Rhone-Poulenc Agrochimie SA & Anor v UIM Chemical Service Pty Ltd & Anor [1986] FCA 266

Trade Practices Act, 1974 ss 442), 52, 53(c), and 55.

RHONE-POULENC AGROCHIMIE SA & ANOR. V_UIM CHEMICAL SERVICE PTY LIMITED & ANOR

Bowen C.d.. Lockhart and Jackson dJ. 8th July 1986 Sydney

) NEW SOUTH WALES DISTRICT REGISTRY } NO. G 303 OF 1985

ON APPEAL FROM a Single Judge of THE FEDERAL COURT OF AUSTRALIA (Proceeding No. G59 of 1985)

LIMITED Second Appellant AND UIM CHEMICAL SERVICES Pry LIMITED

JUDGES MAKING ORDER Bowen C.J., Lockhart and Jackson JJ.

2. That Rhone-Poulenc Agrochimie SA and May & Baker Australia

Pty Limited pay to UIM Chemical Services Pty Limited and Clyde Todhunter Waugh their costs of the appeal.

NEW SOUTH WALES DISTRICT REGISTRY ) NO. G 303 OF 1985 )

ON APPEAL FROM a Single Judge of THE FEDERAL COURT OF AUSTRALIA (Proceeding No. G59 of 1985)

JUDGES : BOWEN C.d., LOCKHART AND JACKSON Jd. DATE: 8th July 1986

This is an appeal from a decision of a single judge of this Court given in proceedings brought by Rhone~-Poulenc

Agrochimie SA ("Rhone-Poulenc") and May & Baker Australia Pty

Limited ("May & Baker") against UIM Chemical Services Pty Limited ("UIM") and Clyde Todhunter Waugh. The application was brought

under the Trade Practices Act 1974 claiming that the sale of a

product m-d KP of UIM contravened ss. 52, 53(c), 53(g) and 55 of

that Act. The proceedings also included as an associated matter a

claim for infringement of Patent No. 493818. Injunctions and

The learned trial Judge was informed that the parties were agreed it was convenient to deal with the question of liability first, leaving the question of damages to be dealt with

later if necessary. He dealt first with the claim in relation to

the patent, holding that there was no infringement. He then dealt with the claim under the Trade Practices Act and rejected that.

In the result he dismissed the application with costs.

Rhone-Poulenc and May & Baker appealed against the whole

It will be convenient to deal with the claim in relation

Patent No. 493818 is a Convention patent. The complete specification was lodged for registration in Australia on 26 November 1974, having been first lodged in France on 26 November

1973. The priority date was the date of first lodgement, namely,

"This invention relates to fundicidal compositions based on phosphorous acid or its salts.

compositions suitable for using in controlling parasitic fungi in plants and containing, as an active material in an amount from 20 to 95% by weight at least one compound selected from the group comprising phosphorous acid, its mineral salts and its organic salts together with an agriculturally acceptable inert support selected from the group consisting of clay, synthetic or natural silicates, resins, waves, solid fertilisers, water, alcohols, ketones, petroleum fractions, cholorinated hydro-carbons and liquefied gases, and at least one lonic or non-ionic surfactant selected from the group consisting of emulsifiers, dispersants, deflocculants and wetting agents."

The claims defining the invention number 17. Claims 1 - 16 are composition claims: claim 17 1s a method claim.

1. Fungicidal compositions for controlling fungus disease in plants, wherein they contain as active material in an amount from 20 to 935% by weight at least one compound selected from the group comprising phosphorous acid, its mineral salts and its organic salts together with an agriculturally acceptable inert support selected from the group consisting of clay, synthetic or natural silicates, resins, waxes, solid fertilisers, water, alcohols, ketones, petroleum fractions. chlorinated hydrocarbons and liquified gases, and at least one lonic or non-ionic surfactant selected from the group consisting of emulsifiers, dispersants, deflocculants and wetting agents.

2. Compositions as claimed in Claim 1, wherein the surfactant is selected from salts of polyacrylic acids, salts of alkylaryl sulphonic acids or lignin sulphonic acids, or condensates or ethelene oxide with fatty alcohols, fatty acids or fatty amines."

claimed in claim 1 or claim 2. Claim 17 is as follows:

"17. A method of controlling fungus disease in plants, comprising applying a composition of the kind claimed in any of Claims 1 to 16 for preventive or curative treatment. "

The m-d KP marketed by the respondents is a composition containing mono-potassium phosphite and di-potassium phosphite in a support of water. It contains no surfactant. The respondents argued that the absence of any surfactant meant that there was no infringement. The appellants argued that there were two separate issues arising from this, first, whether the sale of m-d KP without surfactant, constituted sale of the invention (this depended on claims 1 - 16) and secondly whether the use of m-d KP, with or without surfactant, constituted use or exercise of

The question underlying both these issues is whether the presence of a surfactant in the combination is an essential element in the monopoly as claimed. It appears to me that the claims are drawn in such a way as to make a surfactant an essential element. Claim 1 is rather emphatic in requiring not only the active material but also an inert support and at least one 10nic or non-ionic surfactant selected from a specified group. If, as is argued for the appellants, the surfactant is an inessential element of the composition, how does one explain the difference between claim 1 and claim 2? If the presence of

a surfactant is inessential, it is difficult to attach

significance to claim 2. And what is the point in claim 3 of distinguishing between the composition as claimed in claim 1 from that as claimed in claim 2 if the presence of a surfactant is inessential? The type of surfactant specified is the only

It is true that reference is made in the body of the specification to the discovery that compounds according to the invention may be used as an active material in compositions for protecting plants against fungus diseases. This refers to the active material consisting of phosphorous acid, its mineral salts or its organic salts. But it is the claims which define the monopoly sought by the patentee. The claims, possibly for good reason, were not limited simply to the active ingredient which was discovered to act effectively as a fungicide. Claims 1 - 16 were framed as combination claims, involving a composition having three ingredients. In adopting this mode of claiming the patentee disclaimed any intention of seeking monopoly for the active compound alone or for the active compound with one only of the

It was argued that by selling a composition containing the active ingredient and an inert support the respondents had taken the "pith and substance" or "pith and marrow" of the invention and should be held guilty of infringement. But the "pith and substance" of the patent is to be found in the claims

read in the light of the whole specification. The use of two only

of the three elements claimed is not to take the "pith and substance". This might possibly be found to be the case where two of three elements claimed were taken and an "equivalent" third element was substituted. It is not so where, as here, one element

It was argued that a different question arose in relation to claim 17; that this is a method claim and may he infringed by use as distinct from sale of the relevant composition. However, the composition referred to in claim 17 is "a composition of the kind claimed in any of the claims 1 to 16 for preventive or curative treatment". The reference to claims 1 to 16 inevitably raises the same problem I have discussed above, namely, that the respondents did not use a composition containing all the essential ingredients specified in any of those claims. It was argued that the phrase "a composition of the kind claimed" widened the method claim 17 to embrace the composition m-d KP notwithstanding it lacked any surfactant. In his claims a patentee is called upon to define the scope of the monopoly he wishes to mark out. It is desirable that someone wishing to enter the field should be able to discern what is proscribed and what is free. By using general words such as "composition of the kind" a patentee cannot simply cast a general net to cover what he has not claimed. In other words, I donot construe claim 17 as extending to cover the composition used by the respondents which

is not within any of the claims 1 to 16 because it lacks a

I see no reason to differ from the conclusion of the

learned trial Judge that there was no infringement of the patent.

I should notice one additional argument advanced by the respondents. It was submitted that m-d KP does not contain as

active material in an amount from 20 to 95% by weight at least

one "compound" from groups nominated in the claims namely phosphorous acid its mineral salts and its organic salts. These it was said were fully bonded chemicals in crystalline or powder form. m-d KP was a liquid not containing any salt, as such, but by reason of the mixing together in water of two of the mineral salts of phosphorous acid contains a variety of ions. It 1s simply a solution of potassium ions, phosphite ions, hydroxil ions and hydrogen ions and contains neither phosphorous acid nor one of its salts. I am not persuaded of the correctness of this argument. Although the saits are present in the form of ions in solution, rather than as molecules, it seems nevertheless correct

(and consistent with the terminology of the specification) to

speak of the solution as containing the salts. Nevertheless, as I have said, I am of opinion the trial Judge was correct in holding

I turn now to the claim under the Trade Practices Act.

