FEDERAL COURT OF AUSTRALIA

 Energizer Australia Pty Ltd v Remington Products Australia Pty Ltd Ltd (No 3)

[2008] FCA 304

TRADE PRACTICES – comparative advertising – contravention of section 52 of the Trade Practices Act 1974 (Cth) – supplemental order sought – power to make supplemental orders

ENERGIZER AUSTRALIA PTY LIMITED ACN 003 539 026 v REMINGTON PRODUCTS AUSTRALIA PTY LIMITED ACN 007 070 573

NSD 2354 OF 2007

MOORE J

11 MARCH 2008

SYDNEY

THE COURT ORDERS THAT:

1.                   In these orders, "Current Varta High Energy Packaging"shall mean packaging in the form of the packaging in which Current High Energy Varta AA and AAA Batteries are supplied in Australia as at the date of these orders with the sticker containing the words “Lasts As Long As Energizer & Duracell".

2.                   The respondent forthwith take all available steps:

(a)     to have removed from public display, by 11 April 2008, all Current Varta High Energy AA or AAA Batteries in Current Varta High Energy Packaging in retail stores to which it has supplied Current Varta High Energy AA or AAA Batteries in Current Varta High Energy Packaging;

(b)     alternatively to sub-paragraph (a), to oversticker (or otherwise obliterate or conceal from view) before 11 April 2008 the sticker on any and all Current Varta High Energy Packaging in so far as it contains the words "Lasts as Long as Energizer & Duracell".

3.                   The respondent pay the applicant's costs of the motion dated 1 February 2008.

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

REASONS FOR JUDGMENT

Introduction

1                     This judgment concerns an application, by way of notice of motion filed 1 February 2008, made by Energizer Australia Pty Ltd for what it characterises as a supplemental order following judgment in proceedings it brought against Remington Products Australia Pty Ltd.  The proceedings involve a contest between two battery manufacturers or suppliers.  Energizer has established that Remington engaged in misleading and deceptive conduct which is proscribed by the Trade Practices Act 1974 (Cth).  Final orders were made on 14 December 2007 and reasons for judgment published on 8 February 2008: Energizer Australia Pty Ltd v Remington Products Australia Pty Ltd [2008] FCA 58.  The misleading and deceptive conduct concerned statements made on the packaging of batteries sold by Remington (Varta High Energy AA and AAA batteries) and statements in promotional material (billboards and in-store promotional material).  At the heart of the unlawful conduct was a claim by Remington that certain of its Varta High Energy batteries lasted as long as Energizer batteries when this was only true of a limited class of batteries manufactured and sold by Energizer.

History of the litigation

2                     It is desirable to explain the context in which the present application has been made and I repeat an earlier description of the history of litigation. On 28 November 2007, Energizer approached the duty judge who granted leave to Energizer to file the application, statement of claim and affidavits in support and made the matter returnable before the duty judge at 2.15pm on 30 November 2007 for the hearing of the claim for interlocutory relief.

3                     On 30 November 2007, Remington informed the Court that it was not ready to proceed with an interlocutory hearing on that day and was not in a position to do so the following Wednesday or Friday or “for some little time to come”.  Remingtonindicated that it wanted an urgent final hearing of the matter.  The matter was adjourned to 6 December 2007 on the basis that the applicant would apply to have the matter heard on that day.  The matter was then allocated to my docket.

4                     On Thursday, 6 December 2007, the matter came before me.  Energizer sought to commence the hearing of its interlocutory application.  Remington opposed this course of action on the basis that it was not ready to proceed and could not be ready to proceed until Monday, 10 December 2007, at the earliest.  Remington again indicated its willingness to agree to an early final hearing.  I then fixed the hearing of the interlocutory application for the following day. 

5                     The interlocutory hearing commenced on 7 December 2007.  During the course of the hearing, Remington offered to undertake to remove one of the contentious forms of advertising, namely the billboards, within a period of 5 days but only if Energizer desisted from seeking any further interlocutory relief.  Energizer did not accept that offer. The proceedings did not finish on that day and were adjourned for further hearing to the next available court date, namely 14 December 2007.

