Australian Unity Friendly Society v Health Insurance Commission Mutual Community Ltd v Health Insurance Commission

[1994] FCA 1067

AUSTRALIAN UNITY FRIENDLY SOCIETY v HEALTH INSURANCE COMMISSION
No. VG392 of 1994
MUTUAL COMMUNITY LIMITED v HEALTH INSURANCE COMMISSION
No. VG403 of 1994
FED No. 1067/94
Number of pages - 8
Trade Practices
(1995) ATPR 41-392

COURT

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
GENERAL DIVISION
NORTHROP J

CATCHWORDS

Trade Practices - Misleading or deceptive conduct - comparative advertising - interlocutory injunctions - mandatory injunctions

HEARING

MELBOURNE
#DATE 17:11:1994
#ADD 9:3:1995

In relation to No VG 392 of 1994
Counsel for the Applicant: Mr Clarke

Solicitor for the Applicant: Phillips Fox

Counsel for the Respondent: Mr G.A.A. Nettle QC

with Mr A.K. Panna

Solicitor for the Respondent: Herbert Geer and Rundle

In relation to No VG 403 of 1994
Counsel for the Applicant: Mr Clarke

Solicitor for the Applicant: Phillips Fox

Counsel for the Respondent: Mr G.A.A. Nettle QC

with Mr A.K. Panna

Solicitor for the Respondent: Herbert Geer and Rundle

JUDGE1

NORTHROP J There are before the Court two applications for interlocutory relief arising from an advertising campaign initiated by the respondent, the Health Insurance Commission, which carries on business as Medibank Private in the health insurance market. The market area of competition in the health insurance field is very keen. There appears to be three main competitors - Medibank Private, Mutual Community Limited and the third company being Australian Unity Friendly Society. Mutual Community Limited carries on business under the name HBA. It appears to be the second largest business in this area. Australian Unity Friendly Society, more recently, is a combination of two friendly societies - ANA and another, which now carry on business under the name Australian Unity. The campaign was commenced by Medibank in an attempt to gain a greater share of the market. In the course of doing this it has advertised extensively in newspapers, by notices on trams and taxis, billboards and brochures available for distribution to people. It is a case of comparative advertising where Medibank attempted to show that it provided a far better service than its two main competitors.

1. This is an interlocutory matter and is to be treated as such. The Court has not had the time to consider all the facts and come to any final or firm conclusion on any of these matters. The Court is required to apply the well-known principles to determine whether there is a serious issue to be tried between the parties and if there is a serious issue to determine whether interlocutory relief should be granted or not. On this aspect, questions of the inconvenience or damages likely to be suffered by either party if orders are made or not is of relevance. But although as a matter of methodology these two aspects are often considered separately they are really two aspects of the same question. This is made very clear by the Full Court of the Supreme Court of Victoria in Magna Alloys and Research Pty Ltd v Coffey (1981) VR 23 at 28. In some cases where there is a strong case made out, even though great inconvenience may be suffered by the respondent, interlocutory relief will be granted. In other cases a fairly weak case may be sufficient to justify the granting of interlocutory relief if the inconvenience is all on the part of the applicant. In the present case this is of great importance as will appear later.

2. The newspaper advertisements are quite markedly different from the advertisements on the trams, taxis and billboards. At the present time it has been indicated that the respondent has no present intention to continue the publication of these advertisements in the newspapers. They appeared in the Age newspaper and in the Herald-Sun newspaper over some weeks. The two applicants, in separate proceedings, commenced these proceedings fairly quickly in response to those advertisements. I do not propose to go to them in detail but they are dramatic, the one in the Herald-Sun, for instance, covers the whole page, but that is a fairly small page compared to the Age, while the Age covers just under half a page. Each has colour on it to draw attention to it and then in bold print the main point to be made. In the Age, it refers to "The best intermediate cover now covers more". That statement refers both to the cost per week as well as what is available. The Herald-Sun refers to, "100 per cent hospital cover at the healthiest price". It is concerned more with the cost. In the Herald-Sun advertisement the text gives some details of the cost per week for singles with a footnote that family rates are double the single rates shown. There are then set out the rates for cost per week single under Medibank Private Blue Ribbon Hospital provision, HBA 100 per cent Hospital Cover and Australian Unity 100 per cent Hospital Cover. For Medibank Private it is $14.95, HBA $17.55 and Australian Unity $18.05. One of the complaints made is that the figure of $14.95, although accurate in one sense, is subject to conditions in that to qualify for that rate, the payments must either be deducted under schemes known as the sure pay scheme or the group pay scheme by which the premiums are deducted automatically from a bank account, building society or credit union account or from the employer. Here a saving of 4% is made. Alternatively, if payments are made in advance you get a benefit of 4% if you pay quarterly, 6% half-yearly or 8% yearly. The figure of $14.95 per week single is based on a condition of the sure pay or group pay provision so that if you pay over the counter, and it were permitted on a weekly basis, fortnightly basis or monthly basis, the actual cost per week would be more than $14.95. As far as the other rates in advance are concerned it is all at $14.95 or if you pay 12 monthly it is even less than that amount. HBA apparently does not have a similar provision and the $17.55 applies to it on a weekly basis while Australian Unity does have a similar type of arrangement and the amount of $18.05 is taken as the standard rate without the benefit of the condition reducing that amount if those conditions are complied with.