It was common ground that UIM sold m-d KP to purchasers in New South Wales and Queensland knowing that it was useful as a fungicide and would be used as such. In both States, there is'

legislation relating to the registration of fungicides. The

relevant statutes are the Pesticides Act 1978 (N.S.W.) and the

Agricuitural Standards Act 1952 (Qld.). The trial Judge found

that m-d KP was both a "pesticide" for the purposes of s.5 of the New South Wales Act and an "agricultural requirement" within the meaning of s.7 of the Queensland Act. As such, m-d KP is a product which should be registered in accordance with the legislation of both States. In New South Wales, both the sale and use of an unregistered product are punishable offences under ss.29 and 31 of the Pesticides Act. In Queensland, the sale of an unregistered product is a punishable offence under s.15 of the

Agricultural Standards Act. In each State the consequence of the

sale of m-d KP by UIM prior to the registration of the product under the respective Acts 1s to expose a purchaser to the risk that the product will be seized from him and subsequently

forfeited: Pesticides Act, ss.53 and 61; Agricultural Standards Act, ss.67 and 71.

It was not disputed that the respondents had committed breaches of the State legislation. The enforcement of State law is a matter for the State Government concerned. This Court is asked to rule upon alleged breaches of Federal law, in this case

Stated in a summary way, the appellants contended that in marketing m-d KP without positively stating that (1) the product was unregistered, and (2) the risks (however slight they may be or have been) of

UIM was engaging in misleading or deceptive conduct within the meaning of s.52 of the Trade Practices Act. The appellants aiso alleged that the respondents were in contravention of ss.53(c), 53(g) and 55 of the Act but no separate argument was put to us on

Before dealing with the questions of law raised in this part of the appeal, it is convenient to refer to certain questions of fact. The first relates to the conduct of the New South Wales authorities which administer the Pesticides Act. It was established before the trial Judge that the Queensland Government Department which administers the Agricultural Standards Act - the Department of Primary Industries - was aware of the sale of m-d KP and its use as a fungicide, but had elected

not to take any action in relation to the breaches of that Act. The position with regard to the New South Wales authorities was

Graham, the New South Wales authorities are aware of the position; but they also have elected to

The appellants argued that the evidence upon which this conclusion was based was inadmissible for the purpose of establishing the likely behaviour of the New South Wales authorities. The evidence consisted of answers given by the second respondent, Mr Waugh, to questions put to him in

re-examination. The relevant passage from the transcript reads:

"My Fryberg: --- What has been your belief as to the Magnitude of any risk of seizure of the product in New South Wales? - It is not great. At this stage it is diminishing. It is not great and diminishing? - Yes. Now why do you think that? - Because as I mentioned

un an earlier statement the State D.P.I. have been in contact with the Department of Agriculture of

It is not entirely clear that the trial Judge, in the way in which he stated the matter, was actually making a finding concerning the attitude of the New South Wales authorities. Mr Waugh's evidence was by way of re-examination and did not constitute proof of the present attitude of the New South Wales authorities toward the breaches by UIM of the Pesticides Act. However, there had been no action taken or threatened by the New South Wales authorities. If the trial Judge should be taken to have made a finding about the attitude of the New South Wales

authorities, 1t would not appear to me to be one which was

The second question of fact relates to the time when Mr Waugh became aware of those provisions of the legislation which exposed purchasers of m-d KP to the risks of seizure and forfeiture of the product. According to the trial Judge, Mr Waugh had known of the provisions only since the interlocutory hearing on 12 April 1985. Certainly Mr Waugh gave evidence to this effect. However, as the appellants point out, there was a

specific admission by Mr Waugh made under cross-examination that

he knew "Long before the interlocutory hearing" of the liability of Queensland purchasers to seizure and forfeiture. This raises a question whether the trial Judge was correct in relying on Mr Waugh's earlier evidence. However, even if Mr Waugh should be taken to have known of the position in Queensland prior to the interlocutory hearing, I would not attach much legal significance to this. As Gibbs C.J. said in Parkdale Custombuilt Furniture Pty. Limited v. Puxu Pty. Limited (1982) 149 C.L.R. 191, at p.197: "The liability imposed by s.52 ... is quite unrelated to fault". In particular, there need be no intention to mislead or deceive: Hornsby Building Information Centre v. Sydney Building Information Centre (1978) 140 C.L.R. 216, at p.228. Thus, if the respondents' conduct was misleading and deceptive, it would not be an answer that they were unaware of the risks of seizure and forfeiture; but nor is their awareness of those risks necessarily conclusive, although it is a factor to take into

Finally, in regard to the evidence, I do not consider Mr Waugh's admissions during cross-examination that the failure to warn customers was "dishonest" and "deceptive" and "misleading" as conclusive of the issues in this case. The trial Judge was correct in holding that the determination of the question whether UIM engaged in misleading or deceptive conduct involves a legal conclusion. The task of the Court was to decide whether, on the

evidence before 1t, the conduct complained of contravened s.52,

as that section has been judicially interpreted. The legal

quality of the respondent's conduct must be judged by the Court, not by witnesses. As Lockhart J. observed in Happy Landings Pty.

Limited v. Margarine Promotions Pty. Limited (1984) A.T.P.R. 40-459, at p.45,314:

"Ultimately, it is for the Court to determine whether the respondent's conduct contravenes the

Practices Act, and the evidence of attitudes or views of members of the public in the present case

I turn now to the main question arising under the Trade Practices Act on this appeal. It is whether the sale by UIM of m-d KP as a fungicide at a time when the product was not registered constitutes conduct by that corporation in trade or commerce that is misleading or deceptive or is likely to mislead

or deceive, and hence contravenes s.52 of the Trade Practices

Act. The appellants put forward a number of arguments in support

of their contention that UIM was in breach of s.52. I will deal

It was argued that UIM had been shown to have intended to mislead and deceive some of its customers. This was allegedly borne out by Mr Waugh's admissions that he knew "long before the interlocutory hearing" of the risks of seizure and forfeiture and that the failure to warn customers of those risks was "dishonest", "deceptive" and "misleading". Intent was also demonstrated by the fact that Mr Waugh warned some, but not ail,

of the respondent''s customers. This admittedly selective

approach, so it was argued, gave rise to the plain inference that the admitted failure to warn some of the customers was deliberate. It was then contended that, as it was shown that the respondent's conduct was intentional. the Court should assume that the intention, namely to mislead or deceive, was effectuated. Reference was made to cases of passing-off (Cadbury Schweppes Pty Limited v. The Pub Squash Co. Limited £1981] R.P.C. 429, at p.493; cf. Slazenger v. Feltham (1889) R.P.C. 531 at p.538), and to defamation cases where the plaintiff is not expressly named in the article or broadcast complained of (David Syme & Co. Limited v. Lloyd £1984] 3 N.S.W.L.R. 346, at pp.361-2 per Priestley JA; approved by Privy Council at (1985) 60 A.L.J.R. 10, at p.13.)

However, in this case there are, in my opinion, insufficient grounds for concluding that the appellants did in fact intend to mislead and deceive some of their customers. In this respect, I agree with the observations of the trial Judge, who found that any omissions on the part of UIM or Mr Waugh were inadvertent. I am not persuaded that this conclusion should he overturned. As the trial Judge observed, an intentional decision not to inform some purchasers, and hence to mislead and deceive them, would have been inconsistent with the other behaviour of the respondents. I do not accept the appellants' argument that because the respondents warned some but not all of their customers, an intention to mislead and deceive those customers

who were not warned should be inferred. On the contrary, I agree

with the trial Judge that Mr Waugh's disclosure to some customers

was in the circumstances behaviour inconsistent with such an

Further, as the trial Judge held, an intention to mislead or deceive would also be inconsistent with Mr Waugh's

attitude to suggestions made in Court regarding disclosure on the labels of the product. At the interlocutory hearing, when such a suggestion was first made, the respondents promptly indicated that they "would be agreeable to giving any reasonable form of warning on the label, if that were thought appropriate by the Court". A particular wording was agreed upon and was in fact printed on subsequent labels. When, at the final hearing, counsel for the appellants attacked the adequacy of the disclosure on those labels, the respondents offered to amend the labels to take 1n a full reference to the legal consequences of non-registration and invited the appellants to suggest appropriate words. This behaviour was clearly inconsistent with an intention to mislead or deceive purchasers of m-d KP. This

The second argument advanced by the appellants centred

upon s.4(2) of the Trade Practices Act, That sub-section, in so

(a) a reference to engaging in conduct shall be read as a reference to doing

(c) a reference to refusing to do an act includes a reference to -

(ii) making it known that that act will not be done; ...".