6                     Shortly after the hearing for interlocutory injunctive relief resumed on 14 December 2007, I invited the parties to consider whether the interlocutory hearing might transform into a final hearing on the basis that I would make final orders that day disposing of all issues between the parties.  As I explained in my earlier judgment of 8 February 2008, I suggested this course for several reasons (at [6]):

First, I doubted, as I indicated to the parties, that further additional evidence would be necessary to enable the resolution of the issues on a final basis.  Secondly, I had formed the preliminary view that on the evidence presented to that point, the respondent was able to make claims about the comparative performance of its batteries of the type alluded to in the advertising and other promotional material.  However, I had also formed the preliminary view that the form of advertising and promotion actually used by the respondent to convey the comparative performance of its batteries was misleading and deceptive.  I communicated at least aspects of these views to the parties.  In the result, both the applicant and the respondent agreed to the transformation of the proceedings, with the applicant doing so on the basis that it accepted that the respondent could make a comparison between its batteries and one of the types of batteries made and sold by the applicant.

7                     The hearing on 14 December 2007 generally took the form of the parties presenting several versions of draft orders and making submissions in support of, or in opposition to, each of the proposed orders, either absolutely or in respect of their specific terms.    

8                     It is necessary to note several features of the debate that occurred on 14 December 2007.  The first is that one version of the orders sought by Energizer proposed that the following orders be made:

11.       Order that on and from 19 December 2007 the Respondent use its best endeavours to remove the sticker containing the words "Lasts As Long As Energizer & Duracell" or oversticker that sticker on all Current Varta High Energy Packaging located in retail stores and in any event ensure that by no later than 29 January 2008 all such stickers on such stock are removed or overstickered.

12.       Order that on and from 19 December 2007 the Respondent use its best endeavours to remove or oversticker all Current Varta High Energy Promotional materials wherever located and in any event ensure that by no later than 29 January 2008 all materials are removed or overstickered.

9                     I declined to make proposed order 11.  I will return shortly to the events of 14 December 2007 that lead to my intimation that I would not make that order.  However, it is convenient to set out the reasons I gave on 8 February 2008 for refusing to do so.  I said (at [23]):

I declined to make the orders concerning the over-sticking for essentially two reasons.  The first was that it appeared to me potentially impracticable to require that to be done in what would have effectively been a period commencing the week before Christmas. The second was that I had formed the view that the proceedings could have been brought by the applicant earlier and it would, in all the circumstances, have been unjust to impose on the respondent the burden of complying with the order.  In other circumstances it would have been an appropriate order, particularly given that I had gained the impression from the evidence (which is mainly unnecessary to detail) that the respondent had made a conscious decision (aided by legal advice) to steer a line of saying as little as possible about the basis of the comparison on which its promotion and advertising was based, even if in doing so, there was a real and obvious risk of contravening the Act.  The fact that the respondent had embarked upon this course was starkly illustrated by the fact that it did not follow the form of advertising and promotion used in the United States of America. Indeed, in advertising and promoting Varta High Energy batteries in the United States, the respondent fairly clearly revealed to consumers the nature of the comparison (namely that Varta High Energy batteries last as long as Energizer Max batteries), while in Australia, the respondent had prepared art work (which it later decided not to adopt) for stickers which in substance replicated the United States’ model for advertising and promoting Varta High Energy batteries.

10                  At the hearing on 14 December 2007, the discussion about whether proposed order 11 (set out at [8] above) should be made was complicated by confusion as to whether certain submissions by Energizer related to proposed order 11 or to proposed order 12.  The discussion was also complicated by a suggestion made at one stage (either by me, counsel for Remington or both) that future events which might arise once orders were made could be accommodated by the provision of liberty to apply.  A little later I discussed with counsel for Remington whether an order requiring overstickering of stock in retail stores should be made:

HIS HONOUR:   I must say, a way or the way in fact I’m presently inclined to deal with this is to make no order (11) but to indicate now as I probably have already but I repeat, that there seems to me to be a strong argument that the packaging is misleading and deceptive.  Now, if your client wishes to embark on the process of over-stickering, presently that would be a matter for it.  If it makes a decision not to embark upon that process of over-stickering, then I would entertain any application that might be made during January in exercise of the liberty to apply.

