FEDERAL COURT OF AUSTRALIA

 

ACCC v Purple Harmony Plates Pty Limited [2001] FCA 1062

 

TRADE PRACTICES – misleading and deceptive conduct – representations as to future matters – statements that products would have health and other benefits – onus on corporation to produce evidence of reasonable grounds for making representations.

 

TRADE PRACTICES – remedies – injunctive relief – corrective advertising – corrective statement on website – corrective letters to purchasers of products – offer to refund purchase money for products.

 

CONSTITUTIONAL LAW – whether Trade Practices Act 1974 (Cth) invalid – whether Governors‑General not properly appointed – whether respondents subject to jurisdiction of Court – whether respondents had seceded from Commonwealth of Australia.

 

 

Trade Practices Act 1974 (Cth) – ss 51A, 52, 80, 80A

Constitution (Cth) – s 123

 

 

Joose v Australian Securities & Investment Commission (1998) 73 ALJR 232 referred to

Helljay Investments Pty Ltd v Deputy Commissioner of Taxation (1999) 166 ALR 302 referred to

Deputy Commissioner of Taxation v Levick (1999) 168 ALR 383 referred to

Australian Competition and Consumer Commission v Real Estate Institute of Western Australia Inc (1999) 95 FCR 114 referred to

 

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION v PURPLE HARMONY PLATES PTY LIMITED

 

V 866 of 2000

 

GOLDBERG J

6 AUGUST 2001

MELBOURNE

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	V 866 of 2000

 

BETWEEN:	AUSTRALIAN COMPETITION AND CONSUMER COMMISSION Applicant
AND:	PURPLE HARMONY PLATES PTY LIMITED (ACN 077 965 587) First Respondent   NEAL ARTHUR LYSTER Second Respondent   HELEN THERESE GLOVER Third Respondent
JUDGE:	GOLDBERG J
DATE OF ORDER:	6 AUGUST 2001
WHERE MADE:	MELBOURNE

 

THE COURT ORDERS THAT:

 

1. The first respondent be restrained, whether by itself, its servants or agents or any of them or otherwise howsoever, from publishing, distributing, transmitting, displaying or broadcasting material which contains representations:

(a) in relation to the product known and described as the large Purple Harmony plate that:

(i) the plate has an energy field of approximately 2.5 metres around it that negates the effects of the electrified and frequency toxic environment and treats the sub‑particles of electromagnetic and other frequencies, reducing the effect on human bodies, thereby lowering bodily stress and fatigue levels;

(ii) placing the plate beneath a computer monitor counters the effects of Electromagnetic Radiation (“EMR”) and reduces fatigue;

(iii) the plate will negate the effects of re‑radiated and electromagnetic frequencies;

(iv) the plate will clear and energise fruit and vegetables, restoring their natural vitality;

(v) the plate will calm people, making them more receptive to treatment by health practitioners;

(vi) the plate has a beneficial effect on health, accelerates healing and lessens or cures pain;

(vii) the plate creates a positive energy field around it that is very beneficial to all life, plant, animal or human;

(viii) the plate raises personal energy levels and protects against EMR in the environment and from EMR producing equipment, such as computers, televisions, mobile phones;

(b) in relation to the product known and described as the small Purple Harmony plate that:

(i) the plate has an energy field of approximately 50 centimetres around it that negates the effects of the electrified and frequency toxic environment and treats the sub-particles of electromagnetic and other frequencies, reducing the effect on human bodies, thereby lowering bodily stress and fatigue levels;

(ii) the plate will negate the effects of re-radiated and electromagnetic frequencies;

(iii) the plate has a beneficial effect on health, accelerates healing and lessens or cures pain;

(iv) the plate creates a positive energy field around it that is very beneficial to all life, plant, animal or human;

(v) the plate raises personal energy levels and protects against EMR in the environment and from EMR producing equipment, such as computers, televisions, mobile phones;

(c) in relation to the product known and described as the Purple Harmony disk that:

(i) wearing the purple harmony disk over the thymus gland directly helps to strengthen the immune system;

(ii) the disk enables the human body to cope better with the electrified and toxic environment;

(iii) the disk will increase a person’s general health;

(iv) the disk will cause aches, pains, niggly coughs and colds to be less severe;

(v) the disk can be used to treat cuts, burns, aches and pains, water, foods and all the things that Purple Harmony plates can be used for;

(vi) the disk reduces the effects of harmful electromagnetic and other frequencies on human bodies;

(vii) the disk will decrease stress levels on the human body and strengthen the immune system;

(viii) the disk will negate the effects of re-radiated and electromagnetic frequencies;

(d) in relation to the product known and described as the Purple Harmony angel that:

(i) the angel will strengthen the immune system;

(ii) the angel can be used to treat cuts, burns, aches and pains, water, goods and all the things that Purple Harmony plates can be used for;

