Contact Minerals Pty Ltd v Mineral Providers Australia Pty Ltd
[2001] FCA 1042
•3 AUGUST 2001
FEDERAL COURT OF AUSTRALIA
Contact Minerals Pty Ltd v Mineral Providers Australia Pty Ltd [2001] FCA 1042
TRADE PRACTICES – misleading and deceptive conduct – whether colloidal liquid health product was from original site – whether statements about the origin and processing of a product are in accordance with its claims – failure to call a witness – whether respondent made representations or was a mere conduit
Trade Practices Act 1974 (Cth) s 52
Amalgamated Television v Marsden (1998) 43 NSWLR 158 applied
Jones v Dunkel (1959) 101 CLR 298 applied
Yorke v Lucas (1985) 158 CLR 661 distinguished
Nescor Industries Group Pty Limited v MIBA Pty Limited (1997) 150 ALR 633 cited
Saints Gallery Pty Limited v Plummer (1988) 80 ALR 525 distinguished
Logie Brae Pty Limited v Sevenhill Holdings Pty Limited (FCA, 27 October 1992, unreported) distinguishedCONTACT MINERALS PTY LIMITED AND MARK ECKERSLEY v
MINERAL PROVIDERS AUSTRALIA PTY LIMITED, DOUGLAS KINNON, C & M LABORATORIES INC AND ROBERT A MUSACHN 182 OF 1999
TAMBERLIN J
SYDNEY
3 AUGUST 2001
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
182 OF 1999
BETWEEN:
CONTACT MINERALS PTY LIMITED
(080 004 593)
FIRST APPLICANTMARK ECKERSLEY
SECOND APPLICANTAND:
MINERAL PROVIDERS AUSTRALIA PTY LIMITED
FIRST RESPONDENTDOUGLAS KINNON
SECOND RESPONDENTC & M LABORATORIES INTERNATIONAL INC
THIRD RESPONDENTROBERT A MUSACH
FOURTH RESPONDENTJUDGE:
TAMBERLIN J
DATE OF ORDER:
3 AUGUST 2001
WHERE MADE:
SYDNEY
THE COURT ORDERS THAT:
The parties are directed to bring in draft Short Minutes of Orders to give effect to the reasons for judgment herein.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
N182 OF 1999
BETWEEN:
CONTACT MINERALS PTY LIMITED
(080 004 593)
FIRST APPLICANTMARK ECKERSLEY
SECOND APPLICANTAND:
MINERAL PROVIDERS AUSTRALIA PTY LIMITED
FIRST RESPONDENTDOUGLAS KINNON
SECOND RESPONDENTC & M LABORATORIES INTERNATIONAL INC
THIRD RESPONDENTROBERT A MUSACH
FOURTH RESPONDENT
JUDGE:
TAMBERLIN J
DATE:
3 AUGUST 2001
PLACE:
SYDNEY
REASONS FOR JUDGMENT
INTRODUCTION
This dispute concerns claims by the first applicant (“Contact”) and the second applicant (“Eckersley”), who are distributors of a colloidal mineral liquid product (“the applicants’ product”), that the respondents have breached the Trade Practices Act 1974 (Cth) (“the Act”) as a consequence of misrepresentations made by them since about 1997 concerning the source and production process of the applicants’ product and the source and processing of a competing product distributed by the respondents (“the respondents’ product”).
The applicants’ product consists of colloidal minerals suspended in a liquid solution which is said to have useful medicinal qualities for both humans and animals. It is distributed, in bottles, by the applicants to health food stores in Australia. In its first set of claims, the applicants contend that the respondents have misrepresented that the applicants’ product is not manufactured in accordance with the procedures and practices developed by the late Thomas Jefferson Clark (“Jefferson”). Jefferson is said to have discovered, in the early nineteen twenties, the site on which the basic mineral raw material for the products was found, and to have formulated and used a particular confidential process for making the “authentic” colloidal mineral product.
The second broad group of claims made by the applicants is that the respondents have misrepresented that the respondents’ product, which is distributed by the respondents in Australia, is sourced from the authentic mine site which is claimed to be the original source used by Jefferson and produced in accordance with the procedures and practices originally developed by him. The applicants seek declarations and relief in the form of an injunction, damages and costs. These reasons are concerned with the questions of liability, injunctive relief and costs. The present hearing is not concerned with the question of damages.
DESCRIPTION OF THE PRODUCTS
An indication of the nature of the products at the centre of this dispute can be gleaned from the labels on the bottles of the solutions which were tendered in evidence. In relation to the respondents’ product, which the label refers to as being “The Original T J Clark” product, the following description is set out:
Nature’s Formula
The Original T J Clark
Colloidal
Minerals·Organic, Plant Derived
·Required by Cells for Proper Function
·Contains over 65 Macro and Trace Minerals
·Readily Digested (Bio-Available)
The label on the applicants’ product known as “LifeSPRINGS” refers to it as:
“ A PURE MINERAL RICH
PREHISTORIC PLANT SOURCE FROM
THOMAS JEFFERSON CLARK MINE.”It describes the applicants’ product in greater detail in the following way:
“LifeSPRINGS ‘Original’ Natural Colloidal Trace Mineral Concentrate is offered as a unique and highly effective source of Organically derived, Colloidal, Major and Trace minerals in naturally occuring combinations and balance as produced by nature. These unique products are derived from natural plant deposits discovered at the turn of the century in Central Utah by Thomas Jefferson Clark. Naturally extracted in water without the use of acids or damaging heat, these products have been enjoyed for well over 70 years.
