FEDERAL COURT OF AUSTRALIA

 

Australian Competition & Consumer Commission v Danoz Direct Pty Ltd

(ACN 003 546 709) [2003] FCA 881

 

TRADE PRACTICES – where electronic muscle stimulation device – where advertised on television, website and in catalogue – where representations made in advertisements – whether representations constituted misleading or deceptive conduct or were likely to mislead or deceive – whether had reasonable grounds – whether made inadequate qualifications on opinions or predictions – whether representations showed performance characteristics, uses or benefits the device did not have – whether false or misleading representation with respect to price – whether individuals aided, abetted, counselled or procured contraventions – whether individuals knowingly concerned in contraventions – corrective advertising – declarations – injunctions – trade practices compliance programme – power to order refunds.

Trade Practices Act 1974 (Cth) ss 6(3), 51A, 51A(2), 52, 53, 53(c), 53(e), 75B, 75B(1), 75B(1)(a), 75B(1)(c), 80, 80(1), 80(4), 80(5), 80A, 86C, 86C(2)(b), 86C(3), 86D, 87, 87(2)(c)

Australian Securities and Investments Commission Act 1989 (Cth)

Trade Practices Revision Bill (1986)

Australian Competition & Consumer Commission v Universal Sports Challenge Ltd [2002] FCA 1276 considered

Kellcove Pty Ltd v Australian Motor Industries Ltd & Anor [1990] FCA 306 (Woodward J, unreported judgment, delivered 6 July 1990) cited

Cummings v Lewis & Ors (1993) 41 FCR 559 cited

Phoenix Court Pty Ltd & Ors v Melbourne Central Pty Ltd (1997) ATPR (Digest) 46-179 cited

Blacker v National Australia Bank Ltd [2000] FCA 681 cited

City of Botany Bay Council v Jazabas Pty Limited (2001) ATPR (Digest) 46-210 cited

Ting & Anor v Blanche & Anor (1993) 118 ALR 543 cited

Australian Competition and Consumer Commission v IMB Group Pty Ltd (1999) ATPR 41-704 cited

Yorke & Anor v Lucas (1985) 158 CLR 661 considered

Medibank Private Ltd v Cassidy (2002) ATPR 41-895 followed

 

Oxford Dictionary of Sports Science and Medicine (1994)

The Shorter Oxford English Dictionary

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION v DANOZ DIRECT PTY LTD (ACN 003 546 709), MOSHE OZANA, MICHAEL WILLIAM RONALD QUINN AND AARON SCHERECK

 

Q 77 OF 2002

 

 

 

DOWSETT J

22 AUGUST 2003

BRISBANE

IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY	Q 77 OF 2002

 

BETWEEN:	AUSTRALIAN COMPETITION AND CONSUMER COMMISSION APPLICANT
AND:	DANOZ DIRECT PTY LTD (ACN 003 546 709) FIRST RESPONDENT   MOSHE OZANA SECOND RESPONDENT   MICHAEL WILLIAM RONALD QUINN THIRD RESPONDENT   AARON SCHERECK FOURTH RESPONDENT

 

JUDGE:	DOWSETT J
DATE:	22 AUGUST 2003
PLACE:	BRISBANE

REASONS FOR JUDGMENT

background

1                     The first respondent is a retailer which engages in intensive promotion of its products on television, by post and using a website.  It favours two particular forms of television promotion, namely the “advertorial” and the “infomercial”.  The advertorial usually involves a person acting as host (an employee of the relevant television station) interviewing another person (in this case an employee of the first respondent) about a particular product.  Other participants may demonstrate it.  Such a programme communicates information about the product in a way which suggests that it is not a paid advertisement.  An advertorial generally lasts for about four minutes.  It is pre-recorded and usually approved in advance by the television station’s legal advisers.  Nonetheless it appears to the viewer to be broadcast “live”.  The infomercial resembles an ordinary advertisement, save that it lasts for about twenty-eight and a half minutes and is, to some extent, repetitive.  The first respondent usually receives pre-recorded infomercials from the suppliers of its products.  Where necessary, it  “Australianizes” the infomercial to appeal to local tastes.  Relevantly, the first respondent also promotes products on its website and in its catalogues.

2                     The second respondent, Moshe Ozana, is a director and chief executive officer of the first respondent.  The third respondent, Michael William Ronald Quinn, was, at relevant times, the general manager of the first respondent.  His major function appears to have been preparing and appearing in advertorials.  Aaron Schereck, the fourth respondent, was the first respondent’s executive producer.  He was concerned in the marketing of products, including writing scripts for advertorials and the adaptation of infomercials. 

The “AbTronic”

3                     The word “AbTronic” is apparently a registered trademark.  It describes a device which consists of a pad in the shape of a trapezium, about twenty-four centimetres at its longest point and about twelve centimetres wide.  The pad is made of rubber and vinyl.  Concealed within the pad are electrodes which, when the pad is applied to the human body, transmit electronic stimulation into the body.  The electrodes are fed from a small plastic fitting containing a battery.  The fitting is attached to one side of the pad.  It has three control buttons and two indicator lights.  The pad may be attached to a web belt using Velcro patches.  The web belt can be tied around the trunk of the body or around a limb.  The purpose of the device is to provide electronic stimulation to a muscle, causing it to contract.

The conduct

4                     The applicant claims that in promoting the AbTronic on television, its website and in its catalogues, the first respondent contravened the Trade Practices Act 1974 (Cth) (the “Trade Practices Act”).  The applicant also claims that:

Ÿ                each of the second, third and fourth respondents was, pursuant to s 75B of the Trade Practices Act, involved in the first respondent’s alleged contraventions; and

Ÿ                the third respondent, by his own conduct, contravened the Trade Practices Act by virtue of its extended operation pursuant to subs 6(3). 

It is conceded that all of the relevant conduct occurred in trade or commerce.

5                     The impugned conduct is identified in pars 15 - 29 of the statement of claim.  Broadly speaking, it is alleged that the first respondent represented that use of the AbTronic would cause weight loss, reduce body fat and improve the “tone” of musculature.  Such representations are said to have been misleading or deceptive or likely to mislead or deceive.  It is also said that the first respondent misrepresented the usual price at which the device was offered for sale.  This conduct is said to have been in breach of s 52 and/or s 53 of the Act.  The respondents have admitted that certain of its statements were misleading, in particular:

Ÿ                that use of the AbTronic for ten minutes is the “equivalent” of up to 600 sit-ups without any effort;

Ÿ                that the AbTronic has a fat and cellulite blaster setting, designed to work on fat cells, not on muscles;

Ÿ                that the AbTronic will flatten the stomach “once and for all”;

Ÿ                that the AbTronic firms, tones and tightens a person’s love handles, that term describing fat deposits in the area of the hip;

Ÿ                that the AbTronic can provide a vigorous work-out to such love handles; and

Ÿ                that the AbTronic is normally sold for $220.

THE CENTRAL ISSUE

6                     The primary remaining issue concerns the capacity of the AbTronic to “work” and/or to “tone” muscles.  The matter is complicated by disagreement amongst the experts as to the meaning of the expression “tone” in this context.  The case involves two major factual questions, namely:

Ÿ                whether the use of electronic muscle stimulation (“EMS”) on healthy muscle will provide improved muscle tone, size, strength or other similar benefits (apart from weight loss or fat reduction); and

Ÿ                whether, assuming that EMS has any such beneficial effects when applied to healthy muscle, the AbTronic is capable of providing that effect.

scientific EVIDENCE CONCERNING the use of ems and the AbTronicwith healthy MUSCLE

7                     Professor John Hemsley Pearn is a medical practitioner and is presently Professor of Paediatrics and Child Health in the University of Queensland.  He has worked, researched and published over many years, with a particular focus on paediatric and genetic neuromuscular conditions.  In his evidence, Professor Pearn referred to “adaptation” of a human muscle.  This term denotes increase in muscle size and strength, possibly accompanied by change in muscle definition.  The term “muscle definition” refers to the appearance of the muscle, which appearance may be affected by size and shape, but also by any overlay of fat, subcutaneous tissue and/or skin.  In Professor Pearn’s view, adaptation of a muscle occurs in a normally functioning person when the muscle is contracted against resistance.  In the absence of contraction against resistance, no adaptation will occur.  In general, the greater the resistance against which the muscle contracts, the greater the muscle adaptation achieved. 

8                     Resistance can be provided by one or more of the following:

Ÿ                the mechanical task of the moment;

Ÿ                agonist/antagonist muscle action; and

Ÿ                gravity.

9                     The expression “agonist/antagonist muscle” can be explained by reference to the biceps and triceps muscles in the upper arm.  According to Professor Pearn:

When a person contracts their biceps muscle without moving their forearm (flexing the biceps), the biceps muscle is the agonist muscle.  At the same time as the biceps is contracted, the triceps muscle (running along the underside of the upper arm) also contracts.  By contracting this antagonist muscle at the same time as the agonist muscle, the forearm is held stationary (in a muscle-flexing pose).

10                  The experience of astronauts demonstrates that, in the absence of gravity, human muscle wastes.  In that situation, muscles used for normal human movement contract against insufficient resistance to cause muscle adaptation.  Without performing compensatory agonist/antagonist muscle exercises in which there is resistance to muscle contraction, an astronaut’s muscle size and strength will decrease over time.

11                  Abdominal muscle adaptation is of particular importance in this case.  Professor Pearn said that the abdominal muscles are in distinct layers as follows:

Ÿ                the rectus abdominis, which is closest to the skin, running vertically down the torso;

Ÿ                the external obliques, the next layer of muscle, running diagonally downward from the chest to the waist;

Ÿ                the internal obliques, lying underneath the external obliques and running diagonally downward from the pelvis; and

Ÿ                the transverse abdominis, running horizontally across the abdomen.

12                  Of these muscles, the outline of the rectus abdominis is most easily seen through the skin.  The size and strength of the abdominal muscles can be increased by contracting them against resistance.  The long spinal muscles in the back act as antagonist muscles and provide resistance by bracing against abdominal muscle contraction.  This is the process by which a person performing “sit-up” exercises increases the size and strength of the abdominal muscles.  If the back is held straight during a sit-up, the weight of the torso being lifted off the ground and the bracing of the abdominal muscles against the spinal muscles provide the substantial resistance required to cause adaptation of the abdominal muscles.  Professor Pearn considers that local involuntary contraction of the abdominal muscles (which I understand to be his perception of the effect produced by the AbTronic) will not generally cause the spinal muscles to brace.  In the absence of such bracing against the contraction of the abdominal muscles, there will be no resistance to the abdominal muscle contraction and therefore no adaptation of the abdominal muscles, even over a period of time.

13                  In cross-examination, Professor Pearn agreed that he had not conducted any research into the capacity of EMS to cause muscle contraction or as to the effect of contractions which are “... at a low level of maximal voluntary … contraction  … induced by electrical stimulation”.  He had performed only a superficial review of the literature concerning the subject.  However he has some experience in the use of electrical stimulation of muscles in children suffering from certain neuromuscular conditions such as cerebral palsy.  He has no experience in using such treatment with “normal individuals”.

14                  The other scientific witnesses, Professor De Domenico, Dr Wilson and Dr Coombes prepared a joint report and also provided individual statements of evidence.  I will deal with their evidence as follows:

Ÿ                Firstly, by summarizing their respective backgrounds and experience;

Ÿ                Secondly, by summarizing their joint report;

Ÿ                Thirdly, by summarizing the evidence of Professor De Domenico whom I consider to be the respondents’ primary witness in this area; and

Ÿ                Fourthly, by summarizing the evidence of Dr Wilson and Dr Coombes.

15                  Professor Giovanni De Domenico is a Doctor of Philosophy and also holds a Graduate Diploma in Physiotherapy and the degree of Master of Science.  He is presently Professor and Chairman of the Department of Physical Therapy in the School of Allied Health Sciences within the University of Texas Health Science Centre at San Antonio, Texas in the United States of America.  That university is large and prestigious. It provides professional training in physiotherapy and associated clinical services.  Professor De Domenico has published extensively in the area of EMS over a period of twenty years and has carried out research in that area.  He also has clinical experience and expertise.  Some of his work has dealt with the theory and application of electrical stimulation to human muscle.  He has been invited to speak on the subject and has conducted continuing education courses.

16                  In cross-examination, Professor De Domenico agreed that in recent years he has been principally involved in administration and teaching rather than research.  He has published only one paper in the last twelve years and has made two presentations in the last eight years.  In 1997 he published as joint author, a textbook, the fourth edition of Beard’s Therapeutic Massage.  Professor De Domenico claims that his relevant knowledge is still current.  EMS is an area in which he presently teaches.

17                  Dr Gregory Wilson is a Doctor of Philosophy and also holds the degree of Bachelor of Physical Education.  He has published extensively in the field of assessment and development of human muscular function using various training devices with healthy subjects.  He has been a power lifter, representing Australia at world championships.  In that capacity, he has had substantial practical experience in strengthening and conditioning.  He has also trained elite athletes in a number of sports and has supervised a university student in a research project examining the use of EMS.  He uses EMS as an integral component of his personal training business.  He teaches health and fitness modules at TAFE colleges in New South Wales and strength and conditioning courses for the Australian Sports Commission.  In these programmes he gives detailed consideration to the use of EMS and the merits of such use.

18                  Dr Jeff Scott Coombes is a Doctor of Philosophy and holds the degrees of Bachelor of Education, Bachelor of Applied Science and Master of Education.  He is a senior lecturer in exercise science in the University of Queensland.  He teaches and conducts research in areas such as exercise physiology, nutrition and exercise and muscle physiology.  He has published a number of studies concerning the use of EMS and has worked in the health and fitness industry for over ten years as a fitness assessor, personal trainer and gymnasium manager.

19                  In their joint report, Professor De Domenico and Drs Coombes and Wilson agree that:

Ÿ                The term “muscle definition” relates to the physical appearance of the outline of the muscle, or more accurately, of the skin over the muscle.  This depends upon a combination of factors including tension in the muscle, muscle size and the amount of subcutaneous fat lying over the muscle. 

Ÿ                The terms “muscle firmness” and “muscle hardness” are interchangeable.  When a muscle is not being voluntarily contracted, its firmness or hardness depends upon:

–             its contractile protein density;

–             characteristics of the components of its elastic tissue (such as collagen and elastin) within the muscle;

–             amount of, and characteristics (eg density) of fat within and around the muscle; and

–             resting level of neural activity.

Ÿ                The term love handles, used in some of the relevant publications, refers to fat stored above or near the iliac crest at the side of the waist. 

20                  Apart from these areas of agreement, the joint report also identifies areas of disagreement.  Professor De Domenico and Dr Wilson consider that the term “muscle tone” can be defined as the amount of tension in a muscle.  They refer to the Oxford Dictionary of Sports Science and Medicine (1994) where “tone” is defined as:

A state of tension, such as that caused by a sustained, partial muscle contraction.

21                  This implies that tone describes the state of a contracted, or partially contracted muscle.  Dr Coombes agrees “in principle” but asserts that in lay usage, the term “muscle tone” is synonymous with muscle definition, and is generally used by lay people to refer to muscles in a resting state rather than in contraction.  Professor De Domenico and Dr Wilson consider that muscle tone is most accurately quantified by the strength of the muscle, with a stronger muscle capable of exerting greater tension when contracted, and therefore exhibiting more tone.  Dr Coombes considers that, in lay terms, that view is incorrect because the term “muscle tone” describes muscle in a resting state.

22                  Professor De Domenico and Dr Wilson agree that continued use of the AbTronic is likely to increase abdominal muscle strength and size.  Dr Coombes disagrees.  Professor De Domenico and Dr Wilson summarize their reasons for so concluding as follows:

… the human body is an adaptive organism and will tend to adapt to the level of stress imposed upon it.  This is known as the ‘training principle of overload’, and is one of the fundamental training principles that exercise science is based upon.  The Abtronic will cause the muscles to repeatedly contract at a level of intensity, and for a period of time, that is greater than that usually experienced by the individual, particularly untrained individuals, and over time this will force the body to adapt to the training stimulus causing the stimulated muscles to increase in strength. 

23                  Dr Coombes gives the following reasons for his contrary view:

Firstly, the Abtronic does not cause muscles to contract against a substantial resistance.  Therefore the muscles are doing little or no work.  For muscles to improve in strength they need to contract against resistance so they can adapt and become stronger.  With no resistance there will be little or no adaptation.

Secondly, the Abtronic is not capable of causing substantial muscle contraction.  It will cause muscles near the surface of the body to contract but will not have the power (or people will not be able to tolerate the pain involved) in trying to cause a significant amount of the muscle to contract.  Furthermore many individuals with large amounts of fat around the abdomen will not be able to get the abdominal muscles to contract as the electrical power will be dissipated in the fat.

24                  Professor de Domenico and Dr Wilson refer to various studies in support of their views.  Dr Coombes considers many of these studies to be inappropriate.  It is fair to say that his view has changed over time.  In particular, he originally excluded the possibility that the use of EMS on healthy muscle could ever contribute to improvement in muscle tone or definition.  He now accepts that there is evidence suggesting that EMS may, in some circumstances, make such a contribution.  He does not agree with that view and, in particular, asserts that the AbTronic cannot do so.

25                  The overall conclusions reached by Professor De Domenico and Dr Wilson are as follows:

In many areas of science there is considerable debate and discussion about different points of view, and often many instances of different experimental findings on various issues.  The area of EMS is similar in that there exists scientific evidence supportive of, and dismissive of, the effectiveness of this modality.  However, in overall balance and on the basis of reasonable probabilities, (Professor de Domenico and Dr Wilson) … find that:

Ÿ                There is a reasonable amount of scientific support for the majority of representations made by Danoz Direct in relation to the Abtronic device.  These representations are:

(a)       it generates pulses that activate a person’s underlying motor nerves, causing a person’s muscles to contract and relax, just like normal exercise;

            (b)        it is a brilliant training and toning tool;

(d)       it firms, tones and tightens the upper abs, lower abs, and/or a person’s love handles with no sweat; (provided the reference to love handles is deleted)

            (e)        it will tone and firm muscles;

(f)        it can provide a vigorous workout for the abdominal region, the love handles, arms, buttocks, thighs; (provided the reference to love handles is deleted)

            (h)        it can work out and tone different muscle groups;

While there exists strong support for the majority of representations made by Danoz Direct, there are some claims that (Professor de Domenico and Dr Wilson) … do not believe can be supported at the present time and thus should be withdrawn.  These representations are:

(c)        10 minutes of it is equivalent of up to 600 sit-ups without any effort;

 

(g)       it has a fat and cellulite blaster setting that is designed to work on fat cells, not on muscles;

            (i)         it will flatten your stomach once and for all.

26                  As I have said the respondents accept that these “unsupported statements” were misleading.  The rather curious references to “love handles” flow from a previous disagreement concerning the meaning of the term, which disagreement has been resolved.

27                  Dr Coombes concludes that:

The scientific evidence supplied by (Professor De Domenico and Dr Wilson) …is inappropriate when looking at the representations made by Danoz Direct in regards to the Abtronic.  There are hundreds of published research studies using EMS however these should not be simply applied to the Abtronic.  Overall there is insufficient scientific evidence to support any of the representations listed in this document.  Furthermore, my own testing of the device (as outlined in previous affidavit, in September 2002) showed no benefits of using the Abtronic.

