Nick Scali Limited v Super A-Mart Pty Ltd [2011] FCA 751 | Case summary

Nick Scali Limited v Super A-Mart Pty Ltd [2011] FCA 751 | Case summary | Zoe

[3]

REASONS FOR JUDGMENT 1 This case is about the comparative advertising of lounge suites. 2 The applicant is a manufacturer, importer and supplier of furniture. It operates 28 retail stores located in New South Wales, Victoria, Queensland and South Australia. Since April 2008 the applicant has promoted and supplied a lounge suite called the "Rajah" (the Rajah suite). It also promotes and supplies a modular (or corner) lounge suite called the "Catalina" (the Catalina suite). 3 The respondent is a discount furniture and bedding retailer. It operates 29 stores located in Queensland, New South Wales, Western Australia, South Australia and Victoria. It promotes and supplies a lounge suite called the "Excellence" (the Excellence suite). It also promotes and supplies lounge suites called the "Excellence" modular lounge suite (the Excellence modular suite) and the "Everest" modular lounge suite (the Everest modular suite). 4 The retail market for furniture in Australia can be analysed by reference to three broad categories: high-end retailers, mid-market retailers, and low-end retailers. To some extent these categories overlap. The applicant sees itself positioned in the mid-market category. It sees the respondent positioned in the low-end category, although it perceives the respondent to be seeking to broaden its customer base by selling a line of furniture at higher price points. The respondent did not challenge this categorisation of the market, or the accuracy of the applicant's perceptions of their respective positions in that market or of its pricing strategy. 5 The respondent has caused a television commercial to be broadcast in which it compares the price of the Excellence suite with the price of the Rajah suite (the commercial). The respondent has also caused the commercial to be made publicly available on the Internet from the respondent's website (www.superamart.com) and from the You Tube website (www.youtube.com). In the course of comparing the price of the two products, the commercial employs the slogan: "Compare the product … Compare the price" (the slogan). 6 The respondent has also engaged in comparative advertising using signs (placards) within its stores. These signs also employ the slogan. This advertising, once again, compares the price of the Excellence suite with the price of the Rajah suite. It also, separately, compares the price of the Excellence modular suite with the price of the Catalina suite, and the price of the Everest modular suite with the price of the Catalina suite. 7 For reasons I will explain in greater detail, the applicant alleges that, by making these price comparisons in the particular ways it has, the respondent has engaged in conduct that is misleading or deceptive, or likely to mislead or deceive, and has made false representations, in contravention of ss 52 and 53, respectively, of the Trade Practices Act 1974 (Cth) (Trade Practices Act). In essence, the applicant alleges that the respondent has falsely represented that the price-compared products are of the same or equivalent "standard, quality, grade or composition". The applicant's case is that, in so promoting its products, the respondent has sought to persuade its retail customers that, if they buy the respondent's product, they will acquire the same or an equivalent product to that sold from the applicant's more "up market" stores, but at a much reduced price. 8 The applicant also alleges that, in the course of dealing with customers' inquiries within the respondent's stores, members of the respondent's sales staff have made oral representations that give rise to similar contraventions. 9 There is a related aspect to this conduct. It concerns a representation by the respondent that the Australasian Furnishing Research and Development Institute (AFRDI) had certified the Excellence suite upholstered in "oyster" coloured leather. The respondent accepts that, for a certain period of time, the AFRDI certification it had for the Excellence suite did not extend to leather in "light" shades, and hence did not extend to the Excellence suite upholstered in "oyster" coloured leather. The respondent also accepts that, to this extent, it did misstate in some of its advertising the certification that it had from AFRDI. The respondent has been able to obtain a further certification from AFRDI which covers the Excellence suite upholstered in "oyster" coloured leather. However, the parties remain in dispute about another matter concerning AFRDI's certification of the Excellence suite. 10 The applicant seeks injunctive and pecuniary relief under the Trade Practices Act. The Trade Practices Act was substantially amended by the Trade Practices Amendment (Australian Consumer Law) Act (No 2) 2010 (Cth). Nevertheless, the Trade Practices Act continues to apply to the conduct impugned in this proceeding because the proceeding was commenced before 1 January 2011: see Schedule 7, item 7(1) of the amending Act. However, to the extent that the proceeding is one for an injunction, the proceeding is taken to be one for an injunction under s 232 of the Australian Consumer Law: see Schedule 7, item 7(2) of the amending Act. 11 On 14 September 2010 I made an order, at the request of the parties, that all issues concerning liability in this proceeding (including liability for damages or an account of profits) be heard and determined before any hearing in relation to the quantification of damages or profits. The form of that order reflects the fact that, at that time, the applicant had also claimed that the respondent had engaged in passing-off. This claim was subsequently abandoned by the applicant in the course of closing submissions. Thus, the only matter that arises for present determination is the question of liability in relation to the claims made under the Trade Practices Act, including liability for damages.

[5]

The nature and scope of the alleged representations 13 As I have noted, the applicant alleges that the respondent has falsely represented that the products it has compared are of the same or an equivalent "standard, quality, grade or composition". In the context of allegations of resulting contravention of s 53(a) of the Trade Practices Act, the choice of the words "standard, quality, grade or composition", as characterising the nature and scope of the representations, is no accident. Those words are plainly borrowed from s 53(a) which provides that: A corporation shall not, in trade or commerce, in connexion with the supply or possible supply of goods or services or in connexion with the promotion by any means of the supply or use of goods or services: (a) falsely represent that goods are of a particular standard, quality, value, grade, composition, style or model or have had a particular history or particular previous use; … 14 The word "quality" in this statutory context bears the dictionary meaning of an attribute, property or special feature: Given v CV Holland (Holdings) Pty Ltd (1977) 29 FLR 212 at 216; Thompson v Riley McKay Pty Ltd (No 2) (1980) 31 ALR 507 at 509. In Doolan v Waltons Ltd (1981) 39 ALR 408, Lockhart J observed (at 411) that to construe "quality" in this way was to give it a generally understood and accepted meaning. His Honour noted that the words used in s 53(a) were "components" that "are not mutually exclusive", and that there may be an overlap between them. His Honour instanced the possibility of overlap between "composition" and "quality". 15 In Ducret v Chaudhary's Oriental Carpet Palace Pty Ltd (1987) 16 FCR 562 Ryan J followed these authorities, saying at 577: Those authorities suggest to me that a wide meaning has been given to 'quality' in s 53(a) - a meaning which extends beyond the degree or grade of excellence which a thing can be said upon physical examination to possess in comparison with others of a similar kind, and which includes the virtues, attributes, properties and special feature of the thing … 16 However, in respect of the word "standard", his Honour said at 577: In my opinion "standard" as used in s 53 of the Act connotes a narrower concept than "quality". "Standard" is defined in the relevant sense in the Shorter Oxford English Dictionary as "a definite level of excellence, attainment, wealth or the like, or a definite degree of any quality, viewed as a prescribed object of endeavour or as the measure of what is adequate for some purpose". An example of a representation that goods were of a particular standard within the meaning of s 53(a) of the Act is to be found in Gilmour v Bannister Nominees Pty Ltd (1982) 60 FLR 308 where a statement was made that a concrete pumping machine was "to contractors' standard". 17 I make these observations because much of the evidence was devoted to showing differences in the materials, components and manner of construction of the lounge suites that the respondent had used for its price comparisons. There was also evidence relating to aesthetic differences between the respective lounge suites covering such matters as the shape and appearance of the lounge suites and the standard of workmanship involved in their manufacture. There was also evidence that bridged these two broad areas, relating to matters such as the quality of materials and differences in the design and construction as these might affect the appearance of the lounge suite. No doubt all these matters fall within the scope of, and relate in some way or another, to the "standard, quality, grade or composition" of the lounge suites being compared. The matter of present importance is that the applicant's case was not confined to a bare claim of superiority in the sense of excellence, but was also based on the existence of material differences between the price-compared lounge suites which can be objectively ascertained. Before I turn to consider whether there are such differences, it is necessary for me to say something about the nature of the evidence that was adduced on this issue.

[6]

