Nick Scali Limited v Super A-Mart Pty Ltd
[2011] FCA 751
•6 July 2011
FEDERAL COURT OF AUSTRALIA
Nick Scali Limited v Super A-Mart Pty Ltd [2011] FCA 751
Citation: Nick Scali Limited v Super A-Mart Pty Ltd [2011] FCA 751 Parties: NICK SCALI LIMITED (ACN 000 403 896) v SUPER A-MART PTY LTD (ACN 009 810 324) File number(s): NSD 1142 of 2010 Judge: YATES J Date of judgment: 6 July 2011 Catchwords: TRADE PRACTICES – consumer protection – comparative advertising – misleading or deceptive conduct – false representations – television commercial – point of sale material – relevant approach discussed – whether price-compared products represented to be of the same or equivalent standard, quality, grade or composition – oral representations – whether products represented to be the same or to have come from same factory or place – sufficiency of evidence – whether certification of product misrepresented Legislation: Australian Consumer Law s 232
Evidence Act 1995 (Cth) s 140(2)
Trade Practices Act 1974 (Cth) ss 52, 53, 82
Trade Practices Amendment (Australian Consumer Law) Act (No 2) 2010 (Cth) Sch 7, items 7(1) and (2)Cases cited: Campomar Sociedad, Limitada v Nike International Limited (2000) 202 CLR 45
Country Road Clothing Pty Ltd v Najee Nominees Pty Ltd (1991) 20 IPR 419
Doolan v Waltons Ltd (1981) 39 ALR 408
Ducret v Chaudhary’s Oriental Carpet Palace Pty Ltd (1987) 16 FCR 562
Elna Australia Pty Ltd v International Computers (Aust) Pty Ltd (No 2) (1987) 16 FCR 410
Gillette Australia Pty Ltd v Energizer Australia Pty Ltd (2002) 193 ALR 629
Given v CV Holland (Holdings) Pty Ltd (1977) 29 FLR 212
JLW (Vic) Pty Ltd v Tsiloglou [1994] 1 VR 237
Morgan v Odhams Press Ltd [1971] 1 WLR 1239
Nick Scali Ltd v Super A-Mart Pty Ltd (2010) 189 FCR 550
Parkdale Custom Built Furniture Proprietary Limited v Puxu Proprietary Limited (1982) 149 CLR 191
Siddons Pty Ltd v The Stanley Works Pty Ltd (1991) 29 FCR 14
Thompson v Riley McKay Pty Ltd (No 2) (1980) 31 ALR 507Wardley Australia Limited v The State of Western Australia (1992) 175 CLR 514
Date of hearing: 12, 13, 14, 15, 19 October, 10 November 2010 Date of last submissions: 25 November 2010 Place: Sydney Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 195 Counsel for the Applicant: Mr S Burley SC with Mr H Bevan Solicitor for the Applicant: DLA Phillips Fox Counsel for the Respondent: Mr R Cobden SC with Mr N Murray Solicitor for the Respondent: Clayton Utz
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
NSD 1142 of 2010
BETWEEN: NICK SCALI LIMITED (ACN 000 403 896)
ApplicantAND: SUPER A-MART PTY LTD (ACN 009 810 324)
Respondent
JUDGE:
YATES J
DATE OF ORDER:
6 JULY 2011
WHERE MADE:
SYDNEY
THE COURT ORDERS THAT:
1.The proceeding stand over to 18 July 2011 at 9.30 am for the purpose of making directions as to the further hearing of the matter on the question of relief and costs.
Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using Federal Law Search on the Court’s website.
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
NSD 1142 of 2010
BETWEEN: NICK SCALI LIMITED (ACN 000 403 896)
ApplicantAND: SUPER A-MART PTY LTD (ACN 009 810 324)
Respondent
JUDGE:
YATES J
DATE:
6 JULY 2011
PLACE:
SYDNEY
REASONS FOR JUDGMENT
This case is about the comparative advertising of lounge suites.
The applicant is a manufacturer, importer and supplier of furniture. It operates 28 retail stores located in New South Wales, Victoria, Queensland and South Australia. Since April 2008 the applicant has promoted and supplied a lounge suite called the “Rajah” (the Rajah suite). It also promotes and supplies a modular (or corner) lounge suite called the “Catalina” (the Catalina suite).
The respondent is a discount furniture and bedding retailer. It operates 29 stores located in Queensland, New South Wales, Western Australia, South Australia and Victoria. It promotes and supplies a lounge suite called the “Excellence” (the Excellence suite). It also promotes and supplies lounge suites called the “Excellence” modular lounge suite (the Excellence modular suite) and the “Everest” modular lounge suite (the Everest modular suite).
The retail market for furniture in Australia can be analysed by reference to three broad categories: high-end retailers, mid-market retailers, and low-end retailers. To some extent these categories overlap. The applicant sees itself positioned in the mid-market category. It sees the respondent positioned in the low-end category, although it perceives the respondent to be seeking to broaden its customer base by selling a line of furniture at higher price points. The respondent did not challenge this categorisation of the market, or the accuracy of the applicant’s perceptions of their respective positions in that market or of its pricing strategy.
The respondent has caused a television commercial to be broadcast in which it compares the price of the Excellence suite with the price of the Rajah suite (the commercial). The respondent has also caused the commercial to be made publicly available on the Internet from the respondent’s website ( and from the You Tube website ( In the course of comparing the price of the two products, the commercial employs the slogan: “Compare the product … Compare the price” (the slogan).
The respondent has also engaged in comparative advertising using signs (placards) within its stores. These signs also employ the slogan. This advertising, once again, compares the price of the Excellence suite with the price of the Rajah suite. It also, separately, compares the price of the Excellence modular suite with the price of the Catalina suite, and the price of the Everest modular suite with the price of the Catalina suite.
For reasons I will explain in greater detail, the applicant alleges that, by making these price comparisons in the particular ways it has, the respondent has engaged in conduct that is misleading or deceptive, or likely to mislead or deceive, and has made false representations, in contravention of ss 52 and 53, respectively, of the Trade Practices Act 1974 (Cth) (Trade Practices Act). In essence, the applicant alleges that the respondent has falsely represented that the price-compared products are of the same or equivalent “standard, quality, grade or composition”. The applicant’s case is that, in so promoting its products, the respondent has sought to persuade its retail customers that, if they buy the respondent’s product, they will acquire the same or an equivalent product to that sold from the applicant’s more “up market” stores, but at a much reduced price.
The applicant also alleges that, in the course of dealing with customers’ inquiries within the respondent’s stores, members of the respondent’s sales staff have made oral representations that give rise to similar contraventions.
There is a related aspect to this conduct. It concerns a representation by the respondent that the Australasian Furnishing Research and Development Institute (AFRDI) had certified the Excellence suite upholstered in “oyster” coloured leather. The respondent accepts that, for a certain period of time, the AFRDI certification it had for the Excellence suite did not extend to leather in “light” shades, and hence did not extend to the Excellence suite upholstered in “oyster” coloured leather. The respondent also accepts that, to this extent, it did misstate in some of its advertising the certification that it had from AFRDI. The respondent has been able to obtain a further certification from AFRDI which covers the Excellence suite upholstered in “oyster” coloured leather. However, the parties remain in dispute about another matter concerning AFRDI’s certification of the Excellence suite.
The applicant seeks injunctive and pecuniary relief under the Trade Practices Act. The Trade Practices Act was substantially amended by the Trade Practices Amendment (Australian Consumer Law) Act (No 2) 2010 (Cth). Nevertheless, the Trade Practices Act continues to apply to the conduct impugned in this proceeding because the proceeding was commenced before 1 January 2011: see Schedule 7, item 7(1) of the amending Act. However, to the extent that the proceeding is one for an injunction, the proceeding is taken to be one for an injunction under s 232 of the Australian Consumer Law: see Schedule 7, item 7(2) of the amending Act.
On 14 September 2010 I made an order, at the request of the parties, that all issues concerning liability in this proceeding (including liability for damages or an account of profits) be heard and determined before any hearing in relation to the quantification of damages or profits. The form of that order reflects the fact that, at that time, the applicant had also claimed that the respondent had engaged in passing-off. This claim was subsequently abandoned by the applicant in the course of closing submissions. Thus, the only matter that arises for present determination is the question of liability in relation to the claims made under the Trade Practices Act, including liability for damages.
BACKGROUND MATTERS
Comparative advertising
This case concerns a particular factual application of ss 52 and 53 of the Trade Practices Act in the context of comparative advertising. There was no real dispute between the parties about the relevant principles of law. Neither party has suggested that there are special principles involved in the application of ss 52 and 53 to cases of comparative advertising. Both parties have placed reliance on the discussion of relevant principles in Gillette Australia Pty Ltd v Energizer Australia Pty Ltd (2002) 193 ALR 629. The respondent has also drawn particular attention to the decision in Country Road Clothing Pty Ltd v Najee Nominees Pty Ltd (1991) 20 IPR 419 which involved the use of a similar slogan to the one that features in the present case.
The nature and scope of the alleged representations
As I have noted, the applicant alleges that the respondent has falsely represented that the products it has compared are of the same or an equivalent “standard, quality, grade or composition”. In the context of allegations of resulting contravention of s 53(a) of the Trade Practices Act, the choice of the words “standard, quality, grade or composition”, as characterising the nature and scope of the representations, is no accident. Those words are plainly borrowed from s 53(a) which provides that:
A corporation shall not, in trade or commerce, in connexion with the supply or possible supply of goods or services or in connexion with the promotion by any means of the supply or use of goods or services:
(a)falsely represent that goods are of a particular standard, quality, value, grade, composition, style or model or have had a particular history or particular previous use;
…
The word “quality” in this statutory context bears the dictionary meaning of an attribute, property or special feature: Given v CV Holland (Holdings) Pty Ltd (1977) 29 FLR 212 at 216; Thompson v Riley McKay Pty Ltd (No 2) (1980) 31 ALR 507 at 509. In Doolan v Waltons Ltd (1981) 39 ALR 408, Lockhart J observed (at 411) that to construe “quality” in this way was to give it a generally understood and accepted meaning. His Honour noted that the words used in s 53(a) were “components” that “are not mutually exclusive”, and that there may be an overlap between them. His Honour instanced the possibility of overlap between “composition” and “quality”.
