Andale Repetition Engineering Pty Ltd v Hoshizaki Lancer Pty Ltd

[2011] VSC 496

IN THE SUPREME COURT OF VICTORIA Not Restricted

AT MELBOURNE

PRACTICE COURT

No. 4939 of 2011

ANDALE REPETITION ENGINEERING PTY LTD	Plaintiff
v
HOSHIZAKI LANCER PTY LTD	Defendant

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JUDGE:	DIXON J
WHERE HELD:	MELBOURNE
DATE OF HEARING:	20 SEPTEMBER 2011
DATE OF JUDGMENT:	20 SEPTEMBER 2011
CASE MAY BE CITED AS:	ANDALE REPETITION ENGINEERING PTY LTD v HOSHIZAKI LANCER PTY LTD
MEDIUM NEUTRAL CITATION:	[2011] VSC 496

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Practice and Procedure – interlocutory injunction – to restrain conduct in breach of s 18 of the Australian Consumer Law and/or s 9 of the Fair Trading Act 1999 (Vic) – comparative marketing material withdrawn from internet website prior to return of the summons – balance of convenience considerations – Competition and Consumer Act 2010 (Cth) Sch 2 Australian Consumer Law ss 18, 232 – Fair Trading Act1999 (Vic) ss 9, 149.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr N A Frenkel	Cavoli & Co Solicitors
For the Defendant	Mr D C Gration	DLA Piper Australia as agents for Fox Tucker

HIS HONOUR:

1. The plaintiff, Andale, and the defendant, Lancer, are competitors in the beer dispensing equipment market. They have apparently each been engaging in comparative advertising of their products.

1. On 26 August 2011, Andale discovered that Lancer had published on its website:

·a document dated 26 August 2011, entitled ‘Technical Bulletin’ comprising 12 pages of data, comments and photographs in relation to Lancer’s testing of the Andale Coolabah Glycol Block 2 (Technical Bulletin); and

·a document dated 5 August 2011, entitled ‘Chiller plates – the Lancer difference’ (Summary Sheet), which is a summary of the Technical Bulletin.

1. Andale has commenced a proceeding and now applies for an interlocutory injunction. It seeks two orders: 

1.an injunction requiring the defendant within 24 hours to remove from its internet site the technical bulletin and the summary sheet; and

2.an interim and interlocutory injunction restraining the defendant from representing, publishing or distributing any communications with respect to the plaintiff, to the effect that:

(a)the Andale Test Results produced on 29 September 2010 in relation to the current Andale Coolabah 2 Glycol Block are wrong and/or are potentially misleading;

(b)the Lancer test results set out in its Technical Bulletin dated 26 August 2011, and Summary Sheet dated 5 August 2011 were obtained from testing the current Andale Coolabah 2 Glycol Block;

(c)the current Andale Coolabah 2 Glycol Block has a glycol flow rate of 13.8 litres per minute;

(d)the current Andale Coolabah 2 Glycol Block has a glycol pressure loss of 35kPa (kilopascals);

(e)the current Andale Coolabah 2 Glycol Block has a product coil length of 7.1 metres;

(f)the Andale mechanical compression joint is inferior to the Lancer Tig welded joint in terms of its potential for leaking;

(g)Andale has copied from Lancer certain characteristics of the Lancer chiller including the barbed glycol connections and the block dimensions; and

(h)      Andale has copied Lancer’s bare tube product coil connections.

Each of these statements can be found in either the Technical Bulletin or the Summary Sheet, or both.

1. Since 1998, Andale manufactured and sold a beverage chiller known as the Andale Coolabah Glycol Block, as described in the representations to which I have just referred. From 2009, Andale started manufacturing and selling an improved version known as the Andale Coolabah 2 Glycol Block. On 29 September 2010, Andale produced a confidential internal report comprising its test results of a further improved version of the Andale Coolabah 2 Glycol Block. From December 2010, Andale has manufactured and sold the further improved version which is still known by the same name — Andale Coolabah 2 Glycol Block.