28                  I turn now to consider the individual expert reports provided by these three witnesses.

29                  Professor De Domenico considers that:

There is no doubt that properly administered, electrical stimulation can be a powerful tool in strengthening human muscles.  In fact, the evidence reviewed in the studies cited above, shows that as few as 15 to 30 strong but well tolerated contractions, performed 3 to 5 times a week for as little as 3 to 5 weeks, can be effective.  The strength gains seen with these short-term stimulation protocols are said to be ‘neural’ in nature, rather than morphologic.  This means that the increases in strength are due to an increased ability of the subject to make the muscle in question contract (activate the appropriate motor nerves), rather than by the muscle becoming larger in size.  Morphologic changes require much longer stimulation protocols, in the order of 10 to 12 weeks or longer.  …  These concepts have now been incorporated into standard texts on electrotherapy … .

30                  At p 3 of his report he observes:

When a muscle contracts, whether by voluntary effort or under electrical stimulation, the same neural and metabolic pathways are activated and, given an appropriate regime of exercise, there is every reason to expect similar training effects.  I have personally been involved in several studies that have investigated this question under carefully controlled circumstances.  Two of these studies … are relevant to the question of how much contraction force is needed in order to gain significant strength gains under electrical stimulation.  Lai, De Domenico and Strauss (1987) used a carefully graduated training protocol of EMS to the anterior thigh muscle (Quadriceps Femoris), stimulating five times a week for three weeks.  One group (Low Intensity) of subjects used EMS to produce a training contraction force equal to 25% of his or her maximal voluntary isometric contraction (MVIC) force.  A second group (High Intensity) used 50% of MVIC training contraction level.  A third group acted as controls for the study and received no training.

The entire protocol was repeated by Szeto, Lai and Strauss, in a follow-up study using voluntary exercise, instead of EMS … .  The results from both studies were almost identical.  In both cases, training at either 25% or 50% of MVIC produced significant strength gains.  There were no differences between the EMS and the voluntary groups.  These two studies indicate that significant strength gains can be achieved with relatively low contraction levels of EMS (25% Of MVIC).  However, as expected, the largest and most significant improvements in strength were seen at the higher training levels.  Similar results have been reported by other investigators … .

Another important issue concerning EMS relates to the type of stimulation used and whether one form is more effective than another.  …  (A) commonly addressed question concerned the issue of how much force could be produced in a muscle during electrical stimulation and whether there were significant differences between stimulators.  I have personally been involved in another carefully controlled and comprehensive study …, reported by Strauss and De Domenico in 1986.  In this study, seven different types of stimulator were compared.  Some of the stimulators were large and ‘powerful’ units, while others were very small, battery powered, portable devices.  Results showed no significant differences in muscle torque produced by each of the seven types of stimulator.  The small, portable, battery powered units were just as powerful as the much larger clinic models. 

Under the right conditions, electrically stimulated muscle contractions can be an effective method of conditioning and strengthening human muscles.  While most of the studies on EMS have involved the quadriceps muscle, there is no reason to believe that other muscles in the body (including the abdominal muscles) will produce different results.  In fact, a number of well controlled studies have investigated the direct effects of exercise … and EMS on the abdominal and other trunk muscles of healthy subjects.  In general, these studies also report significant improvements in strength and/or endurance … of the abdominal muscles.

31                  Professor De Domenico refers to various studies and then concludes at p 4 of his report:

Taken together, these studies provide persuasive evidence that statistically significant increases in the strength of the abdominal muscles, can result from the use of electrical stimulation delivered over a relatively short period of time (3 to 4 weeks).  The results also suggest that daily stimulation is likely to result in greater strength improvement.  Most importantly, these increases in strength were produced using contraction forces ranging from the minimally perceived level, to the maximally tolerated.  This strongly suggests that any level of contraction force produced by electrical stimulation can induce strength changes in the abdominal muscles.  Lower force levels however, may need a stimulation protocol lasting several hours each day.  Since this type of protocol does not require strong contractions, it seems particularly suitable for a small stimulator worn in direct contact, under everyday clothing and used throughout the day.  Both high and low levels of muscle contraction can be produced by the Abtronic stimulator and for this reason I believe it is well suited to take advantage of such protocols.

32                  Professor De Domenico then refers to a number of the specific representations made by the first respondent.  I will deal with these matters at a later stage. 

33                  In his oral evidence, Professor De Domenico was asked to comment upon an article by Dr Alon and others concerning the effects of electrode size in EMS.  The paper is ex 8.  Professor De Domenico said that the paper demonstrated that the size of the electrode used to stimulate a muscle should reflect the size of the muscle.  Merely to use a larger, rather than a smaller electrode provides no extra benefit.  The important factor in determining the size of the electrode is the size ratio appropriate to the individual muscle to be stimulated.  Professor De Domenico said that the positioning of the electrodes in ex 7 (part of an earlier report by Alon and others which is ex 12) could be effectively replicated using the AbTronic.  He also said that gel, which is applied between the electrode pads and the skin in using the AbTronic, would tend to extend the area over which the electrical stimulation was provided, creating the effect of a larger electrode.  Professor De Domenico stated that the instructions given on pg 11 of the AbTronic instruction manual (ex 11) as to location of the electrodes were appropriate to achieve the relevant purpose. 

34                  Professor De Domenico asserts in his report that numerous studies have demonstrated that normal and atrophied muscles can gain significant increases in strength from a suitable EMS regime.  In cross-examination, it was suggested to him that one of the four articles cited in support of that proposition, (by Kramer and Mendryk), does not support it.  Apparently the authors of that review article conclude that “…insufficient scientific evidence currently exists to warrant either the acceptance or rejection of electrical stimulation as a strength improvement technique.”  Professor De Domenico said that review articles assemble information from various sources.  Some of those sources may support a proposition while others do not.  He  included the article for the sake of completeness.  Professor De Domenico agreed that in order to induce strength changes in abdominal muscles, it might be necessary to apply the AbTronic for several hours each day, possibly in two different locations. 

35                  In the course of cross-examination he demonstrated a phenomenon to which he refers in his report, namely the capacity of a human being to use abdominal muscles to hold in intestinal content, thus creating a “slimmer” appearance.  He offered the view that electrical stimulation is helpful in facilitating improved control over the muscles to enable production of this effect.  Professor De Domenico said that fat deposits are not themselves significant obstacles to the penetration of electrical stimulation.  He said that the greatest barrier to penetration is the skin.  Fat deposits might make it difficult to position the electrodes accurately but would not significantly impair the flow of current.  However he later seemed to concede that fat layers might pose problems by increasing the distance over which the current must pass to reach the target muscle.

36                  Dr Wilson considers that there has been an enormous amount of scientific research into the area of EMS, particularly over the last thirty years.  He considers that “… the overwhelming majority of research in this area has demonstrated positive effects on the human body from the use of EMS”.  EMS can be used effectively to increase the size, strength and function of muscle.  It is effective because the human body is an adaptive organism which adapts to the stresses imposed upon it.  The various EMS devices cause muscles to contract repeatedly at a level of intensity, and for a period of time that is greater than that usually experienced by the person in question, particularly a sedentary person.  The body adapts to the increased workload, resulting in muscular adaptation, including increased muscular strength, size, tone, function and expenditure of energy.  Dr Wilson conducted tests using a number of people as subjects, including himself.  He says that the AbTronic is capable of repeatedly producing strong contractions of underlying muscle.  He asserts that EMS, plus diet and voluntary exercise, can aid in a number of ways including:

Ÿ                Strengthening, shaping and toning muscle;

Ÿ                Improving posture;

Ÿ                Reducing incidence of low back pain and injury;

Ÿ                Reducing muscular aches and pains in a variety of bodily regions;

Ÿ                Improving diet;

Ÿ                Increasing the amount of voluntary exercise;

Ÿ                Losing body weight and body fat;

Ÿ                Reducing blood pressure, total cholesterol and blood sugar levels; and

Ÿ                Improving overall health and self esteem.

37                  I am not sure how EMS can improve diet.  In any event, many of these assertions are beyond the ambit of the current proceedings, given the respondents’ concessions as to weight loss, fat reduction and exercise equivalence.

38                  In the course of Dr Wilson’s cross-examination he said that in lay terms, muscle tone is affected by strength and “feeling” of the muscle (its firmness or hardness), appearance, size of the muscle and degree of contraction at the relevant time.  If one muscle is flexed and another not, the flexed muscle may well exhibit more tone.  Stronger muscle is capable of exerting greater tension.  It therefore exhibits more tone.  Dr Wilson appears to accept that in lay usage, the word “tone” is somewhat imprecise.  He also says that current thinking suggests that although early changes as a result of EMS may be neural, morphological changes may also occur within four weeks.  As previously mentioned Professor De Domenico has a different view.

39                  Dr Coombes considers that the AbTronic will not achieve the primary goals of changing body shape or improving muscle firmness and tone.  To change body shape requires a loss of fat or an increase in muscle size.  Tests carried out by Dr Coombes demonstrated that the AbTronic does not significantly affect the metabolic rate and therefore will not result in the additional energy expenditure necessary to decrease body fat.  This is conceded.  He considers that the AbTronic, used in accordance with the instruction manual, will not result in an increase in muscle size.  The applicant does not plead inadequacy of such instructions in its pleadings, although counsel raised the matter on a number of occasions in cross-examination and in addresses.  I do not understand the case to have been conducted on that basis.  If the applicant wishes to seek further findings in this respect, it may apply after the publication of these reasons. 

40                  As Dr Coombes considers that the term “muscle tone”, in common usage, describes the ability to visualize muscles through the skin, he also considers that improvement in muscle tone depends primarily upon a decrease in body fat.  AbTronic will not facilitate this.  In clinical usage, the term “muscle tone” denotes the activity of the alpha motor neurons.  It is “plausible” that the AbTronic may affect the activity of the alpha motor neurons while the device is being used and for about half a second afterwards.  This will not result in any change to body shape or to the appearance of the muscles through the skin. 

41                  Dr Coombes considers that for muscle fibre to become thicker (hypertrophy), there must be an increase in the amount of protein within the cell.  In his first report, he asserts that there is no evidence that the use of EMS devices such as the AbTronic will result in such increase.  For hypertrophy to occur, the load against which the muscle is working must be large enough to elicit a response in order to produce additional muscle protein.  When using an EMS device, the muscles contract against little or no resistance.  It is therefore unlikely that any such stimulus will result in increased muscle size.  He refers to a report (Porcari and others, 2002) in which the authors report that subjects who underwent EMS training over a particular period had no change in body weight, body fat, girth, isometric or isokinetic strength or appearance, and that “… claims relative to the effectiveness of EMS for apparently healthy individual are not supported by the findings of the study”. 

42                  In his first report Dr Coombes concludes (at pp 42 and 43) that:

There is very little evidence that EMS using a device such as the Abtronic will significantly increase muscle size in normally active individuals.  It is important not to be confused with the effects of EMS on musculoskeletal rehabilitation patients.  There is much scientific evidence that EMS will decrease muscle loss (atrophy) in immobilised or injured muscle.  This may be described as causing muscle hypertrophy (increasing muscle size) and although this definition is technically correct, the term muscle hypertrophy is much more commonly used in describing the increase in muscle mass from a resting level due to a resistance training program.  A resistance training program, by definition, requires muscles to contract against resistance.  The resistance is usually provided either by the persons (sic) body weight (e.g. abdominal sit-up) or equipment (e.g. gym equipment or free weights).  When a device such as the Abtronic stimulates muscle to contract it is not causing the muscle to generate sufficient force such that an adaptation, such as hypertrophy, would occur.  To summarise, an EMS device such as the Abtronic, may increase the size of a muscle that has wasted away but there is no evidence that muscle size can be increased in active healthy muscle.

43                  Dr Coombes also observes that EMS will not cause any increased hardness in resting muscle.  He considers that there is no significant increase in energy expenditure associated with the use of EMS.  Representations to the effect that using such devices is equivalent to performing conventional exercise are incorrect. 

44                  In his second report, Dr Coombes deals with some of the reported studies relied upon by Professor De Domenico and Dr Wilson.  He asserts that such studies are generally inapplicable to the AbTronic regime.  It is important, in considering Dr Coombes’ evidence, to keep in mind the distinction between the two issues which I have previously identified, namely:

Ÿ                the efficacy of EMS; and

Ÿ                the efficacy of the AbTronic in delivering EMS.

45                  One reason for Dr Coombes’ view concerning the AbTronic is the lack of any significant resistance to muscle contraction when the AbTronic is used.  He says that in the studies, the relevant limbs were restrained during stimulation, thus providing resistance.  He also considers that the AbTronic is not capable of producing contractions to the extent used in the studies.  Many of the studies were carried out using the quadriceps muscle which is much thicker than the muscle tissue in the abdominal region and therefore offers greater opportunity for muscle adaptation.

46                  Dr Coombes also asserts that some of the studies relied upon by Professor De Domenico and Dr Wilson involved protocols which were completely different from those appropriate to the AbTronic.  Some used larger electrodes placed in optimal  locations on large muscle groups.  Some involved contraction against substantial resistance.  However, in his second report, Dr Coombes agrees that “… there is evidence which supports the assertion that EMS used under specific conditions will have an effect on muscle size, strength and functional characteristics …”.  He considers this to be different from muscle tone.

47                  In cross-examination Dr Coombes agreed that his experiments with the AbTronic were concerned only with its capacity to reduce weight or body fat.  Although he has previously conducted research into use of EMS in animals for the purpose of measuring fatigue, his views concerning the AbTronic are based primarily upon his review of the literature.  He agrees that EMS will assist in slowing or arresting atrophy in diseased, injured or inactive muscle but does not believe that it will assist in producing strength gain or hypertrophy in healthy muscle.  He concedes that there is evidence supporting the contrary view.  He remains of the view that the AbTronic cannot do so.

48                  One reason which he gave for dismissing studies relied upon by Professor De Domenico and Dr Wilson was that such studies had involved restraint of the muscle, typically the quadriceps muscle, during EMS.  Such restraint would have resulted in the muscle contraction being against resistance.  One study of some importance for present purposes is described in these reasons as “Alon (1987)”.  It is ex 6.  Dr Coombes commenced his oral evidence by conceding that he had originally misread this report.  He had understood it to involve the application of EMS to restrained limbs.  He now understands that those participants who were subjected to EMS were in an “isometric curl up position” whilst they received such stimulation.  As I understand it, this would still have involved contraction of the muscles against resistance in raising the head and trunk from the ground and holding that position for a period of time.  That activity would have constituted exercise of the abdominal muscles.  Such a reading of the Alon (1987) report would undermine its value as a basis for the De Domenico/Wilson view.  In argument the applicant also sought to undermine this report upon the basis that it was unclear.  It is necessary to consider the report in some detail in order to ascertain its meaning.

49                  It is entitled the Comparison of the Effects of Electrical Stimulation and Exercise on Abdominal Musculature.  The following passages on the first page of the exhibit are of some significance:

Retardation of disuse atrophy or recovery of muscle strength following trauma or disease is a major goal of orthopaedic rehabilitation.  Electrical stimulation has been found to retard atrophy of the quadriceps femoris muscle in patients recovering from knee ligament surgery and enhance strength gain in patients with chondromalacia patellae.  Eriksson and Haggmark found that muscle re-education programs based on electrical stimulation superimposed on volitional isometric contractions minimized muscle atrophy and facilitated succinate dehydrogenase activity.

…

In muscles functioning at normal levels of strength, electrical stimulation has been shown to further enhance contractile strength.

…

Numerous other investigators used different protocols, and a wide range of electrical stimulation waveforms, phase durations, and pulse rates, as well as different contraction-relaxation ratios.  Despite the variance, most studies performed on muscles functioning at normal levels of strength resulted in similar strength gains.

50                  On page 2 of the exhibit the following passage appears:

Repetitive electrical stimulation over several weeks of training may not only alter the effectiveness of muscle contraction but also the response of noncontractile tissue.  Several studies reported that subjects required more current output as training progressed.  No study could be found where quantification of the changes in electrical stimulation variables were documented. 

The purpose of this investigation was to examine the effectiveness of electrical stimulation, volitional exercise, and electrical stimulation superimposed on volitional exercise on the abdominal musculature with respect to muscle strength and endurance.  In addition, voltage, current, and tissue resistance were measured to determine if changes occurred in electrical variables during training.

51                  The authors then describe their methodology.  Clearly, the experiment concerned healthy muscle, but potential subjects who displayed strong abdominal muscles were excluded.  Participants were divided into four groups, a control group (C), a group which underwent volitional exercise (E), a group which was subjected to electrical stimulation (S) and a group which performed volitional exercise with concurrent electrical stimulation (ES). The study reported a surprising increase in abdominal strength in the C group which had undergone neither voluntarily exercise nor electronic stimulation.  The ES group reported the greatest increase in strength of all groups. The S group demonstrated a significantly greater increase in strength that did either the E group or the C group.  It is obviously curious that the C group should have reported strength increase.  However, for present purposes, the report at least suggests that EMS may contribute to increases in abdominal strength, an outcome which offers support for the respondents’ position, subject to the criticisms to which I have referred.

52                  Although I experienced some initial difficulty in understanding the report, I have concluded that its meaning is reasonably clear.  The methodology appears under the heading “Methods” on pages 568 to 570, which are pages 2 to 4 of the exhibit.  It was as follows:

Ÿ                All potential subjects were screened by being asked to assume a supine position without support.  They then performed a five second voluntary abdominal curl (raising the trunk and head from the ground), followed by a five second period of rest.  The cycle was repeated for as long as the subject could lift part of the body to a pre-identified position.  Subjects who were able to perform more than thirty repetitions of this process were deleted from the trial upon the basis that they had strong abdominal muscles.

Ÿ                The remaining subjects were divided into groups as previously described, orientated to the testing procedure and then tested.  There were two aspects to the test.  The first was mechanical measurement of strength whilst voluntarily contracting the abdominal muscles.  This was done by using a force transducer.  Figure 1 illustrates that this involved restraining the subject during testing.  The second aspect was as to endurance.  The subject lay supine, with knees flexed to ninety degrees and feet unsupported.  The subject was then asked to raise the head and trunk and hold them as high as possible, but at not greater than forty-five degrees of flexion.  For this test, the subject was not restrained.

Ÿ                Thereafter all subjects participated in “their respective training regimes” three times per week for four consecutive weeks.  All subjects “… used the previously described position for training”. 

Ÿ                The reference to “training regimes” is, in the case of the S group, a reference to periods of EMS.  In the case of the E group, it is a reference to an exercise regime, namely a series of five second “curls”.  In the case of the ES group, it is a reference to both the exercise and the stimulation regimes. 

Ÿ                The statement that “All subjects used the previously described position for training” refers to the initial position adopted for endurance measurement, namely lying supine with the knees flexed to ninety degrees and feet unsupported.  In the case of the S group stimulation was applied to subjects whilst they were in that position.  Whether the ES group received stimulation whilst in that position or whilst in the curl position is not disclosed.

53                  I reject the suggestion by Dr Coombes that electrical stimulation was provided to the S group whilst each subject had head and trunk raised from the ground.  In my view that is not a fair reading of the report.  To ask members of the S group to adopt such a position before each stimulation would be to mix exercise with the stimulation regime.  This would have been contrary to the purpose of the study.  It is even more unlikely that the group would have been asked to adopt that position and maintain it for the time taken to carry out the whole of a session of EMS.

54                  The respondents submit that the way in which Dr Coombes dealt with this study demonstrates that he is prejudiced against any possibility that EMS or the AbTronic can strengthen muscles.  There is substance in this submission.

55                  Dr Coombes now agrees that there is evidence that muscle adaptation may be achieved using EMS (as opposed to the AbTronic) when the subject is not secured or exerting force against resistance.  He agrees that in a number of studies, subjects were secured during stimulation in order to permit measurement of the force of the contraction produced by the stimulation rather than to provide resistance against contraction.  He agrees that a number of research studies have reported significant results from EMS when applied to a subject who was not secured.  There are seven or eight such studies.

