Elna Australia Pty Ltd v A.F. Harding & Co Pty Ltd

[1978] FCA 108

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CATCHWORDS

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' Trade prac t ices - Misleading and deceptive conduct -

Inter locutory injunct ion - Application by competitor -

Balance o f convenience - Delay. .

Trade Pract ices A c t 1974, ss. 52 & 80.

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ELNA AUSTRALIA PTV. LIMITED v. A. F. HARDING & CO. PTY. LIMITED

G. Ro. l 5 0 o f 1978

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Coram: Franki J.

Sydney

20 December 1978

I N THE FEDERAL COURT OF AUSTRALIA ) \

NEW SOUTH WALES DISTRICT REGISTRY j G. No. 150 of 1978

GENERAL DIVISION

BETWEEN : ELNA AUSTRALIA PTY. LIMITED

i Applicant

AND :	A . F. HARDING & CO. PTY.
LIMITED

Respondent

CORAM: FRANK1 J.

20 December 1978

REASONS FOR JUDGMENT

The appl icant , Elna Australia Pty. Limited, seeks

an interlocutory injunction against the respondent, A. F.

Harding & Co. P ty . Limited r e s t r a in ing it from engaging

by i t s e l f , i t s servants o r agents in conduct in trade o r

commerce in connection with the supply o r possible supply

of Bernina brand sewing machines o r the promotion by

any means of the supply o r use o f such sewing machines :

(a) representing t o any other person, firm o r

corporation tha t :

( i ) Bernina sewing machines have automatic

tension adjustment;

( i i ) Only Bernina sewing machines need no

a tension adjustment;

( i i i ) Bernina sewing machines sew a l l f ab r i c s

bet ter than other sewing machines;

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(iv)    No sewing machines other than

Bernina sew a perfect straight and

zig-zag',;s'ti%ch in all weights of fabric

without tension adjustment;

(v) machines stretch three times more and Stretch stitches sewn by Bernina sewing sewn by other sewing machines;

(b) Making any statement or representation to any

other person, firm or corporation to the same

or similar effect as any of the representations

L set forth in paragraph (a) above.

Certain other relief is also sought,which,in substance,is to

restrain a variety of acts such as aiding or abetting or beixg

knowingly concerned in the making of such statements.

The applicant and respondent are both engaged in

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selling sewing machines, the applicant under the name

llElnafl and the respondent under the name ltBerninafl.

The respondent has been advertising its sewing

machines in Australia since 1972 as IIOnly Bernina needs

no tension adjustment. Its automatic." This form of

advertising attracted the attention of the applicant and

in 1976 it .communicated with th.e Trade Practices Commission

in an attempt, inter alia, to stop such statements being

made. A great deal of correspondence ensued and by letter

of 5 May 1976 the Trade Practices Commission wrote to

the applicant's solicitors saying'that there was insufficient

basis t o indicate a. contravention of the Trade Practices Act

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i n r e l a t i o n t o t he claim that only Bernina needs no .

tension adjustment. The l e t t e r con ta ined a paragraph

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which read : . e

"The Commission's staff then sought

independent expert advice and interviewed

Fashion a t the East Sydney Technical	a Mr. Richardson, Head.of the School.of
College, who confirmed t h a t t e s t s conducted
by his College on behalf o f t he N.S.W. Government Stores Department confirmed
. t h a t Bernina machines required no tension
adjustment whereas a l l other makes t e s t ed ,
including Elna, d id require tension
adjustment. The Commissionts staff then sought f rom Mr.. Richardson permission t o interview h i s lec tur ing staff and they
similarly advised the Commissionts
o f f i c e r s of t h i s assessment,f1

The applicant continued t o correspond wi th the

Trade Practices Commission until August 1977. There was

no evidence of any fu r the r ac t ion by the app l i can t un t i l

proceedings were commenced i n t h i s Court by way o f an

f

order t o show cause issued on 30 November 1978.