1. This product, a chiller, is used in beer delivery systems. It comprises a unit made of varying numbers of laminations, product coils, glycol coils, insulation and an aluminium casing. Lancer produces a similar item that competes with Andale’s product in the market place.

1. The issues that principally arise on this application are: (a) whether the balance of convenience favours the grant of an injunction and, if so, (b) in what form should that injunction take.

1. Andale alleges three causes of action. Primarily, it is said that Lancer has engaged in deceptive and misleading conduct in breach of s 18 of the Australian Consumer Law and s 9 of the Fair Trading Act 1999 (Vic). Lancer does not dispute, for the purposes of this application, that there is a serious question for trial as to whether Andale is entitled to relief in respect of breach of the Australian Consumer Law and/or the Fair Trading Act, as it alleges.

1. It makes no such concession of a serious question to be tried in respect of other causes of action alleged: Andale’s claim of malicious falsehood and Andale’s claim of breach of copyright. In the circumstances, it is not necessary for me to say any more about those further causes of action.

1. Andale invites the court to rely on s 232 of the Australian Consumer Law in granting injunctive relief.[1] By s 232, the court may grant an injunction in such terms as the court considers appropriate if the court is satisfied that a person has engaged in or is proposing to engage in conduct that does or would constitute a contravention of a provision of Chapters 2, 3 or 4 of the Australian Consumer Law. Section 232(4) provides that the injunctive power of the court may be exercised whether or not it appears to the court that the person intends to engage again or continue to engage in conduct of the kind referred to in that subsection, whether or not the person has previously engaged in conduct of that kind, and whether or not there is an imminent danger of substantial damage to any other person if the person engages in conduct of that kind.

   [1]See also s 149 of the Fair Trading Act1999 (Vic). There are material differences in the terms of this section.

1. The forerunner to s 232 of the Australian Consumer Law is s 80 of the Trade Practices Act 1974 (Cth).[2] These sections are in relevantly similar terms to the provisions of s 1324 of the Corporations Act 2001 (Cth) and it has been noted about each Act[3] that from provisions such as sub‑section 4, there cannot be any doubt that the court is not exercising its traditional equitable jurisdiction in granting an injunction pursuant to that section. I consider that a similar observation is apposite in respect of s 232 of the Australian Consumer Law.

   [2]See ICI Australia Operations Pty Ltd v Trade Practices Commission (1992) 38 FCR 248; BMW Australia Ltd v Australian Competition and Consumer Commission (2004) 207 ALR 452 (28 June 2004); Foster v Australian Competition and Consumer Commission (2006) 149 FCR 135; Australian Competition and Consumer Commissionv Dataline.net.au Pty Ltd (2007) 161 FCR 513.

   [3]In respect of the Corporations Act, see Australian Securities and Investments Commission v Mauer-Swisse Securities Ltd [2002] NSWSC 741 (9 August 2002); Australian Securities and Investments Commission v SunEnergy Asia Pacific Pty Ltd [2011] FCA 275 (24 March 2011).

1. The principles that I will apply on this application are these: 

(a)The jurisdiction exercised by the court is a statutory jurisdiction, not its traditional equity jurisdiction. Parliament has made it clear that the court’s statutory jurisdiction under s 232 is not to be confined to its traditional equity jurisdiction. That observation can be made because in most cases where the circumstances envisaged by s 232(4) were engaged, the court would be unlikely, in its ordinary equitable jurisdiction, to grant the relief sought.

(b)Among the considerations to take into account under s 232, a wider issue is discernible from the terms of the section. Broadly speaking, this wider issue involves the question of whether the injunction would have some utility or serve some purpose within the contemplation of the Australian Consumer Law. The authorities suggest a need for a nexus between the contravention of the Act that the court has found, and the terms of the restraint that the court then decides to impose. It seems to me, although it is not relevant on this application, that these considerations are to be taken into account regardless of whether the application is for a permanent injunction under s 232 or for an interim injunction under s 234.

