Rhone-Poulenc Agrochimie SA v UIM Chemical Services Pty Ltd

[1986] FCA 266

cgrcHwoRDs

Patents - Infringement - One of three elements in combination patent omltted by alleged infringer -	Construction of claims	-
Whether ”plth and substance” taken.

Trade Practices - Sale of unregistered pesticide in breach of

State law - Omission to disclose breach or consequences to

purchasers - nether breach of 5.52 of Trade Practices Act -

Circumstances In which sllence may constitute or	be an ingredient
In misleadlng conduct.

Patents Act, 1952 5.40.

Trade Practices Act, 1974

SS 4 ! 2 ) , 5 2 , 53(c), and 55.

Aqricultural Standards Act, 1352 (Q’ld)

f

1	Pesticides Act,	1978 (NSW)
i
i
I
i
.L

E RHONE-FOULENC AGROCHIMIE SA & ANOR. V UIM CHEMICAL SERVICE FTY

i

LIMITED ,G ANOR

L

i

BGwen C.J.. Lockhart and Jackson JJ.

9th JulIJ 1386

>qTdne y

,---

. -

IN THE FEDERAL COURT OF AUSTRALIA 1

1

NEW SOUTH WALES DISTRICT REGISTRY	1	NO. G 303 OF 1985
1
GENERAL DIVISION	1

ON APPEAL FROM a Sinsle Judse

of THE FEDERAL COURT OF

AUSTRALIA (Proceeding No. G59

of 1985)

BEXWEEN RHONE-POULENC AGROCHIMIE SA

First Appellant

MAY & BAKER AUSTRALIA	F'TY
LIMITED

Second Appellant

UIM CHEMICAL SERVICES PTY

LIMITED

First Respondent

! CLYDE TODHUNTER WAUGH

Second Respondent

JUDGES MAKING ORDElR : Bowen C.J., Lockhart and Jackson JJ.

DATE	: 8th	July	1986
PLACE	: Sydney

MINUTE OF ORDER

THE COURT ORDERS THAT:

1. The appeal be dismissed.

2 . That Rhone-Poulenc Aqrochimie SA and May & Baker Australia

Pty Limited pay to UIM Chemical Services Pty Limited and

Clyde Todhunter Wauqh their costs of the appeal.

ILJ TIE FEDERAL COURT OF AUSTRALIA 1

1

NEW SOUTH WALES DISTRICT REGISTRY	)	NO. G 303 OF 1985
)
GENERAL DIVISION	f

ON AFFE9L F P O M a Sinqle Judqe of THE FEDERAL COURT OF AUSTRALIA (Proceeding No. G59

of 1985)

EETWEEN RHONE-POULENC AGROCHIMIE SA

First Appellant

MAY & BAKER AUSTRALIA PTY

LIMITED

Second Appellant

pND . CHE ICAL UIM SERVICES FTY

LIMITED

First Respondent

L CLYDE TODHUNTER WAUGH

Second Respondent

JUDGES : BOWEN C.J., LOCKHART ANI3 JACKSON JJ.

DATE : 8th July 1986

REASONS FOR JUDGMENT

BOWEN C.J.

T h i s is an appeal from a declsion of a single judge of

this Court given in proceedings brought by Rhone-Poulenc

Aqrochimie SA ("Rhone-Poulenc") and May & Baker Australia Pty

7

1.

Limited ("May & Baker") against U I M Chemical Services Pty Llmited

( " U I M " ) and Clyde Todhunter PJaugh. The application was brought

I

under the Trade Practices Act 1974 claiming that the sale of a

product m-d XP of UIM contravened ss. 52, 53(c), 53(g) and 55 of

that Act. The proceedings also included as an associated matter a

claim for infringement of Patent No. 493818. In~unctions and

i

damages were sought.

The learned trlal Judge was informed that the parties

were agreed it was convenient to deal wlth the questlon of

liability flrst, leaving the question of damages to be dealt with

later if necessary. He dealt first with the claim In relation to

the patent, holdlng that there was no infringement. He then dealt

wlth the clalm under the Trade Practices Act and re~ected that.

In the result he dismissed the application with costs.

Rhone-Poulenc and May & Baker appealed against the whole

of His Honour's judgment.

It will be convenlent to deal with the c'laim in relatlon

to the patent first.

Patent No. 493818 is a Convention patent. The complete

speclflcatlon was lodged for reglstration m Australia on 26

November 1974, havmg been first lodged in France on 26 November 1973. The priorlty date was the date of first lodgement, namely,

26 November 1973.

The complete sp clfication c mmences wlth a

descrlptlonof the invention as follows:

"This invention relates to fundicidal composltions

based on phosphorous acid or its salts.

More particularly, the Invention relates to

compositions suitable for using In controlling

parasltic funui In plants and contalning, as an

acti-Je material in an amount from 20 to 95% by

welght at least one compound selected from the

group comprising phosphorous acld, its mineral

salts and its organic salts together wlth an

agriculturally acceptable inert support selected

from the group consisting of clay, synthetlc or

natural si lcates, resins, waves , solid

fertillsers, water, alcohols, ketones, petroleum

fractlons. cholorinated hydro-carbons and liquefied

gases, and at least one ionic or non-Ionic

surfactant selected from the group consisting of

emulslfiers, dlspersants, deflocculants and wetting

agents. "

The clalms definmq the in-rention number 17. Claims

1 - 16 are composltion claims: claim	17 1s a method
claim.

Claims 1 and 2 are as follows:

"The claims definlna the Invention are s follows:

1. Fungicidal composltions for controlling fungus

disease in plants, wherein they contain as actlve

material in an amount from 30 to 95% by welght at

phosphorous acid, its mineral salts and its organlc salts together wlth an agriculturally acceptable	least one compound selected from the group comprising clay, synthetic or natural silicates, resins, waxes,
solid fertilisers, water, alcohols, ketones,
petroleum fractions, chlorinated hydrocarbons and
liquified gases, and at least one lonlc or non-Ionic
surfactant selected from the group consistlng of emulsiflers, dispersants, deflocculants and wetting agents.
2 . Composltlons as claimed In Claim 1, wherein the
surfactant is selected from salts of polyacrylic aclds, salts of alkylaryl sulphonlc acids or lignin sulphonic aclds, or condensates or ethelene oxide
xlth fatty alcohols, fatty aclds or fatty amines."

4.

Claims 3 to 16 inclusive relate to compositions as

claimed in claim 1 or clam 2. Claim 17 is as follows:

"17. A method of controlling fungus disease in plants,

comprising applying a composltion of the kind claimed

in any of Claims 1 to 16 for preventive or curative

treatment. "

l

The m-d KP marketed by the respondents is a composition

containlnq mono-potasslum phosphite and di-potassium phosphite in

a support of water. It contalns no surfactant. The respondents

argued that the absence of any surfactant meant that there was no

infringement. The appellants argued that there were two separate

issues arising from this, first, whether the of m-d KP

xv7lthout surfactant. constituted sale of the invention (this

depended on claims 1 - 16) and secondly whether the of m-d

KP, with or wlthout surfactant, constituted use OK exerclse of

the inventlon (this depended on claim 17).

!

The question underlying both these issues is whether the

presence of a surfactant in the combination is an essential

element in the monopoly as claimed. It appears to me that the

claims are drawn in such a way as to make a surfactant an

essentlal element. Clam 1 is rather emphatic in requiring not

only the actlve materlal but also an inert support and at least

one Ionic or non-ionlc surfactant selected from a speclfied

group. If, as is argued for the appellants, the surfactant is an

inessential element of the composition, how does one explain the

difference between claim 1 and claim 2? If the presence of

surfactant a is inessential, it is difficult attach o

5.

slgnificance to claim 2. And what is the point in claim 3 of

dlstinguishing between the composltion as clalmed in claim 1 fro

that as claimed in claim 2 if the presence of a surfactant is

inessential? The type of surfactant specifled is the only

difference between them.

It is true that reference is made In the body of the speclflcatlon to the dlscovery that compounds according to the

invention may be used as an active materlal In compositions for

protectmg plants against fungus diseases. This refers to the

actlve material consisting of phosphorous acid, its mineral salts

or Its organic salts. But it is the claims which define the

monopoly sought by the patentee. The clalms, possibly for good

reason, were not limited simply to the actlve ingredient which

was discovered to act effectively as a funglclde. Claims 1 - 16

were framed as combinatlon claims, involvlng a composition having

i

1 three Ingredients. In adopting this mode of claiming the patentee

disclaimed any intention of seeking monopoly for the actlve
L:
I	compound alone or for the actlve compound with one only of the other mgredients specified.
f

It was argued that by selling a composltion containing the active ingredient and an inert support the respondents had

'!	taken the "pith and substance" or "pith and marrow" of the
lnventlon and should be held guilty of infringement. But the "pith and substance" of the patent is to be found in the clalms read in the liqht of the whole speciflcation. The use of two only

6.

of the three elements claimed is not to take the "pith and

substance". This might possibly be found to be the case where two

of three elements claimed were taken and an "equlvalent" third

element was substltuted. It is not so where, as here, one element

., comprised in the claim is omitted altogether.

It was argued that a different question arose in

.	relation to claim	17; that this is a	method claim and may be
i

infringed by use as distinct from sale of the relevant

composition. However, the composition referred to in claim 17 is

"a composition of the kind clalmed in any of the claims 1 to 16

for preventive or curative treatment". The reference to claims 1

to 16 inevitably raises the same problem I have dlscussed above,

namely, that the respondents did not use a composltion containing

all the essential ingredients specified in any of those claims.

It was argued that the phrase "a composition of the kind claimed"

widened the method clam 17 to embrace the composition m-d XP

notwithstanding it lacked any surfactant. In his clalms a

patentee is called upon to deflne the scope of the monopoly he

xishes to mark out. It is desirable that someone wishing to enter

the field should be able to discern what is proscribed and what

is free. By using general words such as "composition of the kind"

a patentee cannot simply cast a general net to cover what he has

not claimed. In other words, I do not construe claim 17 as

extending to cover the composition used bp the respondents which

is not wlthln any of the claims	1 to	16 because it lacks a
surfactant.

