CAT MEDIA PTY LTD v MCCOY No. SCGRG-99-501 [2000] SASC 193

Supreme Court of SA|2000-06-30|Before: Olsson J, Williams J

Judgment No. [2000] SASC 193

On Appeal from HIS HONOUR JUDGE BOWEN PAIN, MASTER OF THE SUPREME COURT

In Catto & Ors v Hampton Australia Ltd (In Liq) & Anor ([2000] SASC 104) I dealt with the principles to be applied in relation to an application to strike out a statement of claim under SCR 46.18. I there adopted the test as stated by Olsson J in Esanda Finance Corporation Ltd v Peat Marwick Hungerfords (Reg) ("Esanda's case") [1994] SASC 4402; (1994) 61 SASR 424 at 438:

"Rule 46.04 prescribes the fundamental requirements of a statement of claim. Inter alia, it requires such a document to contain a statement, in summary form, of the material facts on which the relevant party relies, but not evidence by which the facts are to be proved. It also stipulates that proper particulars of the claim be given, including specific particulars of the type adverted to in r 46.04(f).

It is elsewhere provided in r 46.18 that the whole or any part of a pleading which discloses no reasonable cause of action may be struck out at any stage of the proceedings.

As appears from the judgment of Barwick CJ in General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125 at 129 the test to be applied on such an application has been stated in a variety of forms: see also Egan v Commonwealth Minister for Transport (1976) 14 SASR 445. It is sufficient, for present purposes, merely to say that a pleading in a statement of claim will be struck out if, on the face of it, the alleged cause of action - as pleaded - is so obviously untenable that it cannot possibly succeed. The power to strike out is to be exercised with caution and the mere fact that the cause of action as alleged is weak, or not likely to succeed, is not sufficient to warrant a striking out order. The pleading must be so deficient that it is possible, unequivocally, to say that it does not, on any view, raise a case which is sustainable in the form in which it has been pleaded, even if the factual averments are made good."

I will apply this test to the present application to strike out the statement of claim.

The plaintiff has produced and marketed a cosmetic skin cream for reducing the appearance of spider veins. The plaintiff does not assert that the product treats the underlying medical cause of the problem nor does she claim that the cream will provide a cure. The defendant is a medical practitioner who conducts a clinic whose business includes the treatment of spider veins. It is alleged that the plaintiff and the defendant are in competition.

The plaintiff complains about a number of incidents which she alleges caused her product to be regarded in a poor light and which led to a substantial drop in sales. There were television presentations by Channel 7 on 8 March and 17 September 1999 and Advertiser newspaper articles on 17 and 20 September 1999. A series of tests involving participation by the public is alleged to have been conducted by the defendant between 8 March and 4 May 1999 in accordance with publicity given on 8 March 1999. The results of these tests were published to a medical conference in Melbourne on or about 17 September 1999.

The gravamen of the plaintiff's complaint in terms of the statement of claim is that the defendant is guilty of conduct which is likely to mislead the public as to the characterisation, or suitability for purpose, of the plaintiff's goods. Expressed another way, the defendant is alleged to have denigrated or disparaged the product of the plaintiff. I note that in dealing with an appeal relating to an application for an interlocutory injunction Mullighan J observed that "the only words spoken by the respondent are not disparaging of the product" ([1999] SASC 387).

The statement of claim alleges breaches of ss 52 and 55 of the Trade Practices Act 1974 (Cth) ("TPA") and their counterparts in ss 56 and 63 of the Fair Trading Act 1987 SA ("FTA"). The plaintiff alleges that she has suffered damage by reason of the conduct of the defendant and the plaintiff relies on a claim said to arise under s 82 of the TPA and s 84 of the FTA. Injunctive relief is also sought including corrective advertising in accordance with s 80A of the TPA.

The statement of claim asserts that various representations were made by the defendant. However, it might avoid confusion if the so called "representations" are simply referred to as "statements" and regarded as forming part of a course of conduct. The statement of claim pleads the individual alleged statutory breaches. The defendant's conduct generally is alleged to have been the cause of damage to the plaintiff (see statement of claim par 84). On this basis the plaintiff's claim bears some resemblance to a claim for slander of goods or trade libel, a term loosely applied to the action on the case which arises from words which disparage a person's property without being defamatory of that person.