56                  As to the capacity of the AbTronic to produce sufficiently strong contractions to stimulate muscle growth or strength, Dr Coombes suggests that the positioning of the electrodes on the AbTronic is not such as to produce strong enough contractions and that the pads of the electrodes are too small to stimulate enough muscle to give the required effect.  In cross-examination Dr Coombes conceded that he had no particular expertise in the design of such equipment and that he had not conducted research into, or experiments as to comparative designs.  As to the capacity of the AbTronic to produce contractions, his experiments with it were conducted using the “Fat Blaster” programme.  He appears to have assumed this to be the most intensive of the programmes and likely to produce the strongest contractions.  However it seems that the “Fat Blaster” setting produces one long contraction at a quite low level of intensity.  Dr Coombes’ experiments were therefore irrelevant to his opinion.  He has done no experimentation comparing the performance of the AbTronic with those of other electronic muscle stimulants.  His views are based on a review of the literature. 

57                  Concerning the relative size of the electrodes on the AbTronic, Dr Coombes said that the electrodes used in the Alon (1987) study were “huge”.  He derived this information from another Alon study (ex 12), part of which is ex 7.  It will be recalled that Professor De Domenico gave evidence concerning this study.  It considers the use of two surface electrodes, each of which had a surface area of 100 cm² in surface area.  Dr Coombes considers that size of the electrode has a direct relationship to effectiveness in stimulating the relevant muscle.  He offered no real basis for that opinion.  He said that he may have based it upon something that Professor De Domenico had written, but he was not sure about this.  He did no specific research into the matter.  The extent of his research was limited because of  time and cost constraints.  He said that the AbTronic pad is about 50 cm² in surface area.  It was suggested to him that the surface area was 50 to 60 cm².  The difference probably does not matter much.  He pointed out that in the ex 7 study, two electrodes were used, giving a total surface are of 200 cm² as compared to the 50 or 60 cm² of the AbTronic. 

58                  Dr Coombes was shown another paper by Alon and others entitled “Effects of Electrode Size on Basic Excitatory Responses and on Selected Stimulus Parameters” (1994) (ex 8).  The authors propose that:

… the concept that selecting an excessively large electrode size may not add to optimal excitation.  Furthermore, it is likely to decrease stimulation efficiency by requiring more electrical energy, by stimulating undesired muscle groups, and by increasing cost since larger electrodes cost more.  We infer from these findings that selecting optimal electrode size so that discomfort is minimized and force of contraction is maximized may depend to a large extent on the size of the muscle(s) targeted for contraction.

59                  This conclusion is similar to the view offered by Professor De Domenico in evidence. 

60                  Dr Coombes’ initial perception of the capacity of the AbTronic was wrong in another relevant aspect.  In par 77 of his first report, dealing with statements by Professor De Domenico and Dr Wilson, he stated:

The Response states that an article by Shenton et al. 1986 shows that EMS provides similar metabolic demands to conventional exercise.  In the Shenton article, wrist flexors were electrically stimulated to contract using a stimulation protocol of 10 x 6 second at 70 Hz tetanic contractions with a 10 second rest between each contraction.  The authors reported that the depletion on phosphocreatine in the muscles being contracted was similar to when the wrist was voluntarily contracted.  The important difference between this study and the use of EMS devices such as the Abtronic is that the muscle is being stimulated to contract to move the limb (in this case to flex the wrist).  Therefore the muscles are doing work and will therefore need to replenish ATP (in this case by using phosphocreatine as it is a short lasting activity).  When an individual uses an EMS device such as the Abtronic there is no movement of any limbs.  This is primarily due to the inability of devices such as the Abtronic being able to deliver the type of stimulus that result in movement and the inability of people to tolerate the amount of electrical stimulation required to move a limb.

61                  Dr Coombes now concedes that if the AbTronic is used on the wrist, it can cause the wrist to flex.  Used on the biceps, it can produce a contraction which is strong enough to move the arm.

62                  Dr Coombes’ current reasons for thinking that the AbTronic will not cause muscle adaptation is that it does not cause contraction “against substantial resistance”and that it is not capable of causing a “substantial muscle contraction”.  I should say that he has consistently advanced the first of these reasons.  It may be that the second has evolved over time, but that is not necessarily a ground of criticism.

63                  In his second report, Dr Coombes suggests that muscle adaptation requires a contraction of about 25 to 50 per cent of maximum voluntarily contraction capacity.  He agreed in cross-examination that there was support in the literature for the view that adaptation can be achieved at much lower levels of contraction.  He was asked to describe the volume of literature on this subject and replied:

I think there is an extremely large volume of literature to say that electrical muscle stimulation, when used under appropriate conditions, will improve strength.

64                  He stressed the need for appropriate conditions, suggesting that there was a substantial body of opinion supporting his view that the contraction had to be between 25 - 50 per cent of voluntary capacity.  He has not looked at articles to contrary effect, to which articles he was referred in the course of preparing the joint report.  He said that there might be five articles which took a contrary view. 

65                  He also agreed that:

… data has been published in highly respected journals that using battery powered portable low frequency electrical muscle stimulators, which are similar to the Abtronic in that sense, or in those specifications, attached to subjects while freely moving around, have reported that such devices are capable of activating a large portion of the muscle and producing positive muscular adaptations.

66                  It was suggested to him:

… so there is a significant volume of opinion, … that devices … which are portable and low frequently stimulators can produce the positive muscular adaptations that you say the Abtronic cannot produce… .

67                  Dr Coombes said that he did not consider the articles to which he had been referred to be a significant body of evidence.  However he agreed that the articles in question were written by people who claimed to have carried out research work which he had not.

68                  Dr Coombes says in his second report that he maintained a view expressed in his first report that a study by Porcari “… is the most applicable published scientific evidence pertaining as to the effects of … the Abtronic”.  This study (ex 10) reports no significant weight loss or strength improvement in a number of subjects following a regime of EMS.  In cross-examination Dr Coombes conceded that the regime used in the Porcari study involved 100 seconds of stimulation in each session, three times per week over eight weeks, a total of forty minutes.  This is substantially less than the period of contraction prescribed for use of the AbTronic.  It was pointed out to Dr Coombes that he had not considered this factor which seems to be a reasonable basis for distinguishing between the Porcari study and the AbTronic regime.  He considered that it was not necessary to do so because he assumed that Porcari used the relevant device in accordance with instructions provided by the manufacturer.  In other words he treated Porcari’s findings as to the efficacy of the regime prescribed for use with that machine (whatever it was) as indicative of the likely worth of the AbTronic regime, notwithstanding the greater period of time involved in the latter regime and the different equipment used.  In the course of re-examination it was drawn to Dr Coombes’ attention that the prescribed regime in the Porcari study provided for increases in the periods of stimulation after the first four weeks.  However that appears not to have been a matter which was at the forefront of his mind when he classified the Porcari study as being “most applicable” for present purposes.

69                  In re-examination, Dr Coombes also said that EMS would produce strength increases in certain circumstances, namely:

… you have to get a large amount of the muscle contracting, and that can be done by having larger electrodes, and larger stimulus, where a person can put up with more pain than someone else, so - and then the last one is over time.  I mean, there are good animal studies showing that if you can keep a muscle contracting for days, then it is going to really increase in strength, so time and the amount of muscles - the amount of the muscle that you can actually contract are the two most important variables.

70                  He said that another relevant factor is the intensity of the signal which will be affected by the extent of the interface between the electrode and the skin.  Use of a gel may extend the interface.  Large fat deposits may also prevent the signal from reaching the target muscle.

71                  Concerning the probative value of scientific studies, Dr Coombes said that an individual study is of little probative value in itself.  The purpose of a review article is to analyse and summarize individual studies so that researchers can understand the “state of play” in the area.  A review article is of more weight than a single study.  He has read over 200 articles concerning the effects of low intensity EMS, including single studies, review articles and abstracts.

observations concerning the scientific evidence

72                  I accept Professor Pearn’s evidence as reflecting the received view within the medical profession concerning EMS.  He has some experience with the use of electrical stimulation of muscles in children with neuromuscular conditions.  Other evidence suggests that the use of EMS to remedy atrophy in muscles is well-recognized.  From a lay point of view, one is inclined to suspect that if EMS is of value with damaged muscle, then there may be reason to believe that some benefit will be derived from its use with healthy muscle.  Unfortunately, that line of thinking was not pursued with Professor Pearn, nor was he asked to comment upon the very substantial body of evidence given by Professor De Domenico, Dr Wilson and Dr Coombes.  Professor Pearn’s view, probably representing that of the medical profession generally, does not exclude the possibility of a respectable body of opinion to the contrary, either within the medical profession or in “para-medical” professions such as those practised by the other scientific witnesses.

73                  Professor De Domenico’s evidence is of particular importance.  Like Professor Pearn, he occupies a senior position in a large university and is very experienced in his field.  Both Dr Wilson and Dr Coombes are also highly qualified and no doubt entirely competent in their areas of expertise.  Professor De Domenico and Dr Wilson consider that a device such as the AbTronic has a role to play in training healthy muscle.  Dr Coombes now seems to concede that there is support for such a view, but he considers that the AbTronic cannot fulfil such role.  I accept that these views are all honestly held.  I have drawn attention to certain attitudes and changes of position by Dr Coombes.  They lead me to conclude that he was unlikely to be dissuaded from a view which he had formed at an early stage as to the capacity of the AbTronic.  With Professor De Domenico and Dr Wilson, it is not so easy to point to aspects of their evidence which demonstrate any such preconception.  However I was left with the distinct impression that both men were firm and long-standing supporters of the use of EMS.  They were probably also unlikely to change their views.

74                  I do not believe that this conflict of opinion concerning EMS can be resolved by my preferring one view to another.  It can only be resolved by extensive research over time.  It may well be that Dr Coombes is correct in suggesting that the bulk of publications favours his position rather than that adopted by Professor De Domenico and Dr Wilson.  Nonetheless he was unable to discredit the Alon (1987) article or to demonstrate in any persuasive way that it did not support their position.  That article does not stand alone.  Professor Pearn did not deal with the body of opinion of which it is part.  As to the capacity of the AbTronic, Dr Coombes’ criticism of its capacity are not substantiated by his testing it (other than as to weight loss and fat reduction) and inconsistent with views expressed by Professor De Domenico and Dr Wilson.

75                  It is appropriate that I say something about the expression “muscle tone”.  I agree with Dr Coombes that in lay terms, the expression has much to do with the appearance and feel of the muscle through the skin and that this will be affected by actual muscle size and the presence or absence of fat.  However tension in a contracted or partly contracted muscle must also be relevant.  We are all familiar with the image of the flexed male bicep being admired by a woman.  The appearance and feel of the contracted muscle is as much a part of the notion of tone as is the appearance of the muscle when uncontracted.  The concept is imprecise and does not necessarily mean the same thing to all people.  It may not always mean the same thing to any one person.  Such imprecision makes it all the more difficult to prove that the statements concerning tone in the promotional material were misleading.  In any event, even accepting Dr Coombes’ narrower view of the term, the De Domenico/Wilson view is that EMS can cause increase in muscle size and firmness, and therefore in tone.

76                  I am satisfied that there is a significant body of opinion amongst physiotherapists and persons specializing in exercise and development of the body (such as Drs Wilson and Coombes) that EMS may assist in strengthening, enlarging and toning muscles.  Of course Dr Coombes does not hold this view.  I am unable to resolve the conflict between it and the view expressed by Professor Pearn.  I am satisfied that the AbTronic is capable of producing strong contractions in large muscles.  Both Professor De Domenico and Dr Wilson have said as much.  Because of my inability to resolve the dispute as to the benefit of EMS when used with healthy muscle, I am not satisfied that the AbTronic can provide the benefits claimed for it; nor that it lacks such capacity.

77                  It is unfortunate that in a case of this kind, to which substantial resources have been devoted, neither side has conducted appropriate testing of the device in question.  Although limited testing was done by both Dr Wilson and Dr Coombes, it was far from exhaustive and demonstrated virtually nothing about the capacity of the AbTronic other than in connection with weight loss and fat reduction.

EVIDENCE FROM USERS

78                  About 100,000 AbTronics were sold by the first respondent, of which fewer than 8,000 were returned.  There are affidavits from a number of purchasers, complaining that they used the AbTronic as directed, but to no effect.  Some complained of experiencing pain.  Two purchasers attested to having achieved success by using it.  Obviously, this anecdotal evidence is of little value in assessing the capacity of the device for present purposes.

CAUSES OF ACTION

79                  The statement of claim raises numerous different causes of action, resulting in its being somewhat difficult to understand.  I have, on previous occasions, suggested that proceedings of this kind would benefit from careful consideration of the objects sought to be achieved by them and of the best way of achieving such objects.  I doubt whether the present diffuse collection of different causes of action serves any useful purpose.

80                  There is nothing unusual about suggesting that a litigant should identify his or her true case and not simply try to run every possible formulation of it.  For most litigants, scarcity of resources is a primary incentive for taking that step.  Whether or not availability of resources is a problem for the present applicant I do not know.  It is certainly a problem for the Court and, I assume, for the respondents.  Unless reasonable care is taken in identifying the case to be mounted, a respondent may suffer a very serious penalty simply as a result of involvement in the proceedings and regardless of the outcome.  This risk may lead respondents to let such matters go by default, in which case public perceptions of the significance of proceedings such as these and of Court orders generally will be undermined. 

81                  Before going to the pleadings in detail, I should dispose of one matter.  Paragraphs 16, 18, 20, 22 and 23 allege that certain visual images in the promotional material made “before and after” representations concerning use of the AbTronic.  These matters were not mentioned in the course of the trial.  I treat them as abandoned.  Any party requiring findings concerning these matters may apply. 

82                  The alleged misrepresentations with which these proceedings have been mainly concerned are set out in the statement of claim at pars 15 (the advertorials and infomercial), 17 (the first respondent’s website), 19 (the first respondent’s catalogues) and 21 (the representation as to price).  It is alleged in par 24 that the representations in pars 15, 17 and 19 were as to future matters within the meaning of s 51A of the Act.  I will return to that matter at a later stage.  In par 25 it is alleged that:

Ÿ                representations in pars 15, 17 and 19 were opinions or predictions concerning the performance, characteristics, use and/or benefit of the AbTronic;

Ÿ                they conveyed the representation that the first respondent had reasonable grounds for them; and

Ÿ                to the extent that the third respondent published them in the advertorials, they also conveyed the representation that he had such grounds.

I will return to this matter at a later stage.

83                  In par 26 it is alleged that:

The representations set out in paragraphs 15, 17, 19, 22 and 23 were false, misleading and deceptive in that:

(a)       the Abtronic did not have the performance characteristics, use and/or benefit of:

(i)        exercising, toning, firming or tightening the abdominal region, “love handles”, arms, thighs, hips, bustlines and buttocks without any effort by the user;

(ii)        eliminating or reducing fat cells and cellulite;

(iii)       flattening the user’s stomach without any effort by the user;

(iv)       giving the results of up to 600 sit-ups in 10 minutes without any effort;

(b)       the use of the Abtronic by a person would not bring about the results referred to in paragraph (a) hereof;

(c)        the Abtronic did not exercise any part of the user’s body;

(d)       the sending of small electrical signals to muscles is not how a muscle gets exercise which tones the body and eliminates or reduces fat cells and cellulite.

84                  Paragraphs 27 and 28 allege that:

Ÿ                the various implied representations as to reasonable grounds for opinions or predictions (par 25) were misleading because there were no such grounds; and

Ÿ                such opinions or predictions were misleading because they should have been qualified or more extensively qualified.

85                  In par 29 it is alleged that the representation as to price was misleading.

86                  The following breaches of the Trade Practices Act are then alleged:

By the first respondent:

Ÿ                of s 52 (par 32 - as to AbTronic functions);

Ÿ                of subs 53(c) (par 34 - as to AbTronic functions);

Ÿ                of subs 53(e) (par 36 - as to price);

Ÿ                of s 52, by virtue of s 51A (par 37 - as to AbTronic functions); and

Ÿ                of s 52 (par 39 - representations as to grounds and inadequate qualification of opinions/predictions).

By the third respondent:

Ÿ                of s 52 by virtue of subs 6(3) (television) (par 33 - as to AbTronic functions);

Ÿ                of subs 53(c) by virtue of subs 6(3) (television) (par 35 - as to AbTronic functions);

Ÿ                of s 52 by virtue of subs 6(3) (television) and s 51A (par 38 - as to AbTronic functions); and

Ÿ                of s 52 by virtue of subs 6(3) (television) (par 40 - representations as to grounds and inadequate qualification of opinions/predictions).

By the second, third and fourth respondents:

Ÿ                involvement in the first respondent’s contraventions by aiding, abetting, counselling or procuring such contraventions, and/or being knowingly concerned in them (pars 42 - 44).

87                  It is appropriate to consider the statutory regime which has permitted, and perhaps encouraged such a Byzantine muddle.  Section 52 proscribes specific conduct.  Section 53 also proscribes conduct, much of which will almost invariably also be caught by s 52.  Subsection 6(3) extends the operation of the Trade Practices Act (which, for constitutional reasons, is largely limited to the conduct of corporations) to the conduct of natural persons when using electronic media.  Section 75B attacks the conduct of natural persons who are involved in corporate contraventions.

88                  Section 51A was adopted as a result of early experience with the operation of s 52.  There were difficulties in applying it to opinions or statements of expectation which were honestly expressed and therefore not misleading.  The legal profession developed the technique of alleging an implied representation as to reasonable grounds (as raised in pars 25 and 27 of the current statement of claim) and the idea of inadequately “qualified” opinions or predictions (raised in par 28).  Then Parliament intervened, introducing s 51A.  That section provides that a representation as to a future matter, if made without reasonable grounds, is deemed to be misleading for the purposes of Div 1 of Pt V.  Subsection 51A(2) places an onus upon the representor at least to lead evidence of such grounds.

89                  The Explanatory Memorandum which accompanied the introduction of the Trade Practices Revision Bill (1986), inserting s 51A, stated in pars 75 - 78:

75.       Difficulties have occurred in relation to the ability of relevant provisions of Division 1 of Part V to deal with false or misleading statements, representations or predictions about future matters.  The circumstances surrounding these representations are often matters within the knowledge of the person or corporation making the representation, and it has therefore been difficult to obtain conclusive proof of dishonesty or recklessness from the surrounding circumstances without an admission of guilt from the defendant.

76.       These problems were highlighted in Thompson v Mastertouch TV Services Pty. Ltd. (1977) 15 A.L.R. 487, in which Franki J. held that:

….. ‘a prediction or statement as to the future is not false within the words of [s. 59(1)] if it proves to be incorrect unless it is a false statement as to an existing or past fact which may include the state of mind of the person making the statement or of a person whose state of mind may be imputed to the person making the statement.’  (Page 495)

77.       Accordingly, a promoter’s promise or prediction as to the performance or profitability of a business opportunity is not presently caught unless it is based on existing or past facts.  Another problem identified in that case was that a promoter’s promise or prediction is not caught by the Act unless it can be shown that the defendant ‘did not believe that the forecast or prediction would be satisfied or was recklessly indifferent concerning the forecast or prediction.’  (Ibid., page 495)

78.       The new s. 51A deems a prediction made by a corporation in relation to matters specified therein to be misleading for the purposes of Division 1 of Part V (including s. 52) unless the corporation making the prediction has reasonable grounds for making the prediction.  The onus is on the corporation to establish on the balance of probabilities that it had reasonable grounds for the belief.