I see no reason to differ from the concluslon of the

learned trial Judge that there was no Infringement of the patent.

I should notlce one additional argument advanced by the

respondents. It was submitted that m-d KP does not contain as

active materlal In an amount from 20 to 95% by weight at least

one “compound“ from groups nominated in the claims namely

phosphorous acid its mineral salts and Its organic salts. These

it was sald were fully bonded chemicals In crystallme or powder

form. m-d KP was a liquid not containing any salt, as such, but

by reason of the mixing together in water of two of the mineral

salts of phosphorous acid contains a variety of ions. It 1 s

slmply a solution of potassium ions, phosphite ions, hydroxil

ions and hydrogen ions and contams nelther phosphorous acid nor one of its salts. I am not persuaded of the correctness of this argument. Although the salts are present in the form of ions In solution, rather than as molecules, it seems nevertheless correct

(and consistent with the termmology of the specification) to

speak of the solution as containing the salts. Nevertheless, as I

have said, I am of opinion the trial Judge was correct in holding

there was no infringement of the patent.

I turn now to the claim under the Trade Practices Act.

It was common ground that UIM sold m-d KP to purchasers in New

South Wales and Queensland knowlng that it was useful as a fungicide and would be used as such. In both States, there is’ leglslation relating to the reglstration of fungicides. The

relevant statutes are the Pesticides Act 1978 ( N . S . N . ) and the

Aqricultural Standards Act 1952 (Qld.). The trial Judge found

that m-d KP was both a "pesticide" for the purposes of .5 of the

' ,	Mew South Wales Act and an "agricultural requirement" withln the
meaning of S.? of the Queensland Act. As such, m-d KP is a
product which should be registered in accordance with the legislation of both States. In New South Wales, both the sale
and use of an unregistered product are punishable offences under
ss.29 and 31 of the Pesticides Act. In Queensland, the sale of
an unregistered product is a punishable offence under 5.15 of the
i
Aqricultural Standards Act. In each State the consequence of the
sale of m-d KP by UIM prior to the registration of the product
under the respective Acts 1 s to expose a purchaser to the risk that the product will be seized from hlm and subsequently
forfeited: Pesticides Act, ss.53 and 61; Aqricultural Standards
A A , ss.67 and ?l.
It was not disputed that the respondents had committed breaches of the State legislation. The enforcement of State law
is a matter for the State Government concerned. This Court is
asked to rule upon alleged breaches of Federal law, in this case
of the Trade Practices Act.

Stated in a summary way, the appellants contended that

in marketing m-d KP without posltively stating that

(1) the product was unregistered, and

I	(2)	the risks (however slight they may be or have been)	of
seizure and forfeiture

9 .

d 'I

UIM was engaglng in mlsleading or deceptive conduct within the meaning of 5.52 of the Trade Practices Act. The appellants also alleged that the respondents were in contravention of ss.53(c),

53(g) and 55 of the Act but	no separate argument was put to us on
these provisions.

Before dealing with the questions of law raised in this

part of the appeal, it is convenient to refer to certain

questlons of fact. The first relates to the conduct of the New

South Wales authorities which administer the Pesticides Act. It was established before the trlal Judge that the Queensland

Government Department which administers the Aqricultural

Standards Act - the Department of Primary Industries - was aware

of the sale of m-d KP and its use as a fungicide, but had elected

not to take any action in relation to the breaches of that Act. The posltion with regard to the New South Wales authorities was less clear. The learned trlal Judge said:

"According to what was told to Mr Naugh by Mr

Graham, the New South Wales authorities are aware

of the position; but they also have elected to

take no action."

The appellants argued that the evidence upon which this

conclusion was based was Inadmissible for the purpose of

establishing the likely behaviour of the New South Wales

authorities. The evidence consisted of answers given by the

second respondent, Mr Waugh, to questions put to h m in

re-examination. The relevant passage from the transcript reads:

10.

"Mr Frvberq: ... Nhat has been your belief as to the

maqnltude of any risk of seizure of the product in New South Wales? - It is not great. At this stage it is dlminlshing.

It is not great and diminishing? - Yes.

Now why do you think that? - Because as I mentioned

In an earller statement the State D.P.I. have been

In contact with the Department of Agriculture of

New South Wales and no actlon has been taken ... 'I.

It is not entirely clear that the trial Judge, in the

way in whlch he stated the matter, was actually making a f ding concerning the attitude of the New South Wales authorities. Mr

Wauqh's evldence was by way of re-exammation and did not

constitute proof of the present attitude of the New South Wales

authoritles toward the breaches by UIM of the Pesticides Act.

However, there had been no actlon taken or threatened by the New

South Nales authorities. If the trial Judge should be taken to

have made a finding about the attitude of the New South Nales

authorities, It would not appear to me to be one which was

crucial to his decision.

The second question of fact relates to the time when Mr

Naugh became aware of those provisions of the legislation which

exposed purchasers of m-d KP to the risks of seizure and

forfeiture of the product. According to the trial Judge, Mr

Waugh had known of the provisions only since the lnterlocutory

hearmg on 12 April 1985. Certainly Mr Waugh gave evidence to

this effect. However, as the appellants point out, there was a

specific admission by Mr Waugh made under cross-examination that

11.

he knew "long before the interlocutory hearing" of the liability

!

of Queensland purchasers to seizure and forfeiture. This raises

a questlon whether the trial Judge was correct In relying on Mr

Waugh's earlier evidence. However, even if Mr Waugh should be

taken to have known of the position in Queensland prior to the

interlocutory hearlng, I would not attach much legal significance

to this. As Gibbs C.J. sald In Parkdale Custombuilt Furniture

Ptv. Limited v. Puxu PtV. Limited (1982) 149 C.L.R. 191, at

p.197: "The liability imposed by s.52 ... is quite unrelated to

fault". In particular, there need be no intention to mislead or

deceive: Hornsby Buildinq Information Centre v. Svdnev Buildinq

Information Centtre (1978) 140 C.L.R. 216, at p.228. Thus, if the

respondents' conduct was misleading and deceptlve, it would not

be an answer that they were unaware of the risks of seizure and

forfeiture; but nor 1s their awareness of those risks

necessarily conclusive, although it is a factor to take into

account.

Finally, in regard to the evidence, I do not consider Mr

Waugh's admissions during cross-examination that the failure to

warn customers was "dishonest" and "deceptive" and "misleading"

as conclusive of the issues in this case. The trial Judge was

correct in holding that the determination of the question whether

UIM engaged In misleadmg or deceptive conduct involves a legal

conclusion. The task of the Court was to decide whether, on the evidence before It, the conduct complalned of contravened s.52,

t

as that section has been judicially interpreted. The legal

1 2 .

quality of the respondent's conduct must be judged by the Court,

not by witnesses. As Lockhart J. observed in Happv Landinss Ptv.

Limited v. Masqarine Promotions Pty. Limited	(1984) A.T.P.R.
40-459, at p.45,314:

"Ultimately, it is for the Court to determine

xhether the respondent's conduct contravenes the

consumer protection provisions of the Trade

Practlces Act, and the evidence of attitudes or

views of members of the public in the present case

is of limited asslstance."

I turn now to the maln question arising under the Trade

Practices Act on thls appeal. It is whether the sale by UIM of

m-d XP as a fungicide at a time when the product was not

registered constitutes conduct by that corporation in trade or

commerce that is misleading or deceptive or is likely to mislead

or deceive, and hence contravenes s.52 of the Trade Practices

A A . The appellants put forward a number of arguments in support

of their contention that UIM was in breach of	s.52. I will deal
with each In turn.

It was argued that UIM had been shown to have intended

to mlslead and deceive some of its customers. This was allegedly

borne out by Mr Waugh's admissions that he knew "long before the

interlocutory hearing" of the risks of seizure and forfeiture and

that he failure to warn customers of those risks was

"dishonest", "deceptive" and "misleading". Intent was also

demonstrated by the fact that Mr Waugh warned some, but not all,

of the respondent's customers. This admittedly selective

13.

approach, so it was argued, gave rise to the plain inference that

the admitted failure to warn some of the customers was

deliberate. It was then contended that, as it was shown that the

respondent's conduct was intentional. the Court should assume

that he intention, namely to mislead or deceive, was

effectuated. Reference was made to cases of passing-off (Cadbury Schweppes Pty Limited v. The Pub Squash Co. Limited C19813 R.P.C.

429, at p.493; cf. Slazenqer v. Feltham (1889) R.P.C. 531 at

I p.5381, and to defamation cases where the plaintiff is not

expressly named in the article or broadcast complained of (David

Syme & Co. Limited v. LloVd C19841 3 N.S.W.L.R. 346, at pp.361-2

per Priestley	JA; approved by Privy Council at (1985)	60 A.L.J.R.
10, at p.13.)

However. in this case there are, in my opinion,

insufficient grounds for concluding that the appellants did in

fact intend to mislead and deceive some of their customers. In

this respect, I agree with the observations of the trial Judge,

who found that any omissions on the part of UIM or Mr Waugh were

inadvertent. I am not persuaded that this conclusion should be

overturned. As the trial Judge observed, an intentional decision

not to inform some purchasers, and hence to mislead and deceive

them, would have been inconsistent with the other behaviour of

the respondents. I do not accept the appellants' argument that

because the customers, an intention to mislead and deceive those customers respondents warned some but not all of their

gho were not warned should be inferred. On the contrary, I agree

14.

with the trial Judge that Mr Waugh's disclosure to some customers

was in the circumstances behaviour inconsistent with such an

intention.

Further, as the trial Judge held, an intention to

mlslead or deceive would also be lnconsistent with Mr Waugh's

attitude to suggestions made in Court regarding disclosure on the

labels of the product. At the interlocutory hearing, when such a

suggestlon was first made, the respondents promptly indicated

that they "would be agreeable to giving any reasonable form of

warnlng on the label, if that were thought appropriate by the

Court". A particular wordlng was agreed upon and was in fact

printed on subsequent labels. When, at the final hearing,

counsel for disclosure on those labels, the respondents offered to amend the the appellants attacked the adequacy of the

labels to take In a full reference to the legal consequences of

non-registration a d invited the appellants suggest o

!!	appropriate words. This behavlour was clearly inconsistent with
an intentlon to mislead or deceive purchasers of m-d KP. This
b
argument of the appellants therefore fails.

