MERKEL J:
56 The background facts and the issues arising on the appeal have been set out in the reasons for judgment of Heerey J and Lindgren J, which I have read in draft.
57 At the outset I turn to the contention of the appellant ("Duracell") that there was a breach of the rules of natural justice. Duracell contends that it was denied a fair trial because the primary judge referred to and relied upon the affidavits of Mr Hammel and Mr Axford, which were filed by the respondent ("Energizer") and were prejudicial to Duracell, but which were not read and did not form part of the evidence before the Court at the hearing.
58 The passages from Mr Hammel's affidavit to which the primary judge referred compared the technical attributes of carbon zinc and alkaline batteries. Mr Hammel, a highly experienced battery technologist, relied upon the different technical attributes of the two types of battery to conclude that a direct comparison of the performance of a carbon zinc battery and an alkaline battery is "neither a fair nor a meaningful comparison" and is "not a comparison of two batteries which have the same or equivalent technologies, or which sell for the same price, or which are targeted for use in the same devices".
59 The passages from Mr Axford's affidavit to which the primary judge referred provided information as to the composition and performance characteristics of carbon zinc and alkaline batteries and discussed test data concerning whether Duracell's alkaline battery lasts up to three times longer than Eveready's Super Heavy Duty battery.
60 Energizer accepted that the affidavits were not read or relied upon by it before the primary judge and did not form part of the evidence at the hearing. It contended, however, that the evidence did not affect the outcome of the case.
61 The evidence relating to a comparison between Duracell's alkaline battery and Energizer's Eveready Super Heavy Duty carbon zinc battery was relevant to whether the comparison made in the "Race Bunny" advertisements ("the advertisements") between Duracell's battery and Energizer's battery was a comparison that was "not of like commodities". That issue was raised by Energizer in the Amended Statement of Claim dated 7 December 2001 which alleged, inter alia, that the original advertisement's comparison of the Eveready Super Heavy Duty battery and the Duracell alkaline battery was misleading and deceptive as it made a comparison that was "not of like commodities" without disclosing that fact (see paras 11(d), 12(d) and 13 of the Amended Statement of Claim). In the original Statement of Claim the allegation that the comparison is "not of like commodities" was pleaded as a particular of the "false and misleading nature of the representations" made in the "Race Bunny" advertisement (see [21] of the primary judge's reasons).
62 On 6 December 2001 the primary judge ordered, pursuant to O 29 r 2, that all issues relating to liability be tried separately from and prior to all other issues. The only liability issue excluded from his Honour's order was whether the Duracell alkaline battery did last up to three times longer than the Eveready Special Heavy Duty battery, which was a matter addressed by Mr Axford in his affidavit.
63 In his reasons the primary judge dealt with the issues in general terms. As a consequence it is difficult to determine with precision the issues he was determining. However, the terms of his order for a separate determination of liability issues, his references to the amended Statement of Claim (in [20] of his Honour's reasons) and to the comparison being a comparison that was "not of like commodities" as a particular of the misleading nature of the advertisements (in [21] of his Honour's reasons), and the apparent adoption of Energizer's "not comparing like with like" submission ([65(ii)] and [73]), leave little room for doubt that that issue was, and was regarded by his Honour as, a live issue at the preliminary hearing.
64 I turn first to the primary judge's references in his reasons to Mr Hammel's and Mr Axford's affidavits. In the section headed "Additional evidence tendered in the proceedings on behalf of Energizer" the primary judge (at [36]-[37]) referred to Mr Hammel's affidavit:
"Whilst in order to endeavour to confine these reasons for judgment within manageable limits, I have not reproduced the bulk of the technical material provided by affidavit testimonies of Energizer's technical experts, I would seek to complete my review of the thrust thereof by incorporating below certain conclusions of Mr Hammel, who is a US Battery Technologist having nearly thirty years experience with the Gates Corporation until its battery manufacturing business was sold in 1994, and who has been subsequently engaged by Energizer US for approximately one year or thereabouts. His testimony summarised below constitutes in essence a technical comparison between carbon zinc and alkaline batteries.
