Rhone-Poulenc Agrochimie SA v UIM Chemical Services Pty Ltd

[1985] FCA 476

Re: RHONE-POULENC AGROCHIMIE S.A. and MAY AND BAKER AUSTRALIA PTY. LIMITED
And: UIM CHEMICAL SERVICES PTY. LIMITED and CLYDE TODHUNTER WAUGH
No. G58 of 1985
Patent Law

COURT

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Wilcox J.

CATCHWORDS

Patent Law - Patent for fungicide containing three integers vested in applicant - Sale by respondents of fungicide allegedly containing two only of those integers - Whether such sale constitutes infringement of applicant's patent - Significance of definition by applicants for patent of integers in their claim - Discretion of Court to refuse injunction where patentee not exploiting patent and where injunction would prejudice third parties.

Patents Act 1952 ss. 108-112, 118, 142.

Federal Court of Australia Act 1976 s. 23.

Olin Corporation v. Super Cartridge Co.Pty.Limited (1977) 51 ALJR 525, Minnesota Mining and Manufacturing Co. v. Beiersdorf (Australia) Limited (1980) 144 C.L.R. 253, Catnic Components Limited v. Hill & Smith Limited (1982) R.P.C. 183, Codex Corporation v. Racal - Milgo Limited (1983) R.P.C. 369, Populin v. HB Nominees Pty. Limited (1982) 41 A.L.R. 471, Walker v. Alemite Corporation (1933) 49 C.L.R. 643, Rodi and Weinenberger A.G. v. Henry Showell Limited (1969) R.P.C. 367, Electrical & Musical Industries Limited v. Lissen Limited (1939) 56 R.P.C. 23 applied. Clark v. Adie (1875) 10 Ch. App. 667, (1877) 2 A.C. 423, Leader v. Moody (1875) L.R. 20 Eq. Cas. 145, Leeds Forge Company Limited v. Deighton's Patent Flue and Tube Company Limited (1901) 18 R.P.C. 233, Bonnard v. London General Omnibus Company Limited (1919) 36 R.P.C. 309, Fastening Supplies Pty. Limited v. Olin Mathieson Chemical Corporation (1969) 119 C.L.R. 572 referred to.

Trade Practices - Consumer protection - Misleading or deceptive conduct - State legislation requiring registration of fungicides - Product sold for use as fungicide although unregistered - Circumstances under which failure to disclose information will constitute misleading or deceptive conduct - Whether obligation on respondent to spell out legal consequences of non registration to purchasers of- Effect of admission by director of respondent that failure to notify purchasers was dishonest, deceptive and misleading. - Effect of undertaking by respondents to notify position on label and to refund purchase price and freight charges to purchasers upon demand.

Trade Practices Act 1974 ss. 4(2), 52, 53(c), 55

Agricultural Standards Act of 1952 (Qld) ss.7,15, 67, 71, 83,84

Pesticides Act 1978 ss. 5, 29, 30, 31, 53, 61

Taco Company of Australia Inc. v. Taco Bell Pty. Limited (1982)42 A.L.R. 177, Happy Landings Pty. Limited v. Magazine Promotions Pty. Limited (1984) ATPR 45-312 applied.

Cundy v. Lindsay (1878) 3 App. Cas. 459, Blake v. Albion Life Assurance Society (1878) 4 C.P.D. 94, Thorne v. Heard (1895) A.C. 495, Lubidineuse v. Bevanere Pty. Limited (1984) 3 F.C.R. 1, (1985) 59 A.L.R. 334, Peek v. Gurney (1873) L.R. 6 H.L. 377, Ward v. Hobbs (1878) 4 App. Cas. 13, Barton v. The Queen (1980) 147 C.L.R. 75, Abundant Earth Pty. Limited v. R & C. Products Pty. Limited (1985) 59 A.L.R. 211 referred to.

HEARING

SYDNEY
#DATE 19:9:1985

ORDER

1. The Application be dismissed.

2. The applicants pay to the respondents their costs of the proceedings.

3. The exhibits be handed out at the expiration of 21 days, unless in the meantime a Notice of Appeal shall have been filed.
   
   NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

Counsel for the applicant: Mr T.E.F. Hughes QC and Mr D.K. Catterns.

Solicitors for the applicant: Messrs Williams Niblett.

Counsel for the respondent: Mr H.G. Fryberg QC and Mr R.N. Wensley.

Solicitors for the respondent: Messrs T.W. Biggs & Biggs.

JUDGE1

The question raised by this case is the entitlement of UIM Chemical Services Pty Limited, the first respondent, to continue to manufacture and to market a chemical composition sold under the name "m-d KP". For reasons which will appear, the respondent does not promote the sale of the product for any particular purpose but it sells in the knowledge that the only useful purpose of m-d KP is as a fungicide to control phytophthora in fruit trees and that many, if not most, of the ultimate purchasers of the composition are avocado growers in south-east Queensland and northern New South Wales. The use of the product for avocado trees is not accidental; it was developed with that purpose in mind by the second respondent, Clyde Todhunter Waugh, a qualified chemical engineer who combines his duties as a director, and manager of the technical services division, of UIM with the growth of avocados on a property near the Glasshouse Mountains north of Brisbane.

Mr Waugh said in an affidavit that, between September and December 1984, UIM received numerous enquiries from fruit growers for phosphorous acid. At about that 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. The results were widely believed to be excellent; hence the interest. Mr Waugh went on to say that many of the persons requesting phosphorous acid also requested UIM to supply caustic potash (potassium hydroxide); this being an alkaline substance intended to be mixed with the phosphorous acid partially to neutralize its acidity and to prevent leaf burning. However, the reaction of caustic potash with phosphorous acid -- or even with water -- is exothermic, that is heat producing, so that the mixing process must be carried out with care. Mr Waugh went on:

"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."

Mr Waugh added that some farmers informed him that they proposed to apply m-d KP by direct injection into the tree trunk and requested advice as to the best technique. In response, UIM produced an information sheet detailing the appropriate procedure.

The two applicants are chemical companies each ultimately owned by a French company, Rhone Poulenc S.A.. The first applicant, Rhone-Poulenc Agrochimie S.A., is the registered proprietor of two Australian Letters Patent relating to fungicidal compositions. At an early stage of the proceedings it was suggested that the respondent's product may infringe both patents but, at the final hearing, it was common ground that there existed an issue as to infringement in relation to one only of those two patents, namely no.493818. This patent is for an invention entitled "Fungicidal compositions containing phosphorous acid and its salts".

The first applicant does not exploit in Australia patent no.493818. However, the second applicant, May and Baker Australia Pty. Limited, which is also a subsidiary -- through its immediate parent, May and Baker Limited of the United Kingdom -- of Rhone Poulenc S.A., markets a product known as "Aliette". Aliette is known, and used, as a fungicide for various types of fruit crops, including avocados. UIM's product, m-d KP, is thus in competition with Aliette and, as the date of the commencement of these proceedings, m-d KP was selling at a price only about one-sixth that of Aliette.

