Narhex Australia Pty Ltd v Sunspot Products Pty Ltd

Re: NARHEX AUSTRALIA PTY LIMITED
And: SUNSPOT PRODUCTS PTY LIMITED and WARWICK JOHN PLUNKETT
No. G882 of 1989
FED No. 348
18 IPR 535

COURT

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Foster J.(1)

HEARING

PERTH

#DATE 13:7:1990

Counsel for the applicant
from 5.2.90 to 9.2.90: R. White
from 7.5.90 to 10.5.90 A. Boune
instructed by: Mallesons Stephen Jaques

Counsel for the respondents: G. Downes QC with B. Knox
instructed by: Mildrens

JUDGE1

JUDGMENT ON LIABILITY This case concerns the application of s 52 of the Trade Practices Act 1974 ("the Act") to the packaging and promotion of rival products, being creams for the amelioration of wrinkles around the eyes. By consent, I shall deal, in these reasons, only with the question of liability of the applicant and the respondents, in circumstances where each party is alleging that the other is in breach of the section.

The applicant was incorporated on 10 May 1988 and shortly thereafter began distributing in Australia a range of products under the trade name "Cross-linked 10/60TM elastin". In its advertising, packaging, and promotional material, the applicants eye cream is said to contain "3% k-elastin". The first respondent was incorporated in 1982. It has distributed since that time a range of skincare products under the trade name "John Plunkett's". It commenced marketing skincare products containing elastin in 1985. The elastin contained in its products is bought by it in the form of a solution, known as "ELASTIN CLR SOLUTION". The letters "CLR" stand for "Chemisches Laboratorium Richter", which is the German supplier of this elastin. In November 1988, the first respondent commenced marketing its eye cream which is described on its package as "JOHN PLUNKETT'S SUPER CROSS-LINKED ELASTIN EYE CREAM" and on its containing tube as "JOHN PLUNKETT'S SUPER ANTI-WRINKLE EYE CREAM". The second respondent is the managing director of the first respondent.
The evidence establishes that "elastin" is a protein found in both animal and human tissues. It consists of chains of amino-acids which link with each other (hence "cross-linked") to form a three-dimensional network which is believed to contribute significantly to the skin's elasticity. The elastin used in commercially produced skincare preparations comes from the elastic tissues of the neck tendons of bulls. Its use proceeds from the belief that the introduction of molecules of elastin into facial skin tissue can produce significant restoration of elasticity in the skin and thus reduce wrinkling which itself has resulted from loss of elasticity with age. The evidence leaves in doubt how this is said to be achieved. One theory postulates that the introduced elastin insinuates itself into, joins with, and rejuvenates the existing network; the other, that the introduction of the elastin molecules stimulates the body in some fashion to produce new elastin of its own. Happily, although considerable evidence was directed to these matters, I am not called upon to decide whether, and, if so, how introduced elastin reduces skin wrinkling. The parties have not sought that the issue of efficacy of elastin-based treatment be determined in these proceedings.
It remains the fact, however, that producers of skincare preparations have sought to make use of the protein elastin in their products and have consequently sought ways to introduce the protein into human skin tissue through external application in creams. It appears that the historical challenge for the industry has been the sheer size and insolubility of the elastin molecule which tends to prevent its passage through the skin. The answer to this problem was, apparently, first discovered by a Professor Robert in Paris in 1963. In the course of research into other matters he found that partial hydrolysis of the elastin molecules resulted in the weaker cross-linkages being destroyed, leaving fragments or "peptides", of varying shapes and sizes some of which were then capable of penetrating the outer skin tissues and reaching areas where the "network" was situated.
The evidence further establishes that elastin peptides can be produced by either alkaline or acid hydrolysis. Professor Robert used alkaline hydrolysis and gave the name to the elastin thus produced of "k" or "kappa" elastin. It is tolerably clear on the evidence that the adoption of this symbol related to the fact that the professor used potassium hydroxide as the hydrolysing agent, "k" being the chemical symbol for potassium. The applicant's description of its product as "10/60 k-elastin" derives firstly from the fact that the elastin contained in it is produced for it in America by alkaline hydrolysis and secondly from the fact that in its production the larger molecules are sieved out leaving a molecular weight range of 10,000 to 60,000 daltons (units of measurement of molecular weight). It appears, in fact, that the American process uses sodium rather than potassium hydroxide in its hydrolysis, a matter to which I shall make reference later.