90                  One might have thought that the adoption of s 51A would have obviated the need to rely upon implied representations as to reasonable grounds or the absence of adequate qualifications upon opinions and predictions.  It is therefore surprising that in the present case, the applicant has sought to adopt so many different approaches in impugning the same conduct.  Whilst there are circumstances in which the prosecution of alternative cases is advisable, that course is not always necessary or advisable.  It is similarly difficult to understand why subs 53(c) should be invoked when the relevant conduct clearly falls within the proscription contained in s 52 (with or without the aid of s 51A).  Similarly, proceedings against the third respondent relying upon subs 6(3) add little, if anything, to the proceedings based upon his alleged involvement in the first respondent’s conduct pursuant to s 75B.  Finally, one might have hoped that the applicant would have decided whether each of the representations was or was not as to a future matter so that s 51A could be invoked or abandoned.  Instead, the s 52 case was run both with, and without the assistance of that section.  This multiplicity of proceedings has had a substantial effect upon the length and cost of the trial and upon the time involved in writing the judgment.  Unless a claim is abandoned, the Court must consider it in detail, even if it concludes that there is no need for a final determination of it.  I will return to this matter at a later stage.

false statements of fact - The s 52 case without reliance on s 51A

91                  The meaning of a statement depends upon the context in which it occurs.  It is therefore necessary to consider each alleged misrepresentation in its context.  The website and the catalogues do not present any great difficulty in that regard.  However the infomercial was a lengthy publication, involving related statements by a number of people.  It is not easy to determine the effect which a particular statement may have had on a viewer.  The advertorial presents similar problems and a further difficulty.  There were five versions of it, run on consecutive days.  Although I have a script, it bears only limited resemblance to what was actually said.  It is necessary that I set out in some detail the content of the infomercial and the various versions of the advertorial.

the Infomercial

92                  The thrust of the infomercial was quite different from that of the advertorial in that the former was more explicit about predicted results than was the latter.  The infomercial commenced with a “voice over” asking “What would you do to flatten your stomach once and for all?”  It then asked whether the viewer was tired of exercising on the floor, causing injury and producing no results.  Three people, apparently using the AbTronic for the first time, commented on the way in which it seemed to be “working” the abdominal muscles.  The AbTronic was then introduced as a fitness system which “does all the work for you”.  The user could relax and watch the various parts of his/her body improve in appearance, obtaining results equivalent to “up to 600 sit-ups in just ten minutes”.

93                  A man and a woman then appeared as joint presenters.  It was said that a person had only to fit the AbTronic and then “get ready for the greatest set of abs that you’re ever going to see, with no sweat”.  The AbTronic was shown, fitted to the female presenter.  Her abdominal area was vibrating under the effect of it.  It was said that:

Ÿ                the AbTronic would provide the equivalent of 600 sit-ups in ten minutes;

Ÿ                it would provide the most advanced electronic workout which the viewer would ever receive while he/she remained passive;

Ÿ                he/she would lose inches and weight around the mid section; and

Ÿ                in a matter of days the AbTronic would firm and tighten the muscles and make the stomach flatter.

94                  A user then claimed to have lost three inches from the waist and two inches from the hips after three weeks of use.  Another woman claimed to have started using the AbTronic because injury prevented her from visiting the gymnasium.  She had lost five inches from her waist and three inches from the hips in about two-and-a-half months.  It was then said that “You can go about your normal business while AbTronic slims, trims and firms your upper abs, your lower abs and/or your love handles with no sweat”.  A user then observed that she had previously performed her cardiovascular workout and then worked on her muscles, using other equipment.  She implied that she could now save time because, using the AbTronic, she did not have to spend time on exercising her muscles.  It was said that the AbTronic would tone and firm the muscles around the stomach “in no time”, that “Soon you will have results you only dream about” and that “You are going to have abs that you won’t believe”.  There was then a suggestion that the AbTronic would remove cellulite and flabbiness in women.

95                  At this point Dr Garcia, a cosmetic surgeon, was introduced.  I will deal with his evidence separately.  It was then said that:

You only need to use the AbTronic fitness system for ten minutes, two to three times a day to put yourself in bathing-suit shape.  Remember, ten minutes with the AbTronic and you’re doing 600 sit-ups.

96                  The male presenter said that he had never liked getting down on the ground to exercise his abdominal muscles, using equipment.  With the AbTronic he could do so whilst watching television or pursuing other activities.  Users then spoke of this aspect of the AbTronic’s appeal.  The male presenter then said that this was an opportunity to get one’s abdominal muscles “strong, firm and toned”.  Later, the presenters stated that many people blamed their shapeless waistlines on excessive weight when the real culprit was lack of muscle tone.  This suggests that use of the AbTronic tightens muscles in much the way that Professor De Domenico demonstrated.  A user then said that using the AbTronic led to much clearer muscle tone and loss of inches.  A number of users referred to muscle definition.

97                  I have previously mentioned Dr Garcia, a cosmetic surgeon who appeared at various stages during the infomercial.  He was introduced as being well-respected amongst his peers.  He observed that whilst people might lose substantial amounts of body fat, their muscle tone still showed no definition.  He referred to young men and women with “six pack” or “washboard” abdomens, again saying that despite weight loss, if the underlying muscle tone was not good, “you’re not going to have a washboard abdomen”.  Weight loss plus stimulation of abdominal muscles, causing “firming and toning” of them, will give better muscle definition and “better cosmetic improvement”.

98                  On his second appearance, Dr Garcia observed that we all wish to maintain muscle mass in the interests of good health, particularly as we age.  He suggested that the advantage of the AbTronic is that one does not have to go to a gymnasium to exercise with weights in order to achieve that result, a particular advantage where medical problems prevent the performance of usual forms of exercise.  The contractions produced by using the AbTronic will improve muscle tone and maintain muscle mass without such exercise.  A person who uses it will be healthier and look better for the rest of his or her life.  In his third appearance, Dr Garcia suggested that the AbTronic could be used by men and women, young or old.  It will give them a “sleek”, not a “muscled kind of, gymnasium-type … (or) bulky” appearance; a “healthy yet toned appearance”.  In his fourth appearance Dr Garcia observed that the AbTronic will cause a firm contraction of the muscle, stimulating it, and that:

… whether you want to or not … you’re going to get that muscle tone, maintain that muscle mass … and you’re healthier and look better for the rest of your life.

99                  I have not dealt with all of the content of the infomercial.  I have overlooked repetition, matters irrelevant for present purposes and purely promotional verbiage.

Representations in the infomercial

100               According to the applicant’s particulars, the representations pleaded in subpars 15(g) to (k) of the statement of claim were made in the infomercial.  They are admitted.  It is also admitted that the representations pleaded in subpar (g) (“flatten your stomach once and for all”) and subpar (i) (“Get the results of up to 600 sit-ups in just 10 minutes without any effort”) were misleading.  I need only consider the representations alleged in subpars (h), (j) and (k).

(h) “You just sit, relax and watch your abs tighten, your love handles disappear and your thighs and bottom firm up - with no sweating involved”;

101               Insofar as this statement relates to the “love handles”, it was admittedly misleading.  Otherwise, the thrust of the statement is that use of the AbTronic will tighten the abdominal muscles and “firm up” the thighs and bottom without exercise in the usual sense.  Professor De Domenico and Dr Wilson and some scientific studies consider EMS to be capable of producing such results.  Dr Coombes agrees that there is some support for that view.  There is also a substantial body of opinion to the contrary.  The evidence does not allow me to resolve this scientific dispute.  Professor De Domenico and Dr Wilson consider that the AbTronic is capable of fulfilling this function.  Dr Coombes disagrees, even assuming that EMS can be effective.  In the end, I prefer the former view of the AbTronic, largely because Dr Coombes’ view of it as a vehicle for delivering EMS seemed to be largely a product of his rejection of EMS, a view to which I have not been persuaded.  His specific criticisms of the AbTronic did not stand up to scrutiny.  I have previously discussed this matter.  I am not satisfied that the statement was misleading.

(j) “Get ready to firm, tone and tighten your upper abs, lower abs and love handles with no sweat”;

102               This is merely a re-statement of subpar (h).  It is conceded that the representation as to love handles was misleading.  For reasons previously given, I am not satisfied that it was otherwise misleading.

(k) “Watch as your ab muscles contract as if you’re doing the sit-up - your muscles are moving - but you’re not”.

103               The AbTronic will cause the abdominal muscles to contract and therefore to move.  The statement was not misleading.

The Advertorial

104               As I have said, there were five different versions of the advertorial.  I will identify them as the “first” to “fifth” versions in the order in which they appear on the video tape which is in evidence.  The thrust of each version was that the AbTronic would allow the user to “tone” and/or “work out” at home “with a minimum of fuss”.  The “fuss” appears to have been primarily associated with the use of leads, presumably a feature of other EMS devices.  The emphasis on precise outcomes, which was a significant aspect of the infomercial, was not evident in the advertorials.  Each version commenced with a female presenter (presumably an employee of the television station) interviewing the third respondent, Mr Quinn.  Written text, running across the bottom of the screen, asserted that diet and exercise form part of any weight loss programme.  Such a text message is known as a “crawler”.

105               In the first version, Mr Quinn suggested that the AbTronic would do the work and the user would get the results.  The expression “workout” was used.  The AbTronic was said to be a “brilliant training and toning tool”, causing muscles to contract and relax.  About half-way through the segment, the camera turned to a man and a woman in sporting attire.  Their presence in the studio had not previously been disclosed to the viewer.  The woman had the AbTronic applied to the lower part of her upper arm, which she described as her triceps.  She said that women experience sagging of the triceps and that by concentrating on that muscle, she was getting “a fantastic workout”.  Her companion had the AbTronic applied to his thigh.  His leg was visibly shaking.  He said that he was getting “a great workout”.  At one stage Mr Quinn drew attention to an “accelerated weight loss guide” provided with the AbTronic.  The advertorial lasted for about four minutes.

106               The other four versions were to broadly similar effect, with some variations.  In the second version the presenter commenced by speaking about awareness of the need to watch diet and exercise.  She then said that exercise comes in various forms, implying that the AbTronic was one of them.  In the third version the AbTronic was described as a training and toning tool which would help the user “get into shape”.  It was suggested that use of the AbTronic should be combined with a healthy diet and walking.  In this version, the male model had the AbTronic around his abdomen.  He said that:  “It’s a great workout”.  It is of some interest that he spoke of wearing the AbTronic whilst undergoing “cardio” (presumably a reference to cardiovascular exercises).  In the fourth version the AbTronic was described as a powerful training and toning tool which would produce the desired results.  The “results” were not identified.  The fifth version commenced with the presenter talking about people being “tough” on themselves concerning parts of their body.  She suggested that the programme would inform them of how to “do something about it”.  In one version, the male model had the AbTronic on his upper arm.  In two versions, the presenter referred to the equivalent of 600 sit-ups being derived from ten minutes’ use of the AbTronic.  I do not believe that the third respondent made any such claim, but he was no doubt aware that the presenter had done so.  The advertorial was pre-recorded.  It can be confidently inferred that the statement was authorized by Mr Quinn on behalf of the first respondent.

Representations in the Advertorial

107               Subparagraphs 15(a) to (f) of the statement of claim set out representations allegedly made in the course of the advertorial.  The respondents concede that they were made.  It is common ground that the representation in subpar 15(e) (“It even has a fat and cellulite blaster setting that is designed to work on fat cells not on muscles”) was misleading.  I will deal with the other representations individually.

(a)  “The Abtronic system generates small, gentle pulses that are delivered inside the belt that is placed on your skin - these pulses activate your underlying motor nerves, causing your muscles to contract and relax - just like normal exercise - except now, the Abtronic is doing the work and you’re getting the results”;

108               Much of this statement is broadly correct.  Although there was some suggestion that the pulses are not gentle, I do not understand that matter to be in issue.  That such pulses activate motor nerves, causing muscles to contract and relax is also not in dispute.  That process is similar to exercise in that both involve contraction and relaxation of muscle.  To the extent that any work is being done, it is done by the AbTronic.  To the extent that there is any benefit, it is derived by the user.  However the references to “normal exercise” and to “the results” strongly suggest that such results would be the same as those derived from “normal exercise”.  Weight loss and fat reduction are commonly expected results of “normal exercise”.  The advertorial did not expressly claim that the AbTronic would cause weight loss, save for the reference to the “Fat-Blaster” setting, which statement implied that the AbTronic was designed to work specifically on fat and cellulite, a claim which could hardly be made for normal exercise.  The “crawler” referred to diet and exercise as part of any weight loss programme, thus suggesting that the AbTronic was to be used in weight loss programmes.  The third respondent, in at least one version, referred to use of the AbTronic with diet and exercise.  Taken as a whole, each version of the advertorial suggested that the AbTronic would assist with weight loss, at least if used in conjunction with exercise and dieting regimes.  The respondents have conceded that it cannot do so.  To that extent it was misleading.  For reasons previously given, I am otherwise not satisfied that this representation was misleading.

(b)  “a brilliant training and toning tool”;

109               The truth or otherwise of this proposition depends very much upon the ultimate resolution of the dispute as to the efficacy of EMS with healthy muscles.  For reasons which I have given, I am unable to resolve that debate.  Whether or not such tool is “brilliant” is very much, and obviously, a matter of opinion, again dependent upon resolution of the broader question.  I am not satisfied that this representation was misleading.

(c)  “the Abtronic system [can] be used to work out and tone different muscle groups”;

110               It is certainly possible to apply the AbTronic to different muscle groups.  According to The Shorter Oxford English Dictionary, the meaning of the expression “work out” is to “engage in physical exercise or training”.  For reasons already given, whether the AbTronic works out or tones muscles depends upon the resolution of issues which I am unable to resolve on the evidence before me.  I am not satisfied that this representation was misleading.

(d)  “vigorous workout for the abdominal region, the love handles, arms, buttocks, thighs”;

111               Again, it is common ground that there will be no workout of the love handles.  As to the other statements, there is no doubt that the AbTronic is capable of causing muscles to move vigorously.  One has only to watch the effect it had upon the models in the advertorial and infomercial to see as much.  Whether the AbTronic can provide a beneficial workout is a different matter and again, one which I am unable to resolve.  I am not satisfied that the statement was misleading other than in connection with the love handles.

(f) “whether it’s at work, at home, out walking or shopping you can get a great workout”;

112               Again, I am not satisfied that this statement was misleading.

Website

113               In par 17 of the statement of claim, it is alleged that three representations were made on the first respondent’s website.  It is admitted that they were made and that the representation alleged in subpar 17(b) (“10 minutes with the Abtronic is equivalent to 600 sit-ups”) was misleading.  As to the others:

(a)        the Abtronic “firms, tones and tightens the upper abs, lower abs and love handles”;

114               It is conceded that the AbTronic will not firm, tone or tighten the love handles.  As to the balance of the statement, I am not satisfied that it was misleading.  I have given my reasons for this.

(c)  “the Abtronic firms, tones and tightens the upper abs, lower abs and love handles”.

115               Again, the assertion concerning the love handles is conceded to have been misleading.  As to the balance of the statement, I am not satisfied that it was misleading.

Catalogues

116               In par 19 of the statement of claim certain representations are alleged to have appeared in the first respondent’s catalogues.  That is admitted.  Again, I will deal with each representation as follows:

(a)  “the Abtronic is the smart electronic-exercise system specifically designed to support body toning, athletic enhancement and body building”;

117               For reasons previously given, I am not satisfied that this statement was misleading.

(b)  “muscles can be shaped while you are relaxing, walking or doing housework”;

118               I am not satisfied that the statement was misleading.

(c)  “a daily workout is usually all it takes to help improve any figure problems, especially abs, flabby underarms, hips, thighs, bustlines and buttocks”;

119               The words “any figure problems” necessarily include problems caused by excess weight or body fat.  The statement therefore implies that the AbTronic can assist in solving that problem.  The respondents concede that it cannot do so.  To that extent the statement was misleading.  I am not satisfied that the statement was otherwise misleading.

(d)  the Abtronic is “a technological breakthrough for busy people who don’t have the time for long gruelling workouts or the money for expensive gym memberships”;

120               A person may be motivated to work out or use a gymnasium by a desire to lose weight or body fat.  To such a person the statement would indicate that he or she could lose weight or reduce body fat by using the AbTronic instead of such activities.  To that extent the statement was misleading.  I am not satisfied that the statement was otherwise misleading.

(e)  the Abtronic “is the formula for retaining a good figure”;

121               For reasons similar to those concerning the representations contained in subpars 19(c) and (d), the statement was misleading to the extent that it implied that figure problems caused by excess weight or body fat could be resolved by use of the AbTronic.  The statement was not otherwise misleading.

(f)  “the Abtronic generates small, gentle pulses that … activate your underlying motor nerves, resulting in muscle contractions.  The Abtronic sends a signal to your muscle and causes it to contract and then relax.  These impulses are designed to copy the natural nerve signal and to obtain efficient, pleasant muscular contractions, which repeat again and again to simulate normal exercise”;

122               As a description of the mechanical operation of the AbTronic, this proposition is substantially true.  However the words “simulate normal exercise” in the relevant context, imply that the benefits of normal exercise (including weight loss) can be derived from use of the AbTronic.  Such benefits include weight loss or fat reduction.  It is conceded that use of the AbTronic will not produce those benefits.  To that extent, the statement was misleading.  I am not satisfied that it was otherwise misleading.

(g)  people “can enjoy the benefits of … passive exercise in the comfort of [their] own home”;

123               The term “passive exercise” is difficult to define.  In context, it would probably be understood as a representation that a person can derive the benefits of exercise from use of the AbTronic.  To the extent that such a representation suggests weight loss or fat reduction as such a benefit, it was misleading.  I am not satisfied that the statement was otherwise misleading.

section 52 and s 51A

124               The applicant also relies upon s 51A in connection with alleged breaches of s 52.  That section provides as follows:

(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.

125               The applicant asserts that the first respondent made the representations alleged in pars 15, 17, 19 and subpars 22(b) and 23(b) without having any reasonable grounds for doing so, and that they were as to future matters.  Subparagraphs 22(b) and 23(b) relate to the photographs referred to in pars 16, 18 and 20.  I treat those matters as no longer in dispute.  Broadly speaking, the respondents admit that the statements in pars 15, 17 and 19 were representations as to future matters.

126               Representations as to the capacity or qualities of any device almost invariably carry predictions as to the way in which it will perform in the future.  Thus a statement as to such capacity may be misleading pursuant to s 52, both because the device does not have the relevant capacity, and because there were no reasonable grounds for the statement, contrary to s 51A.  It will not necessarily always be appropriate to pursue both routes to a finding of contravention of s 52.  In most cases, an applicant should decide whether the statement in question was misleading because of demonstrable factual incorrectness or because it was made without reasonable grounds.  Pursuing both courses may lead to a waste of resources, as appears from the present case.

127               For the moment I set aside the weight loss and fat reduction issue which took up little time at the trial.  Had the case otherwise focused upon s 51A, it would have been resolved largely, if not entirely by reference to the material which was available to the first respondent at the time at which it was marketing the AbTronic.  On the other hand, had the focus been upon the actual capacity of the AbTronic, much of that evidence would have been irrelevant.  The focus would then have been upon the medical and scientific evidence from Professors Pearn and De Domenico and Drs Wilson and Coombes.  No serious attempt was made by the applicant to discredit either Professor De Domenico or Dr Wilson as experts in their respective fields.  At most, it was suggested that their evidence was coloured by predilections for the use of EMS.  Once the joint report was available, and once it was known that both men were apparently competent in their respective fields, it should have been clear that it would be very difficult to prove that the AbTronic had no capacity to tone, strengthen or increase the size of muscles.  At that stage the applicant should have decided to conduct a case relying upon s 51A.  This may have avoided or reduced the time consumed by the evidence of the four medical/scientific witnesses.  It is possible that the respondents might have sought to demonstrate that the AbTronic had the represented capacity notwithstanding any absence of reasonable grounds at the time at which the representations were made, in other words, to justify those representations.  However it is most unlikely that they would have adopted such a course had they been aware of the evidence available to the applicant.