The applicants claim that the manufacture and sale of m-d KP infringes patent no.493818. They also claim -- for quite separate reasons and by virtue of the terms of Queensland and New South Wales statutes dealing with the registration of fungicides -- that the sale at the present time of the product by the first respondent contravenes the provisions of ss. 52, 53(c) and 55 of the Trade Practices Act 1974. The applicants claim injunctions and damages.

At the commencement of the hearing I was informed by counsel that the parties were agreed that it would be convenient to try the question of damages separately from all issues of liability. By consent, pursuant to 0.29 r.2 of the Federal Court Rules, I ordered that the question of the respondents' liability be tried separately and that any question as to the quantum of any damages to be paid by the respondents, or either of them, to the applicants, or as to the taking of any account of the respondents' profits, be tried separately, and at a date to be fixed after the determination of the question of liability.

The patent claim is, temporally, the more far reaching claim. If the applicants are entitled to restrain UIM from selling m-d KP for the duration of the patent it would appear to be unnecessary to consider the more ephemeral trade practices claim. I therefore turn to it first.
The patent claim

The complete specification for patent no.493818 was lodged for registration at the Australian Patents Office on 26 November 1974. However, the application was a Convention application which had been first lodged in France exactly twelve months earlier, on 26 November 1973. This earlier date was therefore the "priority date" of the specification: see Patents Act 1952 s.142(4).

The Defence filed by the respondents put in issue the validity of Letters Patent no.493818. By their Counterclaim they sought revocation of the grant of the Letters Patent by reason of that alleged invalidity. However, at the hearing, counsel for the respondents expressly abandoned any challenge to the validity of the patent and the Court was asked to deal with the matter upon the basis that the patent is conceded to be a valid, subsisting grant.

The patent specification commences with a description of the invention in respect of which the patent was sought. This description 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 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 fertilisers, water, alcohols, ketones, petroleum fractions, chlorinated hydrocarbons and liquefied gases; and at least one ionic or non-ionic surfactant selected from the group consisting of emulsifiers, dispersants, deflocculants and wetting agents."

It will be noted that the description refers to three elements or integers: an active agent consisting of at least one compound selected from the group containing phosphorous acid, its mineral salts and its organic salts -- which active agent must be from 20% to 95% by weight of the whole; an inert support; and a surfactant.

m-d KP is a composition containing two of the mineral salts of phosphorous acid, namely 13.1% by weight of mono-potassium phosphate and 14.8% by weight of di-potassium phosphate, in a support of water. The mono-potassium phosphate is chemically bonded with the di-potassium phosphate, so as to constitute the whole a compound -- in the ordinary chemical sense of that word -- formed from the mineral salts of phosphorous acid. At first sight, it might, therefore, be thought to fall within the description of the first integer in the defined composition. The respondents deny this, for reasons to which I shall return. They admit the presence in the composition of the second integer, namely water used as an inert support, but they assert that, regardless of this fact and the correctness of their arguments regarding the first integer, the patent claim must fail because of the absence from m-d KP of the third integer, a surfactant. The applicants accept that m-d KP contains no surfactant but they contend that this does not matter. The correctness of that contention was the major question debated by the parties in relation to the patent claim.

A surfactant is a substance added to a product in order to affect the spreading, wetting, emulsifying, dispersing, deflocculating or sticking of a compound within or upon a given medium. In the case of a fungicide delivered to a plant, a surfactant is intended to improve the delivery to the plant of the active material in the fungicide; perhaps by modifying surfact tension when the composition is applied as a spray, perhaps by promoting the fine dispersion of one fluid within another, or of a solid in a fluid, perhaps by promoting or maintaining a homogenous mixture of discrete components.

At pp.20-21 of the patent specification there appears a full statement of "the claims defining the invention". Sixteen claims are composition claims, being "fungicidal compositions for controlling fungus disease in plants". The definition of each of these claims includes three integers: active material, inert material and surfactant. The definition of claim 1 includes "at least one ionic or non-ionic surfactant selected from the group consisting of emulsifiers, dispersants, deflocculants and wetting agents". The difference between claim 1 and claim 2 lies entirely in the nature of the surfactant. Claim 2 is defined as: "Compositions as claimed in Claim 1, wherein the surfactant is collected from salts of polyacrylic acids, salts of alkylaryl sulphonic acids or lignin sulphonic acids, or condensates of ethylene oxide with fatty alcohols, fatty acids or fatty amines".

Claims 3 to 16 inclusive define compositions each of which includes a surfactant; taken either from the group described in claim 1 or from the group described in claim 2. In no case is the surfactant omitted and in no case is language used - such as "whether or not containing" - to suggest that its presence or absence is to be regarded as optional or immaterial.

Claim 17 is a "method" claim which does not rise beyond whatever limitations exist in claims 1 to 16. It 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".

The case for the applicants is that the inclusion of a surfactant is not an essential element in the patent, so that the absence of a surfactant from an otherwise infringing product is not fatal to the claim for protection. They say that it is necessary to consider what was the nature of the invention in relation to which the patent was sought and in this connection they draw attention to the description of the inventive step which is set out at pp.3-4 of the specification itself. This reads:

"Organic phosphorous compounds with fungicidal properties have already been proposed. In particular, certain amino-alkyl phosphites have been described as having an interesting effect upon vine mildew. More recently, certain alkyl phosphates have been found to be active with respect to piriculariosis.

The applicants have surprisingly found that the compounds according to the invention although they have some analogy in formula they all have a common basic property. These compounds on contact with water or on diffusion into a plant release phosphorous acid, either directly or in several steps. These compounds although more simple than conventional compounds show outstanding fungicidal properties and may be used as an active material in compositions for protecting plants against fungus diseases.

It has now been found that the compounds according to the invention, although more simple than conventional compounds, show outstanding fungicidal properties and may be used as active material in compositions for protecting plants against fungus disease."

The applicants say that this passage demonstrates that the inventive step taken by the applicants for the patent was the discovery of the fungicidal effect of phosphorous acid and its salts. They point out that the description of the inventive step includes no reference to the matter of delivery of the active ingredients to the plant -- the matter with which the surfactant is concerned -- and they contend that this demonstrates the immateriality of that question.

In a later part of the specification (p.17) this passage occurs:

"For their practical application, 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 and/or a surfactant in addition to the active material according to the invention.

In the context of the invention, a support is an organic or mineral, natural or synthetic material with which the active material is associated to facilitate its application to the plant, to seeds or to soil, or its transportation or handling. The support can be solid (clays, natural or synthetic silicates, resins, waxes, solid fertilisers) or fluid (water, alcohols, ketones, petroleum fractions, chlorinated hydrocarbons, liquefied gases).

The surfactant can be an ionic or non-ionic emulsifier, dispersant, deflocculant or wetting agent such as, for example, salts of polyacrylic acids, salts of alkylaryl sulphonic acids and lignin-sulphonic acids, condensates of ethylene oxide with fatty alcohols, fatty acids or fatty amines.

The compositions according to the invention can be prepared in the form of wettable powders, dusting powders, granulates, solutions, emulsifiable concentrates, emulsions, suspended concentrates and aerosols."