(c)The court is more likely to give greater weight to that broad issue of whether an injunction would serve a purpose within the contemplation of the Australian Consumer Law where the applicant for the injunctive relief is the regulator rather than a private litigant. Nevertheless, the consideration remains relevant in all cases.

(d)Where there is an appreciable, not fanciful, risk of particular future contraventions of the Australian Consumer Law by a defendant, it may serve a purpose within the contemplation of the Australian Consumer Law that the court grants, in an appropriate case, an interim or interlocutory injunction restraining such conduct.

(e)The questions — whether there is a serious question to be tried and where the balance of convenience lies — would not circumscribe the court’s discretion on an application for an interim injunction under s 232. When restrictions are sought before the case has been properly examined by the court, the interests of justice will always require that those questions are carefully examined, even where the protection of the public is said to be involved.[4]

[4]See by analogy, Liquorland (Aust) Pty Ltd v Anghie [2001] VSC 362 (2 October 2001).

1. The applicable principles in the court’s traditional equitable jurisdiction on applications for interlocutory injunction have been identified by the High Court,[5] and are summarised as follows:

   [5]Australian Broadcasting Corporation v O’Neill (2006) 227 CLR 57; Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd (2001) 208 CLR 199.

(a)The plaintiff must demonstrate a prima facie case. This requirement is to be understood, as whether there is a serious question to be tried as to the plaintiff’s entitlement to relief— not whether it is more probable than not that the plaintiff will succeed at trial. The sense in which the test is understood is that the plaintiff must prove prima facie a sufficient likelihood of success to justify in the circumstances preservation of the status quo pending trial. In context, the plaintiff must show that it has a putative legal or equitable right in respect of which final relief is sought that would justify the restraint sought. The requisite strength of the probability of ultimate success depends on the nature of the rights asserted and the practical consequences likely to flow from the interlocutory orders sought.

(b)The injury that the plaintiff is likely to suffer must be one for which damages will not provide an adequate remedy.

(c)The balance of convenience must favour granting an injunction. The balance of convenience requires consideration of the relevant matters favouring or militating against granting an injunction and will necessarily involve consideration of the strengths of the plaintiff’s claim, assuming that a serious issue has been identified. The court must, in determining whether to grant an interlocutory injunction,

take whichever course appears to carry the lower risk of injustice if it should turn out to have been ‘wrong’, in the sense of granting an injunction to a party who fails to establish his right at the trial, or in failing to grant an injunction to a party who succeeds at trial.[6]

There may be other discretionary considerations that militate against granting an injunction.

[6]Bradto Pty Ltd v Victoria (2006) 15 VR 65, 73 [35].

1. The courts have stressed the need for traders to exercise care with comparative marketing material. In particular, that emphasis is on the potential of comparative marketing to mislead consumers more so than statements commonly employed in advertising — described as mere puffs. Justice Merkel reviewed the authorities in Telstra Corporation Ltd v Optus Communications Pty Ltd.[7]

   [7](1997) ATPR 41‑541 (22 November 1996) 43‑514–43‑515.

1. By reference to Merkel J’s observations in that case, I consider that an injunction against aspects of comparative advertising, where there is a serious question that the advertising may be deceptive or misleading, does address a purpose specifically contemplated by the Australian Consumer Law, that is, enforcing the prescription in trade or commerce against deceptive and misleading conduct by s 18 of the Law. This matter is appropriate to be taken into account in determining whether to grant the relief sought.

1. I was invited to consider the prospect of damage to Andale through commercial losses. Andale submitted that damages will not be capable of being ascertained with any certainty. Andale does not know who has viewed the technical bulletin or the summary sheet on Lancer’s website, or to whom Lancer has sent or provided those documents. Andale contends it would be extremely difficult for Andale to prove whether it has lost contracts due to Lancer’s conduct. Even if Andale can prove that contracts were lost, it would be even more difficult to prove how much money Andale has lost through Lancer’s conduct.