The expert witnesses 18 Each of the parties adduced evidence from experts, principally on the question of the similarities and differences between the Rajah suite and the Excellence suite. There was limited evidence about the Catalina suite, the Excellence modular suite, and the Everest modular suite. For reasons which will become apparent, it is not necessary for me to dwell on similarities and differences between the Catalina suite and the Excellence and the Everest modular suites. 19 The applicant relied on evidence from three experts: William Bennett, Maryanne Lees and Richard Marstan Stokes. 20 Mr Bennett is a leather consultant and owner of a business called Complete Leathercare, which commenced operation in 1992. The business specialises in the care and treatment of leather coverings on furniture and in cars, boats and planes. The business is established in most capital cities and regions in Australia and has facilities for leather restoration, repairs and production. It is also a supplier of leather protection products. Mr Bennett has had approximately 20 years experience in this line of business and has carried out many thousands of inspections of leather coverings used in these applications. After receiving initial training in leather care and establishing the Complete Leathercare business he completed a three year leather technicians course with the Australian Association of Leather Industries. He was a member of the Leather Guild (now defunct). He is now a member of the Furniture Industry Association of Australia and is a Technical Associate Member of the British Leather College. He has lectured on leather at the Royal Melbourne Institute of Technology and at TAFE furniture courses. He conducts a leather training consultancy for various retailers and manufacturers. 21 Ms Lees commenced employment with Howe Leather in Victoria in 1972. She has trained in all forms of leather manufacturing, leather cutting, leather inspection and quality control, and has been employed in leather businesses for many years. In 1992 she commenced employment with Australian Leather Holdings as the National Manager of its furniture and upholstery division in charge of major accounts (such as Myer and David Jones) and export accounts. This position entailed her visiting overseas tanneries (including in the United Kingdom, China, Italy and the United States of America) every three months for the purpose of quality control, learning new techniques and product sales. In 1997/1998 she completed a leather technicians course with a New Zealand tannery, Ashley Leather, and in 2005/2006 she was engaged by AFRDI. Ms Lees was a contributor to the promulgation of AFRDI Standard 146 - Leather Descriptions Furniture Industry. 22 From 2007 she established a business called R.E.D. Leathers which is an independent leather agent and leather consultancy for the importation and distribution of leather into Australia, New Zealand and Asia. 23 Mr Bennett and Ms Lees gave evidence on inspections that each carried out on a sample of the Excellence suite and a sample of the Excellence modular suite at the respondent's Nunawading store, and of a sample of the Rajah suite and a sample of the Catalina suite at the applicant's Nunawading store. Each provided a report of his or her inspection and each was cross-examined. It seems that Mr Bennett and Ms Lees inspected the Excellence suite and Excellence modular suite at the same time. This was not by pre-arrangement between them; it just happened to be the case. There was evidence of some limited interaction between the two of them at the time of that inspection. I am satisfied, however, that the opinions expressed in their reports and in oral evidence reflected the views that each held independently, based on his and her own evaluation of the goods being inspected. It would have been desirable, however, for the inspections not to have been carried out at the same time in each other's presence. There was no challenge to their expertise. Each was an impressive witness giving evidence drawn from a position of considerable expertise in the inspection and evaluation of leather furniture. 24 Mr Stokes has been engaged in the furniture industry for over 50 years. In 1959 he joined a family business established in 1920 which was then being carried on by a company called Stokes Furniture Restoration Pty Ltd. In 1959 he obtained a Diploma in Furniture Manufacturing from Ultimo Technical College. This covered cabinet making, furniture polishing and upholstery trade disciplines. He started working in the workshop of the family business and in 1970, when he took control of the company, he commenced carrying out inspections and providing quotations for work. In 1990 he became the President of the Upholsterers and Allied Trades Association NSW. From 1994 to 2000 he was the Executive Director of the NSW Furnishing Industry Training Council, a division of the Furnishing Industry Association of Australia. In that capacity he assisted in the creation of a curriculum for apprenticeships in the furnishing industry and in registering the Furnishing Industry Association of Australia as a training company to assess the work of trainees. In 2003 he obtained a Workplace Assessors Certificate IV permitting him to be an assessor of trainee work in-house. He maintains that certification. In 1996 he was appointed by the then Minister of Education in New South Wales to the Council of the Southern Sydney Institute of TAFE, representing the furnishing industry. He held that position until 1998. He is a consultant to Divine Word University, Madang, Papua New Guinea with regard to soft timbers used in construction. From 1998 to the present time he has carried out furniture inspections to assess quality, construction and like issues, on request from the Department of Fair Trading in New South Wales and AFRDI. 25 Mr Stokes was a witness of considerable experience in relation to the construction of furniture of the kind in question. His oral evidence, however, revealed a tendency towards advocacy. He speculated on a number of matters on which there was no substitute for objective testing. For example he speculated on the weight bearing capacity of the Excellence lounge suite in a way which, in my view, was subjectively argumentative. He was also shown to be in error in attributing to the Excellence lounge suite a constructional feature (which he criticised) which was, in fact, a constructional feature of the Rajah suite. When this error was exposed, he changed his evidence to criticise an aspect of this feature in the Excellence lounge suite. Because of these matters I have found it necessary to approach his evidence with some caution, particularly where it involves matters of purely subjective evaluation. Nevertheless his evidence was of assistance in elucidating the constructional differences between the parties' respective lounge suites. 26 The respondent relied upon the expert evidence of Geoffrey Morris Boland. From approximately July 1995 to May 2010 Mr Boland conducted business in the Brisbane area under the name "The Leather and Vinyl Doctor" as a franchisee. The business specialised in the repair and maintenance of leather lounges and chairs, and leather car and boat seating. As revealed in cross-examination, Mr Boland's work, at the time he became a franchisee, was exclusively in relation to vinyl products and not leather products. He was unable to recall when his experience in leather products commenced. His training in relation to the repair and maintenance of leather comprised on the job training carried out by the franchisor. The franchisor, on Mr Boland's evidence, had obtained his own training in the same way. The nature of Mr Boland's work involved him visiting a customer's home to either repair the furniture at that location or, if major repairs were required, arranging for the item to be transported to a contractor's workshop. Similarly, if he was providing services to a furniture retailer, he would attend the retailer's warehouse or showroom. If the repairs that were required were extensive, he would arrange for the item to be transported to a contractor's workshop to be repaired. The evidence thus reveals that Mr Boland's work was related to relatively minor work although it included recolouring of leather lounges, the repacking of leather lounges, repairing damaged leather on lounges, repairing damaged or broken lounge frames and occasionally replacing springs in lounges and chairs. Mr Boland fairly conceded in cross-examination that his expertise was less than that of each of Mr Bennett, Ms Lees and Mr Stokes and that he would defer to their views. 27 There is an aspect of Mr Boland's evidence to which I should make specific reference. He accepted that, when he prepared his first report comparing the Rajah suite and the Excellence suite, he did so with a view to pointing out the similarities, rather than the differences, between the two. Therefore, his observations and opinions in relation to that report can be seen as being skewed in a way that emphasises similarities at the expense of failing to identify differences between the two lounge suites. After service of the reports of Mr Bennett, Ms Lees and Mr Stokes, he provided a further report commenting on the differences which those witnesses had observed between the two lounge suites. This report was not, however, based on any further inspection of the lounge suites by Mr Boland. 28 Where there are differences between Mr Boland and Mr Bennett and Ms Lees on questions concerning aspects of the lounge suites relating to the appraisal of the leather that has been used, I prefer the evidence of Mr Bennett and Ms Lees. Mr Boland also expressed opinions which differed from those expressed by Mr Stokes on matters concerning the construction and features of the two lounge suites. On these matters I have made findings based on my own appraisal assisted by the opinions expressed by Mr Boland and Mr Stokes.

[7]

General observations 29 The expert evidence addressed a number of differences between the Rajah suite and the Excellence suite. These differences, particularly as to matters of construction, were addressed principally by reference to the single recliner chair of each lounge suite. It was not suggested, however, that these differences were not also present in the three seat lounge comprising part of each suite. In the description which follows it is convenient to refer simply to the suites themselves without distinguishing between the single recliner chair and the three seat lounge (except where it is necessary to do so). 30 Many of the differences between the Rajah suite and the Excellence suite are matters of objective fact that can be observed, and in some cases measured, when carrying out a close inspection of the physical items. In many cases these differences are not matters that would be readily apparent to the average consumer, without the benefit of instruction from those with specialised knowledge of furniture manufacture and design. Even then, many of the differences to which I will refer can be revealed only by an invasive, side-by-side inspection of the two suites, involving a significant degree of dismantling and, in some respects, destruction of the physical items. Obviously, the average consumer would not be afforded the opportunity of that kind of inspection when seeking to purchase a lounge suite at the retail level. Moreover, the opportunity for instruction, at the time of retail inspection, would be limited by what the consumer, as an uninformed purchaser, might assume or choose to ask, or by what a sales assistant, as a presumably informed seller, might choose to convey, based on the extent and accuracy of his or her knowledge at the time. 31 As I have noted, some of the differences referred to by the experts were matters of aesthetic appeal, on which reasonable minds might express differing preferences. The fact that differing preferences might be expressed is not a matter of prime concern. What is significant is that, where such differences exist, they may reflect a valid contributing reason for the difference in the retail price between the two lounge suites. Such differences may reflect, for example, a difference in the degree and skill of workmanship that has been involved, the use of additional materials or the need to carry out additional manufacturing or processing steps to achieve the aesthetic effect. 32 All these differences must be considered to see whether, as a matter of practical judgment, they are likely to be material to the purchasing decision of the representative consumer. The materiality of these differences, considered individually and collectively, informs the overall assessment of whether, as a matter of practical judgment, the Rajah suite and the Excellence suite are of the same or equivalent "standard, quality, grade or composition".

[8]

Size 33 Overall the Rajah suite is larger than the Excellence suite. According to the advertised dimensions for the respective suites, the Rajah single recliner chair is 112 (w) x 102 (d) x 102 (h) (cm) whereas the Excellence single recliner chair is 95 (w) x 101 (d) x 104 (h) (cm); and the Rajah three seat lounge is 226 (w) x 102 (d) x 102 (h) (cm) whereas the Excellence three seat lounge is 212 (w) x 101 (d) x 104 (h) (cm). Based on the advertised dimensions, the Rajah single recliner chair and three seat lounge are each appreciably wider and slightly deeper than the corresponding components of the Excellence suite; whereas the Excellence single recliner and three seat lounge are slightly higher than the corresponding components of the Rajah suite. 34 Both Mr Stokes and Mr Boland measured the suites they inspected. These measurements were made out of court. Their measurements did not correlate with each other's measurements or with the advertised dimensions for each suite. Mr Stokes' measurements showed the Rajah single recliner chair and three seat lounge to be wider than the Excellence single recliner chair and three seat lounge, respectively. Mr Boland's measurements showed the Rajah single recliner chair to be wider than the Excellence single recliner chair, but the Excellence three seat lounge to be wider than the Rajah three seat lounge. However, when asked to undertake measurements during the course of his cross-examination, he found the Rajah three seat lounge to be wider than the Excellence three seat lounge. The resulting evidence presents a confusing picture. It is clear that the sample lounge suites Mr Boland measured out of court were not the same lounge suites he measured during his cross-examination. However, I think that the more likely explanation for the discrepancy in his measurements is that he was using different endpoints on different occasions. This became clear when, during cross-examination, he was asked to ensure that the tape measure was placed to the extremities of the arm cushions. 35 I am satisfied that the advertised dimensions (which no party sought to actively challenge as typical dimensions) indicate, in a broad way, the overall relative difference in dimensions between corresponding elements of the two lounge suites.

[9]

Leather 36 The evidence establishes that, generally speaking, all upholstery leather is "split". This is carried out on a bandsaw machine through which the hides are passed, creating two or more layers. The top split is referred to simply by that name, or by the names "grain split", "top grain split" and "top grain leather". The lower splits are referred to as the "flesh" or "bottom" splits, or simply as "splits". These lower splits do not have the same tear strength as the top grain split. For this reason they are not considered in furniture production to be suitable for body weight or flex areas. Top grain leather is better wearing and more expensive to use as upholstery than the lower splits. 37 It is necessary to refer to other terms to describe the characteristics and qualities of the leather that is used in furniture production. The word "boardy" refers to a stiff, cardboard-like feel to the leather, indicating that the leather lacks "flex" (that is, the quality of bending and folding). The word "break" refers to the way in which the grain of leather wrinkles or creases when the leather is folded grain inwards. A "poor break" describes the appearance of the leather when folding produces unsightly large loose grain wrinkles. The expression "slippery hand" refers to a soft slippery surface feel when the hand is passed over the surface of the leather. This "feel" indicates that the leather has been treated in some way, usually chemically. Sometimes this involves artificially "correcting" the grain of the leather to remove natural imperfections in the hide (which, for many, are considered to be desirable to show a more natural quality of the leather). 38 The Rajah suite and the Excellence suite are covered in a combination of top grain and bottom split leather. The Excellence suite is upholstered in top grain leather on the seat and lumbar facing cushions and the tops of the arms. The Excellence suite is upholstered in bottom split leather on the outside back, outside side panels, seat side borders, back cushion inside borders, front kick panels, front arm facias, and other areas. 39 On the other hand, the Rajah suite is upholstered in top grain leather on all seat and back cushions, top arms, front arm facias, front kick panels and several borders that would or could become exposed to touch. The Rajah suite is upholstered in bottom split leather on the outside back and outside arms, and on the inside and back cushion borders. In short, significantly more top grain leather is used in the Rajah suite than in the Excellence suite. Mr Boland accepted that, when compared with the Rajah suite, the Excellence suite had 11 more panels covered in bottom split leather. 40 As I have noted, Mr Bennett inspected a sample of the Excellence suite and a sample of the Excellence modular suite at the respondent's Nunawading store in Victoria. Both suites were upholstered in "oyster" coloured leather. On the same day he inspected a sample of the Rajah suite at the applicant's Nunawading store. This suite was upholstered in white leather. He also inspected a sample of the applicant's Catalina modular suite at the same store. This suite was upholstered in "chocolate" coloured leather. 41 Mr Bennett's inspection led him to conclude that, apart from the different use of top grain and bottom split leather to which I have referred, the leather used in the applicant's two suites was of a "notably better quality" than that used on the respondent's two suites. He observed that the top grain leathers used on the applicant's two suites were "both of better feel, flex and break" than the leather used on the respondent's two suites. He observed that the top grain leather used on the Excellence suite had "a glossy appearance" and "appears to have the slippery hand", which indicated to him that a "feel agent" had been used on the leather to reduce surface friction. He observed that the bottom split leather used on the respondent's two suites was "very boardy" and were of "a poor colour and gloss level match" relative to the top grain leather used on those suites. 42 Ms Lees inspected the same suites at the Nunawading stores. Her conclusion was that both the applicant's suites were "of a superior finish and raw material selection and tanning process and production, resulting in a better feel, and higher quality result, also the manufacturing (upholstery) provides a clean result to overall product. The split portion is superior to finish/feel/texture and overall appearance". With respect to the respondent's two suites she concluded: "The split portion is hard/boardy to the hand, showing dirt & dust under the finish coat under microscope, poor colour/gloss/poor flex/resulting in vast colour variation over all units". She also noted with respect to the Excellence suite that the "top grain feels slippery". 43 Mr Boland disagreed with Mr Bennett's and Ms Lees' assessments. In his opinion the leather used on all the suites was "very similar" and "not notably different". He disagreed with Mr Bennett's and Ms Lees' assessments about colour and gloss variations between the top grain leather and the bottom split leather used in the respondent's two suites, and the very "boardy" feel of the bottom split leather. 44 The respondent submits that Mr Bennett's and Ms Lee's opinions as to the superiority in quality of the leather used in the Rajah suite - specifically in respect of any implication as to its durability - is not borne out on examination of the applicant's and respondent's respective service reports relating to the Rajah suite and the Excellence suite. The respondent submits that this evidence suggests that the leather used in the Excellence suite is more durable. In my view the evidence does not enable that conclusion to be reached. Whilst the service reports record the making of customer complaints and contain a summary statement, in each case, of the customer's concerns, they are not such as would enable any safe conclusion to be drawn as to the validity of the complaint made or some more general conclusion concerning the leather quality of the respective lounges or the durability of that leather. 45 It may be accepted that it is a normal occurrence in the supply of manufactured goods that, from time to time, defects occur. However, perceptions as to the existence and significance of defects may differ. Also, the cause of the defect may be a matter of some contention. In common experience, retailers seeking to offer good service to their customers may seek to accommodate customer concerns and complaints, even in cases where legitimate differences of opinion might exist as to the validity of those concerns or complaints. I did not find the service reports to provide any real assistance in evaluating the nature and extent of differences in the leather quality of the two suites. 46 In oral evidence Mr Bennett and Ms Lees demonstrated the differences they observed between the Rajah suite and the Excellence in terms of leather use and quality. For the reasons I have given above, I prefer their considerably more expert evaluations to Mr Boland's evidence on these issues. I accept that the Rajah suite uses leather of superior quality compared to the Excellence suite. This finding relates to both the top grain and bottom split leather that has been used. It is also clear that the Rajah suite uses considerably more top grain leather compared to the Excellence suite, including in relation to high-wear areas, where bottom split leather would not be as suitable. 47 I was able to make my own appraisal of any colour or gloss variations on the two suites produced in court: Exhibits G and H. I was unable to perceive any significant difference between the Rajah suite and the Excellence suite with respect to colour variation between the top grain and bottom split leathers that had been used. However, I observed a noticeable variation in sheen between the top grain and bottom split leather panels of the Excellence suite. This was particularly apparent when the Excellence suite was viewed from the front, and the seat cushions were compared to the front arms. Gloss variation was significantly less apparent in the Rajah suite. This may be due, in part, to the fact that considerably more top grain leather is used in the Rajah suite, allowing for a greater consistency in appearance.