It is a long established rule of patent law that the 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 his patent specification: see Clark v Adie (1875) 10 Ch.App. 667 at p.675, (1877) 2 A.C. 423 at p. 428. The protection of the patent extends against any unauthorized infringement of what is called in the cases the "pith and substance" -- or "pith and marrow" -- of the invention; even though the infringing article departs in a non "pith and substance" respect from the article described in the patent specification. The question is whether the presence in the composition of a surfactant is of the "pith and substance" of the invention the subject of patent no.493818.

The rules relevant to the determination of the ambit of protection were summarized by Gibbs J. in Olin Corporation v Super Cartridge Co. Pty. Limited (1977) 51 ALJR 525 at p.530 in this way:

"There can be no doubt that the appellant cannot succeed in establishing infringement unless it is proved that the respondents' process takes 'each and every one of the essential integers' of the appellant's claim: Rodi & Wienenberger A.G. v Henry Showell Ltd. (1969) R.P.C. 367, at p.391. The appellant in argument relied on a passage from the judgment of Dixon J. in Radiation Ltd. v Galliers & Klaerr Pty. Ltd. (1938), 60 C.L.R. 36, at p.51: 'But, on a question of infringement, the issue is not whether the words of the claim can be applied with verbal accuracy or felicity to the article or device alleged to infringe. It is whether the substantial idea disclosed by the specification and made the subject of a definite claim has been taken and embodied in the infringing thing.' Dixon J. went on, at p.52, to quote the words of James L.J. in Clark v Adie (1875), 10 Ch.App.667, at p.675: 'The patent is for 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 will 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 statements in these passages are still good law: see C. Van der Lely N.V. v Bamfords Ltd., (1963) R.P.C. 61, at p.75. However as was pointed out in C. Van der Lely N.V. v Bamfords Ltd., at pp. 78,80, 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 & Wienenberger A.G. v Henry Showell Ltd., (1969) R.P.C. 367, especially at pp. 383-384."

That summary was cited with approval by Aickin J., with whom Barwick C.J. Stephen. Mason and Wilson JJ. each agreed, in Minnesota Mining and Manufacturing Co. v Beiersdorf (Australia) Limited (1980) 144 C.L.R. 253 at p.286, his Honour commenting that:

" . . it remains the law that a defendant may not take the substance of an invention unless the wording of the claims makes it clear that the relevant area has been deliberately left outside the claim."

The principles relevant to the ascertainment of "pith and substance" were recently summarized by Lord Diplock, speaking for the House of Lords, in Catnic Components Limited v Hill & Smith Limited (1982) R.P.C. 183 at pp.242-243:

"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 (i.e. "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. A patent specification should be given a purposive construction rather than a purely literal one derived from applying to it the kind of meticulous verbal analysis in which lawyers are too often tempted by their training to indulge. The question in each case is: whether persons with 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 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 the 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 light of then-existing knowledge, the reader is entitled to assume that the patentee thought at 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 by him or others in the field of the invention might show the limitation to have been unnecessary. It is to be answered in the negative only when it 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."

Shortly after Catnic May L.J., on behalf of the English Court of Appeal, elaborated a little upon Lord Diplock's reference to the understanding of those with a practical interest in the subject matter. In Codex Corporation v Racal-Milgo Limited (1983) R.P.C. 369 at p.381 he said:

"First, therefore, we must construe the specification and claims in the present case purposively, through the eyes and minds of those skilled in the art at the material time, and not by applying to them an over-meticulous verbal analysis . . . there is no suggestion in Lord Diplock's speech" (in Catnic) "that one should look only to the essence or principle of a patent in suit and hold there to have been an infringement merely because that essence or principle has been made use of by the alleged infringer. They may have been, or there may not."

The "material time", in relation to the knowledge of those skilled in the art, is the date at which the specification speaks; in this case the priority date, 26 November 1973. The specification must be construed in the light of the relevant available knowledge at that date, "bearing in mind that what is being construed is a public instrument that must, if it is to be valid, define a monopoly in such a way that it is not reasonably capable of being misunderstood": see Populin v HB Nominees Pty. Limited (1982) 41 A.L.R. 471 at p.476.

It is common ground between the parties that -- except in relation to one method of application -- 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 exception relates to direct injection of the composition into the trunk of the plant in which case, it is agreed, there is no need for a surfactant. Under those circumstances, counsel for the respondents cross-examined two of the expert witnesses called by the applicants in relation to the state of scientific knowledge in November 1973 in respect of the treatment of fungus in plants by trunk injection. Although neither expert had had any personal involvement in the work, both witnesses indicated an understanding that fungicides had first been directly injected into the trunks of trees in Europe, and perhaps in California, in the endeavour to control the spread of Dutch elm disease. Mr. Michael Tichon, the agrochemicals technical manager of the second applicant, gave the date as being "within the vicinity" of 1980 but Mr. David Guest, a lecturer in Botany at the University of Melbourne, put the date of first use as being 1971. In re-examination he said that in 1973 the use of injection technique to administer a fungicide for Dutch elm disease was "widely known." It was not suggested that, by November 1973, there was any other experience of the injection of fungicides. Mr. Tichon said that the usual methods of administering fungicides in 1973 and 1974 were by spraying, dusting, drenching the ground and the scattering of granulets. Each of these methods usually involved the use of surfactants. Mr. Tichon mentioned a couple of products, apparently intended for mixing by the farmer himself, which may have lacked surfactants but it is clear that surfactants were at that time generally regarded as -- at least -- a highly desirable component of fungicides. As Dr. Guest explained, a surfactant was then -- and had for long been -- regarded as a necessary component to get maximum efficiency from the active ingredients in the composition.

Counsel for the applicants submit that the addition of a surfactant to a composition of mineral salts of phosphorous acid and water is not something that goes to the nature of the invention claimed by the patent specification. The essence of the invention, they say, was the discovery by the applicants for the patent of the fungicidal properties of phosphorous acid and its salts and those properties could be exploited without the addition of a surfactant. It is true, they say, that the various methods of application referred to in the specification -- spraying, scattering, powdering and soaking -- were all methods requiring the use of a surfactant but those were listed merely by way of examples of conventional methods of applying pesticides. There was no exhaustive statement of the possible methods of application and in particular the specification did not negative the use of the composition by injection. Counsel add a reference to the passage on p.17 of the specification which suggests the possibility that both the surfactant and the inert material are dispensible. They point out that -- unlike the position in relation to active material -- the specification mentions no proportion of surfactant.

