Midland Metals Overseas Pte Ltd v Australian Cablemakers Association Ltd

[2017] NSWCA 265

Court of Appeal

Supreme Court

New South Wales

Medium Neutral Citation:	Midland Metals Overseas PTE Ltd v Australian Cablemakers Association Ltd [2017] NSWCA 265
Hearing dates:	17 October 2017
Decision date:	17 October 2017
Before:	Basten JA, Leeming JA, White JA
Decision:	1. Leave to appeal granted. 2. Direct the applicant to file within seven days a notice of appeal in accordance with the draft in the white folder. Direct that the other requirements as to service in the rules be dispensed with. 3. Allow the appeal and set aside the orders made on 21 April 2017 and in lieu thereof there be a grant of leave to the appellant to amend the Commercial List Statement in the manner specified in its notice of motion filed 15 March 2017. 4. The respondents’ notice of motion of 20 March 2017 is dismissed. 5. The respondents to pay Midland Metals’ costs of the notices of motion filed 15 March 2017 and 20 March 2017 and of the proceedings in this court.
Catchwords:	CIVIL PROCEDURE - pleadings - allegations of misleading and deceptive conduct by representations contained in written communication - one of thirteen representations struck out - whether implied representation capable of being conveyed in context - appeal allowed
Legislation Cited:	Australian Consumer Law, s 18 Trade Practices Act 1974 (Cth), s 52
Cases Cited:	Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592; [2004] HCA 60 Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304; [2009] HCA 25 Colgate-Palmolive Pty Ltd v Smithkline Beecham Holdings (Australia) Pty Ltd (1997) 39 IPR 147 General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125; [1964] HCA 69 Wickstead v Browne (1993) 30 NSWLR 1; Wickstead v Browne (Transcript of Proceedings in the High Court, 30 April 1993)
Category:	Principal judgment
Parties:	Midland Metals Overseas PTE Ltd (Applicant) Australian Cablemakers Association Ltd (First Respondent) Frederick Persson (Second Respondent)
Representation:	Counsel: B Coles QC, P Walsh (Applicant) M Izzo, C Palmer (Respondents)   Solicitors: Church & Grace (Applicant) Johnson Winter & Slattery (Respondents)
File Number(s):	2017/147183
Decision under appeal	Court or tribunal: Supreme Court of New South Wales Jurisdiction: Equity Date of Decision: 24 April 2017 Before: Ball J File Number(s): 2016/340194

Judgment

1. JUDGMENT of the COURT delivered by LEEMING JA: The applicant for leave, Midland Metals Overseas PTE Ltd, a Singaporean company, is the plaintiff in pending proceedings in the Commercial List of the Supreme Court of New South Wales in which it seeks declaratory and injunctive relief based on a letter dated 28 April 2016 sent on the letterhead of the first respondent, Australian Cablemakers Association Ltd (ACA) and signed by its Chairman, the second respondent, Mr Frederick Persson, to various Australian State Ministers. The subject of the letter is a product known as “LOBAC 95 mm2 cable” sold by Midlands Metals, which is a type of low voltage, aerial bundled cable, or “LVABC”.

2. The letter in its entirety is as follows:

“Dear Minister,

RE: Midlands LOBAC 95mm2 brand of aerial bundled cable

I write to advise that Australian Cablemakers Association (ACA) member testing has identified another example of electrical cable currently used in Australia that has failed to meet Australian and NZ Standards and is unsafe.

Specifically, the ACA's concerns relate to the heat radiation resistance properties of Midlands LOBAC 95mm2 brand of aerial bundled cable used to supply low voltage electricity to customers in Western Australia, South Australia, New South Wales and Victoria.

As you would be aware, a range of aerial cables with insulated conductors were designed and incorporated within Australian and NZ Standards (AS/NZS 3560.1) following concerns that bush fires, most notably the 1983 Ash Wednesday fires, were started by arcing as a result of open wire lines clashing together and trees falling across open conductors causing arcing that ignited fires. A further enhancement of the Standard was subsequently incorporated to assess a cable's survivability during a fast-paced fire front.

An ACA member tested the heat radiation performance of a sample of Midlands LOBAC 95mm2 cable against AS/NZs 3560.1 (as per the detailed test method and apparatus described in Appendix F of the Standard included as Attachment 2). The Midland Cable LOBAC 95mm2demonstrated a failure to achieve the Standard. During the test, the cable was not only found to fail but also dripped molten polymer from the cable potentially adding to the burning fuel in a bushfire situation.