The one and only true “Original” since 1926
from the original Thomas Jefferson Clark Mine”The bottles in evidence each are 500 ml. They are respectively Exhibit C, for the respondent, and Exhibit 6, for the applicants’ LifeSPRINGS Colloidal Minerals plastic bottle.
In addition, Exhibit 7 is a bottle labelled “MIN RA SOL”. It contains the applicants’ product and is said to be a:
“Natural Plant Derived Colloidal Trace Mineral Supplement”
It is described as manufactured by Hub Research and Development Co of Salt Lake City, Utah. The label reads as follows:
“MIN RA SOL is a unique blend of naturally occurring plant derived, colloidal trace minerals, formulated to the exacting standards of the Clark family for over seventy years. These products are naturally extracted in water without the use of acids or damaging heat, and are derived from an ancient natural plant deposit discovered in Central Utah by Thomas Jefferson Clark at the turn of the century. Today after three generations, countless thousands the world over have come to enjoy these natural, colloidal products and stand as witness to the impact of Tom’s discovery.
Tom’s no longer with us, but his legendary formulations live on in MIN RA SOL products. For nearly half a century Hub Research & Development Co. has remained Tom’s exclusive manufacturer.
The one and only true “Original” Since 1926.
From the Original Clark Mine”Another plastic bottle of the respondents’ product is labelled with the words “T. J. CLARK CREATING QUALITY PRODUCTS FOR over 75 years …” with a laurel crest. The label describes the product as:
“Legendary Colloidal Mineral Formula
The Phenomenon That Created the Colloidal Mineral Industry.”
The label also refers to “The Legend of T. J. Clark”, beside which appears a bust of a youthful figure accompanied by the following statement:
“In the early 1920’s, Tom Clark [Jefferson] was diagnosed with a life-threatening illness which caused his body to deteriorate until he only weighed 97 pounds and was in constant pain. Desperate to find a cure, his Native American friends told him they used to take their sick to a sacred spring to heal. Tom eventually found an older tribe member who remembered the spring and its location. Tom began to drink from it, and after a period of time his health improved. After much experimentation he was able to harness the magic of this sacred spring and bottle it. Word soon spread of Tom Clark’s discovery. In the 1950’s he passed on his secret formula to his grandson and namesake, Tom Clark [Thomas Clark Junior]. Today, after four generations, T.J. Clark & Company is still the only source in the world for this miraculous formula from the Sacred Spring.*
There are no other products in the world that duplicate T.J.Clark’s Colloidal Mineral formulas.* For a detailed explanation, analysis and product comparison, visit our fax on demand at 435-634-0309 then press option 4.
…”
It is clear from these labels that each producer markets the products claiming authenticity as to their source and process based on continuity with Jefferson’s original source and formula. Testimonials in evidence as to the applicants’ product indicate that some users have found that the colloidal liquid has marked beneficial effects in treating burns, “athletes’ foot”, heart disease, cancer and skin problems. It is even said to work miracles on rabbits. However, the correctness of these claims is not an issue in the present proceedings.
FAMILY TREE
Underlying the present dispute is a deep seated family division within the Clark family of Utah, in the United States of America. No members of the family are parties to the present litigation but two, Richard Clark (“Richard”) and Bret Clark (“Bret”), have been called as witnesses on opposing sides. An understanding of the relationships between members of the Clark family is helpful in understanding the nature of the present dispute, as the relevant history of the mine and its production involves three generations of the family. So far as the evidence discloses, the Clark family tree is as follows:
CLARK FAMILY TREE
Thomas Jefferson Clark
Born 1885
Died 1968
(Jefferson)Ora Clark Murdoch
Born 1909
(Murdoch)Thomas Jay Clark (Snr) marriedÕÕ
Died 1984
(T J Clark)Dorothy M Clark
Died 1958Thomas Jay Clark (Jnr)
Born 1942
(Tom)Robert Leon Clark
Richard Douglas Clark
Born 1952
(Richard)Bret William Clark
Born 1958
(Bret)
BACKGROUND FACTS
In approximately 1920, Jefferson came across a site which contained colloidal materials in a remote location in Emery County, Utah, about five miles from the township of Emery and about four hours drive from Salt Lake City. At that time, Jefferson was about thirty-five years old. He began to extract and experiment with the processing of trace minerals with a view to making a colloidal mineral liquid product with healing qualities which would promote good health and well-being. Both the precise location of the original site and the original process used by Jefferson are strongly disputed. The applicants claim that the original site is that known as Miller Rock, from which they derive their minerals. This claim is disputed by the respondents, who say that they produce their product with minerals from the original site.
Jefferson was engaged in producing and developing the product until some years before his death in 1968. For some of that time, Jefferson’s son, Thomas Jay Clark Snr (“T J Clark”), who died in 1984, worked alongside his father. Mrs Ora Clark Murdoch (“Murdoch”), Jefferson’s daughter, visited the site where Jefferson worked from as early as the 1920s and has been familiar with the site over a considerable period of time. A miner, Mr Hewitt (“Hewitt”), called by the applicants, worked with Jefferson at the site from 1945 onwards. In addition, the evidence indicates that Thomas J Clark Jnr (“Tom”) (born 1942), a grandson of Jefferson, worked with his grandfather for some time. In addition, I accept that for a period Richard (born 1952), the brother of Tom, went to the site during the late 1950s and 1960s. I also accept that Bret (born 1958), the youngest grandson of Jefferson, saw his grandfather at the site and spoke with his father and grandfather about the site.