It may, I think, be accepted that the presence of a surfactant in the composition in relation to which the patent claim was made involved no element of inventive step; on the contrary, it had been accepted practice for some decades prior to November 1973 that fungicides intended to be applied to plants would contain a surfactant of one kind or another. There may have been an occasional exception, in relation to "home-made" compositions, and there was recent experience in relation to Dutch elm disease which suggested the feasibility of direct trunk injection; a technique which would allow the omission of a surfactant. But direct trunk injection was very much in its infancy in 1973. There was tendered in evidence a learned article "Injection of insecticides into tree trunks -- a possible new method for the control of citrus pests?" by C.H. Buitendag and G.J. Bronkhorst. This article was published in South Africa in March 1980. It relates to the injection of insecticides, not fungicides, and is concerned to demonstrate the advantages of trunk injection over conventional spray techniques. The authors plainly regarded direct trunk injection of insecticides as a novel, even experimental, technique. I would not extrapolate from this article any conclusion about the novelty of the injection of fungicides but it is noteworthy that none of the witnesses referred to any earlier published material dealing with trunk injection techniques, whether of pesticides or fungicides. I think that the reality is that, in November 1973, little thought had been given to direct trunk injection of fungicides; the only experience being the experimental work being done on Dutch elm disease. In respect of commercial plantations, such as orchards, it appears to have been accepted without question that the only feasible techniques were spraying, dusting, drenching and the scattering of granules. These were all methods involving the use of a surfactant so that, as Mr. Tichon said, a surfactant "was generally regarded as necessary". It appears to me that this is the most likely explanation of the inclusion in each of the claims of a surfactant; the applicants for the patent simply did not contemplate the use of a fungicide without a surfactant.

Whether for this, or for some other, reason when they described (p.2 of the specification) and defined (pp.20-21 of the specification) their claims, the applicants for the patent chose to include all three integers. This is a matter of some importance. In Walker v Alemite Corporation (1933) 49 C.L.R. 643 at p.656 Dixon J. quoted the dictum of Lord Parker, in Fellows v Thomas William Leach Limited (1917) 34 R.P.C. 45 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."

His Honour went on to comment, in relation to the facts of the case then before him:

"It cannot be known, at any rate with certainty, why the draughtsman of the specification should restrict the monopoly he claimed by so definitely including in his description the manner in which the spring is confined between the closure member and the pin extending through and projecting outwardly from the walls. But in such a claim in respect of the nipple as a separate member of the whole combination, common knowledge, and even prior publication, may well have suggested the unwisdom of widening the claim so that it would not depend upon this feature, a feature to which originality might more plausibly be ascribed."

In Rodi and Wienenberger A.G. v Henry Showell Limited (1969) R.P.C. 367 at p.380 Lord Morris of Borth-y-Gest referred to the requirement of the United Kingdom legislation for a specification of the monopoly claimed (cf. s.40(1) of the Australian Act) and said:

" . . . . . if monopoly is to result it will only be for that which has been claimed. Protection will not extend to that which might have been claimed but which, when definition was requisite, was not claimed."

In the same case, at p.392, Lord Upjohn commented in similar vein to Dixon J. in Walker when he pointed out that "some claims may on a superficial reading appear to be unnecessarily circumscribed, but those who have drafted them may have done so in the light of the prior art and have rightly been fearful of claiming too much with possible adverse effects upon the validity of the claim."

It is true that, at p.17 of the specification, the applicants for the patent referred to the possible omission of a surfactant but I do not think that, in construing that document, much weight can be given to that circumstance. In the same passage they also referred to the possibility of omitting the inert ingredient, either alternatively to or cumulatively with the omission of a surfactant. If the omissions were cumulative, one would be left simply with phosphorous acid or one of its salts; but these were well known in November 1973 and a claim which included reference only to them would have lacked novelty. The situation demonstrates the wisdom of the rule against "using stray phrases in the body of a Specification for the purpose of narrowing or widening the boundaries of the monopoly fixed by the plain words of a claim": see per Lord Russell of Killowen in Electric & Musical Industries Limited v Lissen Limited (1939) 56 R.P.C. 23 at p.41. His Lordship stated the principle:

"A claim is a portion of the specification which fulfils a separate and distinct function. It and it alone defines the monopoly; and the patentee is under a statutory obligation to state in the claims clearly and distinctly what is the invention which he desires to protect. As Lord Chelmsford said in this House many years ago: 'The office of a claim is to define and limit with precision what it is which is claimed to have been invented and therefore patented' (Harrison v Anderston Foundry Co., L.R. 1 App. Cas. 574). If the patentee has done this in a claim the language of which is plain and unambiguous, it is not open to your Lordships to restrict or expand or qualify its scope by reference to the body of the specification."

It appears to me that the proper application of the principles to which I have referred requires the conclusion that the inclusion of a surfactant must be regarded as an essential element of the claim; or, to put the matter in another way, that the applicants for the patent were content to limit their statutory monopoly to compositions which included a surfactant falling within one of the specified groups. It may be conceded that the inventive step giving rise to the patent application was the discovery of the fungicidal properties of phosphorous acid and its salts; a discovery not directly related to the need for a surfactant. But, as May L.J. pointed out in Codex, the inventive step is not to be equated with the "pith and marrow" of the patent. The "pith and marrow" of the patent is the combination of essential elements in the patent, as selected and defined by the patentee himself. As Dixon J. said in Radiation, the issue is "whether the substantial idea disclosed by the specification and made the subject of a definite claim has been taken and embodied by the infringing thing". In the present case the definitions of each of the 17 claims involve three distinct elements or integers, one of which is in each case a surfactant selected from one or other of two specified groups. It is the combination of the various integers in each claim which constitutes the "substantial idea" of that claim. It may have been open to the applicants for the patent to obtain a grant of a patent in respect of a different "substantial idea", namely a composition involving only the first and second integer, but they did not do so. This is a case where, to apply the words of Gibbs J. in Olin, "the patentee has by the form of his claim left open that which the alleged infringer has done".

I am not aware of any case in which, there being a given number of clearly identified separate integers in the relevant patent, it has been held that an article which reproduces some only of those integers infringes the patent. Although no authority is cited, it is interesting to note what is said in the leading text book, "Terrell on the Law of Patents", 13th edition, 1982 at para 6.51:

"Once the claims have been construed, any infringing article or process which embodied or employed every integer of any claim as construed would infringe that claim. However the law never restricted the patentee's monopoly to the strict language of the claims so as to enable a potential infringer to avoid infringements by incorporating immaterial variations." (my emphasis)

As this paragraph makes plain, the "pith and marrow" doctrine has typically been applied in cases, of which Catnic is an example, where the alleged infringing article reproduces all integers but departs in a minor respect from the description of one of them. The reason for this limited application of the doctrine is, no doubt, the point made by Lord Diplock in Catnic: the question of the application of the "pith and marrow" principle "does not arise where the variant would in fact have a material effect upon the way the invention worked". The elimination of an integer may normally be expected to affect the way the invention worked. It does so in this case. With a surfactant the fungicidal composition is suitable for application in a variety of ways; not including injection. Without a surfactant it is suitable for application only by injection.