[10]

Seat areas 48 There is a difference in the construction of the seat areas of the respective lounge suites. In the Rajah suite the components from the base up are as follows: calico dust cover; "no sag springs"; foam; and Dacron padding. Dacron padding is typically applied over the foam in lounge suites to make the furniture look rounded by filling out the cushion areas. It helps provide support to the user as well as shape to the cushions. The corresponding components in the Excellence suite, from the base up are: calico dust cover; "no sag springs"; calico layer; "pocket springs"; foam; and Dacron padding. I will return to the question of the "pocket springs" and the function they perform in the Excellence suite. 49 There was a question about whether the foam used in the Rajah suite is of higher density than the foam used in the Excellence suite. The experts agreed that use of higher density foam in the seat cushion of a lounge chair may mean that it lasts longer than a seat cushion made of lower density foam. Lower density foam will compress more and could result in creasing or folding of the foam, which may eventually lead to the foam breaking down in that area. However, the experts disagreed on the question about whether the Rajah suite uses higher density foam compared to the Excellence suite. 50 Mr Stokes expressed the opinion that the foam used in the Rajah suite is of higher density than the foam used in the Excellence suite. His opinion was based primarily on a "squeeze" test he conducted on the foam used in each suite. He noted that the foam in each suite differed in colour, which indicated to him that different grades of foam are used in each case. 51 Mr Boland, on the other hand, expressed the view that the foam used in each suite is of similar density. His opinion was also based on a "pinch" test which he conducted. Hearing both Mr Stokes and Mr Boland explain the tests they conducted in this regard, I am satisfied that Mr Boland's "pinch" test was the same as Mr Stokes' "squeeze" test. Mr Boland expressed the opinion that the foam used in the Rajah suite and the foam used in the Excellence suite are both approximately equivalent to "Dunlop 23/130". Mr Boland said that the only accurate way of testing foam density is to conduct a compression test. Such a test had not been performed on the foam used in either suite. 52 My own observation of the foam used in each suite, based on "squeezing" the foam as the experts had done, is that the foam in each suite is different to the touch. However, I am not able to conclude, by this means, that the foam used in the Rajah suite is noticeably less compressible (and thus of higher density) than the foam used in the Excellence suite. I also observed that the foam used in the Rajah suite is orange and that the foam used in the Excellence suite is pale green. The use of different colours for foam may indicate different densities (with a lighter coloured foam having a lower density than a darker coloured foam), but there is no satisfactory evidence before the Court that the foam used in either suite conforms to an objectively determined colour/density standard. 53 In the end result I am unable to make any finding about the relative densities of the foam used in the suites. The opinions expressed by the experts are essentially subjective views. On this issue I would not prefer the view of one expert over the other. My own examination was inconclusive. The matter could have been proved by objective evidence. It was not. 54 As I have noted, the seat areas of the suites are constructed using foam with Dacron padding. The foam is supported by "no sag" (or "zig zag") springs which, in each case, are attached to the frame of the suite. However, the foam region in the Excellence suite is significantly thinner than the corresponding region in the Rajah suite. The region where there would otherwise be foam in the Excellence suite is occupied by a layer of springs. These springs are made from thin wire and, on my observation, are readily compressed. These springs were referred to in the evidence as "pocket springs". That description is not an entirely accurate one. Pocket springs, typically, are conical in shape, with the distal regions of the spring having a wider circumference than the middle region. Their function, in furniture, is to provide support and resilience. The springs in the Excellence suite do not have the typical shape of pocket springs. They are of uniform circumference. Mr Stokes said that the springs were "just there to fill up the space between the foam and the base". When asked about what compressive effect, if any, these springs had, Mr Stokes replied: "Virtually nothing". Based on my own observations of the springs, I accept this evidence. 55 Another difference between the Rajah suite and the Excellence suite is the method by which the "no sag springs" are attached to the frames of the suites. The "no sag springs" of the Rajah suite are attached to the wooden frame at the front and at the back by an assembly using a metal hook. The "no sag springs" of the Excellence suite are held in place with metal clips. At the back, the metal clip is attached to the wooden frame of the suite. At the front, it is attached, by welding, to the metal frame of the suite. In his oral evidence, Mr Stokes confused the mode of attachment of the springs in the respective suites and, unwittingly, criticised the method of attachment of the "no sag springs" in the Rajah suite. He expressed the opinion that the mode of attachment of the "no sag springs" (as in the Rajah suite) would give "a lot less" longevity than the welded attachment in the Excellence suite. When later cognisant of his mistake, he sought to change the thrust of his evidence by saying that the metal clip used in the Excellence suite was "very thin" and would not "stand the pressure over a period of time". Mr Boland expressed no view as to the respective merits of the modes of attachment of the "no sag springs" in the suites. 56 I regard Mr Stokes' evidence on this issue to be unsatisfactory and unreliable. Although the mode of attachment to the frames of the "no sag springs" is different in each lounge suite, I am unable to conclude that one mode of attachment is preferable to the other or will lead to greater longevity of the lounge suite in use.

[11]

Wing areas 57 There are differences in the appearance and in the construction of the wing areas that are adjacent to the back cushions of the two lounge suites. The wings on the Rajah suite have a "plumped" folded appearance and are finished by what Mr Stokes termed "piping". Mr Boland disagreed with the use of the term "piping". He said that this was not "piping" in the traditional sense. He preferred the expression "reinforced seam", where a piece of leather had been folded and stitched to another piece of leather. The difference in opinion between Mr Stokes and Mr Boland, on this score, was really no more than one of terminology. In my view, based on physical appearance, the term "piping" is apt to describe this characteristic. 58 The wings on the Excellence suite have a flatter, more elongated appearance by comparison. There is no piping. No doubt there will be differences between intending purchasers as to which appearance is preferred. The evidence shows, however, that there is significantly more workmanship involved in producing the wing areas of the Rajah suite and, to that extent, a significant difference in tailoring over the Excellence suite. The evidence shows that, in these areas, the leather in the Rajah suite is joined with double stitching, with the piping adding a third point of attachment between the leather pieces. The wings are then attached to the inside of the frame of the suite by stapling. These elements of construction combine to impart a more cushioned appearance to the Rajah suite, compared with the Excellence suite. In the Excellence suite the leather of the wing areas is joined by a single line of stitching. The wings are then attached to the outside of the wooden frame of the suite by stapling. The area of attachment is then covered by bottom split leather. The evidence is that this is a less costly form of upholstery. Mr Stokes referred to it as a "cost-saving exercise". The evidence also shows that this is a less robust form of construction. In this connection Mr Stokes' evidence was that this form of construction may lead to compromised longevity in the case of the Excellence suite, particularly in the area of the single stitching between leather pieces, where the stitching will wear out with the flexing of the leather. Mr Boland accepted that the wings on the Rajah suite would probably have better performance than the wings on the Excellence suite and would have greater ability to flex with the back of the lounge, although he expressed the opinion that the difference in wing effects would have "a negligible impact on the life of the lounge". I prefer the evidence of Mr Stokes on this issue, where it differs from Mr Boland's evidence.

[22]

Conclusions 76 In my view there are significant differences in construction, design and workmanship between the Rajah suite and the Excellence suite. 77 Overall, the Rajah suite is larger in size and is upholstered in significantly more top grain leather than the Excellence suite, particularly in high-wear areas where top grain leather is better suited than split grain leather. The evidence establishes that the use of top grain leather is more costly than the use of split leather. I am satisfied that, overall, the quality of both the top grain leather and the split leather used in the Rajah suite is superior to the quality of the corresponding leather used in the Excellence suite, based principally on the expert assessments of Mr Bennett and Ms Lees. My own observation confirms that, in respect of sheen, the top grain and split leather used on the Rajah suite is better matched, as compared to the corresponding leather used in the Excellence suite. 78 In my view the Rajah suite is, overall, of sturdier construction than the Excellence suite, particularly in relation to their respective wooden and metal frames and footrests. However, this is not to say that, in these respects, the construction of the Excellence suite is inadequate for its intended purpose. 79 The Rajah suite is also sturdier in relation to its use of double stitching and reinforced stitching (compared to the use of single stitching in the Excellence suite in comparable areas) and in some aspects of design, such as the wing areas, where, in the Rajah suite, the wings are likely to have better performance and greater ability to flex with the back of the lounge, compared to the corresponding areas in the Excellence suite. 80 The Rajah suite has other design features which distinguish it from the Excellence suite in significant ways. These features include: the gutter in the top of the inside back cushions and the use of webbing in the lumbar support areas, to prevent wrinkling or "puddling" in those areas; the use of significantly more foam in the seat areas; the inclusion of tension springs to ensure that the recliners return to their correct positions after use; electrical reclining mechanisms in both the single recliner chairs and the three seat lounge (compared to the manual reclining mechanism in the Excellence three seat lounge); and the provision, advantageously, of holders for transformers for the electrical reclining mechanisms, to enable the transformers and associated wiring to be secured to the inside frames of the chairs/lounge and thus diminish the possibility of the entanglement of electrical wires with other componentry. 81 Apart from these features, the Rajah suite also reflects a significantly greater degree of workmanship in the use of double and reinforced stitching generally, and in the consistent use of curved stitching in the seat and lumbar areas. With the exception of the limited use of curved stitching, the Excellence suite does not exhibit these features of workmanship. 82 For these reasons, in my view, the Rajah suite and the Excellence suite are not of the same or equivalent "standard, quality, grade or composition". These differences in construction, design and workmanship are properly to be regarded as superior features of the Rajah suite compared with the Excellence suite. 83 The respondent submits that, in making a purchasing decision, the typical consumer "will consider what he or she can afford, whether the furniture appeals aesthetically, whether it will fit the desired space and whether it is comfortable", but will not make choices "with respect to matters in the province of expert cabinet makers or leather experts". 84 If, by this submission, the respondent contends that consumers would not regard the differences to which I have referred as material to a purchasing decision, then I do not accept that submission as it applies to the circumstances of this case. I have not sought to detail all the differences between the Rajah suite and the Excellence suite discussed in the evidence. I have, however, sought to identify the more significant differences which, in my estimation, are likely to be regarded by retail purchasers as material differences bearing upon a purchasing decision where the choice presented is between two similar looking lounge suites offered at significantly different retail prices. No doubt, in that context, judgments concerning "value for money" will be made. No doubt, in that context, there will be differences between consumers in the judgments that are made. Nevertheless, significant differences remain between the Rajah suite and the Excellence suite.