The elastin used by the respondents, on the other hand, is produced by acid hydrolysis. Elastin so produced is referred to as "a" or "alpha" elastin. It has a molecular weight range of 30,000 to 1,000,000 daltons which is capable of being altered by the sieving process. Some reference was made in the evidence to a "beta" elastin which appears to be an elastin produced by acid hydrolysis but of a lower molecular weight; but this assumes no significance in the case. The respondents refer to the elastin used in their products as "alpha elastin" and it is clear that this product comes from acid hydrolysis.
Not inconsiderable evidence was directed to the question of whether alpha and kappa elastin were for all practical purposes identical products or whether they had significantly different attributes such that they could be regarded as chemically distinct. This topic was productive of much interesting expert evidence. In the result, however, I have found it to have no bearing upon the issues that I have to decide.
I turn, in the first place, to the applicant's claim against the first and second respondents. There are two versions in evidence of the packaging of the first respondent's eye cream. Exhibit A, in distribution up until the last week of February of this year, contains on its front panel, in typed print of approximately 1mm in height, the words: "WITH 10% CROSS-LINKED ELASTIN CLR SOL N. PLUS COLLAGEN CLR AND ROSE HIP OIL". Exhibit 1, in distribution since the end of February of this year, contains on it, in print of similar size to exhibit A, the words: "WITH 10% OF CROSS-LINKED ELASTIN CLR SOLUTION (APPROX. 1mg PER ml ACTIVE a- ELASTIN) PLUS COLLAGEN CLR AND ROSE HIP OIL".
The applicant alleges in respect of the statements set out above, and similar statements made in the promotional material, that consumers would be misled or deceived into believing that the first respondent's eye cream contains 10% elastin. They make a related submission alleging that the first respondent's failure positively to state the true percentage content of elastin amounts to relevantly misleading or deceptive conduct. It was uncontested that the first respondent's eye cream contains in fact between 0.04 to 0.05% a- elastin peptides, whereas the applicant's contains 3% k- elastin peptides.
Certain propositions of law are clear with respect to s 52 of the Act. A corporation may engage in misleading or deceptive conduct without intending to do so: Hornsby Building Information Centre Pty Limited v Sydney Building Information Centre Limited (1978) 140 CLR 216. Competitors are entitled to bring s 52 actions against one another: R v Federal Court of Australia; Ex parte Pilkington ACI (Operations) Pty Limited (1978) 142 CLR 113. The evidence of consumers may be persuasive but is not determinative; ultimately it is a question for the court to decide: Snoid v Handley (1981) 54 FLR 202 at 211; Parkdale Custom Built Furniture Pty Limited v Puxu Pty Limited (1982) 149 CLR 191 at 198-199. Conduct is likely to mislead or deceive if there is a "real or not remote chance or possibility regardless of whether it is less or more than 50%": Global Sportsman Pty Limited v Mirror Newspapers Limited (1984) 2 FCR 82 per Bowen C.J., Lockhart and Fitzgerald JJ. at 87 approving Tillman's Butcheries v AMIEU (1979) 27 ALR 367 per Deane J. at 380. It is necessary to identify the relevant section (or sections) of the public by reference to whom the question of whether conduct is, or is likely to be, misleading or deceptive falls to be tested: Brook v Terrace Times Pty Limited (1982) 40 ALR 97 at 99; Taco Co. of Australia Inc. v Taco Bell Pty Limited (1982) 42 ALR 177 at 202. Conduct which merely causes some uncertainty in the minds of relevant members of the public does not contravene the section: Parkdale v Puxu per Mason J. at p 210.
More productive of difficulty, however, is the area referred to in the following passage, relied upon by the respondent, from the judgment of Gibbs C.J. in Parkdale v Puxu (at p 199):

"Section 52 does not expressly state what persons or class of persons should be considered as the possible victims for the purpose of deciding whether conduct is misleading or deceptive or likely to mislead or deceive. It seems clear enough that consideration must be given to the class of consumers likely to be affected by the conduct. Although it is true, as has often been said, that ordinarily a class of consumers may include the inexperienced as well as the experienced, and the gullible as well as the astute, the section must in my opinion be regarded as contemplating the effect of the conduct on reasonable members of the class. The heavy burdens which the section creates cannot have been intended to be imposed for the benefit of persons who fail to take reasonable care of their own interests. What is reasonable will of course depend on all the circumstances."

