Snowy Mountains Organic Dairy Products Pty Ltd v Wholefoods Pty Ltd

Federal Court of Australia|2006-10-19|Before: Rares J

REASONS FOR JUDGMENT 1 Snowy Mountains Organic Dairy Products Pty Ltd began proceedings in this Court against Wholefoods Pty Ltd and Stephen Whitsed. Mr Whitsed was a former director of the Dairy. The principal of Wholefoods, Scott Kinnear, on 23 November 2004 wrote a letter to Consumer Affairs Victoria asking it to investigate the truthfulness of the labelling of organic milk and cream produced under the Dairy's brand. He based this, in part, upon what he said were records of telephone conversations he had had with Mr Whitsed who had raised concerns about the source of the Dairy's 'organic milk' which was currently on the market. 2 The Dairy had ceased an association with Mr Whitsed who had supplied certified organic milk prior to this conversation. Apparently the Dairy had also ceased its arrangements with the National Association of Sustainable Agriculture of Australia (NASAA) which was a certifier of organic products. 3 Wholefoods seeks to have these proceedings transferred to the Supreme Court of Victoria pursuant to s 5(4) of the Jurisdiction of Courts (Cross Vesting) Act 1987 (Cth). Alternatively, it has sought to have the proceedings remitted to the Federal Magistrates Court in its Victoria District Registry pursuant to O 82.5 of the Federal Court Rules and s 48 of the Federal Court of Australia Act 1976 (Cth). As another alternative, Wholefoods has sought an order under s 48 of the Federal Court of Australia Act 1976 (Cth) that the proceedings be conducted in the Victorian Registry of the Court.

ALLEGED MISREPRESENTATIONS AND IMPUTATIONS 8 In the proceedings in this Court the Dairy complained that the letter written by Wholefoods (which was signed by Mr Kinnear on its behalf) made representations in trade or commerce in contravention of s 52 of the Trade Practices Act 1974 (Cth) that: · the labelling of milk and cream produced and sold by the Dairy was untruthful; · the truth or falsity of the labelling of the milk and cream produced and sold by the Dairy warranted official investigation by the Victorian Government's Consumer Protection Authority; · Wholefoods' servant or agent, Mr Kinnear, the signatory to the letter, was acting as a retailer and consumer of the Dairy's products in making his complaint to Consumer Affairs Victoria; · the account of events alleged in the document attached to the letter was true and correct (par 3). 9 Each of those representations was alleged to be false. I raised during the course of argument that the last representation, as framed, was quite unclear in respect of what it claimed was misleading, deceptive or false and that it would be impossible for a judge trying the issue to know precisely what it was in the 'account of events alleged' which was in issue. Counsel for the Dairy has indicated that consideration will be given to an amendment to clarify the matters sought to be raised by that allegation. 10 In the Supreme Court proceedings, the broadcast on the 'Country Hour' programme is alleged to have conveyed meanings or imputations that: · the Dairy was reasonably suspected by Consumer Affairs Victoria of falsely advertising that its milk was organic; · the Dairy had so conducted itself as to warrant government investigation of claims made in its advertising of organic milk; · the Dairy was reasonably suspected of making misleading and deceptive claims in relation to its trade in organic milk; · the Dairy had made questionable claims that its milk product was organic (par 11). 11 Justice Bongiorno ruled that each of those imputations was capable of being conveyed by the matter complained of and he refused to strike them out (Snowy Mountains Organic Dairy Products Pty Ltd v Australian Broadcasting Corporation [2006] VSC 138 at [29], [33], [35] and [41]). In doing that he noted that the word 'questionable' in the last of those imputations was not so ambiguous as to render the pleading embarrassing even though it could mean both 'open to question, arguable' or alternatively 'dishonest, dubious, shady' ([2006] VSC 138 at [37]-[38]). No doubt, the precise sensein which that expression will be used when the matter comes to trial will require a degree of clarification: see Singleton v Ffrench (1986) 5 NSWLR 425 at 435E-F per McHugh JA. However, for present purposes, it suffices that on the current state of the pleadings in the Supreme Court, the truth or falsity of the Dairy's claim to have organic milk is squarely in issue. 12 The article in the Weekly Times was said to convey the following meanings or imputations: · the Dairy, in holding out its product as organic milk, was an imposter; · the Dairy had misled consumers by posing as a producer of organic dairy products; · new laws were necessary to prevent the Dairy from falsely describing its product as an organic; · the Dairy had crossed the line delimiting acceptable conduct in relation to promoting its goods honestly; · the Dairy had damaged the credibility of the organic food industry; · it was necessary to pass new laws to protect consumers from the Dairy's conduct; · the Dairy had so conducted itself as to warrant investigation by Consumer Affairs Victoria (par 15). 13 Mr Kinnear filed a defence in the Supreme Court which pleaded justification of the final three imputations said to have arisen from the broadcast. The particulars of justification set out in his defence asserted much of what is in the letter of 23 November 2004 to Consumer Affairs Victoria and annexures which are the subject matter of these proceedings. The Australian Broadcasting Corporation and its journalists pleaded a defence of justification, but the particulars which they gave were that Mr Kinnear had sent the letter of 23 November 2004 to Consumer Affairs Victoria and it had commenced an investigation as a result. The Weekly Times and its journalists pleaded that the final imputation pleaded against them was true, in that, the Dairy was the subject of investigation following receipt by Consumer Affairs Victoria of the letter 23 November 2004. There were differences of a substantial kind between the two matters complained of in the Supreme Court proceedings and the three defences filed (those of Mr Kinnear, the ABC and its journalists and the Herald& Weekly Timesand its journalists). 14 It is apparent that both of the matters complained of in the Supreme Court raised a connection with the original complaint to Consumer Affairs Victoria made by Wholefoods through Mr Kinnear, the subject of the proceedings in this Court.