The second argument advanced by the appellants centred

upon s.4(2) of the Trade Practices Act, That sub-section, in	so
far as is relevant, provides:

"4(2)	In this Act -
(a) a reference to engaging in conduct

shall be read as a reference to dolng

or refusing to do any act, ...

15.

(b) ...

(c) a reference to refuslng to do an act

includes a reference to -

(i) refraining (otherwise than

inadvertently)	from	doing
that act; or

(ii) making it known that that

act will not be done; .. . ' l .

The appellants submit that UIM's failure to warn

customers of the risks of seizure and forfeiture constituted

"engaglng in conduct" within the special definition in s.G(Z.1. I

do not agree. Although s.4(2) recognises that an omission to do

an act may constitute "engaging in conduct", that will only be so

where there has been a refusal to do, or a deliberate refraining

from doing, an act. The words "refuse" and "refraln" clearly

connote that the omission to do an act must be deliberate. I

agree with the trial Judge that	s.4(2) does not materially assist
the appellants.

The main argument put by the appellants related to the

question whether, and if so in what circumstances, silence may

constitute misleading or deceptlve conduct. It was not suggested

that the respondents had been gullty of any positive

misrepresentation; thus they did not assert that their product

was reglstered. Rather what was alleged was that their failure to

warn customers affirmatively by labelling or otherwise that their

product was unregistered and furthermore, that a consequence of

this lack of registration was that the product was liable to

16.

seizure or forfeiture constituted misrepresentation by silence or

i

at least conduct which was misleadlng or deceptive.

In the case of conduct complained of it is insufficient

to show a breach of 5 - 5 2 to prove that it may result in confusion

in the mlnds of consumers (McWilliams Wines Pty Limited v

McDonalds System of Australia Pty Limited (1980) 49 F.L.R. 4551,

it will usually only amount to conduct which is misleading or

deceptive, if it contains or conveys, in all the circumstances of

the case, a misrepresentatlon (Taco Company of Australia Inc. v

Taco Bell PtV Lim.ited (1982) 4 A.L.R. 177, at p.202).

Where silence is relied on in order to show a breach of

I .

s.52 it will depend upon the circumstances whether the sllence

constitutes conduct whlch 1s misleading or deceptive. As in the

case of other sectlons of the Trade Practices Act the Court may

gain assistance from consideration of cases at common law and in

equity dealing with related types of situations. However, the

Court is not confined by such cases because it is concerned with

the interpretation and appllcation of the words	f the particular
statute.

Dealing with question e misrepresentation f

constituted by silence, there are cases which show, for example,

that an omission to mention a qualification, in the absence of

which some absolute statement made is rendered misleading, is

I

conduct which should be regarded as misleading. So too is the

17.

omission to mention a subsequent change which as occurred after

some statement which is correct at the time has been made where

the result of the change is to render the statement incorrect so

that thereafter it becomes misleading. This also may be regarded

as constituting misleading conduct. However, the general position

between contracting parties has been expressed in the following

way : -

I' The general rule, both of law and equity, in

respect to concealment, is that mere silence

with regard to a material fact, which there

is no legal Obligation to divulge, will not

avoid a contract, although it operate as an

! injury to the party from whom it is

concealed. I'

I

I' (Smith v. Hushes (1871) L.R. 6 Q.B. 597 at p.604: and see v

Hobbs (1878) 4 App. Cas. 13; W. Scott . Fell & Co. Limited v.

Llovd (1906) 4 C.L.R. 572: cf. Chadwick v. Manninq C18963 A.C.

231, at p.238). Under the general law it is important to consider

whether there is a legal obligation to divulge. "here are

particular relationships which have been held to raise an

obligation of disclosure. Contracts uberrimae fidei come to mind

as examples of this type of relationship. Indeed, there are many

particular relationships which raise duties of disclosure. These

include trustee and beneficiary, solicitor and client, principal

and agent and guardian and ward. Where an obligation to disclose

arises an omission to inform the person to whom the obligation is

owed may, perhaps on the basis that that person is entitled to

? . I

assume some fact or circumstance which does not exist, constitute

or be an ingredient in misleading conduct.

18.

i

The notion of relationships giving rise to an obligation

to make disclosure is one which may well prove useful in

determining some of the cases which may arise under 5.52 of the

Trade Practices Act. However, the Court wlll not be restricted to

cases where such a relationship has already been held to exist at

common law or in equity. The Court is likely to be faced with

situations under s.52 between particular parties, where it will

feel bound to hold that such an obligation to disclose arises

from the circumstances.

Vendors and purchasers have not generally been regarded as being, without more, in this type of relationship. There are

occasions when a particular enactment or even the terms of a

particular contract will impose an obligation upon a vendor which

will place the parties in a relationship of this type involving

an obligation to make disclosure. However, in the present case I

do not discern any relationship between the respondents and their

customers which would give rise to any particular obligation to

make disclosure or whlch would lead the Court to hold that a duty

of disclosure should be held to arise. When one analyses what it

is said that the respondents should have disclosed to customers

it does not appear to amount to very much more than a statement

of what the customers local State law is (be it Queensland law or

New South Wales law) and a statement that the law has not been complied with by the respondents.

19.

The conduct dealt with by 5.52 is conduct which leads or

is likely to lead a person or persons into error. In the present

case there is no conduct of the respondents which it is shown

would lead a person or persons into error as to what the law of

their State was or lead them into error as to whether or not the

respondents had complied wlth that law. The conduct of the

respondents at the relevant time was silent on these points.

A s I have already mentioned, this is not a proceeding

brought to enforce State law. The appellants have sought to prove

a case of breach of 5.52 of the Trade Practices Act against the

respondents. The matter before us has to	be decided according to
the issue raised by the appellants.

I find myself in agreement with the learned trial Judge

that the appellants have falled to make out	3 case under S . 52
agalnst the respondents.

I would dismiss the appeal with costs

I c e r t l f y t h a t t h l s and the eiyhteW(!g)

precedlng pages are a t rue copy of t he

Reasons f o r Judgment herem of h i s Honour

the Chlef Judge, Slr Nlgel Bowen

m W h Assoclate

IN THE FEDERAL COURT OF AUSTRALIA ) )

NEW SOUTH WALES DISTRICT REGISTRY	1	No.	G 303 of 1985
)
GENERAL DIVISION	)

ON APPEAL FROM A SINGLE JUDGE	OF THE
FEDERAL COURT OF AUSTRALIA

BETWEEN: RHONE-POULENC AGROCHIMIE S.A.

First Appellant

MAY AND BAKER AUSTRALIA	PTY.
LIMITED

Second Appellant

AND: UIM CHEMICAL SERVICES PTY.

LIMITED

First Respondent

CLYDE TODHUNTER WAUGH

Second Respondent

CORAM: BOWEN C.J., LOCKHART and JACKSON JJ.	-
8 JULY 1986

REASONS FOR JUDGMENT

LOCKHART J.

This appeal from the judgment of a single Judge of this Court

(Wilcox J.) concerns two questions: first, whether the respondents are

infrmging patent No. 493818 ("the patent") of which the registered

proprietor is the first appellant, Rhone-Poulenc Agrochimie S.A.

("Rhone-Poulenc") and, second, whether certain of the consumer

protection provisions of the Trade Practices Act 1974 ("the Trade

Practices Act") are being infringed by the respondents .

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2.

The patent is for an invention entitled "Fungicidal

Compositions Containing Phosporous Acid Or Its Salts". The second

appellant, May and Baker Australia Pty. Limited ("May and Baker"),

markets a product known as "Aliette" which is a fungicide for various

fruit crops including avocados. Both Rhone-Poulenc and May and Baker

are subsidiaries of companies that are ultimately owned by	a French
company Rhone-Poulenc S.A..

The first respondent UIM Chemical Services Pty. Limited

("UIM") manufactures and markets a product sold under the name "m-d

KP" in Australia as a fungicide to control phytophthora in fruit

trees. Most of the ultimate purchasers of m-d XP are avocado growers

in south-east Queensland and northern New South Wales. UIM's product,

m-d KP, competes with Aliette but m-d KP is sold for a price

considerably lower than that of Aliette. m-d KP was developed by the

second respondent, Clyde Todhunter Waugh, a chemical engineer and a

director and manager of UIM.

Mr. Waugh gave evidence that UIM received numerous enquiries

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i from fruit growers for phosphorous acid in the latter part of 1984.

At about the same time the Queensland Department of Primary Industries

had been conducting on selected avocado farms trials of the fungicidal

effects of the injection of various types of fruit bearing trees with

a solution containing phosphorous acid. It was thought that the

results were excellent, thus enlivening the interest in phosphorous

acid for this purpose. Many of the persons requesting phosphorous

3 .

acid also asked UIM to supply caustic potash (potassium hydroxide),

this being an alkaline substance intended to be mixed with phosphorous

acid partially to neutralise its acidity and to prevent leaf burning.

The reaction of caustic potash with phosphorous acid is exothermic,

ie. heat producing, so that the mixing process must be carried out

carefully. Mr. Wauqh said in evidence:

“As I feared that customers might not carry out the

mixing process safely and would not be able to

produce an accurate mixture that was neither too

acidic nor too alkaline and in which the potassium

salts were properly dissolved, UIM decided to

supply phosphorous acid and potassium hydroxide

already mixed together with water to these

customers. I decided, merely as an arbitrary

figure, that a 20% weight by volume mixture of each

of phosphorous acid and potassium hydroxide would

be an acceptable mixture. When phosphorous acid

and potassium hydroxide are added to water the

resulting product is a mixture of mono potassium

phosphite and di potassium phosphite. This is the

product which is manufactured and sold by UIM under

the name m-d KP. “

Some farmers told Mr. Wauqh that they proposed to apply m-d

KP by direct injection into the tree trunk and asked him for advice as

to the best technique. UIM then produced	an information sheet setting
out the appropriate procedure.