3. For present purposes it is said that the hospital cover is such as to cover the greatest proportion of the costs of the patient in hospital but some 0.8%, as far as Medibank Private is concerned, relates to ancillary cover. This aspect is more important in relation to the advertisement in the Age newspaper. I will come to that again later.

4. In my opinion, the expression of the figure of $14.95 is misleading or deceptive or is likely to mislead or deceive in the sense that it is a figure which applies only if conditions are complied with. These conditions are not specified in the advertisement and the advertisement does not state that the figure is subject to conditions. It is argued that there is only a small percentage of the group of people who do in fact seek this cover and who do not comply with the condition, it being said that some 85% pay at the rate of $14.95 per week or less, which leaves 15% paying at the higher rate. In my opinion, that is not really important, the important fact is that a figure is given which is not correct and no warning is given that it is subject to conditions. It is argued that that does not really matter because if a person did apply to Medibank Private to take out such a cover the booklet provided to explain it all, together with advice given by counter staff, would make it quite clear that the $14.95 would not be the appropriate figure unless the conditions were complied with.

5. The misleading and deceptive conduct, in my opinion, occurs at the earlier stage when the advertisement is seen by the general public. In this case the public are to be treated as a whole range of people who are likely to read the newspapers, see the advertisement and, in respect to the other, see the advertisements on trams and taxis. To some extent the latter are limited to people within the Melbourne Metropolitan area, there being no evidence about taxis in country areas. But for present purposes, the public to be considered here covers the whole spectrum of the public and all types of persons. Looking at the advertisements, in my opinion, they do have a misleading effect in referring to a figure which is subject to conditions. This is made worse when the comparable figure given in relation to the Australian Unity is itself wrong.

6. There are other aspects complained about in the newspaper advertisements. There is a statement in the Herald Sun after reference to the under $15 a week that "this is the best 100 percent cover at a price that can't be matched by the other two major health funds in Victoria". That statement gives rise to more difficult questions. To some extent, it does involve a matter of opinion. It does involve a consideration of what are the benefits to be obtained by a person paying the premium under the policies of the three competing health insurance companies. There is a certain degree of latitude allowed in cases of competition in a competitive market between competing firms and this is made clear by reference to the authorities. There is always a reluctance for a Court to get involved in a detailed examination of benefits to be obtained under various schemes provided by competing businesses or firms. It is almost impossible for one person to say which is the best. It depends so much on the view of the person concerned. It is easy to imagine one person seeking a certain type of cover being dealt with more beneficially for that person's concern than the others, while other people might have very different concerns. It seems to me, in these circumstances, that a mere statement to the effect that one scheme is better would not constitute misleading or deceptive conduct. It would depend, if the matter came to trial, on a more detailed examination of the benefits provided, something which normally cannot be done on an interlocutory basis, and is certainly not to be done in this case. As far as the rates are concerned, that, in my opinion, is the real defect in the advertisement appearing in the Herald Sun.

7. As far as the Age is concerned, this deals with the intermediate cover, which is something less than the blue ribbon cover. Here the advertisement sets out a comparison of what are said to be benefits available under one or more of the policies of these three competing companies. The chart in the advertisement reflects the figure given for Medibank Private being the figure which is payable subject to the conditions which I have dealt with already. It also has a defect in that the rate for the Australian Unity cover is not comparable because Australian Unity also gives a benefit on conditions which are not referred to. To that extent the advertisement is bad. Reference is then made to what is called a "saver option". This also appears in the text alongside the chart. This is directed to a policy which is said in a booklet provided by Medibank Private to be suitable or may be suitable, to single, healthy people. In this regard, care must be taken, as I understand it, because the law prevents any health insurance company having a policy limited to people of certain ages or certain medical conditions. This is overcome, in the present case, by not making it, of necessity, limited to those people but could cover any person at all whether old, young, healthy or unhealthy, but the benefits are limited in the sense that some benefits which are normally available under the intermediate cover are not available under the saver option. In the booklet this is described as a saver option. It is a name given to a particular policy which is of the intermediate nature but which does not cover all the benefits which are covered by the normal intermediate policy. By adopting this form of comparative advertisement, Medibank Private has created a term and a policy which it says is quite cheaper than the others, at $6.71. There may well be doubt as to whether that is a correct figure or not in view of what I said about the Medibank Private Intermediate at $12.45. Then it says that the other two companies have not got a saver option. In one sense that is right. But the overall effect, in my opinion, is a misleading and deceptive comparison without further explanation.