The second major ground o f complaint was about

a form o f promotion which comnenced i n March 1978 and

which appears t o have been conducted largely through

the applicant 's dealers. This promotion was directed

i t o what a re ca l led l f s t re tch s t i t ches1 ' , and a c i r c u l a r

by the resp.ondent t o i t s dealers of 30 March 1978 claimed,

i n t e r a l i a , .that "In layman's terms, the Bernina stretch

s t i t ch s t r e t ches th ree t imes g rea t e r and . i s l 3 times stronger

than the next best machine tes ted." Th i s statement was

s t r e t c h

apparently based on what was c a l l e d a / s t i t c h t e s t r e p o r t

carr ied out by Ifan independent authorityf1, The c i r cu la r

a lso mentions t h a t t h e s t i t c h used i n each machine was the

s t i t c h recommended by the manufacturer. There was no

evidence of any complaint being made about th i s form

of adver t i s ing unt i l the order t o show cause was obtained.

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No undertakings were offered by the respondent

but the respondent indicated a t the conclusion of the

hearing that, whilst proposingto continue t o use the

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claim t h a t I'Only Bernina needed no tension adjustment.

Its automatic", it did not propose t o i n i t i a t e f r e s h

adver t i s ing c la iming tha t s t re tch s t i t ches sewn by Bernina sewing machines stretched three times greater

and 13 times stronger than other machines without

l imit ing that c la im t o s t i t c h e s recommended by the

manufacturer of the other machines. The evidence f o r

the respondent as t o future advert is ing was very

imprecise and t h i s was explained as being due t o the

fac t tha t the exac t na ture o f future advertisements had

not yet	been received by the 1-espondent from i t s advert is ing
agents.

Since th i s is an appl icat ion f o r inter locutory

r e l i e f it i s not appropriate t o attempt t o make any firm

findings about the t ruth o f the claims made i n t h e

promotional material t o which objection is taken by the

applicant. I have first t o consider whether a prima

fac ie case is made according t o the requirements set

out by the High Court i n Beecham Group L t d . v. B r i s t o l '

Laboratories P ty . Limited (1968) 118 C.L.R. 618. The

proceedings are brought under s.80 of t he Trade Pract ices

-	Act 1974 ("the Act") and the contravention. alleged is
that the representations complained o f are misleading
o r deceptive o r l i k e l y t o mislead o r deceive within
s.52( l ). of the Act. It was a l s o alleged tha t they were i n

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contravention o f ss.53 and 55 o f t h e Act. However, I

am s a t i s f i e d that it is only necessary t o consider the

question o f the contraventQn .of s.52 because a contravention .

of t ha t s ec t ion would be s u f f i c i e n t t o support the

injunctions sought.

Before dealing w i t h the question o f whether a

prima fac ie case has been established I consider it is

appropriate t o examine the matters which I must consider i f

I am s a t i s f i e d that a prima fac ie case has been established.

In th i s regard s .80 (2 ) o f the Act provides, so fa r as is

relevant , that an interim injunction may be granted t o

r e s t r a i n a person from engaging i n conduct tha t cons t i tu tes

or would cons t i tu te a contravention o f s.52 of the Act

where in the opinion o f t he Court it is desirable t o do so .

Section S O ( 4 ) and (5) s o far as is relevant , provides that

i f the Court is of the opinion that it i s desirable t o do

so, it may grant an interim injunction against engaging in

such conduct whether o r not it appears t o the Court tha t

the person intends t o engage again o r t o continue t o

engage i n such cond.uct and a l s o whether o r not there i s

an imminent danger o f substantj-a1 damage t o any person

i f the person sought t o be res t ra ined engages i n such

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conduct

Although apparently t h i s ac t ion was commenced

without the interests of the public being prominent in

the mind o f the applicant and although the evidence

on behalf o f the appl icant was tha t it hoped as a r e s u l t

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of t h e l i t i g a t i o n t o ge t some advice from the Court as

, t o how it might conduct i t s clwn advert is ing campaign,

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(which was said t o commence a t a date not yet determined,

but probably i n March) it appears t o be well established

t h a t t h e Court should look 9% such an action as

predomi.nantly, though not exclusively, one involving

consideration o f the publ ic in te res t . See Commercial

Bank o f Australia L t d . v. Insurance Brokers Associaticn

of Australia (1977) 16 A.L.R. 161 and World Series Cricket

Pty. L td . v. Parish (1977) 16 A.L.R. 181.