In Ducret v Chaudhary’s Oriental Carpet Palace Pty Ltd (1987) 16 FCR 562 Ryan J followed these authorities, saying at 577:
Those authorities suggest to me that a wide meaning has been given to ‘quality’ in s 53(a) – a meaning which extends beyond the degree or grade of excellence which a thing can be said upon physical examination to possess in comparison with others of a similar kind, and which includes the virtues, attributes, properties and special feature of the thing …
However, in respect of the word “standard”, his Honour said at 577:
In my opinion “standard” as used in s 53 of the Act connotes a narrower concept than “quality”. “Standard” is defined in the relevant sense in the Shorter Oxford English Dictionary as “a definite level of excellence, attainment, wealth or the like, or a definite degree of any quality, viewed as a prescribed object of endeavour or as the measure of what is adequate for some purpose”. An example of a representation that goods were of a particular standard within the meaning of s 53(a) of the Act is to be found in Gilmour v Bannister Nominees Pty Ltd (1982) 60 FLR 308 where a statement was made that a concrete pumping machine was “to contractors’ standard”.
I make these observations because much of the evidence was devoted to showing differences in the materials, components and manner of construction of the lounge suites that the respondent had used for its price comparisons. There was also evidence relating to aesthetic differences between the respective lounge suites covering such matters as the shape and appearance of the lounge suites and the standard of workmanship involved in their manufacture. There was also evidence that bridged these two broad areas, relating to matters such as the quality of materials and differences in the design and construction as these might affect the appearance of the lounge suite. No doubt all these matters fall within the scope of, and relate in some way or another, to the “standard, quality, grade or composition” of the lounge suites being compared. The matter of present importance is that the applicant’s case was not confined to a bare claim of superiority in the sense of excellence, but was also based on the existence of material differences between the price-compared lounge suites which can be objectively ascertained. Before I turn to consider whether there are such differences, it is necessary for me to say something about the nature of the evidence that was adduced on this issue.
The expert witnesses
Each of the parties adduced evidence from experts, principally on the question of the similarities and differences between the Rajah suite and the Excellence suite. There was limited evidence about the Catalina suite, the Excellence modular suite, and the Everest modular suite. For reasons which will become apparent, it is not necessary for me to dwell on similarities and differences between the Catalina suite and the Excellence and the Everest modular suites.
The applicant relied on evidence from three experts: William Bennett, Maryanne Lees and Richard Marstan Stokes.
Mr Bennett is a leather consultant and owner of a business called Complete Leathercare, which commenced operation in 1992. The business specialises in the care and treatment of leather coverings on furniture and in cars, boats and planes. The business is established in most capital cities and regions in Australia and has facilities for leather restoration, repairs and production. It is also a supplier of leather protection products. Mr Bennett has had approximately 20 years experience in this line of business and has carried out many thousands of inspections of leather coverings used in these applications. After receiving initial training in leather care and establishing the Complete Leathercare business he completed a three year leather technicians course with the Australian Association of Leather Industries. He was a member of the Leather Guild (now defunct). He is now a member of the Furniture Industry Association of Australia and is a Technical Associate Member of the British Leather College. He has lectured on leather at the Royal Melbourne Institute of Technology and at TAFE furniture courses. He conducts a leather training consultancy for various retailers and manufacturers.
Ms Lees commenced employment with Howe Leather in Victoria in 1972. She has trained in all forms of leather manufacturing, leather cutting, leather inspection and quality control, and has been employed in leather businesses for many years. In 1992 she commenced employment with Australian Leather Holdings as the National Manager of its furniture and upholstery division in charge of major accounts (such as Myer and David Jones) and export accounts. This position entailed her visiting overseas tanneries (including in the United Kingdom, China, Italy and the United States of America) every three months for the purpose of quality control, learning new techniques and product sales. In 1997/1998 she completed a leather technicians course with a New Zealand tannery, Ashley Leather, and in 2005/2006 she was engaged by AFRDI. Ms Lees was a contributor to the promulgation of AFRDI Standard 146 - Leather Descriptions Furniture Industry.
From 2007 she established a business called R.E.D. Leathers which is an independent leather agent and leather consultancy for the importation and distribution of leather into Australia, New Zealand and Asia.
Mr Bennett and Ms Lees gave evidence on inspections that each carried out on a sample of the Excellence suite and a sample of the Excellence modular suite at the respondent’s Nunawading store, and of a sample of the Rajah suite and a sample of the Catalina suite at the applicant’s Nunawading store. Each provided a report of his or her inspection and each was cross-examined. It seems that Mr Bennett and Ms Lees inspected the Excellence suite and Excellence modular suite at the same time. This was not by pre-arrangement between them; it just happened to be the case. There was evidence of some limited interaction between the two of them at the time of that inspection. I am satisfied, however, that the opinions expressed in their reports and in oral evidence reflected the views that each held independently, based on his and her own evaluation of the goods being inspected. It would have been desirable, however, for the inspections not to have been carried out at the same time in each other’s presence. There was no challenge to their expertise. Each was an impressive witness giving evidence drawn from a position of considerable expertise in the inspection and evaluation of leather furniture.
Mr Stokes has been engaged in the furniture industry for over 50 years. In 1959 he joined a family business established in 1920 which was then being carried on by a company called Stokes Furniture Restoration Pty Ltd. In 1959 he obtained a Diploma in Furniture Manufacturing from Ultimo Technical College. This covered cabinet making, furniture polishing and upholstery trade disciplines. He started working in the workshop of the family business and in 1970, when he took control of the company, he commenced carrying out inspections and providing quotations for work. In 1990 he became the President of the Upholsterers and Allied Trades Association NSW. From 1994 to 2000 he was the Executive Director of the NSW Furnishing Industry Training Council, a division of the Furnishing Industry Association of Australia. In that capacity he assisted in the creation of a curriculum for apprenticeships in the furnishing industry and in registering the Furnishing Industry Association of Australia as a training company to assess the work of trainees. In 2003 he obtained a Workplace Assessors Certificate IV permitting him to be an assessor of trainee work in-house. He maintains that certification. In 1996 he was appointed by the then Minister of Education in New South Wales to the Council of the Southern Sydney Institute of TAFE, representing the furnishing industry. He held that position until 1998. He is a consultant to Divine Word University, Madang, Papua New Guinea with regard to soft timbers used in construction. From 1998 to the present time he has carried out furniture inspections to assess quality, construction and like issues, on request from the Department of Fair Trading in New South Wales and AFRDI.
Mr Stokes was a witness of considerable experience in relation to the construction of furniture of the kind in question. His oral evidence, however, revealed a tendency towards advocacy. He speculated on a number of matters on which there was no substitute for objective testing. For example he speculated on the weight bearing capacity of the Excellence lounge suite in a way which, in my view, was subjectively argumentative. He was also shown to be in error in attributing to the Excellence lounge suite a constructional feature (which he criticised) which was, in fact, a constructional feature of the Rajah suite. When this error was exposed, he changed his evidence to criticise an aspect of this feature in the Excellence lounge suite. Because of these matters I have found it necessary to approach his evidence with some caution, particularly where it involves matters of purely subjective evaluation. Nevertheless his evidence was of assistance in elucidating the constructional differences between the parties’ respective lounge suites.
The respondent relied upon the expert evidence of Geoffrey Morris Boland. From approximately July 1995 to May 2010 Mr Boland conducted business in the Brisbane area under the name “The Leather and Vinyl Doctor” as a franchisee. The business specialised in the repair and maintenance of leather lounges and chairs, and leather car and boat seating. As revealed in cross-examination, Mr Boland’s work, at the time he became a franchisee, was exclusively in relation to vinyl products and not leather products. He was unable to recall when his experience in leather products commenced. His training in relation to the repair and maintenance of leather comprised on the job training carried out by the franchisor. The franchisor, on Mr Boland’s evidence, had obtained his own training in the same way. The nature of Mr Boland’s work involved him visiting a customer’s home to either repair the furniture at that location or, if major repairs were required, arranging for the item to be transported to a contractor’s workshop. Similarly, if he was providing services to a furniture retailer, he would attend the retailer’s warehouse or showroom. If the repairs that were required were extensive, he would arrange for the item to be transported to a contractor’s workshop to be repaired. The evidence thus reveals that Mr Boland’s work was related to relatively minor work although it included recolouring of leather lounges, the repacking of leather lounges, repairing damaged leather on lounges, repairing damaged or broken lounge frames and occasionally replacing springs in lounges and chairs. Mr Boland fairly conceded in cross-examination that his expertise was less than that of each of Mr Bennett, Ms Lees and Mr Stokes and that he would defer to their views.
There is an aspect of Mr Boland’s evidence to which I should make specific reference. He accepted that, when he prepared his first report comparing the Rajah suite and the Excellence suite, he did so with a view to pointing out the similarities, rather than the differences, between the two. Therefore, his observations and opinions in relation to that report can be seen as being skewed in a way that emphasises similarities at the expense of failing to identify differences between the two lounge suites. After service of the reports of Mr Bennett, Ms Lees and Mr Stokes, he provided a further report commenting on the differences which those witnesses had observed between the two lounge suites. This report was not, however, based on any further inspection of the lounge suites by Mr Boland.
Where there are differences between Mr Boland and Mr Bennett and Ms Lees on questions concerning aspects of the lounge suites relating to the appraisal of the leather that has been used, I prefer the evidence of Mr Bennett and Ms Lees. Mr Boland also expressed opinions which differed from those expressed by Mr Stokes on matters concerning the construction and features of the two lounge suites. On these matters I have made findings based on my own appraisal assisted by the opinions expressed by Mr Boland and Mr Stokes.
