Ballance Agri-Nutrients Limited v Quin Environmentals (NZ) Limited
[2020] NZHC 1885
•31 July 2020
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2018-404-002438
[2020] NZHC 1885
BETWEEN BALLANCE AGRI-NUTRIENTS LIMITED
PlaintiffAND
QUIN ENVIRONMENTALS (NZ) LIMITED
Defendant
Hearing: 15, 16, 17, 18, 19, 22 June 2020 Appearances:
J Edwards and P E Coulter for Plaintiff
P F Dalkie and D A Watson for Defendant
Judgment:
31 July 2020
JUDGMENT OF VENNING J
This judgment was delivered by me on 31 July 2020 at 3.30 pm, pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date……………
Solicitors: Russell McVeagh, Auckland
McDonald Law, Auckland Counsel: P Dalkie/D Watson, Auckland
BALLANCE AGRI-NUTRIENTS LTD v QUIN ENVIRONMENTALS (NZ) LTD [2020] NZHC 1885 [31 July 2020]
TABLE OF CONTENTS
Introduction [1]
The parties and their claims [3]
The issues [8]
The regulation of the sale of fertiliser in New Zealand [9]
The Fertmark Code classification for RPR [16]
Quin’s importation of Algerian phosphate rock [20]
Red herrings – irrelevancies [31]
Control of the FQC [32]
Ballance’s Hi P RPR [36]
Sampling of the Quin Product [38]
The Watkinson Dissolution test [40]
Criticism of the Citsol Test [45]
What is RPR and is Algerian phosphate rock a RPR? [50]
Summary – What is a RPR? [67]
Does RPR have a particular meaning in New Zealand? [71]
Is Quin’s marketing of its Algerian phosphate rock as Algerian RPR and/or as having phosphorous levels of at least 30 per cent citric
solubility misleading as alleged? [113]
Fair Trading Act [113]
Summary – Plaintiff’s case [148]
Counterclaim [156]
Result/orders [163]
Costs [164]
Introduction
[1] New Zealand soils are typically naturally acidic and low in phosphate and sulphur. The majority of New Zealand farmers supplement the soil’s natural nutrient levels with fertiliser to improve its production potential. For a number of years superphosphate containing both phosphate and sulphur was the most widely used fertiliser.
[2] An alternative to superphosphate is reactive phosphate rock (RPR). RPR is a slow release natural phosphate fertiliser that breaks down in the soil over time. RPR has a number of benefits. It does not need any prior acid treatment or to be ground into a powder prior to application. As it gradually releases phosphate over time, there is less leaching and run-off associated with it, which is better for the environment.
The parties and their claims
[3] Ballance Agri-Nutrients Limited (Ballance) and Quin Environmentals (NZ) Limited (Quin) both market and sell fertiliser, including phosphate rock, to farmers and fertiliser wholesalers and retailers. Ballance currently imports its phosphate rock from Sechura in Peru. Quin imports its phosphate rock from Algeria.
[4] The New Zealand Fertiliser Quality Council (FQC) has established a Fertmark certification scheme and Fertmark Code of Practice (Fertmark Code) to set standards for fertiliser sold in New Zealand. The Fertmark Code provides that for phosphate rock to be approved as a RPR it must contain a minimum of 30 per cent phosphorous being soluble in 2 per cent citric acid (the Citsol Test).1
[5] Ballance alleges that Quin has engaged in conduct that is misleading or deceptive or is likely to mislead or deceive in breach of the Fair Trading Act 1986 (the Act) in marketing its phosphate rock as RPR when it does not meet the Citsol Test. Ballance alleges Quin’s marketing would lead purchasers of its product to believe it was a RPR as defined in the Fertmark Code. Ballance seeks a declaration that Quin has breached the Act and a permanent injunction restraining Quin from publishing or distributing marketing material that represents its Algerian phosphate rock as meeting the Citsol Test or that it is a RPR. Ballance does not seek damages. It says it brings the proceedings as a matter of principle and to maintain the integrity of the Fertmark Code.
[6] Quin denies its conduct is misleading and deceptive. It says its Algerian phosphate rock meets all relevant tests for a RPR except the Citsol Test. It is properly described as a RPR. Quin also says Ballance cannot establish that the FQC has appropriated the term RPR to itself in New Zealand. Further, farmers and other purchasers of the Algerian RPR are not misled into believing it meets the Fertmark test.
