FEDERAL COURT OF AUSTRALIA

SC Johnson & Son Pty Limited v Reckitt Benckiser (Australia) Pty Limited (No 2) [2012] FCA 1362

THE COURT:

1.    DECLARES that by its packaging and sale of its New NaturGard Refill (as depicted in Annexure A to these orders) the respondent, in trade or commerce, has represented, contrary to the fact, that part of the active ingredients of that product is natural and thereby has engaged in conduct that is misleading or deceptive or is likely to mislead or deceive in contravention of section 18 of the Australian Consumer Law in Schedule 2 of the Competition and Consumer Act 2010 (Cth).

2.    ORDERS that the respondent pay 50% of the applicant’s costs as agreed or assessed.

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

ANNEXURE A

REASONS FOR JUDGMENT

(REVISED FROM TRANSCRIPT)

1    On 15 November 2012 I published my reasons for judgment in which I found that the respondent had contravened s 18 of Sch 2 of the Competition and Consumer Act 2010 (Cth) (the Australian Consumer Law) by representing, by means of packaging, that a refill (referred to as the first version of the New NaturGard Refill) to be used in its automatic indoor insect control systems (AIIC systems) contained active ingredients, some part of which was natural: SC Johnson & Son Pty Limited v Reckitt Benckiser (Australia) Pty Limited [2012] FCA 1266. The matter is now before me to determine the form of final relief that should be granted as well as the question of costs. In that latter respect I have already expressed a provisional view that the applicant should have 50% of its costs.

2    The parties have provided written outlines of submissions and also presented oral arguments. The applicant seeks both declaratory and injunctive relief. It is content with the order for costs I have provisionally proposed. The injunctive relief it seeks has two aspects. The first is that the respondent be restrained from selling, offering for sale or promoting a refill for its AIIC systems by reference to the words "90% natural ingredients" or similar words regarding the natural ingredients in the refill without including a statement in close proximity and of equal prominence to those words that identifies the proportion of the synthetic ingredients present in the refill.

3    The second aspect is that an order should be made requiring the respondent to either recall from sale any remaining units of the first version of the New NaturGard Refill or amend the packaging of the those products to bring them into line with the requirements of the first injunction it seeks.

4    The applicant submits that both forms of injunction are warranted in light of my findings in [136] of the reasons. It submits that in circumstances where the Court has found that aspects of the product's packaging are likely to mislead or deceive consumers, the Court should make orders that require all stocks of the product to be recalled or the packaging of the product to be amended so that the consequences of the contravention are contained to the extent that that is possible. It submits that, if the number of the contravening refills is substantial, considerations of consumer protection make a mandatory injunction all the more important. In its written submissions it also submits that, correspondingly, if the number of such products is not substantial the burden on the contravener is less than it might otherwise be. I should say at once that I am unable to see how the second proposition follows from the first, and I doubt that it is valid in any event. There is no evidence before me that makes clear the burden that would be placed upon the respondent by making the mandatory injunction that the applicant seeks. In a sense the applicant is as well-placed as the respondent to adduce such evidence.

5    I do, however, have before me evidence given by Mr Tedesco, the respondent's Marketing Director, that the contravening refills were sold to the trade in June, July and August 2012. As at 8 October 2012 he was able to say that approximately 50% of the contravening refills were still available in the market but that the great majority of them were expected to have been sold by November 2012. No additional or more accurate information has been placed before the Court.

6    The respondent submits that the relief to be granted to the applicant should be confined to a declaration respecting its contravention. It submits that injunctions would be inappropriate. It also submits that each party should bear its own costs of the proceeding.

7    The respondent submits that an injunction restraining the further sale or promotion of the contravening product would be both unnecessary and inappropriate given that, on the evidence, no more refills in the packaging of the first version of the New NaturGard Refill have been manufactured and there is no risk of further contravention in this regard including by way of inadvertent distribution. It submits that the case for granting a mandatory injunction for product recall or packaging amendment is not justified. It submits that the contravening conduct ended before a letter of demand was received from the applicant and that, on the evidence, refills in the form of the impugned packaging have all but disappeared from the marketplace. In those circumstances it submits that to require it to search for what is likely to be a tiny number of cans, if any, in order to recall or amend packaging would be out of proportion to any benefit to be obtained and would have the effect of punishing the respondent for the contravention rather than serving any legitimate public purpose of preventing further misleading conduct. The respondent also points to the fact that the order is impractical because retailers, who now own these products, may decline to cooperate.

8    On the question of costs, the respondent submits that, while the applicant can be seen to have had success on the case it brought, it failed on its “primary claims” and those claims occupied substantially all of the hearing and of the documentary evidence. It points to the fact that the applicant's letter of demand did not make any demand in relation to the New NaturGard Refill and that the second version of the refill had already been adopted. In my view that submission proceeds on a misreading or misunderstanding of the applicant's letter of demand. However, the evidence does suggest that the second version of the New NaturGard Refill had been adopted and was being marketed by the time the applicant's letter of demand had been received. The respondent also submits that the first version of the New NaturGard Refill was not at the forefront of the applicant's case. In my view the first version of the New NaturGard Refill was integral to the applicant's case as presented.

9    The respondent also disagrees with the form of the declaration sought by the applicant. It proposes a declaration in more general terms than that proposed by the applicant. The form of the declaration that the applicant seeks makes express reference to the respondent having "represented, contrary to the fact, that part of the active ingredients of that product is natural". The respondent submits that this adds nothing to the effect of the declaration but may convey the impression that the Court has found that the representation would have been conveyed to every person who encountered the product. It submits that the Court found that at least consumers who were “engaged” with the product would have seen the statement on the back of the refill can concerning the percentage of synthetic active ingredients it contained. Thus it submits that only a limited group of consumers has been found to have been misled or deceived or to be in danger of being misled or deceived.