This is not a case where there is a comparison between the respective goods of the plaintiff and the defendant (see for example The Western Counties Manure Co v The Lawes Chemical Manure Co [1853] EngR 965; [1874] LR 9 Ex 218). Rather, the complaint is one of excess in "reverse puffing" where the impugned conduct amounts to denigration. I note the treatment of this topic by Lindley MR in Hubbuck & Sons Ltd v Wilkinson & Ors [1899] 1 QB 86 at 94.

It is convenient now to summarise the effect of the statement of claim as seen through the eyes of the plaintiff's counsel.

On the face of the statement of claim the efficacy of the plaintiff's product has been called into question by the defendant who puts herself forward as an independent professional medical scientist. The defendant claims to have conducted a series of tests in accordance with standard scientific procedures and has concluded that various claims made for the plaintiff's product are unsustainable. Indeed, as a throw away line the defendant says that it would be a "miracle" if the claims were sustainable. In fact, according to the plaintiff, the defendant is the business competitor of the plaintiff, the defendant's tests leave a lot to be desired scientifically, she has falsely attributed to the plaintiff certain claims which the plaintiff does not herself make and the defendant has made a snide remark about miracles. Even before completing her tests the defendant was prepared to deride the plaintiff's product without having sufficient justification in fact. All this, says the plaintiff, adds up to unfair denigration of the plaintiff's product. Furthermore, as the plaintiff explains in the statement of claim, the defendant claims publicly to have an obligation to investigate and expose the plaintiff's spurious claims. However, the plaintiff says that this is unfair as she does not make the claims attributed to her.

"Misleading" in the context of s 52 of the TPA was explained by the High Court in R v The Credit Tribunal; ex parte General Motors Acceptance Corporation, Australia [1977] HCA 34; (1976) 137 CLR 545 at 561 as a form of conduct which in business is "unfair". In the context of the present case it is asserted that the defendant's conduct, when considered as a whole, has a tendency to induce in the minds of the plaintiff's customers a belief which unfairly reflects on the reputation of the plaintiff's product. It is alleged, in effect, that the defendant has engaged in the "knocking" of the plaintiff's product (cf Calsil Ltd v TVW Enterprises Ltd & Ors (1984) 6 ATPR 40-451).

The defendant's criticisms of the statement of claim arise out of a number of general assertions as follows:

(a) The plaintiff seeks to hold the defendant responsible for adverse media publicity given to the plaintiff's product. The defendant asserts that she was not in a position to exercise control over the material which the various media outlets chose to publish.

(b) Although the plaintiff alleges misleading conduct on the part of the defendant there is no plea of falsity in respect of anything which the defendant caused to be published.

(c) The defendant asserts that many individual acts mentioned in the statement of claim are alleged against the defendant with no consequence alleged to flow therefrom. The defendant acknowledges that it may be appropriate for the plaintiff to allege the cumulative "global" effect of a course of conduct on the part of the defendant but the defendant asserts that such a plea is currently absent from the statement of claim.

(d) The statement of claim complains that the defendant published to a medical conference the results of her tests on the plaintiff's product. The defendant asserts that the mere fact of publication of these results does not have any consequence. There is no pleading as to the results of the tests or as to the correctness of the tests.

(e) There were some miscellaneous criticisms as appears below.

(a) Defendant's responsibility for acts of third parties.

The plaintiff asserts that the defendant has been responsible for the plaintiff's product being subjected to unfair publicity. However, it is alleged that the defendant has achieved this result by the use of others. On the plaintiff's case, the defendant's responsibility in terms of causation arises out of the defendant's procurement of various television and newspaper presentations or articles. It is not suggested that the defendant controlled the actual production or content of these programmes. In the context of the economic tort of interfering with the business relations of another I note the comment made in Torquay Hotel Co Ltd v Cousins & Ors [1969] 2 Ch 106 at 147 by Winn LJ.