[7] Quin counterclaims and alleges Ballance’s product Hi P RPR is not a natural RPR product because it is a blend. Quin says by marketing and selling Hi P RPR as a
1 In this judgment the Citsol Test refers to the 30-minute Citsol Test prescribed by the FQC.
RPR, Ballance is itself engaging in conduct that is misleading or deceptive or is likely to mislead or deceive. It seeks a declaration that Ballance’s conduct contravenes the Act and a permanent injunction restraining Ballance from marketing its Hi P RPR as a RPR.
The issues
[8]The principal issues in this case are:
(a)What is a RPR and is Algerian phosphate rock a RPR?
(b)Does the term RPR have a particular meaning in the New Zealand fertiliser market?
(c)Is Quin’s marketing of its Algerian phosphate rock as Algerian RPR and/or as having phosphorous levels of at least 30 per cent citric solubility misleading as alleged?; and
(d)Is Ballance’s product Hi P RPR a RPR?
The regulation of the sale of fertiliser in New Zealand
[9] Before addressing the main issues, some more background is necessary. The Fertilisers Act 1982 was repealed in November 1997.2 The Fertilisers Act had provided a definition for fertiliser, standards for fertiliser use in New Zealand and auditing requirements.
[10] Prior to and leading up to the repeal of the Fertilisers Act, Federated Farmers of New Zealand Incorporated (Federated Farmers) took the initiative to establish the FQC and the Fertmark certification scheme. In addition to Federated Farmers, major industry operators, including Southfert Limited (now Ballance) and Ravensdown Fertiliser Co-Operative (Ravensdown), were involved in establishing the FQC. Both Ballance and Ravensdown are farmer led co-operatives.
2 Agricultural Compounds and Veterinary Medicines Act 1997, s 86(1).
[11] The FQC operates through an executive committee forum and an operations and administration team. The FQC members include four members from Federated Farmers and one member from each of:
(a)Horticulture New Zealand (Inc);
(b)NZ Institute of Primary Industry Management (Inc);
(c)New Zealand Groundspread Fertilisers Association (Inc);
(d)Aviation Industry Association of New Zealand represented by New Zealand Agricultural Aviation Association;
(e)Fertiliser Association of New Zealand (Inc); and
(f)the Chairman of the FQC.
[12] The FQC administers the Fertmark Code and ultimately makes decisions on the changes to it. The Fertmark Code provides for the use of the Fertmark trademark and establishes a code of conduct. A product which conforms to the description of a fertiliser in the Agricultural Compounds and Veterinary Medicines Act 1997 and meets the Fertmark product classifications standards is eligible for Fertmark certification and, if licensed, can use the Fertmark Tick.
[13] While the Agricultural Compounds and Veterinary Medicines Act defines agricultural compounds broadly, the objectives of the Fertmark programme are more specific. They are stated to include:
To give consumers confidence in fertiliser quality and product advertising.
[14] The Fertmark Code is best described as providing voluntary industry standards. It also prescribes product classifications, and provides for an auditor protocol, industry agreed test methods, and sample and trial protocols.
[15] In May 2000, the Ministry of Agriculture and Fisheries wrote a letter to “recognise” the Fertmark Code as an appropriate guide for the fertiliser industry.
The Fertmark Code classification for RPR
[16] The stated purpose of the product classifications section of the Fertmark Code is to “protect the existing meanings of terms used in the fertiliser and farming industries”. Where it is intended to describe a product using a name in the table of Fertmark product classifications, the product must conform to the appropriate description and quality standard.
[17]The product classification under the Fertmark Code for RPR is:
Name of Material
Meaning
Declarations
Reactive phosphate rock for direct application (RPR) Soft mineral phosphates
containing not less than 10% total phosphorous (soluble in
mineral acids), at least 30% of the declared total phosphorous being soluble in 2% citric acid
Total P.
P soluble in 2% citric acid.P soluble in 2% formic acid by weight.
Amounts of material as a percentage by weight that will pass through a sieve with a mesh of 1.0 mm and 500 microns.
Total Ca.
[18] The FQC has approved and applied the Citsol Test for the product classification of RPR in New Zealand. In brief, the Citsol Test measures the amount of phosphate that can be extracted from a solution of 2 per cent citric acid mixed with a fixed quantity of phosphate rock. The citric soluble phosphorous percentage is divided by the percentage of total phosphorous that is contained in the rock and then multiplied by a 100 to give a percentage score.
