not affect humans or animals, only drives pests away by disturbing their natural breeding and eating cycle.' 93 The promotional brochure also contains the following statement: 'In fact Plug In Pest Free is so "clean and green" and effective in the control of cockroaches, rats and mice, that Australia's own true blue product is exported to many countries around the world.' 94 Clearly enough, the first two representations alleged by the Commission are evident in the passages cited above. The reference to 'pests' in the cited passages may be taken to be a reference to cockroaches, rats and mice. 95 The third alleged representation does not quite make sense. There is no direct reference in the promotional brochure to 'ridding pests from premises'. Nor is there any reference to the Domestic Device having any effect 'all year every year continuously into the future'. It does say that the Device 'works… all year round'. It would be possible to find a representation that the Domestic Device rids premises of pests all year round so that the premises become a 'no go zone'. However, that is not what is alleged. 96 I do not consider that the promotional brochure contains a representation that there is a reasonable foundation in scientific knowledge or testing for the alleged representations. In addition to the passages cited above, the Commission points to the following further statements in the promotional brochure: 'This is the all-Australian-made chemical free electronic pest control device - and it works. ….' 'Certified by the NSW Office of Energy as meeting Electrical Australian Safety Standards (Certificate No CS 6455N) and is EMC 'C' Tick approved.' 97 The Commission contends that the statements that the Device works and the description of how the Device works implies that there must have been some testing of the Device. The Commission says that the reference to the fact that the Device does not affect humans or animals also suggests that some tests have been carried out. It also points to the reference to the certification, although there is no evidence as to what is required in order to satisfy the Electrical Australian Safety Standards or what is meant by "EMC 'C' Tick approved." The Commission also points to the statements as to how long the Device takes to work and its comparison with ultrasonic devices as suggesting testing. 98 However, while those statements may cause a reader to assume that the Company had some basis or foundation for making them, I do not consider they give rise to an implied representation in the terms alleged. 99 The Commission also alleges that, by making the alleged representation (a) above, the promotional brochure also represents that the Domestic Device has the performance characteristic, use or benefit 'in respect to tests including rats and/or cockroaches' that the Domestic Devices 'cause them to leave premises'. The Commission also alleges that by making the alleged representation (c) above, the promotional brochure represents that the Domestic Devices have the performance characteristics, uses or benefits 'in respect to pests including rats and/or cockroaches' that they 'rid premises of them' and 'make premises a "no go" zone for them'. 100 I consider that the promotional brochure represents that the Domestic Devices have the performance characteristic, use or benefit that they cause pests including rats and cockroaches to leave premises. I have expressed my reservations about the Commission's formulation of the alleged representation (c) referred to above. However, I consider that the promotional brochure contains a representation that the Domestic Devices have the performance characteristic use, or benefit that they make premises a 'no go zone' for pests including rats and cockroaches.

THE DOMESTIC FLYER 101 The Commission alleges that the Domestic Flyer contains a representation that the Domestic Device: 'once switched on will: (a) gradually cause pests to move out of a person's home;

(c) rid pests from premises all year every year continuously into the future so that the premises become a "no go zone"'. 102 The Domestic Flyer specifically says, under the heading 'How long does it take to work?': 'Pest Free goes to work as soon as you switch it on. You will most likely see an increase in activity throughout your home. But gradually they move out - it will not affect insects that fly into your home, however, Pest Free will stop pests from nesting and breeding where chemical sprays, powders, baits and ultra sounds can't reach.' In addition, the Domestic Flyer contains the following statement: 'Pest Free does not affect humans or animals, only drives pests away by disturbing their natural breeding and eating cycle.' Clearly enough, the first two representations are contained in those passages. 103 The third representation does not quite make sense. The words do not appear in the Domestic Flyer. For the reasons set out above in relation to the promotional brochure I do not consider that the Domestic Flyer makes that representation. 104 I consider that the Domestic Flyer contains a representation that the Domestic Device, when plugged into any household power point and switched on, will: (a) gradually cause pests of the kind normally found in an average home to move out; (b) stop such pests nesting and breeding in places where chemical sprays, powders, baits and ultrasounds cannot reach. 105 For the reasons indicated above in dealing with the Passas Letter, I do not consider that the Domestic Flyer contains a representation about any scientific foundation or testing. 106 The Commission alleges that, by making alleged representation (a) above, the Domestic Flyer expressly represents that the Domestic Devices have the performance characteristic, use or benefit 'in respect to pests including rats and/or cockroaches' that the Domestic Devices 'cause them to leave premises'. It also alleges that, by making alleged representation (c), the Domestic Flyer expressly represents that the Domestic devices have the performance characteristic, use or benefit 'in respect to pests including rats and/or cockroaches' that the Domestic Devices: 'Rid premises of them. Make premises a no go zone for them.' 107 The Domestic Flyer contains the following statements: 'Pest Free simply plugs into any household power point. When switched on it alerts the existing electro magnetic field in your electrical wiring… affecting the sensitive metabolism of pests, making your home a "no go" zone.' 'Pest Free… drives pests away by disturbing their natural breeding and eating cycle.' 108 Those statements contain a representation that the Domestic Device has the performance characteristic, use or benefit, in relation to the pests depicted in the Domestic Flyer, that the Domestic Device drives such pests away and makes a home a 'no go' zone for such pests. 109 The Domestic Flyer does not contain an express representation that the Domestic Device causes such pests to leave premises. Nor does it contain an express representation that the Domestic Device will rid premises of such pests.