In 1953, Hub Research and Development Company (“Hub”) was incorporated by T J Clark, his wife and his wife’s family. T J Clark carried on with the business of extracting, producing and distributing the colloidal product. His sons, Tom, Richard and Bret were also engaged in that business for some time. On 14 October 1963, Jefferson and his wife, Anna M Clark, transferred their interest in the Miller Rock mine site to Murdoch, their daughter. In 1976, Bret began to work with his father, T J Clark, as an apprentice at the Hub Research facility producing the applicants’ product. In 1984, T J Clark died and thereafter his three sons, Tom, Richard and Bret, split up. Bret continued working at Hub and his brothers began to operate at another site under the business name “T J Clark & Co”, which produces the product distributed by the respondents. The records indicate that T J Clark & Co was established in August 1985 and it then bottled the respondents’ product at Salt Lake City, Utah until September 1990, when it relocated to St George, Utah. The directors of that enterprise were Tom and his wife, Lia Clark (“Lia”), who were respectively President and Vice President.
In 1986, Anna M Clark, the widow of Jefferson, died and left her interest in the Miller Rock mine site to Bret.
On 31 July 1995, Murdoch transferred her interest in the Miller Rock mine site to Bret by way of Quit Claim Deed. The two businesses, Hub and T J Clark & Co, continue to operate in competition and under separate management to the present time.
In October 1995, C & M Laboratories International was incorporated, with Bob Musach and Scott Musach as Directors, and was engaged in marketing the respondents’ product. During late 1996/early 1997, Eckersley contacted Bob and/or Scott Musach in relation to distributing the respondents’ product but subsequently entered into an arrangement with Hub instead. In July 1997, Eckersley began to market the product produced by Hub. In August 1997, Eckersley received a letter from C & M Laboratories which caused him to contact Bob and Scott Musach and Tom about the Hub product.
Eckersley incorporated Contact on 8 September 1997. In November 1997, he became aware of documents distributed within the health food market which he considered were false and would mislead and deceive distributors and customers in relation to the provenance and authenticity of the applicants’ product. He subsequently became aware of the documents referred to earlier which are claimed to make the false representations alleged in the Further Amended Statement of Claim.
PLEADINGS AND ISSUES
After the evidence had closed, an application was made to amend the claims to allege that the second respondent (Kinnon) was not only an aider and abetter to the conduct or knowingly concerned in the conduct of the other respondents, as originally alleged under s 75B, but also that he personally made misrepresentations and was engaged in misleading conduct. After argument, I allowed the amendment, subject to providing Kinnon with an opportunity to give further evidence and reserving the question of costs. I am satisfied that no incurable detriment would be suffered by the respondents as a consequence of the amendment. No further evidence was given by Kinnon.
The Amended Statement of Claim asserts that Eckersley is the Managing Director of Contact, the first applicant. The first respondent (“Mineral Providers”) is a corporation and Kinnon is a director and shareholder. The third respondent (“C & M”) is a United States corporation with Mr Musach as its Chief Executive Officer. Mr Musach died prior to the hearing and no submissions were made on behalf of his estate in relation to this proceeding. However, C & M, which was engaged in distributing the respondents’ product, continued as a party and defended the proceedings.
The pleadings allege that, in or about November 1997, C & M sent by facsimile to Mineral Providers a circular letter headed “Mineral products – are you getting an authentic product?” It is alleged that this letter falsely represented that the colloidal mineral product distributed by Mineral Providers is sourced from the original mine site used by Jefferson. It is alleged that Kinnon sent copies of this letter to distributors and retailers in the health food industry in Australia.
It is further alleged that, in or about March 1998, C & M and Musach sent to Mineral Providers and Kinnon a circular letter dated 23 March 1998. This letter allegedly represented that the applicants’ product is not sourced from the original site nor is it manufactured to the procedures and formulas of Jefferson. It is also said to have misrepresented that the respondents’ product is so sourced. Copies of this letter were allegedly redistributed by Mineral Providers and Kinnon to various distributors and retailers of health food products in Australia and New Zealand.
A third set of misrepresentations is claimed to have occurred in or about July 1998 in the form of an “Information Letter” dated 7 July 1998. It was sent by facsimile to distributors of health food products, health care professionals, researchers and customers for colloidal mineral products and allegedly misrepresented that Eckersley was illegally using the intellectual property of Mineral Providers and was infringing copyright in a promotion of the applicants’ product. This letter is also said to have falsely represented that the applicants’ product is not sourced from the original mine site or manufactured in accordance with the procedures and practices developed by Jefferson, and that Eckersley was making dishonest claims in the market place to persuade consumers to purchase a product inferior to the respondents’ product. The letter alleged that the applicants’ lower quality product is sourced from Bret Clark of Salt Lake City, Utah, whereas the authentic product is produced by Tom Clark’s company.
A fourth set of misrepresentation are said to have been made in or about September 1998 in a letter dated 15 September 1998 to the President of the Nutritional Foods Association of Australia on the letterhead of Mineral Providers to the effect that the applicants had committed criminal offences and had dishonestly marketed and advertised their product thereby putting “at risk” Contact’s distributors by exposing them to legal liability. It is claimed that Kinnon aided and abetted and was knowingly concerned in the copying and sending of this letter, which is signed by him as Managing Director, to various distributors and retailers in the health food industry.
