A.C.I Australia Ltd v Union Kraft Pty Ltd

[1990] FCA 65

C A T C H W O R D S

TRADE PRACTICES - interlocutory injunction - rnisleadiilg and deceptive conduct - misleading description of flammability index - consideration of what constitutes a prima facie case

- inconsistent independent testing of material - matters

taken into account in balance of convenience.

Trade Practices Act 1974, ss.8D, 52 and 53

ACI Australia Limited

v.   Union Kraft Pty Ltd

Qld G10 of 1990

PINCUS J .

BRISBANE

28 FEBRUARY 1990

I

IN THE FEDERAL COURT OF AUSTRALIA - )

QUEENSLAND DISTRICT REGISTRY	)	QLD G10 of 1990
GENERAL DIVISION	)

BETWEEN: ACI AUSTRALIA LIMITED

Applicant

AND: UNION KRAFT PTY LTD

Respondent

MINUTES OF ORDER

JUDGE MAKING ORDER:  PINCUS J .

DATE OF ORDER:	1 MARCH 1990
WHERE MADE:	BRISBANE
UPON

The applicant by its counsel undertaking to abide by any order that the court or a judge may make as to damages in case the Court or a judge shall hereafter be of opinion that the respondent shall have sustained any damages by reason of this order,

THE COURT ORDERS THAT: 

.

l.

Pending trial, or further-earlier order, th&

respondent,.by itself, its servants, agents,
workmen or otherwise howsoever be restrained until
further order from:

(a)	representing that its products Bar-Foil 533, 536 and 539 or any of them are suitable for use in areas where a flammability index not greater than 5 is required;
(b)	selling, offering for sale or supplying for the purposes of sale Bar-Foil 533, 536 and 539 as being suitable for use in applications where such an index is required.

The operation of the orders contained in paragraph
1 be suspended for 1 month from the date of this
order.

2.

The applicant file and serve an amended application and statement of claim by 15 March 1990.

3.

The respondent file and serve a defence by 29 March 1990.

4.

The applicant file and serve a reply by 5 April 1990.

5.

Discovery on oath be completed by the respondent and the applicant by 19 April 1990.

6 .

Inspection be completed by the respondent and the applicant by 26 April 1990.

7.

Trial of this action be on affidavit.

8 .

The applicant's affidavits be filed and served on or before 10 May 1990.

9.

The respondent's affidavits be filed on or before

24 May 1990.

10.

The applicant's affidavits in reply be filed and served on or before 31 May 1990.

11.

The applicant's costs of and incidental to the hearing before me on 8 February 1990, 21 February 1990, 28 February 1990 and 1 March 1990 be costs in the proceedings provided that there shall be no costs as to the purchases and tests and evidence relating to the purchases and tests, being test numbers 3 and 4 in the Flowchart marked as Exhibit 9.

12.

The respondent pay the applicant's costs occasioned
by producing the witness Zel Trojko for
cross-examination on 8 February 1990.

13.

The proceedings be set down for trial on a:date to

be determined by the Registrar on his beingx-
satisfied that the matter is ready.to be heard.

NOTE :	Settlement and entry of orders is dealt with in
-
Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA	- )
QUEENSLAND DISTRICT REGISTRY	)  QLD G10 of 1990
GENERAL DIVISION	)

BETWEEN: ACI AUSTRALIA LIMITED

Applicant

AND: UNION KRAFT PTY LTD

Respondent

PINCUS J . 28 FEBRUARY 1990

REASONS FOR JUDGMENT

This is a motion for an interlocutory injunction to restrain the respondent from representing that certain sarking is suitable for use where a "flammability index" not greater than 5 is required, and from representing that such sarking has a flammability index of less than 5.

The applicant and the .respondent are competi-tors in the sarking business, the applicant being a much bigger manufacturer than the respondent. Sarking is reflective foil material which is used in, among other applications, building; one sees it fixed, in the course of building operations, between inner and outer skins of a building and also just below the roof.