His Honour went on to find that "persons affected in the present case, the potential purchasers of a suite of furniture costing abut $1,500, would, if acting reasonably, look for a label, brand or mark if they were concerned to buy a suite of particular manufacture". Mason J. held (at p 211) that prospective purchasers could "reasonably be expected to look for and find the label or to take comparable steps such as inquiring of a salesman, to ensure that furniture from the 'contour' range was being purchased".
In my opinion, at least in relation to conduct aimed broadly at the buying public (see Sutton v A. J. Thompson Pty Limited (in liquidation) and Ors (1987) 73 ALR 233 at 240), this passage must be read with the statement of the Full Court of this court in Global Sportsman Pty Limited v Mirror Newspapers Limited (1984) 2 FCR 82 at 91:

"In Taco's case and Puxu's case, it was similarly emphasised that there is no contravention of s 52(1) of the Act unless error or misconception results from conduct of the corporation, and not from other circumstances for which the corporation is not responsible. One such circumstance may in some cases be a lack of care or vigilance in all the circumstances by those said to have been or to be likely to be misled or deceived: see Puxu's case, per Gibbs C.J. at p 6 and Mason J. at p 15. However, the character of the corporations conduct is not tested by reference to its effect or likely effect only on the reasonable man, but by reference to the entire class of 'possible victims': Puxu's case, ibid. and per Murphy J. at p 19; Taco's case at 202."