(e) in relation to the product known and described as the Purple Harmony mobile phone disk that placing a mobile phone disk to the area nearest to the antenna will reduce all uncomfortable sensations from using a mobile phone, such as “hot spots”, jaw and/or teeth problems, headaches and/or earaches, tinnitus or nausea;

(f) in relation to the product known and described as the Purple Harmony green thumb that:

(i) holding one or two green thumbs for twenty minutes a day will energise your body system;

(ii) the green thumb will re-oxygenate water, giving it more life force energy to benefit all living organisms;

(iii) use of the green thumb will result in plants growing with vim and vigour;

(iv) by placing the green thumbs in a bucket or jug of water, the green thumbs will treat water, whereby the water will taste, smell and feel, and be so much better for the user;

(v) attaching three green thumbs to any power cord will treat the electromagnetic frequencies emanating from gadgets and result in reduced stress levels;

 

(g) that the product known and described as the fuel ionizer system:

(i) ionizes the fuel cars use;

(ii) creates more power from complete burning of fuel;

(iii) produces cleaner engines and injectors;

(iv) reduces emissions;

(v) gives better mileage and reduces fuel consumption;

(vi) enables quicker starting of engines;

(vii) will lead to less shifting of gears with heavy loads;

(viii) produces useable energy;

(h) that the products known and described as the Hunza water ionizer system/Hunza living-energy water system – gold Hunza and blue Hunza products:

(i) re-oxygenate water;

(ii) energise water;

(iii) improve water quality;

(iv) free water of odour and chlorine;

and that the Blue Hunza will last indefinitely;

(i) that the product known and described as the Hunza swimming pool ionizer:

(i) has similar beneficial effects to the Hunza water ionizer, however, it is much more powerful;

(ii) reduces the use of chemicals required to maintain correct pool pH;

(iii) decreases the effect of those chemicals on hair, skin and eyes;

(j) that the product known and described as the Purple Harmony fridge freshener:

(i) lowers the refrigerator temperature;

(ii) makes food last between two to four times longer than usual;

(iii) removes odours;

(iv) reduces energy costs;

(v) reduces the running costs of a refrigerator;

(vi) saves energy;

(vii) is a long lasting product;

(viii) eliminates the effects of EMR from computers;

(ix) reduces stress and fatigue

 

2. The second and third respondents be restrained from being in any way directly or indirectly, knowingly concerned in, or party to, publishing, distributing, transmitting, displaying or broadcasting material containing any of the representations referred to in paragraph 1 of this order.

 

3. The respondents, within fourteen days of the date of this order, at their own expense, send or cause to be sent by mail a letter to all customers who have purchased any of the products from the first respondent in the form set out in Schedule A to this order.

 

4. The respondents, within fourteen days of the date of this order, place on the Internet website at “www.purple-plates.com”, and maintain for a period of three months thereafter, an automatically generated active pop-up window or message box that complies with the contents, requirements and format described in Schedule B to this order.

 

5. The first respondent refund in full on request by a customer all monies paid by customers for the supply or possible supply of the products.

 

6. The respondents file and serve on the applicant by 31 August 2001 an affidavit verifying that they have carried out their obligations under pars 3 and 4 of this order.

 

7. The respondents pay the applicant’s costs of the application and the applicant’s costs of giving notice under s 78B of the Judiciary Act 1903 (Cth).

 

 

 

 

 

 

 

 

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

 

SCHEDULE A

 

The letter should be in the following terms:

 

 

SCHEDULE B

 

 

The first, second and third respondents will cause to be published on the website at www.purple-plates.com a corrective statement in the following form:

1.                  The corrective statement will be required to be legible and the type will be at least 12 point, Times New Roman font and right and left justified;

2.                  The corrective statement will have a bold type prominent heading at least 18 point;

3.                  The corrective statement will contain the Purple Harmony Plates company logo at the top.

 

4.                  The corrective statement will appear in an automatically generated active pop‑up window or message box, whereby a member of the public is required to interact with the window or message box to close it;

5.                  The corrective statement should not be less than 50% of the size of the computer screen; and

6.                  The corrective statement should appear immediately upon access by a consumer to the homepage and the page containing the order form on the first respondent’s website.

The content of the statement should be in the following terms:

 

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	V 866 of 2000

 

BETWEEN:	AUSTRALIAN COMPETITION AND CONSUMER COMMISSION Applicant
AND:	PURPLE HARMONY PLATES PTY LIMITED (ACN 077 965 587) First Respondent   NEAL ARTHUR LYSTER Second Respondent   HELEN THERESE GLOVER Third Respondent

 

