FEDERAL COURT OF AUSTRALIA

 

Australian Competition & Consumer Commission v Francis [2004] FCA 487

TRADE PRACTICES – misleading and deceptive conduct – proposed consent orders – no statement of agreed facts – pleadings containing partial admissions only – reliance on evidence filed in another case, for another purpose – whether, and to what extent, allegations of falsity of representations and knowledge by respondent of falsity established – relevance of consent – assertion that consent motivated by limited finances

TRADE PRACTICES – liability of natural person as person involved in contravention by corporation – requirement of knowledge – allegations of knowledge not traversed specifically in pleadings – whether knowledge proved – whether orders should be made by consent

 

TRADE PRACTICES – declarations – whether jurisdiction to make – whether appropriate – whether merely recording occurrence of contravention of statute – form of declaration

TRADE PRACTICES – injunctions – based on past conduct, not proposed or intended conduct – whether terms of injunction should go beyond area of past conduct

 

TRADE PRACTICES – injunctions – whether proposed injunctions sought by consent restrain the respondent from conduct of a broader nature than was involved in making the representations

PRACTICE AND PROCEDURE – pleadings – partial admissions – failure to traverse specifically every allegation of fact – whether deemed admission of allegations – relief from compliance with rules – whether power to relieve from compliance carries the power to relieve from past deemed non-compliance – whether power to relieve should be exercised when consent orders sought – relevance of impecuniosity as a motivation for consent

 

PRACTICE AND PROCEDURE – pleadings – representations – allegations of falsity pleaded as direct negatives of representations – failure to plead affirmative facts that would tend to establish the falsity of the representations – whether appropriate

 

COSTS – consent orders – some orders sought by consent not made – whether Court should make agreed costs order

Australian Competition & Consumer Commission v Virgin Mobile Australia Pty Ltd (No 2) [2002] FCA 1548 applied

Australian Competition & Consumer Commission v Real Estate Institute of Western Australia Inc [1999] FCA 18 (1999) 161 ALR 79 applied

Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd (1978) 140 CLR 216 followed

Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 followed

Forster v Jododex Australia Pty Ltd (1972) 127 CLR 421 referred to

McLeish v Faure (1979) 40 FLR 462 discussed

Warramunda Village Inc v Pryde [2001] FCA 61 (2001) 105 FCR 437 discussed

Warramunda Village Inc v Pryde [2002] FCAFC 58 (2002) 116 FCR 58 discussed

Ainsworth v Criminal Justice Commission (1992) 175 CLR 564 discussed

Gardner v Dairy Industry Authority (NSW) (1977) 52 ALJR 180 referred to

Tobacco Institute of Australia Ltd v Australian Federation of Consumer Organisations Inc (No 2) (1993) 41 FCR 89 discussed

Australian Competition & Consumer Commission v Chen [2003] FCA 897 (2003) 201 ALR 40 referred to

Rural Press Ltd v Australian Competition & Consumer Commission [2003] HCA 75 (2003) 203 ALR 217 discussed

Thomson Australian Holdings Pty Ltd v Trade Practices Commission (1981) 148 CLR 150 followed

Trade Practices Act 1974 (Cth) ss 6(3), 51A, 52, 53(c), 55, 75B, 80, 155

Federal Court of Australia Act 1976 (Cth) ss 21, 23

Federal Court Rules (Cth) O 1 r 8, O 11 r 13(1), O 11 r 13(3)

High Court Rules (Cth) O 64 r 2

Supreme Court Rules (Vic) O 70 r 1A, O 2 r 2.04

Supreme Court Rules (NSW) Pt 1 r 2

J Stuckey-Clarke in P Parkinson, ed, The Principles of Equity, 1996

Meagher, Gummow and Lehane’s Equity doctrines and remedies 4th edn, 2002

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION v DAVID FRANCIS

V 756 of 2002

GRAY J

26 APRIL 2004

MELBOURNE

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	V 756 of 2002

 

BETWEEN:	AUSTRALIAN COMPETITION AND CONSUMER COMMISSION APPLICANT
AND:	DAVID FRANCIS RESPONDENT
JUDGE:	GRAY J
DATE OF ORDER:	26 APRIL 2004
WHERE MADE:	MELBOURNE

 

 

THE COURT ORDERS THAT:

 

1.         Leave be granted to the applicant to rely in this proceeding on the affidavits filed in proceeding number VG567 of 1997.

2.         In relation to pars 9, 11, 18(b), 19(b), 21, 28(b), 29(b), 33 and 39 – 53 of the amended statement of claim, the Court dispenses with compliance by the respondent with the requirements of O 11 r 13(3) of the Federal Court Rules.

3.         It be declared that the respondent, by causing to be sent to members of the public through the use of the postal services written material promoting the sale of a wafer biscuit known as ‘ThermoSlim’, containing representations that:

(a)        people can achieve weight loss by the consumption of ThermoSlim;

(b)        people can achieve weight loss by the consumption of ThermoSlim without
undertaking any other method of weight loss (including dieting or exercise);

(c)        ThermoSlim has a 95 per cent success rate;

(d)        the matters set out in paragraphs (a) – (c) hereof have been confirmed by
                        weight loss experts and researchers;

(e)        people can achieve the following weight loss by the consumption of
                        ThermoSlim:

            (i)         2 kilograms within the first 72 hours of commencing to eat
                                    ThermoSlim;

            (ii)        5 kilograms in the first fortnight of commencing to eat ThermoSlim;

(iii)       10 kilograms in the first month of commencing to eat ThermoSlim;

            (iv)       a further 20, 40 or 60 kilograms thereafter.

(f)         the testimonials and scientific endorsement in the material are
                        authentic and truthful; and

(g)        the testimonials contained in the materials represent the typical or
                        ordinary experience of people who eat ThermoSlim

has in trade or commerce:

(1)        engaged in conduct that was misleading and deceptive or was likely to mislead
or deceive, contrary to s 52 of the Trade Practices Act 1974 (Cth);

(2)        in connection with the supply or possible supply of goods, or with the
promotion of the supply of goods, represented that goods have performance
characteristics, uses or benefits they do not have, contrary to s 53(c) of the
Trade Practices Act 1974 (Cth); and

(3)        engaged in conduct that is liable to mislead the public as to the nature or
characteristics of goods or the suitability of such goods for their purpose,
contrary to s 55 of the Trade Practices Act 1974 (Cth);

in that each of the representations was false, at least to the extent that any scientific evidence regarding the merit of ThermoSlim was overstated and the testimonials did not necessarily reflect the experiences of ordinary and typical users of ThermoSlim.

4.         The respondent, by himself, his servants or agents or howsoever otherwise, be restrained for a period of five years in connection with the supply or promotion of a wafer biscuit known as ‘ThermoSlim’, or any substantially similar food product whatever called, from making any representation in trade or commerce through the use of postal services to the effect that the consumption of that product can cause people to lose weight by:

(a)        a process called thermogenesis;

(b)        a process by which calories are converted into heat; or

(c)        burning the body’s fat.

5.         The respondent pay the applicant’s costs of this proceeding, fixed at $15 000.

6.         The application be otherwise dismissed.

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

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	V 756 of 2002

 

BETWEEN:	AUSTRALIAN COMPETITION AND CONSUMER COMMISSION APPLICANT
AND:	DAVID FRANCIS RESPONDENT

 

JUDGE:	GRAY J
DATE:	26 APRIL 2004
PLACE:	MELBOURNE

REASONS FOR JUDGMENT

The nature and history of the proceeding

1                     The Court has been asked to make orders by consent, reflecting the settlement of this proceeding by the parties.  Because a number of issues arise as to the nature and form of the orders sought, the applicant sought a hearing.  At the hearing, there was no appearance on behalf of the respondent, but I heard counsel for the applicant in support of the application for the making of consent orders.  To understand the issues, it is necessary to set out something of the history of the proceeding.

2                     On 31 October 2002, the applicant filed an application and statement of claim.  The proceeding concerned the conduct of the respondent as sole director, secretary, a shareholder, a servant or agent, and the person in control, of each of two companies, Pepin Pty Ltd (‘Pepin’) and Vesk Pty Ltd (‘Vesk’).  It was alleged that, on various dates in 2001, each of Pepin and Vesk had caused to be published advertisements that were false and misleading.  Contraventions of ss 52, 53(c) and 55 of the Trade Practices Act 1974 (Cth) (‘the Trade Practices Act’) were pleaded.  The respondent was alleged to have aided, abetted, counselled or procured, or to have been knowingly concerned in or party to those contraventions.  In addition, it was alleged that the respondent, without the involvement of a corporation, had published other advertisements that were false and misleading and were in contravention of the same provisions of the Trade Practices Act.

3                     The application sought relief by way of declarations, injunctions, orders for the future retention of documents and orders for the publication of advertisements correcting the alleged false and misleading advertisements.

4                     At the initial directions hearing, on 21 November 2002, there was some discussion between counsel for the applicant and me as to the appropriateness of the relief sought.  At the end of that directions hearing, I made orders, including an order directing the applicant to file and serve an amended application and an amended statement of claim.  On 10 December 2002, an amended application and amended statement of claim were filed.  Changes were made to the form of the declaratory and injunctive relief sought, and the application for the publication of corrective advertisements was abandoned.

5                     On 21 January 2003, the respondent filed a defence to the amended statement of claim, in which he traversed a number of the applicant’s allegations.  On 28 March 2003, the respondent filed an amended defence, containing admissions or partial admissions of the allegations in the amended statement of claim and objections to some of the allegations.

6                     At a further directions hearing, on 31 March 2003, at which there was no appearance on behalf of the respondent, I acceded to an application by counsel for the applicant that the matter be fixed for hearing for less than one day.  On 6 May 2003, solicitors acting for the respondent sent by facsimile to the Court a letter, dated 28 March 2003, addressed to me.  The letter expressed the consent of the respondent to orders sought by the applicant ‘in accordance with the executed minutes attached’, although the executed minutes of consent orders were not delivered to the Court until the hearing.  The letter also expressed the consent of the respondent ‘to have costs fixed at $15,000.00 in these proceedings.’  I have taken this somewhat cryptic statement to express the consent of the respondent to an order in favour of the applicant for costs of this proceeding, to be fixed at $15 000.

7                     Before considering the orders sought by consent of the parties in this proceeding, it is necessary to look in some detail at the facts, so far as they can be ascertained from the material before the Court.

The pleadings

8                     The respondent, in his amended defence, admits the entirety of the first seven paragraphs of the amended statement of claim.  These admissions cover the status of the applicant as a body corporate, established pursuant to s 6A of the Trade Practices Act, the incorporation pursuant to legislation of both Pepin and Vesk and their status as corporations within the meaning of the Trade Practices Act, the fact that both Pepin and Vesk carried on business as suppliers of goods by mail order, both trading as ‘Pacific Marketing’, and the fact that the respondent was the sole director, secretary, a shareholder, a servant and/or agent acting within the scope of his authority, and in effective control of the business, of both Pepin and Vesk. 

9                     Also admitted is par 8 of the amended statement of claim, which is in the following terms:

‘From about 17 June 2001 to about 19 August 2001 Vesk, in connection with the supply or promotion of a moulded plastic ear device known as “ACU-SLIM 2000”, represented to the public that:

(a)       the use of ACU-SLIM 2000 for just minutes a day eliminates craving
            for food;

(b)       by the use of ACU-SLIM 2000 people can lose weight;

(c)        by using ACU-SLIM 2000 without undertaking any other method of
            weight loss (including dieting or exercise) people can achieve weight
            loss;

(d)       by using ACU-SLIM 2000 people can achieve weight loss of up to 10
            kilograms in 30 days; and

(e)        the testimonials contained in the advertising material that Vesk caused
            to be published in respect of ACU-SLIM 2000 concerning the weight
            loss that can be achieved by the use of ACU-SLIM 2000 represent the
            typical or ordinary experiences of users of ACU-SLIM 2000.’

10                  The particulars of publication allege that the respondent, acting on behalf of Vesk, caused advertisements containing those representations to be published in the Sunday Age television magazine for 17 – 23 June 2001, 22 – 28 July 2001 and 19 – 25 August 2001.  These so-called particulars appear to me to amount to allegations of material facts.  Because they are included only under the heading ‘Particulars’, the respondent has not been required to plead to them specifically.  Because of the admission of par 8, unqualified by any pleading of facts as to the dates of publication of the representations admitted, it is safe to assume that the representations pleaded in par 8 of the amended statement of claim, and admitted by the respondent, are limited to those particularised.

11                  Paragraph 9 of the amended statement of claim pleads:

‘Each of the representations set out in paragraph 8 hereof was false and misleading in that:

(a)       the use of ACU-SLIM 2000 for just minutes a day cannot eliminate
            craving for food;

(b)       by the use of ACU-SLIM 2000 people cannot lose weight;

 

(c)        by using ACU-SLIM 2000 without undertaking any other method of
            weight loss (including dieting or exercise) people cannot achieve
            weight loss;

 

(d)       by the use of ACU-SLIM 2000 people cannot achieve weight loss of
            up to 10 kilograms in 30 days; and

 

(e)        the testimonials referred to in paragraph 8(e) hereof do not represent
            the typical or ordinary experiences of users of ACU-SLIM 2000.’

 

 

12                  To this allegation, the respondent pleads as follows:

‘Save that the Respondent asserts there is some scientific evidence regarding the merit of the product the Respondent admits the representations were overstated and the testimonials did not necessarily reflect the experiences of ordinary and typical users of the product and on this basis was [sic] capable [sic] and likely to mislead or deceive the public.’

13                  As this form of pleading is repeated a number of times in the amended defence (in some cases with the plural ‘products’ in place of the singular ‘product’), for convenience, I shall refer to it as the ‘standard qualified admission’.