THE LABEL 110 The Domestic Device is supplied by the Company in a cardboard carton. On some occasions the carton contained a label stating, inter alia, the following: 'Pest Free simply plugs into any household power point. When switched on it alters the existing electro magnetic field of your electrical wiring, reaching deep into the walls, ceilings, cupboards and crevices affecting the sensitive metabolism of pests making your home a 'no go' zone. … Pest Free goes to work as soon as you switch it on. You will most likely see an increase in activity throughout your home. But gradually they move out - it will not affect insects that fly into your home. However, Pest Free will stop pests from nesting and breeding where chemicals, sprays, powders and ultra sounds can't reach.' 111 The Commission alleges that the Label contains a representation that the Domestic Device: 'once switched on will: (a) gradually cause pests to move out of a person's home;

(c) rid pests from premises all year every year continuously into the future so that the premises become a "no go zone"'. 112 The same comments as to whether the alleged express representations are made in relation to the Domestic Flyer are applicable to the Label. In relation to the alleged further implied representation that is alleged arise from the express representations, there is nothing in the Label that would support the implication of a representation by the Company concerning the foundation in scientific knowledge or testing for the claims made in respect of the Device. 113 The observations made in relation to the Domestic Flyer are applicable to the question of whether the Label contains a representation as to the performance characteristics, uses or benefits of the Device.

THE COMMERCIAL FLYER 114 The Commission alleges that the Commercial Flyer represents that the Commercial Device: 'once switched on will: (a) affect the natural breeding cycle of cockroaches and rodents so as to drive them away from a person's business premises; (b) affect the sensitive metabolism of cockroaches and rodents so as to drive them away from a person's business premises; and (c) permanently free a person's business premises so that they become a "no go zone" for pests.' The Company concedes that the Commercial Flyer contains the first representation. 115 The Commercial Flyer also contains the following statement: 'When switched on it alerts the existing electro magnetic field in your electrical wiring, reaching deep into the walls, ceilings, cupboards and crevices affecting the sensitive metabolism of pests, making your premises a "no go" zone.' That statement does not contain all of the words alleged in representations (b) and (c). There is no reference to a consequence of driving cockroaches and rodents away from premises. Nor there is any reference to 'permanently freeing' premises. Nevertheless, it is possible to read into the statement, that the Devices affect the sensitive metabolism of pests making premises a 'no go' zone, the statements that the Devices affect the sensitive metabolism so as to drive pests away and that they permanently free premises of pests by making the premises a 'no go' zone. However, the representation that is made in the Commercial Flyer is simply that the Device affects the sensitive metabolism of pests making premises a no go zone. I do not consider that representations (b) and (c) are made out. 116 The Commission alleges that, by making alleged representations (a) and (b) above, the Commercial Flyer represents that the Commercial Device has the performance characteristic, use or benefit 'in respect to pests such as mice, rats and/or cockroaches' that it will 'drive [them] away'. It also alleges that by making alleged representation (c) above, the Commercial Flyer represents that the Commercial Device has the performance characteristics, use or benefit in respect to pests including rats and/or cockroaches, that it would 'make premises a "no go" zone for them'. 117 The Commercial Flyer does contain a representation that the Commercial Device makes premises a 'no go zone' for pests consisting of cockroaches and rodents. That is a representation that the Commercial Device has that performance characteristic or benefit. The Commercial Flyer also refers, in terms, to the Devices as 'driving them away', referring to 'cockroaches and rodents'. That is also a representation that the Commercial Device has that performance characteristic or benefit in relation to rats and cockroaches, since rats are rodents.