Such conclusions of Mr Hammel were as follows:
'(i) the construction and composition of an alkaline battery allows it to provide more of its available energy than a carbon zinc battery is able to do; while the alkaline battery has an advantage over carbon zinc in terms of the amount of energy stored in a given size, the alkaline battery far excels over the carbon zinc during high rates of discharge and continuous service; in a given size of battery, the advantage of alkaline over carbon zinc could be in the order of 60% at low rates of intermittent discharge; however this advantage would extend to over twice that of carbon zinc at high continuous rates of discharge; the discharge rate of the battery depends on the load placed on the battery, which depends on the nature of the device in which the battery is being used;
(ii) items such as portable CD players, digital cameras or electronic game machines have higher discharge rates than items such as radios or battery powered clocks; moreover alkaline batteries, being more suited for use in such devices, will always provide power for a significantly longer period than a carbon zinc battery. The difference in the expected performance of the two battery technologies in high discharge rate devices is generally reflected in the price charged for the product, and the price of carbon zinc batteries is lower than the price of alkaline batteries;
(iii) alkaline batteries and carbon zinc batteries are not equivalent technologies, and a direct comparison of the performance of a carbon zinc battery and an alkaline battery is neither a fair nor a meaningful comparison. It is not a comparison of two batteries which have the same or equivalent technologies, or which sell for the same price, or which are targeted for use in the same devices; and
(iv) an alkaline battery will always provide power for longer than a carbon zinc battery installed in a battery powered toy. No person familiar with battery technology would ever expect a carbon zinc battery to show an equal performance to an alkaline battery and it would therefore be unfair to compare them in a way which suggests that they are capable of equal performance; the fact that International Electrochemical Commission has differing minimum performance standards for the two technologies supported the view that this is the case.'"
65 The primary judge referred to Mr Axford's affidavit in the following contexts. His Honour accepted Mr Axford's evidence as "expert testimony" on the characteristics of batteries generally and of alkaline and carbon zinc batteries in particular (see [9]-[15] and [33] of his Honour's reasons). Mr Axford's testimony as to the tests conducted on the Duracell alkaline and the Eveready Super Heavy Duty batteries was also referred to and relied upon by the primary judge (see [33]-[35] of his Honour's reasons). Mr Axford's conclusions, set out in [35] of his Honour's reasons, were:
"…that it could not be asserted accurately that Duracell alkaline batteries:
(a) last three times longer than the Eveready SHD carbon zinc batteries in all of the battery sizes referred to in the Test Table;
(b) last three times longer than the Eveready Gold alkaline batteries in all of the battery sizes referred to in the Test Table;
(c) last three times longer than the Energizer alkaline batteries in all of the battery sizes referred to in the Test Table; and
(d) last three times longer than the Panasonic alkaline batteries in all of the battery sizes referred to in the Test Table."
66 The primary judge, in summarising Energizer's submissions, stated (at [65]):
"Energizer's next submission was that the propensity for viewers to interpret the first advertisement as making a comparison with the best that Energizer (Eveready) and all other competitors have to offer is heightened by the following factors:
…
(ii) the only statement of difference between the batteries concerns their relative performances (ie "with up to three times more power"), thereby suggesting that the batteries are otherwise comparable, that is to say, that like is being compared with like; in particular, there is no mention of any price differential between the two batteries (see again [51] above relating to the price issue in Makita)."
67 His Honour observed (at [72]-[73]):
"Gillette joined issue upon Energizer's contentions, and submitted that the comparison made in each advertisement is "clearly one between Gillette alkaline batteries and Eveready super heavy duty brand batteries". Duracell did not disagree that at least the first advertisement represents that Duracell alkaline batteries last three times longer, or up to three times longer, than all Energizer Super Heavy Duty batteries, but denied the falsity of that assertion. As I would understand the situation still to be, in the light of the course which the proceedings took before me, those Duracell performance claims require final scientific resolution at a future date, particularly if Energizer is to pursue its claim for damages. However, in the light of the combined testimonies of Mr Axford summarised at [9-15] and [33-36] above, and of Mr Hammel summarised at [37] above, it would follow that such representations are unsustainable, to the extent that the same are made in the first and second advertisements.
Thus the reality of the course of the proceedings which has thus far been taken is an implicit acknowledgment on the part of Gillette of formidable difficulty in maintaining the viability in law of the first or Bunny advertisement, and hence Duracell's placement before me, albeit without admissions, of the succession of proffered modifications thereto set out in [25-27] above. In relation to the first or Bunny advertisement, I am clearly of the view that Energizer's submissions, which I have recorded at length in [58-70] above, should be generally sustained…"
68 When turning to consider the modified advertisement the primary judge at [76] referred to Energizer's submission:
"…that the…[modified advertisement] does not address, adequately or at all, the fundamental problem of the inherently misleading comparison which it still makes…"
and stated at [78] that:
"…My conclusion is that Energizer's submissions in [75-77] above are substantially correct and must be sustained in principle in relation to all changes proposed to the original Bunny advertisement…"
69 The submissions of Energizer that his Honour appeared to accept led his Honour to conclude that the advertisements were misleading.