A fifth set of false representations is said to have occurred in or about September 1998 when, it is alleged, Mineral Providers and Kinnon sent a circular letter to the distributors of Contact Minerals (addressed “To All Life Spring Distributors”, ie those who distribute the applicants’ product). The letter, one version of which is dated 20 September 1998, alleged that Eckersley had abused and harassed distributors of the respondents’ product and that the distributors of the applicants’ product were at risk of being subject to legal proceedings because of their use of false and misleading material in connection with the sale of the applicants’ product. The letter also alleged that the applicants had engaged in blatantly false and misleading advertising practices by claiming in LifeSpring brochures that Nobel Prize nominee Dr Albert Fitzpopp had performed tests on LifeSprings Minerals. It is claimed that Kinnon aided and abetted and was knowingly concerned in the making of the representations contained in the letter.
The sixth set of misrepresentations is alleged to have arisen by Mineral Providers and Kinnon sending a circular letter to distributors of health food products and others in the form of an “Information Letter” dated 18 September 1998 which suggested that the applicants had circulated a letter concerning their product designed to perpetuate a fraud in Australia and that the applicants had taken advantage of an aged woman (Murdoch) to carry on such fraud. In addition, this letter is said to have alleged that the applicants’ product is not sourced from the original mine site nor produced in accordance with the practices developed by Jefferson.
In their defence, the respondents deny the allegations and say that their product is sourced from mineral lode claims owned by Jefferson and located in the vicinity or close to the original mine site used by Jefferson and that, in fact, the products are extracted, blended and processed according to methods first developed and used by him approximately seventy years ago. The respondents also say that the mineral product distributed by Contact is not sourced from the original mine site used by Jefferson and is not manufactured according to his procedures and formulas.
The questions raised for the Court are:
1.Whether the representations alleged by the applicants in the Further Amended Statement of Claim have been made out.
2.Whether the colloidal products distributed by the applicants are sourced from the original Jefferson mine site.
3.Whether the colloidal products marketed by the applicants are produced in accordance with the process developed by Jefferson.
4.Whether the assertions by the respondents as to the source and production of their product is correct.
5.Whether the respondents engaged in or aided and abetted the conduct complained of.
6. What relief if any should be granted.
REPRESENTATIONS – MEANING OF THE STATEMENTS
I am satisfied that the representations alleged by the applicants in the Further Amended Statement of Claim concerning the source and production of the respective products have been made out.
The first representation pleaded is that, in November 1997, a circular was sent by facsimile to the applicants’ distributors. When this circular is read in context by a distributor of the products it is clear that it casts doubt on the authenticity of the applicants’ product. The representation made is that the respondents’ product is the only original T J Clark mineral product and a reasonable recipient would be likely to assume that the reference to T J Clark mineral product was a reference to the product being sourced from the site discovered by Jefferson. Accordingly, I am satisfied that the first representation was made. As Counsel for the applicants points out, a representation does not have to be found in the precise literal words of the written document. It is also essential to consider the surrounding matrix of circumstances making up the context. As Hunt CJ at CL said in Amalgamated Television v Marsden (1998) 43 NSWLR 158 at 165, when considering the meaning conveyed by a statement made in a television broadcast:
“The ordinary reasonable meaning of the matter complained of may be either the literal meaning of the published matter, or what is implied by that matter, or what is inferred from it …”
Although those remarks were made in the context of a defamation action, I consider that they apply to the present circumstances and that the submissions of the respondents in relation to the first representation concentrate unduly on the literal wording of the circular.
The second circular letter of March 1998 is said to represent that the applicants’ product is not sourced from the original mine site used by Jefferson, that it is not manufactured according to procedures formulated and used by him, and also that the respondents’ product is sourced from the original mine site used by Jefferson. This letter was sent from Musach to Kinnon, who circulated it. In terms it says that the original Jefferson mine is the sole property of T J Clark and that T J Clark is the only producer of the mineral formula over the seventy years reputation of the original T J Clark product. In my view, this letter makes the assertions as alleged in the pleadings. In particular, the reference to the “original T.J. Clark mineral formula” is clearly a reference to the Jefferson production process.
The third document is the circular of 7 July 1998. In submissions, the applicants do not seek to rely on any representation that Kinnon was illegally using intellectual property or copyright materials in promoting its products. However, they rely on three representations which are similar to those alleged in the second representation. This “Information Letter”, on a fair reading, conveys assertions to similar effect as the documents referred to earlier.
The fourth set of representations are said to have been made in a letter dated 15 September 1998 to the President of the Nutritional Foods Association of Australia. It is not contested that this letter alleges that the first applicant has broken commercial and criminal codes in every State and Territory in Australasia and has jeopardised their distributors and retailers in so doing. I am satisfied that these representations were made.
The fifth set of representations, claimed to have been made in September 1998, were that the second applicant had abused and harassed the distributors of Mineral Providers, that the distributors of the applicants’ product were at risk of becoming involved in legal proceedings because of false and misleading material used by the first applicant in connection with the sale of its products, and that the applicants had engaged in false and misleading advertising practices. While the respondents do not dispute that these representations were made in this letter, they say that the respondents’ position has been vindicated and that, as regards the origin or method of manufacture of products, the applicants have failed to show that they were false. I am satisfied that the representations were made.
The sixth set of representations allegedly concern the claim that the applicants had told deliberate lies calculated to perpetuate a fraud, had taken advantage of an eighty-nine year old woman to perpetuate the fraud, and that the applicants’ product is not sourced from the original source or manufactured in accordance with the formula developed by Jefferson. These representations are admitted by the respondents but it is said that the applicants have not demonstrated that the material is inaccurate or false.