On the return date o f the order t o show cause,

which was 5 December 1978, I indicated tha t the Court

could offer hearing dates f o r the a.ction early in 1979

and i n p a r t i c u l a r as ear ly a s 6 February 1979 and before

reserving my judgment 1 f ixed 26 February 1979 as the hearing date s o t h a t I am only concerned t o deal wi th

the posi t ion in the intervening per iod	of	some	three
months.

In considering the nature of the prima f a c i e

t

case which must be established i t is c l ea r from the

j o i n t judgment i n Beecham G r o w L t d . v. B r i s t o l Laboratories

Pty. Limited, supra, a t p.622 that before the Court w i l l

g r an t r e l i e f t he p l a in t i f f must make out a prima f a c i e

case in the sense that i f the evidence remains as it is ,

there i s a p robab i l i t y tha t a t the t r i a l of the ac t ion

the p l a in t i f f w i l l be held ent i t led t o r e l i e f . The

judgment, while pointing out that the Court does not

undertake a p re l imina ry . t r i a1 and give o r withhold

in te r locutory re l ie f upon 2 forecas t as t o the ul t imate

- r e s u l t of the case, says i n r e l a t i o n t o a prima fa& case

,	t h a t !lHow strong the probability needs t o be depends, no doubt, upon the nature of the rights he asserts and
the p rac t i ca l consequences l i k e l y t o f low from the order

: he seeks!!.

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In the case before me I have t o bear in mind

t h a t i f the orders sought+y.erc in substance granted by

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interlocutory injunction the course o f advert is ing of

the respondent in re la t ion t o the claim that "Only

Bernina needs no tension adjustment. Its automatic",

which i t ' h a s used f o r some s ix yea r s , would be stopped

upon a bas is which, depending upon the ult imate obtcome

o f t h i s ac t ion , might o r might not prove t o be j u s t i f i e d

whereas so f a r as appears the whole ac t ion w i l l be

determined within a period o f about three months. In

addi t ion the problem of giving effect t o any injunction

would be compounded by the proximity o f Christmas.

The second major complaint, regarding statements about the

s t re tching capaci ty and s t rength o f s t r e t c h s t i t c h e s sewn

by Bernina sewing machines is directed t o conduct which

commenced i n March of th i s year , and does not seem t o be

strenuously pressed by the respondent a t present.

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Looking, a t t he na t t e r from the angle o f the

applicant it i s d i f f i c u l t t o see tha t it would be

seriously prejudiced by a delay of th ree months i n a

determination o f the matter in issue and from the evidence

given it appears that it is concerned t o use the resu l t

of t h i s act ion t o help it decide the nature of i ts own

advert is ing campaign,

The other major matter f o r consideration is that

o f t he in t e re s t s o f the publ ic and t h e e v i d a c e was tha t

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the p laPnt i f f s hac? something o f the o rde r o f 7% o r 8%

'of t h e t o t a l market f o r sewing'machines and that t h e t o t a l

market i s o f the orde r of l 5 O , O O O machines p e r annum.

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If in the nex t t h ree months some,of the potential

purchasers o f . sewing machines sho7lld be mis led or

deceived by claims made by,'she; respondent which 0

ul t imately turn out t o be un jus t i f i ed a s ign i f i can t

p o s s i b i l i t y of damage would a r i s e .

Having t raced the nature of t he major problems

which a r i s e f o r consideration I proceed t o an examination

o f . the evidence which was before me.