70 Duracell's natural justice ground relates primarily to evidence about "not comparing like with like". His Honour ultimately found the advertisements to be misleading, because, inter alia, they were not comparing "like with like". It is clear that Mr Hammel's and Mr Axford's evidence contributed to the factual sub-stratum that led to that finding by the primary judge, which was plainly prejudicial to Duracell.
71 In [72] of his reasons the "combined testimonies" of Mr Hammel and Mr Axford were also relied upon by the primary judge for his conclusion that the statement that Duracell's alkaline batteries last up to three times longer than all Energizer Super Heavy Duty batteries is "unsustainable". I have some difficulty with his Honour's conclusion as in the same paragraph he stated that Duracell's "performance claims require final resolution at a future date", which was consistent with his order for that issue to be tried at a later date. Nonetheless, although the conclusion related to an issue that was to be tried at a later date, it was highly prejudicial to Duracell.
72 The right to be heard must carry with it the right to know the case which is being put, the evidence that has been given, and a fair opportunity to respond to that case and evidence. As was observed by Kirby P in Government Insurance Office of New South Wales v Bailey (1992) 27 NSWLR 304 at 309:
"An aspect of fair trial in our system of public trial by openly disclosed evidence, is that the case will only be determined, and the controversy resolved, by reference to lawful evidence given orally or in written or like form."
73 Scarman J in Brinkley v Brinkley [1965] P 75 at 78 stated:
"…For a court to take into consideration evidence which a party to the proceedings has had no opportunity during trial to see or hear, and thus to challenge, explain or comment upon, seems to us to strike at the very root of the judicial process."
74 In such cases the inquiry is not whether the evidence did work to a party's prejudice. It is sufficient that it "might do so": see Kanda v Government of Malaya [1962] AC 322 at 337 and Kioa v West (1959) 159 CLR 550 at 587-588, 603, 629 and 634.
75 Energizer did not dispute these principles but, rather, contended that there was no breach of the rules of natural justice because the evidence of Mr Hammel and Mr Axford was not relied upon by the primary judge, was replicated by other witnesses, and could not have affected the outcome in any event.
76 The first two contentions can be disposed of briefly. I have already outlined in some detail the manner in which Mr Hammel's and Mr Axford's evidence was used and relied upon by the primary judge in respect of matters that his Honour regarded as live issues before him. While some aspects of the evidence were replicated in other evidence before the Court the evidence itself was not. In any event, the primary judge expressly referred to and relied upon the testimony of Mr Hammel and Mr Axford, rather than that of other witnesses.
77 The real issue is whether the denial of natural justice that occurred as a result of the primary judge's reliance on Mr Hammel's and Mr Axford's evidence deprived Duracell "of the possibility of a successful outcome": see Stead v State Government Insurance Commission (1986) 161 CLR 141 ("Stead") at 147. In order to negate that possibility it is
"…necessary for the…Court to find that a properly conducted trial could not possibly have produced a different result." (Stead at 147)
78 While not every breach of the rules of natural justice invalidates the decision made, once the breach is proved the court should refuse relief only when it is confident that the breach could not have affected the outcome: see Re Refugee Review Tribunal; Ex parte Aala (2000) 204 CLR 82 at 122. That is because
"It is no easy task for a court of appeal to satisfy itself that what appears on its face to have been a denial of natural justice could have had no bearing on the outcome of the trial of an issue of fact." (Stead at 145-146)
79 In Stead (at 145) the High Court pointed out that where the denial of natural justice affects the entitlement of a party to make submissions on an issue of fact it is more difficult to conclude that compliance with the rules of natural justice could have made no difference.
80 In the present case the approach taken by the primary judge of generally accepting the submissions of Energizer, including its submissions as to the misleading comparison of unlike commodities, makes it extremely difficult for Energizer to satisfy the Court that Mr Hammel's and Mr Axford's evidence could not have made a difference. While the approach of his Honour has the consequence that it may not be possible to determine precisely what role Mr Hammel's and Mr Axford's evidence played in his ultimate decision it also has the consequence that it is not possible to determine that it could not have had any bearing on the outcome.