JUDGE:	GOLDBERG J
DATE:	6 AUGUST 2001
PLACE:	MELBOURNE

REASONS FOR JUDGMENT

Introduction

1                     The Australian Competition and Consumer Commission (“the Commission”) has filed an application seeking injunctive relief restraining the first respondent, Purple Harmony Plates Pty Limited (“the company”), from publishing and distributing material containing representations that certain products which it offers for sale have performance characteristics or benefits which they do not have. The products are advertised and promoted by reference to the following names - large Purple Harmony plates, small Purple Harmony plates, Purple Harmony disks, Purple Harmony angels (which are amulets or pendants worn around the neck), Purple Harmony mobile phone disks, Purple Harmony green thumbs, fuel ionizer systems, Hunza water ionizer systems/Hunza living-energy water systems – Gold Hunza and Blue Hunza products, Hunza swimming pool ionizers, and Purple Harmony fridge fresheners (referred to hereafter collectively as “the products”). The Commission seeks an injunction restraining the second respondent (“Mr Lyster”) and the third respondent (“Ms Glover”), directors of the company, from being knowingly concerned in, or party to, the publication or distribution of material containing the representations. The Commission also seeks consequential relief relating to the publication of corrective material and the refund to customers of money paid for the products.

2                     The Commission’s case is that the representations were misleading or deceptive or likely to mislead or deceive, and it claims that the products have performance characteristics and benefits that they do not have contrary to the provisions of s 52 and s 53(c) of the Trade Practices Act 1974 (Cth) (“the Act”). The Commission relies on s 51A of the Act on the basis that the representations are as to future matters which cannot be substantiated.

Background

3                     From a date in 1996, the company has advertised and promoted the products for sale by the distribution of a brochure and display on an Internet website homepage at www.purple‑plates.com (“the website”). The website is promoted by, and maintained in the name of, the company. On 13 and 14 June 2000, officers of the Commission, obtained a print out of the website on which the products were stated to have various benefits.

4                     In July 2000, an officer of the Commission used the website to purchase from the company a Purple Harmony disk and a small Purple Harmony angel. These products were delivered to the officer in Canberra.

5                     The Commission wrote to Mr Lyster and requested the company to remove from its advertising any reference to representations that indicated that the benefits claimed could be derived from the products. Correspondence followed between the company and the Commission, and on 23 August 2000 the company wrote to the Commission stating that the company had removed the contents of its former website and replaced it with an exact copy of the website displayed by the American distributor of Energy Innovation Products, the American manufacturer of the products. On 28 August 2000, an officer of the Commission connected to the website and printed out a copy of its contents. The new website also contained various claims in relation to the performance characteristics and benefits of the products. On 14 September 2000, the Commission wrote to Mr Lyster stating that the Commission was concerned about claims on the website that use of the products could obtain various benefits.

6                     In the letter, the Commission said it had yet to receive any evidence that the products had the performance characteristics as claimed, that it viewed the claims as unsubstantiated and required the claims to be removed from the company’s promotional material. On 20 September 2000, the company supplied the Commission with information about the products, substantially in the form of testimonials from persons who had used them. The Commission remained of the view that the claims made in relation to the products could not be substantiated.

7                     On 2 May 2001, an officer of the Commissionprinted out another copy of the website. The contents of the website were largely the same as on 28 August 2000.

8                     The respondents filed a defence in which they admitted that the company traded as Purple Harmony Plates and Purple Harmony Plates (Aust) and carried on business in Australia promoting and selling plates, disks, tubes and other objects of various shapes, sizes and colours. They also admitted that from a date in 1996, the company advertised and promoted the plates, disks, tubes and other objects of various shapes, sizes and colours for sale by distribution of a brochure and on the website. The respondents denied that the representations were misleading and deceptive or likely to mislead or deceive or that they had contravened the Act.

9                     The Commission alleged that the brochure and the website contained representations to the effect that the products have the following performance characteristics, uses or benefits:

Large Purple Harmony Plate

·                    the plate has an energy field of approximately 2.5 metres around it that negates the effects of an electrified and frequency toxic environment and treats the sub‑particles of electromagnetic and other frequencies, reducing the effect on human bodies, thereby lowering bodily stress and fatigue levels;

 

·                    placing the plate beneath a computer monitor counters the effects of electromagnetic radiation and reduces fatigue;

 

·                    the plate will negate the effects of re-radiated and electromagnetic frequencies;

 

·                    the plate will clear and energise fruit and vegetables, restoring their natural vitality;

 

·                    the plate will calm people, making them more receptive to treatment by health practitioners;

Small Purple Harmony Plate

·                    the plate has an energy field of approximately 50 centimetres around it that negates the effects of the electrified and frequency toxic environment and treats the sub‑particles of electromagnetic and other frequencies, reducing the effect on human bodies, thereby lowering bodily stress and fatigue levels;

 

·                    the plate will negate the effects of re-radiated and electromagnetic frequencies;

Purple Harmony Disk

·                    wearing the disk over the thymus gland directly helps to strengthen the immune system;

 

·                    the disk enables the human body to cope better with the electrified and toxic environment;

 

·                    the disk will increase a person’s general health;

 

·                    the disk will cause aches, pains, niggly coughs and colds to be less severe;

 

·                    the disk can be used to treat cuts, burns, aches and pains, water, foods and all the things that plates can be used for;

 

·                    the disk reduces the effects of harmful electromagnetic and other frequencies on human bodies;

 