I do not think that it is either possible or necessary to reach a firm conclusion as to the reason why the applicants for the patent limited themselves to compositions containing a surfactant. I have already suggested that the most likely explanation is that they did not contemplate the possibility of dispensing with a surfactant. They may have been unaware of the work done on Dutch elm disease; they may have failed to appreciate its wider significance. But if the contrary assumption be made, and it be concluded that the applicants for the parties were alive to the possibility of eliminating a surfactant by the use of trunk injection, the argument for the applicants fares no better. Upon that approach the question must be asked why the applicants for the patent framed their specification so as to include, as a necessary ingredient, a surfactant. They might perhaps have omitted any reference to a surfactant; they might have made the inclusion of a surfactant an optional feature of the various compositions in relation to which they staked their claim. They did not do so, and, upon this assumption, the most probable explanation is that they feared that a composition defined only as phosphorous acid, or one of its salts, with one of the nominated inert substances would be held to lack novelty. There was, after all, no novelty about mixing phosphorous acid with water. By contrast, it was novel to add to such a mixture a surfactant suitable to its delivery as a fungicide. But, however this may be, the fact remains that, "when definition was requisite", the applicants for the patent chose to restrict themselves to compositions which included a surfactant. The protection granted by the patent they gained extended only against such compositions. As m-d KP does not contain a surfactant, the first respondent does not, in marketing that product, infringe patent no. 493818.
In view of this conclusion I need do no more than note the submission of the respondents that the active ingredient in m-d KP does not fall within any of the various definitions of the first integer in the composition. There are three aspects to the submission. Firstly, the respondents submit that m-d KP does not contain a "compound" from the nominated group. They refer to the descriptions in the specification of the various compounds which were tested. Those compounds are fully bonded chemicals (mineral bonded to phosphate) in crystalline or powder form; this, it is said, is what the specification means by a "compound" and it is to be contrasted with m-d KP which is 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 -- containing a variety of ions. It is said, therefore, that, whatever its constituents, m-d KP is simply a dilute solution of potassium ions, phosphite ions, hydroxyl ions and hydrogen ions, containing neither phosphorous acid nor one of its salts. Secondly, and this is perhaps merely a variant upon the first submission, the respondents point to evidence both of Mr Tichon and Mr Waugh that it is the phosphite ions in m-d KP which carry out the fungicidal activity; from which it is said that there is no "active ingredient" which answers the description of phosphorous acid or one of its salts. Finally, counsel refer to the evidence of Dr Doreen Clark, a consulting analytical chemist who analysed m-d KP on behalf of the applicants, that the phosphite content of the composition is less than 20% by weight. Mr Waugh says that it is about 16.7% by weight. There is not, therefore, they say an active ingredient having a weight of not less than 20% of the whole.

Finally, in relation to the patent claim, the respondents contend that, even if it were established that m-d KP infringes patent 'no. 493818, the Court should, in the exercise of its discretion, refuse injunctive relief. The first applicant, the present holder of the patent, has not exploited the patent in Australia for many years; if at all. There is no evidence to suggest that it intends to do so in the future. In these proceedings, counsel say, the applicants are attempting to use the patent to protect from competition Aliette; a product which does not answer any of the composition descriptions of the patent but which happens to be marketed by an associated company to serve the same market need. This is, it is suggested, an attempt to use for an extraneous purpose the provisions of the Patents Act; an abuse said to be exacerbated by the consequences that orchardists would be compelled to pay considerably more for their fungicide and that the interests of a small Australian company would be sacrificed to those of a multi-national conglomerate.

I should say immediately that I do not regard the last stated circumstance as being relevant to the exercise of the Court's discretion. It may be proper to take into account the social and economic effects of an injunction; for example, its effect upon local employment. But it would not be proper to be influenced by the personalities involved; all persons are equal before the law. The other matters mentioned by counsel are more arguable.

There is no doubt that the Court has a discretion whether to grant an injunction to restrain an infringement of a patent. Section 118 of the Patents Act provides that the "relief which a court may grant in an action or proceeding for infringement of a patent includes an injunction (subject to such terms, if any, as the court thinks fit) . . . ". Section 23 of the Federal Court of Australia Act 1976 empowers the Court "to make orders of such kinds . . . as the Court thinks appropriate". It is well established that the fact that particular relief is discretionary entitles a court to withhold that relief in a case where a grant of relief would inflict hardship upon a defendant without benefit to the plaintiff; see, for example, Leader v Moody (1875) L.R. 20 Eq. Cas. 145 at p. 154. But there appears to be an absence of authority upon the question whether a court is justified in refusing relief upon discretionary grounds, being relief which would benefit the plaintiff but for reasons extraneous to the purpose for which the entitlement to relief is granted. Similarly it is not clear to what extent a court will be justified in considering the interests of third parties, such as the orchardists in this case, in determining the proper exercise of its discretion. The question is discussed, in relation to equitable relief generally, in Spry "Equitable Remedies" (1971) at pp.186-188 but the only decisions of which I am aware in relation to the interests of third parties in patent cases are confined to the matter of suspension of an injunction pending appeal: see Leeds Forge Company Limited v Deighton's Patent Flue and Tube Company Limited (1901) 18 R.P.C. 233 at p.240; Bonnard v London General Omnibus Company Limited (1919) 36 R.P.C. 309 at pp.325-326. As it seems to me, it is arguable that a combination of the circumstances that the injunction is being sought to protect an interest other than the applicant's interest in maintaining his patent monopoly and that the grant of any injunction will visit an extra burden on third parties may well furnish a discretionary basis for refusing the grant of an injunction. On the other hand it may perhaps be said that if a patent is not being exploited, under circumstances in which the reasonable requirements of the public with respect to the patented invention are not being satisfied, the proper course for a court to take is to restrain infringement and remit the infringer to an application for the grant of a compulsory licence: see Patents Act ss.108-112 and Fastening Supplies Pty Limited v Olin Mathieson Chemical Corporation (1969) 119 C.L.R. 572. In the event, it is not necessary for me to resolve this question. The claim of infringement of patent fails.
Trade Practices

There is legislation both in Queensland and in New South Wales relating to the registration of fungicides. The Queensland statute is the Agricultural Standards Act of 1952. A key concept in that Act is that of an "agricultural requirement"; a term defined by s.7 so as to include "pest destroyer". The term "pest destroyer" is itself defined in the same section so as to include "fungicide". That word is, in turn, defined as meaning, subject to any contextual indication to the contrary: "any material used or intended for destroying or preventing the attacks on plants . . . of fungi or other parasitic plants or bacteria which affect or which may affect such plants . . . ". "Plant" is defined to include any tree.

It is clear, from the evidence of Mr Waugh, that m-d KP is both intended to be used and is in fact used for the purposes of destroying or preventing the attacks on fruit trees of fungi or other parasitic plants or bacteria which may affect such trees. It follows that the composition is an "agricultural requirement" within the meaning of the Queensland Act.

Part III of the Act applies, inter alia, to "pest destroyers". It provides for the registration of agricultural requirements to which the Part applies. Section 15, which is within Part III, 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 "sell" must be widely interpreted. By s.7 the word "sale" is defined 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". It is clear that the respondents have carried out numerous actions which fall within one or other of the limbs of this definition and, as it is admitted that m-d KP is not yet registered under the Act, it follows that there have been numerous contraventions of s.15. Until registration is achieved each further sale will constitute a further contravention of the section. A contravention of s.15 is punishable as an offence (s.83) and the relevant agricultural requirement is liable to forfeiture (s.84).