The appellants commenced proceedings in this Court claiming

that the sale of m-d KP by UIM contravenes the provisions of ss. 52,

53(c) and 55 of the Trade Practices Act, the claim being based upon

alleged contraventions of certain provisions of Queensland and New

South Wales statutes relating to the registration of funqicides. The

appellants also claimed that the manufacture, sale and use of m-d KP

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4.

infringes the patent. The appellants sought injunctions and damages.

By consent of the parties the learned trial Judge heard and determined

the question of the respondents' liability separately from the

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r	question of damages and directed that any question	as to the quantum
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of damages to be pald by the respondents or either of them to the

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appellants or as to the taking of any accounts of the respondents'

profits be tried separately after the determination of the question of

liability. The trial Judge found against the appellants on the issues

relating to both the claim for infringement of the patent and the

claim based on the Trade Practices Act and dismissed the application,

ordering the appellants to pay the respondents' costs of the

proceedings.	It is from his Honour's judgment that this appeal	is
brought.

I turn first to the patent claim.

The Patent Claim

The specification for the patent was lodged for registration

on 26 November 1974. It has a Convention Priority date of 26 November

1973. The specification commences with a description of the invention

in respect of which the patent was sought. This descrlption reads:

"This invention relates to fungicidal compositions

based on phosphorous acid or its salts.

More particularly, the Invention relates to

compositions suitable for using in controlling

parasitic fungi in plants and containing, as an

active material in an amount from 20 to 95% by

weight at least one compound selected from the

5.

group comprising phosphorous acid, its mineral

salts and its organic salts together with an

agriculturally acceptable inert support selected

from the group consisting of clay, synthetic or

natural silicates, resins, waxes, solid

fertllisers, water, alcohols, ketones, petroleum

fractions, chlorinated hydro-carbons and liquefied

gases; and at least one ionic or non-ionic

surfactant selected from the group consisting of

emulsifiers, dispersants, deflocculants and wetting

agent S. "

The description identifies three elements or integers, namely, an

active material, an inert support and a surfactant, in each case to be

selected from a nominated group.

M-d KP is a composition consisting of mono potassium

phosphite, di potassium phosphite and water. The appellants contend

that the mono potassium phosphite and the di potassium phosphite

together constitute a compound formed from the mineral salts of

phosphorous acid. They argue that the compound, being between 20 and

95 per cent by weight of m-d KP, is thus an active material of the

type described in the patent specification. The respondents deny

this.

It is common ground that the water in m-d KP is an inert

support of the kind described in the specification. It is also common

ground that m-d KP does not contain a surfactant which, in the case of

a fungicide, may be described as a substance intended to improve the

delivery to the plant of the active material present in the

composition.

6 .

The principal issue before the trial Judge relating to the

patent was whether the manufacture and sale of a substance which did

not contain a surfactant could be an infringement of the patent. In

essence the issue was whether the presence of a surfactant must be

regarded as an essential element of the monopoly claimed by the

patent.

The trial Judge considered the seventeen claims in the

specification which were said to define the invention. He found that

the first sixteen were "composition claims" each of which included all

three integers, that is, an active material, an inert support and a

surfactant. He found nothing in the language of those claims to

suggest that the presence or absence of a surfactant was optional or

immaterial. His Honour found that the seventeenth claim was a "method

claim" which "does not rise beyond whatever limitations exist in

claims 1 to 16". Claim 17 is defined as:

"A method of controlling fungus disease in plants,

comprising a composition of the kind claimed in any

of the Claims 1 to 16 for preventive or curative

treatment. "

f

The trial Judge recognised that he protection from

infringement which is given to a patentee by his grant is not

necessarily confined to an infringement by a thing which is in every

respect identical with the invention described in the patent

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specification and that the protection extends to the "pith and

substance" of the invention. He thus posed the question to be

determined as whether the presence in the composition of a surfactant

7.

was of thc "pith and substance" of the invention the subject of the

patent. In order to answer that question his Honour construed the

patent as at its Convention Priority date (26 November 1973) and in

the light of the knowledge available	at that time to persons	I killed
in the relevant field.

The trial Judge stated that it was common ground between the

parties that in only one method of application, namely, the direct

injection of fungicide into the trunk of the plant, was a surfactant

not necessary. He concluded that in November 1973 "little thought had

been given to direct trunk injection of fungicides" and that "the

appllcants for the patent simply did not contemplate the use of a

fungicide without a surfactant". His Honour held that whether for

that or some other reason the appellants chose to include all	three
integers when they described and defined their claims.

The trial Judge concluded that the inclusion of a surfactant

must be regarded as an essential element of the claims, that the

protection granted by the patent extended only against compositions which included a surfactant and that, as m-d KP did not contain a surfactant, the manufacture and sale of it by UIM was not an

infringement of the patent. In view of that conclusion, his Honour

found it unnecessary to decide whether m-d KP in fact contained an

active material of the type described in the patent specification. It

was also unnecessary to decide whether the Court should, in its

discretion, grant an injunction under S. 118 of the Patents Act 1952.

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8.

Counsel for the appellants submitted to this Court n appeal

that the trial Judge erred in finding no infringement by UIM of the

patent. The principal submission of counsel for the appellants was

that, irrespective of whether, on the proper cwistruction of the

composition claims in the specification, the use of a surfactant was

essential, the "method" claim in Claim 17 was distinct from and

independent of the various composition claims. It was argued that the

essence of the patent was the discovery of a new process or method of

using well known chemical substances for a new purpose, namely, the

treatment of fungus diseases in trees and plants. This new method, it

was said, was embodied in the Claim 17, the "method claim" in the

specification and was the application of phosphorous acid or its salts

(the active material) as fungicide. It was argued that it was clear

upon reading the specification as a whole that the new method or

process was the pith and substance of the invention the subject of the

patent. The invention, it was argued, is distinct from the

compositions which are described in the specification. In support of

that argument reliance was principally placed on the following

matters:

(a) The patent specification commences with the words

"This invention relates to fungicidal compositions

..." Counsel for the appellants noted that "relates

to" was chosen rather than, for instance, "consists

of l' .

9.

(b) Thc statement on page 17 of the specification that

"the compounds according to the invention are not used

on their own. Instead, they generally form part of

formulations which, as a rule, contain a support

andlor a surfactant in addition to the active material

according to the invention". The appellants submitted

that this passage indicates that the addition of a

surfactant is not an essential element of the

invention the subject of the patent.

(c) Examples 2(c), 3 and 4 of the examples given in the

specification of "the fungicidal properties of the

compounds according to the invention" do not involve

the use of a surfactant.

Counsel for the appellants submitted that Wilcox J. erred in

holding that the method claim which embodied the essence of the

invention "does not rise above whatever limitations exist in claims 1

to 16". Counsel Submitted that the pith and substance of a method

invention is very different from the pith and substance of a

composition invention and, in any case, the method claim referred to

methods of controlling fungus disease applying compositions "of the

kind" claimed in claims 1 to 16. Counsel submitted that the words "of

the kind" supported their submission that, even if the use of a

surfactant is an essential integer in the composition claims, it is

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not an essential integer in the "method" claim because without it the

composition still assumes the description within the language of Claim

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10.

17 of “a method of controlling fungus djsease in plants, comprising a

composition of the kind claimed in any of the Claims	1	to 16	for
preventive or curative treatment”.

The appellants also challenged the finding of the trial Judge

that it was common ground that, except in relation to the direct

injection of fungicides into the trunks of plants, “the satisfactory

application to plants of any of the compositions constituted by the

first and second integers in the various claims would require the

addition to that composition of a surfactant“. The appellants argued

that there was acceptable evidence that the use of a surfactant was,

at the Convention Priority date, known to be inessential. Counsel

submitted that hese matters upport he contention that he

surfactant is not an essential integer.

Finally, counsel for the appellants submitted that the

application of the pith and substance principle, based upon the

knowledge of a person versed in the relevant field, leads to the

conclusion that the use of m-d KP is an infringement of the patent,

that by selling m-d KP UIM knowingly contributes to such infringement

and that such sale by UIM is itself an infringement of the patent.

Counsel for the respondents argued that upon a proper

construction of the patent it must be concluded that a surfactant is

an essential integer of the patented invention and that the sale and

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use of m-d KP could not infringe the patent. The respondents

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primarily relied upon the wording of the seventeen claims in the

11.

specification said to define the invention. The respondents also

submitted that the process described in the method claim would not

have been a patentable invention if it had not included a surfactant.

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The respondents argued that, in the absence of a surfactant, the

method claim would not have disclosed a practical method of

:	application of the invention. Counsel submitted that at the relevant time the employment of a surfactant was regarded as essential for the
efficient delivery of the active material. At that time a spray
capability was nearly always provided and for that purpose a
surfactant was required. Further, it was submitted, the inlection technique of applying fungicide5 was not known in Australia in November 1973.

Counsel for the respondents submitted that, even if their

arguments concerning the surfactant were rejected, the sale of m-d KP

could not be an infringement of the patent because it did not in fact

contain an active material of the type described in the specification.

It was also contended by counsel for the respondents that, even if it were held that the use of m-d KP infringed the patent, the

respondents neither did nor threatened to do any act which would

itself amount to an infringement of the patent. They argued that

selling the product to others in the knowledge or expectation that

they would use the product in infringement of the patent is not

sufficient to sustain a finding of infringement by the seller.

12.

Finally, counsel for the respondents submitted that, if the

appellants' case concerning infringement was made out, injunctive

relief should be refused by the Court in its discretion, broadly on

the ground of public interest.

In an action to restrain the infringement of a patent it is

first necessary to construe the claims in the specification which

define the invention. It is, I think, permissible to have regard to

the language of the specification as a whole when construing the

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claims but it must be remembered that the invention the subject of a

valid patent is defined solely by the claims in the specification. A

complete specification under the Patents Act 1952 must end with a

claim or claims defining the invention: para. 40(l)(b).