A feature of this case has been the absence of any evidence of actual or potential consumers of the relevant products. Whilst productive of practical difficulty, it seems clear that this has no legal consequences: Snoid v Handley. Unaided, but bound by authority to be undeterred, I turn to make the following general observations about the relevant class of consumers in this case.
Obviously enough the prospective consumer will be concerned about wrinkles or bagginess around his or her eyes. There will be an element of hope or credulity motivating the decision to purchase. Conversely, both the first respondent's and the applicant's eye creams are expensive (respectively approximately $30.00 and $55.00 each); and it is clear that a relatively high price will tend to attract greater consumer vigilance.
In this regard, certain evidence of potential deception was relied upon by the applicant. Professor Thomas, an expert witness for the respondents, conceded that a consumer who looked quickly at the first respondent's package might be relevantly deceived. Ms Penelope Wines, a law clerk with the applicant's solicitors, related the apparent confusion of retailers in response to her queries concerning the phrase "10% CROSS-LINKED ELASTIN CLR SOL N.". Leaving aside the problem of hearsay in Ms Wines evidence, I consider that neither her nor Professor Thomas's testimony, insofar as it tends to establish potential consumer deception, can be given any significant weight, as neither is testifying as a potential consumer. I might add that, for similar reasons, I gain no real assistance from the evidence for the respondents of Mr John Bell, a pharmacist, as to consumer reactions to the relevant products.
In argument counsel postulated three hypothetical types of consumer, namely: those with no knowledge of elastin, those with a general awareness of elastin, and those with a specific knowledge of the applicant's products and its campaign of advertising and promotion of the suggested benefits of elastin. Whilst this division of consumers into classes is of some assistance in analysis, it should not obscure what is a fundamental feature of this case common to the considerations of each class of consumer, namely that the respondents themselves give considerable prominence in the wording on their packaging to the presence of cross-linked elastin in their product. The front panel of the first respondent's packaging prominently states: "JOHN PLUNKETT'S SUPER CROSS-LINKED ELASTIN EYE CREAM". Although in smaller print than the words "super" and "eye cream", the words "cross-linked elastin" will be visible to any potential consumer whose eye is attracted to the front panel of the box. Indeed the second respondent said in evidence that the first respondent wanted consumers to believe that cross-linked elastin was the main ingredient in its products. I consider that most consumers, whatever their prior knowledge of elastin, would have noted the importance attached to the ingredient "cross-linked elastin", before receiving any message from the other wording lower down the front panels of exhibit A or exhibit 1.
I turn first to the wording of exhibit A. It seems clear to me that no ordinary consumer could fully understand the meaning of the phrase "CLR SOL N.". I consider that a section of consumers would simply ignore it; such consumers would not even be confused or put on inquiry by its presence. For practical purposes it would not register on their consciousness. They would simply gain the impression that the cream contained 10% cross-linked elastin.
Others would at least consider the letters "CLR SOL N." and, perhaps, in a tentative way seek to give some meaning to them. Some, having done so, would regard them as essentially meaningless and unimportant in comparison to what preceded them. Others might translate "SOL N." correctly but consider that the phrase meant no more than that the cross-linked elastin constituting 10% of the cream was present in solution. I am satisfied that no customer whatever his or her degree of sophistication, in the absence of highly specialised knowledge as to the world producers of elastin, could do more than guess at the meaning of the letters. Such guesswork might produce, for instance, the speculative conclusion that the elastin was present in a coloured or clear solution.
What is the proper way to characterise the state of mind of such consumers? Would they be merely confused and uncertain? I do not think so. In my view, they would all more probably than not relegate to the back of their minds their uncertainty as to the significance of the letters and accept that the cream contained 10% of the active ingredient. As they would have absorbed the message that elastin was an important active ingredient of the cream, they would regard a cream having 10% of such an ingredient as prima facie more efficacious than one containing less. They would thus more readily decide to buy the cream than if they had been informed on the package that it contained only 0.05% of the ingredient. In so deciding they would not be merely confused as to the elastin content of the cream; they would have formed the erroneous belief that it was 10%.
But would the cause of their erroneous belief be found, as argued by the respondents, in their own negligent failure to make further inquiry of the pharmacists as to the meaning of the words on the packet? The answer to this submission lies not in Ms Wines's hearsay evidence of pharmacists themselves being confused (to which I in any event give very little weight) but in the proposition that the lack of care by the consumer must be such as to break the causal nexus between the respondent's conduct on the one hand and the applicant's deception on the other (Global Sportsman v Mirror). In the present circumstances, I do not consider the consumer's lack of care to be of such a character. In my view to expect consumers to seek expert clarification in these circumstances would be against common sense as well as being inconsistent with cases such as Sutton v Thompson and Henjo Investments Pty Limited v Collins Marrickville Pty Limited (1988) 79 ALR 83 in which it was held that a failure by the representee to check the accuracy of representations did not absolve the representor from liability under s 52.
In all the circumstances I am satisfied that the wording of exhibit A constitutes a breach of s 52 of the Act. It is relevantly misleading or likely to mislead.
I turn to consider the position in relation to exhibit 1. As noted before, this form of packaging contains the words: "WITH 10% OF CROSS-LINKED ELASTIN CLR SOLUTION (APPROX. 1mg PER ml ACTIVE a-ELASTIN) PLUS COLLAGEN CLR AND ROSE HIP OIL". I note that the respondents have also added on a side panel to the containing box the following statement: "the amount of cross-linked elastin CLR solution used in this eye cream is identical to that used in the documented clinical trials of the Academy of Medicine, Poland, which demonstrated the positive cosmetic effect on participants".
The new form of words on the front panel is in slightly lighter print than that used in exhibit A, but I do not consider that anything turns on this distinction. The other differences are the insertion of "of" after "10%", the use of "solution" instead of "sol n.", and the addition of "approx 1mg per ml active a-elastin" in brackets after the word "solution". I note in passing the respondent's concession that the last addition should more accurately read "4 to 5 mg per ml" because that is in fact the elastin content of the CLR solution.
The respondents submit that this new form of packaging makes it clear to the consumer that the cream contains elastin in solution. They say that, if consumers are concerned to find out how much elastin is in the solution, they should look within the explanatory brackets. Counsel for the applicants submitted that some consumers would understand the material in the brackets to refer to the eye cream as a whole and not the elastin CLR solution itself. I note that the respondents made an open offer in court to resolve this ambiguity; however that fact can have no bearing on the question whether the wording on exhibit 1 involves a breach of the section.