PRODUCT COMPARISON
General observations
The expert evidence addressed a number of differences between the Rajah suite and the Excellence suite. These differences, particularly as to matters of construction, were addressed principally by reference to the single recliner chair of each lounge suite. It was not suggested, however, that these differences were not also present in the three seat lounge comprising part of each suite. In the description which follows it is convenient to refer simply to the suites themselves without distinguishing between the single recliner chair and the three seat lounge (except where it is necessary to do so).
Many of the differences between the Rajah suite and the Excellence suite are matters of objective fact that can be observed, and in some cases measured, when carrying out a close inspection of the physical items. In many cases these differences are not matters that would be readily apparent to the average consumer, without the benefit of instruction from those with specialised knowledge of furniture manufacture and design. Even then, many of the differences to which I will refer can be revealed only by an invasive, side-by-side inspection of the two suites, involving a significant degree of dismantling and, in some respects, destruction of the physical items. Obviously, the average consumer would not be afforded the opportunity of that kind of inspection when seeking to purchase a lounge suite at the retail level. Moreover, the opportunity for instruction, at the time of retail inspection, would be limited by what the consumer, as an uninformed purchaser, might assume or choose to ask, or by what a sales assistant, as a presumably informed seller, might choose to convey, based on the extent and accuracy of his or her knowledge at the time.
As I have noted, some of the differences referred to by the experts were matters of aesthetic appeal, on which reasonable minds might express differing preferences. The fact that differing preferences might be expressed is not a matter of prime concern. What is significant is that, where such differences exist, they may reflect a valid contributing reason for the difference in the retail price between the two lounge suites. Such differences may reflect, for example, a difference in the degree and skill of workmanship that has been involved, the use of additional materials or the need to carry out additional manufacturing or processing steps to achieve the aesthetic effect.
All these differences must be considered to see whether, as a matter of practical judgment, they are likely to be material to the purchasing decision of the representative consumer. The materiality of these differences, considered individually and collectively, informs the overall assessment of whether, as a matter of practical judgment, the Rajah suite and the Excellence suite are of the same or equivalent “standard, quality, grade or composition”.
The Rajah suite and Excellence suite compared
Size
Overall the Rajah suite is larger than the Excellence suite. According to the advertised dimensions for the respective suites, the Rajah single recliner chair is 112 (w) x 102 (d) x 102 (h) (cm) whereas the Excellence single recliner chair is 95 (w) x 101 (d) x 104 (h) (cm); and the Rajah three seat lounge is 226 (w) x 102 (d) x 102 (h) (cm) whereas the Excellence three seat lounge is 212 (w) x 101 (d) x 104 (h) (cm). Based on the advertised dimensions, the Rajah single recliner chair and three seat lounge are each appreciably wider and slightly deeper than the corresponding components of the Excellence suite; whereas the Excellence single recliner and three seat lounge are slightly higher than the corresponding components of the Rajah suite.
Both Mr Stokes and Mr Boland measured the suites they inspected. These measurements were made out of court. Their measurements did not correlate with each other’s measurements or with the advertised dimensions for each suite. Mr Stokes’ measurements showed the Rajah single recliner chair and three seat lounge to be wider than the Excellence single recliner chair and three seat lounge, respectively. Mr Boland’s measurements showed the Rajah single recliner chair to be wider than the Excellence single recliner chair, but the Excellence three seat lounge to be wider than the Rajah three seat lounge. However, when asked to undertake measurements during the course of his cross-examination, he found the Rajah three seat lounge to be wider than the Excellence three seat lounge. The resulting evidence presents a confusing picture. It is clear that the sample lounge suites Mr Boland measured out of court were not the same lounge suites he measured during his cross-examination. However, I think that the more likely explanation for the discrepancy in his measurements is that he was using different endpoints on different occasions. This became clear when, during cross-examination, he was asked to ensure that the tape measure was placed to the extremities of the arm cushions.
I am satisfied that the advertised dimensions (which no party sought to actively challenge as typical dimensions) indicate, in a broad way, the overall relative difference in dimensions between corresponding elements of the two lounge suites.
Leather
The evidence establishes that, generally speaking, all upholstery leather is “split”. This is carried out on a bandsaw machine through which the hides are passed, creating two or more layers. The top split is referred to simply by that name, or by the names “grain split”, “top grain split” and “top grain leather”. The lower splits are referred to as the “flesh” or “bottom” splits, or simply as “splits”. These lower splits do not have the same tear strength as the top grain split. For this reason they are not considered in furniture production to be suitable for body weight or flex areas. Top grain leather is better wearing and more expensive to use as upholstery than the lower splits.
It is necessary to refer to other terms to describe the characteristics and qualities of the leather that is used in furniture production. The word “boardy” refers to a stiff, cardboard-like feel to the leather, indicating that the leather lacks “flex” (that is, the quality of bending and folding). The word “break” refers to the way in which the grain of leather wrinkles or creases when the leather is folded grain inwards. A “poor break” describes the appearance of the leather when folding produces unsightly large loose grain wrinkles. The expression “slippery hand” refers to a soft slippery surface feel when the hand is passed over the surface of the leather. This “feel” indicates that the leather has been treated in some way, usually chemically. Sometimes this involves artificially “correcting” the grain of the leather to remove natural imperfections in the hide (which, for many, are considered to be desirable to show a more natural quality of the leather).
The Rajah suite and the Excellence suite are covered in a combination of top grain and bottom split leather. The Excellence suite is upholstered in top grain leather on the seat and lumbar facing cushions and the tops of the arms. The Excellence suite is upholstered in bottom split leather on the outside back, outside side panels, seat side borders, back cushion inside borders, front kick panels, front arm facias, and other areas.
On the other hand, the Rajah suite is upholstered in top grain leather on all seat and back cushions, top arms, front arm facias, front kick panels and several borders that would or could become exposed to touch. The Rajah suite is upholstered in bottom split leather on the outside back and outside arms, and on the inside and back cushion borders. In short, significantly more top grain leather is used in the Rajah suite than in the Excellence suite. Mr Boland accepted that, when compared with the Rajah suite, the Excellence suite had 11 more panels covered in bottom split leather.
As I have noted, Mr Bennett inspected a sample of the Excellence suite and a sample of the Excellence modular suite at the respondent’s Nunawading store in Victoria. Both suites were upholstered in “oyster” coloured leather. On the same day he inspected a sample of the Rajah suite at the applicant’s Nunawading store. This suite was upholstered in white leather. He also inspected a sample of the applicant’s Catalina modular suite at the same store. This suite was upholstered in “chocolate” coloured leather.
Mr Bennett’s inspection led him to conclude that, apart from the different use of top grain and bottom split leather to which I have referred, the leather used in the applicant’s two suites was of a “notably better quality” than that used on the respondent’s two suites. He observed that the top grain leathers used on the applicant’s two suites were “both of better feel, flex and break” than the leather used on the respondent’s two suites. He observed that the top grain leather used on the Excellence suite had “a glossy appearance” and “appears to have the slippery hand”, which indicated to him that a “feel agent” had been used on the leather to reduce surface friction. He observed that the bottom split leather used on the respondent’s two suites was “very boardy” and were of “a poor colour and gloss level match” relative to the top grain leather used on those suites.
Ms Lees inspected the same suites at the Nunawading stores. Her conclusion was that both the applicant’s suites were “of a superior finish and raw material selection and tanning process and production, resulting in a better feel, and higher quality result, also the manufacturing (upholstery) provides a clean result to overall product. The split portion is superior to finish/feel/texture and overall appearance”. With respect to the respondent’s two suites she concluded: “The split portion is hard/boardy to the hand, showing dirt & dust under the finish coat under microscope, poor colour/gloss/poor flex/resulting in vast colour variation over all units”. She also noted with respect to the Excellence suite that the “top grain feels slippery”.
Mr Boland disagreed with Mr Bennett’s and Ms Lees’ assessments. In his opinion the leather used on all the suites was “very similar” and “not notably different”. He disagreed with Mr Bennett’s and Ms Lees’ assessments about colour and gloss variations between the top grain leather and the bottom split leather used in the respondent’s two suites, and the very “boardy” feel of the bottom split leather.
The respondent submits that Mr Bennett’s and Ms Lee’s opinions as to the superiority in quality of the leather used in the Rajah suite – specifically in respect of any implication as to its durability – is not borne out on examination of the applicant’s and respondent’s respective service reports relating to the Rajah suite and the Excellence suite. The respondent submits that this evidence suggests that the leather used in the Excellence suite is more durable. In my view the evidence does not enable that conclusion to be reached. Whilst the service reports record the making of customer complaints and contain a summary statement, in each case, of the customer’s concerns, they are not such as would enable any safe conclusion to be drawn as to the validity of the complaint made or some more general conclusion concerning the leather quality of the respective lounges or the durability of that leather.
It may be accepted that it is a normal occurrence in the supply of manufactured goods that, from time to time, defects occur. However, perceptions as to the existence and significance of defects may differ. Also, the cause of the defect may be a matter of some contention. In common experience, retailers seeking to offer good service to their customers may seek to accommodate customer concerns and complaints, even in cases where legitimate differences of opinion might exist as to the validity of those concerns or complaints. I did not find the service reports to provide any real assistance in evaluating the nature and extent of differences in the leather quality of the two suites.
In oral evidence Mr Bennett and Ms Lees demonstrated the differences they observed between the Rajah suite and the Excellence in terms of leather use and quality. For the reasons I have given above, I prefer their considerably more expert evaluations to Mr Boland’s evidence on these issues. I accept that the Rajah suite uses leather of superior quality compared to the Excellence suite. This finding relates to both the top grain and bottom split leather that has been used. It is also clear that the Rajah suite uses considerably more top grain leather compared to the Excellence suite, including in relation to high-wear areas, where bottom split leather would not be as suitable.
I was able to make my own appraisal of any colour or gloss variations on the two suites produced in court: Exhibits G and H. I was unable to perceive any significant difference between the Rajah suite and the Excellence suite with respect to colour variation between the top grain and bottom split leathers that had been used. However, I observed a noticeable variation in sheen between the top grain and bottom split leather panels of the Excellence suite. This was particularly apparent when the Excellence suite was viewed from the front, and the seat cushions were compared to the front arms. Gloss variation was significantly less apparent in the Rajah suite. This may be due, in part, to the fact that considerably more top grain leather is used in the Rajah suite, allowing for a greater consistency in appearance.