[23]

The commercial described 85 The commercial uses a series of visual images, comprising the respondent's name in logo form, sign-like slogans, still images of lounge suites, and spoken words. The Excellence suite is depicted by a still image, in the configuration of a three seat recliner lounge with two single recliner chairs in "oyster" coloured leather. It is referred to, by spoken words, as "this leather recliner lounge" and, later, as "Super Amart's Excellence recliner lounge". (I refer here and in succeeding paragraphs to the respondent's name as "Amart" rather than "A-Mart" because this is the logo form of the name depicted in the commercial and in the respondent's in-store signs.) The applicant's lounge suite is depicted, by a still image, in the same configuration (that is, as a three seat recliner lounge with two single recliner chairs), in apparently the same or similarly coloured leather. This image is shown against the background of the image of the Excellence suite. The applicant's lounge suite is not referred to by name. It is common ground, however, that the depiction is of the Rajah suite. 86 The presentation of the commercial could be described as "high impact". It is colourful and "busy", with rapid images and rapid messages conveyed, principally, by spoken words supported by on-screen graphics. The words are spoken by a male and a female. The dominating theme is price and, in particular, the respondent's lower price of "under $3,000" (supported by on-screen graphics showing the price to be "$2,999.95") compared with the applicant's price of "over $7,000" (supported by on-screen graphics showing the price to be "$7030"). This theme is supported by the exhortations "Don't pay more elsewhere" and "Get a better deal", and the promises "Always the lowest price" and "Nobody beats Super Amart". 87 The commercial can be described as moving through a number of different stages: The commercial commences with a screen shot of the respondent's name in logo form and the on-screen graphic: "WON'T BE BEATEN ON PRICE". The male voice says: "Nobody beats Super Amart". The commercial moves to a screen shot of the respondent's name in logo form and the on-screen graphic: "DON'T PAY MORE ELSEWHERE". The female voice says: "Don't pay more elsewhere for this leather recliner lounge". The respondent's name in logo form remains on screen until the end of the commercial. The commercial moves to the still image of the Excellence suite in the configuration I have described. The female voice says: "Compare the product … Compare the price". The statement is also made by an on-screen graphic. The still image of the Rajah suite (in the configuration I have described) then appears on screen against the background of the still image of the Excellence suite. These images then remain for substantially the rest of the commercial. The still image of the Rajah suite is accompanied by the words: "NICK SCALI $7030". The still image of the Excellence suite is accompanied by its price of "$2999.95". The female voice says: "At Nick Scali you'll pay over $7,000". The female voice then says: "Super Amart price, less than half that, under $3,000". This is then followed by the female voice saying: "AFRDI certified genuine leather … and backed by a ten year warranty … Super Amart's Excellence recliner lounge, under $3,000". The male voice then says: "Get a better deal on quality furniture". The commercial then moves to a screen shot showing the respondent's name in logo form and the on-screen graphic: "We will beat any LOWER price by 15%". The figure of "15%" is given prominence. The male voice says: "Always the lowest price. Super Amart". The commercial ends with a short jingle and a screen shot of the respondent's name in logo form and other graphical matter such as "There's a Store Near You!" and "OPEN 7 DAYS".

[25]

Consideration 90 I accept the general thrust of the respondent's submission that, for the purposes of the present case, one should not engage in a painstaking analysis of the commercial for fear of losing sight of what it is likely to convey in the medium and in the settings in which it is intended to be viewed. My description of the commercial is no more than an attempt to record, for the purposes of these reasons, the major stages of the commercial and the more significant elements of those stages. I have not attempted to record all the visual details of the commercial that are capable of being discerned from a close and abstract study of it. Indeed, I do not believe that a number of those details would be perceptible to viewers of the commercial exercising reasonable, but undirected, attention in a domestic setting. 91 The cases speak of the need to take account of the fact that the in-court presentation of television commercials in cases such as the present provides a fundamentally different setting from the domestic setting in which they are intended to be viewed. In Gillette at [47] Lindgren J referred to some of those differences. His Honour said: … apart from the difference between a one-off viewing and repeated viewings, the circumstances in which a judge attends to a television commercial for the purposes of a case are not those in which members of the public do so. First, members of the public watch a commercial after and before viewing other things, rather than in isolation. Secondly, unlike the judge, they do not carefully view the commercial with a special interest in noting and memorising its features. Thirdly, they view the commercial, not in the calm of chambers, but against a background of distractions, such as domestic activity, or simply a preoccupation with other more interesting or pressing concerns. Fourthly, usually they do not know in advance that the commercial is about to commence. 92 I accept that, when considering what the commercial is likely to convey to ordinary or reasonable members of the public, its true impact can only be appreciated by considering the setting in which the commercial is intended to be viewed. Here, however, the intended setting is not confined to casual television viewing. As I have noted, the respondent has taken steps to ensure that the commercial is also available on the Internet. It can be taken that, in that setting, there will be viewers who will have sought out the commercial for their own educative purposes, and who can be taken, therefore, to have a particular interest in what the commercial is saying. Accordingly, in that setting, those viewers, unlike casual television viewers, will, for example, view the commercial in isolation, without the commonplace domestic distractions of the kind to which Lindgren J alluded in Gillette. In order to fulfil their need, such viewers may also seek to view the commercial a number of times in the one sitting, or over several sittings. 93 Regardless of the different settings that must be considered in the present case, the ordinary or reasonable member of the relevant class of consumer, for presently relevant purposes, must be taken to be exercising reasonable care for the protection of his or her own interests: Campomar Sociedad, Limitada v Nike International Limited (2000) 202 CLR 45 at [102]; Parkdale Custom Built Furniture Proprietary Limited v Puxu Proprietary Limited (1982) 149 CLR 191 at 199. Thus, in the present case, even the casual television viewer must be taken to be acting with some interest in the subject matter of the commercial; otherwise the question of contravention would stand to be assessed by reference to the false standard of the arbitrary, frivolous or unthinking mind. There could be many different reasons for that interest. For example, the viewer may be a prospective purchaser of a lounge suite. On the other hand, the commercial itself may have simply engendered the viewers' interest, even if only by arousing the viewer's curiosity, without more. But, for whatever reason, the viewer's interest must be sufficient to cause him or her to attempt, reasonably, to comprehend what the commercial is saying. 94 I first viewed the commercial, uninstructed as to its features, during the course of the applicant's opening. I remember its impact on me at that time. The next occasion on which I viewed the commercial was during the course of closing submissions. It had the same impact on me. My consideration of what the commercial is likely to convey to ordinary or reasonable members of the public to whom it is addressed has been guided primarily by my viewing of the commercial on those two occasions. 95 One does not approach the task of assessing the likely effect of a commercial, such as the present one, on the ordinary or reasonable viewer, as if "construing a statue, will or contract": Country Road Clothing at 422. Rather, viewers will be expected to engage in a measure of "loose thinking": Siddons Pty Ltd v The Stanley Works Pty Ltd (1991) 29 FCR 14 at 18. In Country Road Clothing Heerey J at 422 cited the following observation of Lord Reid in Morgan v Odhams Press Ltd [1971] 1 WLR 1239 at 1245 (dealing with the question of imputations in defamation law) as apposite when dealing with the question of representational conduct claimed to contravene the Trade Practices Act: If we are to … take the ordinary man as our guide then we must accept a certain amount of loose thinking. The ordinary reader does not formulate reasons in his own mind: he gets a general impression and one can expect him to look again before coming to a conclusion and acting on it. But formulated reasons are very often an afterthought. 96 In my view it is likely (certainly, more likely than not) that the commercial would be understood by a significant number of viewers having the attributes of the "ordinary" or "reasonable" members of the class of prospective purchasers of lounge suites of the kind advertised, as conveying that the identified lounge suites are relevantly "the same", the only material difference between the applicant's retail offering and the respondent's retail offering being the respondent's much better price. 97 I do not accept the respondent's submission that the commercial conveys only the simple message that consumers do not need to spend more than the respondent's price for a lounge suite of the advertised configuration. This characterisation of the commercial ignores fundamental aspects of its structure and language. I also do not accept that the commercial merely invites the viewer to compare, by inspection, the applicant's lounge with the respondent's lounge, so that the viewer can come to his or her own conclusions about those lounge suites. 98 As I have noted, the dominating theme of the commercial is price. But the price is in respect of a particular article, which provides the centrepiece for the commercial. At the outset the viewer is challenged by the exhortation: "Don't pay more elsewhere for this leather recliner lounge". The words "this leather recliner lounge" immediately identify the article and imbue it with characteristics or qualities beyond being merely "any" leather recliner lounge. It is "this" leather recliner lounge. The image accompanying these words identifies "this leather recliner lounge" by giving it a physical embodiment. The word "elsewhere" conveys, unmistakeably, that "this leather recliner lounge" is, apart from the respondent, available "elsewhere". The slogan "Compare the product … Compare the price" is a lead-in to telling the viewer where "elsewhere" is. In this case, "elsewhere" is identified as the applicant. The applicant's product is identified in the same configuration and apparently in the same or a very similar colour as the respondent's product. By these devices the viewer is told that "this leather recliner lounge" is available from the applicant and the respondent. The ordinary or reasonable viewer would not be able to tell the two suites apart from the images of them shown in the course of the commercial. The only difference about "this leather recliner lounge", is that, if purchased from the applicant, it will cost the viewer more than twice the price for which it can be purchased from the respondent. That is why the viewer should purchase "this leather recliner lounge" from the respondent, who will not be beaten on price. 99 In this context, the slogan "Compare the product … Compare the price" is not an invitation to the viewer to compare the difference between an "over $7,000" leather recliner lounge from the applicant with an "under $3,000" leather recliner lounge from the respondent. Rather, the slogan is an assertive statement, with the words "Compare the product …" functioning as the respondent's emphatic affirmation that the applicant and the respondent both sell "this leather recliner lounge", and the words "… Compare the price" functioning as an affirmation that the respondent's price for "this leather recliner lounge" is much cheaper than the applicant's price. The viewer would appreciate that the respondent is engaging in head-on price competition with the applicant in respect of "this leather recliner lounge". What, then, is conveyed by the description "this leather recliner lounge"? 100 I have referred to the commercial as conveying to a significant number of viewers, as ordinary or reasonable members of the class of prospective purchasers, that the lounge suites are relevantly "the same". By this I mean that a significant number of viewers, acting reasonably, would understand the commercial to be conveying that the physical attributes of the applicant's and respondent's identified lounge suites - "this leather recliner lounge" - are, materially, the same. Having been told that the two products are "this leather recliner lounge", I would not expect the ordinary or reasonable viewer to dwell upon or think too deeply about that fact, if at all. In this case, the ordinary or reasonable viewer would be entitled to rely on the respondent's chosen description of the products as being "this leather recliner lounge". Of course, some members of the class may speculate or engage in a measure of "loose thinking" about the reason for the respondent's chosen description: some may think that the lounge suites are one and the same product, identical in every respect; some may think that they are standard design lounges made to the same or equivalent specifications, which the respondent has been able to procure at a cost which enables it to offer its product at a bargain price; some may think that the respondent's product is a legitimate copy of the applicant's, enabling it, through economical manufacturing costs or other skilful business practices, to offer the product at a much cheaper price. Some may engage in other forms of speculation or reasoning of this kind. Some will not give the matter any thought at all. However, the ordinary or reasonable viewer, no matter what speculation or loose thinking he or she might engage in about these matters, will understand from viewing the commercial that the lounge suites possess materially the same physical attributes - enabling the respondent to properly identify the products as "this leather recliner lounge". 101 In opening and in final submissions the respondent argued that the applicant had departed from its pleaded case by submitting that the commercial represented the lounge suites to be the "same". The applicant disputed that, by couching its submissions in that way, it had departed from its pleaded case. I do not find it necessary to resolve that debate. The applicant's pleading plainly identifies the substance of the representation on which it relies in this regard: the commercial represents, and will cause or be likely to cause members of the public who view it to think, that the two lounge suites referred to in the commercial are of the same or an equivalent "standard, quality, grade or composition". For the reasons I have given, I am satisfied that a significant number of viewers of the commercial, acting reasonably, would understand it to be making that representation. I am satisfied, therefore, that this part of the applicant's pleaded case has been established, regardless of any perceived difference in the way it elaborated its case. 102 As I have noted, the respondent drew particular attention to the decision in Country Road Clothing. In that case, the respondent retailer had caused a newspaper advertisement to be published showing three photographs of the same man wearing a navy blue double-breasted suit. In each photograph the man was wearing the same shirt and tie. Each photograph was accompanied by text describing the suit as a "Pure New Wool Gaberdine suit", stating in each case, the name of the "label" (respectively, COUNTRY ROAD, HUGO BOSS or NAJEE 9.2.5) and the price (respectively, $995, $795 and $349). The advertisement was accompanied by the words: WHY PAY MORE? It was also accompanied by the slogan: COMPARE SUITS, THEN COMPARE PRICES; and by other graphical matter to which it is not necessary to refer. 103 The applicant's case in that proceeding was that the advertisement misled consumers by creating the impression that each of the suits worn by the model was of the same quality, when in fact that was not the case. It was held by Heerey J that the advertisement did not make that representation. His Honour found that the slogan invited the consumer to compare the suits, and then to compare their prices. His Honour (at 423) found: … The message of the advertisement in my opinion is all about value for money and the consumer is invited to go and make his own decision. The consumer, having done this, may think the Najee suit is equal in quality to the other two suits or he may think it is lesser quality but that the difference in quality is not worth the difference in price and that the Najee suit is a better buy. All this is a matter for the purchaser to make his mind up about, as he is expressly invited to do by the advertisement. The possibility that some readers may in fact read the advertisement and go and buy a Najee suit without looking at the other two does not to my mind alter the meaning which the advertisement conveys. 104 The respondent submits that the present case is relevantly indistinguishable from Country Road Clothing and that Heerey J's reasoning is "squarely applicable". 105 Although the advertisement in Country Road Clothing has elements, including its slogan, which are similar to the elements used in the commercial, there are, nonetheless, important differences between the two. Significantly, for present purposes, the commercial's focus is on "this leather recliner lounge", with the dominating price message that the viewer should not "pay more elsewhere for this leather recliner lounge". That feature is missing from the advertisement considered in Country Road Clothing. The "message" in the advertisement in Country Road Clothing is fundamentally different to the message of the commercial in the present case. 106 In light of the findings I have made concerning the differences between the Rajah suite and the Excellence suite, I am of the view that the two lounge suites in the commercial are not of the same or equivalent "standard, quality grade or composition". As I have found, there are a number of significant differences between them in their physical attributes. These differences are most appropriately captured by the words "quality" and "composition", as used in the applicant's pleading and in s 53(a) of the Trade Practices Act. 107 In my view, if alerted to these differences, the ordinary or reasonable viewer of the commercial would regard them as being material differences. Although questions of fact and degree are involved, I am satisfied that it is more likely than not that such persons would regard the Rajah suite and the Excellence suite to be sufficiently different that they could not, as products, answer the description in the commercial of "this leather recliner lounge". Rather, with knowledge of the differences to which I have referred (to which no reference is made in the commercial), the ordinary or reasonable viewer of the commercial would see that two broadly similar, but, in a number of important respects, quite different products, have been compared on price. 108 For these reasons I am satisfied that the respondent has, in trade or commerce, in connection with the supply or possible supply of goods (namely, the respondent's Excellence suite), and in connection with its promotion, falsely represented that the Excellence suite is of a particular "quality" or "composition" (namely, that it has the same qualities and composition - the same physical attributes - as the Rajah suite), contrary to s 53(a) of the Trade Practices Act. For the same reason, in making the price comparison in the way that it has, the respondent has also engaged in conduct, in trade or commerce, that is misleading or deceptive or likely to mislead or deceive, contrary to s 52 of the Trade Practice Act. 109 I am also satisfied that s 52 of the Trade Practices Act has been contravened in the two further respects which the applicant has pleaded: the respondent has represented in the commercial that the price of the Rajah suite is more than double the price of the Excellence suite, despite the two products being of the same quality; and the applicant offers to sell its Rajah suite at a retail price which is excessive given the retail price at which the respondent offers the Excellence suite. I am satisfied that the reasonable or ordinary viewer to which I have referred would see both representations as being made by the commercial. The first representation simply follows from the other findings I have made. As to the second representation, the stated price disparity between the two products is of such magnitude that the viewers to which I have referred are likely to reason that, all other things being relevantly equal (as the commercial does or is likely to lead them to believe), the price offered by the applicant for "this leather recliner lounge" would be, by comparison with the respondent's price, excessive in the circumstances. Given that the foundation for each representation is false (namely that the two products are of the same "quality" or "composition"), the making of each of these representation also constitutes conduct by the respondent in trade or commerce that is misleading or deceptive or likely to mislead or deceive.