MR HUTLEY:   Can I – I’m sorry, your Honour, I do apologise; was I cutting across your Honour?  With respect, that is going to be a recipe for your Honour being badgered by application after application.  Over-stickering where – total, complete, partial, some, what have you.  The difficulty is, your Honour, is this is ‑ ‑ ‑ 

HIS HONOUR:   I’m indicating I’m not making an order, Mr Hutley, but I’m also indicating that it would be a matter for your client to make a commercial decision about whether it wished to embark upon the process of over-stickering or not.  If it made a decision not to, then it may be necessary for me to revisit the question, that’s all.

MR HUTLEY:   If your Honour pleases. 

11                  Thereafter counsel for Energizer referred to evidence concerning the length of time it would take to overstick all the offending stickers if such an order was made.  I said:

HIS HONOUR:   Well, I’ve heard evidence about it today, Mr Bannon.  I’ve indicated I don’t propose to make such an order.  I’ve indicated additionally that it’s really a matter at the moment for Mr Hutley’s client to make a commercial decision whether it wishes to engage in that process or not.  If it transpires that its decision is not to, then if need be the liberty to apply can be exercised.

12                  The question of whether liberty to apply should be reserved surfaced again shortly thereafter:

MR HUTLEY:   Is your Honour making final orders today?  I’m just not quite sure any more where we are. 

HIS HONOUR:   Well, as soon as I make an order liberty to apply, which I understood you to invited me to do – it would probably follow from that that I’m not making final orders.

and resurfaced very shortly after this exchange:

MR HUTLEY:   Your Honour has indicated that your Honour is reserving liberty to apply to conduct a case about the over-stickering.  That means one can’t have a final determination of the issues.  I confess, your Honour, I thought in effect your Honour’s proposed orders disposed of everything but it now appears ‑ ‑ ‑ 

HIS HONOUR:   I think you’re right, Mr Hutley, and perhaps I shouldn’t have said that because both of you were proceeding on the assumption that the orders I would make would be final at least insofar as they are dealing with the subject matter of the orders.

MR HUTLEY:   Yes.

MR BANNON:   We are still agreeable to that course, your Honour.

MR HUTLEY:   Your Honour appreciates the point.

MR BANNON:   But that would rather suggest that our restocking order, consideration there, should be revised.

HIS HONOUR:   Well, I understand what you’re saying, Mr Bannon, but I think in the circumstances, having regard to the difficulties referred to in earlier evidence having regard to the time of year and the time at which these proceedings were brought, I won’t make an order along the lines of order (11) in the short minutes that you have handed up this morning, namely the order relating to the over-sticking of stock in store.

The remarks at the end of this passage were intended to indicate a conclusion about whether an order should be made in the terms of proposed order 11 at the time I was being asked to make it.  I should note that it was clear from remarks made by counsel for Energizer at this hearing that his client understood that if such an order was not made, potentially there would be stock in retail stores with the misleading sticker for some months to come, that is, stock which had not been overstickered with a new sticker which was not misleading.

13                  I should also note that to the extent that it was thought that granting liberty to apply would affect the finality of the orders, this was not correct.  As Kenny J observed in McDermott v Richmond Sales Pty Ltd (in liquidation) [2006] FCA 248 at [22]:

Moreover, it is settled law that orders may be final even though the Court reserves liberty to apply: see, e.g., Abigroup Limited v Abignano (1992) 39 FCR 74 at 87-88 per Lockhart, Morling and Gummow JJ; Comcare v Grimes (1994) 50 FCR 60 at 61-62 per Wilcox J; Maritime Union of Australia v Geraldton Port Authority (No 3) (2001) 106 IR 119 at 122-125 per Nicholson J; and Nicholson v Nicholson [1974] 2 NSWLR 59 at 63 per Jenkyn J.  These cases reveal that liberty to apply does not render a final order any less final: see further Neil J Williams, Civil Procedure at [I 59.01.20] and the cases cited therein. 