Grounds for the first respondent’s representations

128               The knowledge relevantly available to the respondents concerning the AbTronic is to be found in the instruction manual, in other material provided to the first respondent by its supplier (the “scientific material”) and in the evidence of the second, third and fourth respondents. 

The Scientific Material

129               The first respondent received the AbTronic from one of its major suppliers, an American or Canadian company referred to at various stages in the evidence as Thane International, Thane Canada or Thane Direct (“Thane”).  That company was described by the second respondent, Mr Ozana, as “… one of the biggest direct response television companies in the world”.  With the AbTronic, Thane supplied an instruction manual and a brochure entitled “accelerated Weight Loss plan”.  To the extent necessary I will deal with the manual and the brochure later in these reasons.

130               Early in 2001, the first respondent received from Thane, documents which appear as ex PAB6 to Mr Burton’s affidavit filed on 18 March 2003.  This is the scientific material.  Copies of many of the same documents are included in ex 20, attached to a facsimile which suggests that the material was forwarded by Thane on or about 30 March 2001.  The scientific material is voluminous, and no attempt was made to identify aspects which might be relevant for present purposes.  I have, however, considered it.  It suggests that EMS may be beneficial in treating damaged or wasted muscle.  It also advances the proposition, based in some cases upon experiments, including those reported in the Alon (1987) study, that EMS may be of value in stimulating or “re-toning” healthy muscles and in increasing the size and strength of such muscles.  Part of the scientific material appears to have been prepared to assist in promoting EMS equipment and should perhaps be read with that fact in mind.  In discussing this material I will use the pagination system used in Mr Burton’s affidavit.

131               At p 162 there is a report that in healthy individuals:

… capacitively coupled electrical muscle stimulation can, throughout a 1-year period, improve and maintain isometric strength of the lumbar paraspinal muscles independent of exercise, but it has no measurable effect on bone mass in the lumbar spine.

132               In a document headed INTRODUCTION TO ELECTRO-MUSCLE STIMULATION (at p 192), it is said that:

Among athletes, EMS is used to treat muscle injuries and as an adjunct to their training and conditioning routines.

In a salon, EMS units are used to exercise muscles.  A muscle which has lost its conditioning from lack of exercise can be re-educated through muscle stimulation to resume its proper function of supporting the figure.

Thus, EMS re-tones the muscles.

…

Cosmetic uses of EMS have been steadily increasing.

133               In an attached document headed SHOCK IT TO ‘EM (at p 193) by John S Comereski, the author discusses the use of EMS by somebody who appears to be a body builder, in conjunction with other exercise.  It is said that: 

The EMS, he thinks, just might give him the edge he needs to get bigger, harder and denser.

134               There is then a suggestion that Soviet Union athletes were successful at the 1972 Olympic Games, at least partly as a result of the use of EMS, and that:

Increases in strength, muscle size and athletic performance have all been attributed to this technology.  Even claims of improved cardio-respiratory efficiency and reduced bodyfat levels have been made.

135               At p 194 it is said that:

A major topic of researchers as well as weight athletes has been whether electrical muscle stimulations could play a significant part in training.  The consensus, although guarded, is that if utilized correctly and consistently, EMS can be extremely beneficial.

136               It is also said that:

It is possible that EMS might allow for additional muscle hypertrophy (ie. increased development of tissue by enlargement, without multiplication, of cells).

EMS manufacturers claim substantial increases of muscle hypertrophy (growth), strength and endurance.  EMS may be used solely to do this or in conjunction with regular weight training by aiding recovery and thus helping muscles grow and get stronger.  EMS also increases your heart rate, body temperature and metabolism - thus promoting energy and fat absorption from your body.

137               There is then a discussion of its use in medical treatment.  The author continues (at p 195):

EMS is beneficial to bodybuilders who use it correctly.  Since EMS may be able to stimulate muscle tissue not voluntarily stimulated, bodybuilders can use EMS solely or in conjunction with weights to supplement their regular training to fully exhaust muscles and to speed recuperation to enhance maximum growth.

EMS has been shown to help improve strength and muscle hypertrophy.

138               This is one of very few suggestions that EMS may be beneficial as a substitute for, rather than as an adjunct to an exercise programme.

139               At p 198 et seq, there is discussion of an EMS device called the “Bodi-Tek”.  It is compared to the “TENS” machine.  I understand this to be a device which uses electric pulses to relieve pain.  It is suggested that the Bodi-Tek can be used to “… stimulate and rejuvenate muscle groupings …”.  Another report by Alan Clements concerning the Bodi-Tek device suggests (at p 203) that EMS may assist in increasing muscle size (hypertrophy) and in other beneficial ways.  It is said that:

If a muscle contracts a sufficient number of times against the resistance of an adequate load it increases the bulk of those muscle fibres thus increasing muscle strength.

140               This seems to be consistent with Dr Coombes’ view that resistance against contraction is necessary even where EMS is used.  In a subsequent document headed Bodi Tek Muscle Therapist Muscle Mechanics (p 212 et seq) there is discussion of both muscle mechanics and muscle tone.  At p 214, the following passage appears:

Some motor units in any muscle are always active.  They do not cause movement but tense and firm the muscle.  This resting tension is called muscle tone.  Resting muscle tone stabilizes the position of bones and joints … .

141               It is then suggested that Bodi-Tek:

… by stimulating muscles also increases the activity and sensitivity of the muscle spindles, thus improving muscle tone.

…

Improved muscle tone and muscle fibre size improves skin tone by stimulating the elastic fibres between the muscle and skin which reduces the ground matter space between the muscles and skin.  The muscles increases (sic) in firmness which improves definition.

142               In a subsequent discussion headed ENERGETICS OF MUSCULAR ACTIVITY, it is suggested (at p 216) that EMS “… used appropriately can shorten recovery periods” after exercise and that:

Used correctly, the Bodi-Tek EMS stimulates the muscles and hence the blood supply to the muscles.  It is recommended that it not be used for this purpose for approximately 2 hours after exercise and only at low to medium pulses.

143               In a study headed Hypertrophy, Resistance Training and the Nature of Skeletal Muscle Activation by Ruther and others (reprinted from Muscle Media 2000) (at p 222), the authors report an investigation in which two groups were trained, one with normal exercise and the other, using EMS.  Training occurred twice per week for nine weeks.  The authors report (at p 223) increased quadriceps femoris muscle cross-sectional areas in both groups, with a substantially greater increase in the electrical stimulation group.  Similarly, both groups demonstrated increased torque, with the EMS group having the greater increase.  It is postulated that the differences between the groups may be attributable to the exercise group not working to maximum capacity.

144               Another paper (at p 224), headed EMS use in Sports for Strength Enhancement, Recovery, Rehabilitation, by Francis, apparently an athletics coach, assumes the value of EMS in developing strength enhancement, recovery and rehabilitation (at p 225).  The author concedes that, “Most North American research has not substantiated such claims …” but observes:

My own results have been so favorable that I am not interested in debating whether or not it works but rather how best to employ EMS in the training program.

145               It is nonetheless clear that the author contemplates use of EMS in conjunction with other training regimes.  He says:

In discussions with top level European coaches, it is clear that Electronic Muscle Stimulation must be used in conjunction with a full range of traditional training methods.  It is an adjunct to training - not a replacement.  A sound cardiovascular system must be developed prior to the introduction of EMS.

146               There is also a summary of a paper by Kramer (1987) reporting (at p 228) that, “Electrical stimulation is used to improve the strength capability of normally innervated muscles” and that “… Electrical stimulation is a valuable clinical tool for use in muscle re-education”.  A report by Boutelle and others (1985) reports (at p 231) that “Interest has increased in the use of electrical stimulation as either an adjunct or a substitution for voluntary muscle contraction to improve strength in normal individuals”.  A study of such use produced results which unfortunately do not appear from the exhibit.  It seems that the group which received EMS showed some increase in quadriceps strength.  Kubjak and others (1987) also report (at p 232) a net increase of 33 per cent of isometric torque measurement in the quadriceps following EMS treatment.

147               The exhibit also includes a reference to Alon (1987).  It is not necessary that I say anything more about that study, save to point out that the extract included in the exhibit suggests (at p 234) that it reports that “… Exercise plus stimulation was the superior form of training … followed closely by just stimulation alone”.

148               Nelson and others (1986) report a study of thirty healthy college students.  The summary seems somewhat more positive than is the report itself.  Of the thirty, one group underwent weight training, one underwent EMS and the third group functioned as a control group.  Both the weight training group and the EMS group reported increased knee extension and elbow extension, the EMS group reporting rather greater increases (at p 236).  The authors conclude “… that (EMS) may be superior to weight training in athletic performance enhancement and, therefore, a better modality for athletic conditioning and injury rehabilitation”.

149               Prentance and Kooima (1986) report (at p 238) that “(EMS) … techniques have been recommended as a means of increasing strength, as well as flexibility and range of motion”.  They also report that “… (EMS) might be superior to weight training for training programs and rehabilitation because (EMS) … patients improve motor skill through positive motor transfer”.

150               Fahey and others (1985) report (at p 240) that test results “… agree with Romero … who showed that electrical stimulation is effective in increasing isometric strength.  The present study also revealed consistent increases in isokinetic strength”.  Kramer and others (1984) report (at p 242) that “Electrical stimulation-induced maximal muscle contractions can activate more motor units than maximal voluntary contraction … can”.

151               The exhibit also contains a three page summary of “Recent Medical Evidence Supporting the use of EMS”.  However it seems generally to deal with publications which I have already mentioned.

152               In summary, this material acknowledges the undisputed value of EMS in treating injured muscle or muscle suffering from atrophy.  It recognizes the possibility that it may also have a role in training healthy muscle.  Most studies contemplate the use of EMS in conjunction with other exercise regimes.  A person reading this material could not reasonably conclude that EMS can, by itself, play a major role in muscle adaptation.  There is support for the view that it is capable of assisting in muscle toning and development.  However one would not infer that such view enjoyed universal support amongst those who might be expected to have informed views about the subject.

153               This material was not led to prove the efficacy or otherwise of EMS.  It is merely part of the information upon which the first respondent may have relied in making the various representations as to future matters.

Evidence from the second, third and fourth respondents

154               The second respondent, Moshe Ozana, is a director and chief executive officer of the first respondent.  He first became aware of the AbTronic in early 2001.  It was offered to the first respondent by Thane.  Mr Ozana said that the first respondent had a product committee which considered whether a proposed product should be marketed.  As was its practice, Thane had provided a video recording of an infomercial for use in such marketing, a sample of the product, an instruction manual and other information.  Mr Ozana did not look at any of the material which came with the AbTronic.  He said that he had no involvement in preparing any of the promotional material used by the first respondent in marketing it and did not see such material prior to its being broadcast.  He said that he had “signed off on” the product committee’s decision to market the AbTronic. 

155               Much of this evidence seems to contradict the admissions made in pars 1 and 4 of the amended defence, dealing with pars 12, 13 and 14 of the statement of claim.  As I read the pleadings, it is admitted that Mr Ozana was aware of the contents of the television advertisements, the website and the catalogues and approved them.  The statement of claim does not expressly allege the date or dates upon which Mr Ozana acquired such knowledge, but the context provided by pars 12, 13 and 14 suggests that he had such knowledge at the time of approving the relevant promotional material.  In his submissions, Mr DJS Jackson QC for the respondents did not seek to depart from these admissions.  I will proceed upon the basis that Mr Ozana was aware of the contents of the promotional material when it was published.  In any event, it is likely that he became aware of it at some time shortly thereafter, and while it was still being broadcast or distributed.  He said that he was aware of the claims being made concerning the AbTronic.  Given that the promotion continued over many months, such after-acquired knowledge may well be sufficient for present purposes.

156               Mr Ozana said that the first respondent’s procedure for marketing a new product was as follows:

Ÿ                The first respondent received the product with marketing material and instructions;

Ÿ                The product was reviewed by the product committee and a decision made as to whether or not to market it; and

Ÿ                Advertisements were produced and vetted by third parties.

157               He said that the television advertisements were checked by an organisation called CAD.  CAD is a company called Commercials Advice Pty Ltd, which is owned by the various television networks or an association representing them.  At the relevant time CAD charged $300 for reviewing a short advertisement.  Other evidence suggests that it deals only with advertisements lasting for two minutes or less, in which case it would not have considered the advertorial or the infomercial.  When application is made to CAD for consideration of an advertisement, the applicant must warrant the truth of its contents.  Any approval is conditional upon such truth.  If Mr Ozana meant to imply that he relied upon CAD to ensure that the content of the proposed advertisements was accurate, I reject such claim.  CAD approval could mean little more than that there was nothing in the material which was apparently likely to cause problems for the television station in question.  Mr Ozana also said that he understood that the Ten Network’s legal department verified all claims in advertisements aired by that network.  However it is clear that the network also required warranties as to the correctness of advertising material.  I find it impossible to accept that Mr Ozana relied upon the network to ensure the correctness of his company’s advertising.  It defies common sense to suggest that an advertiser can so simply transfer responsibility for the accuracy of its advertisements to third parties.

158               Mr Ozana also said that the first respondent relied upon its suppliers to provide accurate information about products.  I accept that assertion.  Mr Ozana said that he had been associated with marketing for approximately nine years and that he had never had any reason to doubt the accuracy of information so provided.  He said that he had received a report that the Thane documentation concerning the AbTronic could be supported by laboratory testing.  He seemed to imply that he was told that Thane had carried out such tests.  However he subsequently agreed that there had been no such report.  He had a discussion with “… my marketing people and my legal people to say that, as far as the claims are concerned, these are the documents that came with the product from the actual manufacturers and, as far as they are concerned, there’s no issues”.  He could not otherwise remember the content of discussion.  This evidence had the aura of reconstruction about it.  There was no reference to such discussion in his witness statement.

159               Mr Ozana suggested that there would have been practical testing of the AbTronic to see whether it could perform as represented previously by the first respondent.  He agreed that representations made in the course of marketing by the first respondent would have been adaptations of representations made to that company by Thane.  He would have expected the product committee to have checked the various representations made in the infomercial as supplied by Thane.  Mr Ozana said that because customers buy the first respondent’s products, sight unseen, it is not unusual for there to be a number of returns, sometimes up to 45 per cent of those sold.  Only 8 per cent of the AbTronics were returned.  He used the AbTronic to ease his own back pain and was impressed with it.  Personal testing is a common way of testing new products prior to distribution by the first respondent.  He does not believe that use of the AbTronic without either an exercise or dietary regime will cause weight loss.  It is not clear when he formed this view, but it was not suggested that he had any other view at the time at which the relevant advertising was published.

160               The third respondent, Michael William Ronald Quinn, effectively represented the first respondent in the advertorials.  He was employed by the first respondent as a manager.  He said that proposals to market new products were considered by the product committee, meetings of which were usually attended by Mr Schereck (the fourth respondent), Mr Ozana (the second respondent), Yoram Jovani, Cynthia Law and Trevor Goodman.  Sometimes the retail manager, Michael Amler, would also attend.  Mr Quinn and Mr Schereck attended the meeting at which the AbTronic was considered.  He cannot recall the other attendees. He said that important factors in considering a product were that it was functional, of high quality, did what it was supposed to do and was unique.  There had also to be a good margin offered to the first respondent.  When the decision to market the AbTronic was taken, the first respondent had “… no organized basis for checking claims made by our suppliers as to the efficacy of products”.  The committee would collect opinions, primarily as to matters likely to be of relevance to potential purchasers.  Mr Quinn said that television promotional material was supplied with virtually all products.  This was of some importance as the cost of producing such material would otherwise have been prohibitive.  Overseas promotional material was modified for Australian needs.  In considering a product, the product committee would examine part of the supplied advertising material.  If the first respondent decided to market the product, Mr Schereck would commence to edit that material.

161               In early 2001, Mr Quinn was familiar with EMS devices and knew that they had been sold worldwide for many years in the direct marketing industry.  He was interested in the AbTronic because it had no wires or pads which needed attachment.  He thought that its comparative simplicity would appeal to potential purchasers.  He had previously used EMS in connection with an ankle injury.  He considered that it could be used for improving muscle strength.  He had never heard anybody suggest that EMS devices did not work.

162               When the first respondent received the AbTronic from Thane, it also received the infomercial, an instruction manual, an accelerated weight loss plan and the scientific material.  Mr Quinn observed that the scientific material appeared to be in some detail but did not consider it further.  He was not able to understand it as he did not have a scientific background.  He said that it demonstrated to him that the AbTronic could meet the supplier’s claims.  I therefore infer that he read the scientific material to the extent necessary to form at least a superficial view as to its content.

163               Mr Quinn tested the AbTronic on himself to see whether it made his muscles contract, which it did.  A few of the girls in the office took it home and used it.  He said that he had no reason to believe that it could not do what was claimed in the promotional material and in the testimonials.  He believed that it would do those things and in particular, that it would exercise, trim and tone muscles and help in weight loss.  This statement concerning weight loss must be read in conjunction with par 28 of his statement.  He there conceded that prior to the decision to market the AbTronic, he did not believe that it would cause weight loss “… irrespective of changes to diet and exercise”.  Perhaps his view was that the AbTronic could assist in weight loss if used in conjunction with dietary and/or exercise regimes.

164               Although Mr Schereck usually wrote the scripts, Mr Quinn wrote the script concerning the AbTronic for the “Good Morning Australia” programmes (the advertorial).  Mr Schereck adapted the infomercial for Australian use.  Mr Quinn obtained the material for the advertorial from the information provided by Thane and from the instruction manual.  He asserted that the various representations pleaded in par 15 of the statement of claim were derived from the instruction manual.  He offered various page references, but all are incorrect.  In each case, the reference should be to the next following page.  Below I cite the page numbers given by the witness with respect to each subparagraph of par 15, with the correct page numbers thereafter:

Ÿ                15(a)      -           pp 1, 9 and 13 (pp 2, 10 and 14)

Ÿ                15(b)      -           p 8 (p 9) second para

Ÿ                15(c)      -           pp 1, 6, 8, 9 and 13 (pp 2, 7, 9, 10 and 14)

Ÿ                15(d)      -           pp 1 and 12 (pp 2 and 13) under the heading “ABDOMINALS AND WAISTLINE”

Ÿ                15(e)      -           pp 3, 14 and 15 (pp 4, 15 and 16)

Ÿ                15(f)       -           p 1 (p 2) para 2

Ÿ                15(i)       -           p 1 (p 2) para 5, p 6 (p 7) point (D), p 7 (p 8) point D and the description of photograph (D) on p 9 (p 10)

Ÿ                15(j)       -           p 12 (p 13) under the heading “ABDOMINALS AND WAISTLINE”

Ÿ                15(k)      -           the description of photograph (D) on p 9 (p 10), point (D) on p 6 (p 7) and point (D) on p 7 (p 8).