[26]

The placards described 110 The respondent engages in comparative advertising using placards on its display furniture and on notice boards in its stores. The placards and notice boards prominently display the slogan: "Compare the Product … Compare the Price!!!" in conjunction with the respondent's name in logo form. 111 The examples of the placards in evidence take one of two forms. In one form the placard is headed with the respondent's name in logo form in the left corner, beside which the slogan appears. The slogan occupies the greater part of the header. Below the header, there is, to the left of the placard, a reference to the applicant under which appears a space in which a price can be inserted, followed underneath by the model name of the applicant's lounge suite. Typically the space for the price has been completed by the insertion of a handwritten price, presumably representing the applicant's advertised price of its floor stock in nearby stores. In one example the space for the price has been left blank. To the right of this material is a photographic image (in colour) of the applicant's lounge suite. Below the material relating to the applicant and its lounge suite, is corresponding material relating to the respondent and its lounge suite. 112 The footer to the placard contains a number of statements about the price at which the respondent offers its products. These statements are: "We will beat any LOWER price by 15%" (the price guarantee); "Super Amart will ALWAYS strive to provide our customers with Quality & Style at UNBEATABLE PRICES!!"; and "NOBODY BEATS SUPER AMART!". 113 This form of placard is exemplified by Examples 1 and 3 in Exhibit C. 114 In the other form of placard, there is a black and white photographic image of the applicant's lounge suite. This forms the background for the placard. The lounge suite is identified as one of the applicant's products because the image contains the applicant's own placard or product information (variously placed) showing the applicant's name and price. Over this image is placed (to the left), half way down the placard, the respondent's name in logo form, below which appears a photographic image (in colour) of the respondent's product, with other matter, most notably the price of the respondent's product. To the right of this material, in about the middle of the placard, there is a yellow sticker which bears, in handwriting, the slogan "COMPARE THE PRODUCT COMPARE THE PRICE". Sometimes the slogan is followed by exclamation marks. 115 This form of placard is exemplified by Examples 2 and 4 in Exhibit C. 116 Examples of the respondent's notice boards bearing placards can be seen in Exhibit D. 117 As I have noted, relevantly for this proceeding, the placards compare the Rajah suite and the Excellence suite; the Excellence modular suite and the Catalina suite, and the Everest modular suite and the Catalina suite. The comparison between the Catalina suite and the Everest modular suite is with respect to lounge suites upholstered in cloth fabric. The other comparisons are between lounge suites upholstered in leather. 118 The applicant alleges that, in each case, the respondent represents, by these placards, that the applicant's and respondent's lounge suites that are depicted on a particular placard are of the same or equivalent "standard, quality, grade or composition"; that the applicant's product is more than the price of (in the case of the Rajah suite, double the price of) the respondent's compared lounge suite, despite the compared products being of the same or equivalent quality; and that the applicant offers for sale and sells its illustrated product at a retail price which is excessive given the price at which the respondent offers its illustrated product. 119 The threshold question is whether these representations are made by the placards.

[27]

The parties' submissions 120 The applicant submits that these representations are made by the combination of the slogan, the photographic images, the handwritten prices and the inclusion of the respondent's price guarantee. This is but another way of saying that, in determining whether the alleged representations are made, one must have regard to each placard considered as a whole. That proposition cannot be contentious. 121 The applicant submits that the emphasis of the placards is the comparison of the price difference between the products; it is not possible to discern, and the reasonable or ordinary purchaser would not be able to detect, from the photographic images, that there are any differences in the relative characteristics of the two lounge suites. It is implicit in this submission that the absence of any express statement pointing out differences between the lounge suites, coupled with an inability to discern any such differences from the photographic images of them, is tantamount to a representation that the lounge suites are of the same or equivalent "standard, quality, grade or composition". 122 The applicant points to two further matters. First, it says that the price guarantee referred to in one form of the placards conveys a message of "equivalence" between the identified products. There is also evidence that, if the applicant had reduced its price for the Rajah suite or the Catalina suite, the respondent would feel obliged to lower its corresponding price for its compared lounge suite. 123 Secondly, the applicant says that the in-store statements made by some of the respondent's sales staff provide a sure guide as to what the ordinary or reasonable purchaser would understand the placards to be saying. The applicant's reasoning is that, because the respondent has provided limited information or instruction to its sales staff about the applicant's products identified in the placards, whatever the sales staff say about the applicant's compared products must be sourced directly from their own understanding of what the placards convey about those products. 124 For its part, the respondent submits that, on an ordinary reading of the placards, no comparison is made between the respective lounge suites, other than on price. To an extent, this submission is concordant with the applicant's submissions. However, the respondent does not accept that the placards impliedly represent that the lounge suites are of the same or equivalent "standard, quality, grade or composition". 125 The respondent submits that the slogan "Compare the Product … Compare the Price", as used in the placards, would be understood by the ordinary or reasonable purchaser as an invitation to actually make a comparison between the two lounge suites. The respondent submits that the presence of the price guarantee does not advance the applicant's case; it would be understood by the ordinary and reasonable purchaser as simply a statement about the respondent's general pricing policy, without any other significance. The ordinary or reasonable purchaser would not engage upon the elaborate thought processes (which the respondent characterised as "a lawyer's textual analysis") that would be required to correlate the general price guarantee with a statement of sameness or equivalence in the respective physical attributes of the lounge suites identified in the placards.