81 The evidence of Mr Hammel and Mr Axford that related to not comparing "like with like":
· was contrary to the case presented by Duracell;
· supported the case presented by Energizer;
· related to a live issue in the proceeding;
· was accepted and relied upon by the primary judge;
· was capable of supporting one of the bases for the primary judge's finding that the original and modified advertisements involved a misleading comparison.
82 Although the evidence of Mr Axford as to the test data did not relate to a live issue at the preliminary hearing it was nonetheless relied upon by the primary judge in a manner that was prejudicial to Duracell.
83 As I am not satisfied that the affidavits could have had no bearing on the outcome it must follow that in the normal course the orders of the primary judge, made in part in reliance on those affidavits, should be set aside. However, in the course of the hearing before the Full Court Duracell abandoned its appeal in so far as it related to the original advertisement and the earlier modified versions of it. It is not altogether clear whether the abandonment related only to the Trade Practices Act 1974 (Cth) ("the TPA") grounds of appeal concerning those advertisements or whether it also included the natural justice grounds of appeal. In these circumstances it is appropriate for the parties to file written submissions as to the orders (if any) that are appropriate in relation the earlier advertisements. Whatever might be the situation in relation to those advertisements, Duracell is entitled to an order setting aside the primary judge's order in so far as it prohibits the broadcasting of the most recent modified advertisement ("the modified advertisement").
84 The substantive issue argued on the appeal was whether an injunction should be granted to restrain the broadcast of the modified advertisement on the ground that the broadcast would contravene ss 52 and 53(a) of the TPA. The trial before the primary judge was conducted on the basis of affidavit evidence without any cross-examination of witnesses. Thus, the Full Court is in as good a position as the primary judge to determine that issue and, in the circumstances, it is appropriate for it to do so. Of course, the evidence of Messrs Hammel and Axford is not to be taken into account.
85 I have viewed the modified advertisement on several occasions. I agree, for the reasons given by Heerey J and Lindgren J, that the impression that is likely to be created upon the viewer is that the modified advertisement compares the power of the Duracell alkaline battery and the Eveready Super Heavy Duty battery and not their price or value. Accordingly, I do not accept that the advertisement makes any representation as to price or value. Rather, the potential purchaser is left to make his or her own choice on those matters at the point of sale.
86 I also agree with the views expressed by Heerey J and Lindgren J on each of the aspects of the modified advertisement which their Honours found not to be misleading. I would, however, make the following additional observations.
87 The modified advertisement represents that the comparators, the Duracell alkaline battery and the Eveready Super Heavy Duty battery, are direct competitors. That representation is amply justified by the evidence that demonstrates that:
· the batteries can be used interchangeably and in the same devices;
· there is extensive cross purchasing and duplication between the carbon zinc and alkaline battery segments of the market;
· notwithstanding the technical inferiority of carbon zinc batteries they have maintained a share of just under 50 per cent of the Australian battery market, of which Eveready carbon zinc batteries accounted for 68.7 per cent by volume of cells sold or 78.8 per cent by dollar value;
· the Eveready Super Heavy Duty battery alone accounts for approximately 47.5 per cent by dollar value and 35 per cent by sales volume of the carbon zinc batteries sold in Australia;
· since 1981 Duracell and Energizer television advertisements have been making comparisons between the two types of batteries;
· Duracell's internal strategic planning was based, inter alia, on the assumption that the two batteries were direct competitors.
88 The evidence as to the different technical attributes, and recommended usages, of the alkaline and carbon zinc batteries does not have the consequence that they are not direct competitors or that the comparison of the power of each battery type is misleading. In a context where the evidence establishes that there is a significant lack of appreciation and awareness by consumers of the different power characteristics of the two types of batteries it would require some special circumstance before the accurate provision of that information to consumers in an advertisement could be said to be misleading.
89 The difficult question is whether the comparison made in the modified advertisement has been rendered misleading by the omission of any reference to Energizer's alkaline batteries, which have performance characteristics similar to Duracell's alkaline batteries: see Collier Constructions Pty Ltd v Foskett Pty Ltd (1990) 97 ALR 460 at 479 and Hoover (Australia) Pty Ltd v Email Ltd (1991) 104 ALR 369 at 375. See also Sterling Winthrop Pty Ltd v The Boots Company (Australia) Pty Ltd (1995) 32 IPR 361 at 365. Whether particular information needs to be provided to avoid a comparison being misleading as a consequence of the omission of particular information will depend on all of the circumstances of the case.