14                  Paragraph 10 of the amended statement of claim alleges as follows:

‘From about 29 April 2001 to about 3 June 2001 Vesk, in connection with the supply or promotion of a report entitled “Foods That Cause Weight Loss” (“the Report”), represented to the public that:

(a)       consuming any of 19 particular foods causes weight loss by burning
            more calories than it contributes to the person consuming it;

(b)       there are 19 particular foods that the more of any of them a person
            eats, the more weight that person will lose;

(c)        the statements in paragraphs (a) and (b) are supported by
            scientifically accepted evidence;

(d)       there are 19 particular foods that contain negative calories;

(e)        a person can lose between 1½-2 kilograms of weight per week by
eating any of 19 particular foods;

(f)        if a person is more than 10 kilograms overweight, by eating any of
19 particular foods it is possible for that person to lose an average of
2 to 3 kilograms in the first week, and 1½ to 2 kilograms in
subsequent weeks;

(g)       the weight loss referred to in paragraphs (e) and (f) can be achieved
without undertaking any other method of weight loss (including
dieting or exercise); and

(h)       the testimonials contained in the advertising material that Vesk caused
to be published in respect of the Report concerning the weight loss
that can be achieved by the eating of any of 19 particular foods

represent the typical or ordinary experiences of people who consumed

those particular foods.’

15                  Again, this allegation is particularised by means of an allegation that the respondent, acting on behalf of Vesk, caused advertisements containing the above representations to be published in the Sunday Age television magazine dated 29 April – 5 May 2001 and 3 – 9 June 2001, and the Sun-Herald television magazine dated 13 – 19 May 2001.  The allegation is admitted and I take the admission to be in respect of the publications particularised. 

16                  In par 11 of the amended statement of claim, the applicant pleads:

‘Each of the representations set out in paragraphs 10 hereof was false and misleading in that:

(a)       there is no scientifically accepted evidence that consuming particular
            foods causes weight loss by burning more calories than the foods
            contribute to the person eating them;

(b)       there is no scientifically accepted evidence that there are particular
            foods that the more of any of them a person eats, the more weight
            that person will lose;

(c)        no food contains negative calories;

(d)       Vesk did not have reasonable grounds for representing that a person
            can lose between 1½-2 kilograms of weight per week by eating any
            of 19 particular foods;

(e)        Vesk did not have reasonable grounds for representing that if a person
            is more than 10 kilograms overweight, by eating any of 19 particular
            foods it is possible for that person to lose an average of 2 to 3
            kilograms in the first week, and 1½ to 2 kilograms in subsequent
            weeks;

(f)        Vesk did not have reasonable grounds for representing that the weight
            loss referred to in paragraphs (d) and (e) can be achieved without
            undertaking any other method of weight loss (including dieting or
            exercise); and

(g)       the testimonials referred to in paragraph 10(h) hereof do not represent
            the typical or ordinary experiences of people who consumed particular
            foods.’

The respondent pleads the standard qualified admission to these allegations.

17                  In pars 12 and 13, the applicant pleads that, in relation to the allegations in pars 8 and 10 of the amended statement of claim, the respondent acted as the servant or agent of Vesk within the scope of his actual or apparent authority and that the publication of the representations referred to constituted conduct by Vesk in trade or commerce.  These allegations are admitted.  There is then an allegation in par 14 of the amended statement of claim that, in so far as those representations were made with respect to a future matter, Vesk did not have reasonable grounds for making the representation, and a statement that the applicant relies on s 51A of the Trade Practices Act.  To this, the respondent pleads an abridged version of the standard qualified admission, without the reference to testimonials, which is unresponsive to the allegations made by the applicant.

18                  In par 15 of the amended statement of claim, the applicant pleads that, by reason of the matters set out in pars 8 – 14, Vesk in trade or commerce engaged in conduct that was misleading or deceptive or likely to mislead or deceive and has thereby contravened s 52 of the Trade Practices Act.  To this, the respondent pleads the standard qualified admission.  In par 16 of the amended statement of claim, the applicant alleges that, by reason of the matters set out in pars 8 – 14, Vesk in trade or commerce and in connection with the supply or possible supply of goods or the promotion of their supply, falsely represented that such goods have performance characteristics, uses or benefits they do not have, and thereby contravened s 53(c) of the Trade Practices Act.  Again, the respondent pleads the standard qualified admission to this paragraph, with the addition of the words ‘but the balance of Paragraph 16 is not admitted.’  In par 17, the applicant pleads that, by reason of the matters set out in pars 8 – 14, Vesk in trade or commerce engaged in conduct that was liable to mislead the public as to the nature or characteristics of goods or the suitability of such goods for their purpose and has thereby contravened s 55 of the Trade Practices Act.  In respect of these allegations, the respondent again pleads the standard qualified admission, which is unresponsive to the allegations.

19                  In par 18 of the amended statement of claim, the applicant alleges:

‘The Respondent:

(a)       on behalf of Vesk caused the advertisements to be published as set out in paragraphs 8 and 10 hereof; and

(b)       at the time of causing such advertisements to be published, was aware of the matters set out in paragraphs 9, 11 and 14 hereof.’

20                  The particulars appended to this paragraph are as follows:

‘A.  The Respondent’s knowledge can be inferred from the matters set out in paragraphs 45 to 53 hereof, particularly:

(a)       the Applicant has previously taken proceedings against the
            Respondent in respect of advertisements that were identical, save in
            minor respects, to the advertisements referred to in paragraphs 8 and
            10 hereof;

(b)       in support of those proceedings, the Applicant filed, served and relied
            on in evidence an affidavit of Professor Mark Lawrence Wahlqvist
            dated 6 October 1997, Professor and Head of Department of
            Medicine at Monash University, Clayton, an expert in nutrition,
            giving an expert opinion that various of the representations contained
            in the advertisements were false, misleading or unsupported by
            scientific substantiation;

(c)        the Respondent chose not to defend the earlier proceedings and
            consented to the grant of a permanent injunction restraining the
            Respondent from making representations of a kind alleged by the
            Applicant in that proceeding to be misleading and deceptive; and

(d)       the representations referred to in paragraphs 8 and 10 hereof are the
            same or similar to those in respect of which the Applicant commenced
            the earlier proceedings, Professor Wahlqvist provided expert
            evidence and the Court granted an injunction against the Respondent.

B.  Further, the Respondent’s knowledge can be inferred from the fact that in or about October 2001 the Applicant requested from the Respondent that he provide to the Applicant documents in his possession which substantiate the representations referred to in paragraphs 8 and 10 hereof, and the Respondent failed to provide such documents to the Applicant.’

21                  I note the mismatch of terminology between par 18 and pars 8 and 10.  As I have already pointed out, pars 8 and 10 of the amended statement of claim do not themselves plead the publication of advertisements as material facts.  They plead the making of representations.  The reference to the publication of advertisements occurs only in particulars to those paragraphs.  The respondent has not been required to plead to those particulars.  Nonetheless, in par 18 of the amended defence, the respondent admits causing ‘the advertisements’ to be published.  The paragraph continues:

‘but otherwise objects to Paragraph 18(b), which contains allegations, that are irrelevant and prejudicial to the Respondent and are matters for evidence.’

The meaning of this pleading is unclear.  I deal with it at greater length later in these reasons for judgment.

22                  Paragraph 19 of the amended statement of claim refers to pars 8 to 18 and contains the allegations that the respondent aided, abetted, counselled or procured and/or was knowingly concerned in or party to the contraventions of the Trade Practices Act on the part of Vesk.  Again, this has resulted in a qualified admission.  In par 19 of the amended defence, the respondent admits being knowingly concerned and assisting in the promotion of the products referred to in pars 8 to 18 of the amended statement of claim but does not otherwise admit par 19.

23                  Paragraphs 20 to 29 of the amended statement of claim relate to the allegations involving Pepin.  Paragraph 20, which is admitted by the respondent, reads as follows:

‘From about 27 May 2001 to about 5 August 2001 Pepin in connection with the supply or promotion of a report entitled “Foods That Cause Weight Loss” (“the Report”) represented to the public that:

(a)       consuming any of 19 particular foods causes weight loss by burning
            more calories than it contributes to the person consuming it;

(b)       there are 19 particular foods that the more of any of them [sic] a person    eats, the more weight that person will lose;

(c)        the statements in paragraphs (a) and (b) are supported by
            scientifically accepted evidence;

(d)       there are 19 particular foods that contain negative calories;

(e)        a person can lose between 1½-2 kilograms of weight per week by
            eating any of 19 particular foods;

(f)        if a person is more than 10 kilograms overweight, by eating any of 19
            particular foods it is possible for that person to lose an average of
            2 to 3 kilograms in the first week, and 1½ to 2 kilograms in
            subsequent weeks;

(g)       the weight loss referred to in paragraphs (e) and (f) can be achieved
            without undertaking any other method of weight loss (including
            dieting or exercise); and

(h)       the testimonials contained in the advertising material that Pepin
            caused to be published in respect of the Report concerning the weight
            loss that can be achieved by the eating of any of 19 particular foods
            represent the typical or ordinary experiences of people who consumed
            those particular foods.’

24                  The particulars to this paragraph allege that the respondent, acting on behalf of Pepin, caused an advertisement containing those representations to be published in the Sunday Times TV Extra magazine for 27 May – 3 June 2001 and in the Sunday Mail TV Plus magazine editions of 10 June 2001 and 5 August 2001, and an advertisement containing all but the last of those representations in the Sunday Times TV Extra magazine for 24 – 30 June 2001 and in the Sunday Mail TV Plus magazine edition of 17 June 2001.

25                  Paragraph 21 of the amended statement of claim then pleads the falsity of the representations alleged in par 20, in the following terms:

‘Each of the representations set out in paragraph 20 hereof was false and misleading in that:

(a)       there is no scientifically accepted evidence that consuming particular
            foods causes weight loss by burning more calories than the foods
            contribute to the person eating them;

(b)       there is no scientifically accepted evidence that there are any foods
            that the more of any of them [sic] a person eats, the more weight that
            person will lose;

(c)        no food contains negative calories;

(d)       Pepin did not have reasonable grounds for representing that a person
can lose between 1½-2 kilograms of weight per week by eating any of
19 particular foods;

(e)        Pepin did not have reasonable grounds for representing that if a
person is more than 10 kilograms overweight, by eating any of 19
particular foods it is possible for that person to lose an average of 2
to 3 kilograms in the first week, and 1½ to 2 kilograms in subsequent
weeks;

(f)        Pepin did not have reasonable grounds for representing that the
weight loss referred to in paragraphs (d) and (e) can be achieved
without undertaking any other method of weight loss (including
dieting or exercise); and

(g)       the testimonials referred to in paragraph 20(h) hereof do not represent
the typical or ordinary experiences of people who consumed particular
foods.’

The response to this paragraph is the standard qualified admission.

26                  Paragraphs 22 and 23 of the amended statement of claim allege that, in relation to the matters set out in pars 20 and 21, the respondent acted as the servant or agent of Pepin within the scope of his actual or apparent authority and that the publication of the representations referred to in par 20 constituted conduct by Pepin in trade or commerce.  These allegations are admitted in pars 22 and 23 of the amended defence.  Paragraph 24 of the amended statement of claim alleges that, in so far as any of the representations in par 20 was made with respect to a future matter, Pepin did not have reasonable grounds for making the representations and the applicant relies on s 51A of the Trade Practices Act.  To this allegation, the respondent pleads the standard qualified admission.  This pleading is not responsive to the allegation in par 24 of the amended statement of claim.

27                  In par 25 of the amended statement of claim, the applicant pleads that, by reason of the matters set out in pars 20 to 24, Pepin in trade or commerce engaged in conduct that was misleading or deceptive or likely to mislead or deceive and has thereby contravened s 52 of the Trade Practices Act.  To this paragraph, the respondent pleads the standard qualified admission.  In par 26, the applicant pleads that, by reason of the matters set out in pars 20 to 24, Pepin in trade or commerce and in connection with the supply or possible supply of goods or the promotion of their supply, falsely represented that such goods have performance characteristics, uses or benefits they do not have and has thereby contravened s 53(c) of the Trade Practices Act.  In par 26 of the amended defence, the respondent again pleads the standard qualified admission, with the addition of an express non-admission of ‘the balance of Paragraph 26’.  In par 27 of the amended statement of claim, the applicant pleads that, by reason of the matters in pars 20 to 24, Pepin in trade or commerce engaged in conduct that was liable to mislead the public as to the nature or characteristics of goods or the suitability of such goods for their purpose and has thereby contravened s 55 of the Trade Practices Act.  In the equivalent paragraph of the amended defence, the respondent repeats the standard qualified admission.  Again, this is unresponsive to the allegation in the applicant’s pleading. 

28                  Paragraph 28 of the amended statement of claim alleges that the respondent, on behalf of Pepin, caused ‘the advertisements’ to be published as set out in par 20 and at the time of causing ‘such advertisements’ to be published, was aware of the matter set out in pars 21 and 24.  There is, therefore, a similar mismatch between the terms of pars 20 and 28 of the amended statement of claim as there is between pars 8 and 10 and par 18.  In response, the respondent, in par 29 of the amended defence, admits being knowingly concerned and assisting in the promotion of the products referred to in pars 20 to 28 of the amended statement of claim but otherwise does not admit par 29. 

29                  The next nine paragraphs of the statement of claim relate to alleged conduct of the respondent in his own right, without the involvement of any corporation.  In par 30, it is alleged that from about 1 October 2001 to about 14 December 2001, the respondent carried on business as a supplier of goods by mail order, trading as ‘International Weight Loss Specialists’.  In par 31, it is alleged that, between the same dates, the respondent caused written material to be sent to members of the public through the use of postal services, promoting the sale of a wafer biscuit known as ‘ThermoSlim’.  Each of these allegations is admitted.

30                  In par 32 of the amended statement of claim, the applicant alleges:

‘The written materials referred to in paragraph 31 hereof contained the following representations:

(a)       people can achieve weight loss by the consumption of ThermoSlim;

(b)       people can achieve weight loss by the consumption of ThermoSlim
            without undertaking any other method of weight loss (including
            dieting or exercise);

(c)        ThermoSlim has a 95% success rate;

(d)       the matters set out in paragraphs (a)-(c) hereof have been confirmed
            by weight loss experts and researchers;

(e)        people can achieve the following weight loss by the consumption of
            ThermoSlim:

            (i)         2 kilograms within the first 72 hours of commencing to eat
                        Thermo-Slim;

            (ii)        5 kilograms in the first fortnight of commencing to eat Thermo-
                        Slim;

            (iii)       10 kilograms in the first month of commencing to eat Thermo-
                        Slim;

            (iv)       a further 20, 40 or 60 kilograms thereafter.