[28]

Consideration 126 In my view the placards do not make the representations that the applicant alleges. In this connection there is a significant difference between the placards and the commercial, despite the fact that, in each, the slogan "Compare the product … Compare the price" is used. The commercial, unlike the placards, draws an immediate association between the physical attributes of the products identified in the commercial by referring to them as "this leather recliner lounge". The initial reference in the commercial to "this leather recliner lounge" pervades the commercial and provides a particular context in which the slogan will be understood. 127 However, in the placards, the slogan finds a different context. There the slogan invites the customer to compare the products and to embark upon an evaluation of the two products bearing in mind the price difference between them. In my view the ordinary or reasonable purchaser could not reasonably read out of the placards a representation by the respondent that the two identified products are of the same or equivalent "standard, quality, grade or composition". I would accept, however, that, on reading the placards, some intending purchasers might be caused to wonder about that matter, which in turn might, if it were material to their purchasing decision, provide them with a reason to make inquiry of the respondent's sales staff. However, the mere stimulation of any such wonderment does not, in this particular instance, constitute conduct that rises to the level of, or, more importantly, transgresses the boundaries established by, the proscriptions of ss 52 and 53(a) of the Trade Practices Act. Indeed, in this context, it is more likely than not that the identified price differences in the placards would alert the ordinary or reasonable purchaser to the possibility that there could well be differences in the physical attributes of the identified products whose prices are being compared. By contrast, in the case of the commercial, this thought is effectively negated by the initial and abiding reference in the commercial to "this leather recliner lounge". 128 In my view the statement of the respondent's price guarantee on the placards does not advance the applicant's case in this regard. I accept the respondent's submission that the statement of the price guarantee would be seen only as a general statement of the respondent's pricing policy, applying generally to all of its products. Where the respondent has price-compared its product with another, it can be taken that, if the other product were to be offered at a lower price than the respondent's, then, in accordance with the price guarantee, the respondent would be required to "beat" that lower price by another 15% in respect of its own product. 129 In the present case the applicant's submission is theoretical rather than real. There is no real foundation for thinking that the applicant's prices for the Rajah suite or the Catalina suite would be lower than the respondent's prices for its products, as it has advertised them to be. Nevertheless, even if that were to happen, and even if, as a consequence, the respondent felt obliged (or, indeed, was obliged) to lower its price on a particular product for a particular customer, that would speak only of the fact that the respondent had chosen to engage in a head-on price comparison between the two products. Contrary to the applicant's submission, the respondent's price guarantee does not operate "on an assumption of equivalence (if not identicality)". 130 Finally, I do not regard what the respondent's sales staff may or may not have said about the identified products, in response to customer inquiries in the course of performing their sales function, as giving any reliable evidence as to what the placards themselves represent to the ordinary or reasonable purchaser. There may be many reasons why particular responses are made by particular members of the respondent's sales staff to inquiries made of them. Those reasons may be quite unrelated to what the placards actually say or show. It is for the Court itself to determine, objectively, whether the representations alleged by the applicant have been made by the placards themselves. The applicant has not made good that part of its case.

[29]

oral representations 131 The applicant alleges that members of the respondent's sales staff, in performing their sales function at the respondent's stores, have made the following representations to putative customers about the Rajah suite and the Excellence suite: that the Excellence suite is the same as the Rajah suite; that the Excellence suite comes out of the same factory or place as the Rajah suite; and that the price of the Rajah suite is more than double the price of the Excellence suite, despite the two products being the same. 132 The applicant also alleges that, similarly, members of the respondent's sales staff have made the following representations about the Excellence modular suite and the Catalina suite, upholstered in leather: that the Excellence modular suite is the same as the Catalina suite; and that the price of the Catalina suite is more than the price of the Excellence modular suite, despite the two products being the same. 133 It is common ground between the parties in relation to this aspect of the applicant's claim that the Excellence suite and the Rajah suite are not "the same", and that the Excellence modular suite and the Catalina suite upholstered in leather, are not "the same". Furthermore, the respondent does not dispute that, if the alleged representations were made, they are to be taken as having been made by the respondent. 134 The respondent does not dispute the applicant's evidence of a conversation between a member of its sales staff, Neil McLean, and Alan Gould on 10 September 2010. This conversation was held at the respondent's Benowa store in Queensland. Unbeknown to Mr McLean at the time, Mr Gould was the applicant's Queensland State Manager and was only posing as an interested customer. The conversation was recorded by Mr Gould. There is no evidence that this recording was made with Mr McLean's or the respondent's knowledge or consent. However, the respondent does not dispute the terms in which the conversation was held. In those circumstances it raised no objection to the tender of the recording. A transcript of the recording of the conversation was also tendered, without objection. 135 This evidence is compelling. It shows that Mr McLean did represent that the Excellence suite was "the same" as the Rajah suite; that the price of the Rajah suite was more than double the price of the Excellence suite, despite the two products being "the same"; that the Excellence modular suite was "the same" as the Catalina suite upholstered in leather; and that the price of the Catalina suite, upholstered in leather, was more than the price of the Excellence modular suite, despite the two products being "the same". Further, Mr McLean twice represented that the Rajah suite and the Excellence suite "came out of the same factory", although at another stage in the conversation he expressed some equivocation about that fact. However, the overall tenor of the conversation on this topic makes it clear that Mr McLean effectively represented that the Excellence suite "came out of the same factory" as the Rajah suite. Thus, on this evidence alone, the applicant has established the making of the oral representations it has pleaded in this regard. It follows that the applicant has established contraventions of ss 52 and 53(a) of the Trade Practices Act. 136 The main issue between the parties was whether similar representations were made by other members of the respondent's sales staff at about the same time and in substantially the same circumstances, albeit at different stores. It is to that evidence that I now turn. 137 The evidence of these conversations was given, principally, by Mr Gould. Mr Gould gave evidence of separate conversations that he had with a male sales assistant who identified himself as "Haydn" (now known to be Haydn Mount), at the respondent's store at 540 Kessels Road, MacGregor on 30 August 2010; and a conversation that he had with an unidentified male sales assistant at the respondent's store at Oxley on 31 August 2010. Both of these stores are located in Queensland. 138 Evidence was also given by Bruce Verschuuren of a conversation that he had with a female sales assistant wearing a name badge bearing the name "Lee" (now known to be Leanne Prior) at the respondent's store at 1904 Sandgate Road, Virginia on 1 September 2010. This store is also located in Queensland. Mr Verschuuren is the proprietor of a business called Impact Leather Care Specialists (Impact), which specialises in cleaning, conditioning, colouring and repairing leather used in the furniture, automotive and marine industries. Impact provides leather repair services to the applicant. Mr Verschuuren is also involved, as a proprietor, in another business which is concerned with the manufacture and distribution of leather care products. Mr Verschuuren came to have this conversation because Anthony Scali, the applicant's managing director, had asked him to visit one of the respondent's stores and to pretend that he was a customer interested in the Excellence suite. 139 It is convenient to deal with Mr Gould's and Mr Verschuuren's evidence of these conversations on a store-by-store basis.

[30]