Seat areas
There is a difference in the construction of the seat areas of the respective lounge suites. In the Rajah suite the components from the base up are as follows: calico dust cover; “no sag springs”; foam; and Dacron padding. Dacron padding is typically applied over the foam in lounge suites to make the furniture look rounded by filling out the cushion areas. It helps provide support to the user as well as shape to the cushions. The corresponding components in the Excellence suite, from the base up are: calico dust cover; “no sag springs”; calico layer; “pocket springs”; foam; and Dacron padding. I will return to the question of the “pocket springs” and the function they perform in the Excellence suite.
There was a question about whether the foam used in the Rajah suite is of higher density than the foam used in the Excellence suite. The experts agreed that use of higher density foam in the seat cushion of a lounge chair may mean that it lasts longer than a seat cushion made of lower density foam. Lower density foam will compress more and could result in creasing or folding of the foam, which may eventually lead to the foam breaking down in that area. However, the experts disagreed on the question about whether the Rajah suite uses higher density foam compared to the Excellence suite.
Mr Stokes expressed the opinion that the foam used in the Rajah suite is of higher density than the foam used in the Excellence suite. His opinion was based primarily on a “squeeze” test he conducted on the foam used in each suite. He noted that the foam in each suite differed in colour, which indicated to him that different grades of foam are used in each case.
Mr Boland, on the other hand, expressed the view that the foam used in each suite is of similar density. His opinion was also based on a “pinch” test which he conducted. Hearing both Mr Stokes and Mr Boland explain the tests they conducted in this regard, I am satisfied that Mr Boland’s “pinch” test was the same as Mr Stokes’ “squeeze” test. Mr Boland expressed the opinion that the foam used in the Rajah suite and the foam used in the Excellence suite are both approximately equivalent to “Dunlop 23/130”. Mr Boland said that the only accurate way of testing foam density is to conduct a compression test. Such a test had not been performed on the foam used in either suite.
My own observation of the foam used in each suite, based on “squeezing” the foam as the experts had done, is that the foam in each suite is different to the touch. However, I am not able to conclude, by this means, that the foam used in the Rajah suite is noticeably less compressible (and thus of higher density) than the foam used in the Excellence suite. I also observed that the foam used in the Rajah suite is orange and that the foam used in the Excellence suite is pale green. The use of different colours for foam may indicate different densities (with a lighter coloured foam having a lower density than a darker coloured foam), but there is no satisfactory evidence before the Court that the foam used in either suite conforms to an objectively determined colour/density standard.
In the end result I am unable to make any finding about the relative densities of the foam used in the suites. The opinions expressed by the experts are essentially subjective views. On this issue I would not prefer the view of one expert over the other. My own examination was inconclusive. The matter could have been proved by objective evidence. It was not.
As I have noted, the seat areas of the suites are constructed using foam with Dacron padding. The foam is supported by “no sag” (or “zig zag”) springs which, in each case, are attached to the frame of the suite. However, the foam region in the Excellence suite is significantly thinner than the corresponding region in the Rajah suite. The region where there would otherwise be foam in the Excellence suite is occupied by a layer of springs. These springs are made from thin wire and, on my observation, are readily compressed. These springs were referred to in the evidence as “pocket springs”. That description is not an entirely accurate one. Pocket springs, typically, are conical in shape, with the distal regions of the spring having a wider circumference than the middle region. Their function, in furniture, is to provide support and resilience. The springs in the Excellence suite do not have the typical shape of pocket springs. They are of uniform circumference. Mr Stokes said that the springs were “just there to fill up the space between the foam and the base”. When asked about what compressive effect, if any, these springs had, Mr Stokes replied: “Virtually nothing”. Based on my own observations of the springs, I accept this evidence.
Another difference between the Rajah suite and the Excellence suite is the method by which the “no sag springs” are attached to the frames of the suites. The “no sag springs” of the Rajah suite are attached to the wooden frame at the front and at the back by an assembly using a metal hook. The “no sag springs” of the Excellence suite are held in place with metal clips. At the back, the metal clip is attached to the wooden frame of the suite. At the front, it is attached, by welding, to the metal frame of the suite. In his oral evidence, Mr Stokes confused the mode of attachment of the springs in the respective suites and, unwittingly, criticised the method of attachment of the “no sag springs” in the Rajah suite. He expressed the opinion that the mode of attachment of the “no sag springs” (as in the Rajah suite) would give “a lot less” longevity than the welded attachment in the Excellence suite. When later cognisant of his mistake, he sought to change the thrust of his evidence by saying that the metal clip used in the Excellence suite was “very thin” and would not “stand the pressure over a period of time”. Mr Boland expressed no view as to the respective merits of the modes of attachment of the “no sag springs” in the suites.
I regard Mr Stokes’ evidence on this issue to be unsatisfactory and unreliable. Although the mode of attachment to the frames of the “no sag springs” is different in each lounge suite, I am unable to conclude that one mode of attachment is preferable to the other or will lead to greater longevity of the lounge suite in use.
Wing areas
There are differences in the appearance and in the construction of the wing areas that are adjacent to the back cushions of the two lounge suites. The wings on the Rajah suite have a “plumped” folded appearance and are finished by what Mr Stokes termed “piping”. Mr Boland disagreed with the use of the term “piping”. He said that this was not “piping” in the traditional sense. He preferred the expression “reinforced seam”, where a piece of leather had been folded and stitched to another piece of leather. The difference in opinion between Mr Stokes and Mr Boland, on this score, was really no more than one of terminology. In my view, based on physical appearance, the term “piping” is apt to describe this characteristic.
The wings on the Excellence suite have a flatter, more elongated appearance by comparison. There is no piping. No doubt there will be differences between intending purchasers as to which appearance is preferred. The evidence shows, however, that there is significantly more workmanship involved in producing the wing areas of the Rajah suite and, to that extent, a significant difference in tailoring over the Excellence suite. The evidence shows that, in these areas, the leather in the Rajah suite is joined with double stitching, with the piping adding a third point of attachment between the leather pieces. The wings are then attached to the inside of the frame of the suite by stapling. These elements of construction combine to impart a more cushioned appearance to the Rajah suite, compared with the Excellence suite. In the Excellence suite the leather of the wing areas is joined by a single line of stitching. The wings are then attached to the outside of the wooden frame of the suite by stapling. The area of attachment is then covered by bottom split leather. The evidence is that this is a less costly form of upholstery. Mr Stokes referred to it as a “cost-saving exercise”. The evidence also shows that this is a less robust form of construction. In this connection Mr Stokes’ evidence was that this form of construction may lead to compromised longevity in the case of the Excellence suite, particularly in the area of the single stitching between leather pieces, where the stitching will wear out with the flexing of the leather. Mr Boland accepted that the wings on the Rajah suite would probably have better performance than the wings on the Excellence suite and would have greater ability to flex with the back of the lounge, although he expressed the opinion that the difference in wing effects would have “a negligible impact on the life of the lounge”. I prefer the evidence of Mr Stokes on this issue, where it differs from Mr Boland’s evidence.
Back cushions
The top of the inside back cushions on the Rajah suite features a gutter to support the head of the user when moving forward or back in the recliner. The gutter assists the foam, Dacron and leather to remain taut. The Excellence suite does not have this feature. In the Excellence suite the foam will tend to collapse under the weight of the user’s head when the suite is in the reclined position, causing a visible wrinkling or “puddling” effect after use. This effect was demonstrated in the course of the evidence.
Lumbar support
There are differences in the lumbar support of the two lounge suites. The Rajah suite has two straps of webbing which cause the foam, Dacron padding and leather to remain taut, thus preventing wrinkling or “puddling” in the lumber support region after use in the reclined position. The Excellence suite has no webbing. Instead, two “no sag springs” are used to provide support. These springs are held together and apart with two rubber bands. Mr Stokes said that the rubber bands are far less durable than webbing and are more likely to stretch. Also, unlike the webbing, the rubber bands would not cause the foam, Dacron and leather to remain taut and, therefore, would not prevent “puddling” after use in the reclined position. Mr Boland said that the “no sag springs” would provide support, but accepted that the rubber bands in the Excellence suite would be less durable than the webbing in the Rajah suite. He said that he was unable to comment on the question of “puddling”, although he added that he did not observe “puddling” in either the Rajah suite or the Excellence suite when he carried out his inspection. He accepted, however, that the webbing used in the Rajah suite provided both lumbar support and stopped “puddling” from occurring. Based on my own observations of the webbing in the Rajah suite, and the spring and rubber band combination in the Excellence suite, I prefer the evidence of Mr Stokes on this issue, where it differs from Mr Boland’s evidence.
Outside backs
There are differences in the construction of the outside back of the two lounge suites. The outside back of the Rajah suite has rounded corners which feature double stitching along the seams. The outside back of the Excellence suite is squared off following the shape of the internal frame and the seams are single stitched. In the course of the evidence attention was also drawn to the different number of back panels on the single recliner chair of each suite. The back of the Rajah recliner chair is made up of two panels and there are no seams in the headrest. The back of the Excellence recliner chair is made up of four panels and there are two seams in the headrest. The difference in the number of back panels was not explored in the evidence and does not seem to be of any greater significance than providing a visual difference between the two suites. The same may also be said of the rounded corners used in the Rajah suite and seamless headrest, which give a more “plumped” luxurious appearance compared with the Excellence suite. However, the use of double stitching in the seams of the Rajah suite, compared with the single stitching in the Excellence suite, speaks of enhanced durability, as a matter of construction. Mr Boland referred to this as a “reinforced” seam.