THE OPERATION AND INFORMATION MANUAL 118 The Commission alleges that, by publishing the Operation and Information Manual, the Company represented that the Domestic Device: 'when operating will:

(a) create a hostile environment for pests such as will render a person's premises such an unattractive location that such pests will not venture there;

(b) drive away pests from a person's premises continuously day in day out for years into the future so that they become pest free;

(c) prevent pests from staying and establishing themselves in a person's premises;

(d) disorientate pests such that they become easier to catch;

(e) cause pests to move from a person's premises as soon as they can;

(f) within 1 to 4 weeks from commencement of use, cause most pests to move from a person's premises;

(g) stress, disorientate and dehydrate pests to such an extent that they will eventually die.' 119 While the Operation and Information Manual does not specify the pests to which it refers with any great particularity, it contains, in Sections 5 and 6, general information in relation to rodents and cockroaches respectively. In Section 5 there is material relating to:

• Norway Rat;
• Roof Rat; · House Mouse.

Under the heading 'Cockroach Facts' in Section 6, six different species of cockroach are described. Thus, it is clear enough that the representations contained in the Operation and Information Manual relate to rats, mice and cockroaches. 120 The representations are alleged to relate only to the Domestic Device. The Operation and Information Manual has a photograph of the Domestic Device on its cover, although it has a sub-heading on the inside of the cover page saying 'Home and Commercial Pest Management Systems'. Nevertheless, the general thrust of the document appears to be towards domestic premises. Thus, it is fair to conclude that it makes representations about pests consisting of rats, mice and cockroaches that are normally found in domestic premises. 121 The Operation and Information Manual contains inter alia, the following statements: 'Pest Free SENDS 'EM PACKING!' 'REMEMBER: Pest Free IS WORKING FOR YOU 24 HOURS A DAY, 7 DAYS A WEEK! 365 DAYS A YEAR!' 'We are sure you will agree that the best way to keep pests away from your environment is to change that environment. Pest Free alters what is normally a friendly environment for pests into a hostile environment. In doing so, you the owner, quietly retain a "Pest Free" premises without jeopardising your own well being by having to use poisonous and hazardous chemicals.' 'REMEMBER - the Pest Free is working for you chemical free, 24 hours a day, every day and for years to come.' 'Pest Free will prevent the pests from staying and establishing themselves.' 'Pest Free disorientates the pests and they become easy to catch. It will cause them to leave the area as soon as they can. Most pests can be cleaned out of an area in 1-4 weeks.' 'Pest Free stresses the pests and they become disoriented, dehydrated and they will eventually die.' 'Pests will continually attempt to enter all premises via paper bags, crates, boxes or almost anything. Pest Free will prevent them from staying and nesting, and setting up new infestations.' 122 It is possible to find the alleged representations in the statements just quoted. The question, however, is whether those statements carry with them the additional representation, in the context in which they appear, that there is a reasonable foundation in scientific knowledge or testing for the statements. In support of that contention, the Commission refers to additional statements contained in the Operation and Information Manual. 123 Thus, the Operation and Information Manual contains the following: 'Pest Free Management systems are proud to present a quality product designed to safely affect many of the pests which threaten our world and directly effect [sic] our urban society.' The Commission contends that the use of the expression 'quality product' suggests testing or scientific foundation for the assertion. 124 The Commission also contends that the assertion in the passage cited above that the Device operates 'without jeopardising your own well being' suggests testing or some scientific foundation. 125 Elsewhere, the Operation and Information Manual contains captions for drawings depicting insects. The captions are as follows: 'Pest Free vibrations are emitted within your walls so that pests are forced out of hiding. Pests can generally avoid the path of short waves emitted by ultrasonic devices that broadcast within a room.' The Commission contends that those captions suggest testing and scientific foundation for the assertions made. 126 Under the heading 'WHAT TO EXPECT' the Operation and Information Manual contains the following statements: 'Once the Pest Free is operating you may start to see unusual or increased pest activity during the first 1-4 weeks. This is not unusual. This increase in activity is due to the Pest Free forcing the pests to leave their usual hiding places where they have previous been safe from sprays, fogging or bombs.' Again, the Commission contends that those assertions suggest that there has been some testing or that there is some scientific foundation for the assertions. 127 Under the heading 'INSTALLATION' the following appears: '· For maximum affect [sic] it is suggested that you place Pest Free® into the left side of a double power point.