The applicant's claims are two. First of all, it says that, pending the trial, the respondent should not be allowed to say that "Bar-Foil" reflective foil insulation, identified as bearing numbers 533, 536 and 539, is "guaranteed to retain a flammability index number of less than five". The respondent is prepared to give an undertaking about that, so that this part of the application is no longer in dispute; however, the respondent's preparedness to give that undertaking bears upon the question of what should be done with the rest of the application.

Secondly, the applicant complains about labels or notices attached to the relevant "Bar-Foil" product, asserting that it is "suitable for use in areas where a flammability index not greater than 5 is required".

There was conflicting evidence as to what the flammability index of these products is, and the factual issues in the case were principally concerned with that subject.

The significance of the flammability index of 5 is that, under building by-laws and the like operative in the State of Queensland and elsewhere, sarking material in certain sorts of	buildings must have an index not greater than 5. 'The buildings	subject to this requirement are, in brief, all other than single
family dwellings.
What the applicant says is that in asserting that certain sarking is "suitable for use in areas where a flammability index not greater than 5 is required", the respondent would give people to understand that its sarking complies with the statutory requirement. It is argued for the respondent, on the other hand, that its assertion is somewhat vaguer and that suitability for 'use in such areas does not necessarily connote that the sarking in question always has an index of 5 or better.

1 agree that the statement about suitability for use is

not as definite as the statement that the material is guaranteed to retain an index of less than 5. But it appears to me that the "suitable for use" statement is nevertheless misleading if the material does not, at least ordinarily if not always, meet the requirement. Mr Perry, who contested the matter vigorously on behalf of the respondent, said that suitability brought into the scope of one's consideration such questions as whether there was a practical risk to occupants involved in using sarking having an index of 6 or greater. I agree. Further, I am of opinion, on the evidence adduced, that one could not hold that there is any significant added risk of damage to people or property involved in using the respondent's material, assuming it does not comply. Mr S.J. Grubits, the manager of the CSIRO's fire technology program, says that in many applications sarkings having an index between 5

and 15 would not represent a significant additional hazard. ~ e '

',

says :

"For example, curtains in close proximity to sarkings may have a flammability index in excess of

seventy	.
That seems to me to illustrate the point:	many, perhaps

most, buildings will contain considerable quantities of material much more inflammable than the sarking, so that it would, in my opinion, be unrealistic to suggest that using sarking with an index of, say, 7 or 8 instead of 5 would make- much practical'

difference. In reaching this opinion, I am influenced by the fact that, until 1986, the relevant by-laws imposed a limit of 26, not

5. It was said (in effect) for the responclent that the

applicant's reason for coming to Court was not the public safety but commercial advantage. That appears to me to be so, but commercial advantage is not an unlawful purpose. Enforcement of the provisions of the Trade Practices Act, insofar as they tend to suppress misleading advertising, is largely achieved by private suits rather than prosecutions by the Trade Practices Commission; such suits are commonly brought by business enterprises concerned only with their own interests.

There appears to me to be a short answer to the respondent's case, namely that, by the evidence led on its behalf

and the undertaking I have mentioned, it has made it clear that it

is not prepared positively to represent its sarking to have an

index of 5 or less. It says, in effect, that the sarking may or

may not have the requisite index. It seems to follow that, on the

evidence presently available, there is a prima facie case of

3 .

misleading conduct. The respondent does not say .to consumers:

..

"Our sarking index may well be 5 or less", but so expresses itself that many would understand that the index has been established to be 5 or less.

It follows that, in my opinion, the applicant is entitled to succeed at this stage; but because the evidence, although relating only to an interlocutory application, was placed before me in considerable detail and the matter was thoroughly

1

argued, and because the evidence bears upon the nature of-.the
relief the applicant should have, I propose to say something of

the evidence about the index.

The index comes from Australian Standard 1530 Part 2 -

1973. Mr Grubits (mentioned above) says the standard test is "not

completely accurate and does result in variations". He says he would "normally expect that there could be an erlor of plus or minus two index numbers in the results". If he is right about that, the question of the compliance or non-compliance of the respondent's sarking may be quite difficult to answer.