Metal frames
There are differences in the metal frames used in the construction of the two lounge suites. The front angle rail in the Rajah suite measures 43 mm by 20 mm. The front angle rail in the Excellence suite measures 25 mm by 25 mm. The front and back side metal rails used in the Rajah suite have 4 holes drilled in them. The front and back side metal rails used in the Excellence suite have 10 holes drilled into them. Mr Stokes expressed the view that the additional holes in the frame of the Excellence suite would compromise the strength of the frame, leading to fatigue and bending. Mr Boland disagreed with this view. Both opinions were expressed as matters of subjective judgment, without further elaboration. Neither party sought to objectively test the strength of the metal frames or their performance in use. I am unable to make any finding on the question whether the presence of additional holds in the metal frame of the Excellence suite would compromise its strength under conditions of normal use. Mr Boland did accept, however, that the dimensional size difference in the front angle rails may result in the front angle rail in the Rajah suite being stronger than the front angle rail in the Excellence suite; otherwise he expressed the view that the front angle rail in both suites was adequate for its purpose.
I accept the evidence that the front angle rail in the Rajah suite is likely to be stronger than the front angle rail in the Excellence suite. By this finding, however, I do not seek to suggest that the front angle rail of the Excellence suite was inadequate for its purpose.
Wooden frames
There are differences in the dimensions of the timber frames used in the two suites. The wooden rail on each side of the Rajah suite seat frame is approximately 10 cm wide and 4 cm thick. The wooden rail on each side of the Excellence suite seat frame is approximately 4 cm wide and 4 cm thick. Mr Boland agreed that this difference means that the timber frame in the Rajah suite is of a sturdier construction than the timber frame in the Excellence suite. He also accepted that this would contribute to the longevity of the Rajah suite. Mr Stokes expressed the view that the timber frame in the Excellence suite was undersized for the weight that he would expect a lounge suite of this size to bear in normal family use. Mr Boland disagreed with this opinion. The evidence, such as it is, does not enable me to make a finding on this question. However, I accept the agreement between the experts that, all other things being equal, the wooden frame of the Rajah suite is sturdier than the wooden frame of the Excellence suite and that this would enhance the longevity of the Rajah suite in use.
Recliner frames
The timber frame attached to the recliner mechanism of the Rajah suite is 40 mm by 50 mm and made of pine. The timber frame attached to the recliner mechanism of the Excellence suite is 20 mm by 30 mm and also made of pine. Apart from observing this difference, Mr Stokes made no other comment. Mr Boland did not measure the frame.
Inside arm cushions
There are differences in the materials used on the inside arm cushions and under the armrests of the lounge suites. The Rajah suite has light plywood on the inside arm cushion and cardboard under the armrest. Conversely, the Excellence suite has cardboard on the inside arm cushion and plywood under the armrest. The experts did not attach any significance to these differences, beyond noting them.
The Excellence suite also has shorter arm cushions than the Rajah suite. Mr Boland referred to this difference as merely a “design” feature. This is, nevertheless, a difference in configuration, which is also likely to reflect a difference in manufacturing cost between the Rajah suite and the Excellence suite.
Footrests
The metal plate footrest of the Rajah suite is significantly thicker and longer than that of the Excellence suite. There are three metal brackets in the Rajah suite footrest compared to two in the Excellence suite footrest. Mr Boland accepted that this difference would mean that the Rajah suite footrest would bend or break less easily than the Excellence suite footrest, assuming the metal of both was of the same tensility.
The wooden panel under the footrest of the Rajah suite is larger than that in the Excellence suite. Mr Stokes expressed the view that this provided a sturdier construction that would last longer and provide greater support. Mr Boland did not measure the wooden panel under the footrests. He disagreed that the larger wooden panel observed by Mr Stokes would result in a sturdier construction, although he did not disagree that such a panel would provide additional support for the foam and leather above it. Based on my own observation of the footrests, and the manner of their construction, I prefer the evidence of Mr Stokes on this issue, where it differs from Mr Boland’s evidence.
Stitching
The Rajah suite features curved stitching on both the seat cushion and lumbar support areas. The Excellence suite also employs curved stitching on the seat cushion area, but uses straight stitching on the lumbar support area. To this extent, the stitching in the Excellence suite is inconsistent. This may be viewed merely as an aesthetic difference. However, curved stitching involves a more skilled and time-consuming process, employing the use of a template. I accept Mr Stokes’ evidence that this is likely to add to the cost of manufacturing the Rajah suite.
I would add that both Ms Lees and Mr Bennett observed that the stitching on most of the outside back areas of the Excellence suite was crooked and that black Velcro had been used (somewhat incongruously on the light coloured lounge suite) to secure the bottom flaps to the frame. The black Velcro had bled through the leather. Mr Boland did not disagree with these observations. Rather, he discounted them as being merely aesthetic differences. However, these matters do reflect, in an objective way, on the degree of workmanship involved and the suitability of the materials that have been used in the Excellence suite. Similar criticisms were not made of the Rajah suite.
Reclining mechanisms
The Rajah lounge and single recliner chair both feature electrically operated reclining mechanisms. The reclining mechanism in the Excellence single recliner chair is electrically operated; however, the reclining mechanism in the Excellence lounge is manually operated. It is possible to buy the Rajah lounge in “three seater” and “two seater” configurations in which the reclining mechanisms are manual. However, the price comparison that was made was of the applicant’s “floor model” Rajah suite. This configuration included the “three seater” lounge with the electrically operated reclining mechanism.
The transformers used in the Rajah suite bear the imprint of an Australian Standards mark. The transformer in the Excellence single recliner chair does not bear that mark.
The transformers in the Rajah suite are housed in a plastic holder which is attached to the inside of the frame of the lounge/chair. The wiring in the Rajah lounge and recliner chair is fastened and secured to the frame at the rear of each chair. The transformer and wiring in the Excellence recliner chair are not encased or secured. The transformer sits on the ground next to the recliner chair and the wiring is loose and movable. There was disagreement between the experts as to whether this presents a safety risk. My own observation of the wiring of the Excellence suite leads me to conclude that it is possible for the wiring to become entangled with other parts of the chair. However, on the evidence before the Court, I am unable to conclude one way or the other whether this presents a significant safety risk.
The Rajah suite is also fitted with tension springs to ensure that the recliner returns to its correct position. This feature is absent in the Excellence suite.
Conclusions
In my view there are significant differences in construction, design and workmanship between the Rajah suite and the Excellence suite.
Overall, the Rajah suite is larger in size and is upholstered in significantly more top grain leather than the Excellence suite, particularly in high-wear areas where top grain leather is better suited than split grain leather. The evidence establishes that the use of top grain leather is more costly than the use of split leather. I am satisfied that, overall, the quality of both the top grain leather and the split leather used in the Rajah suite is superior to the quality of the corresponding leather used in the Excellence suite, based principally on the expert assessments of Mr Bennett and Ms Lees. My own observation confirms that, in respect of sheen, the top grain and split leather used on the Rajah suite is better matched, as compared to the corresponding leather used in the Excellence suite.
In my view the Rajah suite is, overall, of sturdier construction than the Excellence suite, particularly in relation to their respective wooden and metal frames and footrests. However, this is not to say that, in these respects, the construction of the Excellence suite is inadequate for its intended purpose.
The Rajah suite is also sturdier in relation to its use of double stitching and reinforced stitching (compared to the use of single stitching in the Excellence suite in comparable areas) and in some aspects of design, such as the wing areas, where, in the Rajah suite, the wings are likely to have better performance and greater ability to flex with the back of the lounge, compared to the corresponding areas in the Excellence suite.
The Rajah suite has other design features which distinguish it from the Excellence suite in significant ways. These features include: the gutter in the top of the inside back cushions and the use of webbing in the lumbar support areas, to prevent wrinkling or “puddling” in those areas; the use of significantly more foam in the seat areas; the inclusion of tension springs to ensure that the recliners return to their correct positions after use; electrical reclining mechanisms in both the single recliner chairs and the three seat lounge (compared to the manual reclining mechanism in the Excellence three seat lounge); and the provision, advantageously, of holders for transformers for the electrical reclining mechanisms, to enable the transformers and associated wiring to be secured to the inside frames of the chairs/lounge and thus diminish the possibility of the entanglement of electrical wires with other componentry.
Apart from these features, the Rajah suite also reflects a significantly greater degree of workmanship in the use of double and reinforced stitching generally, and in the consistent use of curved stitching in the seat and lumbar areas. With the exception of the limited use of curved stitching, the Excellence suite does not exhibit these features of workmanship.
For these reasons, in my view, the Rajah suite and the Excellence suite are not of the same or equivalent “standard, quality, grade or composition”. These differences in construction, design and workmanship are properly to be regarded as superior features of the Rajah suite compared with the Excellence suite.
The respondent submits that, in making a purchasing decision, the typical consumer “will consider what he or she can afford, whether the furniture appeals aesthetically, whether it will fit the desired space and whether it is comfortable”, but will not make choices “with respect to matters in the province of expert cabinet makers or leather experts”.
If, by this submission, the respondent contends that consumers would not regard the differences to which I have referred as material to a purchasing decision, then I do not accept that submission as it applies to the circumstances of this case. I have not sought to detail all the differences between the Rajah suite and the Excellence suite discussed in the evidence. I have, however, sought to identify the more significant differences which, in my estimation, are likely to be regarded by retail purchasers as material differences bearing upon a purchasing decision where the choice presented is between two similar looking lounge suites offered at significantly different retail prices. No doubt, in that context, judgments concerning “value for money” will be made. No doubt, in that context, there will be differences between consumers in the judgments that are made. Nevertheless, significant differences remain between the Rajah suite and the Excellence suite.
THE COMMERCIAL
The commercial described
The commercial uses a series of visual images, comprising the respondent’s name in logo form, sign-like slogans, still images of lounge suites, and spoken words. The Excellence suite is depicted by a still image, in the configuration of a three seat recliner lounge with two single recliner chairs in “oyster” coloured leather. It is referred to, by spoken words, as “this leather recliner lounge” and, later, as “Super Amart’s Excellence recliner lounge”. (I refer here and in succeeding paragraphs to the respondent’s name as “Amart” rather than “A-Mart” because this is the logo form of the name depicted in the commercial and in the respondent’s in-store signs.) The applicant’s lounge suite is depicted, by a still image, in the same configuration (that is, as a three seat recliner lounge with two single recliner chairs), in apparently the same or similarly coloured leather. This image is shown against the background of the image of the Excellence suite. The applicant’s lounge suite is not referred to by name. It is common ground, however, that the depiction is of the Rajah suite.