The appellants submit that UIM's failure to warn customers of the risks of seizure and forfeiture constituted "engaging in conduct" within the special definition in s.4(2). I do not agree. Although s.4(2) recognises that an omission to do an act may constitute "engaging in conduct", that will only be so where there has been a refusal to do, or a deliberate refraining from doing, an act. The words "refuse" and "refrain" clearly connote that the omission to do an act must be deliberate. I agree with the trial Judge that s.4(2) does not materially assist

The main argument put by the appellants related to the question whether, and if so in what circumstances, silence may constitute misleading or deceptive conduct. It was not suggested that the respondents had been guilty of any positive misrepresentation; thus they did not assert that their product was registered. Rather what was alleged was that their failure to warn customers affirmatively by labelling or otherwise that their product was unregistered and furthermore, that a consequence of

this lack of registration was that the product was liable to

seizure or forfeiture constituted misrepresentation by silence or

at least conduct which was misleading or deceptive.

In the case of conduct complained of it is insufficient

to show a breach of s.52 to prove that it may result in confusion

in the minds of consumers (McWilliams Wines Pty Limited v

McDonalds System of Australia Pty Limited (1980) 49 F.L.R. 455),

it will usually only amount to conduct which is misleading or

deceptive, if it contains or conveys, in all the circumstances of

the case, a misrepresentation (Taco Company of Australia Inc. v Taco Bell Pty Limited (1982) 42 A.L.R. 177, at p.202).

Where silence is relied on in order to show a breach of s.52 it will depend upon the circumstances whether the silence constitutes conduct which 1s misleading or deceptive. As in the case of other sections of the Trade Practices Act the Court may gain assistance from consideration of cases at common law and in

equity dealing with related types of situations. However, the

Court is not confined by such cases because it is concerned with

the interpretation and application of the words of the particular

Dealing with the question of misrepresentation constituted by silence, there are cases which show, for example, that an omission to mention a qualification, in the absence of which some absolute statement made is rendered misleading, is

conduct which should be regarded as misleading. So too is the

omission to mention a subsequent change which has occurred after

some statement which is correct at the time has been made where the result of the change is to render the statement incorrect so that thereafter it becomes misleading. This also may be regarded as constituting misleading conduct. However, the general position between contracting parties has been expressed in the following

" The general rule, both of law and equity, in respect to concealment, is that mere silence with regard to a material fact, which there is no legal obligation to divulge, will not avoid a contract, although it operate as an injury toa the party from whom it is concealed."

(Smith v. Hughes (1871) L.R. 6 Q.B. 597 at p.604; and see Ward v

Hobbs (1878) 4 App. Cas. 13; W. Scott, Fell & Co. Limited v.

Lloyd (1906) 4 C.L.R. 572; cf. Chadwick v. Manning £1896] A.C. 231, at p.238). Under the general law it is important to consider whether there is a legal obligation to divulge. There are particular relationships which have been held to raise an obligation of disclosure. Contracts uberrimae fidei come to mind as examples of this type of relationship. Indeed, there are many particular relationships which raise duties of disclosure. These include trustee and beneficiary, solicitor and client, principal

and agent and guardian and ward. Where an obligation to disclose

arises an omission to inform the person te whom the obligation is owed may, perhaps on the basis that that person is entitled to assume some fact or circumstance which does not exist, constitute

The notion of relationships giving rise to an obligation to make disclosure is one which may well prove useful in determining some of the cases which may arise under s.52 of the Trade Practices Act. However, the Court will not be restricted to cases where such a relationship has already been held to exist at common law or in equity. The Court is likely to be faced with situations under s.52 between particular parties, where it will feel bound to hold that such an obligation to disclose arises

Vendors and purchasers have not generally been regarded as being, without more, in this type of relationship. There are occasions when a particular enactment or even the terms of a particular contract will impose an obligation upon a vendor which will place the parties in a relationship of this type involving an obligation to make disclosure. However, in the present case I do not discern any relationship between the respondents and their customers which would give rise to any particular obligation to make disclosure or which would lead the Court to hold that a duty of disclosure should be held to arise. When one analyses what it is said that the respondents should have disclosed to customers 1t does not appear to amount to very much more than a_ statement of what the customers local State law is (be it Queensland law or New South Wales law) anda statement that the law has not been

The conduct dealt with by s.52 is conduct which leads or is likely to lead a person or persons into error. In the present

case there is no conduct of the respondents which it is shown would lead a person or persons into error as to what the law of their State was or lead them into error as to whether or not the respondents had complied with that law. The conduct of the

respondents at the relevant time was silent on these points.

As I have already mentioned, this is not a proceeding brought to enforce State law. The appellants have sought to prove

a case of breach of s.52 of the Trade Practices Act against the respondents. The matter before us has to be decided according to

I find myself in agreement with the learned trial Judge that the appellants have failed to make out a case under s.52

I certify that this and the eighteen (ig) preceding pages are a true copy of the Reasons for Judgment herein of his Honour the Chief Judge, Sir Nigel Bowen

) ) NEW SOUTH WALES DISTRICT REGISTRY ) No. G 303 of 1985 ) )

ON APPEAL FROM A SINGLE JUDGE OF THR FEDERAL COURT OF AUSTRALIA

BETWEEN: RHONE-POULENC AGROCHIMIE S.A. First Appellant

CORAM: BOWEN C.J., LOCKHART and JACKSON JJ. 8 JULY 1986

This appeal from the judgment of a single Judge of this Court (Wilcox J.) concerns two questions: first, whether the respondents are infringing patent No. 493818 ("the patent") of which the registered

proprietor is the first appellant, Rhone-Poulenc Agrochimie 5.A. ("Rhone-Poulenc") and, second, whether certain of the consumer

protection provisions of the Trade Practices Act 1974 ("the Trade

Practices Act") are being infringed by the respondents .

The patent is for an invention entitled "Fungicidal Compositions Containing Phosporous Acid Or Its Salts". The second appellant, May and Baker Australia Pty. Limited ("May and Baker"), markets a product known as "Aliette" which is a fungicide for various fruit crops including avocados. Both Rhone-Poulenc and May and Baker

are subsidiaries of companies that are ultimately owned by a French

The first respondent UIM Chemical Services Pty. Limited

{"UIM") manufactures and markets a product sold under the name "m-d

KP" in Australia as a fungicide to control phytophthora in fruit trees. Most of the ultimate purchasers of m-d KP are avocado growers in south-east Queensland and northern New South Wales. UIM''s product, m-d KP, competes with Aliette but m-d KP is sold for a price considerably lower than that of Aliette. m-d KP was developed by the second respondent, Clyde Todhunter Waugh, a chemical engineer and a

Mr. Waugh gave evidence that UIM received numerous enquiries from fruit growers for phosphorous acid in the latter part of 1984. At about the same time the Queensland Department of Primary Industries had been conducting on selected avocado farms trials of the fungicidal effects of the injection of various types of fruit bearing trees with a solution containing phosphorous acid. It was thought that the results were excellent, thus enlivening the interest in phosphorous

acid for this purpose. Many of the persons requesting phosphorous

acid also asked UIM to supply caustic potash (potassium hydroxide), this being an alkaline substance intended to be mixed with phosphorous acid partially to neutralise its acidity and to prevent leaf burning. The reaction of caustic potash with phosphorous acid is exothermic, ie. heat producing, so that the mixing process must be carried out

"As I feared that customers might not carry out the mixing process safely and would not be able to produce an accurate mixture that was neither too acidic nor too alkaline and in which the potassium salts were properly dissolved, UIM decided to supply phosphorous acid and potassium hydroxide

already mixed together with water to these customers. I decided, merely as an arbitrary

figure, that a 20% weight by volume mixture of each of phosphorous acid and potassium hydroxide would be an acceptable mixture. When phosphorous acid and potassium hydroxide are added to water the resulting product is a mixture of mono potassium phosphite and di potassium phosphite. This is the product which is manufactured and sold by UIM under

Some farmers told Mr. Waugh that they proposed to apply m-d KP by direct injection into the tree trunk and asked him for advice as to the best technique. UIM then produced an information sheet setting

The appellants commenced proceedings in this Court claiming that the sale of m-d KP by UIM contravenes the provisions of ss. 52, 53(c) and 55 of the Trade Practices Act, the claim being based upon alleged contraventions of certain provisions of Queensland and New South Wales statutes relating to the registration of fungicides. The

appellants also claimed that the manufacture, sale and use of m-d KP

infringes the patent. The appellants sought injunctions and damages. By consent of the parties the learned trial Judge heard and determined the question of the respondents' liability separately from the question of damages and directed that any question as to the quantum of damages to be paid by the respondents or either of them to the appellants or as to the taking of any accounts of the respondents' profits be tried separately after the determination of the question of liability. The trial Judge found against the appellants on the issues relating to both the claim for infringement of the patent and the

claim based on the Trade Practices Act and dismissed the application,

ordering the appellants to pay the respondents' costs of the

proceedings. It is from his Honour's judgment that this appeal is

The specification for the patent was lodged for registration on 26 November 1974. It has a Convention Priority date of 26 November 1973. The specification commences with a description of the invention

in respect of which the patent was sought. This description reads:

"This invention relates to fungicidal compositions based on phosphorous acid or its salts.

compositions suitable for using in controlling parasitic fungi in plants and containing, as an active material inan amount from 20 to 95% by weight at least one compound selected from the

group comprising phosphorous acid, its mineral salts and its organic salts together with an

agriculturally acceptable inert support selected from the group consisting of clay, synthetic or natural silicates, resins, Waxes, solid fertilisers, water, alcohols, ketones, petroleum fractions, chlorinated hydro-carbons and liquefied gases; and at least one ionic or non-ionic

surfactant selected from the group consisting of emulsifiers, dispersants, deflocculants and wetting

The description identifies three elements or integers, namely, an

active material, an inert support and a surfactant, in each case to be

M-d KP is a composition consisting of mono potassium phosphite, di potassium phosphite and water. The appellants contend that the mono potassium phosphite and the di potassium phosphite together constitute a compound formed from the mineral salts of phosphorous acid. They argue that the compound, heing between 20 and 95 per cent by weight of m-d KP, is thus an active material of the

type described in the patent specification. The respondents deny

It is common ground that the water in m-d KP is an inert support of the kind described in the specification. It is also common ground that m-d KP does not contain a surfactant which, in the case of a fungicide, may be described as a substance intended to improve the delivery to the plant of the active material present in the

The principal issue before the trial Judge relating to the patent was whether the manufacture and sale of a substance which did not contain a surfactant could be an infringement of the patent. In essence the issue was whether the presence of a surfactant must be regarded as an essential element of the monopoly claimed by the

The trial Judge considered the seventeen claims in the specification which were said to define the invention. He found that the first sixteen were "composition claims" each of which included ail three integers, that is, an active material, an inert support and a surfactant. He found nothing in the language of those claims to suggest that the presence or absence of a surfactant was optional or immaterial. His Honour found that the seventeenth claim was a "method claim" which "does not rise beyond whatever limitations exist in

"A method of controlling fungus disease in plants, comprising a composition of the kind claimed in any of the Claims 1to16 for preventive or curative

The trial Judge recognised that the protection from infringement which is given to a patentee by his grant is not necessarily confined to an infringement by a thing which is in every respect identical with the invention described in the patent specification and that the protection extends to the "pith and substance" of the invention. He thus posed the question to he

determined as whether the presence in the composition of a surfactant

was of the "pith and substance" of the invention the subject of the patent. In order to answer that question his Honour construed the patent as at its Convention Priority date (26 November 1973) and in the light of the knowledge available at that time to persons _ skilled

The trial Judge stated that it was common ground between the parties that in only one method of application, namely, the direct injection of fungicide into the trunk of the plant, was a surfactant not necessary. He concluded that in November 1973 "little thought had been given to direct trunk injection of fungicides" and that "the applicants for the patent simply did not contemplate the use of a fungicide without a surfactant". His Honour held that whether for that or some other reason the appellants chose to include all three

integers when they described and defined their claims.

The trial Judge concluded that the inclusion of a surfactant must be regarded as an essential element of the claims, that the protection granted by the patent extended only against compositions which included a surfactant and that, as m-d KP did not contain a surfactant, the manufacture and sale of it by UIM was not an infringement of the patent. In view of that conclusion, his Honour found it unnecessary to decide whether m-d KP in fact contained an active material of the type described in the patent specification. It was also unnecessary to decide whether the Court should, in its

discretion, grant an injunction under s. 118 of the Patents Act 1952.

Counsel for the appellants submitted to this Court on appeal that the trial Judge erred in finding no infringement by UIM of the patent. The principal submission of counsel for the appellants was that, irrespective of whether, on the proper construction of the composition claims in the specification, the use of a surfactant was essential, the "method" claim in Claim 17 was distinct from and independent of the various composition claims. It was argued that the essence of the patent was the discovery of a new process or method of using well known chemical substances for a new purpose, namely, the treatment of fungus diseases in trees and plants. This new method, it

was said, was embodied in the Claim 17, the "method claim" in the specification and was the application of phosphorous acid or its salts {the active material) as a fungicide. It was argued that it was clear upon reading the specification as a whole that the new method or process was the pith and substance of the invention the subject of the patent. The invention, it was argued, is distinct from the compositions which are described in the specification. In support of that argument reliance was principally placed on the following

(a) The patent specification commences with the words "This invention relates to fungicidal compositions -.-" Counsel for the appellants noted that "relates to" was chosen rather than, for instance, "consists

(b) The statement on page 17 of the specification that

"the compounds according to the invention are not used

on their own. Instead, they generally form part of formulations which, as a rule, contain a _ support and/or a surfactant in addition to the active material according to the invention". The appellants submitted that this passage indicates that the addition of a surfactant is not an essential element of the

(c) Examples 2{c), 3 and 4 of the examples given in the

specification of "the fungicidal properties of the compounds according to the invention" do not involve

Counsel for the appellants submitted that Wilcox J. erred in holding that the method claim which embodied the essence of the invention "does not rise above whatever limitations exist in claims 1 to 16". Counsel submitted that the pith and substance of a method invention is very different from the pith and substance of a composition invention and, in any case, the method claim referred to methods of controlling fungus disease applying compositions "of the

kind" claimed in claims 1 to 16. Counsel submitted that the words "of the kind" supported their submission that, even if the use of a

surfactant is an essential integer in the composition claims, it is

not an essential integer in the "method" claim because without it the

composition still assumes the description within the language of Claim

17 of "a method of controlling fungus disease in plants, comprising a composition of the kind claimed in any of the Claims 1 to 16 for

The appellants also challenged the finding of the trial Judge that it was common ground that, except in relation to the direct injection of fungicides into the trunks of plants, "the satisfactory application to plants of any of the compositions constituted by the first and second integers in the various claims would require the addition to that composition of a surfactant". The appellants argued that there was acceptable evidence that the use of a surfactant was, at the Convention Priority date, known to be inessential. Counsel

submitted that these matters support the contention that the

Finally, counsel for the appellants submitted that the application of the pith and substance principle, based upon the knowledge of a person versed in the relevant field, leads to the conclusion that the use of m-d KP is an infringement of the patent, that by selling m-d KP UIM knowingly contributes to such infringement

and that such sale by UIM is itself an infringement of the patent.

Counsel for the respondents argued that upon a proper construction of the patent it must be concluded that a surfactant is an essential integer of the patented invention and that the sale and

use of m-d KP could not infringe the patent. The respondents

primarily relied upon the wording of the seventeen claims in the

specification said to define the invention. The respondents also submitted that the process described in the method claim would not have been a patentable invention if it had not included a surfactant. The respondents argued that, in the absence of a surfactant, the method claim would not have disclosed a practical method of application of the invention. Counsel submitted that at the relevant time the employment of a surfactant was regarded as essential for the efficient delivery of the active material. At that time a spray capability was nearly always provided and for that purpose a surfactant was required. Further, it was submitted, the injection

technique of applying fungicides was not known in Australia in

Counsel for the respondents submitted that, even if their arguments concerning the surfactant were rejected, the sale of m-d KP could not be an infringement of the patent because it did not in fact

contain an active material of the type described in the specification.

It was also contended by counsel for the respondents that, even if it were held that the use of m-d KP infringed the patent, the respondents neither did nor threatened to do any act which would itself amount to an infringement of the patent. They argued that selling the product to others in the knowledge or expectation that they would use the product in infringement of the patent is not

sufficient to sustain a finding of infringement by the seller.

Finally, counsel for the respondents submitted that, if the appellants' case concerning infringement was made out, injunctive relief should be refused by the Court in its discretion, broadly on

In an action to restrain the infringement of a patent it is first necessary to construe the claims in the specification which define the invention. It is, I think, permissible to have regard to the language of the specification as a whole when construing the claims but it must he remembered that the invention the subject of a valid patent is defined solely by the claims in the specification. A complete specification under the Patents Act 1952 must end with a

claim or claims defining the invention: para. 40(1)(b).

I propose to turn first to the sixteen "composition claims" in the specification. Claim 1 encompasses fungicidal compositions which contain an active material together with an agriculturally acceptable inert support and at least one ionic or non-ionic surfactant. There is nothing in the language of that claim which suggests that the presence of a surfactant is optional. Claim 2 is expressed to include compositions as claimed in Claim 1 in which "the surfactant" is selected from nominated groups. All of the "composition claims" from 2 to 16 inclusive, relate directly or indirectly back to Claim 1. They are thus governed by Claim 1. To establish infringement of combination patent claims such as these the patentee must show that the alleged infringer has taken each and every one of

the esential integers of the claims: see Populin v. H.B. Nominees Pty.