[19] The Fertmark Code provides that testing for RPR must be done on an as received representative sample basis and the values declared must be provided on an as delivered basis, in other words, in rock form rather than ground up. Further, the agreed reference test method for the Citsol Test is a 30 minute “shake” test.3 To meet the Fertmark product classification as a RPR, the phosphate rock must be shown to contain 30 per cent phosphorous (P) by the 30-minute Citsol Test.
3 The Fertmark Code of Practice, cl 2.8.
Quin’s importation of Algerian phosphate rock
[20] During 2018, Quin imported Algerian phosphate rock and began marketing it in New Zealand as RPR. The first shipments were in bulk containers between May and June 2018. They were of 100 to 250 tonnes. Quin proposed to supply some to Mr Harold of Fert Wholesale Direct Limited (Fert Wholesale) and some to Mr Sisson of Marsden Agri. Quin then imported a bulk shipment of 15,000 tonnes in July 2018. Ballance initially obtained samples of the Algerian phosphate rock from Mr Sisson. The samples Ballance tested of the Algerian phosphate rock did not meet the 30 per cent P standard using the Citsol Test.
[21] The tests carried out for Mr Sisson conducted using the Citsol Test returned results of 27.78 per cent; 28 per cent; 27.78 per cent and 27.78 percent.4
[22] The tests carried out by Ballance returned results of 25.20 per cent and 26.19 per cent.5
[23] As the Algerian phosphate rock did not meet the Citsol Test, Ballance considered that Quin’s advertising of its product as 30 per cent (or more) P and as a RPR was misleading and deceptive to farmers and fertiliser wholesalers and retailers.
[24] On 21 September 2018, Ballance wrote to Quin, outlining its concerns and inviting Quin to provide testing to verify its product. The parties exchanged correspondence. Quin had obtained test results conducted by SGS Minerals Services (SGS) of 34.78 per cent, 34.6 per cent and 35.2 per cent on the basis of ground up samples.6 Quin provided the test results from SGS to Ballance, but it rejected those results as they were carried out on ground up samples.
[25] In October 2018, Ballance again wrote to Quin’s solicitors. It asked Quin to cease and desist from advertising its product as RPR. When Quin continued to advertise its product as RPR, Ballance issued these proceedings and sought interim injunctive relief.
4 One test on 14 June 2018 and three tests on 1 August 2018.
5 One test on 14 September 2018 and one test on 21 September 2018.
6 One test on 21 March 2018 and one test 12 July 2018.
[26] Ballance alleged that a Quin advertisement in the Waikato Times on 30 August 2018 and its statements on its website on 21 September 2018 and 2 October 2018 were false and misleading.
[27] In a judgment delivered on 19 March 2019, Fitzgerald J held that Ballance had established an arguable case the advertisements and statements were false and misleading. The Judge considered the balance of convenience favoured the granting of an injunction in limited terms.7 Fitzgerald J issued an interim injunction restraining Quin from further publishing or distributing advertisements in the form complained of, particularly that the Algerian phosphate rock met the Citsol Test. Quin was also invited to proffer a suitable form of undertaking to cure the arguably misleading impression created by its reference to the Algerian phosphate rock as an RPR in the New Zealand market.
[28] Following the injunction hearing, Mr Quin provided a draft undertaking. Fitzgerald J settled the final terms and approved an undertaking in the following form on 12 April 2019:
I, BERTRAM FRANCIS QUIN, of Auckland, Director, hereby undertake personally and on behalf of Quin Environmentals (NZ) Limited that until such time as these proceedings conclude, or the Court or the Plaintiff agree to the release of this undertaking (whichever is the earlier), neither of us will publish any reference to Quin Environmentals (NZ) Limited RPR product (“the Product”) as being an RPR, or call it an RPR, without either:
(a)Having first obtained independent laboratory testing, conducted in accordance with the Fertmark’s 30-minute citric acid testing regime on unground samples, and which demonstrate that the Product does meet the Fertmark’s definition of an RPR; or
(b)including in the same publication the following explanatory note:
“Quinfert Algerian RPR has not yet been shown to meet the Fertmark 30-minute citric acid test and consequently is not an “RPR” as defined in the Fertmark Code.”
[29] Ballance alleges Quin has breached the undertaking in a number of its advertisements following the injunction hearing. In its second amended statement of claim, Ballance says that after the injunction hearing Quin advertised its Algerian phosphate rock as RPR in an advertisement in the Rural News on 2 April 2019, and
7 Ballance Agri-Nutrients Ltd v Quin Environmentals (NZ) Ltd [2019] NZHC 490.
then, in breach of the undertaking, in a further advertisement in the Rural News with an amended price list on 24 April 2019.