8. As far as the other particular comparisons are concerned, this does involve a very close examination of what are the benefits available under the policies of each of these companies. In some cases one person might get a better benefit than the other, in other cases, not. But all of these, it is said, come within the 0.8% of payments made by Medibank compared to hospital cover plus the other more common payments made. There is no evidence as to what proportion of these ancillary benefits are paid out by the two applicants. It is argued that these are all fairly minor matters because, having regard to the total amount of expenditures paid out to those who have the cover, this forms a very small part. This again highlights the real danger of the comparative advertisement. It is always important, in these areas, to realise that any comparison must be accurate as deficiencies or errors can give or form the basis for relief by the person claiming to be not properly identified or whose benefits are not properly described. It is impossible, in these proceedings, on an interlocutory basis, to go through and determine whether the last three of the particular items contained in the Age Newspaper are adequate or not, are misleading or deceptive or not. I do not propose to do so.

9. In this type of advertisement there is always room for what has been described as "puffing", expressions of belief and claims that the person making the advertisement believes that its products are better than that of anybody else. The Court does not prevent those types of statements appearing. To a large extent part of the text in this advertisement comes within that category. Medibank Private is conscious of the problems it faced because it says it does not make the claims lightly but it does go to some detail in relation to the capping of out of pocket expenses and matters of that kind, often referred to as excesses, and whether those payments are to be unlimited or up to a certain amount. It is a very complex and difficult area and in cases where any detail is given it is often more easy to prove misleading or deceptive conduct than in cases where a broad claim only is made. Beyond saying that, I do not propose to say anything more about the Age Newspaper advertisement.

10. During the course of submissions I indicated my tentative views and in due course I will be asking parties as to the form of the injunction to be made in relation to those newspapers or whether it can be done by way of undertakings or not, having regard to the fact that there is no present intention to repeat these advertisements and also to what was said in relation to the other matters where questions of undertakings were raised as distinct from injunctions.

11. This leads me then to the advertisements appearing on the trams and taxis. These are very different, as I said before, from the newspaper advertisements, in that they do not descend to any detail at all. But it is, again, a form of comparative advertising and in cases where a figure is given for singles for 100% hospital coverage or for family and those figures are figures which are subject to conditions, as I discussed earlier. In my opinion, these advertisements do constitute conduct which is misleading or deceptive or likely to mislead or deceive. It appears, and I accept for present purposes, that if a reference is made to those amounts being subject to conditions or something along those lines, there could well be a case of no misleading or deceptive conduct because again it appears that even on the higher figure the amount charged for the premium cover by Medibank Private is less than the 100 per cent hospital coverage of the other two companies. This is the area where the 0.8% may be important but it does not really matter as far as these advertisements are concerned, whether details are there or not. What is being said relates to singles hospital cover and family hospital cover, that is what is being advertised at a particular rate. There is no condescending into the detail of what comes within that cover. In any event the amount charged by way of premium if it is paid subject to the conditions, is still correct in that it would be less than that charged by HBA and Mutual Benefits. But in any event what I was saying is that the other companies referred to, insofar as they are HBA and Australian Unity, the rates charged by way of premium is or are greater than $15 or $30 per week or the larger amount with the conditions imposed by Medibank Private are not complied with.

12. In the general context of whether an injunction should go or not, reference is made and is accepted that this forms part of a policy of advertising by Medibank Private to try and attract a greater share of the market. To this extent figures were given as to the amounts so far expended, some of which relate to the newspaper advertisements, some to the advertisements on the trams and on the taxis, and also some to the billboards which, apparently, are in place in various places. The billboard advertisements appear to be the same as those on the trams and taxis except they give a telephone number, a 1800 telephone number, which I understand is a free call. That telephone number does not appear on the tram or the taxi advertisements. It is said that if steps are taken to require removal of all those advertisements it could add up to great cost and could defeat part of this publicity campaign undertaken by Medibank Private. In the circumstances, and in the absence of evidence as to what can be done to resolve this, the Court does accept that the cost of removal of these advertisements would be quite high and would take time, and it would be desirable to allow time for something to be done. The advertisements might be removed or they could be modified to show that the amounts mentioned are subject to conditions or something of that kind. In these circumstances I think it is appropriate that I should at least allow the parties to discuss what can be done to see if any agreement can be reached and as to the time frame in which this is to be done. Time would be required in any event but my current thinking is that if Medibank Private so desires to alter the wording of the notices in relation to being subject to conditions, that would be a satisfactory course. That is something which I will not decide at the moment.