Limited (1982) 41 A.L.R. 471; Terrell on "The Law of Patents", 13th

Ed., 1982, para. 6-51. Clearly, the sale of a product which does not

contain a surfactant could not constitute an infringement of the

If the appellants are to succeed on the question of infringement they must show that the trial Judge erred in holding that

the "method claim" did "not rise beyond whatever limitations exist in

claims 1 to 16". The appellant's case on this point relied largely upon certain parts of the specification which, it was said, indicated

that a surfactant is not an essential element of the invention the

subject of the "method claim". However, it is well established that the extent to which recourse may be had to the language of the general body of the specification in order to construe the claims in the specification is limited. I respectfully adopt the words of Lord

Russell of Killowen in Electric and Musical Industries Limited v.

"The claims must undoubtediy be read as part of the entire document and not as a separate document; but

the forbidden field must be found in the language of the claims and not elsewhere. It is not permissible, in my opinion, by reference to some language used in the earlier part of the specification to change a claim which by its own language is a claim for one subject-matter into a

claim for another anda different subject-matter, which is what you do when you aiter the boundaries

through the eyes and minds of those skilled in the art at the material

time, namely, the priority date: Codex Corporation v. Racal~Milgo

Limited £19833 R.P.C. 369 per May L.d3. at p. 381, It must also be borne in mind that decisions regarding the matters to be included in the claims in a patent rest exclusively with the patentee. In Waiker v. Alemite Corporation (1933) 49 C.L.R. 643 at p. 656 Dixon J. quoted

with approval the dictum of Lord Parker in Fellows v. Thomas William

"A claiming clause operates as a disclaimer of what is not specifically claimed, and for such

disclaimer there may be reasons known to the inventor but not to the Court."

"A method of controlling fungus disease in plants, comprising applying a composition of the kind claimed in any of Claims 1 to 16 for preventive or curative treatment."

It is immediately apparent that the language of the claim reveals a strong connection with the first sixteen claims in the specification. The method it purports to define is a new method for the control of fungus disease in plants. That method is the

application of compositions "of the kind" claimed in any of the first

sixteen claims. Bach of those compositions is defined to contain three essential elements, one of which is a surfactant. It may he true that the actual inventive step involved is not the discovery of new compositions but the discovery of a new use to which previously well-known substances could be put. More importantly, the

exploitation of that inventive step may not logically require the

employment of a surfactant. Nevertheless, the language of Claim 17

conveys the impression that the patentee was content to confine its monopoly to the exploitation of the inventive step through the

application of compositidns each of which contain a surfactant. I do not think that the words "of the kind" in Claim 17, when read in their context, allow the claim to be read as including the use of a

The various passages in the body of the specification which were relied upon by the appellants do not advance their position. The

statement on p. 17 of the specification already referred to and some

of the examples given of the fungicidal properties of the compounds

according to the invention may indicate that the exploitation of the invention the subject of the patent does not necessarily require the use of a surfactant; but to use those passages in support of the submission that a monopoly is claimed over the exploitation of the invention regardless of whether a surfactant is employed comes dangerously close to using the language of the general body of the specification to change the meaning of a claim which must be derived essentially from the language of the claim itself. Further, the description of the invention on p. 2 of the specification clearly indicates that the invention relates to compositions which contain all three integers. Counsel for the appellants suggested that it was significant that the words "relates to" were chosen rather than, for example, "Consists of". However, the use of the words "consists of" would not be apposite here where the invention is not the discovery of a new chemical substance but is the discovery of a new use to whicha

Much reliance was placed by counsel for the appellants in argument upon the "pith and substance" or "pith and marrow" principle. The classic statement of that principle was made by James L.J. in

"The patent is the entire combination, but there is, or may be, an essence or substance of the invention underlying the mere accident of form; and that invention, like every other invention, may be pirated by a theft in a disguised or mutilated form, and it would be in every case a question of fact whether the alleged piracy is the same in substance and effect or is a substantially new or

The principle was discussed by Gibbs J. in Olin Corporation v. Super Cartridge Co. Pty. Limited (1977) 51 A.L.J.R. 525 at p. 530:

"The principle that there may be infringement by taking the 'pith and marrow' or the substance of an invention does not mean that there will be an infringement where the patentee has by the form of his claim left open that which the alleged infringer has done. And it does not affect the fundamental rule that there will be no infringement unless the alleged infringer has taken all of the essential features or integers of the patentee's claim: see Rodi and Wienenberger A.G. v. Henry Showell Limited [19691 R.P.C. 367, especially at pp. 383-384."

See also the judgment of Aickin J. in Minnesota _ Mining and

Manufacturing Company v. Beiersdorf (Aust) Limited (1980) 144 C.L.R.

In Catnic Components Limited v. Hill and Smith Limited [£1982]

"My Lords, a patent specification is a unilateral statement by the patentee, in words of his own choosing, addressed to those likely to have a

practical interest in the subject matter of his invention (ie. "skilled in the art"), by which he informs them what he claims to be the essential features of the new product or process for which the letters patent grant him a monopoly. It is those novel features only that he claims to he

essential that constitute the so-called "pith and marrow" of the claim."

"The question in each case is: whether persons with a practical knowledge and experience of the kind of work in which the invention was intended to be used, would understand that strict compliance with a particular descriptive word or phrase appearing in a claim was intended by the patentee to be an essential requirement of the invention so that any variant would fall outside the monopoly claimed, even though it could have no material effect upon the way the invention worked.

The question, of course, does not arise where the variant would in fact have a material effect upon the way the invention worked. Nor does it arise unless at the date of publication of the specification it would be obvious to the informed reader that this was so. Where it is not obvious, in the light of then existing knowledge, the reader is entitled to assume that the patentee thought at the time of the specification that he had good reason for limiting his monopoly so strictly and had intended to do so, even though subsequent work by him or others in the field of the invention might show the limitation to have been unnecessary. It is to be answered in the negative only when it would be apparent to any reader skilled in the art that a particular descriptive word or phrase used in a claim cannot have been intended by a patentee, who was also skilled in the art, to exclude minor variants which, to the knowledge of both him and the readers to whom the patent was addressed, could have no material effect upon the way in which the invention worked."

In my opinion, the application of the pith and substance principle does not support the contention that the use of m-d KP constitutes an infringement of the patent. The claims, including the method claim, when construed in the light of the whole specification, define the essential elements in the patent which constitute its pith and substance. The presence of a surfactant must in this case be regarded as an essential element of the claimed monopoly. I agree with Wilcox J. that the pith and substance principle has a limited application and is typically applied where the alleged infringing article reproduces all integers but departs ina minor respect from the description of one of them. I also agree with him that this is a case where the elimination of the integer affects the way in which the invention works. It was open to the patentee to attempt to obtain a patent which would involve compositions with only the first two

In my opinion the trial Judge did not err in his findings on the patent question and the appeal on that question should be

Legislation exists in both Queensland and New South Wales

relating to the registration of fungicides. The Queensland Act is the Agricultural Standards Act 1952. The expression "agricultural requirement" is defined by s. 7 as including "pest destroyer". . The

term "pest destroyer" is itself defined in the same section as

including "fungicide". ""Fungicide" is in turn defined as meaning:

preventing the attack on plants ... of fungi or other parasitic plants or bacteria which affect or which may affect such plants ..."

The trial Judge found that m-d KP is intended to be used and is in fact used for the purposes of destroying or preventing attacks on fruit trees of fungi or other parasitic plants or bacteria which

may affect such trees. He held that the composition is an

agricultural requirement" within the meaning of the Queensland Act.

Part III of the Queensland Act provides for the registration of agricultural requirements to which the Part applies. Section 15 forbids any person to "sell" an agricultural requirement to which the

part applies "unless that agricultural requirement is then registered

under this Part". The word "sale" is defined by s. 7 as including:

"placing or causing to he placed on the market in Queensland, and barter and exchange and supply, and also offering or attempting to sell, and supplying or receiving for sale, or having in possession for sale ... or allowing to be sold or offered for

sale". His Honour found that the word "sell" must be widely interpreted, that it was clear that the respondents carried out numerous actions which

fell within one or other of the limbs of the definition of "sale" and,

as it was admitted that m-d KP was not registered under the Queensland

Act, it followed that there had been numerous contraventions of s. 15. Until registration is achieved any further sale would constitute a contravention of the section. His Honour noted that a contravention of s. 15 is punishable as an offence (s. 83) and that the relevant

"agricultural requirement" is liable to forfeiture (s. 84).