Part VIII of the Act relates to inspection, sampling and analysis. Section 67(1) confers power upon inspectors, inter alia, to "seize and detain 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 . . .": see para.(v). Section 71(2) provides for forfeiture, under certain circumstances, of seized goods.

The applicants argue that s.67(1) is sufficiently broad to empower inspectors to seize an agricultural implement which has been sold in contravention of s.15. They say, therefore, that the consequence of the sale by the respondents of m-d KP prior to the registration of the product under the Act is to expose the purchaser to the risk that the product will be seized from him and subsequently forfeited. I do not find s.67(1)(v) easy to construe but I propose to proceed upon the assumption that this submission as to its effect is correct.

The relevant New South Wales legislation is the Pesticides Act 1978. Section 5 of that Act defines "pesticide", subject to any contrary indication and subject to certain exceptions not presently relevant, as including "any substance . . . that is manufactured, represented, sold or used as a means for directly or indirectly . . . 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 III 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(1)(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. It is provided by s.61 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. It follows 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.

The evidence shows that the authorities concerned with the administration of both of the relevant State Acts are aware of the fact that m-d KP is already being sold and that it is used as a fungicide. UIM commenced to manufacture the product on 31 January 1985. The company made no application at that time for registration of the product as an agricultural requirement; although Mr Waugh did have conversations with an officer of the plant pathology section of the Department of Primary Industries, the Queensland Government department which administrates the Agricultural Standards Act. On 28 February 1985 - acting in response to complaints made by May and Baker - two different officers of the Department visited the premises of UIM in Brisbane and had a conversation with Mr Waugh. They were Mr Alan Graham, an assistant inspector employed in the agricultural standards branch of the department, and Mr J.C. Clem, a senior technologist. In the words of Mr Waugh, they "called on me to see what was happening with m-d KP." Mr Waugh was circumspect about his activities in connection with the product but a lengthy conversation ensued during which, according to Mr Clem, Mr Waugh admitted that his company sold m-d KP to people who wished to buy it and that he knew that purchasers used it as a fungicide. He said that he made no claims for the product and that he did not actively promote its sale. According to Mr Waugh - and his evidence was corroborated in substance by that of Mr Clem - Mr Graham told him, in effect, that if U.I.M. proceeded quietly without actively engaging in promoting the product "they" (the department) "were happy that we were selling a simple chemical, and the situation would be all right."

On 12 April 1985 the applicants moved in these proceedings for an interlocutory injunction. During that hearing the respondents offered an undertaking to the Court that, between that date and the final hearing, the product would be distributed to purchasers only in containers bearing a label indicating that the product was not registered under the relevant State legislation. That undertaking was accepted by the Court, on an interim basis and pending the final hearing. Pursuant to that undertaking the form of label previously used by UIM upon the containers was amended to include the following words: "Not a registered fungicide, pesticide or agricultural requirement". Shortly after the interlocutory hearing, on 24 April 1985, Mr Waugh saw Mr Graham and showed him the new label. Mr Graham said "Well, that is satisfactory", or words to similar effect. Once again something was said by Mr Graham to the effect that it was all right for UIM to sell m-d KP" so long as it was not promoted."

Two weeks before the commencement of the final hearing, on 17 June 1985, Mr Waugh telephoned Mr Graham in order "to find out whether there has been any change in the thinking of the standards branch". According to Mr Waugh, Mr Graham said that his department "is not convinced that m-d KP is an agricultural requirement". Mr Graham added that the department had "requested a point of view from New South Wales some time ago" but that there had been no answer. This was apparently still the position at the time of the hearing. Mr Clem expressed the opinion in his evidence that, having regard to the current branch policy, the risk of seizure of the product from a purchaser "would be nil".

During cross-examination, Mr Clem was pressed with the suggestion that his department's handing of the investigation into the complaint by May and Baker lacked vigour. It is not necessary for me to deal with that suggestion. The material matter is that it is apparent that the Queensland department has known for several months of the sale of m-d KP and of its use as a fungicide. It has not elected to take any action in relation to that sale or use, either against UIM or against a purchaser. Moreover, according to what was told to Mr Waugh by Mr Graham, the New South Wales authorities are aware of the position; but they also have elected to take no action. It seems likely that Mr Clem's assessment of the prospect of seizure will prove correct.

In noting the above matters I express no criticism of either government department. The law does not impose upon any person an obligation to prosecute any offence of which he or she becomes aware. Even a person having a statutory function of prosecuting offences retains a discretion as to whether proceedings will be instituted in any particular case: see Barton v. The Queen (1980) 147 C.L.R. 75 at pp 93-94, Edwards "The Attorney General, Politics and the Public Interest (1984) Chapter 13. I find puzzling the reported position of the Queensland department, as appearing from Mr Waugh's account of the telephone conversation of 17 June, but there may be other reasons for non-prosecution of which I am unaware. There is no suggestion in the evidence that m-d KP is an unsafe or unhealthy product. The evidence of Mr Tichon is that registration under the State Acts is achievable only after a protracted process involving approval by various committees at the federal level followed by consideration by the State authorities. Although such a situation may be thought less than desirable, it is not difficult to understand that there may be occasions upon which the State authorities, being satisfied that a product fulfills a legitimate need and that it has no unacceptable effects, elect not to take action to inhibit its distribution. Whether this is in fact the situation in the present case I do not know. I merely say that the absence of action to enforce the two State Acts does not, of itself, justify criticism of the authorities charged with their enforcement.

However these matters may be, 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 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.

The applicants contend that, however theoretical these risks may be, the sale by UIM of m-d KP as a fungicide at a time when the product is not registered in the State of sale and/or proposed use constitutes conduct by that corporation, in trade or commerce, that is misleading or deceptive or is likely to mislead or deceive and is, therefore, in breach of s.52 of the Trade Practices Act. They say that the non-disclosure to purchasers of the status of the product and of the risk of its seizure from purchasers - and, in New South Wales, the risk of prosecution for use - amounts to deceptive and misleading non-disclosure. They refer to s.4(2)(a) and (c) of the Trade Practices Act, to the terms of which I shall return.

Mr Waugh was at all material times aware that m-d KP was being purchased by persons intending to use the composition as a fungicide. He knew of no other use for the 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. Mr Waugh denied knowledge, prior to the interlocutory hearing on 12 April, of those provisions of the Act which enabled seizure of unregistered fungicide from purchasers. I accept Mr Waugh's evidence as to his knowledge of the position but, of course, if UIM's conduct did constitute misleading or deceptive conduct, it would be no answer that the company did not appreciate the extent of the risk imposed upon its customers by that conduct. As Gibbs C.J. said in Parkdale Custom Built Furniture Pty Limited v Puxu Pty 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: see Hornsby Building Information Centre v Sydney Building Information Centre (1978) 140 C.L.R. 216 especially per Stephen J. at p.228. And, in any event, Mr Waugh has appreciated since April the full extent of the risks theoretically run by his customers but he has not, or at least has not always, spelt out those risks to them when making sales. If it be misleading or deceptive conduct for UIM to sell m-d KP without informing purchasers of the full extent of the possible risks to them, the applicants' case is made out. If, upon the other hand, there is either no obligation - in terms of avoiding misleading or deceptive conduct - to inform purchasers that the product is unregistered under State law, or, alternatively, no obligation to spell out the legal consequences of that circumstance, the company is not acting in contravention of s.52. The critical question, then, is the extent of any positive obligation cast upon the company, for the avoidance of misleading or deceptive conduct under the circumstances of this case, in relation to the giving of information to purchasers of the product.