Two further misrepresentations were not pleaded but were referred to and sought to be relied on by the applicants; namely, a letter dated 17 March 1998 from Paul Tipper & Associates, and Exhibit C, being the statements on the label of the respondents’ product which contain assertions as to the original source of the products. No application to amend the pleadings was made in respect of these matters and I am satisfied, in any event, that no leave should be granted. To amend that pleadings in this respect at this late stage could be prejudicial to the respondents having regard to considerations which were no doubt taken into account as to the adducing of evidence and to the nature and extent of cross-examination in order to meet the pleaded allegations.
CREDIT
The question of credibility is important in this case. There is a clear conflict of evidence between Bret, Murdoch and Hewitt, on the one hand, and Richard, on the other. This conflict of evidence relates to the central issues of the location of the original colloidal mineral source and the production processes used in its manufacture.
Having regard to the fact that witnesses were required to recollect events occurring over seventy years ago, the testimony must be approached with some caution as to its reliability.
The principal witness called for the respondent on the central issues of source and process was Richard. It is said by the respondents that he is the only member of the Clark family to have been “personally involved in the manufacture” of his late grandfather’s and father’s product. Richard was not an impressive witness. He could not make any direct observations as to the history of the mine before the latter half of the 1950s. His brother, Tom, who is said to use Jefferson’s formula, is ten years older. Richard claimed in his affidavit of 20 September 2000 that Tom “was the only one old enough to know the location of the original mine site”. However, Tom was not called to give evidence. Richard’s initial affidavit was almost entirely inadmissible and leave was granted to supplement it by oral evidence. He gave his evidence in an off-hand manner and many of his answers were non-responsive and argumentative. His recollection was not clear in a number of instances and his evidence was generalised. He had not seen his bother Tom’s facility since 1990, yet he was prepared to make broad general assertions as to the applicants’ product. He volunteered answers which were unnecessary. For example, when asked whether his grandfather carried out his production using black coal-like material he answered in the negative but then took the opportunity to assert that Hub Research, which processes the applicants’ product, had used such material. He also said that he was close to Tom and his family.
Richard testified that he and Tom spoke with Hewitt in about 1984. Hewitt, so it is said, took him to a site which he understood to be the site of the original mine and said words to the effect that this is “where the good stuff is” and this is “the original spot”. The evidence of Hewitt, which I accept, was to the effect that he misled Richard as to the site of the original mine. Hewitt gave evidence that the original site was, in fact, at Miller Rock, where the applicants’ product is sourced. Moreover, on the question of the location of the site, it is apparent from the Affidavit in Reply of Richard, in response to the evidence of Murdoch and Hewitt, that he and Tom were uncertain as to the location of the original site, as of about 1984. This is said to be the reason why he approached Hewitt. This again casts some doubt both on the reliability of Richard’s testimony as to the location of the original site and on the knowledge of Tom, who runs the T J Clark & Co operation It is also apparent from the affidavits that Richard and Tom did not get on with Bret.
There is some documentary evidence in the form of a Notice of Location of Placer Claim, dated 1948, which refers to the “discovery” of a valuable deposit at the Miller Rock site. However, all that the document asserts is that the site at Miller Rock was claimed to have been first located in 1948 and that an application for final registration was made at that time. I do not think that this document, when properly construed, corroborates the evidence provided by Richard. The position contended for by Richard is contrary to the evidence of Murdoch and Hewitt that the Miller Rock site was the source of the material years before the claim was made in 1948.
I am satisfied that the evidence given by Murdoch, notwithstanding her age and infirmity, was given with a firm and clear recollection. Her evidence was from direct observations of activities which took place in the early years of the operation of the mine and through all relevant times. It was specific and detailed. Her recall of details was confident. Where there is a conflict, I prefer her evidence to that of Richard. In particular, I accept her evidence that she made many visits with her father to the mine as a young girl, many years before 1948, and that she observed the mining of material that took place at the Miller Rock location. I am also satisfied that she has a distinct recollection as to what Jefferson did on the site with a view to extracting the minerals and breaking them and mixing them in enamel pots to make up the colloidal mixture which was the original product. I am further satisfied that her evidence as to the continuation of that process, except for the use of stainless steel pots instead of enamel pots, in the Hub Research operation should be accepted. Her version of events is corroborated by the evidence of Hewitt, whom I regard as both independent and a witness of truth. Although his recollection did not appear as clear as that of Murdoch, it was sufficiently lucid to corroborate the substance of her evidence. I have taken into account Hewitt’s admission that he misled Tom and Richard as to the location of the original site. However, I accept him as a witness of truth in his present testimony. I accept his evidence in relation to the statement made to him by Jefferson in 1945 to the effect that he, Jefferson, had discovered the site “many years ago” and that the material mined there was used to “produce a very special mineral water”. I also accept that he was never told by Jefferson that there was any other mine site that had ever been used to supply the mineral product.