Part VIII of the Queensland Act relates to inspection,

sampling and analysis. Section 67(1)(v) empowers inspectors to:

"seize and detain prohibited materials, agricultural requirements, and packages, labels and advertising matter relating in whole or in part to any agricultural requirement, which or any part of which, in his opinion, does not comply in any respect with any provision of this Act or in relation to which ... he is of the opinion that ail or any of the provisions of this Act have not been

complied with ...": Section 71(2) provides for forfeiture, under certain

His Honour proceeded upon the assumption that s. 67(1)(v) empowered inspectors to seize agricultural requirements which had been sold in contravention of s. 15 and upon the further assumption that the consequence of the failure by the first respondent to register the

product under the Queensland Act is to expose the purchaser of the product to the risk that the product will be seized from him and

The relevant New South Wales legislation is the Pesticides

Act 1978. Section 5 of that Act defines "pesticide" as including:

"any substance eee that is manufactured, represented, sold or used as a means for directly or indirectly eee destroying or rendering

ineffective, or regulating the effect of, a fungus or any other parasitic vegetation, bacteria ora virus on or in... any form of life except where it

is in livestock or on or in man". Part III provides for the registration of pesticides. It is an offence to sell (s. 29), supply (s. 30), prepare for use or use (Ss. 31) an unregistered pesticide. Section 53(1)(c) empowers an inspector who suspects on reasonable grounds that there has been a breach of the Act to seize and remove any substance that he suspects on reasonable grounds to be a pesticide. Section 61 provides that where a person is convicted of an offence against the Act the Court may order forfeiture to the Crown of the pesticide in respect of which the offence was committed. His Honour found that in New South Wales, as in Queensland, a person who purchases m-d KP before registration is at risk of his purchase being seized and forfeited. He aiso found that

s. 31 of the NSW Act exposes a purchaser who uses m-d KP to the risk

There was evidence before the trial Judge as to the awareness of at least one State authority concerned with the administration of the relevant statute of the fact that m-d KP is being sold and used as a fungicide. This included evidence of conversations between Mr. Waugh and officers of the Queensland Department of Primary Industries. His Honour found that it was apparent that the Queensland Department had known for several months before the commencement of the final

hearing of the sale of m-d KP and of its use as a fungicide and that

it had not elected to take any action in relation to that sale or use against either UIM or a purchaser. His Honour also found that the New South Wales authorities were aware of the position and that they too elected to take no action. This last finding of his Honour was challenged by counsel for the appellants who submitted that all the evidence established was that the New South Wales authorities were aware of the position, but there was no evidence that they had made a

decision one way or the other as to the course of action they would

His Honour summarised his findings in relation to this aspect

His Honour found that Mr. Waugh was at all material times aware that m-d KP was being purchased by persons intending to use the composition as a fungicide and that he knew of no other use for the product. He was aware of the requirements of the legislation, in both Queensland and New South Wales, for registration of fungicides. He knew that the sale by his company, as a fungicide, of m-d KP constituted an offence and he said that, for this reason, the company did not promote the product or label or advertise it as a fungicide.

His Honour accepted Mr. Waugh's statement that he did not know prior

to the interlocutory hearing for injunctive relief on 12 April 1985 of Chose provisions of the Act which enabled seizure of unregistered fungicides from purchasers. But his Honour found that, if UIM's conduct constituted misleading or deceptive conduct under the Trade Practices Act, it would be no answer that UIM did not realise the extent of the risk imposed upon its customers by that conduct. His Honour found that there was no deliberate decision by UIM not to disclose the fact that the product was unregistered. At the hearing for interlocutory injuctive relief counsel for the respondents informed the Court that the respondents "would be agreeable to giving any reasonable form of warning on the label, if that were thought

appropriate by the Court". On the final hearing his Honour noted:

"After discussion, during which it was not suggested on behalf of the applicants that the notification should go any further, the wording was formulated which was in fact printed on the subsequent labels. When, at the final hearing, counsel for the applicants attacked the adequacy of the disclosure on those labels, the respondents offered to amend the label to take ina full

reference to the legal consequences of non-registration. Their counsel invited the applicants to suggest appropriate words. In none

of this was there any element of refusal or deliberate refraining from carrying out the relevant acts."

His Honour accepted Mr. Waugh's evidence that he himself informed some purchasers of the fact of non-registration and of the resultant legal position as he understood it. Mr. Waugh conceded that he did not inform all purchasers, but there is nothing to indicate, said his Honour, that this failure flowed from a deliberate decision

not to supply that information. He said that any omissions were

inadvertent and there was no reason to conclude otherwise. His Honour posed the critical question as being whether the circumstances supported the conclusion that the non-disclosure had resulted or would be likely to result not merely in confusion or in a misconception by potential purchasers but ina misrepresentation to them of some

His Honour said that he did not think the present facts fell within either of the two classes of case identified in Halsbury's Laws of England, 4th Ed., Vol. 31, para. 1050 whereby silence may constitute or contribute to actionable misrepresentation, namely, where known material qualifications of an absolute statement are omitted or where the circumstances raise a duty on the representor to state certain matters if they exist and where, therefore, the representee is entitled to infer their non-existence from the representor's silence. His Honour said the real question was whether the marketing of m-d KP as a fungicide constituted a misrepresentation by conduct that the product was registered as such. His Honour was satisfied that m-d KP was marketed as a fungicide although he noted that at no time had the label adopted by UIM stated that the product was sold or intended for use as a fungicide. In fact, the word "fungicide" was not mentioned on the label except in the context of the statement added to the labels used after the interlocutory hearing to the effect that the product was not a registered fungicide. His Honour said, nevertheless, that the marketing methods adopted by UIM were likely to convey at least to a proportion of potential purchasers

that the product was to be regarded as a fungicide.

His Honour found that it would be likely that some potential purchasers would be aware of the existence and possibly of the basic elements of the relevant State legislation and that there may be others with less knowledge of the position who are ignorant of the source of the requirement but are nevertheless aware that fungicides must be registered. A person with such knowledge and being aware of the open sale of m-d KP as a fungicide may assume that m-d KP has been

"To the extent that such a person thought about the

His Honour rejected an argument by the appellants that UIM should have informed persons of the legal consequences of the position of non-registration, warning them of the possibilities of seizure and forfeiture, and in New South Wales of prosecution, if the product was used. His Honour held that the sale by UIM of m-d KP as a fungicide without disclosing to all purchasers prior to April 1985 of the fact of its non-registration and the failure of UIM to inform all

purchasers of the legal results of that fact did not constitute

misleading or deceptive conduct by UIM in contravention of s. 52 of

the Trade Practices Act. As to the other two provisions of that Act

"The applicants also rely upon s. 53(c) and s. 55 of the Trade Practices Act. In connection with the first provision they argue that UIM has falsely represented that m-d KP has uses which it does not have. In relation tos. 55 they say that UIM engaged in conduct that is liable to mislead the public as to the suitability of m-d KP for its purpose. As counsel recognise, these alternative allegations raise the same issues as those under s. 52. They also fail."

His Honour therefore dismissed the Trade Practices part of the

The trial Judge held that if, contrary to his view, the marketing of m-d KP as a fungicide without disclosure of non-registration did constitute a misrepresentation by UIM and misleading or deceptive conduct by it, he would nevertheless have refused injunctive relief in relation to that conduct. He relied upon the fact that, since shortly after the interlocutory hearing UIM has followed the practice of disclosing by appropriate wording on its label the fact of non-registration, the fact that the practice was adopted pursuant to an undertaking given to the Court at the hearing, and that a renewal of the undertakings was offered at the final hearing. His Honour relied also upon the fact that, to take account of the possibility that some persons may order the product without having seen the label, the respondents offered an undertaking to sell to 30 day credit customers by debiting their accounts and to make a full refund both of the purchase price and of the freight costs to any such customer who returned the goods within 14 days of delivery. His

Honour said that the adoption of those procedures will not always be

effective to eliminate the possibility of the customer being misled or

deceived, but having regard to the identity of the product

nature and size of the market, the implementation of those

undertakings would be likely to avert the possibility of prejudice to

Counsel for the appellants argued before us that the of the respondents in marketing m-d KP without disclosing (a) was unregistered under the relevant legislation and (b) the seizure, forfeiture and prosecution, however slight it may be

been, constitutes misleading or deceptive conduct within the

of s. 52 of the Trade Practices Act. Counsel relied in particular

(a) the fact that UIM sells m-d KP knowing that its only useful

purpose is as a fungicide, that it was developed with that

purpose in mind and that it knew, as did Mr. Waugh, would be so used; (b) both respondents knew long before the interlocutory

of the liability of Queensland purchasers to the seizure and

forfeiture of the product under the Queensland legislation;

