FEDERAL COURT OF AUSTRALIA

Nick Scali Limited v Super A-Mart Pty Ltd (No 2) [2011] FCA 1500

In these orders:

(a)    “Commercial” mans the commercial broadcast on television and made available on the websites www.superamart.com and www.youtube.com by the respondent, a copy of which is Exhibit ASJ2 to the affidavit of Anthony John Scali sworn 1 September 2010.

(b)    “Rajah Suite” means the lounge product called the “Rajah” manufactured, imported, offered for sale, sold, advertised, promoted and exhibited in Australia by the applicant.

(c)    “Excellence Suite” means the lounge product called the “Excellence” imported, offered for sale, sold, advertised, promoted and exhibited in Australia by the respondent.

THE COURT ORDERS THAT:

1.    The respondent, by itself, its servants or agents or otherwise howsoever, be permanently restrained from broadcasting, causing to be broadcast, making available or transmitting online, or otherwise causing the Commercial to be viewed by members of the public in Australia and, further, that the respondent take such steps available to it as are necessary to permanently withdraw any permission previously given by it for the broadcast of the Commercial.

2.    The respondent, by itself, its servants or agents or otherwise howsoever, be permanently restrained from representing in trade or commerce, contrary to the fact, that:

(a)    the Excellence Suite is of the same quality or composition as the Rajah Suite;

(b)    the price of the Rajah Suite is more than double the price of the Excellence Suite, despite the two products being of the same quality; and

(c)    the applicant offers to sell its Rajah Suite at a retail price which is excessive given the retail price at which the respondent offers the Excellence Suite given that the two products are of the same quality or composition.

3.    The application, as amended, be otherwise dismissed.

4.    The applicant pay the respondent’s costs thrown away by reason of the amendments to the application and statement of claim made pursuant to leave granted on 20 September 2010.

5.    The costs, if any, occasioned by the vacation of the hearing date on 22 September 2010 be costs in the proceeding.

6.    The respondent pay 80% of the applicant’s costs of the proceeding as taxed or agreed.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

1    On 6 July 2011 I delivered judgment on the question of liability in relation to claims made by the applicant against the respondent under the Trade Practices Act 1974 (Cth) (the Trade Practices Act): Nick Scali Limited v Super A-Mart Pty Ltd [2011] FCA 751.

2    At that time I adjourned the proceeding to 18 July 2011 for the purpose of making directions for the further hearing of the matter on the question of relief and costs. The directions hearing scheduled for 18 July 2011 was subsequently adjourned to 28 July 2011 at the request of the parties. On that day I made directions, as agreed between the parties, for the filing and service of written submissions on the question of relief and costs. The timetable for the filing and service of written submissions was subsequently extended at the request of the parties. The further hearing was listed for 18 October 2011. The parties applied for that listing to be vacated and for the further hearing to be appointed for 14 December 2011.

3    I have been prepared to accommodate the parties in this way in the hope that, with extra time, the issues between the parties on the question of relief and costs might be narrowed, if not resolved by agreement. As matters have transpired, the parties have reached substantial agreement on the orders that should be made. Two matters, however, remain in dispute. The first is whether a declaration should be made concerning the respondent’s contraventions of s 52 of the Trade Practices Act. The second matter is the appropriate order for costs.

Should a declaration be granted?

4    The applicant seeks a declaration in relation to the respondent’s contraventions of s 52 of the Trade Practices Act. The respondent resists the granting of that relief.

5    The power of the Court to make binding declarations of right is expressed in s 21 of the Federal Court of Australia Act 1976 (Cth) (the Federal Court Act). There is no doubt that the Court has power to make such a declaration in relation to conduct that contravenes a statutory provision. Specifically, the Court has power to make such a declaration where conduct has been found to contravene s 52 of the Trade Practices Act. The power can be exercised, in those circumstances, where the applicant for relief is a member of the public and not the relevant Minister or the regulatory authority: Tobacco Institute of Australia Limited v Australian Federation of Consumer Organisations Inc (No 2) (1993) 41 FCR 89 at 99. Proceedings under the Trade Practices Act have a special character involving the protection of the public. This special feature is not diminished because the proceedings for contravention are brought by a competitor whose primary objective may be the protection of private commercial interests: World Series Cricket Pty Ltd v Parish (1977) 16 ALR 181 at 186-187; Dynamic Supplies Pty Limited v Tonnex International Pty Limited (No 2) [2011] FCA 675 at [22].

6    A significant discretionary consideration in relation to the granting of a declaration is whether it will have utility. Such utility may be found, for example, in declaring the basis on which other relief has been granted: Rural Press Limited v Australian Competition and Consumer Commission (2003) 216 CLR 53 at [95]. Such utility may also be found, for example, in recording the Court’s disapproval of particular contravening conduct, especially where no other relief is granted: Tobacco Institute at 100 and 106.