The evidence before me on the question o f the

t r u t h o r f a l s i t y 'of the claim Only Bernina needs no

tension adjustment. Its automatict1 f a l l s in to three

categories :

1. Sworn technical evidence;

2. Other material before the Court of a hearsay

nature;

3.	material.	Other
In category l i s the evidence o f a Mr. Bennett,

a mechani.c,who had car r ied out a number o f t e s t s i n 1978

and who said that an examination of the Bernina machine

model g00 disclosed no mechanism which he thought was

capable o f automatically affecting the tension o f the

thread, that sewing t e s t s conducted on the Bernina

machine and four others using fabrics o f sa t in , popl in ,

cotton and denim produced r e s u l t s which were i n p r a c t i c a l

t h a t

terms the same a n d h i s t e s t s d i d n o t s u p p o r t t h e

proposit ion that only B'ernina needed no tension adjustment

or t h a t i t s tension adjustment w a s automatic. The

merchandise manager f o r the appl icant , Mr. Windler, who had long experience as a mechanic i n r e l a t i o n t o sewing

machines, and had a l s o served an apprenticeship,

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t 1: c r i t i c i s e d Mr. Bennet t ' s t es t s say ing tha t l imited the

!. range o f f ab r i c s chosen by Mr. Bennett did not include

i;	syn the t i c s t r e t ch f ab r i c s hd -d id no t adequa te ly
i l l u s t r a t e t h e s i g n i f i c a n t d i f f e r e n c e s between the
Bernina machine and the other machines which Mr. ,Bennett
had tes ted .

The most re levant mater ia l in category 2 is

the staten ent contained i n t h e ' l e t t e r of 5 May 1976 from t he Trade Pract ices Commission t o which I have previously

referred. Although t h i s i s purely hearsay I consider

i n an interlocutory application o f t h i s na tu re it is

evidence t o which regard should be given. A book e n t i t l e d

"Consumer Guide(Sewing Machine Test Reports and Fabric parentage, was a l s o i n evidence and it seemed ra the r

to support this claim.

In category 3 is a statement in evidence made by

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Mr. Marbot, the manager f o r New South Wales o f the

appl icant company, who expressed a view which appeared

t o be tha t t he re was nothing inappropriate in the

respondent putting forward a claim tha t it had automatic

tension but he did not consider that the respondent could'

say that only i ts machines had automatic tension and

that the appl icant would be e n t i t l e d t o claim tha t its

' machine had automatic tension.

I pass now t o t he second objection which i s ,

in substance, t h a t "The s t r e t c h s t i t c h e s sewn by Bernina

sewing machines stretched three times more and a r e 13

times stronger than s t i t c h e s sewn by other machines!'.

In the category of sworn evidence t h e app l i can t r e l i e s

on some t e s t s ca r r i ed ou t by Mr. Bennett w i t h the same

Rovnina m a o h i n n Qnrl ~ r n	p1113 A i v , E'loofrnnir 9	D	rnQohirt0
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t o compare the s t r e t ch qua l i t i e s of s t r e t c h s t i t c h e s

sewn on each machine. Mr. Windler c r i t i c i s ed these

t e s t s a l l eg ing tha t t he cl&m@de by the respondent

! .

was l imited t o a comparison o f recommended s t r e t c h

s t i t c h e s and t h a t Mr. Bennett had not used the

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s t r e t c h s t i t c h recommended by the appl icant . It appears

t h a t Mr. Windler conceded tha t the claim should be

directed only t o recommended s t i t c h e s .

It appears that the claims in re la t ion t o

s t r e t c h s t i t c h e s were based on some t e s t s ca r r i ed ou t

i n America by a body cal led "Nationwide Consumer

Test ing Inst i tute , Inc.11. It a l s o appears tha t a

c i r cu la r was sent by the respondent t o i t s dea le r s i n

Mar c.h 1978 based on t h i s report . There i s l i t t l e

evidence t o show the s t a tus	of	the Nationwide Consumer
Test ing Inst i tute , Inc. but	as	hearsay evidence o f

uncertainvalue it appears t o support the respondent's

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claims when limited t o recommended s t i t c h e s .