(f)        the testimonials and scientific endorsement in the material are
            authentic and truthful; and

(g)       the testimonials contained in the materials represent the typical or
            ordinary experience of people who eat ThermoSlim.’

That paragraph is also admitted.

31                  In par 33, the applicant pleads:

‘Each of the representations set out in paragraph 32 hereof was false and misleading in that:

(a)       people cannot achieve weight loss by the consumption of ThermoSlim;

(b)       people cannot achieve weight loss by the consumption of ThermoSlim
            without undertaking any other method of weight loss (including
            dieting or exercise);

(c)        ThermoSlim does not have a 95% success rate;

(d)       the matters referred to in paragraphs 32(a)-(c) hereof have not been
            confirmed by weight loss experts and researchers;

(e)        people cannot achieve the weight loss referred to in paragraph 32(e)
            hereof by the consumption of ThermoSlim;

(f)        the testimonials and scientific endorsement referred to in paragraph
            32(f) hereof are not authentic and truthful; and

(g)       the testimonials referred to in paragraph 32(f) hereof do not represent
            the typical or ordinary experience of people who eat ThermoSlim.’

To these allegations, the respondent pleads the standard qualified admission.

32                  Paragraph 34 of the amended statement of claim contains the allegation that the sending of the written materials containing the representations through the use of the postal services to members of the public, referred to in par 31, constituted conduct by the respondent in trade or commerce.  The respondent admits this allegation.  Paragraph 35 pleads that, in so far as any of the representations set out in par 32 was made with respect to a future matter, the respondent did not have reasonable grounds for making the representation and the applicant relies on s 51A of the Trade Practices Act.  For this paragraph, the respondent pleads the standard qualified admission.  Again, it is unresponsive of the allegations in par 35 of the amended statement of claim.  In par 36 of the amended statement of claim, the applicant pleads that, by reason of the matters set out in pars 30 to 35, the respondent in trade or commerce engaged in conduct that was misleading or deceptive or likely to mislead or deceive and has thereby contravened s 52 of the Trade Practices Act.  Once again, the respondent pleads the standard qualified admission.

33                  In par 37, the applicant pleads that, by reason of the matters set out in pars 30 to 35, the respondent in trade or commerce and in connection with the supply or possible supply of goods or the promotion of their supply, falsely represented that such goods have performance characteristics, uses or benefits they do not have and has thereby contravened s 53(c) of the Trade Practices Act.  The respondent repeats the standard qualified admission, with the addition of the words ‘the balance of Paragraph 37 is not admitted.’  In par 38, the applicant pleads that, by reason of the matters set out in pars 30 to 35, the respondent in trade or commerce engaged in conduct that was liable to mislead the public as to the nature or characteristics of goods or the suitability of such goods for their purpose and has thereby contravened s 55 of the Act.  Again, the respondent pleads the standard qualified admission, which is unresponsive to the allegations of the paragraph.

34                  The remainder of the amended statement of claim consists of allegations of prior conduct by the respondent.  These allegations were inserted by amendment as a result of my suggestion at the first directions hearing that, if the applicant wished to rely on prior conduct of the respondent, it should plead the material facts and give the respondent an opportunity to plead to the allegations.  The applicant has done so in the following terms:

‘39.      The Respondent has been involved in prior contraventions of sections
            52, 53(c) and 55 of the Act (within the meaning of section 75B of the
            Act) as set out in paragraphs 40 to 53 hereof.

40.       On 19 March 1993, the Trade Practices Commission (TPC), the
            predecessor of the Applicant, commenced proceedings in the Federal
            Court of Australia (No VG74 of 1993) against, amongst others, the
            Respondent and Boardchain Pty Ltd (ACN 007 378 789)
            (“Boardchain”), a company of which the Respondent was a director,
            alleging that the Respondent aided, abetted, procured, induced, was
            knowingly concerned in or was party to contraventions of sections
            52, 53(c), 55 and 59 of the Act by Boardchain (“Boardchain
            proceeding”).

41.       The contraventions of the Act referred to in paragraph 40 hereof
            concerned the publication by Boardchain in various publications of
            advertisements titled:

            (a)        “How I earned $500,000 In the Last Six Months”;

            (b)        “$200,000 Per Year While Vacationing In Europe”; and

            (c)        “$10,000 In Thirty Days or Less Every Month...No Risk!”
                        all of which advertised the sale by mail order of a book or
                        written material which purported to contain a method or
                        program of earning substantial amounts of money in a short
                        time frame (“Boardchain advertisements”).

42.       The Boardchain advertisements contained purported testimonials from
            persons who claimed to have used the method or program successfully.

43.       The TPC alleged in the Boardchain proceedings that the Boardchain
            advertisements were misleading or deceptive and otherwise
            contravened the provisions of the Act referred to in paragraph 40
            hereof, and that the Respondent aided, abetted, procured, induced,
            was knowingly concerned in, or was party to the contraventions.

44.       In the Boardchain proceeding, the Respondent consented to a
            permanent injunction being granted, restraining the Respondent from
            aiding, abetting, counselling or procuring any company or person to
            (sic) engaged in trade or commerce in the conduct of advertising,
            representing, offering for sale or permitting publications which are
            of a kind or similar to the Boardchain advertisements, and such an
            injunction was granted by the Court on 6 April 1993.

PARTICULARS

            The injunction is recorded in an Order of Justice Ryan dated 6 April
            1993, a copy of which is annexed to this Statement of Claim, and
            marked “A”.

45.       On 3 October 1997, the Applicant commenced proceedings in the
            Federal Court of Australia (No VG567 of 1997) against, amongst
            others, the Respondent and Jayco Pty Ltd (ACN 057 480 556)
            (“Jayco”), a company of which the Respondent was a director,
            secretary, shareholder and general manager, alleging that the
            Respondent was involved in contraventions (within the meaning of
            s75B of the Act) of sections 52, 53(a), 53(c), 53(g) and 55 of the Act
            by Jayco (“Jayco proceeding”).

46.       The contraventions of the Act referred to in paragraph 45 hereof
            concerned:

            (a)        the publication by Jayco in various publications of
                        advertisements for the sale by mail order of the following
                        weight loss or slimming products or methods:

                        (i)         a moulded plastic ear device named Acu-Stop 500; and
                       

                        (ii)        a booklet describing a method of weight loss known as
                                    Negative Calories; and

            (b)        the sending of written materials to members of the public
                        through the use of postal services promoting the sale by mail
                        order of the following weight loss or slimming products or
                        methods:

                        (i)         a wafer biscuit named Thermoslim;

                        (ii)        a product named Medex Diet Patches;

                        (iii)       a choc-mint caramel flavoured tablet named E-Z Trim;

                        (iv)       a powder to be dissolved in a drink named ChitoSlim
                                    5000, (“Jayco advertisements and promotions”).

47.       The Jayco advertisements and promotions contained purported
            testimonials from persons who claimed to have used the product or
            method successfully.

48.       The Jayco advertisement referred to in paragraph 46(a)(i) hereof is
            identical to, other than for minor variations, the advertisement
            referred to in paragraph 8 hereof.

49.       The Jayco advertisement referred to in paragraph 46(a)(ii) hereof is
            identical to, other than for minor variations, the advertisement
            referred to in paragraphs 10 and 20 hereof.

50.       The Jayco promotion referred to in paragraph 46(b)(i) hereof is
            identical to, other than for minor variations, the promotion referred
            to in paragraphs 31 and 32 hereof.

51.       The Applicant alleged in the Jayco proceedings that the Jayco
            advertisements and promotions were misleading or deceptive and
            otherwise contravened the provisions of the Act referred to in
            paragraph 45 hereof, and that the Respondent was involved in the
            contraventions (within the meaning of s.75B of the Act).

52.       In the Jayco proceeding, the Applicant filed, served on the Respondent
            and relied on in evidence an affidavit of Professor Mark Lawrence
            Wahlqvist dated 6 October 1997, Professor and Head of Department
            of Medicine at Monash University, Clayton, an expert in nutrition,
            giving an expert opinion that various of the representations contained
            in the Jayco advertisements and promotions were false, misleading
            or unsupported by scientific substantiation.

PARTICULARS

            A copy of the affidavit is in the possession of the solicitors for the
            Applicant and may be inspected by appointment.

53.       In the Jayco proceeding, the Respondent consented to a permanent
            injunction being granted, restraining the Respondent from making
            representations in relation to the weight loss products or methods
            referred to in paragraph 46 hereof of a kind alleged by the Applicant
            in the proceeding to be misleading and deceptive, and such an
            injunction was granted by the Court on 3 November 1997.

PARTICULARS

            The injunction is recorded in an Order of Justice Goldberg dated 3
            November 1997, a copy of which is annexed to this Statement of
            Claim and marked “B”.’

           

35                  Appended to the amended statement of claim, and marked ‘A’ and ‘B’ respectively are the orders of Ryan J and Goldberg J referred to in pars 44 and 53 of the amended statement of claim.  The respondent has not taken the opportunity to plead to the allegations in pars 39 – 53 of the amended statement of claim.  Instead, in par 39 of the amended defence, the respondent says:

‘The Respondent objects to pleading to Paragraphs 39 to 53 on the basis that they contain irrelevant and objectionable materials and matters for evidence and if necessary would not otherwise admit Paragraphs 39 to 53.’

Interpreting the pleadings

36                  The manner in which the respondent has used the standard qualified admission in the amended defence, and his statements of objection to pleading to allegations of his knowledge, have given rise to problems in determining exactly what is admitted.  It is necessary to refer to O 11 r 13 of the Federal Court Rules, which provides:

‘(1)      Subject to sub-rule (3) and to Order 43, rule 7 (which deals with persons under disability), an allegation of fact made by a party in his pleading is deemed to be admitted by the opposite party unless it is traversed by that party in his pleading or a joinder of issue under rule 14 operates as a denial of it.

(2)       A traverse may be made either by a specific denial or by a statement of specific non-admission.

(3)       Subject to sub-rule (4), every allegation of fact made in a statement of claim or counterclaim which the party on whom it is served does not intend to admit must be specifically traversed by him in his defence or defence to counterclaim, as the case may be; and a general denial of such allegations, or a general statement of non-admission of them is not a sufficient traverse of them.

(4)       Any allegation that a party has suffered damage and any allegation as to the amount of damages is deemed to be traversed unless specifically admitted.’

Order 11 r 14 provides for an implied joinder of issue in the absence of a reply to a defence.  Such a joinder of issue operates as a denial of every allegation of fact in the defence.

37                  Order 11 r 13 is not easy to construe.  In particular, the purpose of the words ‘Subject to sub-rule (3)’ at the start of subr (1) is something of a puzzle.  Subrule (3) does not appear to contain a derogation from the effect of subr (1), as the words ‘subject to’ suggest, and as O 43 r 7 undoubtedly does.  Rather, subr (3) appears to provide an explanation of what is meant by the word ‘traversed’ in subr (1).  It is really to be read as ‘having regard to subr (3)’.  Even if subr (1) is read in this way, it does appear that the effect of O 11 r 13 is to both to impose a requirement (that every allegation be traversed specifically, unless admitted) and to provide for a consequence of non-compliance with that requirement (that every allegation not specifically traversed is deemed to be admitted).

38                  The effect of O 11 r 13 therefore appears to be that, in the absence of a specific denial or non-admission of an allegation, there is deemed to be an admission.  This is so even if the pleading manifests an intention not to admit allegations.  The application of the rule in the present case would lead to the conclusion that the respondent has admitted each of the separate subparagraphs of pars 9, 11, 21 and 33 of the amended statement of claim, because he has pleaded the standard qualified admission in relation to each of those paragraphs, and has not included a specific statement of non-admission of each subparagraph.  Those subparagraphs relate to the allegations of falsity of the various representations. This conclusion would be necessary despite the terms of the standard qualified admission, which make it clear that the respondent’s intention was to make only limited admissions as to the falsity of the representations.

39                  The applicant did not approach the hearing of this proceeding on the basis that the allegations in pars 9, 11, 21 and 33 of the amended statement of claim should be taken to be admitted because of O 11 r 13 of the Federal Court Rules.  Counsel for the applicant made no submission that the matters pleaded in those paragraphs should be taken to be admitted by the respondent.  Rather, the applicant attempted to establish the falsity of the representations by means of evidence, which is summarised later in these reasons for judgment.

40                  For the most part, the allegations of falsity in pars 9 and 33 of the amended statement of claim have been pleaded simply as the direct negatives of the representations to which they are directed.  The applicant has chosen to plead this way, instead of pleading affirmative facts, which would tend to establish the falsity of the representations.  Such a method of pleading is unsatisfactory.  It is similar to the method of pleading that was criticised by French J in Australian Competition & Consumer Commission v Virgin Mobile Australia Pty Ltd (No 2) [2002] FCA 1548 at [13].  It leaves the Court, and the opposing party, with no real idea of the issues that will be canvassed at a trial of a proceeding.  In a case such as the present, the Court has no capacity to determine from the pleadings on what basis the applicant alleges that the representations were false, for the purpose of deciding whether the consent orders are appropriate.  In the absence of an agreed statement of facts, evidence is necessary.  In pars 11 and 21 of the amended statement of claim, the applicant did much more by way of pleading affirmative facts that would tend to falsify the representations than it did in pars 9 and 33.

41                  For these reasons, I am of the view that injustice to the respondent would result from the application of O 11 r 13 in relation to pars 9, 11, 21 and 33 of the amended statement of claim.  Although the respondent has not complied strictly with the requirements of subr (3), it is clear that his intention was to resist admitting all that is pleaded in those paragraphs.  The use of the standard qualified admission makes that plain.

42                  The question therefore arises whether the Court has power to relieve the respondent from what would otherwise be the consequences of failure to comply with the rules, namely that he is deemed to have made admissions.  Order 1 r 8 of the Federal Court Rules provides:

‘The Court may dispense with compliance with any of the requirements of the Rules, either before or after the occasion for compliance arises.’