Professor Thomas and Dr Cleary, expert witnesses for the respondents and the applicant respectively, testified that the expression "mg per ml" was as scientifically valid a way of stating the amount of a solid in solution as was the use of a percentage figure. Mr Stevens, an expert witness for the respondents, went further, testifying that two standard texts on chemical data that he looked up did not contain percentage figures in their list of conversions, and that, in any event, any percentage figure would have to be qualified by stating whether that figure referred to weight per weight, weight per volume, or volume per volume. Accordingly, the respondents submit that the use of "mg per ml" is scientifically more appropriate than the use of a percentage figure, even if the latter be accurately qualified. They also submit that, in any event, most consumers would before purchasing require clarification by the vendor pharmacist of either expression.
The evidence does not satisfy me that there is any reasonable likelihood of consumers seeking clarification of this advertising material by making inquiries of the selling pharmacist. In any event, I am quite satisfied that I should not approach the resolution of this matter by entertaining a proposition that a manufacturer of a pharmaceutical product should be entitled to rely upon the assistance of a pharmacist vendor to explain to the consuming public the meaning of the advertising material it has placed on its packaging. I can reasonably approach the matter only by considering what effect the material would have when read by a potential purchaser. I am satisfied that only scientifically literate consumers would be able to attribute an accurate meaning to the phrase "approx. 1mg per ml active a-elastin". This means, in my opinion, that the bulk of consumers would simply be confused by the expression, even though it is scientifically accurate. In other words it would do nothing, in itself, to clear up any misconception which might arise from other parts of the advertising material .
The question is whether the alteration of the wording, by the addition of the word "of", setting out the word "solution" in full, and the additional material on the side panel overcomes the misleading effect of the original advertising material in exhibit A. The respondents' submission is simple. They say that the material is literally correct and should not be held to be misleading. The applicants, however, assert that the material remains misleading unless the actual elastin content is expressed as a percentage. In other words if the expression "10% of cross-linked elastin CLR solution" is to be retained it should be followed by a clear statement in percentage terms of the amount of active elastin contained in the cream as a whole. It is put that the expression "1mg per ml" does nothing to obviate the otherwise misleading nature of the expression "10% of cross-linked elastin CLR solution". This submission is, of course, put in the commercial setting that the applicant's own advertising, to which detailed reference will be made when I consider the cross-claim, refers to its product as containing "3% k-elastin".
The respondents' answer is that the consumer would reasonably be expected to read on, when it would become apparent that the expression "10%" related to the CLR solution, which was itself the subject of further explanation on the side panel of the box. They further say that in the commercial context of competition between their and the applicant's products, the application of s 52 would require that they go no further than state the literal truth. If they were to be required to state in terms that their cream contained only 0.05% of active elastin they would be placed in a position of commercial disadvantage vis-a-vis the applicant. This would be unfair, so the argument proceeds, in circumstances where there is no scientific certainty or even probability that the percentage of kappa-elastin in the applicant's cream is more potentially efficacious in treating the wrinkles on a consumer's face than the smaller percentage of alpha-elastin in the respondents' product. The conflicting scientific evidence in the case is productive of some sympathy with this argument, but its adoption would, in my view, only deflect attention from the true issues of the case, posed by s 52 of the Act.
I cannot, of course, in determining these issues assume that the potential consumer has any actual scientific knowledge of the possible effect of elastin, whether of the kappa or alpha variety, in restoring the ageing elastin network of the skin. He or she obviously would not have had the advantage of listening to and absorbing the conflicting views of expert scientific witnesses on this subject. In approaching my decision I must, in fact, put out of my mind all information that I have been given on these subjects which would not be present to the mind of the ordinary consumer of expensive cosmetic preparations. This, indeed, requires, in the ultimate, that I exclude from my mind most if not all of the scientific evidence. I must decide what the consumer of the type envisaged in the authorities referred to above would gain simply from reading the advertising material on exhibit 1.
Firstly, in my view, his or her attention would be caught, as with exhibit A, by the main wording on the packet, i.e. that which refers to the contents as being super (emphasised) cross-linked elastin eye cream. Thus informed, his or her eye would, I accept, travel down the packet and receive the further message that the cream contained 10% of cross-linked elastin. The first impression would therefore be that the ingredient that made the eye cream "super" was present in a strength of 10%. Further reading would indicate that the cross-linked elastin referred to was described as a solution which itself was further described as being "CLR", a collection of letters which would remain as meaningless as it was in exhibit A. Moreover, the statement on the side panel would not serve to give any further explanation of the meaning of those letters. As already indicated, in my view, the further explanation in terms of weight per volume would be only confusing to the ordinary consumer of the class I am considering. Only a most careful consumer, who was also aware of the applicant's advertising, would note the reference to alpha-elastin and compare it with the applicant's reference to kappa-elastin. Even if the differences were noted, the consumer could attribute no significance to it. It would not be reasonable, on the part of the advertiser, to assume that the potential purchaser would pursue inquiries outside the four walls of the advertising material as to whether the two differently described elastins had different properties. Indeed, even if such an inquiry were undertaken, I am satisfied that the purchaser could achieve no greater degree of certainty than I have reached at the end of some days of scientific testimony.