13. As far as the brochure is concerned it really comes within a third category. To a large extent the brochure is an invitation by Medibank Private to people to come to Medibank Private to discuss what could be done.

14. It is misleading in that the amount of $14.95 for the Medibank Private hospital room is the wrong figure in the way which I have discussed earlier. To that extent it is misleading and deceptive and ought to be corrected, but apart from that it appears to be not in contravention of the Trade Practices Act.

15. The applicants were also seeking mandatory injunctions for corrective advertising but in my opinion there is no ground made out for that, particularly on an interlocutory basis, and that application is refused. The further hearing of this matter is adjourned to 21 November 1994.

21 NOVEMBER 1994
17. Following the publication of reasons on Thursday of last week in relation to an application for interlocutory relief, the Court indicated that in some respects it formed the view that the conduct by the respondent in making use of the advertisement the subject of the complaint did constitute conduct which was misleading or deceptive or likely to mislead or deceive in contravention of section 52 of the Trade Practices Act. At the request of the respondent, the Court refrained from making any orders on that occasion to enable discussions to take place between the parties to see if some agreement could be reached as to the form of the orders. Substantial agreement was reached but a number of matters were still in dispute. Insofar as the orders are concerned, counsel for the applicant has given the usual undertakings as to damages but is seeking an order, while counsel for the respondent is prepared to give an undertaking in the appropriate form rather than an injunction.

1. It is not at all unusual for a respondent to oppose a grant of interlocutory relief but when the matter has been determined to give an undertaking rather than have an injunction made against it. The legal effect of an injunction and an undertaking to the Court are the same. Essentially, if there is a contravention of the injunction or a contravention of the undertaking, a contempt of Court is committed and punishment is imposed accordingly. It is said that an undertaking may not look quite so bad as an injunction and counsel for the applicant has urged on the Court the need for an injunction in this case having regard to the way in which the respondent conducted the case, the way in which the advertisements had been operating for so long and that there should be some indication of the appropriate displeasure of the Court in the conduct of the respondent. In my opinion that is putting the matter too high. Once a respondent agrees to an undertaking in the appropriate form the Court should, unless there is very good reason to the contrary, accept that undertaking even after the hearing of the matter and before orders are made. In this case I am not satisfied that this is a case where the Court should not be prepared to accept an undertaking on the part of the respondent.

2. The other issue relates to the question of the time factor. As far as the billboard advertisement is concerned, 14 days is an adequate time, but counsel for the respondent wanted 28 days for the removal or modification of the advertisements on the trams and on the taxi cabs. Some arbitrary time must be allowed. There are problems where you have a mobile vehicle for the exhibiting of the advertisements. In all the circumstances, 21 days appears to me to be an adequate time both from the respondent's point of view and from the applicants' point of view having regard essentially to the fact that the removal will commence immediately but will need to be completed within 21 days. Accordingly orders 3 and 4 will be varied to give effect to those reasons.

3. Possibly the most contentious matter was in relation to the form of the advertisements if they are to be modified. The respondent has agreed to modify the advertisements by inserting the words, "With Sure Pay/Group Pay/Advance Pay Discount". In doing that, in my opinion, the respondent possibly has gone further than the Court would have required if an injunction had been made and this to some extent has a bearing on the question of whether there should have been an undertaking or an injunction. The Court, in the course of giving its reasons, referred to the need for a reference to conditions that the amount specified should be modified by words "subject to conditions". The words agreed to be inserted specify what those conditions are, but to many people reading those additional words there would be uncertainty as to what they meant. Unless a person has some knowledge, and one might almost say a fairly detailed knowledge, of the proposals offered by the respondent, the words "With Sure Pay/Group Pay/Advance Pay Discount" are almost meaningless. The parties have agreed to that form of words and they are to be inserted in the advertisements if they are continued to be displayed in public.

4. The question then arose which gave rise to the dispute as to whether those words should be in the same size as the text which accompanies the rate being the text "Family Hospital Cover for Less Than" or "Single Hospital Cover for Less Than" as the case may be. Problems arise as to how this can be done and it is urged by counsel for the respondent that instead of those words being in the same size as the text as described, if they were in a clear, visible text that would be a sufficient warning that the rates mentioned are not absolute but are subject to conditions being those specified. In my opinion it is appropriate that those words be used. There need not be the direct and explicit requirement that they be of the same size as long as the words are in a clear, visible text. That, in my opinion, would be a sufficient warning that the rates specified were subject to conditions, the conditions being those expressed in the words "With Sure Pay/Group Pay/Advance Pay Discount".

5. Accordingly, the Court upon the applicant giving the undertaking as to damages and the respondent giving the undertakings set out in the draft orders 1, 2, 3 and 4 and as modified by these reasons, will make the orders which are set out in paragraph 5, but the form of the order will need to be altered slightly.

6. Orders made accordingly.