It is noteworthy that, on its face, this power is limited to dispensing from compliance.  It does not provide expressly for the Court to relieve a person from the consequences of non-compliance.  Older-style rules of court, such as the former O 70 r 1A of the Supreme Court Rules (Vic), contained such an express power.  Order 64 r 2 of the High Court Rules (Cth) still contains an express power to relieve a party from the consequences of non-compliance with a rule.  The modern form of the dispensing rule is found in O 1 r 8 of the Federal Court Rules, as well as in O 2 r 2.04 of the Supreme Court Rules (Vic) and Pt 1 r 12 of the rules of the Supreme Court of New South Wales.  The difficulty of a rule in the modern form is that it does not expressly provide a power to modify or undo altogether consequences attached by the rules to non-compliance, where the non-compliance has already occurred.  To relieve a party retrospectively from the obligation to comply with the requirement might not be sufficient if the consequence of non-compliance has already come about because of the automatic operation of the rules.  The present case is an example, in that the effect of O 11 r 13 is that admissions are deemed to have been made.

43                  In the absence of any submission to the contrary, I propose to act on the assumption that an order dispensing with compliance by the respondent with the requirement of O 11 r 13(3), to traverse specifically every allegation in the amended statement of claim that he does not admit, will be sufficient to exclude the deeming effect of O 11 r 13(1).  In other words, although the respondent is currently deemed to have admitted those allegations, the admissions will cease to be operative if an order is made dispensing him from compliance with the obligation to traverse specifically.  If this assumption were not made, or turned out to be false, it would be necessary to consider whether the power in O 1 r 8, to dispense from compliance with a requirement of the Federal Court Rules, carries with it the power to relieve from the effects of past non-compliance.  I incline to the view that, although this latter power is not expressed in the rules, it is a necessary incident of the power to dispense from compliance.  If the rule does not extend that far, then the Court must have power under s 23 of the Federal Court of Australia Act 1976 (Cth) (‘the Federal Court Act’) to make such an order.  That section gives the Court power to make such orders, including interlocutory orders, as the Court thinks appropriate.  It is broad enough to encompass a power to relieve from the consequences of non-compliance with a provision of the Federal Court Rules.

44                  It is true that, in pars 19 and 29 of the amended defence, the respondent admits being ‘knowingly concerned and assisting in the promotion of the products’ referred to in pars 8 to 18 and 20 to 28 respectively of the amended statement of claim.  I take these admissions to be no more than admissions that the respondent engaged in the physical acts that constituted publication by Vesk and Pepin respectively of the representations and that he did so knowing that the representations were to be published.  Because of the repeated use of the standard qualified admission and the respondent’s evident desire to avoid admitting that, at the time when the representations were made, he knew them to be false, I do not take pars 19 and 29 of the amended defence to be admissions of what is pleaded in pars 18(b), 19(b), 28(b) and 29(b) of the amended statement of claim.  For the respondent to have intended to make such admissions would be at odds with the rest of the amended defence.

45                  In the circumstances, in my view, it is appropriate to make an order, pursuant to O 1 r 8 of the Federal Court Rules, dispensing with compliance with the requirements of O 11 r 13(3) in relation to pars 9, 11, 21 and 33 of the amended statement of claim.  The effect of such an order is that the onus falls on the applicant to prove the falsity of the representations in all the respects pleaded, as it has attempted to do, if it wishes the Court to consider the consent orders on the basis that all of the allegations of falsity have been proved.  If it were also necessary to make an express order relieving the respondent from the consequences attached by O 11 r 13(1) to non-compliance with the requirements of O 11 r 13(3) in relation to the allegations in those paragraphs, and if there is power to do so, I should also make such an order.  As I have said, I act on the assumption that such an order is unnecessary.

46                  As I have already said, it would be inappropriate to regard the respondent as having admitted the allegations of knowledge in pars 18(b), 19(b), 28(b) and 29(b) of the amended statement of claim.  Although the respondent has not traversed the matters in pars 39 – 53 of the amended statement of claim, it would also be inappropriate for him to be taken to have admitted them.  To do so would be at odds with the rest of the respondent’s amended defence.  An order dispensing with compliance with O 11 r 13(3) in respect of those allegations and, if necessary and possible, relieving the respondent from the consequences of non-compliance, is also appropriate.

47                  It is therefore necessary to turn to the evidence, to see if the falsity of the representations is proved in all respects, and to see if the allegations of knowledge on the part of the respondent are made out.

The evidence

48                  Save for appending to the amended statement of claim the order made by Ryan J on 6 April 1993, the applicant made no attempt to prove the facts alleged in pars 40 to 44.  An examination of the order of Ryan J discloses that, in order to be comprehensible, it requires resort to be had to documents filed in the proceeding in which it was made.  In particular, the order includes an order that there be judgment for the applicant for final injunctions in the terms of pars 13 and 14 of the application in that proceeding.  The application is not in evidence in this proceeding.  I must therefore disregard pars 40 to 44 of the amended statement of claim in this proceeding, as the allegations in them have not been proved.

49                  In relation to the proceeding referred to in pars 45 – 53 of the amended statement of claim, the applicant attached the order made by Goldberg J on 3 November 1997.  That order is at least specific as to the terms of the injunction his Honour granted.  It is therefore established that such an order was made by consent in that proceeding.  In order to make good the rest of the allegations made in pars 45 – 53 of the amended statement of claim, the applicant, with the consent of the respondent, tendered in this proceeding some material that was filed in the earlier proceeding involving Jayco Pty Ltd.  The material consists of three affidavits.  An affidavit of Mark Lawrence Wahlqvist, affirmed on 6 October 1997, was filed in proceeding number VG567 of 1997 on 7 October 1997.  Professor Wahlqvist is a medical expert, eminently qualified in the field of nutrition.  A further affidavit of Professor Wahlqvist, affirmed on 30 October 2002, was filed in proceeding number VG567 of 1997 on 31 October 2002, in support of an application to punish the respondent for contempt of court by reason of contraventions of the injunction granted by Goldberg J in proceeding number VG567 of 1997.  Also filed in support of that application on 31 October 2002, was an affidavit of Gad Binyamin Ellinson, an officer of the applicant, sworn on 29 October 2002. 

50                  Much of the material contained in the affidavit of Mr Ellinson and the exhibits to it is irrelevant to this proceeding, in the light of the admissions made by the respondent.  The affidavit was produced for a purpose other than proving the unadmitted allegations in this proceeding.  Among the exhibits to the affidavit, however, is a notice served on the respondent by the applicant, pursuant to s 155(1)(a) and (b) of the Trade Practices Act, seeking answers to written questions and the production of documents and a document containing the respondent’s answers to these questions.  The notice contains 132 numbered questions, some of which have multiple parts.  Significantly for the present proceeding, the notice asked the respondent detailed questions as to the information in his possession substantiating the various representations, and as to the identities of the persons to whom testimonials are attributed in the advertisements.  In one of his answers, the respondent referred to ‘material regarding the effect of pressure points within the ear upon suppression of hunger.’  He claimed that, ‘there is a body of material which is successful [sic] via the internet in respect to auriculotherapy, ear acupuncture and acupuncture generally’ and gave a reference to an example of such material.  He also referred in general terms to material from an organisation which originally produced a product similar to Acu-Slim 2000 in America, with which he claimed to have had dealings in the early to mid 1990s.  He described this material as being ‘in the form of reports and opinions regarding both issues of pressure points within the ear which effect [sic] hunger and also in respect to the production of the product itself plus testimonial material.’  He referred to conversations he claimed to have had with a person called Jean Claude Koven of Original Marketing Inc, who he said originally produced a similar product in America.  The conversations related to the existence of pressure points within the ear, affecting hunger and to issues of acupuncture generally and the way in which the product ‘operated to access and stimulate the particular pressure points.’

51                  The respondent also referred to two specific written testimonials which he said were in his possession, but which he could not locate.

52                  In relation to foods that cause weight loss, the respondent claimed that there is a wealth of material accessible via the internet.  He gave examples of two sites.  He referred to many discussions on dieting and recipes via radio and television, and to general discussion regarding foods which assist in weight loss, including conversations regarding negative calorie foods.  As to testimonials on this subject, he claimed to have taken them from an American publication in the early to mid 1990s.  When asked to list 19 foods causing weight loss by burning more calories than they contributed, he listed 32 different foods and claimed that there are more than 19 foods that qualify as negative calorie products.

53                  Also among the material exhibited to the affidavit of Mr Ellinson filed in the earlier proceeding is an exchange of correspondence, consisting of a letter from the applicant to the respondent dated 27 May 2002, and the respondent’s reply dated 31 May 2002.  The applicant’s letter contained the following allegation:

‘As you may recall, in 1997 the Australian Competition and Consumer Commission (“ACCC”) instituted proceedings against you in respect of your involvement in the distribution of virtually identical material as the enclosed material.  The ACCC alleged in those proceedings and continues to maintain that the claims and representations made in the material concerning the weight loss that can be achieved by use of ThermoSlim cannot be substantiated.’

54                  The letter contained a number of questions, directed to the respondent.  One such question requested:

‘the reason you recommenced promoting ThermoSlim despite the previous action taken against you by the ACCC in respect of your previous involvement in the promotion of the product’.

55                  In response, the respondent did not admit distinctly that the earlier proceeding involved the distribution of virtually identical material.  Indeed, in answer to the question quoted above, he said:

‘I was under the impression that it was Easy Trim that was banned, and not Thermoslim.  It had been just over seven years since the court case and I had become confused.  I apologise for this error.’

56                  My purpose in referring to this material is not to suggest that the respondent’s statements should be believed.  The material supplied by the respondent in response to the questionnaire is relevant in three ways.  First, it makes clear that the respondent has not admitted the allegation of republication of material relating to ThermoSlim, identical to that published in the Jayco case, pleaded in pars 46(b)(i) and 50 of the amended statement of claim.  Second, it goes to the question of extent to which the falsity of the advertisements the subject of this proceeding has been established by other evidence.  Third, it goes to the issue of the state of mind of the respondent in relation to the Vesk and Pepin advertisements, in which his knowledge of falsity is relevant.

57                  To ascertain whether the allegations of publication of identical material have been proved, it is necessary to make a comparison between the advertisements, publication of which is admitted in the present proceeding, which are exhibited to Mr Ellinson’s affidavit filed in the earlier proceeding, and some of the exhibits to the first affidavit of Professor Wahlqvist, filed in the earlier proceeding.  It is then necessary to make a judgment as to whether the advertisements, the publication of which is admitted in the present proceeding, are ‘identical to, other than for minor variations’ the earlier advertisements.

58                  An examination of an earlier advertisement for a device called ‘ACU-STOP 500’ shows that it is identical in every respect with the copy advertisement for ‘ACU-SLIM 2000’ the subject of this proceeding, with the exception of the name of the product, the name, address and telephone numbers of the marketing business, and the extent of weight loss claimed in respect of one of the testimonials.  In addition, the words ‘(Original Testimonials held on file)’ appear on the earlier advertisement.  The variations between the ‘Foods That Cause Weight Loss’ advertisement, the subject of par 20 of the amended statement of claim, and an earlier advertisement for ‘The Twelve Foods That Cause Weight Loss:  The Cal-Burn Principle’ are much greater.  Perhaps most obviously, the earlier advertisement relates to 12 foods that are said to help in weight loss, whereas the advertisement the subject of the present proceeding refers to 19 such foods.  It is fair to say, however, that the representations alleged in pars 10 and 20 of the amended statement of claim are similar to those that emerge from the earlier advertisement.  The material relating to ThermoSlim appears to be almost identical to the equivalent material the subject of the earlier proceeding, with the exception of changes of the name, address and telephone numbers of the supplier.  Perhaps significantly, two identical testimonials (save for a change from using ‘pounds’ to using ‘kilos’), with two identical photographs, are attributed to two different people as between the two advertisements.  By means of this material, therefore, it can be said that the applicant has succeeded in establishing the allegations in pars 48, 49 and 50 of the amended statement of claim.

59                  The falsity of the advertisements is the next issue.  Between Professor Wahlqvist’s second affidavit and his first affidavit, there is a considerable amount of repetition.  The second affidavit was filed in the Jayco proceeding, in support of the application that the respondent be dealt with for contempt of court in that proceeding.  It therefore relates specifically to the three sets of advertisements that are the subject of this proceeding.  Professor Wahlqvist expresses opinions in general terms about an area of his specialisation, namely the treatment of obesity, including weight loss techniques, before expressing particular opinions about the sets of advertisements the subject of the present proceeding.  I summarise his views as follows.

60                  The principal way for a person to lose body fat is by the creation of an energy deficit, when the level of energy used by the body exceeds the level of energy taken in the form of calories contained in food consumed.  This results in some of the body’s fat deposits being transformed into energy to meet the deficit.  There are two principal ways of creating an energy deficit.  One is to restrict energy intake, ie eating food with lower overall number of calories.  The other is to increase energy expenditure, usually by way of physical activity.  A third method is altering the efficiency with which energy is used by the body.  This may be achieved by increasing the body tissue which requires energy.  The greater the muscle mass, the higher the basal metabolic rate.  The body stores energy as fat and carbohydrates in a form known as glycogen.  The fat and carbohydrate are ultimately converted into adenosine triphosphate (ATP) as the final common pathway for delivery of energy for the basic functions of life and for tissue maintenance and movement.  The metabolic rate is the rate at which ATP stores within the body are used up.  It includes hormonal profiles or other chemical regulators.  For example, the thyroid hormones produced in the thyroid gland at the root of the neck are transported to the body’s tissue via the bloodstream and speed up tissue metabolism.  Restriction of food intake has the result that, in the first few days there is a loss of glycogen stores in the liver and muscle.  Most of the weight loss in this period would be loss of fluid and not of significant amounts of fat.  It is necessary to use ‘up to approximately 500 calories per day’ in excess of normal calorie expenditure for a period of two weeks to achieve 1 kilogram of fat loss.  Even with a combined program of energy intake restriction and increased physical activity, it would be most exceptional to use more than 1.5 kilograms of fat per week or 6 kilograms per month.  Greater body fat losses than 1.5 kilograms per week are unrealistic and certainly unsafe because of the adverse nutritional consequences on the body.  Such losses would be akin to an illness involving vomiting or diarrhoea, or to diabetes.