165               Mr Quinn was not involved in preparation of the infomercial or the promotional material dealing with the AbTronic used in the catalogues and on the website.  He said that the television broadcaster required that the “crawler” message concerning diet and exercise be inserted in the advertorials.  He was aware that the advertorials were approved by CAD which is owned by members of the Federation of Australian Commercial Television Stations.  He understood that commercials lasting for two minutes or less would not be broadcast without a FACT number.  The advertorials and the infomercial were of longer duration than two minutes.  The FACT number is only provided after CAD has viewed the script and the finished commercial.  Mr Quinn said that the first respondent marketed many products, relying upon information provided by suppliers “… as well as the organizations broadcasting the advertisements and CAD as to the content of the advertising made in respect of the products”.  I do not accept that Mr Quinn believed that either CAD or the relevant television station would ensure the accuracy of advertisements prepared by the first respondent.  Such an assertion is inherently improbable.

166               In cross-examination Mr Quinn agreed that the representations made by the first respondent implied that it had reasonable grounds for them and that he was aware of that at the time of publication.  He asserted, however, that it had such grounds.  He was responsible for the advertorial but not for the infomercial, for which Mr Ozana and Mr Schereck were responsible.  At one stage he said that he and Mr Ozana were responsible for the overall marketing strategy for the AbTronic.  However, it emerged that his involvement was limited to writing and presenting the advertorial.

167               In the two years before his departure from the first respondent’s employment in November 2002, Mr Quinn was general manager.  However Mr Ozana was responsible for advertising, expenditure and revenue.  Mr Schereck was the executive producer, presumably responsible for producing and/or editing television advertisements.  Mr Quinn’s position as general manager did not carry with it many of the responsibilities which would normally be conferred upon such an officer.  He was not second-in-charge to Mr Ozana.  His primary duties were as a presenter and, to some extent, writer of advertising material.  He also had some responsibilities in the areas of personnel management and customer service.  Mr Ozana made the final decision to market the AbTronic.  It would be inappropriate to infer that as general manager, Mr Quinn’s involvement in such marketing went beyond writing the script for, and appearing in the advertorial.

168               Mr Quinn said of the claims made for the AbTronic:

We felt that they were reasonable claims or we wouldn’t have gone ahead with the product, and in our checking we did that ourselves.  We also looked at the information that came with this product and relied on Thane, and we had no reason to doubt them as they’d been a huge supplier to us and only ever shown themselves to be spot on, the best you could find.

169               Aaron Schereck was, as I have observed, effectively a producer of television advertisements.  He said that Thane was one of the first respondent’s major suppliers.  When a new product was offered, the head buyer would pass the proposal to the product committee.  A committee meeting was then held, attended by Mr Schereck, Mr Ozana, Mr Jovani, Ms Law, Mr Goodman and sometimes by Mr Amler.  Mr Schereck recalled that he and Mr Quinn were present at the meeting which considered the AbTronic.  He could not recall other attendees.  At that time there was no organised basis for checking claims made by a supplier.  At any one committee meeting, up to thirty products might be considered.  Such consideration involved feedback from members of the committee and perhaps others, the focus being upon the likely views of potential purchasers.  Most products came with advertising material which was modified to meet Australian needs.  At a product committee meeting, part of the videotape provided by the supplier would be viewed.  If it was decided that a product should be marketed, the editing process would begin.

170               Mr Schereck recalled that Thane had initially supplied two samples of the AbTronic, an infomercial, an instruction manual and an accelerated weight loss plan.  He saw the scientific material.  He did not consider it in detail or seek to understand it.  It appeared to him that the AbTronic could fulfil the claims in the material supplied.  Nonetheless I infer from par 15 of his statement, particularly the last sentence, that he read the scientific material to much the same extent as did Mr Quinn.  He informally tested the product on himself.  His wife also tested it.  He read the instructions.  Other members of the committee also tried it.  He was a little sceptical about its capacity.  However he found that it caused his muscles to contract.  He had no reason to believe that the AbTronic could not perform as claimed.  He had no involvement in preparing the catalogues or the website and was absent when the advertorial was prepared.  All of the testimonials in the advertising were accompanied by consent forms signed by the persons giving them.  Mr Schereck had no reason to doubt their truthfulness.

171               Prior to the AbTronic being marketed, Mr Schereck had no view as to whether or not the AbTronic or other similar equipment could cause a person to lose weight without changes to his/her diet or exercise regime.  He was aware that Channel Ten would require a “crawler” message advising that diet and exercise form part of any weight loss programme.  He also understood that a commercial could only be broadcast if it had first received a FACT number provided by CAD.  He understood that CAD reviewed the script and the finished video.  He was also aware that the first respondent marketed a great many products relying upon information provided by suppliers, the broadcasting stations and CAD as to the accuracy of the content of its advertising.  For reasons previously given, I cannot accept Mr Schereck’s assertion of reliance on CAD or the broadcasters.

Reasonable Grounds

172               The Explanatory Memorandum to which I have referred stated that the intention underlying the enactment of s 51A was to place the onus of establishing reasonable grounds upon the relevant representor.  It may be that the section did not achieve that result.  In Australian Competition & Consumer Commission v Universal Sports Challenge Ltd [2002] FCA 1276 at [46], Emmett J observed:

Another question concerning the effect of s 51A(2) is whether the provision does no more than require a corporation to go into evidence.  That is to say, it does not ultimately reverse the onus but simply provides that the deeming takes effect unless the corporation adduces some evidence to the contrary.  Once such evidence is adduced, it is for the Court to make a judgment, on the balance of probabilities, having regard to all the evidence, as to whether the corporation had reasonable grounds for making the representation.  If an applicant elects to adduce no evidence as to that question, then the only evidence before the Court would be that adduced by the corporation.  Whether that is adequate to establish that the corporation had reasonable grounds for making the representations is a matter for the Court.  However, once the corporation has adduced some evidence, there is no deeming arising from s 51A(2).

173               That view seems to be inconsistent with the Explanatory Memorandum.  On the other hand, it accurately reflects the wording of s 51A.  His Honour did not find it necessary to resolve the question.  See also Kellcove Pty Ltd v Australian Motor Industries Ltd & Anor [1990] FCA 306 (Woodward J, unreported judgment, delivered 6 July 1990), Cummings v Lewis & Ors (1993) 41 FCR 559, Phoenix Court Pty Ltd & Ors v Melbourne Central Pty Ltd (1997) ATPR (Digest) 46-179, Blacker v National Australia Bank Ltd [2000] FCA 681, City of Botany Bay Council v Jazabas Pty Limited (2001) ATPR (Digest) 46-210, Ting & Anor v Blanche & Anor (1993) 118 ALR 543 and Australian Competition and Consumer Commission v IMB Group Pty Ltd (1999) ATPR 41-704.  Most of these authorities suggest that the effect of s 51A is to place the ultimate burden of proof of reasonable grounds upon the representor.  It may be that I, like Emmett J, will not have to decide the question.

174               The applicant submits that the first respondent cannot demonstrate reasonable grounds merely by showing that it relied upon information provided by a supplier such as Thane.  I do not accept that assertion as necessarily correct.  In many cases a retailer will rely upon representations made by a manufacturer or wholesaler as to the quality and capacity of a particular product and will make representations based upon them.  It cannot be seriously suggested that a pharmacist who recommends a product to a customer, acting upon information provided by a reputable manufacturer, lacks reasonable grounds.  Similarly, it cannot be asserted that s 51A requires a retailer of electrical goods to carry out testing on a television set supplied by a reputable manufacturer in order to ensure that it has the qualities asserted in relevant promotional material, before he or she represents that it has such qualities.  In my view, such representations may well be made on reasonable grounds if they are based upon information provided by a supplier.  In each case, the question will depend upon the reputation of the supplier and past dealings between it and the retailer.  If goods of a particular kind have been consistently provided over a lengthy period of time, have always been of good quality and lived up to representations made by the supplier, then it may well be reasonable for the retailer to act upon representations concerning a new product.  Each case will depend upon its own facts.  In the present case, Thane had been a supplier to the first respondent for many years.  However the evidence concerning such history is somewhat sketchy.  As I understand it, Thane was not the manufacturer of the AbTronic. 

175               The evidence concerning the decision to market the AbTronic tended to focus upon the product committee.  Despite Mr Ozana’s assertions, I infer from the evidence of both the third and fourth respondents that the committee’s function was not so much to ensure that a product could perform as claimed by the supplier, as to determine whether or not it was marketable.  The superficial approach taken to the AbTronic’s capacity reflected that focus.  I do not accept that Mr Ozana believed that the product committee would ensure that the product was capable of performing as claimed by Thane.  I infer that he was aware that the product committee was primarily concerned with likely success from a marketing point of view.  I have already given my reasons for rejecting claims that any of the respondents relied upon either CAD or the broadcasters to determine the accuracy or otherwise of the various representations.  Even the most inexperienced of persons involved in retailing would expect the entity placing the advertisement to bear primary responsibility for its correctness.  In my view, the position was as the third and fourth respondents suggested:  there was no system designed to ensure that representations as to particular products could be justified.  I accept that Thane was a trusted supplier.  However the first respondent had access to the scientific material provided by Thane and so had an opportunity to assess the reliability of its claims in light of that material.  The second and third respondents’ views as to the capacity of the AbTronic to produce weight loss are also relevant in this regard.

176               I infer that Mr Ozana has virtually no recollection of the extent of his involvement in the decision to market the AbTronic.  He probably had little such involvement, save for accepting the recommendation made by the product committee as to its likely success in the market place.  I infer that neither Mr Quinn nor Mr Schereck really turned his mind to the question of whether the AbTronic could perform the functions which they subsequently attributed to it in the infomercial and the advertorial, and that they accepted Thane’s assertions at face value.  They also read the instruction manual and quickly read the scientific material.

177               I turn now to consider the various representations alleged in pars 15, 17 and 19 of the statement of claim in order to determine whether the first respondent had reasonable grounds for making them.  I commence with subpars 15(a) to 15(f) of the statement of claim which relate to the contents of the advertorial.

(a)  “The Abtronic system generates small, gentle pulses that are delivered inside the belt that is placed on your skin - these pulses activate your underlying motor nerves, causing your muscles to contract and relax - just like normal exercise - except now, the Abtronic is doing the work and you’re getting the results”;

178               The description of the mechanical function of the AbTronic seems accurately to reflect the contents of the instruction manual.  I see no reason why the first respondent should not have accepted that document as reasonable grounds for so describing such function.  Weight loss is not uncommonly expected as a result of “normal exercise”.  However the instruction manual expressly disavows any claim that the AbTronic will reduce weight or eliminate cellulite.  See p 15.  On the other hand, at p 16, it is said that “… along with a controlled calorie diet, (it) will help in the reduction of fat”.  It is also implied that use of the AbTronic will “fight Cellulite”.  These glaring inconsistencies would have put even the casual reader on notice that claims in the manual might be unreliable.  There is nothing in the scientific material which would suggest that the AbTronic can assist in this area.  To the extent that the representation implied that use of the AbTronic could produce weight loss, there were no reasonable grounds for it. 

179               There were reasonable grounds in the scientific material for predicting the possibility of other benefits usually expected from “normal exercise”, such as improved muscle tone and strength.  However there were no reasonable grounds for the assertion that use of the AbTronic would produce those results.  The statement was misleading.

(b)  “a brilliant training and toning tool”;

180               Although the instruction manual may well have given grounds for believing that the AbTronic could satisfy this description, the qualified nature of the scientific evidence concerning the use of EMS must inevitably have led a reasonable person to conclude that one could not accurately represent that this was a “training and toning tool”, let alone a “brilliant” tool.  The most that could have been said, having regard to the entirety of the material, was that the AbTronic might perform such a function or that there was evidence which suggested that it might.  To go further was, in my view, to make a statement as to a future matter without reasonable grounds.  The statement was misleading.

(c)  “the Abtronic system [can] be used to work out and tone different muscle groups”;

181               The verb “work out” means, according to The Shorter Oxford English Dictionary, to “engage in physical exercise and training”.  Such a meaning necessarily implies that some physical benefit or improvement is expected from the activity in question.  While there were grounds for believing that use of the AbTronic might yield such benefit, there were no reasonable grounds for asserting that it would do so.  The representation was made without reasonable grounds and was misleading.

(d)  “vigorous workout for the abdominal region, the love handles, arms, buttocks, thighs”;

182               The AbTronic certainly provides a good shakeup to the part of the body to which it is applied.  However, as explained above, the term “work out” implies the production of some benefit.  The material provided by Thane did not establish the capacity to produce any such result.  It only raised the possibility.  For the reasons given in connection with subpar (c) above, the representation was made without reasonable grounds and was misleading.

(e)  “It even has a fat and cellulite blaster setting that is designed to work on fat cells not on muscles”;

183               This representation carries the implication that the AbTronic will eliminate fat and cellulite.  As I have already observed, the instruction manual disavows any such capacity.  As a statement about a future matter, it was made without reasonable grounds and was misleading.

(f) “whether it’s at work, at home, out walking or shopping you can get a great workout”;

184               For reasons which I have given in connection with subpars (c) and (d) above, this representation was made without reasonable grounds and was misleading.

185               Subparagraphs 15(g) to 15(k) relate to the infomercial.

(g)  “flatten your stomach once and for all”;

186               This statement implies that use of the AbTronic will cause fat reduction and toning of the abdominal muscles.  In view of the express disavowal in the instruction manual of any capacity to bring about weight loss and the equivocal nature of the evidence as to toning capacity, the representation was made without reasonable grounds and was misleading.

(h)  “You just sit, relax and watch your abs tighten, your love handles disappear and your thighs and bottom firm up - with no sweating involved”;

187               For similar reasons this statement was made without reasonable grounds and was misleading.

(i)  “Get the results of up to 600 sit-ups in just 10 minutes without any effort”;

188               It is a little difficult to identify the likely “results”, but common expectations would include tightening and/or toning of the abdominal muscles and weight loss.  For the reasons previously given, that statement was made without reasonable grounds and was misleading.

(j) “Get ready to firm, tone and tighten your upper abs, lower abs and love handles with no sweat”;

189               This representation carries the implication that use of the AbTronic will produce these results.  For reasons previously given, the representation was made without reasonable grounds and was misleading.

(k) “Watch as your ab muscles contract as if you’re doing the sit-up - your muscles are moving - but you’re not”.

190               There is evidence to justify the assertion that EMS provokes muscle contraction in much the same way as occurs in the course of performing exercise.  There is some evidence to suggest that the AbTronic can produce contractions which will move the arm and wrist.  This statement accurately describes the effects of EMS as described in the material.  There were reasonable grounds for making this statement.  It was not misleading.

191               I turn to the website.  The relevant representations are contained in par 17 of the statement of claim.

(a)  the Abtronic “firms, tones and tightens the upper abs, lower abs and love handles”;

192               For reasons previously given, this representation was made without reasonable grounds and was misleading.

(b)  “10 minutes with the Abtronic is equivalent to 600 sit-ups”;

193               Again, the subject matter of the equivalence is not clear, but it is undoubtedly some physical benefit.  For reasons which I have previously given, the representation was made without reasonable grounds and was misleading.

(c)  “the Abtronic firms, tones and tightens the upper abs, lower abs and love handles”. 

194               For reasons previously given, this statement was made without reasonable grounds and was misleading.

195               As to the catalogues, the relevant representations appear in par 19 of the statement of claim.

(a) “the Abtronic is the smart electronic-exercise system specifically designed to support body toning, athletic enhancement and body building”;

196               The statement carries the representation that use of the AbTronic will produce the identified results.  For reasons previously given, it was made without reasonable grounds and was misleading.

(b)  “muscles can be shaped while you are relaxing, walking or doing housework”;

197               For reasons which I have given, the statement was made without reasonable grounds and was misleading.

(c)  “a daily workout is usually all it takes to help improve any figure problems, especially abs, flabby underarms, hips, thighs, bustlines and buttocks”;

198               I have previously pointed out that the expression “figure problems” includes those caused by excess weight and/or body fat.  Weight or fat must be lost in order to resolve the problem.  The other aspects of the representation are absolute assertions which cannot be supported by reference to the information available to the first respondent at the time.  The representation was made without reasonable grounds and was misleading.

(d)  the Abtronic is “a technological breakthrough for busy people who don’t have the time for long gruelling workouts or the money for expensive gym memberships”;

199               The statement contains the implication that the benefits of work outs and/or use of a gymnasium can be derived from use of the AbTronic.  For reasons which I have given, the representation was made without reasonable grounds and was misleading.

(e)  the Abtronic “is the formula for retaining a good figure”;

200               For reasons which I have given, the representation was made without reasonable grounds and was misleading.

(f)  “the Abtronic generates small, gentle pulses that … activate your underlying motor nerves, resulting in muscle contractions.  The Abtronic sends a signal to your muscle and causes it to contract and then relax.  These impulses are designed to copy the natural nerve signal and to obtain efficient, pleasant muscular contractions, which repeat again and again to simulate normal exercise”;

201               The statement appears to be correct and justified by the material, save for the reference to simulating “normal exercise”.  In a sense the contractions simulate normal exercise, but the context clearly indicates that the outcome will be physical benefit.  To that extent the representation was made without reasonable grounds and was misleading.

(g)  people “can enjoy the benefits of … passive exercise in the comfort of [their] own home”;

202               As I have previously observed, the “benefits” of exercise, “passive” or otherwise, are usually of a physical kind.  In those circumstances, the representation was made without reasonable grounds and was misleading.

claims under subsections 53(c) AND 53(e)

203               Section 53 relevantly provides as follows:

A corporation shall not, in trade or commerce, in connexion with the supply or possible supply of goods or services or in connexion with the promotion by any means of the supply or use of goods or services:

(a)       …

(aa)     …

(b)       …

(bb)     …

(c)        represent that goods or services have sponsorship, approval, performance characteristics, accessories, uses or benefits they do not have;

(d)       …

(e)        make a false or misleading representation with respect to the price of goods or services;

…

204               In par 34 of the statement of claim, it is pleaded that the representations alleged in pars 15, 17, 19, 22 and 23 were in contravention of subs 53(c).  Paragraphs 22 and 23 concern the “before and after” allegations which I have treated as no longer in issue.  I would expect that most of the other representations which offend against s 52 would also offend against subs 53(c).  I doubt whether there is any point in making further findings.  Any party may seek them if there is some good reason.  There is no reason to doubt that the misrepresentation as to price offended against s 53(e). 

claims relying upon implied representations as to grounds

205               These claims are raised in pars 25 and 27 of the statement of claim.  I cannot see that any good purpose will be served by addressing those allegations.  My findings concerning s 51A cover the same ground.  Again, any party requiring further findings may seek them.

Unqualified, or inadequately qualified opinions or predictions

206               These claims are raised in pars 25 and 28 of the statement of claim.  They seem to add nothing to the case.  Any party requiring further findings may request them.

claims against the third respondent, relying on subs 6(3)

207               As I have observed, subs 6(3) extends the operation of the Trade Practices Act to conduct occurring in television broadcasts.  In par 33 of the statement of claim, it is alleged that the third respondent breached s 52 of the Trade Practices Act in making the various representations particularized in subpars 15(a) to 15(f).  This claim does not rely upon s 51A.  In par 35 of the statement of claim the applicant alleges that the same conduct by the third respondent was contrary to subs 53(c) of the Trade Practices Act.  In par 38 of the statement of claim it is alleged that the same conduct constituted contravention by Mr Quinn of s 52.  This claim relies upon s 51A.  In par 40 of the statement of claim the applicant asserts that the same conduct was contrary to s 52, relying upon the allegations in pars 27 and 28.  It will be remembered that those paragraphs plead:

Ÿ                that there were, implicit in the various statements, implied representations as to reasonable grounds, which implied representations were false; and

Ÿ                that opinions and predictions lacked appropriate qualification.

208               The various representations in question were made by the third respondent on behalf of the first respondent.  The relevant knowledge of the first respondent was that of the third respondent.  It is not necessary to reconsider the various representations in detail.  Appropriate orders can be drafted by reference to my earlier findings.  If further findings are thought necessary, I will entertain any appropriate application.