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t I propose to turn first to the sixteen "composition claims"

in the specification. Claim 1 encompasses fungicidal compositions

which contain an active material together with an agriculturally

acceptable inert support and at least one ionic or non-ionic

surfactant. There is nothing in the language of that claim which

suggests that the presence of a surfactant is optional. Claim 2 is

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expressed to include compositions as claimed in Claim 1 in which "the

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I	surfactant" is selected from nominated groups. All of the "composition
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claims" from 2 to 16 inclusive, relate directly or indirectly back to
Claim 1. They are thus governed by Claim 1. To establish
infringement of combination patent claims such as these the patentee
must show that the alleged infringer has taken each and every one of
the esential integers of the claims: see Populin v. H.B. Nominees Ptv.

13.

Limited (1982) 41 A.L.R. 471; Terre11 on "The Law of Patents", 13th

Ed., 1982, para. 6-51. Clearly, the sale of a product which does not

contain a surfactant could not constitute an infringement of the

monopoly defined by the "composition claims".

If the appellants are to succeed on the question of

infringement they must show that the trial Judge erred in holding that

the "method claim" did "not rise beyond whatever limitations exist in

claims 1 to 16". The appellant's case on this point relied largely

upon certain parts	of the specification	which, it was said, indicated
that a surfactant	is not an essential	element of the invention the

subject of the "method claim". However, it is well established that

the extent to which recourse may be had to the language of the general body of the specification in order to construe the claims in the

specification is limited. I respectfully adopt the words of Lord

Russell of Killowen in Electric and Musical Industries Limited v.

Lissen Limited (1938) 56 R.P.C. 23 at p. 39:

"The claims must undoubtedly be read as part of the

entire document and not as a separate document; but

the forbidden field must be found in the language

of the claims and not elsewhere. It is not

permissible, in my opinion, by reference to some

language used in the arlier part of he

specification to change a claim which by its own language is a claim for one subject-matter into a claim for another and a different subject-matter,

which is what you do when you alter the boundaries

of the forbidden territory."

The specification and the claims must be construed

through the eyes and minds of those skilled in the art at the material

time, namely, the priority date: Codex Corporation v. Racal-Milqo

14,

Limited C19833 R.P.C. 369 per May L.J. at p. 381. It must also be

borne in mind that decisions regarding the matters to be included in

the claims in a patent rest exclusively with the patentee. In Walker

v. Alemite Corporation (1933) 49 C.L.R. 643 at p. 656 Dixon J. quoted

with approval the dictum of Lord Parker in Fellows v. Thomas William

Leach Limited (1917) 34 R.P.C. at p. 55:

"A claiming clause operates as a disclaimer of what

is not specifically claimed, and for such

disclaimer there may be reasons known to the inventor but not to the Court."

I repeat the words of Claim 17, namely:

"A method of controlling fungus disease in plants,

comprising applying a composition of the kind

claimed in any of Claims l to	16 for preventive or
curative treatment."

It is immediately apparent that the language of the claim

reveals a strong connection with the first sixteen claims in the

specification. The method it purports t o define is a new method for

the control of fungus disease in plants. That method is the

application of compositions "of the kind" claimed in any of the first

sixteen claims. Each of those compositions is defined to contain

three essential elements, one of which is a surfactant. It may be

true that the actual inventive step involved is not the discovery of

new compositions but the discovery of a new use to which previously

well-known substances could put. be More importantly, the

exploitation of	that inventive step may not logically require the
employment of a	surfactant. Nevertheless, the language of Claim 17

15.

conveys the impression that the patentee was content to confine its

monopoly to the exploitation of the inventive step through the

application of compositidns each of which contain a surfactant. I do

not think that the words "of the kind" in Claim 17, when read in their

context, allow the claim to be read as including the use of a

composition which does not contain a surfactant.

The various passages in the body of the Specification which

were relied upon by the appellants do not advance their position. The

statement on p. 17 of the specification already referred to and some

of the examples given of the fungicidal properties of the compounds

according to the invention may indicate that the exploitation of the

invention the subject of the patent does not necessarily require the

use of a surfactant; but to use those passages in support of the

submission that a monopoly is claimed over the exploitation of the

invention regardless of whether a surfactant is employed comes

dangerously close to using the language of the general body of the

specification to change the meaning of a claim which must be derived

essentially from the language of the claim itself. Further, the

description of the invention an p. 2 of the specification clearly

indicates that the invention relates to compositions which contain all

three integers. Counsel for the appellants suggested that it was

significant that the words "relates to" were chosen rather than, f o r

example, "consists of". However, the use of the words "consists of"

would not be apposite here where the invention is not the discovery of

a new chemical substance but is the discovery of a new use to which a

previously well known substance could be put.

16.

Much rellance was placed by counsel for the appellants in

argument upon the "pith and substance" or "pith and marrow" principle.

The classic statement of that principle was made by James L.J. in

Clark v. (1875) 10 Ch. App. 667 at p. 675:

"The patent is the entire combination, but there

is, or may be, an essence or substance of the

invention underlying the mere accident of form: and

that invention, like every other invention, may be

pirated by a theft in a disguised or mutilated

form, and it would be in every case a question of

fact whether the alleged piracy is the same in

substance and effect or is a substantially	new or
different combination."

The principle was discussed by Gibbs J. in Olin Corporation v. Super Cartridqe Co. Ptv. Limited (1977) 51 A.L.J.R. 525 at p. 530:

"The principle that there may be infringement by

taking the 'pith and marrow' or the substance of an

invention does not mean that there will be an

infringement where the patentee has by the form

of his claim left open that which the alleged

infringer has done. And it does not affect the

fundamental rule that there will be no infringement

unless the alleged infringer has taken all of the

essential features or integers of the patentee's

claim: see Rodi and Wienenberqer A.G. v. Henry

Showell Limited C19697 R.P.C. 367, especially at

pp. 383-384. "

See also the judgment of Aickin J. in Minnesota Mininq and

Manufacturinq Company v. Beiersdorf (Aust) Limited	(1980) 144	C.L.R.
253 at p. 286.

In Catnic Components Limited v. Hill and Smith Limited C19823

R.P.C. 183 Lord Diplock said at pp. 242-243:

17.

"My Lords, a patent Specification is a unilateral statement by the patentee, in words of his own

choosing, addressed to those likely to have a

practical interest in the subject matter of his

invention (ie. "skilled in the art"), by which he

informs them what he claims to be the essential

features of the new product or process for which

the letters patent grant him a monopoly. It is

those novel features only that he claims to be

essential that constitute the so-called "pith and

marrow" of the claim. ' I

His Lordship continued:

"The question in each case is: whether persons

with a practical knowledge and experience of the

kind of work in which the invention was intended to

be used, would understand that strict compliance

with a particular descriptive word or phrase

r	appearing in a claim was intended by the patentee
to be an essential requirement of the invention so
that any variant would fall outside the monopoly
claimed, even though it could have no material
effect upon the way the invention worked.
The question, of course, does not arise where the variant would in fact have a material effect upon
the way the invention worked. Nor does it arise
unless at he date of publication of the
specification it would be obvious to the informed
reader that this was so. Where it is not obvious,
in the liqht of then existing lmowledge, the reader
is entitled to assume that the patentee thought a
the time of the specification that he had good
reason for limiting his monopoly so strictly and
had intended to do so, even though subsequent work
might show the limitation to have been unnecessary.
by him or others in the field of the invention would be apparent to any reader skilled in the art that a particular descriptive word or phrase used
in a claim cannot have been intended by a patentee,
who was also skilled in the art, to exclude minor variants which, to the knowledge of both him and the readers to whom the patent was addressed, could
have no material effect upon the way in which the
invention worked. 'I

18 *

In my opjnion, the application of the pith and substance

principle does not support the contention that the use of m-d KP

constitutes an infringement of the patent. The claims, including the

method claim, when construed in the light of the whole specification,

define the essential elements in the patent which constitute its pith

and substance. The presence of a surfactant must in this case be

regarded as an essential element of the claimed monopoly. I agree

with Wilcox J. that the pith and substance principle has a limited

application and is typically applied where the al1eqe.d infringing

article reproduces all integers but departs in a minor respect from

the description of one of them. I also agree with him that this is a

case where the elimination of the integer affects the way in which the

invention works. It was open to the patentee to attempt to obtain a

patent which would involve compositions with only the first two

integers present but they did not do so.

In my opinion the trial Judge did not err in his findings on

the patent question and the appeal on that question should be

dismissed.

The Trade Practices Act Claim

Legislation exists in both Queensland and New South Wales

relating to the registration of fungicides. The Queensland Act is the

Aqricultural Standards Act 1952. The xpression "agricultural

requirement" is defined by S. 7 as including "pest destroyer". . The

term "pest destroyer" is itself defined in the same section as

19.

including "funglcide". "Fungicide" is in turn defined as meaning:

"any material used or intended for destroying or

preventing the attack on plants ... of fungi or

other parasitic plants or bacteria which affect or

which may affect such plants ...'I

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"Plant" is defined as including any tree.

"he trial Judge found that m-d KP is intended to be used and

is in fact used for the purposes of destroying or preventing attacks

on fruit trees of fungi or other parasitic plants or bacteria which

may affect such trees. He held that he composition is "an

agricultural requirement" within the meaning of the Queensland Act.

Part I11 of the Queensland Act provides for the registration

of agricultural requirements to which the Part applies. Section 15

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forbids any person to "sell" an agricultural requirement to which the

part applies "unless that agricultural requirement is then registered

under this Part". The word "sale" is defined by S . 7 as including:

"placing or causing to be placed on the market in

Queensland, and barter and exchange and supply. and

also offering or attempting to sell, and supplying or receiving for sale, or having in possession for

sale ... or allowing to be sold	or offered for
sale".

His Honour found that the word "sell" must be widely interpreted, that

it was clear that the respondents carried out numerous actions which fell within one or other of the limbs of the definition of "sale" and,

as it was admitted that m-d KP was not registered under the Queensland

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Act, it followed that there had been numerous contraventions of S . 15.

Until registration is achieved any further sale would constitute a

contravention of the section. His Honour noted that a contravention

of S. 15 is punishable as an offence ( S . 83) and that the relevant

"agricultural requirement" is liable to forfeiture ( S . 8 4 ) .

