FEDERAL COURT OF AUSTRALIA

Panasales Clearance Centre Pty Ltd v J B Hi Fi Brighton Pty Ltd

[1999] FCA 1227

PANASALES CLEARANCE CENTRE PTY LTD (ACN 971 407 004)

v J B HI FI BRIGHTON PTY LTD (ACN 007 379 777) and

J B HI FI CAMBERWELL PTY LTD (ACN 006 787 006)

RYAN J

MELBOURNE

31 AUGUST 1999

The applicant by its Counsel having given the usual undertaking as to damages THE COURT ORDERS THAT:

1.         The respondents and each of them be restrained until the hearing and determination of this application or further order from making representations by their employees agents or otherwise that, or to the effect that:

(a)        all or most of the applicant's stock comprises "factory seconds", "second-hand" items or items which have been refurbished after being returned by their original purchasers;

(b)        Panasales Clearance Centre Pty Ltd is not allowed to sell some brands of television sets or has been found liable by a court for making unauthorised sales of certain television sets;

(c)        the applicant's after-sales service is poor;

(d)        if it be contrary to the fact, that new goods purchased from Panasales Clearance Centre Pty Ltd are never subject to the manufacturer's warranty or guarantee;

(e)        all goods sold by the applicant attract the benefit only of a Panasales warranty or guarantee.

2.         Counsel submit by 6 September 1999 minutes of the directions which they contend are appropriate to ready this application for trial.

3.         The costs of all parties of the motion for interlocutory relief be costs in the cause;

4.         Liberty be reserved to any party to apply on not less than 48 hours notice in writing to the other parties.

Note:       Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

REASONS FOR JUDGMENT

1                     There is before the Court a motion by the applicant, Panasales Clearance Centre Pty Ltd ("Panasales"), for interim injunctions against the respondents J B Hi Fi Brighton Pty Ltd ("J B Hi Fi Brighton") and J B Hi Fi Camberwell  Pty Ltd ("J B Hi Fi Camberwell").

2                     Panasales is a retailer of television sets, high-fidelity stereo equipment, video recorders, telephones, answering machines and the like which are apparently known generically in the trade as "brown goods".  Panasales conducts its business from a single outlet at 239 Nepean Highway, Brighton.  The respondents are a part of a group of retailers carrying on business under the name  "J B Hi Fi" from ten different retail outlets in suburbs of Melbourne, including one at Brighton conducted by the first respondent and one at Camberwell conducted by the second respondent.

3                     By its amended statement of claim, Panasales alleges that various employees of J B Hi Fi Brighton and J B Hi Fi Camberwell have made remarks disparaging Panasales stock-in-trade and business practices which have been misleading and deceptive and have thereby contravened the Trade Practices Act 1974. 

4                     One series of such remarks was allegedly made to a Mr Kourtis on 17 April 1999.  Mr Kourtis had found that he could purchase a particular type of video recorder from Panasales for $529.  He then spoke by telephone to the J B Hi Fi store at Nunawading and was told that its price for that machine was $530 but there were none in stock.  Accordingly, he was advised to try another J B Hi Fi store.  Upon his telephoning J B Hi Fi Camberwell, he had the following telephone conversation, he has deposed, with an unidentified salesman:

"I asked whether the VCR was in stock at the price at which it was selling.  I was told that the VCR was in stock and that the price was $569.00.  I asked why the price was so much higher than the J B Hi Fi store at Nunawading?  The salesperson said he was unable to answer that question.  I then said that I had been quoted a cheaper price to what he had quoted me, by the Applicant Panasales.  The salesperson then said, "If you want to purchase a second-hand factory remake from Panasales, go ahead and buy it.  We deal in new stock only."  I then asked the salesperson how he could prove that that statement was true?  The salesperson replied that Panasales always have "second-hand stuff and you will be going back with the warranty all the time."  I then said to the salesperson that I did not appreciate him speaking about other stores in that way, that I had been offered a better deal by Panasales, that I had received better customer relations from Panasales and that I intended to deal with them.  The salesperson then said, "Mate, if you want to buy second-hand stuff, go ahead and buy it and leave us alone."

5                     The other instances of allegedly offending oral representations occurred in conversations between J B Hi Fi sales staff and either private inquiry agents retained by Panasales or Mr Leibovich, the Managing Director of Panasales.  Those circumstances increased the possibility that the conversations were directed towards the case which Panasales was seeking to make or were recollected or recorded selectively or otherwise favourably to Panasales.  I have taken these features into account in assessing the extent to which the evidence as a whole raises a serious question to be tried.