"...mere advice, warning or information cannot amount to tortious procurement of breach of contract. Whilst granting arguendi causa that a communication which went no further would, in general, not, in the absence of circumstances giving a particular significance, amount to a threat or intimidation, I am unable to understand why it may not be an inducement. In the ordinary meaning of language it would surely be said that a father who told his daughter that her fiancé had been convicted of indecent exposure, had thereby induced her, with or without justification, by truth or by slander, to break her engagement. A man who writes to his mother-in-law telling her that the central heating in his house has broken down may thereby induce her to cancel an intended visit."

The defendant asserts that she cannot be held responsible for what was said by others in a television broadcast when she had no control of the overall content. The essence of the plaintiff's complaint is that the defendant caused various matters to be represented to the television viewers (see statement of claim par 18). In my opinion it is reasonably arguable that, as now relevant, the defendant procured the particular outcome, including the resultant damage, using various intermediaries as her conduit to approach the public. The plaintiff argues that the defendant's conduct in projecting her message via a third party is exemplified in Barton v Croner Trading Pty Ltd [1984] FCA 195; (1984) 3 FCR 95 at 107. That was a case where a false message was included on packaging by the defendant wholesaler knowing that a retailer would pass on the message to customers. The present case is more subtle and reflects the manner in which people may be manipulated in accordance with the examples given by Winn LJ. The fact that the conduct alleged is misleading rather than false, as in Barton v Croner, needs to be separately addressed.

For the purposes of the appeal the defendant should be restricted to the complaints made in the letter of 26 October 1999 and developed before the Master. The submission made to me was in general terms.

The letter of 26 October 1999 deals in several respects with the contention that the plaintiff's allegation ought to plead falsity together with appropriate details of the alleged true facts. Those complaints are particularised in pars 13, 15, 17 and 18 of the defendant's letter.

In support of his contention, Mr Daenke, of counsel for the defendant, relies on State of Western Australia v Bond Corporation Holdings Ltd & Ors (1991) 13 ATPR 41-081 cited in the Master's reasons of 17 March 2000.

In my view the statement of claim satisfactorily pleads the matters of complaint. The defendant seeks to treat the allegations in the statement of claim in a manner which does not reflect the language of the statement of claim. In each instance the plaintiff is alleging that the defendant did not have reasonable grounds for promoting the impugned assertion (see pars 73, 76.1, 77-80).

For the purposes of argument counsel for the defendant selected by way of example a statement published in the Advertiser of 20 September 1999 which the plaintiff claims to have been published at the defendant's instigation. The defendant said at par 43.2 of the statement of claim "[w]e really didn't think it was going to work because we couldn't find anything in it that we thought could work." (emphasis added).

Paragraph 46 then explains what this statement would convey to the public at large. The defendant's opinion (allegedly) was that "[t]he product did not have any ingredients which could lead to the conclusion that it may cause veins to fade ("Fourth Advertiser Representation")" (see par 46.2).

"The Fourth Advertiser Representation was misleading or deceptive or likely to mislead or deceive in that the defendant did not have reasonable grounds for causing the Fourth Advertiser Representation to be made as the defendant had no scientific evidence supporting the representation and the representation was made prior to any proper and reliable testing of the Product being conducted by the defendant...."

The plaintiff is claiming that the basis on which the defendant proceeded was insufficient to fairly justify the course which the defendant took in proselyting her point of view. The plea in the statement of claim is to be treated as a complaint about the defendant's promotion of her opinion without sufficient foundation.

It is not a case where a plea of falsity is required on the plaintiff's case.

Each of the other matters where the defendant contends that a plea of falsity is essential also involves an alleged statement of opinion. In each case the plaintiff says that the defendant had insufficient foundation to justify the promotion of the defendant's viewpoint.

The defendant's counsel seeks to fight the case on ground of his own choosing but it is different from the ground selected for the purposes of the statement of claim. The plaintiff does not set out to prove the efficacy of her product in terms of scientific analysis and testing. The plaintiff places the onus on the defendant by asserting that the defendant's comments are unfair and lacking sufficient scientific support by a person who claims professional qualifications.

In the case of the second Advertiser representation (see pars 33.2 and 73) the allegation (on the plaintiff's interpretation) is that "[t]he Product did not appear to have any scientific backing". In context the plaintiff says that this should be treated as equivalent to:

"It could be concluded from the results of the trial that the plaintiff's Product did not appear to have any scientific backing."