1. I am prepared to accept that such losses may be very difficult to calculate and assess because, in a practical way, any inquiry involves assessment of the behaviour of customers — why they bought one product and not the other, and what they relied upon in making that decision. It may well be that damages could prove to be an inadequate remedy.

1. On the other hand, Lancer has acknowledged that the documents, which it has on its website, must be removed, and it is accepted by the parties that Lancer has already done so. The scope of the debate before the court was largely whether any further relief was necessary or desirable. Lancer submits that an order restraining it generally from making particular representations in the form I have set out is too wide. Commercial losses may follow for Lancer if it is generally restrained in that manner. If ultimately Andale fails to show an entitlement to injunctive relief, such losses will be very difficult for Lancer to calculate and assess. An undertaking as to such damages could prove to be an inadequate remedy.

1. I ought record that Lancer made it clear to the court that it did not intend to deliberately engage in the conduct alleged against it. There is evidence suggesting some difficulty in identifying precisely the model of the Andale Coolabah Glycol Block that was tested, leading to an accidental association with the model currently on offer. I was informed that Lancer has arranged to obtain the current model and it intends to test that model for the purposes of its advertising and marketing documentation. Such tests may permit comparative representations in the same or substantially similar terms to those set out above without engaging in conduct proscribed by s 18 of the Australian Consumer Law.

1. I have reached a conclusion that the position maintained by each party in their negotiations prior to coming to court has been unsatisfactory. Lancer’s position has been too narrow, particularly in the context of its acknowledgement by its conduct that the documents on its website be removed, while the relief for which the plaintiff contends seems too wide for the reasons I have just set out.

1. The lower risk of injustice, should it turn out that my decision is not correct, will be achieved by granting an injunction to Andale but upon more limited terms than is sought. Accordingly, I will, subject to any submissions from counsel as to form and upon the usual undertaking as to damages being given by the plaintiff, order that: 

1.Until the determination of this proceeding or further order, the defendant be and is hereby restrained, whether by itself or its servants or agents or otherwise, from representing of or about the plaintiff that (referring to the plaintiff as ‘Andale’ and the defendant as ‘Lancer’):

(a)the Andale Test Results produced on 29 September 2010 in relation to the current Andale Coolabah 2 Glycol Block are wrong and/or are potentially misleading;

(b)the Lancer test results set out in its Technical Bulletin dated 26 August 2011 and Summary Sheet dated 5 August 2011 were obtained from testing the current Andale Coolabah 2 Glycol Block;

(c)the current Andale Coolabah 2 Glycol Block has a glycol flow rate of 13.8 litres per minute;

(d)the current Andale Coolabah 2 Glycol Block has a glycol pressure loss of 35  kPa (kilopascals);

(e)the current Andale Coolabah 2 Glycol Block has a product coil length of 7.1 metres;

(f)the Andale mechanical compression joint is inferior to the Lancer Tig welded joint in terms of its potential for leaking;

(g)Andale has copied from Lancer certain characteristics of the Lancer chiller including the barbed glycol connections and the block dimensions;

(h)Andale has copied Lancer’s bare tube product coil connections

by publicly, distributing or communicating to any person, save for its legal and technical advisers or as required by law, the documents entitled:

(a)‘Chiller Plates – the Lancer Difference’ dated 5 August 2011; and

(b)‘Technical Bulletin’ (Hoshizaki Lancer Tests the new Coolabah 2 Chiller Plate from Andale) dated 26 August 2011

whether by posting such documents on an internet website or by direct communication with any other person or howsoever otherwise.

2.I will grant liberty to apply and I propose to reserve the costs of the application.

(Discussion re order)

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