This testing was conducted on equipment designed and built by the ACA member as no suitable testing apparatus existed to test Heat Radiation Resistance. While we have full confidence in the veracity of the apparatus and subsequent test results, the apparatus was not covered by the Member's NATA registration. The results of the Midland Cable Heat Radiation Test are included in Attachment 1.

ACA is committed to ensuring safety of all electrical cable used in Australia. It was through laboratory testing undertaken by ACA members that identified faulty cable and prompted two recent major recalls - Infinity cables in 2013 and ECABLES in 2014. We urge, as a matter of priority, further investigation to ensure the compliance to AS/NZS 3560.1 of Midland Cable LOBAC 95mm2.”

3. The letter attached a test report which referred to the Heat Radiation Test as “optionally specified in Appendix F” of the Australian and New Zealand standard.

4. Midland Metals wishes to plead that the 28 April communications contained no fewer than 13 representations in trade or commerce, all of which are said to have been misleading and deceptive or likely to mislead or deceive contrary to s 18 of the Australian Consumer Law. By notice of motion dated 15 March 2017 it sought leave to amend the way in which the 12th representation had been pleaded. By notice of motion dated 20 March 2017, the respondents sought to strike out the 12th representation. The representation, in the form it was sought to be amended, which was as it was treated by the primary judge in his Honour’s reasons, was in the following terms:

“By the 28 April communications and the attached purported Test Report, the Australian Cablemakers Association and Mr Persson made the following representations, namely that:

…

“(l) in their opinions, based on reasonable grounds, LVABC offered for sale in Australia and/or New Zealand by the Australian Cablemakers Association members that offered it for sale complied with the Heat Radiation Test (“the twelfth representation”).”

5. The proposed Amended Commercial List Statement particularised this representation as follows:

“The Twelfth Representation is to be implied from the 28 April communications read in its full context having regard to:

(a) the identities, expertise, expertise, skill and experience of the intended audience of the 28 April communications;

(b) the apparent superior knowledge of the defendants of the subject matter of the 28 April communications; and

(c) the stated purposes of the Australian Cablemakers Association, particularised in paragraphs 9 and 10 above.”

6. The particularised purposes of ACA to which reference was made included representing the interests of Australia’s cable manufacturers, lobbying governments to support and install Australian manufactured cable, and “ensuring that electrical cables available in the Australian market are fully compliant to the relevant Australian standards.”

7. The primary judge heard argument on the point and struck out that paragraph and also the corresponding allegation that the representation was misleading or deceptive. In fact, his Honour struck out the unamended paragraphs of the original Commercial List Statement which were to the effect that the 28 April communications implicitly represented that ACA members’ cables did not comply with the Heat Radiation Test. Nothing turns for present purposes on the difference between the ways in which the representation was formulated and was said to have been misleading or deceptive as originally pleaded and as amended; the submissions advanced both at first instance and in this Court stand or fall on what is said to be capable of being represented by the 28 April communications.

8. His Honour applied the test in General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 at 129; [1964] HCA 69 and identified the question as “whether the pleaded representation can be implied from the 28 April letter and report and the other matters set out in the particulars.” The primary judge observed that neither the letter nor the report said anything about whether the LVABC supplied by ACA members complied with the Heat Radiation Test. His Honour said this could not be inferred as a matter of logic:

“To say something about one product is not to say the opposite, or that there are reasonable grounds for believing the opposite, about similar products sold by other manufacturers. The only inference that can be drawn from the fact that nothing is said about other cables is that nothing is being said about whether those cables complied with the relevant standards.”

9. His Honour added that the position was not altered by the particulars given, nor by the fact that the representations were made to Ministers and impliedly to their departments. Nor could the knowledge of the defendants help to make an illogical inference logical.

10. The reasons of the primary judge to the effect that to say something about a competitor’s product is not to say anything about other products are, with respect, unexceptional. They accord with what Lockhart J said in Colgate-Palmolive Pty Ltd v Smithkline Beecham Holdings (Australia) Pty Ltd (1997) 39 IPR 147 about an advertisement that the respondent’s product contained “no harsh abrasives”:

“The applicant argued that this statement carried the imputation that CBSP and CSW contain harsh abrasives. I find it difficult to accept that, in the absence of anything else, a mere representation that one product does not contain a harmful substance, is a representation that another product does contain that harmful substance. Of course the applicant argues that this inference can be drawn since it is the market leader and it relies on the other statements on the toothpaste tube and its pack. Nonetheless I find it hard to accept that that is sufficient to cause the statement to be misleading or deceptive. I do not find that there is a serious question to be tried on this issue.”