(c) Mr. Waugh warned some but not all of the customers of UIM of

these risks, and this admittedly selective approach gives

(da) Mr. Waugh admitted during the course of cross-examination that the failure to warn customers was dishonest, deceptive and misleading. This admission demonstrates that the conduct of the respondents was intentional. The Court will in those circumstances infer that the intention achieved its objective. Reliance was placed upon Blackadder v. The Good

Roads Machinery Company (1926) 38 C.L.R. 332; Lee v. Wilson

(1934) 51 C.L.R. 276; Cadbury-Schweppes v. Pub Squash £19813

R.P.C. 429 and Hayward v. Thompson £1982] 9.B. 47; and

(e) the fact that Mr. Waugh was at pains to warn some customers, demonstrates a strong likelihood that consumers would be

Counsel for the appellants submitted that the sale by UIM of m-d KP to persons who had intended to use the product as a fungicide on avocado trees implied that there was no legal prohibition against its sale or use for that purpose and that possession of the product by a purchaser would not give rise to any liability of seizure and forfeiture. In those circumstances the respondents had to disclose the relevant prohibition and liability if they were to avoid engaging

Counsel for the appellants also challenged his Honour's finding that it would be proper to refuse injunctive relief and to

accept undertakings about the labelling of the product.

The appellants further contended that if the Court were to find that the use of m-d KP infringed the patent (whether or not the sale of the product infringed it), it would follow that the sale of m-d KP would amount to a contravention of s. 52 of the Trade Practices Act. It was argued that the sale of m-d KP in circumstances where the seller knows that the purchasers are likely to infringe the patent and be exposed to the possibility of infringement proceedings, and yet fails to warn purchasers of that danger, amounts to conduct falling within s. 52. Further, it was argued that even if the use of m-d KP does not infringe the patent, the respondents knew that at least some purchasers would add a surfactant to m-d KP before using it asa spray and would thereby infringe the patent. Again, it was submitted that the sale of m-d KP in such circumstances without warning purchasers of the potential danger is conduct within s. 52. This

sufficiently summarises the submissions of counsel for the appellant.

Counsel for the respondents submitted that the trial Judge's

conclusions regarding the Trade Practices Act were correct and should

not be disturbed. They submitted that no conduct of the respondents was capable of amounting to a misrepresentation that m-d KP was registered under any State legislation. Further, they contended that the respondents made no representation as to the fitness of m-d KP for its purpose and in any event it was fit for its purpose in that the risk of seizure or prosecution was nil and the appellants made no

effort to prove otherwise. Alternatively, it was submitted that there

was no basis for interfering with the exercise of discretion by the trial Judge in relation to the refusal of injunctive relief. Counsel for the respondents repeated before us, as they did before the trial Judge, that the respondents are willing to submit to the Court any appropriate undertakings which may be thought necessary. Neither party put separate argument to the Court relating to either para.

Misleading or deceptive conduct under s. 52 generally, though not always, consists of misrepresentations. The distinction between conduct which produces mere confusion or misconception falling short of misrepresentation is well established: Parkdale Custombuilt

Furniture Pty. Limited v. Puxu Pty. Limited (1982) 149 C.L.R. 191; Taco Company of Australia Inc. v. Taco Bell (1982) 42 A.L.R. 177.

Nor do misrepresentations at common law necessarily define in an exhaustive sense misrepresentations of the kind to which s. 52 is directed. They are, of course, a useful guide, but they must not be taken as circumscribing the plain words of a statute of the

Commonwealth Parliament enacted in the 1970's. Section 52 should be interpreted according to the natural and ordinary meaning of its language. Whether it has been contravened depends upon an analysis of the conduct of the alleged contravener viewed in the light of all the

relevant circumstances constituted by acts, omissions, statements or

Intention to mislead or deceive is not a necessary ingredient

of liability under s. 52: Hornsby Building Information Centre Pty.

Limited v. Sydney Building Information Centre Limited (1978) 140

C.L.R. 216; Parkdale Custombuilt Furniture Pty. Limited v. Puxu Pty.

Limited (supra); but intent is not irrelevant in all cases: Bridge

Stockbrokers Limited and Moore v. Bridges (1984) 4 F.C.R. 460 per

It is difficult to conceive how mere silence by an alleged contravener could be sufficient to attract the operation of s. 52, but

when all the relevant circumstances of a case are analysed silence of the alleged contravener may be the critical matter upon which reliance

is placed to establish misleading or deceptive conduct.

I agree with the trial Judge that the determination of the question whether UIM engaged in misleading or deceptive conduct is a matter for the Court to determine and that admissions of Mr. Waugh during cross-examination that his failure to warn customers was "dishonest", "deceptive" and "misleading" are not conclusive of the issues in the case. I agree with the trial Judge that there were insufficient grounds to found a conclusion that the respondents in fact intended to mislead or deceive some of their customers. I say nothing about the finding of the trial Judge that Mr. Waugh knew of the risks of seizure and forfeiture being run by purchasers only after the hearing for interlocutory injunctive relief as I do not find it

The real question, so far as the Trade Practices Act is concerned, is whether it was misleading or deceptive for UIM to sell m-d KP to purchasers in New South Wales and Queensland without informing them that the sale was unlawful and that the product might be seized from them and forfeited and, so far as sales in New South Wales were concerned, that the product might not lawfully be used in

I accept that UIM and Mr. Waugh knew that the purchasers of m-d KP intended to use it as a fungicide. IT accept also that the marketing methods adopted by UIM were likely to convey to prospective purchasers that the product was to be regarded as a fungicide, that it would be likely that some potential purchasers would be aware of the existence and possibility of the basic elements of the relevant State legislation and that there may be others with less knowledge of the position who were ignorant of the sources of the requirement but were

nevertheless aware that fungicides must be registered.

It is widely known that fungicides belong to a class of products, including insecticides and other chemical compositions, which are strictly regulated by government, doubtless because of the real and substantial risks to the health and safety of the public, including people who handle and use them, and because the environment may be harmed by them. But I find it impossible to take the step of holding that any assumption by purchasers that the product is lawfully sold or may be lawfully used or is not susceptible of confiscation

would be relevantly induced or caused by the conduct of the

respondents. Without sale by the respondents there could, of course,

be no such assumption by purchasers; but the mere absence of some

communication from the respondents to the effect that the product is sold by them in contravention of State law cannot in my view constitute a misrepresentation or other conduct falling within the prohibition of s. 52. It is not a case of incorrect information having been given by UIM which it was bound to correct. Nor can I discern from the evidence any material leading to the conclusion that

It is not difficult to think of circumstances in which UIM would have engaged in misleading or deceptive conduct and thus contravened s. 52: for example, if it placed labels on the containers of m-d KP stating that the product was registered under the relevant Queensland and New South Wales legislation or that the product could be lawfully used. That would be a clear case of a representation being made to prospective purchasers that was false and would be of a kind likely to mislead or deceive people into purchasing the product

or otherwise believing that it was fit or safe for use. But that is

Numerous products are marketed today which are closely regulated by government by imposing, for example, minimum standards of safety and health. There are many instances and some spring readily to mind: dairy products, clothing (especially nightwear), electrical goods, motor cars and processed foods. What are the relevant

differences, if any, between this very large range of commodities and

m-d KP? It is true that the unlawful sale or use of m-d KP attracts legal consequences not necessarily shared by other products sold unlawfully, in particular no doubt the susceptibility to confiscation, But it is not difficult to imagine other equally serious legal consequences flowing from the unlawful sale and use of many other goods. I do not accept the correctness of the proposition that the unlawful sale of such goods, with or without knowledge of their prospective use, constitutes a contravention of s. 52 when not coupled with notification of the illegality and its consequences. If the sale and use of m-d KP is unlawful under State law then the State can enforce its own law and stop unlawful sale and use. Similarly in the case of unlawful sale or use under Commonwealth law; courts of competent jurisdiction may enforce Commonwealth law to prohibit such sale or use. I am not persuaded that the facts of this case enter the prohibited domain of misleading or deceptive conduct. When stripped of its cladding all that the argument of the appellants leaves exposed is the proposition that the sale by a manufacturer of a product which he knows is bought for the purpose for which it was made, in circumstances where its sale and use is unlawful, where the product is liable to forfeiture and where the illegality is not made known to purchasers by the manufacturer, constitutes misleading or deceptive