SECOND, THIRD AND FOURTH respondents’ INVOLVEMENT IN THE first respondent’S CONTRAVENTIONS

209               Relief under the Trade Practices Act is prescribed by Pt VI.  Subsection 75B(1) provides:

A reference in this Part to a person involved in a contravention of a provision of Part IV, IVA, IVB, V or VC, or of section 75AU or 75AYA, shall be read as a reference to a person who:

(a)       has aided, abetted, counselled or procured the contravention;

(b)        has induced, whether by threats or promises or otherwise, the contravention;

(c)        has been in any way, directly or indirectly, knowingly concerned in, or party to, the contravention; or

(d)       has conspired with others to effect the contravention.

210               Where injunctive relief is sought pursuant to s 80, subs 80(1) similarly extends the operation of that section.  In pars 41 to 44 of the statement of claim, the applicant pleads that the second, third and fourth respondents were involved in the first respondent’s contraventions as pleaded in pars 32, 34, 36, 37 and 39 of the statement of claim by:

Ÿ                aiding, abetting, counselling or procuring contraventions; and/or

Ÿ                being knowingly concerned in, or parties to such contraventions.

211               Paragraph 32 of the statement of claim concerns the first respondent’s breaches of s 52 (absent reliance on s 51A); par 34 concerns the alleged breach of subs 53(c); par 36 raises the alleged breach of subs 53(e); par 37 concerns the alleged breaches of s 52 (relying on s 51A); par 39 concerns the implied representation as to grounds and the absence of adequate qualifications upon opinions and/or predictions.  As against the third respondent, these allegations are in addition to those which rely upon subs 6(3).

212               Paragraphs 75B(1)(a) and (c) were considered by the High Court in Yorke & Anor v Lucas (1985) 158 CLR 661.  The majority (Mason ACJ, Wilson, Deane and Dawson JJ) recognised the that the expression “aided, abetted, counselled or procured” was borrowed from the criminal law and, at 667, observed:

Both in the case of felonies where the principal offender and the secondary participant commit separate offences, and in the case of misdemeanours where no distinction is drawn between the two, a person will be guilty of the offences of aiding and abetting or counselling and procuring the commission of an offence only if he intentionally participates in it.  To form the requisite intent he must have knowledge of the essential matters which go to make up the offence whether or not he knows that those matters amount to a crime.  … The offence of culpable driving under s. 52A (of the Crimes Act 1900 (NSW)) is an offence of strict liability which, putting the defence of honest and reasonable mistake to one side, requires no proof by the prosecutor of any mental state on the part of the accused.  Nevertheless it was held that to have aided and abetted or counselled and procured the offence of culpable driving the appellant must have intentionally participated in that offence and to have done so must have had knowledge of the essential matters which went to make up the offence on the occasion in question.  Those matters included the defective condition of the brakes upon the vehicle being driven, because the culpable driving alleged consisted of the driving of that vehicle with defective brakes.  Proof of such knowledge on the part of the principal offender was, however, not part of the prosecution case because the principal offence was one of strict liability.

213               Their Honours went on to hold that the expression “aided, abetted, counselled or procured” as used in s 75B has a similar meaning.  Brennan J reached the same conclusion.  At 676 - 677 his Honour observed:

As we have seen, the actual misleading or deception of a person is not an element of a contravention of s. 52, though a person seeking compensation under s. 82(1) must establish that his loss or damage resulted from the contravening conduct.  In determining who is civilly liable for a s. 52 contravention under s. 75B(a) no question arises as to whether the person upon whom liability is sought to be imposed knew that another person would or might be misled or deceived by the contravening conduct.  But s. 75B(a) does require knowledge of the acts constituting the contravention and of the circumstances which give those acts the character which s. 52 defines, namely, “misleading or deceptive or … likely to mislead or deceive”.  As the net of civil liability for a contravention does not catch those who would not be caught if s. 52 created an offence, honest ignorance of the circumstances which give a representation a misleading or deceptive character or the character of a representation which is likely to mislead or deceive is inconsistent with civil liability under s. 75B(a).  The operation of s. 75B(a) in conjunction with s. 52 may be incongruous, for s. 52 throws a strict liability on a corporation, but s. 75B(a) does not extend liability for a s. 52 contravention to a person who procures the corporation to engage in contravening conduct if that person is honestly ignorant of the circumstances that give that conduct a contravening character.

214               As to par 75B(1)(c) Mason ACJ, Wilson, Deane and Dawson JJ considered that a person is knowingly involved in a contravention if he or she is “… an intentional participant, the necessary intent being based upon knowledge of the essential elements of the contravention” (at 670).

215               Similarly, Brennan J observed at 677:

Nor, in my opinion, does par. (c) of s. 75B impose a stricter liability.  The juxtaposition of “knowingly concerned in” and “party to” in a statute defining criminal liability (e.g., s. 5 of the Crimes Act) would deny to the latter term a construction equivalent to “unknowingly concerned in”.  A “party to” an offence is one who, by the principles of the common law, would be held to be criminally liable for the offence.  The term adds little to the more specific terms to be found in s. 5 of the Crimes Act, but it ensures that none is omitted from the net of criminal liability whom the common law would include.  As s. 75B transports the criteria of the criminal law into the definition of the parties who are civilly liable for contraventions of Pts IV and V, the criminal law definition of parties to an offence furnishes the definition of those who are civilly liable as a party to a contravention under s. 75B(c).  The requirement of knowledge under par. (a) is no less stringent under par. (c).

216               I will consider separately the alleged involvement of each of the second, third and fourth respondents.

Second Respondent - Mr Ozana

217               The case against Mr Ozana appears from subpars 12(a), 13(a), 14(a) and par 41 of the statement of claim.  It is said that he knew and approved of the publication of the infomercial, the advertorial, the website and the catalogues; that he obtained and assessed relevant information and that he participated in trials.  It is alleged that he knew that the various representations were misleading, were made without reasonable grounds and/or that opinions and predictions should have been qualified.

218               I found certain aspects of Mr Ozana’s evidence to be unconvincing.  He asserted the existence of a system for checking claims by suppliers concerning the qualities of products, in which system he played no part.  I have concluded that the true position was as suggested by Mr Quinn and Mr Schereck:  that there was no such system.  It may well be that the directors of the first respondent, including Mr Ozana, ought to have ensured that there was such a system, but that is not the issue with which I am presently concerned.  I have concluded that Mr Ozana had virtually nothing to do with the decision to market the AbTronic other than to endorse a recommendation, or perhaps decision of the product committee.  I doubt whether he had any knowledge of the AbTronic at all.  In evidence, he denied advanced knowledge of the content of the promotional material which is the subject of those proceedings, but such knowledge is admitted in the pleadings.  I suspect that he was happy to accept anything provided by Thane as satisfactory for his purposes.  The very limited personal testing which he carried out on the AbTronic would not have disclosed any information which might have been relevant for present purposes.

219               The applicant asserts that Mr Ozana knew that the first respondent had no grounds for making the various representations concerning the AbTronic.  However I am unable to reach that conclusion.  He had no duty as a director or as chief executive officer to be personally aware of each representation made by the first, third or fourth respondent or to ensure its correctness.  As I have observed, he may have had a duty to ensure that there was a system for doing so, but that is not presently relevant.  It may well be that he had no reasonable grounds for believing that the representations were true.  It may also be that he had no reasonable grounds for believing that the first respondent had such grounds.  However I am not satisfied that he knew that the first respondent had no reasonable grounds.

220               One aspect of the case against Mr Ozana calls for special treatment.  To the extent that the promotional material represented that the AbTronic would produce weight loss without exercise or diet change, Mr Ozana did not believe that it would do so.  However such belief does not exclude the possibility that the first respondent had grounds for such a representation.  There was no suggestion that Mr Ozana considered himself to be an expert in that area.  He might well have assumed that Thane knew more than he did about it.  Unfortunately, this matter was not pursued in Mr Ozana’s oral evidence.  He knew that the first respondent had received “other information” from Thane and as I have previously observed, he seemed to trust that company.  I doubt whether Mr Ozana gave much thought to the AbTronic at any stage.  The burden of proof lies on the applicant.  Although it is a close-run thing, I find myself unpersuaded that Mr Ozana was aware that the first respondent had no reasonable grounds for the representations as to weight loss.  I should also add that I did not understand the applicant’s case to be based upon any failure by Mr Ozana to remove or correct the promotional material at any time after it was first released.

221               It is never satisfying to dispose of a case such as this upon the basis that a senior manager did not know because he did not look.  However that is a consequence of the fact that the Trade Practices Act is primarily concerned with the conduct of corporations.  It may be that if Mr Ozana’s conduct were judged pursuant to the legislation which governs the internal management of such corporations, it would be found wanting.  I am not satisfied on the balance of probabilities that Mr Ozana was involved in the first respondent’s contraventions.

Third Respondent - Mr Quinn

222               Mr Quinn wrote the script for the advertorial and participated in it.  There is no evidence of his having been involved in preparation of any of the other promotional material.  He denied such involvement.  However he had some knowledge of the content of the infomercial as originally supplied by Thane.  He saw at least some of it at the product committee meeting.  The applicant submits that he and Mr Ozana were jointly responsible for marketing strategy.  However the evidence on this point (at TS 580 ll 4 - 9) was that Mr Quinn was not concerned with promotion on the web, in the catalogues or in the infomercial.  I see no basis for finding that he was involved in any contravention other than in connection with the representations alleged in subpars 15(a) to 15(f) of the statement of claim.

223               As I have previously observed, little was said in the advertorial about specific results to be derived from use of the AbTronic.  There were numerous assertions as to the quality of the AbTronic, but no clear statement as to what it could achieve.  The “crawler” message must be kept in mind, as must the fact that in at least one version, Mr Quinn spoke of use of the AbTronic in conjunction with exercise programmes and diet.  None of the pleaded representations deals specifically with weight loss or fat reduction, save for that in subpar 15(e), “It even has a fat and cellulite blaster setting that is designed to work on fat cells not on muscles”.  The reference to the AbTronic working on fat cells clearly conveys the message that it could assist in reducing or eliminating them.  This representation is inconsistent with the express disavowal in the instruction manual to which I have previously referred. 

224               Mr Quinn was familiar with the instruction manual.  Indeed, he said that it was the source of much of the material which he used in the advertorial.  The assertion on p 15 that “We do not say that AbTronic will reduce weight or eliminate cellulite …”, the statement on p 16 that “AbTronic along with a controlled calorie diet, will help in the reduction of fat” and the reference to fighting cellulite must have raised in Mr Quinn’s mind some doubt as to what was being claimed.  None of the material, save for the relatively loose and clearly contradictory language in the instruction manual and the assertions in the original infomercial, supported the proposition that the AbTronic had any capacity to eliminate fat or cellulite.  Mr Quinn had no reason to believe that the first respondent had any other material which supported the proposition.  Given the equivocal nature of the content of the instruction manual with which Mr Quinn was familiar, I conclude that he must have been aware that the first respondent had no reasonable grounds for its assertion that the AbTronic was capable of eliminating cellulite or fat.  In making the representation identified in subpar 15(e), he was therefore knowingly concerned in the first respondent’s contravention.

225               As to the other representations in the advertorial, the scientific material supported the possibility that the AbTronic might provide some of the benefits of exercise in the form of toning and exercising muscle.  However the material was far from conclusive.  Mr Quinn said that he was not able to understand the material.  This may be correct.  However, he also asserted that the material offered some support for the claims, implying that he had some understanding of its content.  It would not have taken any great expertise or detailed reading to understand that the material offered no support for a positive assertion that EMS was certainly able to provide such benefits.  In those circumstances, I infer that Mr Quinn knew that the first respondent had no reasonable grounds for making the representations identified in subpars 15(a) to 15(d) and 15(f).  To the extent that his conduct on behalf of the first respondent was misleading, he was knowingly concerned in it and therefore involved in it pursuant to s 75B.

Fourth Respondent - Mr Schereck

226               Subject to one qualification, I consider Mr Schereck to have been a generally honest witness.  I accept that he had no relevant involvement in writing the script for the advertorial, nor in preparation of the website or the catalogues.  The qualification upon my acceptance of Mr Schereck’s evidence concerns the assertion in par 15 of his written statement that he received the supportive scientific evidence provided by Thane but that:

… apart from observing that it seemed to be in some detail, I did not consider it further.  I did not really attempt to understand what it was saying, as I do not have a scientific background.  However, it appeared to me that the Abtronic could do what the advertising was claiming it could.

227               As with Mr Quinn, the statement seems to be designed to be both factual and misleading.  Mr Schereck must have read the scientific material in order to conclude that it contained some detail and suggested “… that the Abtronic could do what the advertising was claiming it could”.  In other words, he was saying, as Mr Quinn did, that he had read it superficially, without fully understanding it, but in sufficient detail to form a view as to its content.  In particular, he was able to identify the extent to which that material supported the claims.  As I have previously observed, whilst the scientific material raises the possibility that EMS may have some beneficial results when used with healthy muscles, it by no means establishes that it has such beneficial results.  No reasonably intelligent lay person could have come to any other conclusion.  Mr Schereck also read the instruction manual.  He had no reason to believe that the first respondent had any other material supporting the representations in the infomercial.  He may have considered Thane to be a reliable source of information, but he had also to take into account the material which Thane had provided.  In my view the evidence does not support the finding that Mr Schereck was involved in any of the first respondent’s conduct other than that concerning the infomercial.  That conduct is particularized in subpars 15(g) to 15(k) of the statement of claim.

(g)  “flatten your stomach once and for all”;

228               This statement implies a capacity to reduce weight or body fat and to tone muscles.  There is nothing in any of the scientific material to justify the implication as to weight and fat.  Mr Schereck had read the instruction manual and must have seen the inconsistency to which I have previously referred.  His reading of the scientific material must also have disclosed  to him the equivocal nature of any support for the use of EMS with healthy muscle.  He was knowingly concerned in this conduct and therefore involved in it.

(h) “You just sit, relax and watch your abs tighten, your love handles disappear and your thighs and bottom firm up - with no sweating involved”;

229               As to the love handles, there is certainly no suggestion in the scientific material that EMS would assist in removing them.  The picture on p 10 of the instruction manual, under the heading “LOVE HANDLES/WAIST”, suggests that it “tucks in the girth”.  On p 14, under the heading “BODY TONING”, it is suggested that the AbTronic will “work on” the love handles.  However in the next paragraph, and again on p 15, the author disavows any capacity to cause weight loss.  On p 16, it is said that the AbTronic, with a controlled calorie diet, will help in reducing fat.  If the reference to working on love handles implies a capacity to reduce fat, then it is inconsistent with the disavowal of any capacity to reduce weight.  If the claim is that it will “tone” the love handles, such a positive statement was inconsistent with the equivocal statements in the scientific material.  None of the material provided any other grounds for these statements.  Mr Schereck had no reason to believe that the first respondent had any other grounds for the statements.  He was knowingly concerned in this contravention and was therefore involved in it.

230               As to the other aspects of the statement, the scientific material offers some support for the proposition that EMS can bring about such results but does not support the proposition that it can certainly do so.  The representation, cast in this absolute way, was without reasonable grounds.  Mr Schereck must have been aware of that.  He was knowingly concerned in this contravention and therefore involved in it.

(i)  “Get the results of up to 600 sit-ups in just 10 minutes without any effort”;

231               Very little in the scientific information supports the proposition that the AbTronic can, by itself, provide the equivalent of exercise.  The primary suggestion is that it may operate as an adjunct to exercise programmes.  I can see nothing in the scientific material which would justify the representation.  For reasons previously given I consider that Mr Schereck must have been aware that there was nothing in the material available to the first respondent which would justify such a positive statement.  He was knowingly concerned in this contravention and therefore involved in it.

 (j) “Get ready to firm, tone and tighten your upper abs, lower abs and love handles with no sweat”;

232               I have, in effect, already dealt with this matter.  Mr Schereck must have been aware that the representation was made without reasonable grounds.  He was involved in the contravention.

(k) “Watch as your ab muscles contract as if you’re doing the sit-up - your muscles are moving - but you’re not”.

233               This statement is factually correct and reflects the scientific material.  I accept that there were reasonable grounds for it.

OTHER EVIDENCE and issues

Television stations and cad

234               There is evidence concerning the terms upon which relevant television stations broadcast advertorials and perhaps, other advertisements and as to the functioning of CAD.  This evidence relates to the extent to which any of the respondents may have believed that either CAD or the relevant television stations had assumed responsibility for ensuring that the content of advertising material was correct.  I have dealt with this matter, taking into account such evidence.  The second category is evidence concerning the willingness of broadcasters to broadcast remedial advertising pursuant to any order made in these proceedings.  I need not address that material in detail.

marketing evidence

235               There is a substantial body of evidence which might be described as “marketing evidence”.  It concerns television viewing habits and surveys as to the extent of public knowledge of EMS devices, including the AbTronic.  There is also evidence from marketing specialists, primarily seeking to identify an appropriate advertising regime designed to correct any false impressions concerning the AbTronic and its capacity.  The evidence concerning viewing habits and surveys is designed to support the opinions of the marketing specialists, including Dr George Ramsay Beaton who was called by the applicant.  He was asked to advise as to the extent and nature of advertising necessary to correct the effect of any misrepresentations made in the first respondent’s promotion of the AbTronic.  He offered the view that:

Consumers buy - and form relationships with - brands rather than products per se.  For the consumer, the product is only part of the overall brand.  In this context, by ‘product’ I mean the consumer good and/or the service that delivers benefits to the consumer.  …

The brand is the main, and usually dominant, method of differentiation of products.  Consumers rely on brands when they are making choices.  The brand is designed to identify the product and differentiate it from its competitors in such a way that the consumer’s attention is attracted, the brand is recognised, recalled, preferred and purchased.  The ABTRONIC brand is the means by which the advertiser, DANOZ DIRECT, and the consumer refer to the ABTRONIC product.  The ABTRONIC brand is more than the physical product and its functionality to the consumer.  It is also the set of associations the consumer has in their mind as a result of, for example, exposure to the advertising and/or use of the product and/or materials and information in which the product is packaged and/or what the consumer has heard from others by word-of-mouth.

236               This overall concept of brand identity was described by Dr Beaton as the brand’s “gestalt”.  Dr Beaton considered the extent of promotion of the AbTronic and concluded that:

… the ABTRONIC product received very significant television exposure across a wide geographic area and spread across the day and night, weekdays and weekends and during each month of the year.

237               At par 81 of his report, he observed:

In my opinion, the components of a promotional program to correct the impact of the First Respondent’s promotion will need to be tailored to meet the specific objectives of any such correction.  I have assumed for present purposes that the objective - in several parts would be to:

81.1          correct within memory;

81.2          each of the relevant misrepresentations as well as the overall impression;

81.3     held by the majority of consumers;

81.4     in each part of the population previously exposed, either by way of promotion or word-of-mouth.

81.5     I note that this objective does not include:

(a)       persuading consumers to buy the product;  nor

(b)       informing consumers as to how to order and how to pay.

238               He suggested that for present purposes the planning of any advertising campaign to correct false impressions might involve the following steps:

Ÿ                How many advertising exposures (total number of screenings) are required;

Ÿ                To deliver a given total number of exposures of the target audience for the advertising;

Ÿ                Thus delivering a given number of the target audience who have attended to and processed the advertisement or advertisements; and

Ÿ                Which in turn delivers a given number of prospects with full communication effects and brand position established in their minds.