The standard requires that specimens of material be cdt and prepared in specified ways. This part of the standard creates a problem for those who would wish to test their own material for it requires, in part, that the specimens be:

". . . conditioned for not less than 24h in an

atmosphere having a relative humidity of 65 + 5 per

cent and a temperature of 20° * Z°C."

The respondent, which has attempted to test its own material as well as it can according to the standard, has not conditioned the specimens in this way, but there is no evidence as to whether that makes much difference.

The standard goes on to require that a certain test apparatus be used, in accordance with a figure appearing in the standard. A specimen is placed in the apparatus in a stipulated way and ignited in a stipulated way. Then the height of the "tip

I

of the main body of the flame" is observed. The expression *'tip
of the flame" is defined to -

"... mean the top of the main body ol airborne flame; in the case of oscillating flames, the mean position of the tip of the flame shall be considered".

There are two alternative ways of calculating the index, depending on the results of the test. The way which is presently relevant is that a "heat factor" is added to a "spread factor". Of these two factors, the more important is the Latter; in the relevant tests, the heat factor was usually 0 or 1.

Because the heat factor does not assume much importance, and because it is difficult to determine (the process requiring the use of thermocouples) the respondent simply assumed a heat factor of one. That course was criticised by counsel for the applicant, but in my opinion, it is unlikely that the course taken by the respondent made any significant difference. Further, the tests on which the applicant relied, performed at the Australian

Wool Testing Authority and National Building Technology Centre, .

-	.	did,not themselves involve following the standard to obtain'the
heat factor. The standard requires the heat factor to be obtained from the expression:

H = 0.24A to the nearest integer.

The expression A has a definition which relates it to the difference between the temperature recorded in the rlue (above the flame) and the ambient temperature.

It was explained from the bar table that the applicant's counsel had instructions concerning the method used in the National Building Technology Centre ("NBTC") to calculate heat factor. Results obtained at that centre were based on a calculation of heat factor involving multiplying 1.17 by a certain area, not 0.24 by a certain area as the standard requires. It may be that the method used at the NBTC can be shown to be precisely equivalent to that which the standard contemplates, but there was no attempt to prove that to be so, nor can I assume it to be so.

In the other laboratory whose results were relied on by the applicant, that of the Australian Wool Testing Authority ("AWTA"), a similar discrepancy appears: that is the heat factor was calculated by use of a formula of 0.0755 multiplied by an area. Again, there was no attempt to show this to be precisely equivalent to the standard formula.

Taking the heat factor, then, to be about 1, the index

is about equal to 1 plus the spread factor, which is,defined to be

as the "six-specimen mean of the scale markings (0 - 21) reached	20/9 (D-31, to the nearest integer. The,expression D-is'defined
by flame during tests". What this amounts to, then, is that one takes an average flame height, apparently in inches, deducts 3 and multiplies by 2.22.
The point that has troubled me about the whole case is that the two sets of independent tests seem to be so much at variance. The applicant bought the respondent's sarking in August

!

and again in September last year and had the same rolls tested by AWTA and also by NBTC. Since the test is destructive, the same specimens could not be used in each set of tests, yet one would have expected them to be roughly the same. In fact, however, the AWTA tests averaged an index of 7, and the NBTC tests 10.67 - about 50% more. There were also sets of tests done by AWTA for the respondent in February and May last year. Those tests produced indexes of 2, 6 and 7 (February) and 8 and 7 (May). Except for the first, the results of these tests were similar to those obtained in the AWTA tests done for the applicant. ~t should be added, however, that AWTA also tested the respondent's material for the applicant about the end of 1988 on twb separate occasions, and those results were somewhat higher, ranging between

7 and 13.

To return to the difference between the AWTA and NBTC tests done on the same rolls of sarking in the latter half of last year, it is my opinion that that difference raises more than a reasonable doubt as to the consistency of the results likely to be obtained by different operatives using the method of testing laid

down in the standard. Mr Grubits says that theie'could be an

error of 2 2; one would not exeect one set of tests to be

consistently higher, by about 50% on the average, than another set. It was pointed out, and seems to me correct, that picking, not the tip of the flame but the tip of the main body of the flame leaves much room for subjective judgment, as does picking, in the case of oscillating flames, the mean position of the tip of the flame. ~t is no doubt conceivable that, if another set of tests were done on the same material by a third laboratoiy, its results would lie, not between the AWTA and NBTC results, but in a range below AWTA or higher than NBTC. Of course, if the range were below AWTA, the results might well be 5 or less.