Conversations at the respondent's MacGregor store 140 Mr Gould visited the respondent's MacGregor store on two occasions on 30 August 2010. On each occasion he had a conversation with Mr Mount about the Excellence suite and the Rajah suite. In the course of those conversations they also talked about the Excellence modular suite and the Catalina suite, upholstered in leather. 141 On the second occasion, Mr Gould was accompanied by his wife, his (adult) daughter and the applicant's Visual Merchandiser, Belinda Ritchie, although it seems that none of them participated in or, with the exception of Mr Gould's wife, was privy to Mr Gould's conversation with Mr Mount on this occasion. Mr Gould's wife did not give evidence. 142 On the first occasion, according to Mr Gould's evidence, he engaged Mr Mount in a conversation about the Excellence suite. I will not set out, in full, the terms of that conversation as recounted by Mr Gould in his affidavit. The conversation, as recounted in the affidavit, is lengthy. However, Mr Gould's evidence was that, in the course of that conversation, when referring to features of the Excellence suite, Mr Mount said: "… you can buy the same suite at Nick Scali for $6,000 to $7,000". According to Mr Gould, Mr Mount told him on two occasions during that conversation that the Excellence suite and the Rajah suite were "the same". Mr Mount also told Mr Gould that the Excellence suite and the Rajah suite came out of the same factory. When later asked to confirm that the two lounge suites came out of the same factory, Mr Mount said: "… I am not certain that they come out of the same factory but they are the same lounge …". When asked for a reason for the price difference, Mr Mount said: "… Super Amart are a discount chain, we buy directly from the manufacturer and can pass those savings on to the customers …". He also said: "… we have better buying power than Nick Scali, you are paying for the Nick Scali name and they could be sourcing or buying from an Australian importer or they are just making huge profits …". 143 According to Mr Gould, in the course of this conversation he and Mr Mount also discussed the Excellence modular suite and the Catalina suite, upholstered in leather. Mr Mount said: … this is the same as the Catalina across the road and you will pay $5,990 for theirs and ours is $2,990. It has the same leather as on this suite [pointing to the Excellence]. 144 Mr Gould says that, during his second visit, when he asked whether the Excellence suite was "the same product as the Nick Scali Rajah", and whether he was "looking at the same lounge, same leather and same quality as Nick Scali Rajah", Mr Mount said: "… yes you are". According to Mr Gould, Mr Mount later said, in the same connection: "… you are getting the same product as across the road …". I pause to note that the applicant also has a store in Kessels Road, across the road from the respondent's store. 145 On this occasion, according to Mr Gould, he also discussed the Excellence modular suite with Mr Mount. Mr Mount pointed to a placard on the Excellence modular suite (of the kind I have earlier described) and said: "… the same suite in Nick Scali sells for $5,990 and ours is $2,990 for the same thing and it's called the Excellence …". 146 Mr Gould gave evidence that, after leaving the MacGregor store on the first occasion, he made notes of his conversation. He made these notes for the purpose of reporting to Mr Scali - to "give him an overview of the conversations". There is no indication in the evidence as to how extensive those notes were. Mr Gould did not keep them after speaking to Mr Scali; he destroyed them a few days after his visit. He did not make notes of the conversation he had with Mr Mount on the second occasion he visited the MacGregor store that day. 147 In his affidavit, prepared and sworn on 16 September 2010, Mr Gould deals with six visits he made to the respondent's stores during the period 30 August to 10 September 2010. His affidavit records that, on four of those visits, he had reasonably extensive conversations with the respondent's sales staff. In his affidavit he sought to recount the detail of these conversations, by dialogue. However, in the case of two conversations held on 30 August 2010 (with Mr Mount) and one conversation held on 31 August 2010 (with the unidentified male sales assistant), Mr Gould was relying on his memory, some two weeks after the events in question, in setting out the conversations. 148 Mr Gould accepted that the account of the conversations given in his affidavit may not have captured everything that was said at the time. There is an additional matter. Mr Gould recorded the last of the conversations recounted in his affidavit (that is, his conversation with Mr MacLean on 10 September 2010, to which I have earlier referred). When preparing his affidavit on 16 September 2010, he used that recording to assist him in recounting that conversation. The respondent put to Mr Gould that, in recounting the conversations he said he had had on 30 and 31 August 2010, he had used the recording of the conversation on 10 September 2010 to bring the earlier conversations "into consistency" with the later recorded conversation. Mr Gould denied this suggestion. I will return to that matter. 149 In his evidence, Mr Mount said that he did not recall the details of conversations he had had with customers at the MacGregor store on 30 August 2010. He said that, on some days, he attends "to upwards of 80 customers" and that "it is difficult to recall the nature of the conversations with each customer". He said, however, he did remember a man who had visited the store at around that date and who had "showed a strong interest in the Excellence corner [ie modular] suite". He was able to recall some parts, but not all, of his conversation with that man. The parts recounted by Mr Mount in his affidavit bear little resemblance to the conversation recounted by Mr Gould, so much so that I have real doubts that the man referred to by Mr Mount was in fact Mr Gould. 150 After providing his recollection of his conversation with this man to the respondent's solicitors (as recounted in his affidavit), Mr Mount was shown a copy of Mr Gould's affidavit. Mr Mount denied having said a number of things recounted by Mr Gould in that affidavit. It is not necessary for me to set out all aspects of the conversations recounted in Mr Gould's affidavit that Mr Mount denied. Significantly, for the present purposes, Mr Mount denied having said the following things: that he said that the Excellence suite and the Rajah suit were "the same": Mr Mount said that he has never seen the Rajah suite, except as shown in the respondent's placard; that he does not know what type of leather is used in the Rajah suite; that he has not tested how comfortable the Rajah suite is to sit on; and that, from the respondent's placard, he had noted that there are slight differences in shape between the Rajah suite and the Excellence suite; that he said that the Excellence modular suite and the Catalina suite are the same: Mr Mount said that he had observed from the respondent's placard that there are slight differences in shape between the two; that the Rajah suite and the Excellence suite come from the same place or the same factory: Mr Mount said that he does not know from which factory either suite comes; that he said that the respondent buys directly from the manufacturer: Mr Mount said that he does not know the source of the respondent's products; that he said that the applicant could be sourcing or buying from an importer: Mr Mount said that he does not know the source of the applicant's lounge suites or other furniture; that the respondent has "better buying power" than the applicant: Mr Mount said that he does not use those words; he normally tells customers that the respondent "buys in bulk and can pass on those savings to customers"; that he said that the applicant is "making huge profits": Mr Mount said that it is not his practice to refer to competitors' profits and cannot recall saying such a thing to a customer; and that, in purchasing from the applicant, a customer is "paying for the name". 151 There is no doubt that, in his affidavit, Mr Mount sought to support a number of his denials by a process of rationalisation. In his cross-examination, however, Mr Mount was firm in his denials, saying, variously, that "I don't say those things in a normal conversation"; "In my sales pitch I never say those things" and "I know I wouldn't have said things like that, that's why I deny it". 152 The applicant submits that Mr Gould's version of the conversations should be accepted because, given the circumstances in which the conversations came to be held, Mr Gould is more likely to recall what was said. The applicant submits that Mr Gould had been informed that the respondent was up to "dirty tricks" and that he was investigating "what they were". The applicant submits that the fact that Mr Gould took notes (albeit, later destroyed by him) would serve to "reinforce his recollection of events". 153 The respondent submits that Mr Gould's version of the conversations should not be accepted. It submits that the fact that Mr Gould had been informed that the respondent was up to "dirty tricks" indicates that he approached his task with a mindset which assumed that fact and which would, necessarily, colour his recollection of events. The respondent points to the lack of a contemporaneous record of the conversations with Mr Mount and submits that I should find that, by preparing his affidavit using the recorded conversation with Mr McLean on 10 September 2010, Mr Gould was reconstructing his conversations with Mr Mount, rather than genuinely recalling them. The respondent also repeats the submissions it made during the course of the hearing when it sought to have Mr Gould's evidence of these conversations rejected because timely notice of them had not been given to the respondent: see my ruling in Nick Scali Ltd v Super A-Mart Pty Ltd (2010) 189 FCR 550. 154 I am not prepared to find, on the evidence before me, that Mr Mount made the representations alleged by the respondent. Allegations that, in trade or commerce, false representations have been made, or that misleading or deceptive conduct has been engaged in, are serious allegations, calling into question the fairness, and in many cases the honesty, with which the person, against whom the allegations are made, has acted. I am confronted by Mr Gould's adherence to his version of the conversations with Mr Mount, and with Mr Mount's firm denial of many aspects of that version, including those aspects of the conversations that are critical to establishing the representations that the applicant alleges were made at that time. It is for the applicant to establish its case to the requisite standard: see, in that connection, s 140(2) of the Evidence Act 1995 (Cth). 155 Without intending any personal criticism of Mr Gould, there are aspects of his evidence of the conversations that affect its reliability and, ultimately, its acceptance as providing a satisfactory and sufficient basis for the findings that the applicant seeks. Although I accept, in general terms, that Mr Gould would be in a better position than Mr Mount to recall the details of the conversations they had on 30 August 2010, Mr Gould's recollection of the conversations in his affidavit is, nevertheless, an exercise based essentially on memory without the benefit of any contemporaneous record save for, importantly, the recording of the conversation that Mr Gould had with Mr McLean on 10 September 2010. As I have noted, the recounting of those conversations in the affidavit shows them to have been fairly extensive conversations that had occurred on two separate visits on 30 August 2010. The lack of a contemporaneous record of the conversations held on that day, recounted in the detail in which they were in the affidavit, over two weeks after the conversations were held, and in the course of recounting a number of other conversations, raises a question concerning the accuracy of that account. My concerns about that question have been heightened by the use of the recording of the conversation with Mr McLean when Mr Gould prepared his affidavit dealing with all relevant conversations in the period 30 August to 10 September 2010. I am left with a considerable sense of unease that recourse to that recording had some influence on Mr Gould's recollection of earlier conversations in other circumstances, the extent of which cannot be ascertained with any certainty. Nevertheless, the likelihood of such influence is, in my assessment, real. I say this based, in part, on my comparison of the different conversations recounted in the affidavit with the recording of the conversation with Mr McLean. There are, to my mind, elements of similarity in the dialogue attributed to the sales assistants which may well be the product of such influence, rather than actual recollection. I should record, in this connection, that the applicant does not seek to make a case that the respondent's sales staff were acting on the basis of instructions from the respondent or through any form of co-ordinated activity. 156 Confidence in Mr Gould's ability to accurately recall critical statements said to have been made in the course of those fairly lengthy conversations is vital if his evidence is to provide a satisfactory foundation for fact-finding in relation to the representations that are alleged to have been made. When faced with Mr Mount's denials, which in my assessment were made honestly, I am not satisfied that the applicant has established, on the balance of probabilities, that Mr Mount said, or otherwise represented in the course of his conversations with Mr Gould, that the Excellence suite and the Rajah suite were "the same" or had come from the same place or out of the same factory; or that the Excellence modular suite and the Catalina suite, upholstered in leather, were "the same".

[31]

Conversation at the respondent's Oxley store 157 Mr Gould visited the respondent's Oxley store on 31 August 2010. On that occasion, when looking at the Excellence suite on display, he was approached by "a young male sales consultant". According to Mr Gould's evidence, he had a conversation with this person about the Excellence suite. In company with that person he tried out the recliner mechanism in an Excellence single recliner chair located in another part of the store. According to Mr Gould the sales assistant then pointed to a placard on the Excellence suite (which had a picture of the Rajah suite shown at a price of $6,970 and which stated the price of the Excellence suite to be $2,990) and said: " … you can buy the same suite at Nick Scali furniture for this amount …". When asked how do "they" (meaning the applicant) justify "the difference" (meaning the difference in price), the sales assistant replied: "… we are a discount chain that buys directly from manufacturers. With Nick Scali you are only paying for the name as they all come out of the same factory …". When asked whether the respondent buys its product from the same factory as the applicant, the sales assistant replied: "… yes, we just have better buying power than Nick Scali so we can sell the same thing cheaper …". 158 Once again Mr Gould took notes of this conversation, this time to report to the applicant's Marketing and IT Manager, Mr "Nicky" Scali. As with the notes of his conversation with Mr Mount, Mr Gould discarded those notes a few days later, well before he came to recount, on 16 September 2010, the conversation in his affidavit made the same day. 159 It has not been possible for the respondent to identify, with certainty, the "young male sales consultant" referred to by Mr Gould. There were, however, only two male sales assistants working at the respondent's Oxley store on 31 August 2010 - Andrew Buhagiar and Chad Morrison. Both gave evidence. 160 Mr Buhagiar is the Manager of the Oxley store. He said that he deals with approximately 40 people each day. He had no recollection of dealing with a male customer in relation to the Excellence suite on 31 August 2010. He was provided with a copy of Mr Gould's affidavit of 16 September 2010. 161 Mr Buhagiar denied having said a number of things recounted by Mr Gould. Amongst other things, he denied: that he said "you can buy the same suite at Nick Scali furniture": Mr Buhagiar said that he had been to one of the respondent's stores and knew that the suites were not the same; that he said "they all come out of the same factory" or that the respondent buys from the same factory as the applicant: Mr Buhagiar said that his understanding is that the factories that supply the respondent do not supply other retailers in Australia. 162 Mr Buhagiar sought to support his denials by a process of rationalisation. However, in cross-examination, he repeated his denials. 163 Mr Morrison is a sales assistant at the Oxley store. He said that he did not recall dealing with any male customer on 31 August 2010 in relation to the Excellence suite. He said that he talks to many customers every day about all sorts of different lounges. He said that it was difficult for him to remember conversations with a customer "more than a couple of days after I have had them", unless there is something about the customer that "stands out". 164 He too was provided with a copy of Mr Gould's affidavit of 16 September 2010. He denied having said a number of things recounted by Mr Gould. Amongst other things he denied: that he said "you can buy the same suite at Nick Scali Furniture": Mr Morrison said that he does not use the words "same" when referring to the Excellence suite and the Rajah suite; that he said "with Nick Scali you are only paying for the name as they all come out of the same factory": Mr Morrison said that he does not know where the respective lounge suites are manufactured or from which factory they come and, additionally, that he has never been into one of the respondent's stores and does not know whether "Nick Scali" is a brand name; and that he said that the respondent has "better buying power than Nick Scali so we can sell the same things cheaper": Mr Morrison said that he has no idea about the buying power of the applicant or of the respondent. 165 Mr Morrison also sought to support his denials by a process of rationalisation. Nevertheless, in his cross-examination he repeated his denials. He also said that, before 31 August 2010, he was instructed by Mr Buhagiar to use the word "similar" in relation to the Excellence suite and the Rajah suite. For this additional reason he supported his denial that he had said that the Excellence suite and the Rajah suite were "the same". 166 The applicant submits that Mr Gould's evidence about the conversation at the Oxley store on 31 August 2010 should be accepted because Mr Buhagiar conceded in cross-examination that he could not say "one way or the other" whether he had the conversation recounted by Mr Gould, and because Mr Morrison could not be "absolutely sure that [he] did not say the words that are set out in those paragraphs of Mr Gould's affidavit". While in making that submission the applicant relies on particular responses given by those witnesses in cross-examination, my consideration of the totality of their cross-examination satisfies me that they maintained their denials and that their evidence as a whole was given honestly and in an attempt to be accurate. The evidence makes clear that only either Mr Buhagiar or Mr Morrison could have had a conversation with Mr Gould on 31 August 2010 at the Oxley store. It follows that the evidence of one of them must be incontrovertibly correct. The applicant did not seek to have Mr Gould identify which of the two witnesses was "the young sales consultant" with whom he had his conversation on 31 August 2010. 167 Mr Gould's recounting of his conversation at the Oxley store on 31 August 2010 raises the same concerns to which I have referred in relation to his recounting of the conversations at the MacGregor store on 30 August 2010 with Mr Mount. For the reasons I have given in relation to that evidence, and faced with the denials of both Mr Buhagiar and Mr Morrison, I am not satisfied, on the balance of probabilities, that one or the other of them said, or otherwise represented in the course of a conversation with Mr Gould, that the Excellence suite and the Rajah suite were "the same" or had come out of the same factory or place, or that the Excellence modular suite and the Catalina suite, upholstered in leather, were "the same".