Events surrounding compliance with orders

14                  Since the orders were made on 14 December 2007, Remington has embarked on a programme of overstickering existing stock in retail stores with a new sticker which I presently assume is not misleading.  While Energizer does not suggest this is inappropriate, it complains about the slow speed at which it is happening and the consequential effect of stock remaining in retail stores containing the earlier misleading sticker.  It is for this reason it seeks what it characterises as the supplemental order.  Having regard to that evidence, I am satisfied that the programme of overstickering (being undertaken by Alliance Marketing Corporation Pty Ltd on behalf of Remington) does not have, as an objective, ensuring that all battery packets with the misleading sticker would be overstickered as soon as possible.  It is more a question of the overstickering being done as and when it is convenient, but no more.  I am also satisfied from the evidence that although there can be no precision about it, there are significant numbers, at least in the tens of thousands and perhaps hundreds of thousands, of packets in retail outlets with the misleading sticker and they are likely to remain in the marketplace for several more months though obviously in diminishing numbers as they are sold.  One difficulty in being precise about the number is that there is, in a sense, a probably unquantifiable circulation to and within retail organisations of batteries packaged with the old sticker, batteries packaged with the old sticker which has been overstickered in the retail outlets and batteries in packages overstickered by Remington before distribution.  I should note that it was part of Remington's case, in resisting the making of the supplemental order, that when I declined to make order 11 on 14 December 2007, there was evidence before the court (from Energizer) that it could take more than six months, and in some cases up to a year after launch, for old stock to be sold through at retail outlets.

15                  It is necessary to refer to the approach adopted by Remington in informing retailers about the orders.  The clear implication of the orders made on 14 December 2007, as ultimately articulated in the reasons published on 8 February 2008, was that the dissemination to the public of the packaging containing the old sticker involved misleading or deceptive conduct proscribed by the Act.  On 19 December 2007, Remington sent to, I infer, all of its retailers an e-mail stating that "Varta is pleased to make the attached announcement".  Accompanying the e-mail was a document illustrating the new sticker which does not contain the vice evident in the old sticker found to have been misleading.  The document said that Varta would sell its High Energy AA and AAA batteries to retailers with the new sticker from 22 January 2008.  The document also said that Varta would continue to sell its Varta High Energy AA and AAA batteries (which were made in Germany) bearing the old sticker.  The document noted that for a period of time after 22 January 2008 it was likely that Varta batteries with both the new sticker and the old sticker would be sold in retail stores until stock with the old sticker was eventually sold through.

16                  The document continued:

The use of the new sticker has come about as a result of a legal challenge by Energizer Australia Pty Ltd.  VARTA is very pleased to be able to state the fact that VARTA High Energy AA and AAA batteries made in Germany "LAST AS LONG AS ENERGIZER MAX AND DURACELL COPPERTOP".

As an exercise in marketing, this document, and in particular the passage just quoted, may be masterful in putting a positive gloss on the orders made on 14 December 2007.  It probably conveyed to at least some recipients that the step being taken by Remington of adopting the new labelling was one that Remington welcomed and was seen by it to be a positive step forward.  What this communication singularly failed to inform the recipients was that the new labelling was required by Court order which, by necessary implication from the orders made on 14 December 2007, flowed from a finding of this Court that the packaging with the old sticker was misleading and that to offer packaging with the old sticker for sale ultimately to the public was misleading and deceptive conduct in contravention of trade practices legislation.