The evidence of Tom’s brother, Bret, is consistent with the evidence of Murdoch and Hewitt, although he could not be expected to recollect the mine site or mining process until, at the earliest, the mid 1960s, since he was born in 1958. I prefer his evidence, where it differs, from that of Richard in relation to the location of the site, what he was told, and the way in which the mineral was and has been continuously processed by Jefferson and himself. Some criticism was made of his evidence because, in paragraph 5 of his affidavit of 10 November 1999, he said that Jefferson, in the mid to late 1920s, developed a procedure to refine the material and that, after many years, Jefferson “felt his formulations were ready for distribution on a commercial level” and “to achieve this goal” Jefferson thereafter “searched for the best site to locate his mine … and found this site in Miller Canyon”. (Emphasis added) The inference is said to be that because he had to search for the Miller Rock site it could not have been the original site. In my opinion, his assertion is not inconsistent with the Miller Rock site, which is within Miller Canyon, being the original site. The fact that his grandfather may have searched around that area to locate the mineral source and locate its boundaries does not require a conclusion that Miller Rock was not the original site. In cross-examination, Bret was asked whether what he was told by his father was reflected accurately and truthfully in paragraphs 5 and 6 of his Affidavit and he agreed. I am satisfied that, in answering that question, Bret was reaffirming what he claimed he was told by Jefferson; namely, that the Miller Rock site was the original site. I do not take him to have agreed with any proposition to the effect that, when he referred to Jefferson searching for the best site to locate his mine and finding it in Miller Canyon, he considered the Miller Rock site was not the original mine. In answering questions put to him, Bret gave his evidence carefully, as demonstrated by his reluctance to give answers which had been objected to on the basis of hearsay. Richard, on the other hand, gave the firm impression of giving his answers in an off-hand and self-serving way by frequently and persistently introducing extraneous matters relating to family discord.
Whilst on the question of credit, I should note that I have considerable reservations in accepting the evidence of Eckersley having regard to his assertion that the similarities between his brochure in relation to the product and that of C & M were a coincidence. Furthermore, Eckersley’s failure to correct the mis-statement as to the testing of the product by Dr Fritz Popp goes against the credibility of his evidence. In addition, Eckerlsey’s denials in cross-examination in relation to assertions of endorsement by Dr Popp were unconvincing. However, in deciding the central issues in the case, the credit of Eckersley is not of significance.
DOCUMENTARY EVIDENCE
The principal document relied on by the respondents is a Notice of Location of Placer Claim posted on the ground at Miller Rock on 5 July 1948. The “locators” are shown as Rinda N Clark, T J Clark and two others. The document states that the signatories, on 1 July 1948, “discovered a valuable deposit of FLUX SHALE within the limits of … [the] claim” and by virtue of that discovery have located and claimed a placer mining ground to be known as Miller Rock. The claim is an area of approximately eighty acres. The document appears to be signed by the Recorder of Emery County, Utah. It contains a number of stamps which record “proof of labour” for annual periods. I accept that this document is an official record. However, it does not preclude, in terms or on its face, a finding that Jefferson had discovered the Miller Rock site and worked a deposit of minerals there 28 years or so previously. It does not necessarily mean that it was only in 1948 that the deposit was first discovered. The document can be construed consistently with the site having been previously located by Jefferson.
The other documents, in the form of subsequent Quit Claim Deeds, do not affect this interpretation but simply deal with the devolution of the interests. The evidence of Hewitt is to the effect that the Miller Rock site had been worked, both by him and to his direct observations, in the period from July 1945, when he first came to the site at Miller Rock, and beyond. Therefore, the document cannot be taken to establish that the site was only discovered in 1948. In addition, the evidence of Murdoch reaches back to the 1920s and is inconsistent with such an interpretation. Both Hewitt and Murdoch were able to give direct observation evidence as to what they saw happening on the site in those earlier periods in addition to what was recounted to them by Jefferson.
Title records (Exhibit 10) indicate that several months after the death of their father, T J Clark, in July 1984, Tom and his wife Lia, together with Richard, made claims to mining interests in the vicinity of Miller Rock. These were known as the “Daddy Dearest” claims, no doubt in memory of their father. They were “lode” claims which related to mining materials at a deeper level than the placer claims. At this time, Bret and the Hub Research Centre continued to mine and process minerals from the original placer claim site at Miller Rock. It was suggested that the 1984 claims were made to override the placer claims. However, the evidence is not sufficient to warrant such a finding. I do not consider that the existence of the 1984 lode claims justifies a finding that they refer to the original mining site discovered and used by Jefferson.
Exhibit 10 also records lode claims made by T J Clark dated 23 April 1954. The claim names refer in these instances to “Miller”. However, the existence of these claims, at most, indicates some indeterminate area at Miller Pass. They do not, on the state of the evidence, support the conclusion that T J Clark & Co, after 1984, was obtaining its minerals from the original source found by Jefferson.
As to the production process carried on by the respondent, there is a “Food Establishment Report” by the Utah Department of Agriculture (Exhibit E) recording an inspection of the T J Clark & Co operation at Salina, Utah made on 14 February 1997. Relevantly, it records that outside the factory building on the site there were “numerous piles of black dirt, several trucks and a series of pits lined with plastic and filled with water and black dirt”. Each pit was connected by a series of hoses and pipes. Inside the building the inspector met the manager, Darrol Webb, and noted eight large plastic or fibre glass holding tanks of about 7,000 gallon capacity. In the centre of the building was a dirt hauling truck about 40 foot long and 6-8 feet wide filled with black dirt. There was a garden hose with several sprinklers attached spraying water on top of the truck. A drum on the bottom of the truck was collecting the water which was “brownish coloured” and running it through a transfer tank to one of the eight large tanks. The inspector records that “the conditions inside the building were not satisfactory for any type of food production” but he was told by the manager that the facility was producing only plant food. The inspector did not notice any finished product or bottling facilities. The layout and use of dirt at the T J Clark & Co premises, as recorded in these observations, are quite different to those observed by the witnesses for the applicants in relation to the production of the applicants’ products at the Hub Research Centre.