Bearing in mind. the technical evidence it i s

v e r y d i f f i c u l t t o decide whether the applicant has

established a suf f ic ien t probabi l i ty o f success t o

sat isfy the requirement o f a prima f ac i e case in the

circumstances o f t h i s case.

However, assuming without deciding tha t such

a case has been established, I am s a t i s f i e d tha t t h i s

is not a case in which I should grant an interlocutory

injunctinn. In consider'ing the balance of convenience

it i s appropriate t o cons ide r the following two passages.

In FloI-ld Series Cricket P t y .	Ltd. v.	Parj-sh, s u p r a , a t
p.191 Bowen C.J. said :-

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When looking t o the balance of convenience

where there i s a prima facie case made out

by the appl icant tha t the consumer protect ion

provisions o f the Act have been contravened,

it is necessary.to l o o k , on the one hand,

t o the poss ib l e d.amage t o consumers t h a t

would f low from a r e fusa l o f the inter locutory

injunction and, on the other , t o t he damage

that would f l o w t o the adver t i se r i f the

l injunction i s granted but not made perpetual

a t the f ina l hear ing . This i s a f a r more

d i f f i cu l t t a sk than weighing two p r iva t e

in t e re s t s aga ins t each other. It

In Commercial Bank o f Australia L td . v. Insurance

Brokers Association o f Australia, supra, a t p.170 h i s Honour

sa id :

I thother mat ter t o be considered is tha t i n

br inging their motion f o r an injunction,

the applicants 'may be regarded as seeking

to protect the publ ic interest in prevent ing

the making o f fa lse s ta tements , but it i s

d i f f i c u l t t o a t t ach much weight t o t h i s

i n advance of	a f i n a l determination being
arr ived a t as	t o whether the statements

a r e i n f a c t f a l s e o r not."

Without repeating anything I have said previously

I consider tha t i n r e l a t i o n t o the claim that only Bernina

sewing machines need	no	tension adjustment, the	most
r e l evan t f ac to r s a re	:

1. That no proceedings have b en commenced t o

r e s t r a i n t h i s form o f advertising although it has

continued since the commencement of the Act.

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2. The action should be f inal ly disposed o f within

three montns.

3. If the claims are not misleading o r deceptive

o r likely t o mislead o r deceive the advertising campaign

o f the respondent would be quite &reasonably disrupted

3 , t o t h e co.mmercia1 advantage. o f the applicant. It is not

clear on-the evidence t h a t e i t h e r claim i s misleading

o r deceptive o r l i k e l y t o mislead o r deceive.

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4 . If any statement i s misleading o r d.eceptive .

or l i k e l y t o mislead o r deceive there i s no clear mater ia l

before me t o ind ica te the natd$e.'or the extent of the

damage any purchaser is l i k e l y t o suf fe r .

5. There was some evidence -that the respondent

subs id ises the adver t i s ing of i t s dealers and therefore

p a r t i c u l a r d i f f i c u l t y may a r i s e from complying with an

inter locutory injunct ion.

a 6. The grant of an interlocutory injunction would

. a l t e r t h e s t a t u s quo.

I . p a s s now t o the second form o f advert is ing

of which complaint i s made. This only commenced i n March

1978 but there is some evidence that the czmpaign directed

t o t h i s form of advertising has been subs tan t ia l ly completed.

Otherwise the same po in t s t ha t I have j u s t enumerated a r e

a l s o re levant with regard t o th is form o f advertising.

. Complaint was made about cer ta in o ther s ta tements bu t I -

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do not consider any inter locutory injunct ion i s j u s t i f i e d

in respect of them. I refuse any in te r locutory re l ie f .

I have decided t o g ive e i ther p a r t y l i b e r t y t o

apply on two days not ice t o the other party. I have done

th i s t o dea l -wi th any s i t u a t i o n that may possibly emerge

due t o any relevant change i n t h e . n a t u r e o r extent of the

respondent 's advertisements. . .

I w i l l give the parties an opportunity t o

address me on the question o f costs .

-.m-_ , ..--_ _L -.-.....,.- -

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1 Associa te

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