7    In the present case the respondent, at trial, strenuously resisted the contention that the commercial it had caused to be broadcast on television and had made available online, particularly on its own website, constituted conduct that was misleading or deceptive or likely to mislead or deceive or had involved the making of false representations. That legal controversy was determined adversely to the respondent by the judgment given on 6 July 2011 considered in the light of the findings contained in the published reasons for judgment.

8    There is now no dispute between the parties about whether injunctive relief should be granted or about the form of that relief. There will be two injunctions. One injunction will be directed to restraining the respondent from causing the impugned commercial to be broadcast or made available or transmitted online. The second injunction will be more broadly based. It will be directed to restraining the respondent from representing in trade or commerce, contrary to the fact, that:

(a)    the Excellence Suite is of the same quality or composition as the Rajah Suite;

(b)    the price of the Rajah Suite is more than double the price of the Excellence Suite, despite the two products being of the same quality; or

(c)    the applicant offers to sell its Rajah Suite at a retail price which is excessive given the retail price which the respondent offers the Excellence Suite given that the two products are of the same quality or composition.

9    Those prohibitions, so expressed, reflect the findings made in [108]-[109] of the reasons for judgment published on 6 July 2011.

10    The form of the declaration propounded by the applicant is based on the form of the second injunction that will be made. In that form the declaration would declare that the respondent has contravened s 52 of the Trade Practices Act by falsely representing each of the matters set out in sub-paragraphs (a), (b) and (c) of [8] above.

11    In the course of oral argument I expressed my concerns about whether a declaration in that form would be appropriate in any event. One of my concerns was that, in that form, the declaration would not identify the conduct or acts by which the contravening representations had been made.

12    Leaving those concerns to one side for one moment, the form of the declaration that has been propounded underscores the fact that it is no more than a reflection of one of the injunctions that will be granted. Even if the form of such a declaration were to be appropriately modified to identify the specific conduct or acts by which the contravening representations came to be made (namely, by causing the commercial to be broadcast or made available online), such a declaration, in that modified form, would simply reflect a combination of the two injunctions that will be granted. Thus, if a declaration were to be so made, it would provide no greater information to the public than the other relief to be granted, with the result that the public would be no better informed about the conduct that has been found to be unlawful. Members of the public reading the injunctions would realise that they are orders of this Court directed to the respondent. They will understand that those orders must have been made by the Court, for good legal reasons, in proceedings in which the applicant was the moving party and the respondent was the responding party.

13    Furthermore, the making of the injunctions by the Court will carry with it the same disapproval of the respondent’s conduct the subject of those injunctions as would the making of a declaration declaring that conduct to be a contravention of s 52 of the Trade Practices Act.

14    For these reasons I am unable to see any utility in the present case in making a declaration in addition to the two injunctions that will be granted. I am not persuaded, therefore, that in all the circumstances it would be an appropriate exercise of discretion to grant declaratory relief. I therefore refuse to grant that relief.

Costs

15    The applicant seeks an order that the respondent pay its costs. It says that costs should follow the event. Alternatively, it submits that, if the Court considers an apportionment of costs to be warranted, only a small discount should be made (in the order of 15%) to the costs to which it is otherwise entitled as the successful party.

16    The respondent submits that no order for costs should be made. It submits that, properly viewed, each party had equal success and costs should lie where they fall. Alternatively, it submits that, if the Court considers an apportionment of costs to be warranted, the applicant should only be entitled to a small percentage of its costs.

17    The reason for these competing contentions is that the applicant did not succeed on all the claims it brought forward at trial.

18    When the applicant first commenced the proceeding, it claimed that the respondent had contravened the Trade Practices Act:

(a)    by causing the commercial to be broadcast and to be made available or transmitted online;

(b)    by advertising the Excellence Suite on its website by reference to a claim that the suite was approved by AFRDI; and

(c)    by making certain representations at point of sale through the use of placards on display furniture and notice boards.

19    The applicant also relied on the same conduct to advance a case of passing off but, ultimately, this case was not pursued.

20    An expedited hearing was granted in relation to those claims. Shortly before the commencement of that appointed hearing the applicant sought to amend its pleadings by introducing claims based on representations alleged to have been made orally by members of the respondent’s sales staff at various stores. The applicant also sought to amend its pleadings by making other amendments which, as events turned out, had relatively minor significance for the case.

21    On 20 September 2010 I granted leave to make those amendments. In light of the amendments, it was not possible for the case to proceed at the time of the appointed hearing. However, the case could not have proceeded at that time in any event. It had originally been listed by me for hearing on 22 September 2010 with an estimated duration of 1 day. When the matter came before me on 20 September 2010, I was informed that it was anticipated that at least 12 witnesses would be called (including a number of expert witnesses) and that, if the amendments dealing with the alleged oral representations were to be allowed, additional witnesses would need to be called on behalf of the respondent. Therefore, even without the proposed amendments, the case was of a far greater size than had been revealed to me at the time I ordered the original listing to be made.