61                  Professor Wahlqvist is aware of no published scientific data to show that acupuncture, or its derivatives by way of oral devices, are effective in humans in appetite suppression or weight management.  He has worked with hospitals in China which have expertise in traditional Chinese medicines.  In those centres, acupuncture as a treatment for weight loss is ‘relatively undeveloped’.  This is not surprising as acupuncture was developed in a society where obesity has rarely been a problem.  The claim that Acu-Slim can cause a person to lose up to 10 kilos in 30 days, without illness, is in Professor Wahlqvist’s opinion completely unsupported by any scientific substantiation.  The testimonials set out in the Acu-Slim material are not credible and could not represent the typical or ordinary experience of users of the product.

62                  The concept of foods containing ‘negative calories’ is spurious.  Calories measure energy and all calories are equal.  There are no foods containing particular types of calories which are different in nature from calories in other foods.  It is part of conventional weight management to employ foods having low calorific values for the purpose of allowing people to reach satiety without excessive calorific intake.  There is no scientific evidence that the consumption of such foods causes weight loss by burning more calories than the foods contribute to the body, or that the more of these foods a person eats, the more weight will be lost.  There is scientific evidence that certain foods have properties that minimise weight gain.  For example, it is possible to reduce the body’s absorption of nutrients which provide energy by inhibition of digestic enzymes.  For example, soy has components which inhibit the enzymes which digest protein.  There are dietary fibres which bind nutrients and prevent their absorption.  Some components of foods, such as lectins found in certain beans, can induce malabsorption by damaging the intestinal lining.  It is possible in this way to reduce the effectiveness of the body absorbing food and thereby reduce the amount of fat stored.  It would be false to represent about these foods that they contain negative calories.  There is no scientific evidence that these foods cause weight loss by burning more calories than they contribute to the body or that the more of them a person eats, the more weight would be lost.  There is no scientific evidence that persons can achieve weight loss by the consumption of any food when added to their diet.  In Professor Wahlqvist’s opinion, there is no scientific evidence to support the claims that any foods contain negative calories, that the consumption of foods causes weight loss by burning more calories than the foods contribute to the person consuming them or that the more of those foods a person eats, the more weight will be lost.  The testimonials set out in the advertisement are not credible and could not represent the typical or ordinary experience of users of that weight loss method.

63                  Thermogenesis is the generation of heat from energy stores, such as fat or glycogen, ie the conversion of calories into heat.  It can be a method of ‘wasting’ energy, rather than using energy stores for the body’s normal functions.  This is not entirely waste because heat is required to maintain core body temperature.  Thermogenesis, over and above that which occurs through basal metabolism, normally occurs from activity, including exercise, from eating, in which a proportion of the calories consumed is expended as heat through the activity of consumption, and through shivering.  It is possible to affect thermogenesis through diet and drugs.

64                  In relation to diet, the thermogenic effect of consuming a particular food will depend upon the presence and amount of macro nutrients (protein, carbohydrates, fat and alcohol) in the food and the extent to which the food stimulates the body’s rate of metabolism.  Diet-induced thermogenesis generally accounts for only a small proportion of the average person’s energy expenditure, perhaps 200 calories each day or up to 10 per cent of intake.  This is a negligible amount and achieving an energy deficit of this amount would have a minimal effect on weight.  Greater thermogenic effect will be achieved if food with more protein, carbohydrates or alcohol, as opposed to fat, is consumed.  The consumption of foods containing protein, carbohydrates or alcohol cannot cause loss of body weight because the energy input arising from the consumption of those foods will always exceed the energy expenditure caused by thermogenesis arising from the consumption of the foods.  Only about four types of foods have been identified as having a significant thermogenic affect, such that their consumption can cause a significant increase in the body’s metabolic rate.  These include chilli, mustard, red pepper and coffee.  There is no scientific evidence that the consumption of any of those foods can cause weight loss.

65                  In relation to drugs, if the thyroid hormone level in the blood is altered by ingesting thyroid hormones, or by the thyroid gland making more thyroid hormones, thermogenesis will occur.  If a person is deficient in iodine, the thyroid gland does not make an adequate amount of thyroid hormone.  Replenishing iodine stores will allow the body to make more.  Increasing iodine intake over the norm will not increase the production of thyroid hormones further.  Because of the mixed diet enjoyed by most Australians, iodine deficiency is extremely rare in this country.  It is unsafe to the human body to consume food containing thyroid hormones and it is outside medical practice for a medical practitioner to prescribe food containing thyroid hormones, irrespective of the patient’s medical condition.  Even if the ThermoSlim wafer contained iodine, it would not be effective as a weight loss product for the vast majority of Australians.  If it contained thyroid hormones, it would be medically unsafe to consume.

66                  In Professor Wahlqvist’s opinion, the endorsements and testimonials in the ThermoSlim material could not possibly represent the typical or ordinary experience of people who have consumed ThermoSlim wafers.  The only way by which a weight loss of 2 kilograms in the first 72 hours could occur is through a loss of body fluid, not fat.  In any event, extrapolations based on the first week of weight loss in any program are misleading in so far as they suggest any change in body fat and in so far as they suggest that such a dramatic weight loss could be continued at the same rate.  While people normally fluctuate by up to 1 kilogram in the course of 24 hours, a weight loss of 10 kilograms in the first month, or any weight loss, could not be brought about by the eating of wafers such as ThermoSlim, regardless of their precise composition, unless they were heavily medicated with diuretics, which would induce fluid loss, or thyroid hormone, or iodine where the person had an iodine-related deficiency.  In Professor Wahlqvist’s opinion, the ThermoSlim wafer does not represent a breakthrough in weight management in any sense.  He is aware of no scientific substantiation for the weight loss claims made in the ThermoSlim material.  Despite his involvement in national and international nutritional affairs, and his awareness of nutrition institutes and authorities around the world, he has never heard of the person whose opinion was included in the ThermoSlim material. 

67                  The evidence of Professor Wahlqvist is unchallenged and is not inherently incredible.  It tends to prove the falsity of each of the representations pleaded in pars 8, 10, 20 and 32 of the amended statement of claim.  It does not always express the negative propositions pleaded in pars 9, 11, 21 and 33 of the amended statement of claim in such absolute terms as they are pleaded.  Perhaps more importantly, it does not attempt to grapple with the standard qualified admission in the respondent’s pleading, particularly the assertion of the existence of some scientific evidence regarding the merit of the various products.  Although Professor Wahlqvist’s second affidavit was affirmed more than 11 months after the respondent provided to the applicant information in response to the notice pursuant to s 155 of the Trade Practices Act, Professor Wahlqvist makes no attempt to deal with the respondent’s assertions in some of those answers.  In particular, where the respondent has referred to identified websites as containing information, Professor Wahlqvist has not been asked to ascertain what information is available on those websites and to state his opinion in respect of such information.  Although there is no doubting the eminence of Professor Wahlqvist in his field, there is no indication in either of his affidavits as to whether his views represent a scientific orthodoxy which is subject to challenge and, if so, the source and nature of the challenge.

68                  These deficiencies in the material leave the Court unable to arrive at a clear view of the facts.  The applicant has pleaded a number of representations and has pleaded their falsity, usually in absolute terms and in the negative of the representation.  The respondent has agreed to consent to orders of the Court on the basis of his pleading, which contains the standard qualified admission.  If there should be any doubt that this is the basis on which the respondent has consented, it is removed by the letter from the respondent’s solicitors, to which I have referred in [6] above.  That letter contained the following:

‘Please note our client has filed the attached Amended Defence to Amended Statement of Claim[.]  This indicates in substance, that the representations made in respect to the various products were overstated and the testimonials did not reflect the ordinary and typical experiences of persons who use them and on that basis the representations were capable and likely to mislead and deceive.

Our client wishes to resolve the matter promptly and at minium [sic] cost.’

69                  The evidence does not enable me to find the negative of each of the representations, as the applicant pleaded.  I am left to determine the case on the basis that the representations were misleading and deceptive at least to the extent admitted by the respondent in the standard qualified admission.  They may have been misleading and deceptive in other respects, but I cannot determine the degree or nature of their falsity on the evidence before me.

70                  The seriousness of the conduct alleged is a matter relevant to the exercise of any discretion whether to make orders against a respondent in a proceeding of this kind.  If the Court cannot assess the degree of seriousness, it is hampered in exercising its powers. 

71                  In this respect, it is also necessary to examine whether the allegations of knowledge in pars 18(b), 19(b), 28(b) and 29(b) of the amended statement of claim have been established.  In his letter dated 31 May 2002 to the applicant, from which I have quoted in [55], the respondent’s answer to one of the applicant’s questions suggested that he was unaware of the precise terms of the injunction granted against him in the Jayco proceeding.  The affidavit of Ms Jarvis, filed in the Jayco proceeding, makes it clear that the order of Goldberg J, made on 3 November 1997, was never served personally on the respondent.  In seeking to punish the respondent for contempt of court in contravening the order made in the Jayco proceeding, the applicant was forced to rely on the fact that the respondent was present in court when the order was made and that the order was served on his solicitors.  Further, there is nothing in the material presently before me that would indicate that the respondent had actual knowledge of the contents of the first affidavit of Professor Wahlqvist, filed in the Jayco proceeding, that being the only expression of Professor Wahlqvist’s opinions in existence at the time of the publication of the material the subject of this proceeding.  It is worth noting that the material in Professor Wahlqvist’s first affidavit was considerably shorter than that in his second, but I have not troubled to ascertain whether it is sufficient to render false all of the representations pleaded in the present proceeding.  The point is that, by reason of his solicitors having received the affidavit and the order of Goldberg J, the respondent had the means of knowledge of the matters referred to in the particulars appended to pars 18 and 28 of the amended statement of claim, but there is no evidence that he had actual knowledge of those matters. 

72                  In relation to some of the allegations in the amended statement of claim that were not admitted by the respondent in his amended defence, the applicant made no attempt at proof.  I refer particularly to the allegations in pars 40 – 44 of the amended statement of claim, relating to the earlier proceedings involving Boardchain Pty Ltd, in relation to which the precise terms of earlier injunctions, and in particular whether they bound the respondent, were not apparent from any material before the Court in the present proceeding.

73                  The one affidavit filed on behalf of the applicant in the present proceeding does not deal with any of these gaps.  It merely deposes to the fact that Pepin was deregistered on 15 December 2002, a fact peripheral to the issues in the present proceeding, as Pepin has never been a party to the proceeding.

The significance of consent

74                  When the Court comes to decide whether to make the orders sought by consent, it must exercise the judicial power of the Commonwealth.  The consent of the respondent to those orders is only one circumstance that the Court must take into account.  While the function of the Court is not to frustrate the settlement of the proceeding, or to substitute its own view of the orders sought, the Court must scrutinise the orders sought to see that they are within power and appropriate.  See Australian Competition & Consumer Commission v Real Estate Institute of Western Australia Inc [1999] FCA 18 (1999) 161 ALR 79 at [1] and [17], and Australian Competition & Consumer Commission v Virgin Mobile Australia Pty Ltd (No 2) [2002] FCA 1548 at [1].

75                  In an ordinary case, the view might be taken that the consent of a party to the orders sought by an opposite party in a proceeding constitutes an admission by the consenting party of all of the elements of each cause of action that would justify each of the orders.

76                  Where both parties have legal representation, the Court can be persuaded more readily that orders sought by consent are within the jurisdiction of the Court and are appropriate in the circumstances.  This readiness may be tempered in some cases, however, by the existence of a resource imbalance between the parties.  Extensive litigation is out of the reach of many people, for financial reasons.  A party who believes that he or she has a reasonable chance of a favourable outcome may nevertheless be persuaded to consent to the making of orders because of inability to afford to conduct a proceeding.  The last paragraph of the letter of the respondent’s solicitors, dated 28 March 2003, to which I have referred in [6], suggests that the respondent was motivated to consent to orders in the present case, at least partly, because of limited finances.  It reads:

‘Our client wishes to resolve the matter promptly and at minium [sic] cost.  In this regard our client is currently using his limited income to pay of [sic] an order made in this Honourable Court in related proceedings on 17 February 2003.’

77                  As a public regulatory authority, the applicant has some responsibility to ensure that orders it seeks are within the jurisdiction of the Court and appropriate to the circumstances of the case.  The applicant ought not to adopt the strategy of devising the fullest range of orders, with the furthest reach, that its officers and advisers can think of, securing the consent of the other party, and then leaving it to the Court to choose which of the orders it ought to make.  The applicant ought to be particularly wary of such a strategy in a case in which it is aware that there are issues of fact between it and the other party and that the other party lacks the resources to litigate those issues fully.  As French J suggested in Virgin Mobile at [10], an agreed statement of facts and a joint submission ‘may often be helpful in assisting the Court in determining whether the consent orders are appropriate and within power.’  The present case is one in which an agreed statement of facts would have been of great assistance.  In the light of the pleadings, it is doubtful that the parties would have reached agreement readily.  This only serves to underline the fact that the Court has been left to try and determine the facts from admissions and evidence that are incomplete.

78                  Having regard to the views I have expressed about the pleadings, particularly the use of the standard qualified admission, and the failure of the respondent to admit the allegations of knowledge, it would be wrong to regard the consent of the respondent in the present case as an admission of every allegation pleaded in the amended statement of claim.  In particular, it would be wrong to regard him as having made admissions as to knowledge of the falsity of the representations, in the terms pleaded by the applicant, because of the respondent’s apparent desire not to make such admissions.

The extent of falsity

79                  There is a spectrum of conduct that might constitute breaches of ss 52, 53(c) and 55 of the Trade Practices Act.    When the Court comes to decide whether it should make the orders sought, it is relevant to know where on the spectrum of conduct the particular conduct of the respondent is to be located.  The greater the culpability, the more ready the Court will be to determine that orders are appropriate.