The consequence of these deliberations is that I am satisfied that a consumer of the type considered, after assimilating, to an extent reasonably to be expected, the material in exhibit 1, would be in a state of initial confusion. No negligence on his or her part would be involved if he or she failed to take steps to alleviate that confusion by further inquiries. Consequently if such a consumer were misled into a belief that the product contained 10% of pure elastin as an active ingredient that belief would result from the advertising material and not from some fault on the consumer's part. I have come to the conclusion that such a consumer, although initially confused, would on the balance of probabilities resolve that confusion by concluding that the material on the packet was conveying the message that the cream contained 10% of the important ingredient, namely cross-linked elastin. Nothing on the package would serve to tell the consumer that there was significantly less than 10% of that ingredient in the cream. The consumer would be misled.
In other words, I consider that to refer prominently to an active ingredient and then give a percentage figure for the solution in which it is dissolved, in circumstances where there is a significant difference between the amount of active ingredient and the amount of solution, is prima facie misleading or deceptive. In my view the respondents should not be allowed to avoid this finding simply by adding allegedly explanatory material which although literally true would nevertheless be meaningless to most consumers. I am satisfied that the material in exhibit 1 is in breach of the section.
I turn then to the cross-claim.
The first claim made by the cross-claimants is that the cross-respondent's use of the brand name "cross-linked 10/60TM elastin" and the promotion by use of that name amounts to a misleading or deceptive representation that the product contains 100% elastin or is pure elastin. The misrepresentation is said to arise from certain advertisements in which emphasis is placed on "cross-linked 10/60TM elastin" but in which little or no mention is made of the actual percentage content of that ingredient. It is also said to arise from the cross-respondent's packaging in that some consumers would believe that "3% k-elastin" refers to a particular type of elastin that makes up only a small part of the whole which is "cross-linked 10/60TM elastin".
The threshold question in this claim is whether consumers could understand the use of "cross-linked 10/60 elastin" as the brand name of a product as representing that the product is composed entirely of that ingredient. In my view the mere use of the name of an active ingredient as a product's brand name does not represent that that product contains 100% of that ingredient. The chances of such a misconception arising are remote and not real (Global Sportsman v Mirror). Alternatively I consider that consumers who believe this would be guilty of so fanciful an interpretation as to effectively mislead or deceive themselves. The vast majority of consumers would simply understand the cross-respondent's brand name to represent that its product contains cross-linked 10/60 elastin and that it is regarded as the most important ingredient.
In any event, the circumstances in which the phrase "cross-linked 10/60 elastin" is used clearly inform consumers that it is simply being used as a brand name. It is reasonable to assume that at the point of sale, a prospective purchaser will be faced with a range of the cross-respondent's products, all of which are known by the name "cross-linked 10/60TM elastin". These products are differentiated by their differing purposes (eye cream, facial lift, facial treatment, and moisturising day cream) and by their differing statements of content of k-elastin (respectively: 3%, 3%, 1%, and 0.1%). In each case, these percentage statements of content occur directly underneath the brand name "cross-linked 10/60 elastin". It is unlikely that a consumer would read the one without noticing the other. In these circumstances it is very difficult to see how consumers could nevertheless believe that they are all identical, namely that each is pure cross-linked 10/60 elastin.
The circumstances surrounding the cross-respondent's media advertising are less clear-cut. Much of the print advertising refers to the eye cream in the context of the whole range of cross-linked 10/60 elastin products. Additionally the references to the percentage content of "k-elastin" are often visible. In contrast, much of the television advertising and promotions tend to focus on the eye cream and often do not mention the percentage content of elastin. However, I agree that a robust attitude should be adopted towards television advertisements: Stuart Alexander and Co (Interstate) Pty Ltd v Blenders Pty Ltd (1982) 53 FLR 307 at 311 (Lockhart J.). In all the circumstances, the first claim cannot be upheld.
The second claim of the cross-claimant is that the representation that the cross-respondent's product contains "k-elastin" is misleading or deceptive because it is in fact prepared by hydrolysis using sodium hydroxide and not potassium hydroxide. Although there was expert disagreement as to whether "k" or "kappa" elastin can only be produced by alkaline hydrolysis using potassium hydroxide, I consider that it is not necessary to resolve this question.
It is clear that the law requires that the conduct complained of be assessed in the light of the understanding of the relevant class of consumers. In Weitmann v Katies Limited (1977) 29 FLR 336, Franki J. held that the use of words which would mislead or deceive a trade expert did not breach s 52 because the relevant class of purchasers would simply not understand the trade meaning of those words. His Honour said (at p 339) that "whether conduct is deceptive in the subject case must be examined in the light of what the alleged deceptive words mean to the relevant purchaser... This involves two questions, first, who is to be considered as the relevant purchaser and secondly what will the words mean to that purchaser?". I am satisfied that there is here no representation that could mislead purchasers. They would be ignorant of the finer points of scientific nomenclature and would not, therefore, be misled by a misuse of terminology. I find that this claim also fails.