1

Part VI11 of the Queensland Act relates to inspection,

sampling and analysis. Section 67(l)(v) empowers inspectors to:

"seize d tain and prohibited materials,

agricultural requirements, and packages, labels and advertising matter relating in whole or in part to any agricultural requirement, which or any part

of which, in his opinion, does not comply in any respect with any provision of this Act or in

relation to which ... he is of the opinion that all

or any of the provisions of this Act have not been

complied with ... U .

Section 71(2) provides for forfeiture, under certain

circumstances, of seized goods.

His Honour proceeded upon the assumption that S. 67(l)(v)

empowered inspectors to seize agricultural requirements which had been

sold in contravention of S. 15 and upon the further assumption that

the consequence of the failure by the first respondent to register the

product under the Queensland Act is to expose the purchaser

of the

product to the risk that the product will be seized from him and

subsequently forfeited.

The relevant New South Wales legislation is the Pesticides

- Act 1978. Section S of that Act defines "pesticide" as including:

21.

“any substance . . . that I s manufactured,

represented, sold or used as a means for directly

indirectly or ... destroying or rendering	ineffective, or regulating the effect of, a fungus
or any other parasitic vegetation, bacteria or a virus on or in ... any form of life except where it is in livestock or on or in man”.

Part I11 provides for the registration of pesticides. It is an

offence to sell (S. 29) , supply ( S . 30), prepare for use or use (S. 31) an unregistered pesticide. Section 53(l)(c) empowers an inspector

who suspects on reasonable grounds that there has been a breach of the

Act to seize and remove any substance that he suspects on reasonable

grounds to be a pesticide. Section 61 provides that where a person is

convicted of an offence against the Act the Court may order forfeiture

to the Crown of the pesticide in respect of which the offence was

committed. His Honour found that in New South Wales, as in

Queensland, a person who purchases m-d KP before registration is at risk of his purchase being seized and forfeited. He also found that

S . 31 of the NSW Act exposes	a purchaser who uses m-d KP to the risk
of prosecution.

There was evidence before the trial Judge as to the awareness

of at least one State authority concerned with the administration of

the relevant statute of the fact that m-d KP is being sold and used as

a fungicide. This included evidence of conversations between Mr.

Waugh and officers of the Queensland Department of Primary Industries. had known for several months before the commencement of the final

hearing of the sale of m-d KP and of its use as a fungicide and that

2 2 .

it had not elected to take any action in relation to that sale or use

against either UIM or a purchaser. His Honour also found that the New

South Wales authorities were aware of the position and that they too

elected to take no actlon. This last finding of his Honour was

challenged by counsel for the appellants who submitted that all the

evidence established was that the New South Wales authorities were

aware of the position, but there was no evidence that they had made a

decision one way or the other as to the course of action they would

pur sue.

His Honour summarised his findings in relation to this aspect

of the matter in these terms:

l ' . . . the position remains, upon the facts I have

found, that breaches of the legislation of each of

the two States have occurred. Further breaches

will occur in respect of future sales before

: I	registration of the product in the relevant State.
:,	Purchasers are exposed, in theory at least, to the
possibility of seizure of their purchase. People
who use the product in New South Wales are exposed
to the risk of prosecution for so doing."
His Honour found that Mr. Hauqh was at all material times

aware that m-d KP was being purchased by persons intending to use the

I

composition as a fungicide and that he knew of no other use for the

r product. He was aware of the requirements of the legislation, in both

, Queensland and New South Wales, for registration of fungicides. He

knew that the sale by his company, as a fungicide, of m-d KP

:

constituted an offence and he said that, for this reason, the company

did not promote the product or label or advertise it as a fungicide.

. I

His Honour accepted Mr. Waugh's statement that he did not know prior

4 ' . '

I

: I

-- ,-

2 3 .

to the interlocutory hearing for injunctive relief on 12 April 1985 of

those provisions of the Act which enabled seizure of unregistered

fungicides from purchasers. But his Honour found that, if UIM's

conduct constituted misleading or deceptive conduct under the Trade

Practices Act, it would be no answer that UIM did not realise the

extent of the risk imposed upon its customers by that conduct. His disclose the fact that the product was unregistered. At the hearing

for Interlocutory injuctive relief counsel for the respondents

informed the Court that the respondents "would be agreeable to giving

any reasonable form of warning on the label, if that were thought

appropriate by the Court". On the final hearing his Honour noted:

"After discussion, during which it was not suggested on behalf of the applicants that the

notification should go any further, the wording was

formulated which was in fact printed on the

subsequent labels. When, at the final hearing,

counsel for the applicants attacked the adequacy of

the disclosure on those labels, the respondents

offered to amend the label to take in a full

reference legal the consequences to of

non-registration. Their counsel invited the

applicants to suggest appropriate words. In none

of this was there any element of refusal or

deliberate refraining from carrying out he

relevant acts. "

His Honour accepted Mr. Waugh's evidence that he himself

informed some purchasers of the fact of non-registration and of the

resultant legal position as he understood it. Mr. Waugh conceded that he did not inform all purchasers, but there is nothing to indicate, said his Honour, that this failure flowed from a deliberate decision

not to supply that information. He said that any omissions were

24 -

inadvertent and there was no reason to conclude otherwise. His Honour

posed the critical question as being whether the circumstances

supported the conclusion that the non-disclosure had resulted or would

be likely to result not merely in confuslon or in a misconception by

potential purchasers but in a misrepresentation to them of some

relevant matter.

His Honour said that he did not think the present facts fell

within either of the two classes of case identified in Halsbury's Laws

of England, 4th Ed., Vol. 31, para. 1050 whereby silence may

constitute or contribute to actionable misrepresentation, namely,

where known material qualifications of an absolute statement are

omitted or where the circumstances raise a duty on the representor to

state certain matters if they exist and where, therefore, the

representee is entitled to infer their non-existence from the

representor's silence. His Honour said the real question was whether

the marketing of m-d KP as a fungicide constituted a misrepresentation

by conduct that the product was registered as such. His Honour was

satisfied that m-d KP was marketed as a fungicide although e noted

that at no time had the label adopted by UIM stated that the product

was sold or intended for use as a fungicide. In fact, the word

"fungicide" was not mentioned on the label except in the context of

the statement added to the labels used after the interlocutory hearing

to the effect that the product was not a registered fungicide. His

Honour said, nevertheless, that the marketing methods adopted by UIM

were likely to convey at least to a proportion of potential purchasers

that the product was to be regarded as a fungicide.

25.

His Honour found that it would be likely that some potential

purchasers would be aware of the existence and possibly of the basic

elements of the relevant State legislation and that there may be

others with less knowledge of the position who are ignorant of the

source of the requirement but are nevertheless aware that fungicides

must be registered. A person with such knowledge and being aware of

the open sale of m-d KP as a fungicide may assume that m-d KP has been

I registered. His Honour found:

"To the extent that such a person thought about the

matter at all, he or she may reason that 'it must

be registered or they would not be able to sell

it'. That would be a misconception, but I do not

think that it would be a misconception stemming

from a misrepresentation by UIM."

His Honour rejected an argument by the appellants that UIM should have informed persons of the legal consequences of the position

'I

I	of non-registration, warning them of the possibilities of seizure and forfeiture, and in New South Wales of prosecution, if the product was
used. His Honour held that the sale by UIM of m-d KP as a fungicide
without disclosing to all purchasers prior to April 1985 of the fact
of its non-registration and the failure of UIM to inform all
purchasers of the legal results of that fact did not constitute
misleading or deceptive conduct by UIM in contravention of S. 52 of
the Trade Practices Act. As to the other two provisions of that Act his Honour said:

26.

"The applicants also rely upon S . 53(c) and S . 55

of the Trade Practices Act. In connection with the

first provision they argue that UIM has falsely

represented that m-d KP has uses which it does not

have. In relation to S, 55 they say that UIM

engaged in conduct that is liable to mislead the

public as to the suitability of m-d KP for its

purpose. As counsel recognise, these alternative

allegations raise the same issues as those under S .

52. They also fail. "

His Honour therefore dismissed the Trade Practices part of the appellants' claim.

i The trial Judge held that if, contrary to his view, the

marketing of m-d KP as fungicide a without disclosure of

non-registration did constitute a misrepresentation by UIM and

misleading or deceptive conduct by it, he would nevertheless have

refused injunctive relief in relation to that conduct. He relied upon the fact that, since shortly after the interlocutory hearing UIM has followed the practice of disclosing by appropriate wording on its

label the fact of non-registration, the fact that the practice was

adopted pursuant to an undertaking given to the Court at the hearing,

and that a renewal of the undertakings was offered at the final

hearing. His Honour relied also upon the fact that, to take account

of the possibility that some persons may order the product without

having seen the label, the respondents offered an undertaking to sell

to 30 day credit customers by debiting their accounts and to make a

I full refund both of the purchase price and of the freight costs to any

such customer who returned the goods within 14 days of delivery. His

Honour said that the adoption of those procedures will not always be

!	27.
r

effective to eliminate the possibility of the customer being misled or

1.

deceived, but having regard to the identity of the product and the

!

nature and size of the market, the implementation of those

undertakings would be likely to avert the possibility of prejudice to

a purchaser by reason of lack of information.

Counsel for the appellants argued before us that the conduct

of the respondents in marketing m-d KP without disclosing (a) that it

was unregistered under the relevant legislation and (b) the risk of

seizure, forfeiture and prosecution, however slight it may be or have

been, constitutes misleading or deceptive conduct within the meaning

of S . 52 of the Trade Practices Act. Counsel relied in particular

upon the following matters:

(a)

the fact that UIM sells m-d KP knowing that its only useful purpose is as a fungicide, that it was developed with that purpose in mind and that it knew, as did Mr. Waugh, that it

would be so used:

both respondents knew long before the lnterlocutory hearing

of the liability of Queensland purchasers to the seizure and

forfeiture of the product under the Queensland legislation;

Mr. Waugh warned some but not all of the customers of UIM of

these risks, and this admittedly selective approach gives

rise to a plain inference that the failure to warn some of

the customers was deliberate;

!

28.