6                     The first private inquiry agent, Mr MacDonnell, attended at the premises of J B Hi Fi Brighton and had a conversation with a salesman, later identified as Kevin Koelmeyer, which, so far as is relevant, was recorded in these terms:

7                     Mr Koelmeyer has sworn an affidavit, denying mentioning to anybody any litigation in which Panasales has been involved, although he concedes, "that I could possibly have said that their [Panasales'] after-sales service was poor".

8                     The second conversation to which Mr MacDonnell deposed was with a salesman named "Steve" at J B Hi Fi, Brighton, which included this exchange:

9                     That allegation has been answered by an affidavit sworn by Stephen Hardie, who does not recall a conversation with Mr MacDonnell but who has deposed:

"5.       I am aware that Panasales does sell some refurbished products as well as new products.  Unless MacDonnell made an inquiry about a specific product and told me that he had obtained a quote for that product from Panasales, I would not have spoken to him about Panasales selling refurbished products.

6.         If a price was mentioned on a particular product, then I expect that I would have explained to MacDonnell why the price could be lower than the JB price.  I do not as a matter of habit use the expression "second hand".  I do use the expression "refurbished".  This is because I have learned during my time working for JB that the term "refurbished" is to be used in preference to the term "second hand".

7.         I believe that I would not have said to MacDonnell that a lot of the goods sold by Panasales were refurbished.  It is not my habit to speak generally about competitors of JB.  Rather, I limit my comments about competitors to the particular product which a customer is enquiring after.

8.         I was told some time ago by Ian Wattley, the sales representative for Panasonic that Panasales would not get a manufacturer's warranty for Panasonic products.  I was told by Ian Wattley that the contract with Panasales stipulated that they did not get a manufacturer's warranty, in fact that they took the warranty card out of the box for this stock."

            ...............

10.       I may have said that you will get a Panasales warranty only.  Again, this would only be in relation to a particular product.  I believe that some Panasales products have a manufacturer's warranty and some do not.

11.       I may have spoken about warranties because of a specific query from the customer about the difference between a manufacturer's warranty and a warranty.

12.       I would not have said that Panasales' "prices are so much more than anyone else's" because I do not believe this to be the case.  Each week I go through all advertising drops to get an idea of competitors' prices.  For this reason, I am not of the view that Panasales' prices are greater than JB's and I would not say that they were.  I would certainly have said something to the effect that whatever price Panasales offered JB would beat it as this is what JB seeks to do.

13.       I do believe that I could have said something about companies going broke.  However, I believe I would have said it more in the context of a comparison with for example, the Brash's stores, which, while they are no longer there, some of the stock attracts a manufacturer's warranty because Brashs was an authorised dealer for certain brands.  I do not believe I would specifically have said this only about Panasales in the manner which is quoted in that statement.  I have used the Brash's example with customers before about the issue of manufacturer's warranty."

10                  Another inquiry agent, Mr Kicetzis, deposed to two conversations with J B Hi Fi sales staff, one on 8 July 1999 with a man identified as "Michael" at Brighton, in which this exchange occurred:

11                  Those allegations have been answered by an affidavit sworn on 27 August 1999 by Michael Amarasingham, who acknowledged that Mr Kicetzis' account sounded accurate, as "it is along the lines of the things that I would say to customers".  Mr Amarasingham's affidavit then continues:

"6.       I have told customers that Panasales sell a lot of factory seconds.  I believe this to be correct from advertising, particularly on television and its shop-front that states that Panasales sell factory seconds.

            ......

8.         I do recall a particular incident with customers in early to mid 1998 where they had come to me with a Panasales price and I had cautioned that the stock could be second-hand.  The customers went away and purchased the Panasales product and seven to eight days later, because of trouble which they had experienced with that product had returned it to Panasales and had some difficulty in getting their money back.  The customers had told me that they had to threaten legal proceedings to get their money back.  They subsequently came to JB to purchase a product.  I believe that I would have related this story to other customers.

9.         I also believe that Panasales could not give the same warranty as JB on second‑hand stock.  I believe this from my own experience as a consumer.

10.       It is also my understanding that a better warranty is obtained if a retailer is an authorised agent.

11.       I have previously said to customers that there is a risk in purchasing products from a retail outlet that has only one store, however, I have not said this to customers recently and was not saying it to customers in July 1999."

12                  The second conversation deposed to by Mr Kicetzis was with an unidentified salesman at Camberwell and included this exchange:

"I went to another store as well, what was it ....ah, Panasales, how do your prices compare with them? 