11. Whether or not the 12th representation is capable of being conveyed by the 28 April communications falls to be determined not solely by reference to the particular sentences in the letter and their logical corollaries, but by the communication as a whole considered contextually. In Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592; [2004] HCA 60 at [109], McHugh J emphasised the importance of examining the relevant course of conduct as a whole, stating:

“Thus, where the alleged contravention of s 52 relates primarily to a document, the effect of the document must be examined in the context of the evidence as a whole. The court is not confined to examining the document in isolation.”

12. That paragraph was approved in Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304; [2009] HCA 25 at [102]. Section 18 of the Australian Consumer Law is the counterpart to (former) s 52 of the Trade Practices Act 1974 (Cth) to which McHugh J had referred.

13. In a case such as the present, what follows logically from the express statements is not the sole measure of the representations capable of being conveyed. That is well illustrated by an apparent illogicality on the face of the letter itself. It appears from what is said in the report that the Heat Radiation Test is “optionally specified in Appendix F” of the standard. (There is an issue between the parties on the pleadings as to the effect of non-compliance with Appendix F but it is sufficient for present purposes to proceed on the basis as alleged by the plaintiff that the standard is not mandatory.) However, the covering letter to the Ministers refers to Midland Metals’ product as having “failed to meet Australian and NZ standards”, as demonstrating “a failure to achieve the Standard” and urged investigation “to ensure the compliance to AS/NZS 3560.1 of Midland Cable LOBAC 95mm2”. No attempt is made to address what is meant by a failure to meet or to achieve, or to ensure compliance with, an optional appendix to a standard.

14. The point of the 28 April letter and report is to urge government action and investigation in relation to one specific brand of aerial bundled cable – 95mm2 cable supplied by Midland Metals – because there was reason to believe that it failed to pass the Heat Radiation Test. That purpose was sought to be achieved by summarising the results of testing by an ACA member and reminding the Ministers that two recent major recalls of specific products had been prompted by the same process previously. The recipients of the letter were persons with power to investigate and if appropriate recall products being sold in Australia. From the perspective of the local industry association, there would be no point in any government investigation of Midland Metals’ products’ compliance with the Heat Radiation Test if many or most of the products supplied by ACA members likewise failed to achieve the same standards.

15. The matter may be further tested this way. It is difficult to see how the Ministers’ product recall powers could appropriately be exercised to recall one company’s product for non-compliance with Australian standards if the Ministers were at the same time aware that many other companies’ products – whose sales would be enhanced if Midland Metals’ product were withdrawn – likewise failed to comply with the standards.

16. The issue before the primary judge was not whether the 28 April communications gave rise to the 12th representation. The issue was merely whether the Court could be sufficiently confident, to a General Steels standard, that the allegations would never be made out at trial in light of the evidence. In light of the narrowness of the point, the parties constructively agreed to a concurrent hearing of the leave application and the appeal, and this Court has today heard full argument.

17. The matters referred to above may not have been given any, or any prominent, attention in the parties’ submissions at first instance. Although the matter is quite finely balanced, we would conclude that, considered in its context as particularised, the 28 April communications were capable of giving rise to the 12th representation pleaded. We are strengthened in concluding that the issue raised by the 12th representation should go to trial by the considerations stated in Wickstead v Browne (1993) 30 NSWLR 1 at 5-7, with which the High Court generally agreed (Wickstead v Browne (Transcript of Proceedings in the High Court, 30 April 1993))and upon which Midland Metals relied before the primary judge and in this Court, given that on any view there will be a trial on the other representations. We note further that the proposed Amended Commercial List Statement shrinks the scope of further inquiries by reason of what is alleged in proposed paragraphs 11A-11M. The considerations stated in Wickstead v Browne, to which the primary judge did not refer, constitute in our opinion a basis for the grant of leave in this interlocutory application.

18. There will therefore be a grant of leave, the applicant will be directed to file within seven days a notice of appeal in accordance with the draft in the white folder, the other requirements as to service in the rules will be dispensed with, the appeal will be allowed, the orders made on 21 April 2017 set aside, and in lieu thereof there will be a grant of leave to the appellant to amend the Commercial List Statement in the manner specified in its notice of motion filed 15 March 2017 and the respondents’ notice of motion filed 20 March 2017 will be dismissed. The respondents must pay Midland Metals’ costs of the notices of motion filed 15 March 2017 and 20 March 2017, and of the proceedings in this Court.

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Decision last updated: 20 October 2017