There were also two documents in evidence from the Department of Agriculture, Division of Regulatory Services, itemising a number of contraventions at the St George Plant of the T J Clark & Co operations. One of the documents is part of Exhibit E and is dated 1 April 1999. The second document is part of Exhibit G and is dated 15 January 1998. In a further document (Exhibit G) dated 2 July 1991, from the Department of Health and Human Service, the business of T J Clark & Co is described as manufacturing bottled mineral water for wholesale distribution nationwide. There is a record of an inspection on 1-2 July 1991 when the company was not processing. It records that the approved source water used in the processing of T J Clark’s mineral formula product was from St George municipal water supply. The operation of Tom and Lia Clark is then recorded as having been described as follows:
“T. J. Clark & Co. established 7/8/85 and located originally at 939 Jewel, Salt Lake City, Ut 84104, bottled Clark’s Original Mineral Formula in 1 pt. 1 Qt. and 1 Gal. bottles. The liquid, trace mineral supplement, as described by Mr. Clark, was bottled at the Salt Lake City location until Sept. 1990 when the firm was then relocated to 1145 N 1100 W., St George, Ut 84770. Only excavation equipment is stored at the Salt Lake City location. No liquid, trace mineral supplement is bottled at this location.”
There is then a description of the process relating to the respondents’ product which is largely ‘whited out’ due to its confidential nature.
EVIDENCE OF FAMILY MEMBERS AND HEWITT ON PROCESS
The evidence of Murdoch is that, according to her observations, the applicants’ product continues to be manufactured in the same way as that originally used by Jefferson. Her evidence is to the effect that while there were some variations in relation to the use of storage tanks, namely stainless steel tanks in place of the enamel pots used by Jefferson, there was an essential continuity in the method of production used by her father and that of Hub. Her evidence is corroborated by that of Hewitt. In addition, I accept the evidence of Bret to the effect that he saw his father and grandfather working together in the factory from the early 1960s through to 1984, when his father died. Jefferson died in 1968 and Bret’s father, T J Clark, died in 1984. Bret’s detailed evidence was that he witnessed the equipment used in the processing procedures and the grinding and pulverizing of ore from the Miller Rock site. The ore was introduced into the processing vats in a slurry form. He refers to the general extraction methods used and the packaging of the finished product. He observed, in the period up to 1984 and after, the product being produced and packaged in the Hub factory. He said that, except for the use of more modern equipment, the same methods were used in relation to the production of the applicants’ product. He said that he had a new generation of vats which had been especially designed for the processing of the material and which provided greater volume capacity. However, his evidence was that the production procedures still followed the original methods of formulation that he saw his father using and which his father taught and which he was told were the formulation methods of his grandfather. He described in considerable detail the essential way in which the product is made. He described the mining and production processes and the location of the Miller Rock mine in such detail as to indicate a close observation and involvement. Bret, during his entire adult life, has essentially only worked for Hub.
The evidence for the respondents on this point was given by Richard who, in a number of important respects, was not familiar with the current method of production of the respondents’ product and who, it is fair to say, had been out of touch with the operation for many years. I therefore do not accept his evidence on this point as providing any useful guide in determining both whether the original process is being used and whether the respondents’ product is currently produced in accordance with the original method.
FAILURE TO CALL TOM CLARK
The operator of the T J Clark establishment producing the respondents’ product is Tom Clark, who was not called to give any evidence as to the method of production used in the making of the respondents’ product. It is apparent, especially having regard to the lack of current familiarity with the existing process on the part of Bret, that Tom could reasonably be expected to have been called on the part of the respondents if he could give any useful evidence to support the respondents’ case as to the original site or as to the method of manufacture. On the present state of the evidence, an inference can reasonably be drawn to the effect that the process used in the making of the applicants’ product was that essentially used by Jefferson. The absence of Tom as a witness and the lack of any satisfactory explanation for his not having been called reinforces the inference which could independently be drawn from the facts, in accordance with the principles set out in Jones v Dunkel (1959) 101 CLR 298 at 308 per Kitto J.
Weighing the evidence, taking into account the documents, and bearing in mind the failure of the respondents to call Tom, I am satisfied that the correct inference is that the version of events recounted by the applicants’ witnesses is accurate and that the Miller Rock mine was the original source of the mineral products and that Hub has continued to use substantially the same process as that used by Jefferson with some modifications, such as the use of stainless steel tanks instead of enamel pots, as testified to by Murdoch.
WAS KINNON A MERE CONDUIT?
The respondents submit that, even if the representations are shown to constitute misleading and deceptive conduct, nevertheless Kinnon cannot be held responsible because he was in effect a mere conduit for the passing on of information which was given to him. The principle underlying the notion of a conduit is that adverted to by the High Court in Yorke v Lucas (1985) 158 CLR 661, where Mason ACJ, Wilson, Deane and Dawson JJ said, at 666:
“It is … established that contravention of that section [s 52] does not require an intent to mislead or deceive and even though a corporation acts honestly and reasonably, it may nonetheless engage in conduct that is misleading or deceptive or is likely to mislead or deceive … That does not, however, mean that a corporation which purports to do no more than pass on information supplied by another must nevertheless be engaging in misleading or deceptive conduct if the information turns out to be false. If the circumstances are such as to make it apparent that the corporation is not the source of the information and that it expressly or impliedly disclaims any belief in its truth or falsity, merely passing it on for what it is worth, we very much doubt that the corporation can properly be said to be itself engaging in conduct that is misleading or deceptive.” (Emphasis added)
Therefore, knowledge is not a condition of liability under s 52 of the Act. Yorke is also authority for the proposition that knowledge is a condition of liability under s 75B of the Act. That section applies to persons who aid, abet, counsel or procure a contravention or who induce the contravention or who are directly or indirectly knowingly concerned in the contravention. The principles enumerated in Yorke have been consistently followed in subsequent judgments: see, for example, Nescor Industries Group Pty Limited v MIBA Pty Limited (1997) 150 ALR 633 at 637-638.