He said,           "Well, they are cheaper, but the reason for that is that their stock is all factory seconds.  You can tell the difference between their products and ours when you walk in there and look at them.  For instance if you bought a TV from here, and it caught on fire, we would come in, put it out, send the TV back to the manufacturer and then they'd sell it to Panasales for 50% off, because frankly, we won't have it."

13                  The account of that second conversation in which Mr Kicetzis engaged has been answered by Mr Victor Duca, whose affidavit sworn 27 August 1999 includes these passages:

"4.       I do not bag other product or other companies.  I have never been to Panasales, so I would be unable to say whether or not their prices are cheaper or that you can "tell the difference" between their product and those of JB by walking in there and looking at them.  I would not have said anything to the effect that Panasales' prices were cheaper because its stock was all factory seconds.

5.         I have never spoken about JB being able to put out televisions that have caught fire or such damaged televisions ending up at Panasales.  I would not have said anything to the effect that Panasales sells second hand televisions which have caught on fire and have been repaired by the manufacturer.

6.         Although I agree that I might sometimes tell "little white lies" to customers to get a sale, I do not bag other product and other companies and I have never been to Panasales or know much about what they sell or what their prices are."

14                  It is undesirable at this early stage of this litigation that I attempt to make concluded findings of fact based on this necessarily incomplete evidence, as to which there has been no cross-examination.  However, the evidence as it stands, even with the qualifications which I have earlier indicated, creates the impression that on some occasions when a prospective purchaser has mentioned Panasales, a sales representative of J B Hi Fi Brighton or J B Hi Fi Camberwell, has taken the opportunity to point out that Panasales is not an authorised retailer of the brand of brown goods enquired after.

15                  Sometimes, in conjunction with a statement of that kind, reference has been made to the fact that Panasales is a substantial trader in factory seconds or returns, liquidated stock or refurbished items.  Occasionally, the evidence suggests, those statements have been legitimate warnings that Panasales might not be offering goods of the same quality, or backed by warranties or guarantees as readily enforceable or as fully effective as those available from J B Hi Fi as an authorised reseller of the brand concerned.  In other instances the disparagement of Panasales' after-sales service or its ability to offer effective warranties has been more extravagant, prima facie, than the circumstances have warranted.  Those extravagances, I consider, have gone beyond mere negative puffery or contrasting of J B Hi Fi's own good qualities and have been contrary to its own company policy, which has been articulated as regarding it as "totally unethical and against company policy to make comments disparaging Panasales or any of our other competitors".

16                  I accept, as Mr Wyles of Counsel for J B Hi Fi submitted, that the evidence does not support a finding of a concerted campaign by the respondents to make unsolicited disparaging remarks with a view to diminishing Panasales as a significant competitor in the brown goods market.  However, I have been persuaded on balance that a serious question to be tried has been raised by the evidence, going to what I have called extravagant representations by employees of J B Hi Fi.  If injunctions were framed to restrain the respondents from repeating those representations or representations to the same effect, I do not consider that the balance of convenience would be against allowing them to go.

17                  I have been influenced in coming to this view by the reflection that pecuniary damages, because of the difficulties of their assessment, are unlikely to prove an adequate remedy for the loss caused by those so-called extravagant representations if they continue to be made to genuine prospective customers of Panasales up to the trial of this action.

18                  The usual undertaking as to damages having been given, I shall therefore order that the respondents and each of them be restrained from making representations by their employees, agents or otherwise, that, or to the effect that:

(a)          all or most of Panasales' stock compromises "factory seconds", "secondhand items" or items which have been refurbished after being returned by their original purchasers;

(b)          Panasales is not allowed to sell some brands of television sets or has been found liable by a court for making unauthorised sales of certain television sets;

(c)          Panasales' after-sales service is poor;

(d)          if it be contrary to the fact, that new goods purchased from Panasales are never subject to the manufacturer's warranty or guarantee;

(e)          that all goods sold by Panasales attract the benefit only of a Panasales warranty or guarantee.

19                  Counsel should submit by next Monday 6 September 1999 minutes of the directions which they contend are appropriate to ready this application for trial.  I shall order that the costs of all parties of the motion for interlocutory relief be costs in the cause, and I shall reserve liberty to any party to apply on not less than 48 hours' notice in writing to the other parties.  If Counsel wish to make submissions about the precise form of the injunction which I have pronounced, that can be done pursuant to the liberty to apply which I have reserved.

Associate:

Dated:              31 August 1999