I have also taken into account that the respondent

performed tests, by methods intended roughly to correspond with those obtainable by use of the standard method. The respondent did not, however, purport to follow the standard method exactly. I have already mentioned one difference, namely that the respondent did not measure the heat factor - a point which seems to me of no real importance. Another difference, however, was that it did not prepare the specimens as the standard requires, by conditioning them for not less than 24 hours in an atmosphere having a stipulated relative humidity and temperature. Presumably, specimens tested when in a state (as to humidity and temperature) markedly different from the standard might seem to have flammability indexes significantly different from the indexes which would be obtained by testing according to the standard. But there was no evidence which would assist me to determine to what extent that variation from the standard would make a zreal

difference. In discounting, as I do, the weight of the	respondent's own measurements of flammability index, I am
influenced by the fact that, as Mr Chesterman Q.C. for the applicant pointed out, the independent test results were, with one exception, above 5.
The respondent's own results were usually better than 5 and the evidence from Mr Trodden, on behalf of the respondent, was that batches which did not meet the standard were downgraded and not sold as having an index of 5 or better. Nr Perry suggested on behalf of the respondent that the proper course would be to appoint a Court expert to conduct another set of tests, in an attempt to determine whether the respondent's sarking has an index of 5 or less. I do not propose to do that, because it seems to me probable on the evidence presently available that. the material being produced, if again independently tested, would not meet the standard. Mr Perry also argued, principally in his written submission, that the Court should accept undertakings to test each batch of sarking by selecting one in every twenty rolls, not to sell any that exceeds an index of 4 and to retain samples to enable retesting at a later date. It does not appear to me that these undertakings would solve the problem, which is essentially that the independent testing is producing results above, and the respondent's testing producing results below, the standard. One possibility is to require that each batch be indeperidently tested, but that course would not only be quite expensive, but would, on the evidence available to date, not be likely to result in much satking being saleable as meeting the standard.
Despite the problems with the independent tests to which I have alluded, I have come to the conclusion that the applicant has a strong prima facie case.
In my opinion, unless the facts change significantly, the applicant is likely to succeed at the trial, for there is reason to think that independent testing will not pass the respondent's sarking. Mr Perry argued that the Court should take into account the serious financial loss the respondent may suffer
if an interlocutory injunction is granted,.and .I have done so. I-
have also given consideration to the question of public safety mentioned above, and to the fact that on the evidence one could not find that use of the respondent's sarking would, in a practical sense, present any danger. I have come, somewhat reluctantly, to the conclusion that the proper course is to restrain the respondent from selling any of its sarking as suitable for use where a flammability index not greater than 5 is required. I propose to make an order, subject to anything counsel may say as to form, having that effect. In the circumstances I have outlined, however, it appears to me that the operation of the injunction should be suspended for one month. The purpose of doing so is to allow for the possibility that, perhaps by further investigation or modification of its mode of manufacture, the respondent's sarking may be got to satisfy independent testing. If that occurred, the operation of the injunction might be modified or further suspended.
As to the other aspect of the matter, namely the representation that the material is guaranteed to 'retain an index
of less than 5, I will accept an undertaking. The r:os'ts should be costs in the proceedings; although it seems unlikely that the
respondent will succeed at the trial, I must allow for that possibility.

I certify that this and the ten preceding pages are a true copy of the rcasons for judgment herein of His Honour Mr. Justice Pincus.

<. -

c--

Dated z$/2 / g 9

Counsel for the applicant:  Mr R . Chesterman Q . C . a& Mr R .

Douglas

Solicitors for the applicant:	Cooper Grace and Ward
Counsel for the respondent:	Mr R. Perry

Sol ic i tors for the	respondent:	Thompson King and Partners
Date of Hearing:	28 February 1390