239               In order to identify this number, Dr Beaton referred to research concerning the period over which a residual positive effect, flowing from advertising, might endure.  Some studies suggest that the effect may last for months.  However Dr Beaton suggested that even when the advertisement itself had been forgotten, the “gestalt” of the brand might still be implanted in the memory and enlivened by external stimuli such as word of mouth.  Dr Beaton opined that:

… the appropriate corrective response to meet the specified objective would require:

90.1     reaching the same audiences previously exposed to the misleading and deceptive messages, including audiences reached previously by way of promotion as well as by way of word-of-mouth;

90.2     with such reach and frequency … of promotion commensurate with the objectives specified … above, taking into account the “objective and task” method of advertising, planning and budgeting.

240               He suggested that to achieve this result it would be desirable to advertise in such a way as to provide, in effect, a viewing audience of between 50 and 75 per cent of that originally exposed to the advertising programme through all its various publications, using the same media, advertising during the same programmes and employing an even distribution over the same times and days as were adopted by the first respondent.  To be fair to Dr Beaton, he did not assert that his conclusions were other than matters of judgment.  He tried to use scientific method in an area in which, as I am sure he would readily concede, there are so many variables that scientific objectivity and certainty is unachievable.  Even the objectives of his proposed campaign were unclear.  It would have been very difficult for him to be precise about them until such time as this case had been substantially resolved.  Further, there is no evidence as to the likely endurance, at the present time, of any impact created by the first respondent’s advertising campaign.  Such evidence as has been obtained is now quite dated.

241               It is of considerable importance that, at the beginning of this trial, the first respondent gave an unconditional undertaking permanently to refrain from distributing the AbTronic.  There is no evidence to suggest that anybody else is doing so, or is likely to do so.  There is therefore little risk that anybody will buy an AbTronic.  If Dr Beaton’s focus upon the AbTronic brand and its associated “gestalt” is correct, then there is very little risk of anybody buying any other similar device as a result of the AbTronic promotion.  It follows that there is little or no need for corrective advertising in order to minimize such risks.  I will say a little more about other devices at a later stage.

242               Mr Michael John St Aubin Brazier, another marketing expert, was called by the respondents.  He considered that there was an “industry practice” of using newspapers for apologies to consumers, regardless of the medium in which the relevant product was advertised.  Such an advertisement should appear in the earlier pages of a newspaper, preferably on the right hand side.  The practice is to advertise once only.  Because newspapers will not accept full page advertisements for earlier pages, any advertisement will necessarily be in what is described as “broken space”, in other words it will occupy less than a full page.  Mr Brazier considered that a similar approach should be taken in corrective advertising.  Mr Brazier said that negative publicity associated with the AbTronic, some of which occurred as late as May 2002, should be taken into account in assessing the likely continuing effect of the first respondent’s advertising campaign which ceased in March 2002.  Dr Beaton had also given some consideration to this matter.  Mr Brazier was of the view that much of the first respondent’s advertising campaign had been wasteful in terms of its likely effect.

243               Dr Beaton challenged the proposition that there was an industry standard for corrective advertising.  Mr Brazier subsequently justified his view by reference to a guide, apparently formulated by the applicant in connection with recall notices.  It describes the publication of recall notices in newspapers as “The traditional way of publicising recalls …”.  The guide also raises the possibility of other means of communication, depending upon the risk associated with the reason for recall.  Mr Richard Steven Wilson, also a marketing expert, considered that “… the level of remedial advertising that may possibly now be required, is no more than a notification to the public that the Abtronic fails to deliver on claims made”.

244               I have been somewhat selective in my summary of the evidence in this area.  In particular, I have omitted reference to much of the reasoning which led to the various conclusions.  Unfortunately, the volume of this evidence is not justified by its value for present purposes.  It goes little beyond intuitive perceptions.  To the extent that it goes further, it raises matters of judgment.

245               The first respondent conducted an extensive advertising campaign over many months.  Much of it occurred in daytime television and late night television.  For those who viewed it repeatedly, its impact may have been significant.  There is nothing unlikely about Dr Beaton’s proposition that the effect of such advertising may last for some considerable time thereafter and may be refreshed by quite casual external stimuli.  However this must be seen in light of the first respondent’s undertaking not to market the AbTronic.  Whilst it is theoretically possible that another person could market it, one assumes that these proceedings and the orders which are likely to flow from them will discourage any substantial investment by another prospective distributor.  Of course that view highlights the need for some publicity concerning these proceedings.

ORDERS

advertising

246               I am unpersuaded that any significant number of persons might, in the future, buy an AbTronic as a result of the first respondent’s advertising campaign.  Common sense suggests that much of its effect would, by now, be spent.  To the extent that any vestigial effect remains, the undertaking not to sell will make it impossible to obtain the AbTronic in the manner advertised, that is from the first respondent.  That there is no substantial risk does not mean that there is no risk.  Nevertheless it is difficult to conclude that the magnitude of the risk would justify the extensive regime of advertising suggested by Dr Beaton.

247               The power to order advertising pursuant to the Trade Practices Act is now found in s 86C which provides that the Court may order a person who has contravened that Act:

Ÿ                to disclose information in his or her possession; or

Ÿ                to publish at his or her expense, and in the way specified in the order, an advertisement.

248               Subsection 86C(3) provides that the relevant provisions do not limit the Court’s power under any other provision of the Act.  This qualification may be designed to give full effect to s 86D which contemplates advertising in circumstances which are not presently relevant.  It is also possible that an appropriate order under s 87 might involve advertising.  The applicant submits that s 80 also authorizes an order for advertising.  I doubt whether that is so.  Section 80 is concerned with injunctions.  In my view the proper purpose of an injunction under that section is to enforce an existing obligation or to vindicate an existing right.  I do not understand the section to confer a power to create new rights or obligations.  Much of the relevant conduct in the present case occurred after the commencement of s 86C (26 July 2001).  However similar advertising might previously have been ordered pursuant to s 80A.  I do not understand the change in statutory regime to have any present significance.

249               Presumably, advertising must be related in some way to the contravening conduct or any damage caused, or likely to be caused by it.  At one stage in the course of argument, it seemed that the applicant was seeking orders for advertising designed to discourage members of the public from purchasing equipment similar to the AbTronic.  This perception arose largely out of the applicant’s persistence in seeking such relief in the face of the first respondent’s undertaking not to distribute the AbTronic and the absence of any reason to believe that anybody else would do so.  It would be inappropriate for the Court to make orders designed to interfere in the marketing of other products.  These proceedings are between the applicant and the various respondents and concern the AbTronic only.  If it is alleged that any other product of a similar kind has been marketed in a way which contravenes the Act, then that matter must be resolved in proceedings involving the appropriate parties.  If any other person wishes to market the AbTronic, he or she is entitled to do so, provided that such marketing involves no contravention of the Act.  My findings may, inevitably, reflect upon other products and other businesses, but the advertising should not be designed to accentuate that effect.  These are not, as it were, proceedings in rem.

250               The legitimate purposes which might be served by advertising include informing purchasers of the misleading nature of the first respondent’s conduct so that they:

Ÿ                will not continue to expect benefits from use of the Abtronic; and

Ÿ                may seek refunds where it can be shown that a particular purchase was the result of contravening conduct.

251               If at all possible, the parties should agree upon the content of the advertising and upon the broadcasting programme.  However I will make some observations as to my views in the hope of assisting them to reach agreement.

Content

252               Any advertising should accurately record such of the findings or orders as the applicant reasonably considers to be appropriate.  It should not be necessary to set out all findings of fact or orders, particularly where there is overlap or repetition.  It will be more effective if the spirit of the findings and orders can be captured.  The advertisement should also advise purchasers that they may be entitled to return their purchases and obtain refunds.  It might advise them to seek legal advice or (if the applicant desires it) to contact the applicant at an identified contact point.  The length of the advertisement will depend upon the amount of information to be communicated and the views of relevant television stations.

Media

253               I am inclined to the view that the advertisement should be broadcast on the same television stations as were used by the first respondent in promoting the AbTronic.  An advertisement should also be inserted in The Australian newspaper and appear on the first respondent’s website and in its catalogues.

Schedule

 Television stations

254               The advertisement should be broadcast over a two week period on each day on which the advertorial or infomercial was broadcast, and at about the same times.

Website

255               The advertisement should remain on the website for a period of fourteen days.

Catalogues

256               The advertisement should appear in the edition of the first respondent’s catalogue issued next after agreement is reached as to the form of advertisement or any order for such advertisement is made.  I do not know how long a catalogue remains current.  My intention is that the advertisement should appear in a current catalogue for a period of not less than two weeks.

The Australian

257               The advertisement should be inserted in the early pages of The Australian, on a right hand page, on two days in each week, of which one is to be a Saturday and in two consecutive weeks.

Other matters concerning the advertisement

258               The applicant has sought to involve Mr Quinn in the advertisement.  I doubt whether I have power to compel such personal involvement.  Even if there were such power, I would be reluctant to so order.  To compel the personal performance of a physical act is an extreme step, a step which the courts do not readily take.  In any event I am far from convinced that Mr Quinn’s involvement would serve any useful purpose.  Further, Mr Quinn no longer works for the first respondent. 

259               The above views concerning advertising are proposals only.  Should any party wish to advance a different view, I am quite willing to receive submissions.

Other relief

Declarations

260               The declaration is a relatively recent remedy.  The courts are jealously protective of it, resisting attempts to resort to it where there is no real dispute to be resolved.  In my view we must ensure that this very useful device is not deprived of its efficacy by over-use or inappropriate use.  I do not mean to imply that declaratory relief is inappropriate in the present case.  However it is important that any declaration be framed so as to convey a limited and accurate message to those who have an interest in its subject matter.  It is unlikely that any good purpose will be served by numerous declarations which merely reflect the various misrepresentations and the various occasions on which they were made.  The most effective form of declaration will accurately reflect the impugned conduct in a concise way.  Complete accuracy is essential.  I would prefer it if the parties were to agree upon the forms of the declarations.  A suitable formula might be:

That the conduct of Danoz Direct Pty Ltd, in connection with the promotion of the AbTronic, an electronic muscle stimulation device, was misleading or deceptive or likely to mislead or deceive contrary to s 52 of the Trade Practices Act 1974 (Cth), such conduct being the broadcasting on Channels ……… between ……… and ………, of statements to the following effect:

…

261               Similar declarations might be made concerning the website and the catalogues.  As to the claims arising under s 75B, the form of declaration might be as follows:

The Court declares that ……… was knowingly concerned (or involved) in the conduct of Danoz Direct Pty Ltd in its promotion of the AbTronic (an electronic muscle stimulation device), particulars of such conduct being as follows:

…

262               Again, these are merely suggestions designed to assist the parties in their negotiations.

Injunctions

263               The first respondent has undertaken that it will not continue to market the AbTronic.  There is no reason to doubt that this undertaking will be honoured.  Neither the third nor the fourth respondent is now employed by the first respondent.  There is no reason to believe that either will again be involved in marketing the AbTronic.  It is therefore difficult to see any real point in restraining any of the respondents from future contraventions of the Act.  Any injunction would necessarily be limited to conduct in connection with promotion of the AbTronic.  As with declaratory relief, the courts have always been anxious to defend the efficacy of the injunction by avoiding its use in inappropriate or unnecessary circumstances or where it will be difficult to enforce.  It is in the public interest that such efficacy not be undermined.  I take into account the provisions of subss 80(4) and 80(5).  However those provisions do not mandate injunctive relief in all cases.  It is my present view that in this case, declarations will provide sufficient vindication of the legislation without injunctive relief.  If any party takes a different view, I will receive further submissions.

Trade Practices Compliance Programme

264               Pursuant to par 86C(2)(b), the Court may make a probation order for a period of no longer than three years.  The expression “probation order” suggests an order of the kind frequently made in criminal proceedings.   In the present context, the meaning is a little different.  The term “probation order” is defined in s 86C to mean:

… in relation to a person who has engaged in contravening conduct, … an order that is made by the Court for the purpose of ensuring that the person does not engage in the contravening conduct, similar conduct or related conduct during the period of the order, and includes:

(a)       an order directing the person to establish a compliance program for employees or other persons involved in the person’s business, being a program designed to ensure their awareness of the responsibilities and obligations in relation to the contravening conduct, similar conduct or related conduct; and

 

(b)       an order directing the person to establish an education and training program for employees or other persons involved in the person’s business, being a program designed to ensure their awareness of the responsibilities and obligations in relation to the contravening conduct, similar conduct or related conduct; and

 

(c)        an order directing the person to revise the internal operations of the person’s business which lead to the person engaging in the contravening conduct.

 

265               It is common ground that at least some relevant conduct occurred after the commencement of s 86C.  However I do not understand that this causes any problem for present purposes.  It is also common ground that the first respondent has already introduced an appropriate compliance programme.  The applicant seeks no further order in that regard.  However the applicant seeks an order that an independent external auditor be appointed to report to the applicant the extent of the first respondent’s compliance with the programme.  The first respondent does not oppose the appointment of an auditor but objects to the auditor’s reporting to the applicant.  It also submits that the probation period should be for less than three years.

266               As I understand it, the existing compliance programme is exhibited to the affidavit of Rosana Celina Tyler.  The programme consists of a “Code of Practice” for a company called TVSN Ltd with which the first respondent is now associated.  There is also a series of standard operating procedures.  The two documents deal with many matters of relevance to a compliance programme, including standards to be observed in selecting and marketing products, but say very little about enforcement.  The code refers to “The Australian Programming Committee (“APC”)” which appears to be a mechanism for dealing with complaints.  There is also to be some scrutiny of promotional material.  However there is little or no discussion of staff training or preventative measures designed to avoid unacceptable conduct, as opposed to dealing with such conduct after it has occurred. 

267               In my view a compliance programme should focus on education and prevention.  Such a focus provides a basis for developing objective guidelines as to performance.  For example, it might be reported that a certain percentage of the staff have attended a specified number of programmes lasting for identified periods of time.  The content of such programmes might also be reported.  There could be a system of random audits of steps taken by staff to ensure compliance with the code and standard operating procedures.  The first respondent could itself report the extent of compliance to the applicant.  I consider that some external reporting is desirable.

268               As to the period of the probation order, one would hope that the first respondent would maintain the compliance programme permanently, regardless of the duration of any such order.  If orders are to be made, and I consider it appropriate to do so in this case, the period of three years is appropriate.  The evidence of Mr Ozana, Mr Quinn and Mr Schereck suggests that in the first respondent’s operation, little attention was paid to ensuring the accuracy of promotional material.  Corporate culture cannot be changed overnight nor, in my view, can it be changed in a twelve month period.  The period necessary to design, implement and enforce an appropriate programme to establish a culture of compliance is probably not much less than three years.  I ask the parties to give further consideration to the compliance programme and to the proposed system for ensuring implementation.

Orders for Refund

269               Paragraph 13 of the amended application seeks orders pursuant to subs 80(1) of the Trade Practices Act to the effect that the first respondent pay to each person:

… who, during a period of 6 months commencing on the date on which the corrective advertisements … are first telecast … submits a written claim to the First Respondent asserting that he or she was misled when he or she purchased the Abtronic:

(a)       the amount paid for the purchase of the Abtronic; and

(b)       the costs (including, but not limited to, postage and packaging) associated with the return of the Abtronic,

such refund to be made within 21 days … .

270               In other words, the Court is asked to determine that any purchaser who claims to have been misled by any of the promotional material is to be accepted at face value.  The first respondent is to be deprived of any opportunity to cross-examine as to such reliance.  Further, even a purchaser who believes that he or she has derived benefit from using the AbTronic is to be entitled to a refund.  These considerations suggest that I should be reluctant to make such an order.  However there is a more compelling reason for declining to do so.

271               In Medibank Private Ltd v Cassidy (2002) ATPR 41-895, the Full Court considered analogous provisions in the Australian Securities and Investments Commission Act 1989 (Cth) (“the ASIC Act”).  In so doing, the Court examined the history of provisions in the Trade Practices Act, including s 80.  The Court (Sundberg, Emmett and Conti JJ) concluded that s 80, as it then was, did not authorise an order that a corporation pay compensation to unidentified persons who were not parties to the proceedings.  Their Honours pointed out that s 87 deals with compensatory orders in favour of parties to proceedings, including persons on whose behalf the applicant has commenced such proceedings.  Section 87 was amended in 1977 to provide that compensation could only be awarded to parties.  The reasons for this amendment were said to be “constitutional”.  In Cassidy, the Court concluded that given such history, it was unlikely that Parliament had intended that s 80 would authorize compensatory orders in favour of persons who were not parties (presumably including persons on whose behalf the applicant had brought proceedings).  Sections 80 and 87 are now in somewhat different forms from those considered in Cassidy, but I do not understand the amendments to undermine the applicability of the decision.  The High Court has declined special leave to appeal from the decision in Cassidy, largely because the order at first instance was interlocutory.  See M176 of 2002, 20 June 2003.

272               The applicant seeks to distinguish Cassidy on the ground that the relief sought in that case was “compensatory” whilst the relief sought in the present case is “restorative”.  This seems to mean that the orders sought in Cassidy involved the award of damages whilst the applicant now seeks the refund of purchase moneys.  Whilst in some circumstances that distinction may be relevant, I doubt that it is for present purposes.  Section 87 speaks of an order which will “compensate” the relevant person “… in whole or in part for the loss or damage or will prevent or reduce the loss or damage”.  Those words are wide enough to include refunds.  As I understand it, the applicant’s point is that “compensation” involves the substitution of something for something else.  The word “compensate” is defined in The Shorter Oxford English Dictionary as follows:

Counterbalance, make amends for … Serve as a recompense or adequate substitute (for); make up for … Make amends to, recompense.

273               We often distinguish between relief in the form of an award of damages as compensation for breach of contract and relief designed to remedy such breach by permitting or recognizing rescission (returning the parties to their original positions, to the extent possible) or by enforcing the contract.  Rarely, if ever, does the innocent party receive precisely that for which he or she bargained.  Save in a small number of cases, there is at least substantial delay in vindicating claims.  Any order will almost always be compensatory in the sense of offering something to take the place of the benefit which would have flowed from compliance with the contract, even if only in the sense of offering delayed performance in place of timely performance.

274               In the present case, any refund of the purchase price will not “restore” a purchaser to precisely the position he or she would have been in had there been no contravention in the sense urged by the applicant.  He or she will still have incurred the trouble of ordering the machine, being out of pocket for the cost, spent time and effort in using it and incurred further trouble in returning it.  In that sense the order would be “compensatory” in that it would offer something in lieu of that which has been lost.  The other subsections of s 87 suggest that the section deals with a broader range of orders than the applicant submits.  Indeed, an order for refund would probably fall squarely within par 87(2)(c).

275               In my view, the decision in Cassidy should be followed.  The Court has no power to make an order for refund in favour of a person who is neither a party nor a person on whose behalf the applicant has claimed pursuant to the Trade Practices Act.  In these proceedings the applicant has not purported to so claim.  I will make no orders as to refunds.

276               I adjourn the matter to enable the parties to formulate any requests for further findings of fact and to make submissions concerning appropriate relief and costs.

 

I certify that the preceding two hundred and seventy-six (276) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Dowsett.

 

Associate:

 

Dated:              22 August 2003

 

Counsel for the Applicant:	Mr P O’Shea SC Ms S Brown
Solicitor for the Applicant:	Corrs Chambers Westgarth
Counsel for the Respondent:	Mr DJS Jackson QC Mr R Jackson
Solicitor for the Respondent:	Morgan Lewis Alter
Dates of Hearing:	28 & 29 October 2002 19, 20, 21, 24, 25 & 31 March 2003 1 & 2 April 2003
Date of Judgment:	22 August 2003