Consideration

10    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). 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 18 of the Australian Consumer Law. Proceedings involving contravention of the Australian Consumer Law have a special character because they involve 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 its own 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]; Nick Scali Limited v Super A-Mart Pty Ltd (No 2) [2011] FCA 1500 at [5]. In Nick Scali I observed (at [6]) that:

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.

11    Here the parties are at least in agreement that it is appropriate that a declaration should be made. In my view that agreement is well-based. The applicant advanced claims which covered a broader range of conduct than was found to be contravening. In a case where only part of that conduct has been found to be contravening, there is utility in a declaration being made to identify with specificity the conduct that has been found to be contravening.

12    In my view, the making of a declaration would also have utility in the present case in recording the Court’s disapproval of the respondent’s conduct. I cannot help but think that the respondent’s deployment of the contravening packaging for the first version of the New NaturGard Refill was opportunistic, knowing, at the very least, that there must have been a significant chance that purchasers would regard the “90% statement” as referable to at least part of the active ingredients of the product. The respondent should be astute to avoid repetition of this conduct or to avoid any similar contravening conduct.

13    As I have noted, the significant matter of dispute between the parties on the question of declaratory relief is the form of the declaration that should be made. In my view, the form of declaration proposed by the applicant achieves more closely the utility in granting a declaration in the present case because it is more specific. The form of the declaration proposed by the respondent merely informs the public that misleading or deceptive conduct has occurred by the sale of the contravening product without stating why the respondent’s conduct had that character. In my view both as a matter of form and as a matter of utility, it is important that the declaration make explicit why the respondent’s conduct contravenes s 18 of the Australian Consumer Law. I should add that I do not think that the form of the declaration should have the time limitations that the respondent proposes.

14    In connection with whether an injunction should be granted, it is convenient for me to repeat some observations I made in Dynamic Supplies at [23]:

The special character of proceedings under the Trade Practices Act is also relevant to the question of whether injunctive relief should be granted. The statutory injunction for which s 80 of the Trade Practices Act provides is not one that is limited by the characteristics of the injunction developed by courts of equity. Rather, it is a modification of that remedy, although traditional equitable principles may still assist in informing the Court how the discretion to grant injunctive relief might best be exercised in particular circumstances: Ricegrowers’ Co-Operative Limited v Howling Success Australia Pty Limited (1987) ATPR ¶ 40-778 at 48,492; ICI Australia Operations Pty Limited v Trade Practices Commission (1992) 38 FCR 248 at 256-257 and 263-264. Section 80 itself recognises that this form of remedy can be granted, for example, whether or not it appears to the Court that a person intends to engage again, or to continue to engage, in contravening conduct or whether or not there is imminent danger of substantial damage to any person because of the contravening conduct: see s 80(4)(a) and (c). Such relief can be granted to deter future similar conduct: ICI at [268]. Such relief can also be granted to mark the Court’s disapproval of particular conduct: Trade Practices Commission v Mobil Oil Australia Ltd (1985) 4 FCR 296 at 300; Australian Competition and Consumer Commission v 4WD Systems Pty Ltd (2003) 200 ALR 491 at [217].

15    It seems to me that, in the present case, a reason for granting a prohibitory injunction would be to mark the Court’s disapproval of the conduct of the respondent.

16    That said, I am satisfied, on the evidence, that the respondent would not repeat its conduct by supplying the New NaturGard Refill in the contravening packaging.

17    If I were persuaded that a prohibitory injunction should be granted, I would limit it to restraining the respondent from supplying the New NaturGard Refill in the form of packaging which I have found to represent a contravention of the Australian Consumer Law. I do not consider that it is appropriate that the Court be prescriptive in relation to the form of packaging that the respondent should adopt in the specific way that the applicant seeks. Although no specific argument was addressed on this point, it seems to me that the prescriptive qualification to the injunction that is sought by the applicant has real potential to foment further dispute. That leaves the Court’s disapproval of the respondent’s conduct as constituting the only substantial basis on which a prohibitory injunction should be made. However, the Court’s disapproval of the respondent’s conduct will have been satisfied by the making of the declaration that I propose to make. Therefore, I do not propose to grant a prohibitory injunction.

18    On balance, I am not satisfied that it would be appropriate to grant the mandatory injunction that the applicant seeks for product recall or repackaging. I have found this to be the most difficult part of the present application to decide. Overall, however, I accept the respondent’s submissions. Although the evidence before me is not specific, I would understand Mr Tedesco’s evidence at trial to have been that, by far, most of the contravening product would have been sold by the beginning of November. Accepting the evidence to be to that effect, I entertain significant doubts whether granting the mandatory relief that the applicant seeks will have utility. Once again, the applicant was as equally placed as the respondent to adduce evidence on that question. Such an order would also have the potential to work great inconvenience to parties who are not before the Court. In oral submissions, it was suggested by the applicant that the respondent could seek to place demands upon or make requests to the major retailers, but the mandatory injunction which the applicant seeks is not limited to products held by major retailers. It would extend to all retailers of the respondent’s products. For a mandatory injunction to have efficacy, it would require the cooperation of all retailers. I hold doubts that, for practical reasons, significant assistance would be forthcoming. In all the circumstances, therefore, I decline to grant the mandatory injunctive relief that is sought.

19    As to the question of costs, I am not persuaded by the respondent’s arguments. It actively sought to defend its position in relation to the contravening packaging and it has failed. The applicant was well-justified in claiming relief in respect of that packaging and it has succeeded. The appropriate order is that the respondent should pay 50% of the applicant’s costs.

Associate:

Dated:    30 November 2012