17                  It is true that when the e-mail was sent, Remington did not have the benefit of my reasons published on 8 February 2008.  However, it is inconceivable, in my opinion, that Remington did not understand (doubtless with the benefit of legal advice) from the orders (as well as from the discussion at the hearing on 14 December 2007) that a finding to this effect had been made.  Moreover, a legal obligation on Remington and retailers not to engage in misleading and deceptive conduct flows directly from the Act.  It is true that no order was made expressly requiring Remington to do anything about its packaging in relation to packets of batteries already in retail stores (and putting to one side an argument advanced by Energizer in contempt proceedings about the legal effect of one of the orders made on 14 December 2007) and that the retail stores were not themselves parties to those proceedings.  But neither of these facts lessen the legal effect of the express and unqualified proscription of misleading and deceptive conduct by s 52 of the Act which requires all corporations to act in a particular way (as to this issue more generally see Australian Competition and Consumer Commission v Dataline.Net.Au Pty Ltd [2007] FCAFC 146).

18                  To similar disingenuous effect as the 19 December 2007 announcement was a letter dated 24 January 2008 from Remington's solicitors forwarded by Remington to relevant retailers, including Coles (this retail chain which was, by a considerable margin, the largest retailer of Varta batteries) on the same day.  The letter noted the legal action by Energizer, as well as the order requiring the fixing of a new sticker on all stock leaving Remington's warehouse as of 23 January 2008 and then stated:

The Court did not make any orders restraining any retailer (including Coles) from selling Varta HIGH ENERGY batteries that have the old sticker on them.

This statement is true.  No such orders were made.  However, it is false to the extent that it implies (and in my view it does) that such an order was sought or even might have been able to be made against Coles in the proceedings resulting in the orders of 14 December 2007.  Coles was not a party to those proceedings.  Coles, and any other retailer, remains at risk of proceedings seeking such an order of the type referred to in the letter.

Relief sought -supplemental order?

19                  Remington maintains the position that the order sought by Energizer is not a supplemental order.  The order is in these terms:

1.         Order that the Respondent:

(a)       forthwith take all available and lawful steps:

(i)        to have removed from public display, by such date to be determined by the Court during February 2008, all Current Varta High Energy AA or AAA Batteries in Current Varta High Energy Packaging in retail stores to which it has supplied Current Varta High Energy AA or AAA Batteries in Current Varta High Energy Packaging;

(ii)       alternatively to sub-paragraph (i), to oversticker (or other obliterate or conceal from view) before a date to be determined by the Court during February 2008 the sticker on any and all Current Varta High Energy Packaging in so far as it contains the words "Lasts as Long as Energizer & Duracell";

(b)       on or before a date to be determined by the Court during February 2008 send (by facsimile or courier) in the form of annexure A to the retailers to which it any time in the period from 1 August 2007 to date supplied Current Varta High Energy AA or AAA Batteries in Current Varta High Energy Packaging;

(d)       on or before a date to be determined by the Court during February 2008 file and serve an affidavit made by an officer with knowledge of and fully detailing the steps taken by the Respondent pursuant to paragraphs 1(a) to (b) above.

As I understand the submission of Remington, an order is a supplemental order (in the sense used in the leading authority of Caboolture Park Shopping Centre Pty Ltd (In Liquidation) v White Industries (Qld) Pty Ltd (1993) 45 FCR 224) only if the order is made when there has been a change in circumstances since the original final orders were made.  The reasons of the Full Court in Caboolture do not support that qualification.  At its highest, the Full Court's citation with approval (at 234-235) of Lord Lindley's speech in Preston Banking Company v William Allsup & Sons (1895) 1 Ch 141 at 143-144 would suggest that a supplemental order can be made if circumstances had occurred since the original final orders were made which rendered a supplemental order necessary.  In the present case, I have no hesitation in finding that such circumstances have arisen.  Since the original orders were made in this matter, Remington has embarked on a programme of overstickering but without the objective of ensuring it occurs as soon as possible.  At the same time it has communicated with retailers in a way which, in my opinion, misrepresented (at the least by failing to fully explain) the reason the orders were made on 14 December 2007 and endeavoured to create an unjustified measure of comfort for the retailers if they continued to display and sell batteries in the packaging that has been found to be misleading.

20                  Order 5 made on 14 December 2007 was:

Order that on and from 23 January 2008 the Respondent whether by its servants or agents or otherwise be permanently restrained from making any representation in trade or commerce that or to the effect that Current Varta High Energy AA or AAA Batteries last as long as Energizer or Duracell.