The presentation of the commercial could be described as “high impact”. It is colourful and “busy”, with rapid images and rapid messages conveyed, principally, by spoken words supported by on-screen graphics. The words are spoken by a male and a female. The dominating theme is price and, in particular, the respondent’s lower price of “under $3,000” (supported by on-screen graphics showing the price to be “$2,999.95”) compared with the applicant’s price of “over $7,000” (supported by on-screen graphics showing the price to be “$7030”). This theme is supported by the exhortations “Don’t pay more elsewhere” and “Get a better deal”, and the promises “Always the lowest price” and “Nobody beats Super Amart”.
The commercial can be described as moving through a number of different stages:
·The commercial commences with a screen shot of the respondent’s name in logo form and the on-screen graphic: “WON’T BE BEATEN ON PRICE”. The male voice says: “Nobody beats Super Amart”.
·The commercial moves to a screen shot of the respondent’s name in logo form and the on-screen graphic: “DON’T PAY MORE ELSEWHERE”. The female voice says: “Don’t pay more elsewhere for this leather recliner lounge”. The respondent’s name in logo form remains on screen until the end of the commercial.
·The commercial moves to the still image of the Excellence suite in the configuration I have described. The female voice says: “Compare the product … Compare the price”. The statement is also made by an on-screen graphic.
·The still image of the Rajah suite (in the configuration I have described) then appears on screen against the background of the still image of the Excellence suite. These images then remain for substantially the rest of the commercial. The still image of the Rajah suite is accompanied by the words: “NICK SCALI $7030”. The still image of the Excellence suite is accompanied by its price of “$2999.95”. The female voice says: “At Nick Scali you’ll pay over $7,000”.
·The female voice then says: “Super Amart price, less than half that, under $3,000”.
·This is then followed by the female voice saying: “AFRDI certified genuine leather … and backed by a ten year warranty … Super Amart’s Excellence recliner lounge, under $3,000”.
·The male voice then says: “Get a better deal on quality furniture”.
·The commercial then moves to a screen shot showing the respondent’s name in logo form and the on-screen graphic: “We will beat any LOWER price by 15%”. The figure of “15%” is given prominence. The male voice says: “Always the lowest price. Super Amart”.
·The commercial ends with a short jingle and a screen shot of the respondent’s name in logo form and other graphical matter such as “There’s a Store Near You!” and “OPEN 7 DAYS”.
The parties’ submissions
The applicant has provided a detailed analysis of the words and images used in the commercial. In essence, however, it contends that the commercial conveys that the products being shown are the “same” and that, all other matters being relevantly equal, the real point of difference between them is the advertised retail price. It submits that the commercial falsely represents that the Excellence suite is of the same or equivalent “standard, quality, grade or composition” as the Rajah suite; that the price of the Rajah suite is more than double the price of the Excellence suite, despite the two products being of the same or equivalent quality; and that the applicant offers to sell its Rajah suite at a retail price which is excessive given the retail price at which the respondent offers to sell the Excellence suite. It submits that these representations are false because the two lounge suites are not of the same or equivalent “standard, quality, grade or composition”.
For its part, the respondent submits that it would be an error to undertake a painstaking deconstruction of the commercial and that, in considering the factual assertions made in it, “there is no substitute for simply watching [the commercial] in real time, without pausing or undue repetition”. When this is done, the respondent submits, the commercial conveys no more than the following message: “Don’t pay more elsewhere for a leather recliner suite with a three seat sofa and two armchairs”. The respondent submits that the commercial makes no express or implied comparison of quality with the applicant’s lounge suite. It submits that the only matter being compared is price and that the commercial lawfully discriminates between the applicant’s and the respondent’s furniture on that basis, and on that basis alone.
Consideration
I accept the general thrust of the respondent’s submission that, for the purposes of the present case, one should not engage in a painstaking analysis of the commercial for fear of losing sight of what it is likely to convey in the medium and in the settings in which it is intended to be viewed. My description of the commercial is no more than an attempt to record, for the purposes of these reasons, the major stages of the commercial and the more significant elements of those stages. I have not attempted to record all the visual details of the commercial that are capable of being discerned from a close and abstract study of it. Indeed, I do not believe that a number of those details would be perceptible to viewers of the commercial exercising reasonable, but undirected, attention in a domestic setting.
The cases speak of the need to take account of the fact that the in-court presentation of television commercials in cases such as the present provides a fundamentally different setting from the domestic setting in which they are intended to be viewed. In Gillette at [47] Lindgren J referred to some of those differences. His Honour said:
… apart from the difference between a one-off viewing and repeated viewings, the circumstances in which a judge attends to a television commercial for the purposes of a case are not those in which members of the public do so. First, members of the public watch a commercial after and before viewing other things, rather than in isolation. Secondly, unlike the judge, they do not carefully view the commercial with a special interest in noting and memorising its features. Thirdly, they view the commercial, not in the calm of chambers, but against a background of distractions, such as domestic activity, or simply a preoccupation with other more interesting or pressing concerns. Fourthly, usually they do not know in advance that the commercial is about to commence.
I accept that, when considering what the commercial is likely to convey to ordinary or reasonable members of the public, its true impact can only be appreciated by considering the setting in which the commercial is intended to be viewed. Here, however, the intended setting is not confined to casual television viewing. As I have noted, the respondent has taken steps to ensure that the commercial is also available on the Internet. It can be taken that, in that setting, there will be viewers who will have sought out the commercial for their own educative purposes, and who can be taken, therefore, to have a particular interest in what the commercial is saying. Accordingly, in that setting, those viewers, unlike casual television viewers, will, for example, view the commercial in isolation, without the commonplace domestic distractions of the kind to which Lindgren J alluded in Gillette. In order to fulfil their need, such viewers may also seek to view the commercial a number of times in the one sitting, or over several sittings.
Regardless of the different settings that must be considered in the present case, the ordinary or reasonable member of the relevant class of consumer, for presently relevant purposes, must be taken to be exercising reasonable care for the protection of his or her own interests: Campomar Sociedad, Limitada v Nike International Limited (2000) 202 CLR 45 at [102]; Parkdale Custom Built Furniture Proprietary Limited v Puxu Proprietary Limited (1982) 149 CLR 191 at 199. Thus, in the present case, even the casual television viewer must be taken to be acting with some interest in the subject matter of the commercial; otherwise the question of contravention would stand to be assessed by reference to the false standard of the arbitrary, frivolous or unthinking mind. There could be many different reasons for that interest. For example, the viewer may be a prospective purchaser of a lounge suite. On the other hand, the commercial itself may have simply engendered the viewers’ interest, even if only by arousing the viewer’s curiosity, without more. But, for whatever reason, the viewer’s interest must be sufficient to cause him or her to attempt, reasonably, to comprehend what the commercial is saying.
I first viewed the commercial, uninstructed as to its features, during the course of the applicant’s opening. I remember its impact on me at that time. The next occasion on which I viewed the commercial was during the course of closing submissions. It had the same impact on me. My consideration of what the commercial is likely to convey to ordinary or reasonable members of the public to whom it is addressed has been guided primarily by my viewing of the commercial on those two occasions.
One does not approach the task of assessing the likely effect of a commercial, such as the present one, on the ordinary or reasonable viewer, as if “construing a statue, will or contract”: Country Road Clothing at 422. Rather, viewers will be expected to engage in a measure of “loose thinking”: Siddons Pty Ltd v The Stanley Works Pty Ltd (1991) 29 FCR 14 at 18. In Country Road Clothing Heerey J at 422 cited the following observation of Lord Reid in Morgan v Odhams Press Ltd [1971] 1 WLR 1239 at 1245 (dealing with the question of imputations in defamation law) as apposite when dealing with the question of representational conduct claimed to contravene the Trade Practices Act:
If we are to … take the ordinary man as our guide then we must accept a certain amount of loose thinking. The ordinary reader does not formulate reasons in his own mind: he gets a general impression and one can expect him to look again before coming to a conclusion and acting on it. But formulated reasons are very often an afterthought.
In my view it is likely (certainly, more likely than not) that the commercial would be understood by a significant number of viewers having the attributes of the “ordinary” or “reasonable” members of the class of prospective purchasers of lounge suites of the kind advertised, as conveying that the identified lounge suites are relevantly “the same”, the only material difference between the applicant’s retail offering and the respondent’s retail offering being the respondent’s much better price.
I do not accept the respondent’s submission that the commercial conveys only the simple message that consumers do not need to spend more than the respondent’s price for a lounge suite of the advertised configuration. This characterisation of the commercial ignores fundamental aspects of its structure and language. I also do not accept that the commercial merely invites the viewer to compare, by inspection, the applicant’s lounge with the respondent’s lounge, so that the viewer can come to his or her own conclusions about those lounge suites.
As I have noted, the dominating theme of the commercial is price. But the price is in respect of a particular article, which provides the centrepiece for the commercial. At the outset the viewer is challenged by the exhortation: “Don’t pay more elsewhere for this leather recliner lounge”. The words “this leather recliner lounge” immediately identify the article and imbue it with characteristics or qualities beyond being merely “any” leather recliner lounge. It is “this” leather recliner lounge. The image accompanying these words identifies “this leather recliner lounge” by giving it a physical embodiment. The word “elsewhere” conveys, unmistakeably, that “this leather recliner lounge” is, apart from the respondent, available “elsewhere”. The slogan “Compare the product … Compare the price” is a lead-in to telling the viewer where “elsewhere” is. In this case, “elsewhere” is identified as the applicant. The applicant’s product is identified in the same configuration and apparently in the same or a very similar colour as the respondent’s product. By these devices the viewer is told that “this leather recliner lounge” is available from the applicant and the respondent. The ordinary or reasonable viewer would not be able to tell the two suites apart from the images of them shown in the course of the commercial. The only difference about “this leather recliner lounge”, is that, if purchased from the applicant, it will cost the viewer more than twice the price for which it can be purchased from the respondent. That is why the viewer should purchase “this leather recliner lounge” from the respondent, who will not be beaten on price.