DAIRY'S PARTICULARS OF LOSS 15 Wholefoods sought to have the Dairy answer properly a particular identifying whether the Dairy was alleging that it had suffered any and, if so, what loss of business or economic loss or special damage. To those questions the Dairy simply responded 'Yes'. As I pointed out during the course of argument, in commercial litigation of this character and, as indeed in other litigation in today's society, that approach is unacceptable for the reasons given by Allsop J in White v Overland [2001] FCA 1333 at [4] which were applied by Heydon JA with the endorsement of Mason P and Young CJ in Eq in Nowlan v Marson Transport Pty Ltd (2001) 53 NSWLR 116 at 128-129 [28]-[32] and by a Full Court of this Court in Maniotis v JH Lever & Co Pty Ltd [2006] FCAFC 7 at [72] per Finn, Emmett and Bennett JJ. In the last case, the Court said: '[72] In the efficient and proper conduct of civil litigation, even civil litigation hard fought between parties, it should always be recognised that, in the propounding of issues for trial, the parties should take steps to ensure that all relevant parties to the dispute are cognisant of what the issues are. Quietly leaving footprints in correspondence or directions hearings to be uncovered some time later in an attempt to reveal that a matter was always in issue is a practice that must be firmly discouraged. Where it is evident, or indeed suspected, that the other side is proceeding on the basis of a misconception or has not appreciated something, common sense will, as a general rule, mandate that a party ensure that the other is not proceeding on a misconception or that the other does appreciate something that has been said. No one's interests are advanced by litigation proceeding on assumptions which are seen or suspected to be false. The only consequence of keeping issues hidden or not clearly identifying them is to disrupt the business of the court leading to the waste of valuable public resources and to lead to the incurring of unnecessary costs by the parties, costs which ultimately have to be borne by someone: see White v Overland [2001] FCA 1333 at [4].' 16 And as Heydon JA noted that even in personal injury litigation 'the ambush theory of life has been abandoned' (53 NSWLR at 128 [30]). 17 Counsel for the Dairy recognized that particulars were required, and I made an order at the conclusion of the hearing that they be given within three weeks.