During the cross-examination of Mr Waugh, counsel for the applicants procured from that witness a number of admissions on behalf of UIM as to the quality of the company's conduct. Mr Waugh said that he had given warnings to some purchasers about the risk of seizure and forfeiture but that he could not guarantee that a warning had been given to each and every one of them. The cross-examination proceeded:

Q. "And not to give a warning to each and every purchaser is dishonest, is it not? A. Yes, sir.

Q. "And deceptive? A. Yes.

Q. "And misleading is it not? A. And misleading."

Understandably, counsel for the applicants seize upon these admissions as conclusively establishing the case against U.I.M. in relation to contravention of s.52. I do not think that the matter may be so easily resolved. I make no comment about the issue of commercial morality involved in Mr Waugh's answer to the question relating to dishonesty but the determination of the question whether the company has engaged in misleading or deceptive conduct involves a legal conclusion based upon an assessment of that conduct in the course of whatever obligation of disclosure was in the circumstances required. In the course of considering the evidence of witnesses in relation to the question whether they had been misled by the respondent's conduct, in Happy Landings Pty Limited v. Magazine Promotions Pty Limited (1984) ATPR 45-312 at p. 45-314, Lockhart J. said:

"Ultimately, it is for the Court to determine whether the respondent's conduct contravenes the consumer protection provisions of the Trade Practices Act, and the evidence of attitudes or views of members of the public in the present case is of limited assistance."

The same goes for evidence, even by a principal of the respondent, as to the legal quality of the respondent's conduct. However significant may be an admission as to the particular actions or omissions of the respondent, it is for the Court to determine whether those actions constitute misleading or deceptive conduct.

It is not suggested on behalf of the applicants that the mere fact that the sale of m-d KP as a fungicide constitutes a breach of State law renders that sale conduct in contravention of s.52 of the Trade Practices Act. Such a proposition would be clearly untenable. There may be occasions upon which a particular act or omission will constitute both a breach of State law and a contravention of s.52 but they will probably be rare. There may be cases, and this is argued to be one of them, when the situation under State law is relevant to the question whether given conduct is misleading or deceptive. But the evidence must show that, irrespective of whether or not there has been a breach of State law, the respondent has engaged in misleading or deceptive conduct.

In support of their argument that the conduct of U.I.M. contravened s. 52 of the Trade Practices Act, counsel for the applicants refer to s. 4(2) of the Act. That subsection relevantly provides:

"4(2) In this Act -

(a) a reference to engaging in conduct shall be read as a reference to doing or refusing to do any act, . . .

(b) . . .

(c) a reference to refusing to do an act includes a reference to -

(i) refraining (otherwise than inadvertantly) from doing that act; or

(ii) making it known that that act will not be done; . . .

The effect of these provisions is that - by their operation - an omission to do an act may constitute "engaging in conduct"; but only where the omission is such that it may properly be described as "refusing to do", or deliberately refraining from doing, an act. "Refuse" and "refrain" suggest that the omission must be the result of a deliberate decision. The relevant act, the omission of which is here complained of, is either the notification to prospective purchasers of the fact that m-d KP is not registered or, alternatively, the notification to them of both that fact and the legal liabilities flowing from it. In neither case is there any evidence of a refusal or deliberate refraining by UIM from doing the act. True it is that it commenced selling the product in containers whose labels made no reference to the fact of non-registration but I do not think that there was any deliberate decision not to disclose. There is nothing to indicate that the possibility of taking that course occurred to Mr Waugh before the interlocutory hearing. When it was then suggested, counsel for the respondents promptly indicated their instructions that the respondents "would be agreeable to giving any reasonable form of warning on the label, if that were thought appropriate by the Court". 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 to the legal consequences 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 the relevant acts.

I accept 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. He conceded that he did not inform all purchasers but there is nothing to indicate that this failure flowed from a deliberate decision not to supply that information. He says that any omissions were inadvertent and there is no reason to conclude otherwise. A deliberate decision not to inform some purchasers would have been inconsistent not only with his disclosures to others but also with his attitude to the suggestions made in court regarding disclosure on the labels. Upon the facts, the expanded definition of the phrase "engage in conduct" which is provided by s. 4(2) does not assist the case for the applicants.

Notwithstanding that conclusion, it remains to be considered whether the failure of UIM to disclose the position constitutes, under the circumstances, misleading or deceptive conduct. If it does, it does not matter that the failure was not deliberate. In Taco Company of Australia Inc. v. Taco Bell Pty.Limited (1982) 42 A.L.R. 177 AT p.202 Deane and Fitzgerald JJ said:

"Irrespective of whether conduct produces or is likely to produce confusion or misconception, it cannot, for the purposes of s.52, be categorized as misleading or deceptive unless it contains or conveys, in all the circumstances of the case, a misrepresentation."

Ordinarily a misrepresentation will be conveyed by a positive statement, made orally or in writing. But there may be misrepresentation by conduct. For example, a person may by his actions falsely suggest an association with (Cundy v. Linsay (1878) 3 App. Cas. 459), or independance from (Blake v. Albion Life Assurance Society (1878) 4 C P.D.94), some other person. A person may fraudulently suggest that a mortgage continues to exist, though the property upon which it was security has been sold, by paying to the mortgagee the interest which would be due under the mortgage: see Thorne v. Heard (1895)A.C. 495 at p.506. In such a case there are really two elements in the wrongdoing: behaviour calculated to cause the representee to come to a particular conclusion - for example that the mortgage continued to subsist - together with a failure to disclose the true position.

Halsbury "Laws of England" 4th ed. Vol 3 para 1050 identifies" two main classes of case" in which silence may constitute, or contribute to, actionable misrepresentation: where known material qualifications of an absolute statement are omitted; and 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. As to the first, there must be an express statement which is rendered inaccurate by reason of the omission of necessary qualifications or other material. As to the second, the duty may arise because - to the knowledge of the representor - incomplete and potentially misleading information has been given by him or upon his behalf to the representee. The duty also will arise where, the representation being continuous, the circumstances have changed; so that a statement which was true when it was made is no longer true. The facts of the recent case of Lubidineuse v. Bevanere Pty Limited (1984) 3 F.L.R. 1, (1985) 59 A.L.R. 334 furnish an example of that situation, in the context of s.52 of the Trade Practices Act; although in that case it was not necessary to consider the nature of the duty because it was not denied that a failure to reveal the changed circumstances would constitute misleading conduct. In a case where a failure to disclose information does amount to misleading or deceptive conduct it is immaterial whether the relevant corporation refused disclosure, or refrained otherwise than inadvertently from disclosing. Misleading or deceptive conduct being established, resort to s.4(2) is unnecessary.