That is how the plaintiff asks me to read the pleading. I will do so.

When so construed the thrust of the pleading is directed to the results of the trial and whether there was a basis from which it could be scientifically concluded that the plaintiff's product was lacking in efficacy to justify the defendant's manner of expression. This assertion could have been perhaps expressed more clearly.

The topics now in question deal with a lack of a reasonable basis for the statements and as such the pleading is sufficiently particularised. I point out that the items of conduct do not stand alone. They are drawn together in par 84 of the statement of claim as conduct giving rise to damage.

According to the plaintiff, the defendant made a statement to the effect that the effectiveness of the plaintiff's product would be accurately and reliably tested by an identified trial which was in the course of being arranged (see par 18.6). The defendant asserts that such an allegation can have no consequences and is not relevant to any cause of action as pleaded. However, the defendant's statement constituted a description of the trial which by then was in embryonic form. The defendant's "puffing" with respect to her scientific trial gave a status to the trial which, on the plaintiff's case, it did not deserve. In par 42 of statement of claim it is alleged that the results of the test were published. It is alleged that the defendant's conduct, including her promotion of the trial in advance of tests being completed was misleading and is pleaded as part of a course of conduct in par 53. The plaintiff's criticism of the trial is set out in par 63. Damages from conduct is pleaded in a global fashion at par 84 and this paragraph unifies the individual items of conduct.

Paragraph 84 alleges that "[b]y reason of the defendant's conduct pleaded above" the plaintiff has suffered damage and continues so to do. In my opinion this plea draws together the individual alleged statutory breaches and gives rise to a cause of action based on the TPA or the FTA. I reject the defendant's submission that there is no global plea with respect to conduct.

(d) Publication of test results to a medical conference

The statement of claim criticises the defendant's methodology in the conduct of a scientific trial (see par 28) and then complains that she published the results based on this defective trial (par 42). The plaintiff says that if the method was faulty in the manner alleged then the results must likewise be unreliable. To publish test results which are based on faulty methodology is therefore likely to mislead (see par 87). The plaintiff contends that given that the defendant has published the test results it is appropriate to seek an injunction (see plaintiff's claim for relief). On this basis the allegation in par 42 does have work to do in the context of the pleading even though there is no reliance on the actual results.

(i) The statement of claim pleads both the TPA and the FTA. The defendant complains that the plaintiff has not differentiated between conduct to which each Act respectively applies. In my view it is consistent with current practice to plead in this way. The facts of this case are such that there will be no embarrassment in allowing the form of the pleading to stand.

(ii) The plaintiff has alleged an "interview" between the defendant and a television journalist. It is common ground between the parties that this so called "interview" was not one single event but compiled by the television station drawing pieces together. When one understands the use of the term "interview" in the statement of claim then some of the defendant's objections disappear.

(iii) An issue was raised as to whether the defendant was claiming to have "personally" conducted the trial and the degree of responsibility which the defendant might be expected to assume in terms of personal involvement (see statement of claim par 39.1). These are not questions to be resolved on an application to strike out the pleading.

(iv) The plaintiff attributes to the defendant a statement for a television presentation:

"There is nothing that we can see has any medical basis that would effectively cure spider veins, but we can't give that a categorical no it won't work until it's been trialled." (see statement of claim par 14.5).

The defendant contends that there is nothing misleading in such a statement. However, as the plaintiff alleges that she never asserted that she had a "cure" for spider veins in her promotions, it is arguable that the statement is misleading (see statement of claim par 66).

The plaintiff's case is not untenable. The statement of claim sufficiently gives notice as to what is being put forward on the plaintiff's behalf.

The parties have exchanged written argument on this appeal. For the purposes of the strike out application the plaintiff has demonstrated an arguable case. I have read the reasons given by the Master. In my opinion error in the Master's conclusions has not been demonstrated. Nevertheless, I have picked out and explained in my own way the broad thrust of the statement of claim and the way in which it may be justified as a matter of principle based on the arguments advanced before me. I have made allowance for the refinements which may have occurred in the arguments for the purposes of the appeal. I consider that the claim has been adequately particularised.

Fair Trading Act 1987(SA)ss 56, 63, 84, referred

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