22    As recorded in the reasons published on 6 July 2011, the applicant succeeded on its case with respect to the commercial; on its case with respect to oral representations made at the respondent’s Benowa store on 10 September 2010; and on one aspect of its case with respect to the AFRDI certification. It is fair to say that the latter claim, although established, was of relatively minor significance in the overall conduct of the case and related to a matter that was rectified by the re-issuing of the relevant AFRDI certification within a matter of days after the proceeding had commenced.

23    The applicant failed on its case with respect to the respondent’s use of its point of sale material and on its case with respect to the oral representations allegedly made at the respondent’s MacGregor, Oxley and Virginia stores.

24    In support of its submissions on costs, the applicant provided a table setting out the times occupied at the hearing by evidence and other procedural matters related to the issues on which it could be said that the applicant and the respondent ultimately enjoyed their respective successes. This table was the subject of a number of criticisms by the respondent. Taking those criticisms into account, the table does provide some assistance in considering how costs should be awarded.

25    For its part, the respondent submits that more assistance is provided by simply referring to the reasons for judgment. There is obvious force in that submission.

26    The parties were not at issue on the general principles that should be applied in exercising the broad discretion conferred by s 43(2) of the Federal Court Act in respect of the awarding of costs.

27    My approach to the exercise of that discretion in the present case is as follows.

28    The applicant’s case was grounded on the proposition that there were significant differences in construction, design and workmanship between its Rajah Suite and the respondent’s Excellence Suite which were material to a consumer’s purchasing decision and which were reflected in the apparent price difference between the competing lounge suites as offered to consumers by the applicant and the respondent, respectively. It was in this setting that the impugned conduct fell to be assessed. The respondent disputed that basal proposition by contesting the existence of a number of differences between the two lounge suites as a matter of fact, as well as contesting the significance of a number of differences in terms of their effect on the purchasing decisions of consumers. The parties each had a measure of success on these matters but, overall, in the face of the respondent’s opposition, the applicant had substantial success and its case prevailed.

29    The misleading or deceptive nature of the respondent’s commercial was fundamental to the applicant’s case. The publication of that commercial, by television broadcast and online, had the potential to cause the greatest harm to the applicant and, concomitantly, to consumer welfare, even though the applicant’s evidence was not sufficient to make good a claim for damages under the Trade Practices Act. Nevertheless, it succeeded in establishing the respondent’s contravening conduct. That event must be reflected in the costs that should be awarded.

30    The same factual case, so far as it concerned differences between the two lounge suites, was fundamental to the applicant’s case based on the respondent’s use of the point of sale materials. But that factual case had to be proved in any event as part of the applicant’s case in respect of the commercial. The applicant’s case with respect to the respondent’s use of the point of sale materials failed because I was not satisfied that those materials made the representations that the applicant had alleged. In my view, that part of the case involved minimal court time. For the purpose of determining costs, the applicant’s claims in that regard are properly to be viewed as ancillary to its case in respect of the commercial. For this reason no apportionment of costs should be made on account of the applicant’s lack of success in respect of the discrete, but relatively narrow, issue thrown up by the respondent’s use of the point of sale materials.

31    The applicant’s case brought on the oral representations is another matter. It was a significant and new element of the applicant’s case introduced by the amendments permitted on 20 September 2010. The nature of the alleged acts relied on in that regard was different in quality to the other representational acts on which the applicant had relied. These acts also related to a number of discrete events involving different persons at different stores at different times. As I noted at [187] of the reasons published on 6 July 2011, although the applicant submitted that the Court should infer that there was a consistent pattern of conduct among the respondent’s sales staff, I declined to draw that inference. The applicant failed to make good its case in respect of most of the alleged events. In my view it is appropriate to make an apportionment of costs on this account.

32    In my view the appropriate award for costs in all the circumstances is that the applicant should have an order for costs in its favour, discounted by 20%, representing the measure of success that the respondent had in its defence.

33    When the amendment application was made on 20 September 2010 I reserved the question of costs generally, but indicated that the respondent should have its costs thrown away by the amendments. That leaves the question of costs occasioned by the vacation of the earlier hearing date. In my view those costs, if any, should simply be part of the costs of the proceeding. The vacation of the earlier hearing date was inevitable, regardless of the amendments sought to the applicant’s pleadings. No submission has been advanced which would require any costs occasioned by the vacation of the hearing appointed for 22 September 2010 to be treated any differently.

Disposition

34    The injunctions, as sought, will be granted. I will make an order for costs on the basis I have indicated, providing, in the event that it is necessary, that the respondent is to have any costs thrown away by reason of the applicant’s amendments to its pleadings pursuant to the leave granted on 20 September 2010.

Associate:

Dated:    23 December 2011