Subject to the above - and excluding cases in which there is a positive duty of disclosure arising out of the position of the parties or the fact that the transaction is uberimmae fidei - mere silence or inaction, however morally reprehensible it may be, does not constitute misrepresentation: see Halsbury para 1053 and authorities cited therein, noting especially per Lord Cairns in Peek v. Gurney (1873) L.R. 6 H.L. 377 at p. 403. Equally, as it seems to me and applying Taco, such silence cannot constitute misleading or deceptive conduct within the meaning of s.52.

The critical question in the present case is whether there exist circumstances such that it may be concluded that the non-disclosure has resulted, or will be likely to result, not merely in confusion, or in a misconception, by potential purchasers but in a misrepresentation to them of some relevant matter.

I do not think that the present facts fall within either of the two classes of case identified by Halsbury. No complaint is made of the inadequacy of any response to a question asked by, or on behalf of, any potential purchaser. Nor is this a case where incorrect information has been given which it is the duty of UIM to correct. Even if, as I think, it should be held that the effect of the label adopted by the company was to convey to some potential purchasers that the product was intended to be used, and was in fact chemically suitable for use, as a fungicide, those were not incorrect statements. I think that the real question in the case is whether the marketing of m-d KP as a fungicide constitutes a misrepresentation by conduct that the product is registered as such. I refer to the marketing of m-d KP as a fungicide notwithstanding that, at no time, has the label adopted by UIM stated that the product is sold, or is intended for use, as a fungicide. The word is in fact not mentioned on the label except in the context of the statement that the product is not a registered fungicide. Nonetheless the marketing methods adopted by the company - low-key as they have been to date - are likely to convey, at least to a proportion of potention purchasers, that the product is to be regarded as a fungicide. The labels bear pictures of four different types of fruit trees, suggesting that this product, which is described on the labels as "mono-di potassium phosphite" is useful in relation to such trees. Those who are aware that mono-di potassium is a solution of phosphorous acid and potassium hydroxide would be likely to know of its fungicidal properties and to deduce that it was intended to control fungus on the illustrated trees. Others may have been told by someone, whether on behalf of UIM or otherwise, of the use to which the product may be put. This must be UIM's expectation. The instruction sheet issued by the company, which illustrates the various recommended methods of application of the product to trees, assumes that the reader knows the purpose of that application.

The legal principle that everyone must be taken to know the law is a rule of practical convenience having no relationship to reality. It would be quite wrong to make the assumption that in fact every potential purchaser would be aware of the existence and content of the relevant State legislation. But, although there was no evidence upon the matter, it is likely that some potential purchasers would be aware of the existence, and possibly of the basic elements, of such legislation. 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 registered. 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.

This is not a case where the behaviour of the respondent, said to constitute the misrepresentation, points unequivocally in a particular direction; so that it may be said that, in the absence of a verbal disclosure, the behaviour itself amounts to an untrue assertion of fact. Fraud apart, payments of interest due under a mortgage would be made by persons charged with the collection of that interest only if the mortgage continued in operation and interest had been paid thereunder. But the marketing of a product required by law to be registered does not unequivocally proclaim that the product is in fact registered. That action is consistent with other possibilities, including ignorance of the law, a misunderstanding as to its application and a decision by UIM to defy the law.

The only case, of which I am aware, in which it has been argued that the failure of a defendant to reveal his non-compliance with a statutory requirement constituted a misrepresentation is Ward v. Hobbs (1878) 4 App. Cas. 13. In that case the respondent sold to the appellant, at a public market, pigs suffering from typhoid fever. There were circumstances to indicate that he knew or ought to have known that the pigs were diseased. The sale was made "with all faults". The appellant argued that this condition did not exclude liability because there had been a misrepresentation. There existed a statute, the Contagious Diseases (Animals) Act, under which it was an offence to send to a public place animals having at the time an infectious or contagious disease. It was argued, therefore, that the respondent, from the mere act of sending his pigs into a public market and being assumed to be aware of the law, must be taken as representing that he was complying with the law, that is that the pigs were not tainted with any infectious or contagious disease. The House of Lords rejected this argument. A major reason for that rejection was the existence of the exclusion in the contract, but one member of the House, Lord O'Hagan, would have rejected the argument even in the absence of that condition: see p.25. Lord Selborne, at p. 209, made the general comment: "To say that every man is always to be taken to represent, in his dealings with other men, that he is not, to his knowledge, violating any statute, is a refinement which . . . would not I think appear reasonable to any man."

The applicants go further than to contend that the fact of non-registration should have been disclosed to potential purchasers. They say that UIM should have informed such persons of the legal consequences of that position, warning them of the possibilities of seizure and forfeiture and - in New South Wales - of prosecution if the product was used. I do not see any basis for that argument. I am not aware of any case in which failure to spell out the legal consequences of a fact has been held to be a misrepresentation or to constitute misleading or deceptive conduct. An active misrepresentation of the relevant law may attract liability but it would be extraordinarily onerous to require that a person who offers for sale a product, or who enters into negotiations with another, must inform the other of the legal liabilities and risks which he may incur if he purchases or uses the product or concludes an agreement. In my view the sale by UIM of m-d KP as a fungicide without the disclosure to all purchasers - prior to April 1985 - of the fact of its non registration and the failure of the company to inform all purchasers of the legal results of that fact do not constitute the engaging by the company in misleading or deceptive conduct in contravention of s. 52 of the Trade Practices Act.

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. The trade practices part of the applicants' claim must also be dismissed.

I should say that if, contrary to my view, the marketing of m-d KP as a fungicide without any disclosure of the fact of non-registration did amount to a misrepresentation, and therefore to engaging in misleading or deceptive conduct, it would nonetheless be proper to refuse injunctive relief in relation to that conduct. Since shortly after the interlocutory hearing UIM has followed the practice of disclosing, by appropriate wording on its label, the fact of non-registration. That practice was adopted pursuant to an undertaking given to the Court at that hearing. A renewal of the undertakings was offered at the final hearing; the respondents being prepared to spell out upon one label, in a form approved by the Court, the consequences of non-registration. Moreover, 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 only to 30 day credit customers, by debiting their accounts, and to make a full refund both of the purchase price and any freight costs to any customer who returned the goods within 14 days of delivery. The adoption of such procedures will not always be effective to eliminate the possibility of a customer being misled or deceived; see Abundant Earth Pty. Limited v. R.& C Products Pty. Limited (1985) 59 A.L.R. 211 and the cases referred to theein at p. 217. However, having regard to the identity of the present 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. It would be for the purchaser to decide whether to take the risk of buying, and retaining, the product. Under those circumstances it would have been appropriate to dispose of the trade practices claim by accepting the undertakings offered by the respondents at the final hearing.

The application should be dismissed with costs.