Kinnon also relied on the decision in Saints Gallery Pty Limited v Plummer (1988) 80 ALR 525 where a Full Federal Court, applying Yorke, decided that a gallery owner who had relied on information given by a non-expert as to the provenance of a painting was not in breach of s 52 in circumstances where it was apparent that the gallery was not the source of the information and had impliedly disclaimed any belief in its truth or falsity, merely passing it on to a prospective buyer.
Counsel for Kinnon also referred to the Full Court decision in Logie Brae Pty Limited v Sevenhill Holdings Pty Limited (FCA, 27 October 1992, unreported) where the Court decided that the respondent had not participated in a contravention of s 52. In that case there had been a clear and prominent disclaimer and the particular circumstances made it apparent that there was no participation on the part of the respondent in making the incorrect representation. The facts of that case bear no resemblance to the present case.
With respect to the representation originating from C & M, I am satisfied that Mineral Providers and Kinnon did more than simply pass on the material provided. Kinnon admits that he was the author of the letters dated 15 and 20 September 1998 sent on behalf of Mineral Providers. Nowhere in the letters is there any suggestion that Mineral Providers or Kinnon are simply passing on information. Kinnon contends that he conscientiously relied on information given to him by Musach and C & M. He claims to have taken steps to verify the information by travelling to the United States on two occasions and visiting the sites where material for Mineral Providers’ product is extracted and speaking with Tom about the procedures used there. The fact that he may have believed the statements contained in the letters does not, of course, mean that he was a bare conduit. Indeed, it may explain why Kinnon would be likely to participate in the diffusion of the statements. However, the information was distributed to consumers of the applicants’ products who were selling in direct competition to Mineral Providers, and Kinnon was a director and shareholder of that company.
There was no express or implied disclaimer in relation to the information. Indeed, Kinnon and Mineral Providers held themselves out to be the suppliers of the “authentic” product. In the absence of a disclaimer, a recipient of the information would be likely to infer, as a matter of common sense, that the first two respondents, in circulating the material, were adopting and endorsing the remarks it contained. In other words, Mineral Providers and Kinnon should be taken to have disseminated the misrepresentations as their own. There was no question that Kinnon was responsible for the day to day activities of the first respondent and, accordingly, it was Kinnon who in fact engaged in the conduct in question. He gave evidence that he personally posted and transmitted the letters and that he did so with a commercial purpose in mind; namely, the enhancement of the respondents’ product in the Australian market. He said that the allegations, for example in the first letter, were statements that he was prepared to adopt as his own because he believed them to be correct. That included an allegation that in Australia “there are unscrupulous companies that would have people believe that their product is coming from [the T J Clark] source” when in fact it does not, and also that some companies, particularly in Australia (namely the first applicant), have made claims that their product is the original T J Clark mineral product and that they used the respondents’ material in their marketing efforts. Kinnon clearly adopted the position that he was the distributor of the only authentic product. The reason he gave for distributing the letter of 20 January 1998 was his incentive to make profits for his own company, Mineral Providers. This indicates that, in distributing material, he was promoting this product in his own commercial interest. In his letter of 15 September 1998, on the letterhead of Mineral Providers, he refers to “our products”. He continues:
“These are very serious allegations that I have just made. I will be attaching evidence proving that the Contact Minerals point of sale material is false and misleading … Over the last nine months, I have put copious amounts of information into the market place …” (Emphasis added)
Accordingly, I do not accept the submission that either Kinnon or his company, Mineral Providers, were merely conduits for the communication of information received from C & M Laboratories. There were a series of representations which Kinnon was not only content to distribute but which he had an incentive to distribute. He must be taken to have participated in the false representations formulated with C & M.
CONCLUSION
Accordingly, I find that the process and the method of manufacture used in the production of the applicants’ product was that originally used by Jefferson and that the process and the method of manufacture used to make the respondents’ product is not in accordance with that process. I also find that the applicants’ product is sourced from the original site and that the respondents’ product is not and that, therefore, there have been misrepresentations in the statements referred to in the Further Amended Statement of Claim and that there has been misleading conduct on the part of Mineral Providers, Kinnon and C & M in contravention of the Act. In view of this conclusion, it is not necessary to address the other provisions of the Act referred to in the Further Amended Statement of Claim.
RELIEF
It follows from my acceptance of the principal witnesses called for the applicants and the matters which I have referred to above, that the respondents have engaged in misleading conduct and that there has been a breach of s 52 of the Act. This is a case where appropriate declarations should be made. I am satisfied that, unless restrained, the misleading conduct will continue and that this is a case where injunctive relief should be granted. I note that additional relief has been claimed and I direct the applicants to serve on the respondents draft Short Minutes of appropriate Orders, at a time to be arranged with my Associate, dealing with questions of costs and directions as to any future proceedings in relation to any outstanding question of damages or other relief sought.
I certify that the preceding sixty-seven (67) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Tamberlin . Associate:
Dated: 3 August 2001
Counsel for the Applicants: Mr S Wheelhouse Solicitor for the Applicants: Mr M Quintiliani
Kells The LawyersCounsel for the Respondents: Mr J Stoljar Solicitor for the Respondents: Mr G Coyne
Coyne & WhittemoreDate of Hearing: 6-8 March 2001 and 5 June 2001 Date of Judgment: 3 August 2001
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