In this context, the slogan “Compare the product … Compare the price” is not an invitation to the viewer to compare the difference between an “over $7,000” leather recliner lounge from the applicant with an “under $3,000” leather recliner lounge from the respondent. Rather, the slogan is an assertive statement, with the words “Compare the product …” functioning as the respondent’s emphatic affirmation that the applicant and the respondent both sell “this leather recliner lounge”, and the words “… Compare the price” functioning as an affirmation that the respondent’s price for “this leather recliner lounge” is much cheaper than the applicant’s price. The viewer would appreciate that the respondent is engaging in head-on price competition with the applicant in respect of “this leather recliner lounge”. What, then, is conveyed by the description “this leather recliner lounge”?
I have referred to the commercial as conveying to a significant number of viewers, as ordinary or reasonable members of the class of prospective purchasers, that the lounge suites are relevantly “the same”. By this I mean that a significant number of viewers, acting reasonably, would understand the commercial to be conveying that the physical attributes of the applicant’s and respondent’s identified lounge suites – “this leather recliner lounge” – are, materially, the same. Having been told that the two products are “this leather recliner lounge”, I would not expect the ordinary or reasonable viewer to dwell upon or think too deeply about that fact, if at all. In this case, the ordinary or reasonable viewer would be entitled to rely on the respondent’s chosen description of the products as being “this leather recliner lounge”. Of course, some members of the class may speculate or engage in a measure of “loose thinking” about the reason for the respondent’s chosen description: some may think that the lounge suites are one and the same product, identical in every respect; some may think that they are standard design lounges made to the same or equivalent specifications, which the respondent has been able to procure at a cost which enables it to offer its product at a bargain price; some may think that the respondent’s product is a legitimate copy of the applicant’s, enabling it, through economical manufacturing costs or other skilful business practices, to offer the product at a much cheaper price. Some may engage in other forms of speculation or reasoning of this kind. Some will not give the matter any thought at all. However, the ordinary or reasonable viewer, no matter what speculation or loose thinking he or she might engage in about these matters, will understand from viewing the commercial that the lounge suites possess materially the same physical attributes – enabling the respondent to properly identify the products as “this leather recliner lounge”.
In opening and in final submissions the respondent argued that the applicant had departed from its pleaded case by submitting that the commercial represented the lounge suites to be the “same”. The applicant disputed that, by couching its submissions in that way, it had departed from its pleaded case. I do not find it necessary to resolve that debate. The applicant’s pleading plainly identifies the substance of the representation on which it relies in this regard: the commercial represents, and will cause or be likely to cause members of the public who view it to think, that the two lounge suites referred to in the commercial are of the same or an equivalent “standard, quality, grade or composition”. For the reasons I have given, I am satisfied that a significant number of viewers of the commercial, acting reasonably, would understand it to be making that representation. I am satisfied, therefore, that this part of the applicant’s pleaded case has been established, regardless of any perceived difference in the way it elaborated its case.
Mr Morrison also sought to support his denials by a process of rationalisation. Nevertheless, in his cross-examination he repeated his denials. He also said that, before 31 August 2010, he was instructed by Mr Buhagiar to use the word “similar” in relation to the Excellence suite and the Rajah suite. For this additional reason he supported his denial that he had said that the Excellence suite and the Rajah suite were “the same”.
The applicant submits that Mr Gould’s evidence about the conversation at the Oxley store on 31 August 2010 should be accepted because Mr Buhagiar conceded in cross-examination that he could not say “one way or the other” whether he had the conversation recounted by Mr Gould, and because Mr Morrison could not be “absolutely sure that [he] did not say the words that are set out in those paragraphs of Mr Gould’s affidavit”. While in making that submission the applicant relies on particular responses given by those witnesses in cross-examination, my consideration of the totality of their cross-examination satisfies me that they maintained their denials and that their evidence as a whole was given honestly and in an attempt to be accurate. The evidence makes clear that only either Mr Buhagiar or Mr Morrison could have had a conversation with Mr Gould on 31 August 2010 at the Oxley store. It follows that the evidence of one of them must be incontrovertibly correct. The applicant did not seek to have Mr Gould identify which of the two witnesses was “the young sales consultant” with whom he had his conversation on 31 August 2010.
Mr Gould’s recounting of his conversation at the Oxley store on 31 August 2010 raises the same concerns to which I have referred in relation to his recounting of the conversations at the MacGregor store on 30 August 2010 with Mr Mount. For the reasons I have given in relation to that evidence, and faced with the denials of both Mr Buhagiar and Mr Morrison, I am not satisfied, on the balance of probabilities, that one or the other of them said, or otherwise represented in the course of a conversation with Mr Gould, that the Excellence suite and the Rajah suite were “the same” or had come out of the same factory or place, or that the Excellence modular suite and the Catalina suite, upholstered in leather, were “the same”.
Conversation at the respondent’s Virginia store
Mr Verschuuren visited the respondent’s Virginia store on 1 September 2010. When looking at the Excellence suite on display, he was approached by Ms Prior, who offered her assistance.
According to Mr Verschuuren, a conversation to the following effect took place:
V: “Do they sell the same type of lounge suite at Nick Scali as well?”
P: “Yes, they do”.
V:“Surely it can’t be the same, this lounge suite must only be kind of like the lounge suite at Nick Scali”.
P: “No, no, it is exactly the same”.
V: “But the price is so different”.
P:“I’ll let you in on something, I used to work for Nick Scali at the MacGregor store.
The way Super A-Mart works is that Super A-Mart purchases a suite from Nick Scali. Super A-Mart then sends the suite to its manufacturer and tells the manufacturer to make a replica that is of the same quality and out of the same material.
Super A-Mart’s manufacturer then pulls the suite apart and makes a replica.
Super A-Mart can sell the lounge suite cheaper because we have our own manufacturer and import direct”.
V: “That is amazing. Thanks for your help. I am just looking around.”
Mr Verschuuren did not make notes of his conversation with Ms Prior. He was challenged on whether Ms Prior had said that the Excellence suite was “exactly the same” as the Rajah suite. He maintained, however, that Ms Prior did make that statement. He accepted, however, that at no stage did Ms Prior suggest that the manufacturer of those suites was the same.
Ms Prior is a sales assistant at the respondent’s Virginia store. She has worked in the furniture industry for approximately 12 years, largely as a sales assistant, but also in servicing. Her previous employment included employment as a sales consultant at the applicant’s Fortitude Valley store and as a service assistant in the Servicing Department of that store.
On 15 September 2010 Ms Prior was first asked whether she recalled dealing with a male customer in relation to the Excellence suite on 1 September 2010 at the Virginia store. Her evidence was that she could recall dealing with a gentleman that day regarding the Excellence suite. Her recollection was prompted because the gentleman was “quite tall” and went outside the store to make a number of calls on his mobile phone, ostensibly because of reception difficulties, which Ms Prior thought to be “very odd”.
In her affidavit, Ms Prior set out the conversation she had with this gentleman, according to her then recollection. She did so without having seen Mr Verschuuren’s version of that conversation. In a number of respects, the conversation recounted by Ms Prior in her affidavit is quite different, as a matter of structure and content, to the conversation recounted by Mr Verschuuren, albeit that the conversation was about the Excellence suite. The conversation recounted by Ms Prior was significantly more extensive than the conversation recounted by Mr Verschuuren. There are, however, two matters which indicate that Ms Prior was in fact recounting a conversation with Mr Verschuuren. First, in the conversation she recounted, Ms Prior recalled a passage of dialogue to the following effect:
V:“These lounges look similar but there is quite a substantial difference in the price between the lounges. Why is that?”
P:“It is common practice in the industry for a retailer to purchase another retailer’s product and copy the design and have their own one manufactured. I can’t comment on the price difference as I am not familiar with the Scali lounge on the tag but the Super A-Mart buyers are doing a good job. The majority of lounges come from similar places. Most lounges these days are imported.”
This passage reveals a degree of similarity with the corresponding part of the conversation recounted by Mr Verschuuren.
Secondly, in the course of his cross-examination, Mr Verschuuren accepted that, during the course of his conversation with “Lee”, he could have stepped outside to make a telephone call, although he did not recall doing so.
I am satisfied that it is more likely than not that Ms Prior, in her affidavit, was recounting a conversation with Mr Verschuuren.
After recounting that conversation, Ms Prior was provided with a copy of Mr Verschuuren’s affidavit. In responding to that affidavit, Ms Prior said that Mr Verschuuren’s account of the conversation was inaccurate in a number of respects. According to Ms Prior’s evidence, Mr Verschuuren was not standing in front of the Excellence suite when she approached him; he was wandering around the store looking at recliners. She recalled speaking about the copying of designs (in the terms I have quoted) but said that this was only part of a larger conversation, which she had set out in her affidavit. The details of the earlier part of the conversation recounted by Ms Prior are not relevant for present purposes, other than to note that they form no part of Mr Verschuuren’s version of the conversation. As to the part of the conversation about “copying”, Ms Prior said that this was initiated by Mr Verschuuren (in the terms I have quoted) after he had viewed the tag on the lounge upon returning to the store after making a telephone call.
Ms Prior’s evidence was that she did not say that the Excellence suite and the Rajah suite were “the same”. Her evidence was that she was certain that she would not have said this because she was not familiar with the Rajah suite. Ms Prior also specifically denied saying that the respondent “purchases a suite” from the applicant and tells its “manufacturer” to “make a replica”; that the respondent’s manufacturer “pulls the suite apart and makes a replica”; and that the respondent “can sell the lounge cheaper because we have our own manufacturer and can import direct”.