80                  In the present case, it is difficult to determine at what point on the spectrum of conduct the respondent’s conduct should be placed.  For the most part, the applicant has chosen to plead the falsity of the representations by pleading allegations of the absence of scientific evidence, or of reasonable grounds, for their truth.  It has not pleaded facts that would tend to falsify the representations.  This technique, coupled with the respondent’s repeated reliance on the standard qualified admission, means that there are issues of fact evident on the pleadings as to the extent to which the representations are false.  Are they completely without truth, or are they merely overstatements?  The affidavit evidence, on which the applicant might have relied to resolve these issues, does not do so completely.  The affidavits of Professor Wahlqvist were affirmed for the purpose of being used in another proceeding, not for the purpose of dealing with the issues raised on the pleadings in this proceeding.  The second of those affidavits fails to deal specifically with the issues raised by the respondent in material in the possession of the applicant at the time the affidavit was affirmed.  It is less than satisfactory for the applicant to rely on Professor Wahlqvist’s lack of knowledge of scientific evidence to support the truth of a representation, or of his general opinion that such evidence did not exist in relation to others, without providing him with the specific suggestions of the respondent as to possible sources of such evidence and inviting him to evaluate those sources.

81                  As the evidence stands, therefore, I do not feel able to make a finding on the balance of probabilities that the representations were totally false.  I can do no more than act on the basis that there was some element of falsity in them.  So much is admitted by the respondent, in his repeated use of the standard qualified admission.

The requirement of knowledge

82                  It is well established that a corporation can be found to have contravened ss 52, 53(c) and 55 of the Trade Practices Act by the making of representations that are in fact misleading and deceptive.  It is unnecessary for there to be evidence that any natural person intended to mislead and deceive, by the publication of the representations, or even that any natural person knew that the representations were misleading and deceptive, or likely to be so.  As regards a corporation, innocent misrepresentation is caught by the legislation.  See Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd (1978) 140 CLR 216 at 228 and Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 197.

83                  Section 80(1) of the Trade Practices Act provides:

‘Subject to subsections (1A), (1AAA) and (1B), where, on the application of the Commission or any other person, the Court is satisfied that a person has
engaged, or is proposing to engage, in conduct that constitutes or would constitute:

(a)       a contravention of any of the following provisions:

            (i)         a provision of Part IV, IVA, IVB, V or VC;

            (ii)        section 75AU or 75AYA;

(b)       attempting to contravene such a provision;

(c)        aiding, abetting, counselling or procuring a person to contravene such a provision;

(d)       inducing, or attempting to induce, whether by threats, promises or otherwise, a person to contravene such a provision;

(e)        being in any way, directly or indirectly, knowingly concerned in, or party to, the contravention by a person of such a provision; or

(f)        conspiring with others to contravene such a provision;

the Court may grant an injunction in such terms as the Court determines to be appropriate.’

84                  Sections 52, 53(c) and 55 are within Pt V of the Trade Practices Act.  Section 80(1) is the foundation for the present proceeding.  No allegation is made that the respondent is liable in respect of the representations made by Vesk and Pepin, other than by pleading facts that would lead to the conclusion that he aided, abetted, counselled or procured Vesk and Pepin to contravene ss 52, 53(c) and 55, or that he was knowingly concerned in or party to their contraventions of those sections.  There is no allegation of attempt, of inducement, or of conspiracy, made against the respondent.  The provisions of pars (c) and (e) of s 80(1) are in identical terms to those of pars (a) and (c) of the definition of ‘person involved in a contravention’ in s 75B of the Trade Practices Act.  In Yorke v Lucas (1985) 158 CLR 661, the High Court of Australia held that those provisions require knowledge of the essential matters that go to make up the contravention.  Specifically, knowledge of the falsity of the relevant representation is required before a natural person can be found to have aided, abetted, counselled or procured a contravention of s 52 by that representation.  Similarly, a person could not be knowingly concerned in, or party to, a contravention without knowledge of the essential facts, specifically the falsity of the relevant representation.  The same must follow in respect of the application of s 80(1) to ss 52, 53(c) and 55.

85                  It follows that, to make the respondent liable to the grant of an injunction pursuant to s 80(1) of the Trade Practices Act, in respect of the admitted contraventions of ss 52, 53(c) and 55 by Vesk and Pepin, it must be established that the respondent had knowledge of the falsity of the representations.  It is for this reason that the applicant pleaded the allegations in pars 18(b), 19(b), 28(b) and 29(b) of the amended statement of claim.

Failure to prove knowledge

86                  The need for the applicant to establish knowledge on the part of the respondent, in relation to the allegations concerning Vesk and Pepin causes difficulty.  In substance, the Court is invited to infer that the respondent had knowledge of the falsity of the representations because of his involvement in the prior proceeding concerning Jayco Pty Ltd.  I have already referred to some aspects of the evidence in the present proceeding as to that involvement, including the lack of evidence of actual awareness of the contents of the first affidavit of Professor Wahlqvist, the failure of the applicant to effect personal service of the order containing the injunction, and the claimed misapprehension of the respondent as to the terms of that injunction.

87                  In the light of the pleadings, as the evidence stands, I do not feel able to find on the balance of probabilities that the respondent had actual knowledge of the falsity of the representations, to the extent to which they were false.  Given the indication in the respondent’s solicitors’ letter of 28 March 2003, to the effect that he is consenting to the orders because he lacks the resources to litigate the matter, it would be inappropriate to regard the absence of evidence from the respondent as a ground for drawing an inference adverse to him.  In any event, silence can only be used to support an inference when the grounds for that inference exist otherwise.  It cannot itself be a ground for drawing an inference.   I can only approach the consent orders on the basis that the representations were not wholly true, but that the respondent might have had some belief as to their truth.  I cannot form the view, by inference or otherwise, that the respondent knew of the falsity of the representations, so I cannot act on the basis that he set out to mislead and deceive the public.  The only proper approach to the consent orders is to take the view that the respondent, although seeking to make money from the advertisements he caused to be published, did so with a belief that what he was advertising was true.

88                  The result of this conclusion is that it is not open to me to make any of the orders sought in respect of the publication of the representations by Vesk and Pepin.  The fact that knowledge is an essential element of the cause of action against the respondent in respect of those representations, and the failure of the applicant to establish that the respondent had the requisite knowledge, mean that the Court does not have power to make the orders sought, even though they are sought by consent.

89                  The situation is different in relation to the ThermoSlim representations.  There was no corporation involved in the making of those representations.  The applicant has alleged, and the respondent has admitted, that the respondent used the postal services to publish the material in which the representations were made.  Section 6(3) gives to certain of the provisions of the Trade Practices Act, including ss 52 and 53(c), effect to the extent to which the conduct that would be a contravention of them involves the use of postal services, as if the references to corporations in those sections were references to natural persons.  The consequence for the present case is that, so far as ss 52 and 53(c) are concerned, the respondent is to be treated as if he were a corporation in posting material containing the ThermoSlim representations to members of the public.  The same does not apply to s 55, which is specifically excluded from the operation of s 6(3) (see s 6(3)(a)), because s 55 attaches liability to ‘a person’, not to a corporation.  As long as the respondent was sending his advertisements ‘in trade or commerce’, which is admitted, s 55 is applicable to him.  It is unnecessary for the applicant to establish that the respondent had knowledge of the falsity of the representations, to give the Court power to make orders in respect of the respondent’s conduct consisting of making the representations in that manner.

90                  It is therefore necessary to consider whether the orders sought by consent, or some other orders, should be made in respect of the ThermoSlim representations.

The consent orders in relation to ThermoSlim

91                  So far as it relates to the ThermoSlim representations, the minute of consent orders tendered at the hearing is in the following terms:

‘The parties agree to the making of the following orders by consent.

THE COURT DECLARES THAT:

...

4.         The Respondent, by causing written material to be sent to members
            of the public through the use of postal services promoting the sale of
            a wafer biscuit known as “ThermoSlim”, such written materials
            containing representations that:

            (a)        people can achieve weight loss by the consumption of a
                        product named ThermoSlim, whereas people cannot achieve
                        weight loss by the consumption of ThermoSlim;

            (b)        people can achieve weight loss by the consumption of
                        ThermoSlim without undertaking any other method of weight
                        loss (including dieting or exercise), whereas people cannot
                        achieve weight loss by the consumption of ThermoSlim without
                        undertaking any other method of weight loss (including dieting
                        or exercise);

            (c)        ThermoSlim has a 95% success rate, whereas ThermoSlim does
                        not have a 95% success rate;

            (d)        the matters set out in paragraphs (a)-(c) hereof have been
                        confirmed by weight loss experts and researchers, whereas
                        those matters have not been confirmed by weight loss experts
                        and researchers;

            (e)        people can achieve the following weight loss by the
                        consumption of ThermoSlim:

                        (i)         2 kilograms within the first 72 hours of commencing to
                                    eat Thermo-Slim [sic];

                        (ii)        5 kilograms in the first fortnight of commencing to eat
                                    Thermo-Slim [sic];

                        (iii)       10 kilograms in the first month of commencing to eat
                                    Thermo-Slim [sic]; and

                        (iv)       a further 20, 40 or 60 kilograms thereafter,

                        whereas people cannot achieve this weight loss by the
                        consumption of ThermoSlim;

            (f)        the testimonials and endorsement contained in the material
                        that the Respondent caused to be published concerning the
                        weight loss that can be achieved by the eating of ThermoSlim
                        are authentic and truthful, whereas the testimonials and
                        endorsement are not authentic and truthful; and

            (g)        the testimonials contained in the material that the Respondent
                        caused to be published concerning the weight loss that can be
                        achieved by the eating of ThermoSlim represent the typical or
                        ordinary experience of people who eat ThermoSlim, whereas
                        the testimonials do not represent the typical or ordinary
                        experience of people who eat ThermoSlim,

            has in trade or commerce:

            (A)       engaged in conduct that was misleading and deceptive or was
                        likely to mislead or deceive contrary to section 52 of the Act;

            (B)       in connection with the supply or possible supply of goods, or
                        with the promotion of the supply of goods, represented that
                        goods have performance characteristics, uses or benefits they
                        do not have, contrary to section 53(c) of the Act; and

            (C)       engaged in conduct that is liable to mislead the public as to the
                        nature or characteristics of goods or the suitability of such
                        goods for their purpose, contrary to section 55 of the Act.

AND THE COURT ORDERS THAT:

...

7.         The Respondent be restrained, by himself or his servants or agents or
            otherwise howsoever, for a period of 5 years in connection with the
            supply or promotion of:

            (i)         a wafer biscuit known as “ThermoSlim”;

            (ii)        any substantially similar food product whatever called; or

            (iii)       any food product

            from:

            (a)        making any representation in trade or commerce through the
                        use of postal, telegraphic or telephonic services or radio or
                        television broadcasting;

            (b)        making any representation in trade or commerce to the public;
                        or

            (c)        aiding, abetting, counselling or procuring or being in any way
                        directly or indirectly knowingly concerned in or party to the
                        making of any representation by a corporation in trade or
                        commerce;

            to the effect that the consumption of that product can cause people to
            lose weight by:

            (A)       a process called thermogenesis;

            (B)       a process by which calories are converted into heat; or

            (C)       burning the body’s fat.

8.         The Respondent be restrained, by himself or his servants or agents or
            otherwise howsoever, for a period of 5 years in connection with the
            supply or promotion of any product represented as being able to assist
            people to lose weight, from:

            (a)        making any representation in trade or commerce through the
                        use of postal, telegraphic or telephonic services or radio or
                        television broadcasting;

            (b)        making any representation in trade or commerce to the public;
                        or

            (c)        aiding, abetting, counselling or procuring or being in any way
                        directly or indirectly knowingly concerned in or party to the
                        making of any representation by a corporation in trade or
                        commerce;

            to the effect that:

            (i)         a person can achieve weight loss by using or consuming that
                        product unless there is reasonable scientifically accepted
                        evidence in support of a person being able to achieve weight
                        loss by using or consuming that product;

            (ii)        refers to a written statement by a person regarding his or her
                        experience in respect of the loss of weight that he or she has
                        achieved from his or her use or consumption of that product
                        (“testimonial”) unless before he makes the representation the
                        Respondent has received the original of the testimonial and
                        the testimonial identifies the full name and address of the
                        person making it;

            (iii)       that a testimonial represents the typical or ordinary experience
                        of users or consumers of that product where that is not the
                        case.

9.         The Respondent pay the Applicant’s costs of this proceeding fixed in
            the sum of $15,000.

...

AND THE COURT NOTES:

11.       The Respondent undertakes to the Court that, if at any time within a
            period of 5 years from the date of this order the Respondent by himself
            or his servants or agents or otherwise howsoever:

            (a)        makes any representation in trade or commerce through the
                        use of postal, telegraphic or telephonic services or radio or
                        television broadcasting;

            (b)        makes any representation in trade or commerce to the public;
                        or

            (c)        aids, abets, counsels or procures or is in any way directly or
                        indirectly knowingly concerned in or party to the making of
                        any representation by a corporation in trade or commerce,

            concerning the loss of weight that can be achieved by the use or
            consumption of any product (“the representation”), he will:

            (d)        prior to the representation being made, use his best endeavours
                        to obtain:

                        (i)         a copy of all documents relied upon by the person
                                    making the representation in support of the
                                    representation;

                        (ii)        if the representation refers to a written statement by a
                                    person regarding his or her experience in respect of
                                    the loss of weight that he or she has achieved from his
                                    or her use or consumption of the product
                                    (“testimonial”), the original of any such testimonial
                                    which must identify the name and address of the person
                                    making it; and

                        (iii)       a document containing a list of the names and
                                    addresses of all persons who purchased the product
                                    which is the subject of the representation from the
                                    person making the representation; and

            (e)        retain all documents referred to in paragraph (d) herein which
                        he obtains, for a period of 18 months from the date the
                        representation is made and provide a copy of the documents
                        referred to in paragraph (d) herein which he obtains, to the
                        Applicant within 7 days of the date of receiving a written
                        request for them from the Applicant provided the request is
                        made by the Applicant within 18 months from the date the
                        representation was made.’