·                    the disk will decrease stress levels on the human body and strengthen the immune system;

 

·                    the disk will negate the effects of re-radiated and electromagnetic frequencies;

Angels

·                    angels will strengthen the immune system;

 

·                    angels can be used to treat cuts, burns, aches and pains, water, goods and all the things for which plates can be used;

Purple Harmony Mobile Phone Disk

·                    placing a mobile phone disk in the area nearest to the antenna will immediately cease all uncomfortable sensations from using a mobile phone, such as “hot spots”, jaw and/or teeth problems, headaches and/or earaches, tinnitus or nausea;

Purple Harmony Green Thumb

·                    cancer patients undergoing chemo and radio-therapies have found they are able to cope with the cancer treatments when using green thumbs, as their bodily reserves of energy are renewed more quickly;

 

·                    holding one or two green thumbs for twenty minutes a day will energise your body system;

 

·                    the green thumb will re-oxygenate water, giving it more life force energy to benefit all living organisms;

 

·                    use of the green thumb will result in plants growing with vim and vigour;

 

·                    by placing the green thumbs in a bucket or jug of water, the green thumbs will treat water, whereby the water will taste, smell and feel, and be so much better for the user;

 

·                    attaching three green thumbs to any power cord will treat the electromagnetic frequencies emanating from gadgets and result in reduced stress levels;

Fuel Ionizer System

This system:

·                 ionizes the fuel cars use;

 

·                 creates more power from complete burning of fuel;

 

·                 produces cleaner engines and injectors;

 

·                 reduces emissions;

 

·                 gives better mileage and reduces fuel consumption;

 

·                 enables quicker starting of engines;

 

·                 will lead to less shifting of gears with heavy loads;

 

·                 produces useable energy;

Hunza Water Ionizer System/Hunza Living-Energy Water Systems – Gold Hunsa and Blue Hunza products

 

These products:

·                    re‑oxygenate water;

 

·                    energise water;

 

·                    improve water quality;

 

·                    free water of odour and chlorine;

The Blue Hunza will last indefinitely.

Hunza swimming pool Ionizer

The ionizer:

·                    has similar beneficial effects to the Hunza Water Ionizer, however, it is much more powerful;

 

·                    reduces the use of chemicals required to maintain correct pool pH;

 

·                    decreases the effect of those chemicals on hair, skin and eyes;

Purple Harmony Fridge Freshener

The freshener:

·                    lowers the refrigerator temperature;

 

·                    makes food last between two to four times longer than usual;

 

·                    removes odours;

 

·                    reduces energy costs;

 

·                    reduces the running costs of a refrigerator;

 

·                    saves energy;

 

·                    is a long lasting product;

 

·                    eliminates the effects of electromagnetic radiation;

 

·                    reduces stress and fatigue

General representations relating to the products

The products:

·                    have a beneficial effect on health, accelerate healing and lessen or cure pain;

 

·                    through the Purple Harmony plates, create a positive energy field around them that is very beneficial to all life, plant, animal or human;

 

·                    through the Purple Harmony plates, raise personal energy levels and protect against electromagnetic radiation in the environment and from electromagnetic radiation producing equipment, such as computers, televisions, mobile phones etc.;

 

·                    all do the same work and are generally interchangeable depending on the job they are to do.

 

10                  The Commission submitted that insofar as the representations related to future matters, the company did not have reasonable grounds for making the representations. To the extent that the representations were not as to future matters, the Commission did not lead any evidence to establish that the statements were misleading or deceptive within s 52, or that the products did not have performance characteristics, uses or benefits which they were claimed to have within s 53(c). The Commission relied on s 51A of the Act which provides:

“(1) For the purposes of this Division, where a corporation makes a representation with respect to any future matter (including the doing of, or the refusing to do, any act) and the corporation does not have reasonable grounds for making the representation, the representation shall be taken to be misleading.

(2)               For the purposes of the application of subsection (1) in relation to a proceeding concerning a representation made by a corporation with respect to any future matter, the corporation shall, unless it adduces evidence to the contrary, be deemed not to have had reasonable grounds for making the representation.

(3)               Subsection (1) shall be deemed not to limit by implication the meaning of a reference in this Division to a misleading representation, a representation that is misleading in a material particular or conduct that is misleading or is likely or liable to mislead.”

11                  Section 51A casts the burden of proof upon a respondent, who has made a representation about a future matter, to show that it had reasonable grounds for making the representation. Pursuant to s 51A(2) of the Act, unless a corporation adduces evidence to the contrary, it shall be deemed not to have had reasonable grounds for making the representation as to a future matter for the purposes of s 51A(1) and the representation will be taken to be misleading for the purposes of Pt V Div 1 of the Act, including s 52 which provides:

“A corporation shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.”

 

12                  The Commission claimed that the representations were contained in the company’s brochure and on its website, which the company used to advertise and promote the products for sale. The company’s brochure and print outs of the website’s contents were obtained by officers of the Commission on 13 and 14 June 2000, 28 August 2000 and 2 May 2001.