· Ideally, any appliance such as a television or video should be placed adjacent to Pest Free®.

· Do not install next to a refrigerator or a freezer.

· Do not use double adaptors.' The Commission contends that the Company could not make those assertions unless it had some scientific foundation for making the assertions. Thus, the making of the assertions is said to suggest that the Company has carried out some testing. 128 Sections 3 to 7 of the Operation and Information Manual contain the following headings: 'Section 3 Good Housekeeping Section 4 General Information - Reinfestation Section 5 General Information - Rodent Facts Lifecycle of Rodents Section 6 General Information - Cockroach Facts Section 7 General Prevention'

The Commission asserts that Sections 3 to 7 contain scientific material that, taken in conjunction with the alleged representations, suggest that there is a scientific foundation for the representations. 129 Section 8 of the Operation and Information Manual contains questions and answers. One of those is as follows: 'Q: Is there a typical chain of events that I will see using the Pest Free?

A: Yes, depending upon the severity of the infestation, you may notice increased activity starting in 1-2 weeks and lasting for 1 month or more. As eggs hatch, mainly smaller insects will become noticeable.' Again, the Commission contends that that statement implies that there is a reasonable foundation in testing or that there is some scientific foundation for the answer given to the question. 130 As with the other documents, it may well be that the reader of the Operation and Instruction Manual would assume that there is some basis or justification for the assertions contained in it. However, it does not follow that a reader would understand that the Company is making a positive statement in the terms alleged. I do not consider that the Operation and Information Manual contains the representation alleged. 131 The Commission also alleges that, by making alleged representations (b), (c) and (f) above, the Operation and Information Manual expressly represents that the Devices have the performance characteristics, uses or benefits 'in respect to pests including rats and/or cockroaches' that the Devices: 'Drive [them] away. Cause them to leave the premises.' 132 Clearly enough, the statements in the Operation and Information Manual that are quoted above contain representations that the Domestic Device will, when operating, drive pests away from premises and cause pests to leave the premises. As I have said, the documents refer to pests that include rats and cockroaches. I consider that the Operation and Information Manual contains an express representation that, when operating, it will drive away pests and cause them to leave the premises.

THE COMPANY PROFILE BOOKLET 133 Prior to 15 April 2002, the Company published a booklet described as 'Company Profile' ('the Booklet'). The Commission contends that, by publishing the Booklet, the Company represented that: 'within the premises where it is switched on the Devices will result in:

(a) cockroaches and rodents being unable to carry out their normal feeding and breeding routines;