Mr. Wauqh admitted during the course of cross-examination

that the failure to warn customers was dishonest, deceptive

and misleading. This admission demonstrates that the conduct

of the respondents was intentional. The Court wlll in those

circumstances infer that the intention achieved its

objective. Reliance was placed upon Blackadder v. The Good

Roads Machinery Companv (1926) 38 C.L.R. 332; Lee v. Wilson

(1934) 51 C.L.R. 276; Cadbury-Schweppes v. Pub Squash C19813

R.P.C. 429 and Hayward v. Thompson C19823 Q.B. 47; and

the fact that Mr. Wauqh was at pains to warn some customers,

demonstrates a strong likelihood that consumers would be

mislead unless warned.

Counsel for the appellants submitted that the sale by m-d XP to persons who had intended to use the product UIM of

a s a fungicide

on avocado trees implied that there was no legal prohibition against

its sale or use for that purpose and that possession of the product by

a purchaser would not give rise to any liability of seizure and

forfeiture. In those circumstances the respondents had to disclose

the relevant prohibition and liability if they were to avoid engaging

in misleading or deceptive conduct.

Counsel for the appellants also challenged his Honour's

finding that it would be proper to refuse injunctive relief and to

accept undertakings about the labelling of the product.

!

i 2 9 .

The appellants further contended that if the Court were to find that the use of m-d KP infringed the patent (whether or not the

sale of the product infringed it), it would follow that the sale of

m-d KP would amount to a contravention f S . 52 o f the Trade Practices

m. It was argued that the sale of m-d KP in circumstances where the

seller knows that the purchasers are likely to infringe the patent and

be exposed to the possibility of infringement proceedings, and yet

fails to warn purchasers of that danger, amounts to conduct calling

within S . 52. Further, it was argued that even if the use of m-d does not infringe the patent, the respondents knew that at least some KP

purchasers would add a surfactant to m-d KP before using it as a

spray and would thereby infringe the patent. Again, it was submitted

that the sale of m-d KP in such circumstances without warning

purchasers of the potential danger is conduct within S . 52. This

sufficiently summarises the submissions of counsel for the appellant.

Counsel for the respondents submitted that the trial Judge's

conclusions regarding the Trade Practices Act were correct and should

not be disturbed. They submitted that no conduct of the respondents

was capable of amounting to a misrepresentation that m-d KP was

registered under any State legislation. Further, they contended that

the respondents made no representation as to the fitness of m-d KP or

its purpose and in any event it was fit for its purpose in that the

risk of seizure or prosecution was nil and the appellants made no

effort to prove otherwise. Alternatively, it was submitted that there

:,

30,

was no basis €or interfering with the exercise of discretion by the

trial Judge in relation to the refusal of injunctive relief. Counsel

€or the respondents repeated before us, as they did before the trial

Judge, that the respondents are willing to subinit to the Court any

appropriate undertakings which may be thought necessary. Neither

party put separate argument to the Court relating to either para.

53(c) or S . 55 of the Trade Practices Act.

Misleading or deceptive conduct under S. 52 generally, though

not always, consists of misrepresentations. The distinction between

conduct which produces mere confusion or misconception falling short

of misrepresentation is well established: Parkdale Custombuilt

Furniture Ptv. Limited v. Puxu Ptv. Limited (1982) 149 C.L.R. 191;

Taco Companv of Australia Inc. v. Taco Bell (1982) 42 A.L.R. 177.

Nor do misrepresentations at common law necessarily define in

an exhaustive sense misrepresentations of the kind to which S. 52 is

directed. They are, of course, a useful guide, but they must not be

taken as circumscribing the plain words of a statute of the

Commonwealth Parliament enacted in the 1970’s. Section 52 should be

interpreted according to the natural and ordinary meaning of its

language. Whether it has been contravened depends upon an analysis of

the conduct of the alleged contravener viewed in the light of all the

relevant circumstances constituted by acts, omissions, statements or

silence.

31.

Intention to mislead or deceive is not a necessary ingredient

of liability under S. 52: Hornsby Buildinq Information Centre Ptv.

Limited v. Sydney Buildins Information Centre Limited (1978) 140

C.L.R. 216; Parkdale Custombuilt Furniture Pty. Limited v. PIAXU Ptv.

Limited (supra); but intent is not irrelevant in all cases: Bridrre

Stockbrokers Limited and Moore	v. Bridqes (1984) 4 F.C.R. 460 per
Lockhart J. at pp. 472-475.

It is difficult to conceive how mere silence by an alleged contravener could be sufficient to attract the operation of S. 52, but

when all the relevant circumstances of a case are analysed silence of

the alleged contravener may be the critical matter upon which reliance

is placed to establish misleading or deceptive conduct.

I agree with the trial Judge that the determination of the question whether U I M engaged in misleading or deceptive conduct is a

matter for the Court to determine and that admissions of Mr. Waugh

during cross-examination that his failure to warn customers was

"dishonest", "deceptive" and "misleading" are not conclusive of the

issues in the case. I agree with the trial Judge that there were

insufficient grounds to found a conclusion that the respondents in

fact intended to mislead or deceive some of their customers. I say

nothing about the finding of the trial Judge that Mr. Kaugh knew of

the risks of seizure and forfeiture being run by purchasers only after

the hearing for interlocutory injunctive relief as I do not find it

necessary to decide that question.

F

i

32.

The real question, so far as the Trade Practices Act is

concerned, is whether it wa5 misleading or deceptive f o r UIM to sell

m-d KP to purchasers in New South males and Queensland without

informing then that the sale was unlawful and that the product might

be seized from them and forfeited and, so far as sales in New South

Wales were concerned, that the product might not lawfully be used in that State as a fungicide.

I accept that UIM and Mr. Waugh knew that the purchasers of

m-d KP intended to use it as a fungicide. I accept also that the

marketing methods adopted by UIM were likely to convey to prospective

purchasers that the product was to be regarded s a fungicide, that it

would be likely that some potential purchasers would be aware of the

existence and possibility of the basic elements of the relevant State

legislation and that there may be others with less knowledge of the

position who were ignorant of the sources of the requirement but were

nevertheless aware that fungicides must be registered.

It is widely known that fungicides belong to a class

L '

of products, including insecticides and other chemical compositions,

which are strictly regulated by government, doubtless because of the

real and substantial risks to the health and safety of the public,

including people who handle and use them, and because the environment

may be harmed by them. But I find it impossible to take the step of

holding that any assumption by purchasers that the product is lawfully

sold or may be lawfully used or is not susceptible of confiscation

would be relevantly induced or caused by the conduct of the

33.

respondents. Without sale by the respondents there could, of course,

be no such assumption by purchasers; but the mere absence of some

communication from the respondents to the effect that the product is

sold by them in contravention of State law cannot in my view

constitute a misrepresentation or other conduct falling within the

prohibition of S. 52. It is not a case of incorrect information

having been given by UIM which it was bound to correct. Nor can I

discern from the evidence any material leading to the conclusion that

UIM represented that m-d KP was registered.

It is not difficult to think of circumstances in which UIM

would have engaged in misleading or deceptive conduct and thus

contravened S. 52: for example, if it placed labels on the containers

of m-d KP stating that the product was registered under the relevant Queensland and New South Wales legislation or that the product could

be lawfully used. That would be a clear case of a representation

being made to prospective purchasers that was false and would be of a

kind likely to mislead or deceive people lnto purchasing the product

or otherwise believing that it was fit or safe for use. But that is

not this case.

Numerous products are marketed today which are closely

regulated by government by imposing, for example, minimum standards of

safety and health. There are many instances and some spring readily

to mind: dairy products, clothing (especially nightwear), electrical

goods, motor cars and processed foods. What are the relevant

differences, if any, between this very large range of commodities and

34.

m-d KP? It is true that the unlawful sale or use of m-d XP attracts

legal consequences not necessarily shared by other products sold

unlawfully, in particular no doubt the susceptibility to confiscation.

But it is not difficult to imagine other equally serious legal

t:

consequences flowing from the unlawful sale and use of many other

goods. I do not accept the correctness of the proposition that the

unlawful sale of such goods, with or without knowledge of their

prospective use, constitutes a contravention of S . 52 when not coupled

with notification of the illegality and its consequences. If the sale

and use of m-d KP is unlawful under State law then the State can

enforce its own law and stop unlawful sale and use. Similarly in the

case of unlawful sale or use under Commonwealth law; courts of

competent jurisdiction may enforce Commonwealth law to prohibit such

sale or use. I am not persuaded that the facts of this case enter the

prohibited domain of misleading or deceptive conduct. When stripped

of its cladding all that the argument of the appellants leaves exposed

is the proposition that the sale by a manufacturer of a product which

he knows is bought for the purpose for which it was made, in

circumstances where its sale and use is unlawful, where the product is

llable to forfeiture and where the illegality is not made known to

purchasers by the manufacturer, constitutes misleading or deceptive

conduct under S. 52. I reject that proposition.

It is useful to consider the relief which the Court is asked

to grant because it serves not only to illustrate the difficulties

inherent in the question of relief itself in this case, but also

exposes the problems inherent in the argument that the impugned

35.

conduct is misleading or deceptlve conduct under S . 52. If an

injunction were granted, although it would in form restrain UIM from

engaging in mlsleading or deceptive conduct in contravention of S. 52,

and not prohibit sale of the product itself, it would be in substance

a restraint on sale unless made in circumstances where UIM discloses

both that it is breaching State law and the consequences thereof,

because ultimately it is the non-disclosure of those matters that

allegedly constitutes the misleading or deceptive conduct. I would

regard such an injunction a s the countenancing by this Court of

continuing breaches of the laws of New South Wales and Queensland and

would not therefore be disposed, in the exercise of the Court's

discretion, to grant Injunctive relief. It is true that an injunction

of this Court of that kind would not detract from the authority of the

States to prosecute for breach of the relevant State laws, nor would

it render lawful the prospective conduct under State law: but it would

assume the prospective breach of State law as an essential condition

precedent to the operation of this Court's Injunction. The case for

not granting such an injunction is in my view compelling. In my

opinion the acceptance by this Court of undertakings along the lines

suggested by counsel for the respondents would be no different in

substance from the granting of injunctions and would thus be	an
unacceptable alternative.

I find myself in agreement with the conclusion of the trial

Judge that	the respondents have not contravened the relevant consumer
protection	provisions of the Trade Practices Act.

3 6 .