One submission made by Remington was that it was necessary to construe order 5 and if, as Energizer contends, it required the overstickering of stock in retail outlets, the supplemental order sought by Energizer could not be made as a matter of power.  For my part, I do not see how this is so.  While it is probably undesirable for a Court to make orders with overlapping effect, I am not aware of any authority that denies the existence of power to do so.  It is not necessary, in my opinion, to construe order 5 to determine whether a supplemental order should be made.

21                  I should note that I did not make the several orders on 14 December 2007 and then a further order that Energizer's application "otherwise be dismissed".  The matter, however, proceeded on 14 December 2007 on the basis that Energizer would be able to pursue that part of its claim which claimed damages for Remington's conduct. 

Whether the order should be made

22                  Plainly there is a need for finality in litigation.  That overarching principle is well settled, reflected in many legal principles and serves an obvious and important purpose.  However, this case is unusual.  I adopted a course, with the agreement of the parties, designed to fast track the resolution of the dispute between them.  Regrettably, it has had the result of fomenting further litigation, manifest by Energizer's notice of motion of 1 February 2008 as well as contempt proceedings brought by Energizer which are in the docket of another judge. 

23                  However, in adopting the course I did on 14 December 2007, many issues needed to be addressed by counsel and considered by me in a comparatively short time frame.  Had I taken the course I originally discussed with counsel for Remington but was then persuaded not to follow, I would have expressly granted liberty to apply to the parties (in practical terms, to Energizer) to approach the Court to further consider whether I should make an order to substantially the same effect as order 11, with knowledge of what Remington had done in the intervening period to ameliorate the effect of its decision to use packaging which, at the time that decision was made, might reasonably have been thought to be misleading. 

24                  Having concluded that I have power to make the supplemental order sought by Energizer, the only question is whether as a matter of discretion I should make it.  Having regard to the likelihood that there will be misleading packaging in the market place for several months if Remington is not compelled to overstick all packets with the misleading sticker expeditiously, and also having regard to Remington's conduct since the orders were made (discussed earlier in these reasons), I have concluded that the supplemental order should be made.

25                  There was an issue concerning the length of time it would take for Remington to comply with the order proposed by Energizer and how that time frame should be reflected in the order.  Energizer pointed to earlier affidavit evidence of Remington that it would take four weeks to complete the process.  Remington has updated this evidence.  It was that 90 to 95% of stock in Coles' stores had been overstickered, although no estimate was given as to how long it would take to oversticker all Coles' stock, it would take three to five weeks to oversticker stock displayed in Bunnings' stores and up to four weeks and eight weeks to oversticker stock in independent electrical stores in metropolitan and non-metropolitan areas respectively.  However, compliance with that part of the order sought concerning overstickering (which I propose to make) presents Remington with the alternative of making whatever commercial arrangements it wishes with retailers to retrieve stock with the misleading sticker.  In my opinion, a month is adequate for Remington to either oversticker all stock with the misleading sticker or to take such steps as may be available to it to retrieve stock which cannot be overstickered.  I do not think it is appropriate to make an order requiring Remington to communicate with the retailers in the terms proposed by Energizer which specified how Remington would achieve the results required by the principal order.  The method by which Remington goes about complying with the order is a matter for it.

26                  I conclude by repeating an observation in the reasons for judgment published on 8 February 2008 quoted earlier.  Remington made a conscious decision (aided by legal advice) to steer a line of saying as little as possible about the basis of the comparison on which its promotion and advertising was based, even if in doing so, there was a real and obvious risk of contravening the Act.  The fact that Remington had embarked upon this course was starkly illustrated by the fact that it did not follow the form of advertising and promotion used in the United States of America.  Remington prepared art work for use in Australia (which it later decided not to adopt) which in substance replicated the United States’ model for advertising and promoting Varta High Energy batteries and clearly revealed to consumers the nature of the comparison. The packaging Remington actually adopted, in contrast, did not reveal the nature of the comparison.

27                  Energizer should have its costs of this application.

Associate:

Dated:         11 March 2008