(b) the cockroaches and rodents consequently moving out.' 134 Those representations are said to be made by the following statement contained in the Booklet: 'Rodents and cockroaches which set up their breeding grounds in the walls, ceilings and hidden crevices throughout a home or building have extremely sensitive metabolisms which are so affected by the altered electro-magnetic field they are unable to carry out their normal feeding and breeding routine and simply move out.' Clearly enough the alleged representations are to be found in that statement. 135 The Commission also alleges that, by publishing the Booklet, the Company represented further it: '… (c) had commissioned a leading Australian university to conduct studies on the Devices and that the results of those studies demonstrates that the Devices alter the natural behaviour of rodents and creates an environment that discourages their feeding and breeding behaviour'. 136 The Commissioner alleges that that representation is to be found in the following statement in the Booklet: 'Not content with the experience of tens of thousands of satisfied home owners the company commissioned one of Australia's leading Universities to conduct studies designed to confirm the behaviour changes Pest Free makes to the normal and natural behaviour of rodents. The results demonstrate that Pest Free alters their natural behaviour and creates an environment that discourages feeding and breeding behaviour.' Clearly enough, the alleged representation can be found in that statement. 137 The Commission then points to a number of other statements in the Booklet as giving rise to an implication that there is a reasonable foundation in scientific knowledge or testing for the representations made in it. 138 Thus, the Booklet contains the following additional statements: 'We officially began trading in January, 1995 although we had spent enormous amounts of time, money and effort prior to this in researching, developing and refining our core product until we were sure it was ready for the Australasian market…. … The Plug In Pest Free is a unique electronic device. Once plugged into a power socket and switched on, it works by creating a structured pulse which travels down the power supply wiring, pulse modulating the existing background electromagnetic field in the area, set up by the wiring circuit…' 'Because of the neat, compact design of Pest Free in both the home and commercial models, it is easy to underestimate the sophisticated technology that lies behind their effectiveness as a safe, reliable pest control system. From the computer chip controlling the pulse into the special coil, the product has been designed to world quality standards.' 'Production manager, Mr Peter Marsland, is no stranger to high precision technology having spent many years in the Royal British Navy in the complex world of submarine operations as well as having extensive experience in the commercial electronics industry in product development and design. Peter has brought the same high standards of discipline and checking procedures to each stage of the process in the manufacture of Pest Free products.' The Commission contends that those statements, in addition to the references to the commissioning of studies by a leading university, give rise to an implied representation that there is a reasonable foundation in scientific knowledge or testing for each of the representations made. 139 However, once again, while a reader of the Booklet may well assume that the Company would not have made the claims that it made without some foundation, the express statement that the Company had commissioned studies and that the results showed certain things indicates the extent of the representation made by the Company as to the foundation that it had for making the claims. Having regard to the express representation that the Company had commissioned studies, and as to the results of those studies, there is no reason to read into the Booklet an implied representation that there is a reasonable foundation in scientific knowledge or testing for the claims, beyond the results of the studies commissioned by the Company. 140 That is to say, there is a clear and express representation that the Company had commissioned studies and that the results of those studies demonstrated certain things in relation to the Devices. That is a different representation from the implied representation alleged to arise from the express representations. I do not consider that the express representations in the Booklet give rise to an implied representation beyond the express representations. The fact that the Booklet refers to 'sophisticated technology' and 'high standards of discipline and checking procedures' does not justify the implication of a representation as alleged. 141 The Commission also alleges that, by representing in the Booklet that cockroaches and rodents, being unable to carry out their normal feeding and breeding routines, move out, the Company represented that the Devices have a performance characteristic, use or benefit that they 'cause [pests including rats and/or cockroaches] to leave premises'. The representation in the Booklet is specific. By publishing the Booklet, the Company represented that the Devices have the performance characteristic, use or benefit that they cause pests including rats and cockroaches to leave premises.

THE WEBSITE 142 As at 18 September 2002, the Company operated a website at www.pestfree.com.au ('the Website'). On the Website, the following statements appeared. 'Rodents and cockroaches whose breeding grounds are in walls, ceiling and hidden crevices throughout your home or building, have extremely sensitive metabolisms which are so affected by the altered electromagnetic field they are unable to carry out their normal feeding and breeding routine and simply move out. Not content with the experience of tens of thousands of satisfied home owners the company commissioned one of Australia's leading universities to conduct studies designed to confirm the normal and natural behaviour of rodents. The result demonstrated that Pest Free alters their natural behaviour and created an environment that discourages feeding and breeding behaviour.' 143 The Commission alleges that the Website makes the three representations alleged to be made by the Booklet. For the reasons indicated above in relation to the Booklet, there is to be found in those statements in the Website the three representations alleged in relation to the Booklet. While the wording is not identical, it is sufficiently similar for the same representations to be made. 144 However, the Commission also alleges in relation to the material on the Website that the Company made further representations that: '(d) the Devices will work 24 hours a day into the future;

(e) the premises will be permanently rid of pests; and

(f) the Devices create an environment where such things as cockroaches, mice and rats cannot eat, drink or breed.'