The declaration

92                  The remedy of a declaration has its origins in the Court of Chancery.  See Meagher, Gummow and Lehane’s Equity doctrines and remedies 4th edn, 2002 at [19-005].  It may now be considered to have become a statutory, rather than an equitable, remedy, because it is statutory provisions, such as s 21 of the Federal Court Act, that confer on superior Courts the power to grant the remedy.  The history of such statutory provisions, and their construction, is set out conveniently in the judgment of Gibbs J in Forster v Jododex Australia Pty Ltd (1972) 127 CLR 421 at 433 – 437.  Prior to the fusion of law and equity in the Supreme Court of New South Wales, it appears that that court could only make a declaration in a proceeding in which equitable relief was otherwise sought.  It is plain that such a restriction no longer exists, and that a declaration can be sought in respect of any right or obligation.  So much has been recognised since Forster. 

93                  Section 21 of the Federal Court Act provides as follows:

‘(1)      The Court may, in relation to a matter in which it has original
            jurisdiction, make binding declarations of right, whether or not any
            consequential relief is or could be claimed.

(2)       A suit is not open to objection on the ground that a declaratory order
            only is sought.’

94                  In McLeish v Faure (1979) 40 FLR 462 at 473 – 476, the Full Court considered the effect of s 21 in the light of Forster.  At 473 – 474, the Court recognised that the power to grant a declaration is discretionary.  It also recognised that, although the absence of a claim for consequential relief was immaterial to the existence of the power conferred by s 21, such absence may affect the exercise of the power.  The Court granted a declaration as to the validity of certain proposed amendments to the rules of an organisation, registered pursuant to the Conciliation and Arbitration Act 1904 (Cth) (now repealed), notwithstanding that the Industrial Registrar had a statutory power to consider the validity of those rule amendments, if they were to be adopted.

95                  It is to be noted that the power given to the Court by s 21 of the Federal Court Act is a power to make ‘binding declarations of right’.  As defined by one academic commentator:

‘A declaration is an order made by a court which declares with finality the nature of the legal rights and obligations of the parties in relation to the dispute before it.’

See J Stuckey-Clarke in P Parkinson, ed, The Principles of Equity, 1996, p 843.  Thus, in Warramunda Village Inc v Pryde [2001] FCA 61 (2001) 105 FCR 437, the Full Court held that summary expressions of conclusions reached in reasons for judgment did not amount to binding declarations of right within the meaning of s 21.  At [8], the Court said:

‘The remedy of a declaration of right is ordinarily granted as final relief in a proceeding.  It is intended to state the rights of the parties with respect to a particular matter with precision, and in a binding way.  The remedy of a declaration is not an appropriate way of recording in a summary form, conclusions reached by the Court in reasons for judgment.  This is even more strongly the case when the conclusion is not one from which any right or liability necessarily flows.’

96                  A subsequent Full Court dealt with the same case in Warramunda Village Inc v Pryde [2002] FCAFC 58 (2002) 116 FCR 58.  One member of that Full Court, Finkelstein J, took issue with the proposition that the orders made by the primary judge did not amount to binding declarations of right.  His Honour’s discussion appears at [64] – [80].  Even allowing for differences of opinion as to the meaning of the orders made in that case, and as to the effect of orders of a superior court, the point remains that a declaration of the kind contemplated by s 21 must be of such a nature, and in such a form, as to be of significance.  What is declared must have some effect on the rights and obligations of the parties to the proceeding in which the declaration is pronounced.  As Mason CJ, Dawson, Toohey and Gaudron JJ pointed out in Ainsworth v Criminal Justice Commission (1992) 175 CLR 564 at 582, quoting Mason J in Gardner v Dairy Industry Authority (NSW) (1977) 52 ALJR 180 at 188, a declaration will not be granted if it ‘will produce no foreseeable consequences for the parties’.  The mere expression of a conclusion, particularly a conclusion as to the facts, in the form of a declaration will generally fall short of this requirement.

97                  For these reasons, it is hard to see that a declaration that a person, by engaging in certain conduct, has contravened a provision of a statute can amount to a declaration of right.  On its face, it does no more than to record something about the person’s past conduct and its relationship with the statute concerned.  Of course, there may be cases in which such a form of declaration does amount to a declaration of right, because it forms the basis on which some element of a controversy between the parties can be resolved.  Such cases will be unusual.  More commonly, a declaration of right will be as to a state of affairs, such as validity or invalidity, or the meaning of a particular provision in a particular factual context, so that the parties can resolve their controversies on the basis that the state of affairs exists.  In that way, the exercise of the power to make a declaration of right can be a useful exercise of the judicial power, saving the Court and the parties the trouble and expense of further involvement in litigation as to the details of a controversy.

98                  From the earliest days of the Trade Practices Act, it became common for applications to be filed in which the first form of relief sought was a declaration that some alleged conduct amounted to a contravention of a particular provision of the Trade Practices Act.  In most cases, the making of a declaration was entirely unnecessary, because other relief sought was perfectly adequate for the occasion.  Such other relief was normally in the form of injunctions, or judgments for damages.  Nevertheless, it appears that the fashion of seeking declarations has led, in many cases, to the Court granting them as a matter of course, and
usually without discussion as to the adequacy of the terms of the declaration sought, or as to the necessity for one to be made. 

99                  In Tobacco Institute of Australia Ltd v Australian Federation of Consumer Organisations Inc (No 2) (1993) 41 FCR 89, the Full Court considered the relationship between s 21 of the Federal Court Act and the Trade Practices Act.  In that case, all three members of the Full Court were of the view that the conduct of the appellant had amounted to a contravention of s 52 of the Trade Practices Act.  Different members of the Full Court took different views as to the nature of the contravention.  The Full Court decided that it was appropriate to make a declaration.  The declaration made by the Full Court was in the barest of terms.  It is found at 115:

‘It be declared that par 3 of the advertisement published by the appellant in or about July 1986 is misleading and deceptive contrary to the provisions of s 52 of the Trade Practices Act 1974.’

100               In the course of their respective reasons for judgment, the members of the Full Court discussed the power of the Court to make a declaration in a case involving misleading and deceptive conduct under the Trade Practices Act.  At 98, Sheppard J said:

‘[The Court] is therefore empowered, if it is otherwise appropriate to do so, to make a declaration of right in such a case whether or not the injunctive relief is also granted.  The declaration, if made, will be a declaration of right because the right which will be declared will be a public right, namely, the right of the public not to be misled or deceived by factual statements in an advertisement concerning the effects of passive smoking.’

101               At 99, his Honour recognised that the Court will not grant declaratory relief in hypothetical cases, or in cases where the making of a declaration is of no utility.  At 100, Sheppard J said:

‘Although the respondent here did not seek a declaration at first instance and although its claim was entirely for injunctive relief, the question whether the advertisement was misleading or deceptive was a central issue before the primary judge and before us on appeal.  For the various reasons given by the four judges who have dealt with the matter, the advertisement has been found to be both misleading and deceptive and thus to be in breach of s 52 of the Act.  The hearing before his Honour, which was largely occupied with this question, lasted for many months; before this Court, which was principally concerned with the same question, the hearing lasted for three weeks.  Whatever counsel for the appellant may now say about the effect of this Court’s judgment or the questions which were in issue, the fact is that their client fought the question of misleading or deceptive advertising, contending that a proper result was that the advertisement was not misleading or deceptive and thus not in breach of s 52 of the Act.  That proposition has been rejected firmly by each of the judges who has dealt with the matter.  That being the case, it would seem quite undesirable to me that, in a matter involving as it does the public interest — really the public health and well-being of the nation — the court having reached its conclusion should not formally indicate the result of the litigation by an appropriate declaration of right.’

102               At 101, his Honour said:

‘If the matter did not involve the public interest or if the appellant had not conducted the case in the way that it did, meeting the respondent’s case head on, I may have reached a different conclusion.  But those two matters persuade me that the correct course is to make a declaration formally recording the court’s finding on the principal issue which was litigated.’

103               At 104, Foster J recorded the fact that the reasoning by which individual members of the Full Court arrived at the conclusion that the relevant advertisement was misleading and deceptive differed.  At 106, his Honour expressed agreement with the reasons given by Sheppard J that declaratory relief could and should be given in the case. 

104               At 107, Hill J said:

‘The real issue litigated between the parties was whether the publication of the advertisement containing par 3 was conduct which was misleading or deceptive or likely to mislead or deceive within the meaning of those words in s 52 of the Act.  While the applicant’s case sometimes failed to recognise the significance of the context in which the words in par 3 appeared, a significance emphasised by all members of the court, the applicant in the result succeeded in establishing that, in that context, par 3 did infringe s 52 of the Act.  In my view, the applicant is entitled, assuming that the court has power, to a declaration appropriately framed.

...

It can not be said, in the relevant sense, to be hypothetical to grant a declaration or to be of no utility.  It is, in my view, in the public interest that the court indicate the result of the case by the making of an order binding at least on the parties.’

105               His Honour went on at 108 – 112 to hold that the Court had power to grant to the applicant a declaration expressed in appropriate terms.  In the course of that reasoning, at 110, his Honour said:

‘There can be little doubt that a declaration might be obtained by a regulatory authority that particular conduct is in breach of a statutory provision, whether or not injunctive relief is appropriate:  cf Australian Softwood Forests Pty Ltd v Attorney-General (NSW) (Ex rel Corporate Affairs Commission) (1981) 148 CLR 121 at 125.  It has never been suggested that no power exists to grant such declaratory relief merely because the consequence of a declaration is to declare the existence of a wrong.  The declaration that an offence has been committed is the concomitant of the non-existence of a right.  Semantically, it may be said to be the declaration of a negative right.  It is appropriate, in my view, to refer to it as a declaration of right.’

106               At 112 – 113, Hill J referred to the differences of reasoning among the members of the Full Court.  At 113, his Honour said:

‘I have considered whether there was some possibility of making declarations which sought to spell out the relevant meaning of the words used, but have found the exercise most difficult and, more significantly, I have reached the conclusion that the making of such a declaration could itself give a false impression of what actually was decided by the court.  In these circumstances, in my view, the appropriate declaration is a declaration that the publication of the advertisement was, as at the date it was published, conduct which was misleading and deceptive and in breach of s 52 of the Act.  Such a declaration necessarily requires the reader to refer back to the judgments delivered to see precisely what it was that this Court decided.’

107               Clearly, there were circumstances in the Tobacco Institute case that are not present in every case.  The Full Court had previously held that injunctive relief was inappropriate.  There was no possibility of damages, or of the imposition of any financial penalty.  Only by means of a declaration could the major issue between the parties, whether the published advertisement was misleading or deceptive, have been resolved by any kind of order.  The majority also recognised that the public interest element was an important factor in the decision to make a declaratory order.  So also was the fact that the issue whether there had been misleading and deceptive conduct had been fought at great length and with considerable vigour, and resolved by the Court without agreement among the judges as to the particular aspect or aspects of the conduct that made it misleading or deceptive.

108               Even so, the justifications advanced for the making of a declaration in the Tobacco Institute case are unconvincing, especially when the form of order made is taken into account.  It is hard to see how an issue can be said to have been resolved by an order which is not comprehensible, except by recourse to the reasons for judgment to ascertain what the Court said.  In many cases, it will be possible to make a declaration in a form that is much more informative than the order made in the Tobacco Institute case.  It is clear that the vagueness of the declaration made in that case was, at least in part, the result of the different views taken by the members of the Full Court as to the precise misleading or deceptive effect of the advertisement concerned.  Even if a more precise declaration were to be made, however, the notion of a declaration as a vindication of a public right is difficult to grasp.  The right of a member or members of the public not to be misled or deceived by conduct to which s 52 of the Trade Practices Act applies is apparent on the face of the section itself.  The right might be said to be vindicated if some penalty could be imposed upon the contravener of the section.  It is hard to see how it could be vindicated by the mere recording of the conclusion that a contravention had occurred.  It is not clear why the expression of that conclusion in a summary form in a declaration should be considered to be more capable of vindicating the public right than the detailed findings expressed in published reasons for judgment.

109               Since the Tobacco Institute case, declarations have been made in a very great number of cases involving contraventions of the Trade Practices Act, particularly s 52.  In most of those cases, the peculiar circumstances present in the Tobacco Institute case have been absent.  Declarations in summary form have often been made by single judges who have expressed clear views in their reasons for judgment as to the nature of the misleading or deceptive effect of the conduct concerned.  These cases have generated very little discussion as to the rationale for making a declaration.  It has been said that the reason is to mark the Court’s disapproval of the conduct concerned.  See, for example, Australian Competition & Consumer Commission v Chen [2003] FCA 897 (2003) 201 ALR 40 at [36].  Again, I have difficulty with this as a reason for granting a declaration.  The function of the Court is to find the facts and apply the law to them, to determine whether a contravention of a statutory provision has occurred.  It is not to express its opinion of the quality of the conduct, by the use of adjectives indicating that opinion.  In any event, adjectives of that kind are never used in the declarations concerned.  The question is not whether the judge approves, or disapproves, or has no opinion either way.

110               The process of an applicant seeking, and the Court granting, a declaration, if the Court finds that a contravention has occurred, seems to have become mechanical, at least in cases under the Trade Practices Act.  The fashion seems to have been established.  In the case of the applicant in the present case, it seems to have become something of a fetish.  The seeking of a declaration is regarded as no mere formality, and substantial resources are expended in an effort to persuade the Court that the declaration should be made.  The question, then, is whether I should be persuaded to make a declaratory order, even though my view is that such an order is totally pointless.

111               In Rural Press Ltd v Australian Competition & Consumer Commission [2003] HCA 75 (2003) 203 ALR 217, the High Court of Australia allowed an appeal from the Full Court of this Court, in a case arising under s 45(2) and s 46 of the Trade Practices Act.  The High Court set aside an order made by the Full Court and substituted declarations.  The principal declaration, that there had been a contravention of s 45(2), contained some detail as to the provisions of the arrangement concerned that led to the contravention.  Two subsidiary declarations were simply that other persons had been knowingly concerned in or party to the contraventions.  The High Court did not attempt to explain the rationale for making declaratory orders.  At [89] – [90], Gummow, Hayne and Heydon JJ, with whom Gleeson CJ and Callinan J agreed, said:

‘The trial judge’s orders.  The trial judge made declarations that Rural Press and Bridge had contravened s 46; that Rural Press, Bridge and Waikerie Printing had contravened s 45; that McAuliffe and Law were directly or indirectly knowingly concerned in the contraventions by Rural Press and Bridge of ss 45 and 46; and that Paul Taylor was directly or indirectly knowingly concerned in the contraventions by Waikerie Printing of s 45.  The Rural Press parties made no complaint about these declarations to the Full Federal Court or to this court.  The declarations spoke merely of “an arrangement” having a purpose and effect, without giving any content to that expression and without indicating the gist of the findings of the primary judge identifying the arrangement.