ARGUMENTS FOR CROSS VESTING 18 During the course of submissions in the Supreme Court proceedings before Bongiorno J on the joinder of the two matters complained of, the Dairy submitted: 'There seem likely to be at least common issues of fact (as to the Consumer Affairs investigation, at the very least). In this respect it is submitted that the claim almost certainly would or should satisfy [VSC] Rule 9.02(2)(i). There also seem likely to be common witnesses, [Mr] Kinnear at least.' 19 The Dairy also submitted to Bongiorno J that there were likely to be common questions of fact, witnesses and that a separation into separate jury trials would involve incurring further costs or delay, with an unsatisfactory spectre of two actions in which trials could be conducted at different times or worse at the same time. It said that either way, the call upon the resources of the Court would be greater than the present combined action. It also said that the evidence of the Dairy's witnesses '… and witnesses such as [Mr] Kinnear, will inevitably take longer in the second of the two trials as there would be cross-examination about the evidence in the first trial'. 20 Wholefoods submitted on the present motion that there will be common issues of fact with those raised in the Victorian proceedings. In essence, Wholefoods argued that the Dairy's claim in this Court is a contrivance and is a further claim in defamation, dressed up as a trade practices claim. Wholefoods also relied upon the failure of the Dairy to give proper particulars of the way in which it put its loss. 21 At the hearing it was not known what the attitude of the other parties to the Supreme Court proceedings, other than Mr Kinnear, would be to the question as to, if the matter were cross vested to the Supreme Court, whether it could be heard together with or consolidated into the current Supreme Court proceedings. I directed that the parties make enquiries for the purposes of ascertaining that. Having regard to the fact that Bongiorno J appears, at this stage, to have considered that it was appropriate that the two separate claims for defamation proceed concurrently, and remain joined in the one action, it seemed to me that, given the materiality of Mr Kinnear as a witness and the centrality of his complaint to Consumer Affairs Victoria, which was written on Wholefoods' letterhead, it would be in the interests of the parties to these proceedings, and the Dairy and Mr Kinnear as parties to the Supreme Court proceedings, to have the issues raised here also considered together with the issues in the Supreme Court action. Most significantly I raised the risk of inconsistent findings as to the truth of the relevant imputations or representations, all of which arise out of, in substance, the question whether it was appropriate for the Dairy to represent its milk as organic. I raised with the parties that there was a clear risk of inconsistent findings of fact. That risk applied also to issues as to the credibility of Mr Kinnear and the Dairy's witnesses.

FURTHER EVIDENCE AND SUBMISSIONS FOLLOWING ENQUIRIES OF PARTIES TO VICTORIAN PROCEEDINGS 22 The Dairy and Wholefoods filed further submissions in early October 2006 and Wholefoods also filed further evidence, to which I now refer. 23 In late August 2006, the media defendants in the Supreme Court proceedings brought an application for third party discovery against the Director of Consumer Affairs Victoria. The Dairy supported this application. Its solicitor, Mr Ball, in an affidavit sworn on 6 September 2006, exhibited notices issued by the Director pursuant to s 106A of the Fair Trading Act 1999 (Vic) which had been served on the directors of the Dairy. These notices required them to substantiate a number of claims made in relation to the Dairy's products. Additionally, on 8 September 2006, the Dairy made submissions in support asserting that it was not an issue that the investigation by Consumer Affairs Victoria was initiated by the complaint made to it by Mr Kinnear. None of this was before me during the course of the hearing on 7 September 2006. 24 On 26 September 2006 the Dairy commenced further proceedings for defamation in the Supreme Court of Victoria against the Director of Consumer Affairs, Victoria. This claim was based on assertions that the Director had confirmed to each of the media defendants in the Victorian proceedings that he was investigating Mr Kinnear's letter. That gave rise to alleged republications of imputations: (1) by both the broadcast and the newspaper publication: that the Dairy had so conducted itself as to warrant government investigation of claims made in advertising that its products were 'organic'; and (2) by the newspaper publication: that the Dairy was reasonably suspected by Consumer Affairs Victoria of acting unlawfully in advertising its products as 'organic'. 25 The Dairy applied for the new proceedings against the Director to be heard together with the Victorian proceedings. A solicitor for the Dairy, in an affidavit asserted that each of the media defendants in their particulars of reasonableness for the plea of qualified privilege was relying upon the fact of the investigation by Consumer Affairs Victoria. He swore that: 'In the present proceedings it is alleged that the communication by [Consumer Affairs Victoria] to the ABC and the HWT is itself defamatory to [sic] the [Dairy] and a breach of s 106(P) of the Fair Trading Act 1999. It is clear that similar questions of law shall arise in the present proceedings and the first proceedings (both being libel cases concerned with publication and republication of common matter) and that there will be common questions of fact to be resolved in relation to publication of matters by [Consumer Affairs Victoria] to the Defendants in the first proceedings and the present proceedings.' 26 The Dairy submitted that six of the seven parties to the Victorian proceedings had objected to these proceedings being joined to or consolidated with the Victorian proceedings. Mr Kinnear's attitude was that he neither consented nor objected. The Dairy argued that if the matter were cross-vested to the Supreme Court of Victoria the result would still be that the two sets of proceedings would continue separately. It suggested that any motion for joinder would be resisted by the five media parties. 27 However, on 5 October 2006 after being apprised of the transcript of the hearing before me and further matters, the solicitors for the Herald and Weekly Times now do not object to a common mediation on 17 November 2006 but they were not in a position to consent or oppose to any application for consolidation or joinder of these proceedings if they were cross vested. Mr Whitsed's solicitors said they were not aware of the mediation that had been proposed or of the other parties' attitude to his being involved. However, they noted that they saw no disadvantage to their client doing so were he invited. They said that they had now reviewed matters including a transcript of the hearing before me, and in principle now supported the application for cross-vesting.