13                  I am satisfied that although the representations do not always appear in the precise words used by the Commission, most of the representations are in the same form or to the same effect as the representations alleged by the Commission. Some of the representations alleged by the Commission include the word “will” (see par 9). In several cases, the word “will” is not used in the statement in the company’s promotional material relied upon by the Commission. For example, the representation alleged by the Commission that the large Purple Harmony plate “will calm people, making them more receptive to treatment by health practitioners” is derived from the statement in the company’s brochure that “health practitioners can put a large plate under their treatment couch, or stand on one, to calm their client to be more receptive to their treatment”. I am satisfied that the Commission’s use of the word “will” does not change the meaning of the statement in the brochure, as the effect of the statement is that using the large plate will calm people.

14                  Although the company’s brochure does not specifically state that “angels will strengthen the immune system”, it says that angels can be used just like disks and that “wearing a Purple disk over your thymus gland… helps to strengthen your immune system directly.” The brochure and the material on the website do not specifically state that “placing a mobile phone disk to the area nearest to the antenna will immediately cease all uncomfortable sensations from using a mobile phone, such as ‘hot spots’, jaw and/or teeth problems, headaches and/or earaches, tinnitus or nausea”. However, the following statements appear in the brochure:

“Do you suffer from ‘hot spots’, jaw and/or teeth problems, headaches and/or earaches, tinnitus, or nausea when using your mobile phone or slightly after?

…

Tesla inspired positive energy products treat the sub-particles of these destructive frequencies, rendering them less harmful to our bodies. This is demonstrated by biofeedback and radionic equipment, but more immediately by immediate cessation of uncomfortable or painful conditions brought about by use of mobile phones.

Purple Phone disk: Simply apply a phone disk to the area nearest the antenna, (either the side or the back, depending on the model) using just blu‑tack if you have a cover that extends over this area, or a more permanent installation using silicon, black gasket sealant, or araldyte (clear resin). Users report immediate cessation of all uncomfortable sensations once a Disk has been applied.”

 

The following statements were also made on the website:

“Even particularly insensitive individuals have reported ‘hot spots’ or headaches when mobile phones are used for more than a couple of minutes, and news media reports indicate the scientific jury is still out about the degree of harm that could be involved. However, users of mobiles report a marked reduction of these unpleasant effects when a Disk or Angel is attached to the back or side of the phone with an adhesive or with tape.”

 

15                  I consider that these statements amount to a representation that placing a mobile phone disk in the area nearest to the antenna will reduce, rather than “immediately cease”, all uncomfortable sensations from using a mobile phone, such as “hot spots”, jaw and/or teeth problems, headaches and/or earaches, tinnitus or nausea.

16                  The representations that “the products have a beneficial effect on health, accelerate healing and lessen or cure pain”, “the products through the plates, create a positive energy field around them, that is very beneficial to all life, plant, animal or human” and that “the products through the plates, raise personal energy levels and protect against electromagnetic radiation in the environment and from electromagnetic radiation producing equipment, such as computers, televisions, mobile phones etc.” appear only to be made with reference to the plates in the company’s brochure and on the website. While the representation that the products “are generally interchangeable depending on the job they are to do” appears in the website’s contents, there does not seem to be a statement that the products “all do the same work”.

17                  I consider that most of the representations have two characteristics. They assert that the products presently possess the performance characteristics claimed and they also make claims as to future matters. On a fair reading, the representations are stating that if a person buys these products, the person will derive the benefits from them. For example, the representations include positive statements to the effect that:

·                    the small and large Purple Harmony plates negate the effects of re-radiated and electromagnetic frequencies;

 

·                    the Purple Harmony disks decrease stress levels on the human body and strengthen the immune system;

 

·                    the Purple Harmony green thumbs re‑oxygenate water, giving it more life force energy to benefit all living organisms;

 

·                    the fuel ionizer system produce cleaner engines and injectors;

 

·                    the Hunza Water Ionizer system energises water;

 

·                    the Hunza swimming pool ionizers decrease the effect of chemicals on hair, skin and eyes;

 

·                    the Purple Harmony Fridge Fresheners reduce energy costs.

 

The language used is that the products presently possess the benefits and characteristics claimed but it also, in substance, claims benefits which will be produced by the products, if purchased. The majority of the representations fall into this category. The only representation which I consider does not relate to a future matter is the representation in relation to the Purple Harmony green thumbs that “cancer patients undergoing chemo and radio-therapies have found they are able to cope with the cancer treatments when using green thumbs, as their bodily reserves of energy are renewed more quickly”.

 

18                  I am satisfied that the representations relied upon by the Commission have been made in the company’s brochure and on the website. Almost all the representations were in terms which made them representations with respect to future matters. There were not merely representing matters of present or past fact; rather they were couched in terms that represented that the products presently possessed characteristics and benefits, the characteristics and benefits had been demonstrated to exist in the past and would be maintained and enjoyed in the future. Put shortly, the representations were saying that if a person was to buy the relevant product, it would display the relevant characteristic or produce the relevant benefit in the future after the purchase was made: see Australian Competition and Consumer Commission v Giraffe World Australia Pty Ltd (No 2) (1999) 95 FCR 302 at 332.