These declarations provide a bad precedent and were of a kind which the trial judge should not have agreed to make even if urged to do so by the parties.  Close attention to the form of proposed declarations, particularly those “by consent”, should be paid by primary judges.’

112               At [140], Kirby J expressed a different view.  His Honour said:

‘I have previously expressed my hesitation over attempts to subject to the rigidities of traditional equity practice the scope of declaratory and injunctive orders of the Federal Court, made pursuant to broad powers in a remedial statute, in novel circumstances, to afford new protections for large and important social and economic purposes.’

113               The High Court, by a clear majority, has obviously taken the view that the mechanical process of making declaratory orders should not continue.  At the same time, the High Court has also taken the view that, whatever might be the rationale behind the making of declaratory orders of the kind it made, there are circumstances in which it will be appropriate to declare that a contravention of a provision of the Trade Practices Act has occurred.  Attention must be given to the form of the declaration, so that it is at least informative as to the basis on which the Court declares that a contravention has occurred.  With these principles in mind, I turn to the form of the declaration sought in the present case in relation to the ThermoSlim conduct. 

114               The form of declarations sought in par 4 of the minute of consent orders represents an attempt to state in specific terms the nature of the respondent’s conduct in relation to the ThermoSlim representations.  The attempt to achieve specificity is to be commended.  It would avoid the kind of ‘bad precedent’ to which the majority of the High Court referred in Rural Press.  In the present case, however, the attempt has given rise to two problems.  One is a problem of form, the other of substance. 

115               As it stands, the form of declarations sought in par 4 attempts to build into each of the representations the negative proposition, as the applicant sees it.  The result of this form is to make it appear as though the respondent has made representations which contain their own negative.  At the very least, it would make the declaration ambiguous.  At the worst, it would leave the reader wondering why, if someone had made a representation, accompanied by a statement negativing that representation, the person would be found to have contravened the provisions of the legislation.

116               The substantial problem relates to the issues with which I have already dealt of the form of the pleadings and the evidence in this case.  On the findings I have made, or perhaps more accurately have expressed myself as being unable to make, it would be impossible for me to make a declaration that the ThermoSlim representations were misleading and deceptive in the sense which the person drafting the proposed declaration has sought to express.  I could not make the declaration sought in the form in which it was sought because it is not supported by the admissions made in the proceeding, by the evidence, or by the consent of the respondent.

117               Further, because of the nature of the evidence, I am unable to express in the form of a declaration the extent to which the making of the representations involved misleading or deceptive conduct, other than to say that it was at least to the extent conceded in the standard qualified admission.

118               For these reasons, the only declaration I can make is in the following terms:

The respondent, by causing to be sent to members of the public through the use of the postal services written material promoting the sale of a wafer biscuit known as ‘ThermoSlim’, containing representations that:

(a)        people can achieve weight loss by the consumption of ThermoSlim;

(b)        people can achieve weight loss by the consumption of ThermoSlim
without undertaking any other method of weight loss (including dieting or exercise);

(c)        ThermoSlim has a 95 per cent success rate;

(d)        the matters set out in paragraphs (a) – (c) hereof have been confirmed by          weight loss experts and researchers;

(e)        people can achieve the following weight loss by the consumption of        ThermoSlim:

(i)         2 kilograms within the first 72 hours of commencing to eat ThermoSlim;

            (ii)        5 kilograms in the first fortnight of commencing to eat ThermoSlim;

(iii)       10 kilograms in the first month of commencing to eat ThermoSlim;

            (iv)       a further 20, 40 or 60 kilograms thereafter.

(f)         the testimonials and scientific endorsement in the material are
            authentic and truthful; and

(g)        the testimonials contained in the materials represent the typical or
            ordinary experience of people who eat ThermoSlim.

has in trade or commerce:

(1)        engaged in conduct that was misleading and deceptive or was likely to mislead
or deceive, contrary to s 52 of the Trade Practices Act 1974 (Cth);

(2)        in connection with the supply or possible supply of goods, or with the promotion of the supply of goods, represented that goods have performance characteristics, uses or benefits they do not have, contrary to s 53(c) of the Trade Practices Act 1974 (Cth); and

(3)        engaged in conduct that is liable to mislead the public as to the nature or
characteristics of goods or the suitability of such goods for their purpose,
contrary to s 55 of the Trade Practices Act 1974 (Cth);

in that each of the representations was false, at least to the extent that any scientific evidence regarding the merit of ThermoSlim was overstated and the testimonials did not necessarily reflect the experiences of ordinary and typical users of ThermoSlim.

119               Although it seems to me that such a declaration is pointless, for the reasons that I have given, I am prepared to make an order containing it. 

The injunctions sought

120               Ordinarily, an injunction is granted to restrain conduct that is threatened or intended.  In the present case, there is no indication that the respondent threatens or intends to repeat his contraventions of the Trade Practices Act in any relevant way. 

121               An injunction granted pursuant to s 80 of the Trade Practices Act is subject to special rules.  By s 80(1), such an injunction may be granted when ‘the Court is satisfied that a person has engaged, or is proposing to engage, in conduct that constitutes or would constitute’ a contravention of certain provisions, including ss 52, 53 and 55.  The use of the disjunctive suggests that it is intended that past engagement, and proposing to engage, in the required conduct are intended to be alternatives.  The fact of having engaged in conduct of the required kind is sufficient to give rise to the power to grant an injunction.  This construction is confirmed by s 80(4)(a), which provides that the power of the Court to grant an injunction restraining a person from engaging in conduct may be exercised whether or not it appears to the Court that the person intends to engage again, or to continue to engage, in conduct of that kind.  In this sense, therefore, the ordinary purpose of an injunction is not the purpose of an injunction pursuant to s 80 of the Trade Practices Act.

122               In respect of contraventions of the kinds committed by the respondent in the present case, there is no power to impose a financial penalty.  Nor is such a contravention visited with criminal consequences.  The effect of granting an injunction, if there is a repetition of the conduct enjoined, is to render the person enjoined liable to punishment for contempt of court.  By this means, what would otherwise be a contravention of the Trade Practices Act can be converted to conduct rendering the person liable to a financial penalty, or, in extreme cases, to imprisonment.  The Court must therefore be satisfied that the possibility of such consequences ought to be visited upon a person, if there should be a repetition of the conduct complained of, before granting such an injunction.  The terms of the injunction must be specific, so that the person subject to it can understand clearly what conduct will amount to a breach of the injunction, and what conduct he or she can engage in legitimately.

123               The injunction sought by consent in par 7 of the minute of consent orders is based on the ThermoSlim representations.  In its terms, however, it would restrain the respondent from conduct of a much broader nature than was involved in the making of those representations.  In my view, an injunction founded on past conduct should be limited to restraining conduct of the kind the respondent has been found to have engaged in.  In this case, the conduct concerns representations made through the use of the postal service in relation to ThermoSlim.  There is no suggestion that the respondent has made, or proposes to make similar representations with respect to a food product of any other kind.  Nor is there evidence that, if he did, such a representation would necessarily be without foundation.  In his letter to Mr Ellison dated 31 May 2002, the respondent indicated that he no longer had faith in mail advertising, because of the lack of response.  He also signified a desire to live outside Australia.  He said:

‘It’s all T.V. now – and if I ever did want to do business in this country again, it would be via this medium, where all advertising is passed by F.A.C.T.S. (which is a good thing.).’

124               It is not possible to take this statement as evidence that the respondent proposes to engage in conduct in contravention of ss 52, 53 or 55 of the Trade Practices Act by means of advertisements on television.  Indeed, it is a statement to the opposite effect.  There is no other evidence that he intends to use telegraphic or telephonic services or radio or television broadcast, or to be involved with a corporation making representations of the kind already made.

125               Although the terms of the representations referred to in the proposed injunction differ from those that are pleaded and admitted as having been made, they are sufficiently closely related to what has already occurred to warrant the references to thermogenesis, conversion of calories into heat or burning fat.

126               The period of five years, for which the proposed injunction is to run, has been chosen by the parties.  It is not an obviously excessive period.  It is therefore unnecessary for me to concern myself with whether, if I had been choosing the period, I should have chosen a different one.

127               Accordingly, I am prepared to make an order including an injunction in the following terms:

The respondent, by himself, his servants or agents or howsoever otherwise, be restrained for a period of five years in connection with the supply or promotion of a wafer biscuit known as ‘ThermoSlim’, or any substantially similar food product whatever called, from making any representation in trade or commerce through the use of postal services to the effect that the consumption of that product can cause people to lose weight by:

(a)        a process called thermogenesis;

(b)        a process by which calories are converted into heat; or

(c)        burning the body’s fat.

128               The injunction sought in par 8 of the minute of consent orders is in terms so broad as to be beyond the power of the Court.  It refers to means of making representations that have nothing to do with this case, namely telegraphic or telephonic services or radio or television broadcasting.  Its terms are too vague, in that it would prohibit the respondent from making representations ‘unless there is reasonable scientifically accepted evidence’ in support of their truth.  I am aware that an injunction containing similar wording was made in the Jayco proceeding, but in my view it is imposing too big an onus on a person to require that the person should adjudicate upon the reasonableness or the acceptability of scientific evidence before making a representation, on pain of punishment for contempt of court if the result of that adjudication turns out to be wrong.  There is absolutely no warrant for a requirement that the respondent should be in possession of an original testimonial, or that the testimonial identify the full name and address of the person giving it, before relying on such a testimonial.  Reliance on testimonials might be fraught with difficulty in terms of the truthfulness of representations, but there may be circumstances in which it is legitimate even though the original is not held and the full name and address of the person giving it are not available.  The suggestion that the respondent should be enjoined from representing that a testimonial represents the typical or ordinary experience of users or consumers where that is not the case is too vague.  I would therefore not make an order including any injunction of the kind sought in par 9 of the minute of consent orders.

The undertakings

129               In Thomson Australian Holdings Pty Ltd v Trade Practices Commission (1981) 148 CLR 150, the High Court held that this Court has no power to accept undertakings in terms in which it has no power to make orders.  I am unable to see that the Court could make orders in terms of the undertaking referred to in par 11 of the minute of consent orders.  Counsel for the applicant sought to justify the terms of the undertaking by claiming that they were in the nature of a compliance program.  Orders for compliance programs have commonly been made against corporations, to ensure that they make all of their relevant employees aware of the obligations of the corporation to comply with the Trade Practices Act.  I am not aware of any case in which anything in the nature of a compliance program has been imposed on a natural person.  The practice of ordering corporations to implement compliance programs has led to the production of a standard form of such programs.  The form is reflected in Australian Standard AS 3806, produced by Standards Australia.  No attempt was made by counsel for the applicant to relate to any of the terms of that standard the terms of the undertaking in par 11 of the minute of consent orders.  If such an attempt had been made, it would have become abundantly clear that there was no such resemblance. 

130               The obvious purpose of the undertakings in par 11 of the minute of consent orders is to make the task of the applicant in investigating and detecting any future contraventions of the Trade Practices Act easier.  It is no part of the function of the Court to assist the applicant in that way.  I therefore do not accept the undertakings offered.

Costs

131               I have considered whether I should make the order in par 9 of the minute of consent orders, or whether I should make some other order as to costs, given that the orders I am prepared to make are significantly different from those sought by consent.  In a sense, it is wrong to make the respondent responsible for the costs of the applicant to the degree agreed when the applicant has been unable to establish, either by admissions on the pleadings, or by evidence, a case that would justify the making of most of the orders sought.  In the end, I have decided that I should make the orders sought in relation to costs.  In part, the difficulties that I have had in deciding whether to make the orders sought by consent have arisen from the inadequacy of the respondent’s pleadings.  When both parties are in default to a degree, it is inappropriate to interfere with their choice of the amount of costs to be paid.

Conclusion

132               Ordinarily, if parties to a proceeding approached the Court to make consent orders, and the Court reserves its judgment and then determines that it should not make those orders, but should make different orders, procedural fairness would dictate that notice be given to the parties of the orders proposed to be made and that they be given an opportunity to make further submissions on them.  In the present case, as I have said, the applicant appeared by counsel for the purpose of persuading me to make the orders sought by consent.  Many of the issues that have caused me difficulty were canvassed in the course of argument or were anticipated in counsel’s written submissions.  Counsel for the applicant expressly invited me to make so much of the orders sought by consent as were properly to be made, if I were not disposed to make them all.  I do not think it is necessary to give the applicant a further opportunity to make submissions.  The respondent did not attend, and was not represented at, that hearing.  The orders I do propose to make are well within the ambit of those to which he had consented.  In effect, the orders I propose to make do much to relieve him of obligations he was prepared, for whatever reason, to undertake.  Accordingly, I do not see that his rights have been affected to the extent that I should give him a further opportunity to make submissions.

133               The orders sought by consent included an order granting leave to the applicant to rely in this proceeding on the affidavits filed in proceeding number VG567 of 1997.  I propose to grant such an order.  Otherwise, the orders I make will be limited to those referred to in [45 – 46] (relief from compliance with O 11 r 13(3)), [118] (the declaration), [127] (the injunction) and [131] (costs) of these reasons for judgment.  Otherwise, the application will be dismissed.

 

I certify that the preceding one hundred and thirty-three (133) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gray.

 

 

Associate:

 

Dated:              26 April 2004

 

 

Counsel for the Applicant:	C Scerri QC with M O’Bryan
Solicitor for the Applicant:	Australian Government Solicitor
Counsel for the Respondent:	The respondent did not appear and was not represented
Date of Hearing:	6 May 2003
Date of Judgment:	26 April 2004