CONSIDERATION 28 The Dairy did not inform me either at the hearing or subsequently of the steps which it had taken in relation to the Director, including the bringing of its new proceedings. 29 As Gleeson CJ, McHugh, Gummow and Hayne JJ said in Dow Jones & Co Inc v Gutnick (2002) 210 CLR 575 at 604 [36]: 'Clearly, the common law favours the resolution of particular disputes between parties by the bringing of a single action rather than successive proceedings. The principles of res judicata (Jackson v Goldsmith (1950) 81 CLR 446), issue estoppel (Blair v Curran (1939) 62 CLR 464), and what has come to be known as Anshun estoppel (Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589), all find their roots in that policy. …Effect can be given to that policy by the application of well-established principles preventing vexation by separate suits … .' 30 Of course, the proceedings in this Court raise a separate cause of action, namely under the Trade Practices Act 1974 (Cth), from the common law and statutory causes of action in defamation the subject of the two Victorian Supreme Court proceedings. The only common party in each set of proceedings is the Dairy itself. 31 On the other hand, if all proceedings brought by the Dairy based on Mr Kinnear's letter of 23 November 2004 were tried in different courts, there could be conflicting findings made on one or more issues common to the two proceedings. That is an indication that there is a single matter or controversy between the parties: Re Wakim; Ex parte McNally (1999) 198 CLR 511 at 586 [141] per Gummow and Hayne JJ. Here, at the present time, Bongiorno J has held that there is, in substance, a single controversy between the parties to the first Supreme Court proceedings notwithstanding that there are two separate matters complained of published by apparently separate individuals with no common connexion other than the fact that the Dairy is the plaintiff against all those defendants. And the Dairy asserts that the second Supreme Court proceedings are also part of that one controversy. 32 One, perfectly legitimate reason why the Dairy considered that it should not sue in New South Wales was that under the Defamation Act 1974 (NSW), s 8A would have prevented a corporation of the size of the Dairy, according to Mr Lester, its managing director from bringing the proceedings because it was a corporation which that section precluded from having a cause of action. Similar legislation now exists in the Uniform Defamation Acts 2005 and 2006 of all the States and Territories. However, the fact that the law of New South Wales prevented recovery of damages for a defamatory publication in New South Wales would not mean that it was not at least, for present purposes, arguable that s 118 of the Constitution would require the Courts of New South Wales to recognize the right of the Dairy to bring proceedings for defamation which occurred in the other States and Territories in 2005 while the laws of those jurisdictions permitted recovery for a corporation in the position of the Dairy on such causes of actions: John Pfeiffer Pty Ltd v Rogerson (2000) 203 CLR 503. 33 Mr Kinnear gave evidence that he was the sole director and secretary of Wholefoods and he asserted he would suffer extreme financial hardship if the Federal Court proceedings continued to be heard in Sydney. He said that he resided in Victoria and ran his business exclusively in and from that State. 34 There can be no doubt that the concurrent maintenance of proceedings in two different jurisdictions involving the same parties can be seen as vexatious and oppressive within the meaning of the test on which the exercise of the power of a superior court of record to stay proceedings exists. Bringing multiple proceedings with respect to the same subject matter in different courts in Australia was discussed by Dawson, Gaudron, McHugh and Gummow JJ in Henry v Henry (1996) 185 CLR 571 at 590-591. They said: 'In Union Steamship Co of New Zealand Ltd v The Caradale (1937) 56 CLR 277 at 281, Dixon J observed of that latter situation that "[t]he inconvenience and embarrassment of allowing two independent actions involving the same question of liability to proceed contemporaneously in different courts needs no elaboration". From the parties' point of view, there is no less -- perhaps, considerably more -- inconvenience and embarrassment if the same issue is to be fought in the courts of different countries according to different regimes, very likely permitting of entirely different outcomes. It is prima facie vexatious and oppressive, in the strict sense of those terms, to commence a second or subsequent action in the courts of this country if an action is already pending with respect to the matter in issue (see Moore v Inglis (1976) 9 ALR 509; 50 ALJR 589 and, on appeal, (1976) 51 ALJR 207).' 