She also denied saying that she had worked at the applicant’s MacGregor store. It is clear, however, that Ms Prior did in fact work for the applicant. It is not suggested that Mr Verschuuren could have had knowledge of that fact beyond his conversation with Ms Prior. I would accept, therefore, that, at some stage in the conversation, Ms Prior must have mentioned that she had worked for the applicant. Also in cross-examination, Ms Prior accepted that Mr Verschuuren had asked: “Do they sell the same type of lounge suite at Nick Scali as well?” She recalls responding: “Yes, they do”. But she maintained her denials of saying that the Excellence suite and the Rajah suite were “exactly the same”, and the other matters I have noted.
The applicant submits that Ms Prior’s evidence supports its case. It submits that her evidence about it being common practice in the furniture industry for one retailer to “copy the design” of a product “and have their own one manufactured” must have been intended to lead Mr Verschuuren to understand that that is what the respondent had done in the case of the Excellence suite: made a copy of the Rajah suite. The applicant submits that, by saying this, Ms Prior conveyed that the products were “the same”.
The respondent submits that Ms Prior’s account of the conversation with Mr Verschuuren does not contain any representation that the Excellence suite and the Rajah suite are “the same” or, indeed, that they are of “the same quality”. It also submits that, in that connection, Ms Prior’s account should be accepted because it was not “relevantly disturbed” in cross-examination.
The respondent also submits that Mr Verschuuren’s evidence should not be accepted (I assume to the extent that it is inconsistent with Ms Prior’s evidence). The respondent points to the fact that Mr Verschuuren did not make notes of his conversation with Ms Prior and that the first time he committed that conversation to writing was when his affidavit was prepared on about 14 September 2010. The respondent points to the fact that Mr Verschuuren’s affidavit was accepted by him to be incomplete in some respects (notably, in relation to some details of a prior telephone conversation he had had with Mr Anthony Scali leading to his visit to the Virginia store, and in relation to making telephone calls outside the Virginia store during his meeting with Ms Prior), and was shown to be inaccurate in other respects (notably, Mr Verschuuren’s mistaken recollection that Ms Prior worked at the applicant’s MacGregor store). The respondent also points to the fact that, when giving evidence of his prior telephone conversation with Mr Scali, Mr Verschuuren accepted that it was “not easy to recall” the “total words” used in that conversation, thereby suggesting that Mr Verschuuren’s recollection of his conversation with Ms Prior, held at about the same time, could not be sound or should at least be treated with caution.
On considering all the evidence in relation to this conversation, including, importantly, the oral evidence of the two witnesses, I have no reason to think that Mr Verschuuren’s recollection is necessarily better than Ms Prior’s recollection, or vice versa. In this connection I accept the respondent’s submission that parts of Mr Verschuuren’s account were incomplete and inaccurate, although this criticism of his evidence was in relation to matters that were, perhaps, subsidiary to the substance of the conversation. By the same token, Ms Prior’s account was incomplete. In her account she made no mention of the fact that she had told Mr Verschuuren that she had worked for the applicant. As I have noted, this information, which is of some importance in Mr Verschuuren’s account, could only have come from Ms Prior during the course of their conversation. Each witness was seeking to give an account from memory of a conversation that had taken place approximately two weeks earlier. I am satisfied that, in undertaking that task, both were seeking to give an account that was honest and, so far as memory would allow, accurate in detail. Detail is, however, all-important in relation to this aspect of the applicant’s case.
In all the circumstances, including Ms Prior’s considered denials, I am not prepared to find, on the balance of probabilities, that Ms Prior said, or otherwise represented, that the Excellence suite and the Rajah suite were “exactly the same”, or that the Excellence suite was a “replica” of the Rajah suite, or that the Excellence suite was of “the same quality” and made “out of the same material” as the Rajah suite. This finding does not, however, conclude the matter. There is still Ms Prior’s account of the conversation insofar as it concerns “copying the design” of products.
Assuming the conversation to have taken place in the terms to which Ms Prior has deposed, I am not satisfied that, as a matter of objective assessment, it conveys that the Excellence suite and the Rajah suite are “the same” in the sense in which those words have been used in the applicant’s pleading, and in the way in which the applicant has advanced its case. In this connection, the applicant has used the words “the same” to convey identity or near identity. To suggest, as Ms Prior undoubtedly did, that, in making the Excellence suite, the respondent had copied the design of the Rajah suite, is not to make the representation that the applicant has alleged. Indeed, no more than “similarity” is conveyed. This is made clear in Ms Prior’s account of the conversation in which Mr Verschuuren prompted Ms Prior’s response by suggesting, by reference to the respondent’s placard, that “these lounges look similar”. Ms Prior’s response must be looked at in that particular context. So considered, her response can be seen as being directed to the suggestion of similarity, not identity or near identity. It should not be taken as conveying anything more than Mr Verschuuren had suggested.
Other matters
There are two further matters to be dealt with on this part of the applicant’s case.
First, the applicant submits that the Court should infer that the applicant’s evidence of the conversations between Mr Gould and Mr McLean, and Mr Verschuuren and Ms Prior, “reflects conduct that is consistent across [the respondent’s] stores and amongst its staff”. It said that this inference was “amply supported by Mr Gould’s evidence of his conversations with Mr Mount at the MacGregor store, and his conversations at the Oxley store”. The conceptual basis for this submission was not articulated by the applicant. But, quite apart from that, the findings I have made do not provide a sound factual basis for making any such inference.
Secondly, the applicant pleaded an alternative case to the effect that the combination of the respondent’s use of the in-store signs and the alleged making of the oral representations by its sales staff constituted conduct that was misleading or deceptive, in contravention of s 52 of the Trade Practices Act. In light of the findings I have made, the only incident where this combination has possible operation is Mr Gould’s conversation with Mr McLean. It is not necessary, however, to decide that alternative case because the conversation alone establishes the contraventions I have identified.
THE AFRDI CERTIFICATION
At the time when this proceeding was commenced, the respondent held a particular certification from AFRDI in relation to the compliance of the Excellence suite with the AFRDI Leather Standard: AFRDI certificate no. 8463/2. The certification was for the Excellence suite upholstered in “Medium and Dark” (but not “Light”) coloured leather designated as “Corrected Grain”. AFRDI certificate no. 8463/2 makes clear that the certification included split grain leather.
Prior to the commencement of this proceeding, the respondent advertised the Excellence suite, on a store-by-store basis, on its website. In some of those advertisements the respondent stated that the Excellence suite was available in “oyster” coloured leather that was “top grain leather”, and that the suite was “AFRDI Approved”. The applicant’s case is that, at the time that those statements were made, the respondent held no AFRDI certification for the Excellence suite upholstered in (a)
“oyster” coloured leather or (b) top grain leather. The applicant pleads that the respondent thereby contravened ss 52 and 53(a) and (c) of the Trade Practices Act.
The respondent accepts that, prior to 8 September 2010, its AFRDI certification for the Excellence suite did not extend to that suite upholstered in “oyster” coloured leather. However, by 8 September 2010 (that is, prior to the hearing), this had been rectified; AFRDI had re-issued its certificate in respect of the Excellence suite to include upholstery in “light” coloured leather (and hence “oyster” coloured leather). Nevertheless, in representing prior to 8 September 2010 that it had “AFRDI Approval” for the Excellence suite upholstered in “oyster” coloured leather, the respondent had made a false representation that the Excellence suite had an approval that it did not have. It follows that, by making that representation, the respondent contravened ss 52 and 53(c) of the Trade Practices Act. The applicant’s allegation that s 53(a) of the Trade Practices Act was also contravened involves no more than an elaboration of, and is indistinguishable from, its case that s 53(c) had been contravened. In my view that case sounds in contravention of s 53(c) rather than 53(a).
I am not satisfied that the applicant has shown that the respondent has otherwise contravened ss 52 and 53 of the Trade Practices Act in relation to its statement of AFRDI “approval”. AFRDI’s certificate is in respect of the Excellence suite upholstered in “corrected grain” leather. There is no evidence that the Excellence suite is not upholstered in “corrected grain” leather. The statement in some of the advertisements that the Excellence suite is upholstered in “top grain leather” (a statement about which that the applicant makes no complaint) is consistent with the leather also being “corrected grain” leather. The evidence shows that the expression “corrected grain” refers to leather in which naturally occurring imperfections have been “corrected” by a process that includes buffing the leather to remove the imperfections and then embossing it to give it a “grain”. The evidence shows that the term “corrected grain” can apply to split leather, including top grain leather. Accordingly, this aspect of the applicant’s case fails.
RELIEF
Earlier I referred to the fact that the matter that arises for present determination is the question of liability in relation to the applicant’s claims against the respondent under the Trade Practices Act, including its claim for damages. In relation to its claim for damages, it is essential that the applicant establish that it is a person who has suffered loss or damage by the respondent’s conduct done in contravention of a relevant provision of the Trade Practices Act: s 82 of the Trade Practices Act. Actual loss or damage is the gist of the action for damages: Wardley Australia Limited v The State of Western Australia (1992) 175 CLR 514 at 525; Elna Australia Pty Ltd v International Computers (Aust) Pty Ltd (No 2) (1987) 16 FCR 410 at 418-419; JLW (Vic) Pty Ltd v Tsiloglou [1994] 1 VR 237 at 249 and 251. The applicant has not established that it has suffered actual loss or damage by reason of the contraventions it has alleged or, more particularly, by the contraventions I have found. It follows, as a consequence, that its claim for damages must be dismissed.
The applicant submits that the case is appropriate for the granting of injunctive relief. The respondent submits that the scope of any injunctive relief, as well as the question of costs, should be addressed after the publication of these reasons. In light of the findings I have made, it is appropriate that the parties should address me on the question of both injunctive relief and costs, unless they can now come to some agreement on those matters.
DISPOSITION
The only order that I will make at the present time is that the proceeding stand over to 18 July 2011 at 9.30 am for the purpose of making directions as to the further hearing of the matter on the question of relief and costs.
I certify that the preceding one hundred and ninety-five (195) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Yates. Associate:
Dated: 6 July 2011
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