90 The modified advertisement makes representations about two battery types. It does not make any representation about, or comparison between, the two brands or their respective ranges of batteries. Thus, the modified advertisement does not represent that the Eveready Super Heavy Duty battery is the only direct competitor (within the Eveready range of batteries) of the Duracell alkaline batteries. It does no more than represent in graphic terms the power difference between two specified batteries which are direct competitors in the market place. In the absence of a representation, implication or impression that the Eveready Super Heavy Duty battery is the only Eveready competitor, I do not think that the disclosure of other competitive products in the Eveready alkaline range, having similar performance characteristics to Duracell's alkaline battery, is necessary to prevent the comparison from being misleading. The position might have been otherwise if the two comparators were not competitors or if the comparison were for some other reason inappropriate. That however, is not the situation in the present case.
91 There is also a further relevant circumstance, which has been referred to by Heerey J, which should lead to the Court acting with some caution before restraining the publication of information that the parties have accepted as accurate for the purposes of the present application, and which will assist in the making of better informed purchase decisions. His Honour pointed out that it is inconsistent with the policy and objectives of the TPA to restrict a trader from publishing, truthfully, a feature of its product which is superior to that of a competitor or to impede the making of better informed consumer choices. A similar approach has been taken in the United States where the Federal Trade Commission stated in respect of comparative advertising:
"For purposes of this Policy Statement, comparative advertising is defined as advertising that compares alternative brands on objectively measurable attributes or price, and identifies the alternative brand by name, illustration or other distinctive information." (Federal Trade Commission Commercial Practices Rule, 16 C.F.R. s 14.15 n. 1 (2002))
"The Commission has supported the use of brand comparisons where the bases of comparison are clearly identified. Comparative advertising, when truthful and nondeceptive, is a source of important information to consumers and assists them in making rational purchase decisions. Comparative advertising encourages produce improvement and innovation, and can lead to lower prices in the marketplace. For these reasons, the Commission will continue to scrutinize carefully restraints upon its use." (16 C.F.R. s 14.15)
92 In relation to disparaging advertising the Commission stated that it
"know[s] of no rule of law which prevents a seller from honestly informing the public of the advantages of its product as opposed to those of competing products…" (16 C.F.R. s 14.15)
93 Thus, while the authorities cited by the primary judge, Heerey J and Lindgren J point out the dangers in comparative advertising and caution against the "half truth" or the unqualified literal truth, it is also important that advertisers are not inhibited in the lawful provision of accurate and important information that will assist consumers to make rational purchase decisions.
94 Energizer also claimed that Duracell accepted that the "up to 3 times more powerful" representation is not accurate in 6V and 9V sizes. That point was raised in Energizer's written submissions but received little, if any, attention on the appeal and is at best an incidental and minor issue. Further, it is far from clear as to how it arises. The allegations of misleading conduct in the original and the amended Statement of Claim concerning the "3 times more powerful" representation, which were to be tried at a later date, only relate to "all battery sizes referred to in the advertisement", which did not refer to the 6V and 9V batteries. That pleading appears to accept that the superscript was successful in avoiding the making of any representation in the advertisement about those battery sizes. Ultimately, I have concluded that it is unnecessary to form a concluded view on whether the point is open on the appeal, and if it is, whether the superscript has achieved its purpose, as even if it has not I am satisfied that damages, rather than an injunction, would be the appropriate remedy for any misleading conduct that might occur in respect of those two battery sizes.
95 For the above reasons I have concluded that an injunction restraining the modified advertisement should not be granted.
96 Accordingly, I would refuse the application of the respondent for injunctive relief in relation to the modified advertisement and remit all other matters back to the trial judge for determination.
97 Duracell has substantially succeeded on the appeal. Consequently, its costs of and incidental to the appeal should be paid by Energizer. In the unusual circumstances of the present case, which include:
· Duracell modifying the advertisement in significant respects in the course of the hearing before the trial judge;
· Duracell abandoning its appeal on the merits in relation to the earlier advertisement;
· Duracell succeeding on the natural justice ground and on the merits of the modified advertisement on the appeal;