I would dismiss the appeal with c o s t s ,

I

I

i!

IN THE FEDERAL COURT OF AUSTRALIA	)
)
NEW SOUTH WALES DISTRICT REGISTRY	) No. 303 of 1985

’I 1

GENERAL DIVISION )

?

ON APPEAL from a slngle

ludge of the Federal Court

of Australia

BETWEEN:

RHONE-POULENC ACROCHIMIE SA

First Appellant

MAY & BAKER AUSTRALIA PTY

LIMITED

Second Appellant

AND :	-	UIM CHEMICAL SERVICES PTY
LIMITED

l . First Respondent

CLYDE TODHUNTER WAUGH

Second Respondent

CORAM: BOWEN C.J., LOCKHART AND JACKSON JJ.

DATE: 8th July 1986

REASONS FOR JUDGMENT

I

JACKSON J.

I agree with Bowen C.J. and wlth Lockhart J. that the

appeal against the learned trlal judge’s finding that there

i

-2-

was no infringement of Patent No. 493818 should fail.

Except in the respect to whlch I am about to refer, I

also agree with the reasons for judgment of Bowen C.J. on the

claims under the Trade Practices Act 1974.

The polnt at whlch I differ from the judgments of

other members of the Court is on the questlon whether the

conduct of UIM and Mr Waugh in selling m-d KP:-

knowing that It was useful only as a fungicide;

knowing that it would be used as a fungicide;

knowing that the m-d KP was not registered under

the Agricultural Standards Act 1952-1981

(Queensland) or the Pesticides Act 1978 (New

South Wales) ;

knowing that the sale of the product, In

consequence of the non-registration, was

unlawful in Queensland and In New South Wales

and that the product might be seized from

purchasers and forfeited; and

(in respect of sales in New South Wales) knowing

that the product might not lawfully be used by

1 -3-

the purchasers in consequence of the

non-reglstration under the Pesticides Act;

without notifying purchasers that m-d KP was not registered

under the relevant State enactment was a contravention of

s . 5 2 ( 1 ) of the Trade Practices Act.

The question of course, is whether in the particular

circumstances to whlch I have referred "silence" may amount to

conduct which is, or is likely to be, "misleading or

deceptive".

In dealing with this aspect of the case the primary

Judge referred to the observation of Deane and Fitzgerald JJ.

In Taco Company of Australia Inc. v. Taco Bell Pty Ltd (1982)

4 2 A.L.R. 1 7 7 at 2 0 2 that:-

"Irrespectlve of whether conduct produces or is

likely to produce confusion or misconception, ~t

cannot, for the purposes of s.52, be categorized as

misleading or deceptive unless it contains or

conveys, in all of the clrcumstances of the case, a

misrepresentation."

and then went on to apply the tests apposite at common law to

determine whether there was an actionable misrepresentation on

the part of UIM or Mr Waugh. He held that there was no such

misrepresentation, the circumstances not being such that the

case fell within	any of the categories in	which a duty to
speak arises.

His Honour was correct, it seems to me, In saylng

-4-

that the case was not one which would give rlse to actionable

mlsrepresentation under the general law. It was not a case

where known material qualifications to an absolute statement should have been mentloned, nor was it a case (as in Jones v.

Dumbrell [l9811 V.R. 199) where a statement true when made had

later become false. Further, there was no relationship other

than that of vendor and purchaser existing between UIM and the

purchasers from it and It 1s clear that the relationshlp of

vendor and purchaser is not, without more, sufficient to give

rise to a duty to disclose. See Smlth v. Hughes (1871) L.R. 6

Q.B.597, Ward v. Hobbs (1878) 4 App. Cas. 13 and W. Scott,

Fell & Co. Ltd v . Lloyd (1906) 4 C.L.R. 572.

I do not agree, however, that the question whether

there was a contravention of s.52(1) was concluded once it was

I

determined that there was not a representation which would be

actionable under the general law. In the passage whlch I have

quoted above from Taco Company of Australia Inc. v. Taco Bell

Pty Ltd., Deane and Fltzgerald JJ. were not concerned to

define whether the ambit of the concept of conduct whlch in

terms of s . 5 2 ( 1 ) was or was likely to be mlsleading or

deceptive coincided exactly wlth the ambit of

mlsrepresentation under the general aw. Rather they were

concerned to make the point that conduct whlch produced

confusion or misconception was not sufficient to establish a

contravention of ~.52(1)wnless it was conduct whlch	Involved
some misrepresentation of the true situation.

-5-

Similarly, when In Global Sportsman Pty Ltd v. Mlrror Newspapers Pty Ltd ( 1 9 8 4 ) 2 F.C.R.	8 2 at 8 8 the Full Court
said that:-

"Whether a statement 1s a statement of past or

present fact, a promise, a predlction, or an

expression of opinion, the making of it constitutes

conduct which is mlsleadlng or deceptive or likely to

mislead or deceive if the statement contains or

L conveys a misrepresentation."

it is obvious from the context that heir Honours were not

determining that only conduct which satisfied the tests of the

general law as to misrepresentation could be conduct to which

s . 5 2 ( 1 ) applied. Instead they were emphaslzlng that the mere

fact that the content of a statement was incorrect did not

mean that to make it was inevitably to engage in conduct in

contravention of s . 5 2 ( 1 ) .

The words of s . 5 2 ( 1 ) should be given their plain and

natural meaning, and should not necessarlly be construed to

conform with the common law (see Parkdale Custom Built

Furniture Pty Ltd v. Puxu Pty Ltd ( 1 9 8 2 ) 1 4 9 C.L.R. 1 9 1 at

198 , 202 -203 , 204 , 219 ) and It is not, In my view, correct to

treat s . 5 2 ( 1 ) as applying only to cases where the conduct of

the respondent could amount to misrepresentatlon under the

general law. The ultimate question In each case is whether in the particular clrcumstances the respondent's conduct whether constltuted by act or omission, by communication or by

-6-

silence, is or is likely to be misleadlng or deceptive.

It follows from what I have said that a vendor's

silence in clrcumstances where the common law would not impose

on him a duty to speak may __ constltute conduct which is, or is

llkely to be, misleading or deceptive in terms of s.52(1).

Indeed one sees that In the statements of the common law

principle contained in Story on Contracts, v01 I. secs. 516

and 517 and adopted by Cockburn C.J. In Smith v. Hughes

(supra) at 604 and by Griffith C.J. in W. Scott, Fell & Co.

Ltd v. Lloyd (supra) at 517, it 1 s recognlzed in sec. 516 that the vendor's silence may "operate as an injury to the party

from whom It is concealed", and in sec. 517 that "his" (the

vendor's) "sllence may operate virtually to deceive the

vendee." Of course, not every instance of silence on the part

of a vendor means that he has engaged in conduct which is

mlsleading or deceptive. It must be the conduct of the

vendor, i.e. the vendor's silence, which induces or is likely

to induce the mistaken view on the part of the potential

I	purchaser.
'.	!
I turn then to conslder whether in the circumstances of the particular case the conduct of UIM and Mr Waugh was
wlthln s.52(1). It seems to me that It was, and I am of that
view because In the case of a product havlng one use, at least
i
where, as in the present case, that use 1 s of a nature likely
to be subject to legislative regulation, I regard it as

-1-

mlsleadlng to sell the product in a manner which would be

approprlate If the sale were lawful. It 1s mlsleadlng because

the sale in that manner creates the clear impression that the

product does have whatever approval may be necessary and nay

be used by the purchaser for the purpose for which It 1s

purchased without, in New South Wales, that use being unlawful

and wlthout, in both States, the product being liable to be

E seized.

I do not mean to convey, of course, that there will

be a contravention of s .52 (1 ) on every occasion on whlch there

is a sale by a corporation of a product in contravention of a

law be it a law of a State, a law of the Commonwealth or a law

of a Territory. Each case must turn on its own facts.

?

i. The fact that I have concluded that the respondents

!I

are In breach of s .52 (1 ) , however, does not end the matter.

The trial Judge went on to say that if, contrary to hls view,

the respondents were in breach of the Act, he would

?,

nevertheless exerclse his dlscretlon to refuse injunctive

relief, and accept the undertakings offered by the respondents

at the final hearing. In this regard UIM has, pursuant to an

undertaking given at the interlocutory hearing, disclosed the

fact of non-registratlon by approprlate wording on its labels

since shortly after that hearing. It offered to renew the

undertakings at the final hearing and agreed to lndlcate on

the label, In a form approved by the Court, the consequences

-8-

of non-registratlon.

The appellants made a number of objectlons to these

undertaklngs. Flrst, they allege that the last undertaklng

would Involve a contraventlon of s.78(l)(iv) of the

Agricultural Standards Act which provides relevantly that:-

any label afflxed to or upon or inserted in or	"78(1). A person shall not use or make ... on
used In connectlon with any package of
agricultural requirement -
...

(iv) Any reference to this Act..."

The problem so ralsed may well be no more than one of

drafting but, for the reasons I shall mention below, It 1s

unnecessary to decide the question.

The appellants also argued that persons who order m-d

KP by mail or telephone, or who buy It in a cash sale over the

counter, do not see the label until they have bought the

product. This problem was referred to by the trial Judge, who noted that the respondents had offered an undertaking to sell only to thlrty day credit customers by debiting thelr

accounts, and to make a full refund both of the purchase price

and any other freight costs to any customer who returned the

goods wlthin fourteen days of dellvery. Such a procedure

-9-

would overcome this objectlon.

The final and significant question, however, is

whether it is appropriate for this Court to accept those

undertakings. It was argued by the appellants that in so

doing, the Court would be, in effect, countenancing continued breaches of Queensland and New South Wales law. I agree with this vlew and think that the Court should decline to accept

the undertaklngs but should in lieu grant approprlate

mjunctions in respect of the contraventions of s .52 (1 ) .

In my opinlon the appellants' appeal on the Trade

Practices Act issue should be allowed, and the matter relisted for argument as to the form of the injunctions which should be granted.

1 I ce, "iif _, y that this and the &$f

pcecding pages are a true copy of the

1

t Repsons for Judgment herein of his Honour

b ~ r Justice ZJLACL- .

Associate