19                  The Commission contended that the respondents had not adduced any admissible or relevant evidence to support the truth of the representations and that there was no medical or scientific evidence which would justify a finding that the representations had been made good. In support of its claims, the Commission filed an affidavit of Monica Yvonne Cutmore on 12 February 2001 which detailed her purchase of a Purple Harmony disk and a Purple Harmony angel from the company’s website. Exhibit 5 to Ms Cutmore’s affidavit comprised a letter from the company attaching some background information, statements of persons who recommended the use of Purple Harmony plates and a brochure with pictorial representations of the products, which contained a number of the representations relied upon by the Commission.

20                  Mr Lyster and Ms Glover filed a joint affidavit which exhibited material purporting to demonstrate the effectiveness of the products. To the extent that this material was relevant, it had no probative value. The material comprised:

·                  correspondence relating to a dispute between Harmonic Products Pty Ltd and the respondents in relation to the alleged passing off of Harmonic Products;

 

·                  advertising material in relation to products which are not the subject of this proceeding, for example EM power modulators;

 

·                  testimonials from two persons who had used Purple Harmony plates; and

 

·                  a conference paper in relation to the Instant Kirlian Diagnostic System.

 

Assuming the testimonial evidence is admissible, it is of no probative value as it is merely evidence of that person’s belief and does not address the issue whether the company had reasonable grounds for making the representations.

 

21                  The respondents did not lead any evidence which satisfied me that the company had reasonable grounds for making the statements. By virtue of s 51A(2) the representations are therefore taken to be misleading. It follows that the representations constitute a contravention of s 52 of the Act. Section 51A does not create or give rise to a cause of action, but rather facilitates the proof of a contravention of s 52 and a contravention of those provisions in s 53 which proscribe the making of misleading representations concerning certain matters. Section 53(c) proscribes the making of representations that goods or services have sponsorship, approval, performance characteristics, accessories, uses and benefits which they do not have. It is not expressed in terms of making such representations which are misleading or likely to mislead and therefore s 51A does not apply to s 53(c) or facilitate the proof of a contravention of s 53(c). The Commission’s case based on s 53(c) is therefore not made out.

22                  I am satisfied that Mr Lyster and Ms Glover have been shown to have been involved in the contraventions of s 52 of the Act. They are the only directors of the company and the correspondence passing between them and the Commission demonstrates that they have been actively involved in its business and the marketing and selling of the products and have been directly knowingly concerned in, and a party to, the representations.

23                  The respondents challenged the jurisdiction of the Court to hear and determine the application filed by the Commission. Their contentions focused on claims that the Act was invalid, and that they were not subject to the jurisdiction of the Court as they had seceded from the Commonwealth of Australia and were now citizens of the Principality of Caledonia, having transferred their assets and investments to the Principality.

24                  It was not apparent what were the boundaries of that Principality, but the address of the company and Mr Lyster was 20 Davis Street Kew. The respondents filed a joint affidavit sworn on 19 April 2001 in which they asserted that:

·                    According to s 7 of the Act, it was the duty of the Governor‑General to appoint members of the Commission;

 

·                    The post of Governor‑General does not hold a legal position or authority to carry out this duty. The position of Governor-General has never existed or held jurisdiction in matters pertaining to the Commonwealth of Australia or the people of Australia as the appointment of each of the Governors-General was invalid because the relevant Letters Patent were not signed under the Royal Sign Manual or by Queen Victoria’s heir;

 

·                    All employees, members and associate members of the Commission were illegally employed and had no jurisdiction over matters described in the Act;

 

·                    As the post of Governor‑General was invalid, the Act was invalidly assented to and was unconstitutional, null and void;

 

·                    On and from 17 February 1986, the respondents formed the constructive intent to secede from the Commonwealth of Australia, and the Governor of the State of Sherwood had the power to deem the respondents to be Caledonian citizens and to have seceded from that date;

 

·                    As Caledonian citizens, the respondents had no allegiance to uphold contracts pertaining to the Commonwealth of Australia and were not beholden to answer to the Commission;

 

·                    All members of parliament, ministers of State and justices were invalidly appointed;

 

·                    As the respondents were no longer citizens of the Commonwealth of Australia, having chosen to exercise their right of secession, they were immune from the jurisdiction of the Court;

 

·                    The former officers of the former de facto government of the Crown and Government of the Commonwealth of Australia, including the Commission, by continuing to assume sovereignty over the people of Australia, represented the imposition over the people of Australia of a foreign power;

 

·                    There were no members or employees of the Commission validly appointed at law to cause the issue of demand for relief sought in the Commission’s application, to cause the issue of the initial inquiry, to swear any affidavit in support of application for relief, or to appoint and instruct the Australian Government Solicitor (also invalidly or illegally appointed) to prosecute the proceeding.