By their third claim the cross-claimants allege the following misrepresentations: "that the applicant is French and/or its product is manufactured in, distributed in, and or distributed from France and/or Paris, or has some other close connection with France or Paris". The representations are said to arise from the following facts: the use of the word "Paris" and the phrase "creme des yeux pour les rides a l'elastine 10/60" on the front panel and side panels respectively of the cross-respondent's packaging, the presence of instructions written in French and English inside that packaging, the reference to "laboratoire de Narhex Paris- France" on those instructions, and reference in the promotional material to French scientists working at the University of Paris.
The cross-respondent submits that these facts do not give rise to the misrepresentations relied upon. Alternatively, if they do in whole or in part, any misconception is clarified by the presence on the back panel of the packaging of a sticker reading "manufactured in Japan for Narhex Australia Pty Limited". It says that, at most, consumers could conclude the product is associated with France, and that there is sufficient evidence to establish the truth of such a belief.
The associations that the cross-respondent relies on are firstly, that the expertise which led to the production and marketing of the product was acquired from French scientists, and marketers and distributors of French products; secondly, that it has always intended to distribute its products in France.
The reference to "French scientists" is fundamentally a reference to Professor Robert who in 1963 led a team at the University of Paris which first produced the partially hydrolysed elastin to which he gave the name "kappa elastin". The reference to marketers and distributors of French products is a reference to the association that Mr Majewski, the managing director of the cross-respondent, had with a product called "soluelastin". Soluelastin contains kappa elastin and is manufactured in France. There is a dispute as to whether at relevant times a French or Swiss company held the international distribution rights to soluelastin; however I do not believe that anything turns on that point.
It seems that Mr Majewski's first contact with soluelastin was as the advertising consultant to its launch in Australia in 1981. From 1982 to 1985, although the exact nature of his role was disputed, Mr Majewski was associated with the distribution of soluelastin in Japan and the United States of America. It was by virtue of these facts that Mr Majewski had some contact with Professor Robert who was acting at that time as a scientific consultant on soluelastin.
The evidence establishes to my satisfaction that, at least since April 1989 the cross-respondent has intended, if possible, to distribute its cross-linked 10/60 elastin products in France. Certain evidence was given by Mr Majewski in relation to this aspect of the case, which evidence was made the subject of a confidentiality order. Accordingly, I shall not refer to it in these reasons. Suffice to say that it established that whatever the future may hold, the products are not currently distributed in France. Furthermore, it is clear on the evidence that the products are neither manufactured in France nor imported into Australia from that country.
In light of these facts I must ask myself whether the cross-respondent's advertising and promotional material referred to above is relevantly misleading. I should, perhaps, add that there is some expert evidence in the case that in the field of cosmetic preparations, as in other fields related to human adornment, a reference to a French origin for a product or an indication of its acceptance by French people, especially Parisians, serves greatly to enhance consumer expectations as to its efficacy and to increase consumer willingness to pay a higher price for it. I consider that such testimony is not really necessary to establish these facts. They are well and truly known to all mankind.
I ask myself , then, what is the message conveyed to the ordinary consumer of the relevant class by this advertising and promotional material? I must consider, of course, the overall impression of the material on such a consumer (Parkdale v Puxu per Gibbs C.J. at p 199). I am satisfied, at the outset, that the general elegance of the design of the cross-respondent's packaging, including the rich but tasteful colouring, coupled with the prominent use of the word Paris and the clearly displayed French language directions, combine to convey the impression of a definite connection with France. If no more were conveyed than a mere connection, then Mr Majewski's evidence, set out above, might, arguably, prevent the material from being misleading. I do not need to decide this, however, as I have come to the view that this material conveys to the consumer much more than a mere historical connection of the product with France. I am satisfied that, at the very least, it indicates that the product is currently available to consumers in France and in Paris in particular. To the less astute purchaser it could also convey overtones of acceptance of the product by discerning Parisian buyers.
I do not consider that the presence of the sticker on the packaging indicating that the product is manufactured in Japan for the applicant does anything to dilute the fundamental message of gallic availability and acceptance. Conversely, it conveys, in my view, the notion that the product originates from a major French enterprise with international ramifications, which arranges, where appropriate, the overseas production and distribution of its product. It thus makes the statements in the packaging even more misleading. I am satisfied that the cross-claimant's third claim is established.
The cross-claimants allege in their fourth cross-claim that the cross-respondent "makes representations as to its products which fall within the definition of 'therapeutic goods' within the meaning of those words in s 4 (1) of the THERAPEUTIC GOODS AND COSMETICS ACT 1972 (NSW) which, in turn, amounts to representations that the applicant is licensed under that Act". The representation is said to be made by the use in the cross-respondent's advertising of words such as "treatment" and statements that their product "is not a cosmetic; it doesn't cover up signs of ageing. It is a skin treatment".
It is notable that the claim is not that such statements are in themselves misleading or deceptive, but that they mislead or deceive insofar as they represent that the product is licensed under a specific Act. I cannot accept that consumers would make such a conceptual leap. Even if they were led to believe that the product is a therapeutic good as defined, they would not be so aware of the relevant law as to think that such goods required licensing under a statute: see generally Weitmann v Katies. I find that this claim fails.