[32]

Conversation at the respondent's Virginia store 168 Mr Verschuuren visited the respondent's Virginia store on 1 September 2010. When looking at the Excellence suite on display, he was approached by Ms Prior, who offered her assistance. 169 According to Mr Verschuuren, a conversation to the following effect took place: V: "Do they sell the same type of lounge suite at Nick Scali as well?" P: "Yes, they do". V: "Surely it can't be the same, this lounge suite must only be kind of like the lounge suite at Nick Scali". P: "No, no, it is exactly the same". V: "But the price is so different". P: "I'll let you in on something, I used to work for Nick Scali at the MacGregor store. The way Super A-Mart works is that Super A-Mart purchases a suite from Nick Scali. Super A-Mart then sends the suite to its manufacturer and tells the manufacturer to make a replica that is of the same quality and out of the same material. Super A-Mart's manufacturer then pulls the suite apart and makes a replica. Super A-Mart can sell the lounge suite cheaper because we have our own manufacturer and import direct". V: "That is amazing. Thanks for your help. I am just looking around." 170 Mr Verschuuren did not make notes of his conversation with Ms Prior. He was challenged on whether Ms Prior had said that the Excellence suite was "exactly the same" as the Rajah suite. He maintained, however, that Ms Prior did make that statement. He accepted, however, that at no stage did Ms Prior suggest that the manufacturer of those suites was the same. 171 Ms Prior is a sales assistant at the respondent's Virginia store. She has worked in the furniture industry for approximately 12 years, largely as a sales assistant, but also in servicing. Her previous employment included employment as a sales consultant at the applicant's Fortitude Valley store and as a service assistant in the Servicing Department of that store. 172 On 15 September 2010 Ms Prior was first asked whether she recalled dealing with a male customer in relation to the Excellence suite on 1 September 2010 at the Virginia store. Her evidence was that she could recall dealing with a gentleman that day regarding the Excellence suite. Her recollection was prompted because the gentleman was "quite tall" and went outside the store to make a number of calls on his mobile phone, ostensibly because of reception difficulties, which Ms Prior thought to be "very odd". 173 In her affidavit, Ms Prior set out the conversation she had with this gentleman, according to her then recollection. She did so without having seen Mr Verschuuren's version of that conversation. In a number of respects, the conversation recounted by Ms Prior in her affidavit is quite different, as a matter of structure and content, to the conversation recounted by Mr Verschuuren, albeit that the conversation was about the Excellence suite. The conversation recounted by Ms Prior was significantly more extensive than the conversation recounted by Mr Verschuuren. There are, however, two matters which indicate that Ms Prior was in fact recounting a conversation with Mr Verschuuren. First, in the conversation she recounted, Ms Prior recalled a passage of dialogue to the following effect: V: "These lounges look similar but there is quite a substantial difference in the price between the lounges. Why is that?" P: "It is common practice in the industry for a retailer to purchase another retailer's product and copy the design and have their own one manufactured. I can't comment on the price difference as I am not familiar with the Scali lounge on the tag but the Super A-Mart buyers are doing a good job. The majority of lounges come from similar places. Most lounges these days are imported." 174 This passage reveals a degree of similarity with the corresponding part of the conversation recounted by Mr Verschuuren. 175 Secondly, in the course of his cross-examination, Mr Verschuuren accepted that, during the course of his conversation with "Lee", he could have stepped outside to make a telephone call, although he did not recall doing so. 176 I am satisfied that it is more likely than not that Ms Prior, in her affidavit, was recounting a conversation with Mr Verschuuren. 177 After recounting that conversation, Ms Prior was provided with a copy of Mr Verschuuren's affidavit. In responding to that affidavit, Ms Prior said that Mr Verschuuren's account of the conversation was inaccurate in a number of respects. According to Ms Prior's evidence, Mr Verschuuren was not standing in front of the Excellence suite when she approached him; he was wandering around the store looking at recliners. She recalled speaking about the copying of designs (in the terms I have quoted) but said that this was only part of a larger conversation, which she had set out in her affidavit. The details of the earlier part of the conversation recounted by Ms Prior are not relevant for present purposes, other than to note that they form no part of Mr Verschuuren's version of the conversation. As to the part of the conversation about "copying", Ms Prior said that this was initiated by Mr Verschuuren (in the terms I have quoted) after he had viewed the tag on the lounge upon returning to the store after making a telephone call. 178 Ms Prior's evidence was that she did not say that the Excellence suite and the Rajah suite were "the same". Her evidence was that she was certain that she would not have said this because she was not familiar with the Rajah suite. Ms Prior also specifically denied saying that the respondent "purchases a suite" from the applicant and tells its "manufacturer" to "make a replica"; that the respondent's manufacturer "pulls the suite apart and makes a replica"; and that the respondent "can sell the lounge cheaper because we have our own manufacturer and can import direct". 179 She also denied saying that she had worked at the applicant's MacGregor store. It is clear, however, that Ms Prior did in fact work for the applicant. It is not suggested that Mr Verschuuren could have had knowledge of that fact beyond his conversation with Ms Prior. I would accept, therefore, that, at some stage in the conversation, Ms Prior must have mentioned that she had worked for the applicant. Also in cross-examination, Ms Prior accepted that Mr Verschuuren had asked: "Do they sell the same type of lounge suite at Nick Scali as well?" She recalls responding: "Yes, they do". But she maintained her denials of saying that the Excellence suite and the Rajah suite were "exactly the same", and the other matters I have noted. 180 The applicant submits that Ms Prior's evidence supports its case. It submits that her evidence about it being common practice in the furniture industry for one retailer to "copy the design" of a product "and have their own one manufactured" must have been intended to lead Mr Verschuuren to understand that that is what the respondent had done in the case of the Excellence suite: made a copy of the Rajah suite. The applicant submits that, by saying this, Ms Prior conveyed that the products were "the same". 181 The respondent submits that Ms Prior's account of the conversation with Mr Verschuuren does not contain any representation that the Excellence suite and the Rajah suite are "the same" or, indeed, that they are of "the same quality". It also submits that, in that connection, Ms Prior's account should be accepted because it was not "relevantly disturbed" in cross-examination. 182 The respondent also submits that Mr Verschuuren's evidence should not be accepted (I assume to the extent that it is inconsistent with Ms Prior's evidence). The respondent points to the fact that Mr Verschuuren did not make notes of his conversation with Ms Prior and that the first time he committed that conversation to writing was when his affidavit was prepared on about 14 September 2010. The respondent points to the fact that Mr Verschuuren's affidavit was accepted by him to be incomplete in some respects (notably, in relation to some details of a prior telephone conversation he had had with Mr Anthony Scali leading to his visit to the Virginia store, and in relation to making telephone calls outside the Virginia store during his meeting with Ms Prior), and was shown to be inaccurate in other respects (notably, Mr Verschuuren's mistaken recollection that Ms Prior worked at the applicant's MacGregor store). The respondent also points to the fact that, when giving evidence of his prior telephone conversation with Mr Scali, Mr Verschuuren accepted that it was "not easy to recall" the "total words" used in that conversation, thereby suggesting that Mr Verschuuren's recollection of his conversation with Ms Prior, held at about the same time, could not be sound or should at least be treated with caution. 183 On considering all the evidence in relation to this conversation, including, importantly, the oral evidence of the two witnesses, I have no reason to think that Mr Verschuuren's recollection is necessarily better than Ms Prior's recollection, or vice versa. In this connection I accept the respondent's submission that parts of Mr Verschuuren's account were incomplete and inaccurate, although this criticism of his evidence was in relation to matters that were, perhaps, subsidiary to the substance of the conversation. By the same token, Ms Prior's account was incomplete. In her account she made no mention of the fact that she had told Mr Verschuuren that she had worked for the applicant. As I have noted, this information, which is of some importance in Mr Verschuuren's account, could only have come from Ms Prior during the course of their conversation. Each witness was seeking to give an account from memory of a conversation that had taken place approximately two weeks earlier. I am satisfied that, in undertaking that task, both were seeking to give an account that was honest and, so far as memory would allow, accurate in detail. Detail is, however, all-important in relation to this aspect of the applicant's case. 184 In all the circumstances, including Ms Prior's considered denials, I am not prepared to find, on the balance of probabilities, that Ms Prior said, or otherwise represented, that the Excellence suite and the Rajah suite were "exactly the same", or that the Excellence suite was a "replica" of the Rajah suite, or that the Excellence suite was of "the same quality" and made "out of the same material" as the Rajah suite. This finding does not, however, conclude the matter. There is still Ms Prior's account of the conversation insofar as it concerns "copying the design" of products. 185 Assuming the conversation to have taken place in the terms to which Ms Prior has deposed, I am not satisfied that, as a matter of objective assessment, it conveys that the Excellence suite and the Rajah suite are "the same" in the sense in which those words have been used in the applicant's pleading, and in the way in which the applicant has advanced its case. In this connection, the applicant has used the words "the same" to convey identity or near identity. To suggest, as Ms Prior undoubtedly did, that, in making the Excellence suite, the respondent had copied the design of the Rajah suite, is not to make the representation that the applicant has alleged. Indeed, no more than "similarity" is conveyed. This is made clear in Ms Prior's account of the conversation in which Mr Verschuuren prompted Ms Prior's response by suggesting, by reference to the respondent's placard, that "these lounges look similar". Ms Prior's response must be looked at in that particular context. So considered, her response can be seen as being directed to the suggestion of similarity, not identity or near identity. It should not be taken as conveying anything more than Mr Verschuuren had suggested.

[34]

the afrdi certification 189 At the time when this proceeding was commenced, the respondent held a particular certification from AFRDI in relation to the compliance of the Excellence suite with the AFRDI Leather Standard: AFRDI certificate no. 8463/2. The certification was for the Excellence suite upholstered in "Medium and Dark" (but not "Light") coloured leather designated as "Corrected Grain". AFRDI certificate no. 8463/2 makes clear that the certification included split grain leather. 190 Prior to the commencement of this proceeding, the respondent advertised the Excellence suite, on a store-by-store basis, on its website. In some of those advertisements the respondent stated that the Excellence suite was available in "oyster" coloured leather that was "top grain leather", and that the suite was "AFRDI Approved". The applicant's case is that, at the time that those statements were made, the respondent held no AFRDI certification for the Excellence suite upholstered in (a) "oyster" coloured leather or (b) top grain leather. The applicant pleads that the respondent thereby contravened ss 52 and 53(a) and (c) of the Trade Practices Act. 191 The respondent accepts that, prior to 8 September 2010, its AFRDI certification for the Excellence suite did not extend to that suite upholstered in "oyster" coloured leather. However, by 8 September 2010 (that is, prior to the hearing), this had been rectified; AFRDI had re-issued its certificate in respect of the Excellence suite to include upholstery in "light" coloured leather (and hence "oyster" coloured leather). Nevertheless, in representing prior to 8 September 2010 that it had "AFRDI Approval" for the Excellence suite upholstered in "oyster" coloured leather, the respondent had made a false representation that the Excellence suite had an approval that it did not have. It follows that, by making that representation, the respondent contravened ss 52 and 53(c) of the Trade Practices Act. The applicant's allegation that s 53(a) of the Trade Practices Act was also contravened involves no more than an elaboration of, and is indistinguishable from, its case that s 53(c) had been contravened. In my view that case sounds in contravention of s 53(c) rather than 53(a). 192 I am not satisfied that the applicant has shown that the respondent has otherwise contravened ss 52 and 53 of the Trade Practices Act in relation to its statement of AFRDI "approval". AFRDI's certificate is in respect of the Excellence suite upholstered in "corrected grain" leather. There is no evidence that the Excellence suite is not upholstered in "corrected grain" leather. The statement in some of the advertisements that the Excellence suite is upholstered in "top grain leather" (a statement about which that the applicant makes no complaint) is consistent with the leather also being "corrected grain" leather. The evidence shows that the expression "corrected grain" refers to leather in which naturally occurring imperfections have been "corrected" by a process that includes buffing the leather to remove the imperfections and then embossing it to give it a "grain". The evidence shows that the term "corrected grain" can apply to split leather, including top grain leather. Accordingly, this aspect of the applicant's case fails.

Nick Scali Limited v Super A-Mart Pty Ltd

At a glance

Court

Decision date

Before

Source

Judgment (36 paragraphs)

Parties

Legislation Cited (2)

Cases Cited (13)

Cited By (1)