 

The respondents also claimed $30 million in damages and sought injunctions directing the Commission to distribute and publish corrective material and directing all unconstitutional government bodies to exempt the respondents’ activities.

 

25                  Similar arguments in respect of the invalidity of certain other legislation were considered and rejected by Hayne J in Joose v Australian Securities & Investment Commission (1998) 73 ALJR 232 and Helljay Investments Pty Ltd v Deputy Commissioner of Taxation (1999) 166 ALR 302. In those cases, it was submitted that there had been a break in sovereignty in Australia with the effect that some legislation purportedly passed by the Parliament of the Commonwealth, or one or more State Parliaments was invalid. Hayne J considered that these submissions confused questions of political sovereignty with the question of identifying the supreme legislative authority recognised in the legal system and the rules for recognising its valid laws. He found that these questions were resolved by cl 5 of the Commonwealth Constitution which provided that the Constitution and the laws made by the Parliament of the Commonwealth under the Constitution were binding on the Courts, judges and people of every State and every part of the Commonwealth.

26                  The respondents’ arguments were also not unlike those considered by Hill J in Deputy Commissioner of Taxation v Levick (1999) 168 ALR 383 in which his Honour rejected an argument that the Income Tax Assessment Act 1936 (Cth) was invalid and made a costs order against the solicitor who had advanced that argument in opposition to a creditor’s petition against his client. This decision was upheld by the Full Court in Levick v Deputy Commissioner of Taxation (2000) 120 FCR 155.

27                  I reject the respondents’ submission that the Governors‑General have not been properly appointed and that legislation assented to by the Governors‑General has not been validly assented to. On 29 October 1900, Queen Victoria issued Letters Patent constituting the office of Governor‑General of the Commonwealth of Australia. Those Letters Patent were passed under the seal of the United Kingdom and issued by Warrant under the Queen’s Sign Manual: Commonwealth Gazette (No 1), 1 January 1901. The first Governor‑General, Lord Hopetoun, was appointed to his office in accordance with those Letters Patent. The current Letters Patent were issued by Queen Elizabeth II on 21 August 1984 and gazetted in the Commonwealth Special Gazette (No S334), 24 August 1984. The Governor‑General at the time the application was filed, Sir William Deane, was appointed to his office in accordance with the current Letters Patent by Commission dated 29 December 1995 passed under the Royal Sign Manual and the Great Seal of Australia and took the oath of allegiance and prescribed oath of office on 16 February 1996: Commonwealth Special Gazette (No S66), 19 February 1996. As each of the Governors‑General have been validly appointed, there is no merit in the respondents’ contentions that all members of parliament, ministers of State and justices were invalidly appointed or that the Act is invalid.

28                  I also reject the respondents’ claims that they are no longer citizens of the Commonwealth of Australia, having chosen to secede. The Commonwealth Constitution recognises the Commonwealth and the States and Territories as the only entities in the federal polity known as the Commonwealth of Australia. An area of land cannot cease to be part of a State in the Commonwealth of Australia except pursuant to s 123 of the Constitution which provides that:

“The Parliament of the Commonwealth may, with the consent of the Parliament of a State, and the approval of the majority of the electors of the State voting upon the question, increase, diminish, or otherwise alter the limits of the State, upon such terms and conditions as may be agreed on, and may, with the like consent, make provision respecting the effect and operation of any increase or diminution or alteration of territory in relation to any State affected.”

 

There are no other constitutional means available for the establishment of any separate political community in Australia. The territory allegedly forming the Principality of Caledonia remains part of Australia and the respondents remain subject to Australian law, including the Act.

 

29                  The respondents asserted that they had seceded from the Commonwealth of Australia and that the crown land of Australia had been annexed by the Principality of Caledonia through the United Nations. Such an assertion is quite untenable and I reject it. The respondents were not able to produce a copy of the instrument by which the transfer was effected at the hearing. The Commission produced evidence of the incorporation of the company under the Corporations Law and evidence that Mr Lyster and Ms Glover were directors and secretaries of the company. Mr Lyster and Ms Glover acknowledged (as was disclosed by a search obtained from records of the Australian Securities and Investments Commission) that they were directors and secretaries of the company and that the company carried on business at 20 Davis Street Kew, which is geographically within the State of Victoria and, therefore, part of the Commonwealth of Australia.

30                  I am satisfied that each of the respondents are amenable to the jurisdiction which is conferred on the Court in any matter arising under the Act pursuant to s 86 of the Act. Not only was a Notice of Appearance filed on their behalf on 4 December 2000, but it is apparent that the commercial activities of the company are carried on within Australia. There is no basis for the respondents’ claim for damages against the Commission and I reject it.