The remaining claims made by the cross-claimants in there cross-claim may be disposed of briefly. Although no formal concession in respect of them is made by the cross-respondent, the court has been told that it will cease making the representations, the subject of the claims, in its advertising and promotional material.
The fifth claim is in respect of representation allegedly made by the cross-respondent in its advertisements and promotional literature that "the applicant developed or was partly responsible for developing a product called k-elastin or kappa elastin".
I am satisfied that this representation has been made by Narhex Australia Pty Limited in the material referred to. I am equally satisfied that the representation is incorrect. The company played no part whatever in the development of k-elastin or kappa elastin. The assertion that it did so is, in my view, capable of enhancing the value of the company's products in the eyes of purchasers or potential purchasers. The representation is relevantly misleading and constitutes a breach of the section.
The next claim is based upon an alleged representation by the cross-respondent that "k-elastin or kappa elastin is made or marketed only by the applicant". I am satisfied that this representation is made in the advertising and promotional material tendered in this case.
The representation is plainly incorrect. The evidence establishes that the product kappa elastin, being commercial elastin produced by alkaline hydrolysis (whether or not the alkali used is potassium or sodium hydroxide) has been known since it was first produced by Professor Robert in the 1960s. The cross-respondent does not make this elastin. It buys it from a producer in America. It would appear that it is the active ingredient of at least the product soluelastin which is still marketed. It has not been asserted by the cross-respondent that the representation is correct. I am satisfied that it is incorrect. I am equally satisfied that the representation would have the effect of enhancing the value of the cross-respondent's product in the market place. I consider the representation to be relevantly misleading and in breach of the section.
The final claim made is that the evidence in the case demonstrates that the cross-respondent makes the representation that "only the applicant's product contains cross-linked elastin".
I consider that the general impact of the advertising and promotional material issued on behalf of the cross-respondent is such as to demonstrate that this representation is made out. The representation is clearly incorrect and relevantly misleading. I hold it to be a breach of s 52 of the Act.
As appears from the above findings and reasons, I hold that both the applicant and the first-respondent have committed breaches of s 52 of the Act. I do not understand it to have been submitted that the second respondent has committed separate breaches. At this point, I defer this matter for further consideration. The question of what if any orders should be made in respect of the breaches which have been established is also deferred. I will place these proceedings in the list before me at Sydney at 9.30 am on Monday 30 July for mention, and further directions.

[1990] FCA 348

13 JULY 1990