It is useful to consider the relief which the Court is asked to grant because it serves not only to illustrate the difficulties inherent in the question of relief itself in this case, but also

exposes the problems inherent in the argument that the impugned

conduct is misleading or deceptive conduct under s. 52. If an injunction were granted, although it would in form restrain UIM from engaging in misleading or deceptive conduct in contravention of s. 52, and not prohibit sale of the product itself, it would be in substance a restraint on sale unless made in circumstances where UIM discloses both that it is breaching State law and the consequences thereof, hecause ultimately it is the non-disclosure of those matters that allegedly constitutes the misleading or deceptive conduct. I would regard such an injunction as the countenancing by this Court of continuing breaches of the laws of New South Wales and Queensland and would not therefore be disposed, in the exercise of the Court's discretion, to grant injunctive relief. It is true that an injunction of this Court of that kind would not detract from the authority of the States to prosecute for breach of the relevant State laws, nor would it render lawful the prospective conduct under State law; but it would assume the prospective breach of State law as an essential condition precedent ta the operation of this Court's injunction. The case for not granting such an injunction is in my view compelling. In my opinion the acceptance by this Court of undertakings along the Lines suggested by counsel for the respondents would be no different in

substance from the granting of injunctions and would thus be an

I find myseif in agreement with the conclusion of the trial Judge that the respondents have not contravened the relevant consumer

ON APPEAL from a single judge of the Federal Court of Australia

I agree with Bowen C.J. and with Lockhart J. that the

appeal against the learned trial judge's finding that there

was no infringement of Patent No. 493818 should fail.

Except in the respect to which I am about to refer, I also agree with the reasons for judgment of Bowen C.J. on the

other members of the Court is on the question whether the

a) knowing that 1t was useful only as a fungicide; b) knowing that it would be used as a fungicide; c) knowing that the m-d KP was not registered under

d) knowing that the sale of the product, in consequence of the non-registration, was unlawful in Queensland and in New South Wales and that the product might be seized from

e) (in respect of sales in New South Wales) knowing

without notifying purchasers that m-d KP was not registered under the relevant State enactment was a contravention of

The question of course, is whether in the particular circumstances to which I have referred "silence" may amount to conduct which is, or is likely to be, "misleading or

In dealing with this aspect of the case the primary Judge referred to the observation of Deane and Fitzgerald JJ.

in Taco Company of Australia Inc. v. Taco Bell Pty Ltd (1982)

likely to produce confusion or misconception, it cannot, for the purposes of s.52, be categorized as misleading or deceptive unless it contains or

conveys, in all of the circumstances of the case, a misrepresentation." and then went on to apply the tests apposite at common law to determine whether there was an actionable misrepresentation on the part of UIM or Mr Waugh. He held that there was no such misrepresentation, the circumstances not being such that the

case fell within any of the categories in which a duty to

• A- - that the case was not one which would give rise to actionable misrepresentation under the general law. It was not a case

where known material qualifications to an absolute statement

should have been mentioned, nor was it a case (as in Jones v.

Dumbrell [1981] V.R. 199) where a statement true when made had later become false. Further, there was no relationship other than that of vendor and purchaser existing between UIM and the

purchasers from it and 1t 1s clear that the relationship of

vendor and purchaser is not, without more, sufficient to give

rise to a duty to disclose. See Smith v. Hughes (1871) L-R. 6

Q.B.597, Ward v. Hobbs (1878) 4 App. Cas. 13 and W. Scott,

I do not agree, however, that the question whether there was a contravention of s.52(1) was concluded once it was determined that there was not a representation which would be actionable under the general law. In the passage which I have

quoted above from Taco Company of Australia Inc. v. Taco Bell

Pty Ltd., Deane and Fitzgerald JJ. were not concerned to define whether the ambit of the concept of conduct which in terms of s.52(1) was or was likely to be misleading or deceptive coincided exactly with the ambit of misrepresentation under the general law. Rather they were concerned to make the point that conduct which produced confusion or misconception was not sufficient to establish a contravention of s.52(1) 'unless it was conduct which unvolved

Similarly, when in Global Sportsman Pty Ltd v. Mirror

Newspapers Pty Ltd (1984) 2 F.C.R. 82 at 88 the Full Court

present fact, a promise, a prediction, or an expression of opinion, the making of it constitutes conduct which is misleading or deceptive or likely to mislead or deceive if the statement contains or conveys a misrepresentation."

it is obvious from the context that their Honours were not determining that only conduct which satisfied the tests of the general law as to misrepresentation could be conduct to which s.52(1) applied. Instead they were emphasizing that the mere fact that the content of a statement was incorrect did not

mean that to make it was inevitably to engage in conduct in

The words of s.52(1) should be given their plain and natural meaning, and should not necessarily be construed to

conform with the common law (see Parkdale Custom Built

Furniture Pty Ltd v. Puxu Pty Ltd (1982) 149 C.L.R. 191 at

198, 202-203, 204, 219) and it is not, in my view, correct to treat s.52(1) as applying only to cases where the conduct of the respondent could amount to misrepresentation under the general law. The ultimate question in each case is whether in the particular circumstances the respondent's conduct whether

constituted by act or omission, by communication or by

silence, is or is likely to be misleading or deceptive.

It follows from what I have said that a vendor's silence in circumstances where the common law would not impose on him a duty to speak may constitute conduct which is, or is likely to be, misleading or deceptive in terms of s.52(1). Indeed one sees that in the statements of the common law principle contained in Story on Contracts, vol I. secs. 516

and 517 and adopted by Cockburn C.J. in Smith v. Hughes

(supra) at 604 and by Griffith C.J. in W. Scott, Fell & Co.

Ltd v. Lloyd (supra) at 577, it 1s recognized in sec. 516 that

the vendor's silence may "operate as an injury to the party - from whom it is concealed", and in sec. 517 that "his" (the vendor's) "silence may operate virtually to deceive the vendee." Of course, not every instance of silence on the part of a vendor means that he has engaged in conduct which is misleading or deceptive. It must be the conduct of the vendor, i.e. the vendor's silence, which induces or is likely to induce the mistaken view on the part of the potential

I turn then to consider whether in the circumstances of the particular case the conduct of UIM and Mr Waugh was within s.52(1). It seems to me that it was, and I am of that view because in the case of a product having one use, at least where, as in the present case, that use 1s of a nature likely

to be subject to legislative regulation, I regard it as

misleading to sell the product in a manner which would be appropriate 1f£ the sale were lawful. It 1s misleading because the sale in that manner creates the clear impression that the product does have whatever approval may be necessary and may be used by the purchaser for the purpose for which it is purchased without, in New South Wales, that use being unlawful and without, in both States, the product being liable to be

I do not mean to convey, of course, that there will be a contravention of s.52(1) on every occasion on which there is a sale by a corporation of a product in contravention of a law be it a law of a State, a law of the Commonwealth or a law

of a Territory. Each case must turn on its own facts.

The fact that I have concluded that the respondents are in breach of s.52(1), however, does not end the matter. The trial Judge went on to say that if, contrary to his view, the respondents were in breach of the Act, he would nevertheless exercise his discretion to refuse injunctive relief, and accept the undertakings offered by the respondents at the final hearing. In this regard UIM has, pursuant to an undertaking given at the interlocutory hearing, disclosed the fact of non-registration by appropriate wording on its labels since shortly after that hearing. It offered to renew the undertakings at the final hearing and agreed to indicate on

the label, in a form approved by the Court, the consequences

The appellants made a number of objections to these undertakings. First, they allege that the last undertaking would involve a contravention of s.78(1)(iv) of the

Agricultural Standards Act which provides relevantly that:-

any label affixed to or upon or inserted in or used in connection with any package of agricultural requirement -

The problem so raised may well be no more than one of

drafting but, for the reasons I shall mention below, it is

The appellants also argued that persons who order m-d KP by mail or telephone, or who buy it in a cash sale over the

counter, do not see the label until they have bought the

product. This problem was referred to by the trial Judge, who noted that the respondents had offered an undertaking to sell only to thirty day credit customers by debiting their accounts, and to make a full refund both of the purchase price and any other freight costs to any customer who returned the

goods within fourteen days of delivery. Such a procedure

The final and significant question, however, is whether it is appropriate for this Court to accept those undertakings. It was argued by the appellants that in so doing, the Court would be, in effect, countenancing continued breaches of Queensland and New South Wales law. I agree with this view and think that the Court should decline to accept

the undertakings but should in lieu grant appropriate

injunctions in respect of the contraventions of s.52({1).

Practices Act issue should be allowed, and the matter relisted for argument as to the form of the injunctions which should be

; | cerlify that this and the eight | ; preceding pages are a true copy of the

Reesons for Judgment herein of his Honour | i Mr. Justice Tackton ee oll |