31                  The nature of the representations which are misleading is such that I consider that it is appropriate to grant the injunctive relief against the respondents sought by the Commission in the amended application filed on 24 May 2001 to prevent the continuation and repetition of the misleading conduct, subject to the modifications to which I have referred in pars 14 to 17. Notwithstanding the issues raised by the Commission with the respondents, the display of the representations on the website and in the brochure has continued. The misleading statements in relation to the products have appeared in material contained on the website and in the company’s brochure and the further dissemination of those representations should be restrained. I am satisfied that the injunctions sought in the amended application are not too broad and are so defined that the respondents can understand the conduct which the injunctions restrain them from continuing: Commodore Business Machines Pty Ltd v Trade Practices Commission (1990) 92 ALR 563 at 574‑576; ICI Australia Operations Pty Ltd v Trade Practices Commission (1992) 38 FCR 248 at 259.

32                  Having regard to the nature of the misleading representations, I consider it appropriate to make the order sought by the Commission directing the company to refund in full on request by a customer all monies paid by the customer in respect of the purchase of the products. The published material on the website indicated that a 90 day 100% money back guarantee, including postage and packaging charges, on return of a purchased product was offered to purchasers of the products. Ms Glover said that the company had always offered that guarantee to any customer and that it was not limited to American customers. I consider that this order is necessary, in particular as persons who purchased products more than 90 days ago should be able to receive a refund for their purchase monies in the light of my determination that the representations were misleading.

33                  The Commission also sought orders for corrective advertising, directing the respondents to place a corrective statement on the website and to send corrective letters to the company’s customers. The Court has the power to make an order for corrective advertising under the general injunction power pursuant to s 80(1) of the Act and, on application by the Commission or the Minister, pursuant to s 80A(1): Truth About Motorways Pty Ltd v Macquarie Infrastructure Investment Management Pty Ltd (2000) 34 ACSR 673 at 676‑677. The purpose of corrective advertising is not to punish the offending company, but to protect the public interest by dispelling incorrect or false impressions which may have been created as a result of misleading or deceptive conduct: Truth About Motorways Pty Ltd v Macquarie Infrastructure Investment Management Pty Ltd (supra) at 677; Australian Competition and Consumer Commission v Real Estate Institute of Western Australia Inc (1999) 95 FCR 114 at 133; Australian Competition and Consumer Commission v On Clinic Australia Pty Ltd (1996) ATPR ¶41-517 at 42,459. I consider that this case is one in which it is appropriate to order corrective advertising. I take into account the period during which the representations have appeared on the website, the subject‑matter of the representations and the fact that they relate to the ability of the products to resolve health problems and help people with their personal well‑being.

34                  The Commission submitted that the corrective statement on the website should appear as an automatically generated active pop‑up window or message box when the consumer accessed the homepage and the page containing the order form on the website. As the representations were published on the website, they have the capacity to reach a wide audience of people who may have been misled by the representations. The corrective statement proposed by the Commission informs consumers about the misleading nature of the previous representations, offers a full refund to consumers who purchased the company’s products and believe that they were misled, invites consumers who have inquiries about the notice to contact the Commission and informs consumers that the statement has been placed as a result of action taken in the Court pursuant to s 52 of the Act. I am satisfied that an order for corrective advertising in this form is appropriate to remedy the misleading effect of the material published on the website.

35                  Although the website does not have an “au” designation, I am satisfied that the Court has jurisdiction in relation to the website. The Commission produced evidence that the website was registered in the name of the company and Mr Lyster was the administrative contact for the site. Mr Lyster asserted that the website should have been registered in his name, rather than the name of the company. Mr Lyster also submitted that the Court had no jurisdiction over the website as his contract with the company which administered “.com” domain names was governed by the laws of Virginia in the United States of America. It is irrelevant that the agreement with the domain name administrator may not be subject to the jurisdiction of Australian Courts (on which issue I express no view in the absence of full argument on the issue). The Commission has sought to invoke the Court’s jurisdiction and power of enforcement over the respondents and, as Mr Lyster acknowledged, Mr Lyster has the authority to instruct other people to place material on the website.

36                  I also intend to make the order sought by the Commission directing the respondents to send a letter to all customers who had purchased the products informing them that representations contained in promotional material of the company prior to 2 May 2001 were misleading and that a refund of all money paid by customers for the products could be obtained from the company. Again, such an order is not intended to be punitive in nature, but is necessary to inform purchasers of the products about the misleading nature of the representations which may have led them to purchase the products. I consider that it is necessary to make this order in addition to the order in respect of the corrective statement on the website because people who have purchased the products in the past may not necessarily access the website again, or may never have accessed the website if they purchased their products by other means.

37                  The respondents should pay the Commission’s costs of the application and the Commission’s costs of giving notice under s 78B of the Judiciary Act 1903 (Cth).

I certify that the preceding thirty-seven (37) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Goldberg.

Associate:

Dated: 6 August 2001

Counsel for the Applicant:	P J Cosgrave
Solicitor for the Applicant:	Australian Government Solicitor
Counsel for the Respondent:	The respondents appeared in person
Date of Hearing:	2 and 23 May 2001
Date of Judgment:	6 August 2001