35 In order that the Court can deal with the issue of whether the proceedings are vexatious or oppressive it is not necessary to establish that the continuance of the action would involve moral delinquency on the part of the plaintiff or applicant: what is decisive is the objective effect of the continuation of the action in the forum when other proceedings are pending in a court of another State or Territory within the Commonwealth: Batistatos v Road & Traffic Authority of New South Wales (2006) 227 ALR 425 at 442 [70] per Gleeson CJ, Gummow, Hayne and Crennan JJ. 36 And, in Re Wakim; Ex parte McNally (1999) 198 CLR at 587 [145] Gummow and Hayne JJ noted that the bringing of separate proceedings and the joining of different parties would often be important facts in deciding whether there was a single justiciable controversy for the purposes of Ch III of the Australian Constitution. 37 In my opinion there is a single controversy arising out of the assertions made in the letter signed by Mr Kinnear on the letterhead of Wholefoods that the Dairy ought be investigated by Consumer Affairs Victoria, in respect of whether or not it is accurate to say its milk was labelled as organic. The way in which the Supreme Court has treated the first two matters complained of in the defamation proceedings emphasises that it so regards that question. And the Dairy regards its proceedings against the Director in the same light. 38 In Batistatos v Roads and Traffic Authority of New South Wales (2006) 227 ALR 425 at 427-431 [4]-[16] Gleeson CJ, Gummow, Hayne and Crennan JJ discussed the concept of abuse of court process. They noted that what amounts to abuse of court process is insusceptible of a formulation comprising closed categories and that development continues (227 ALR at 428 [9]). 39 Here, I am of opinion that it would be unduly vexatious and oppressive upon Wholefoods to require it to litigate these proceedings in this Court. Mr Kinnear, although in law a separate individual, in a practical sense is closely connected to Wholefoods. He will be required to litigate in the Supreme Court proceedings, issues which, even the Dairy, in the joinder motion before Bongiorno J recognized were closely connected. 40 The Courts must have regard to the realities of the capacity of individuals, including corporations, to deal with litigation. Litigation is invariably expensive. It is stressful on individuals concerned with it, be they personal parties to the litigation or, where there are small, and sometimes large, corporations involved, on the individual director or shareholder or employee concerned. Courts must be mindful that there are both matters of public and private interest in ensuring that litigation does not become overwhelming for one or other of the parties concerned because it is conducted on more than one front in different courts or different jurisdictions. 41 Of course, the principles relating to a stay on the ground of oppression or vexation are not directly applicable to the application currently before me. Rather, I am concerned with the test in s 5(4)(d) of the Jurisdiction of Courts (Cross Vesting) Act 1987 (Cth) as to whether it is otherwise in the interests of justice that these proceedings be determined by the Supreme Court of Victoria in which case I must transfer the proceedings to that court. As Callinan J noted in BHP Billiton Ltd v Schultz (2004) 221 CLR 400 at 492 [258], one person's legitimate advantage is another person's disadvantage and there should be no presumption in litigation in favour of any party. His Honour continued: 'Courts are required to do equal justice.' And, as Gleeson CJ, McHugh and Heydon JJ said in that case (221 CLR at 421 [14]): '… the Court is required by statute to ensure that cases are heard in the forum dictated by the interests of justice.' 42 The Dairy can hardly complain if I see the Supreme Court of Victoria as being the place where the interests of justice require these proceedings to be determined. After all, the Dairy has initiated defamation proceedings in that forum and has joined Mr Kinnear there. The other respondent to this application, Mr Whitsed, now consents to the application to cross vest the proceedings, and he is a resident of Victoria. 