145 Those representations clearly arise from the following statements made on the Website: 'Pest Free plugs into any power point, works 24 hours a day and is completely safe.' 'Plug In Pest Free is the simple yet very effective way to rid your home of household pests without the use of hazardous chemical treatments. Just plug it in to any household power point and you'll have a completely safe and economical way to drive pests away.' 'Pest Free creates a structured pulse on the existing wiring of a home or building, thus creating an environment where things such cockroaches, mice and rats cannot eat, drink or more importantly breed.' 146 However, for the reasons outlined above in relation to the Booklet, there is no further representation implied that there is a reasonable foundation in scientific knowledge or testing for the representations beyond what is expressly stated as the foundation for the claims. 147 The Commission alleges that, by representing in the Website that cockroaches and rodents, being unable to carry out their normal feeding and breeding routines, move out, the Company represented that the Devices have a performance characteristic, use or benefit that they 'cause [pests including rats and/or cockroaches] to leave premises'. The statement in the Website is specific. By publishing the Website, the Company represented that the Devices have the performance characteristic, use or benefit that they cause pests including rats and cockroaches to leave premises. 148 Further, the statement in the Website that the Device is 'the simple yet very effective way to rid your home of household pests' is an express representation that the Device has the performance, characteristic, use or benefit that it will rid a home of household pests.

TELEVISION ADVERTISEMENTS 149 From mid April 1997 to mid April 2002, the Company caused a television advertisement to be broadcast on Channel 10, Newcastle. The advertisement showed individuals in military uniform. There was an exchange between those individuals as follows: 'Sergeant: Didn't I tell you we had a pest invasion? Cockroaches, rats and mice? Private: I'll fix 'em Sarg'. Sergeant: No, young fellow - Plug In Pest Free. Private: Ohhh! Sergeant: No mess, no fuss, no fumes, chemical free, environmentally friendly protection. And it works' The Commission contends that constitutes a representation on behalf of the Company that the Domestic Device: 'will provide householders with protection from invasion of cockroaches, rats and mice.' It may be that there is a representation to be found in the advertisement. However, it is not the representation as alleged. 150 Finally, from mid June 2000 up to mid April 2002, the Company caused the broadcast of a second advertisement on Channel 10 Newcastle. In the course of the advertisement, a naturalist is shown as saying: 'Having trouble with household pests? [Reference is then made to a carpet python and to a spider]… Now, these guys are super efficient and environmentally friendly, but they're hardly the answer to your household pest control. Now, meet Pest Free. … Just Plug In Pest Free and it utilises the existing electromagnetic field produced by your household wiring to create a no-go area for rodents and cockroaches… Plug In Pest Free - effective, non-toxic and true blue Aussie made. …' 151 The Commission alleges that, by that advertisement, the Company represented that the Domestic Device 'will create within a person's household a "no go area" for rodents and cockroaches'. Clearly enough, that statement can be found in the advertisement. However, for the reasons advanced above, there is no implied representation that there is a reasonable foundation in scientific knowledge or testing for that claim. The reference to the utilisation of the 'electromagnetic field' does not just give rise to such an implication. Nor does the reference to 'non toxic and true blue Aussie made' assist, as the Commission contended. 152 On the other hand, the statement that the operation of the Device will 'create a no go area for rodents and cockroaches' is a representation that the Device has the performance, characteristic, use or benefit that it creates a no go area for pests including rats and cockroaches, as alleged by the Commission.

CONCLUSION 153 I have concluded that certain of the representations alleged by the Commission in relation to various communications are to be found in those communications. However, I do not consider that any of the communications gives rise to the implication of a representation that the claims made in any particular communication have a reasonable foundation in scientific knowledge or testing. On the other hand, I consider that certain of the communications contain express representations alleged by the Commission that the Devices have performance characteristics, uses or benefit. Accordingly, it will be necessary for a further hearing to determine whether the Devices do in fact have the performance, characteristics, uses or benefits claimed by the Company. 154 Each party has been partially successful in the conclusions that I have reached. The parties have requested that I make no order as to costs until I have heard further argument. Accordingly, I propose to fix the matter for directions on a date suitable to the parties for the purposes of considering the further conduct of the proceeding and argument as to costs. 155 In the meantime, the parties should bring in short minutes to reflect the conclusions that I have reached thus far. I am conscious that I have not necessarily answered the questions in the precise terms in which they were posed. I propose to hear the parties further as to the orders or declarations, if any, that I should make at this stage.

I certify that the preceding one hundred and fifty five (155) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett.

Associate: Dated: 30 April 2004 Counsel for the Applicant R Layton QC

Date of Hearing: 11, 12 February 2004