43 This Court is clearly able to hear and determine the claims in defamation. They are in federal jurisdiction because the Australian Broadcasting Corporation, among other things, pleaded a defence of qualified privilege which relied upon the principle in Lange v Australian Broadcasting Corporation (1997) 189 CLR 520. It said the broadcast concerned government or political matters that affected the people of Australia and that it was published within the implied constitutional freedom of communication on government and political matter. This Court has jurisdiction to hear and determine that matter under s 39B(1A)(b) of the Judiciary Act 1903 (Cth) as a matter arising under the Constitution or involving its interpretation. However, no party has applied to the Supreme Court of Victoria to cross vest the matter here. 44 I have not overlooked one possibility which may be available that, until matters clarify in the Supreme Court proceedings, this matter could be transferred to the Victorian Registry of the Court where, if need be, it could be later cross vested under the Jurisdiction of Courts (Cross Vesting) Act 1987 (Cth). 45 It is important that this Court retain the flexibility as to venue which was established by the decision in National Mutual Holdings Pty Ltd v The Sentry Corporation (1988) 19 FCR 155 at 165 per Bowen CJ, Woodward and Lockhart JJ. They said that the Court's powers under s 48 of the Federal Court of Australia 1976 (Cth) and under the Court's Rules exist within the context of a national court. Earlier they said that the power under s 48 should be exercised flexibly having regard to the circumstances of a particular case. The Court or judge is in a position to mould orders under the section to take account of the many and varied circumstances that arise in particular cases (19 FCR at 162). However, in light of the evidence this is not the appropriate course to take here. 46 The new material confirms that there is a single controversy arising out of the assertions made in the letter signed by Mr Kinnear. I am satisfied that these proceedings should be transferred to the Supreme Court of Victoria in the interests of justice. The more recent developments make it even more compelling that the whole controversy be decided in the one forum. The Dairy has chosen to litigate on a considerable scale there. Given that the Dairy asserts that all its Victorian claims for defamation should be heard together because of the commonality of facts, I am of opinion that these proceedings are so closely connected to them that they should be cross-vested. 47 I will hear the parties on whether I should make an order for these proceedings to be referred to mediation on 17 November 2006 before the same mediator as is dealing with the media claims. If that mediator needs to conduct mediations separately with those parties or in a different way I am provisionally of the view that the mediator will be able to devise an effective means of doing so, even if the ABC and its journalists who are defendants do not consent to that course. However, the parties should have an opportunity to consider the position and to approach the mediator to see whether what I have in mind is feasible. If all parties were to approach the mediation in good faith with a view to resolving disputes, there would be considerable advantages in a common mediation. 48 Since the Dairy has failed in its opposition, it must pay the costs of the application. The other costs of the proceedings in this Court should be in the discretion of the Supreme Court of Victoria. 49 In order that the parties can formulate appropriate orders and resolve any outstanding issues in relation to the issue of an order under s 53A of the Federal Court of Australia Act 1976 (Cth) for mediation, I will direct that the first respondent prepare short minutes of order and relist the matter on 27 October 2006. I certify that the preceding forty-nine (49) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Rares.

Counsel for the Applicant: Mr S Littlemore QC and Ms P Lane

Solicitor for the Applicant: Warren F Ball & Co

Solicitor for the First Respondent: Coadys, Barristers and Solicitors

Second Respondent: No appearance

Date of Hearing: 7 September 2006

Date last written submissions filed: 6 October 2006

Date of Judgment: 19 October 2006

Jurisdiction of Courts (Cross Vesting) Act 1987(Cth)

Trade Practices Act 1974(Cth)

Fair Trading Act 1999(Vic)

Defamation Act 1974(NSW)

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Cases Cited (19)