[30] During the course of the hearing, Ballance identified further statements and advertisements by Quin which it said also breached the undertaking. Mr Edwards, counsel for Ballance, referred to the following advertisements:
(a)the Dairy News of 20 August 2019;
(b)the Rural News of 19 November 2019; and
(c)the Rural News of 19 May 2020.
Red herrings – irrelevancies
[31] Some evidence during the hearing focused on issues which are not directly relevant to the determination of the principal issues in the case. They included:
(a)whether Ballance and Ravensdown control the FQC;
(b)Ballance has not advertised its Hi P RPR with the Fertmark Tick even though it is entitled to do so;
(c)whether the samples of Algerian phosphate rock obtained by Ballance or others to test Quin’s representations complied with the Fertmark Code for the taking of samples;
(d)the status of the Watkinson Dissolution Test in New Zealand; and
(e)criticism of the Citsol Test.
I briefly address the above matters.
Control of the FQC
[32] Quin alleged that Ballance and Ravensdown (who between them have approximately 90 per cent of the fertiliser market in New Zealand) control the FQC and that only a few companies have registered products with Fertmark.
[33] The membership of the FQC is broad. It is dominated by farmers and those involved in servicing the primary industries. Ballance does not sit on the Executive Committee, which is the committee which makes decisions as to Fertmark Code changes. Ballance is on the FQC Forum which makes decisions and recommendations by consensus.
[34] On a related, but equally irrelevant point, Quin criticised the relatively limited number of companies that register their products with Fertmark. Fertmark remains the body which sets the industry standards, albeit on a voluntary basis.
[35] The short point is that even if Ballance and Ravensdown had influence with the FQC, it would not affect the issue for determination in this case. Quin’s advertisements are either misleading or deceptive or likely to mislead or deceive or not.
Ballance’s Hi P RPR
[36] During cross-examination of the Ballance witnesses it was established that even though Ballance’s Hi P RPR meets the Citsol Test, Ballance has not advertised it with the Fertmark Tick as it may be entitled to do. The Ballance witnesses seemed surprised it was not marketed in that way.
[37] Nothing turns on the fact Ballance has not marketed its Hi P RPR products with the use of the Fertmark Tick. If it is entitled to do so but for whatever reason has not, that is not determinative or of any relevance in relation to issues in the claim or counterclaim.
Sampling of the Algerian phosphate rock
[38] During his evidence, Dr Quin, the sole owner of Quin, made the point that the samples of the Algerian phosphate rock he was importing to New Zealand which Ballance obtained through Mr Sisson were not taken in the way prescribed by the Fertmark Code for sampling.
[39] It seems logical, as Dr Quin explained that as a ship travels the phosphate rock in its hold will settle, so that there will be a difference in makeup between the top and the bottom of the phosphate rock in the hold. However, while that may mean the result of the test is potentially unreliable, the point is that, with the exception of one type of Algerian phosphate rock, namely V2, which has passed the Citsol Test (and which Ballance has no objection to as being marketed as RPR), none of the sample results establish that Algerian phosphate rock imported by Quin meets the Citsol Test.8
The Watkinson Dissolution Test
[40]The Watkinson Dissolution Test is a chemical test for RPR.
[41] The Algerian phosphate rock scores well in the Watkinson Dissolution Test. Mr Catto, Science Strategy Manager at Ballance and Ballance’s representative on the FQC, acknowledged that the principles of the Watkinson Dissolution Test had been agreed as an additional test for RPR but said the laboratory results are not consistent at the moment. In response to a question from the Court as to whether phosphate that met the Watkinson Dissolution Test but not the Citsol Test could be described as RPR, Mr Catto said:
A.That’s why we’re thinking of using a different term, DAPR, that’s why that document was there, because we think – well certainly my view is that farmers had become accustomed that an RPR is an RPR in terms of that quality criteria, and in terms of definition and if we’re going to bring in rocks with lower Cit Sols it needs a different descriptive so they’re not misled as to what that is.
[42] Despite Mr Catto’s evidence, it appears the FQC is moving towards adopting the Watkinson Dissolution Test as a test for RPR. The minutes of the FQC Laboratory
8 There is a test carried out by Dr Chien, but even it produced a result of 29.9 per cent.
Test Methods Expert Group from 21 November 2019 record the auditor reporting the FQC had accepted the Watkinson Dissolution Test method. The Group reviewed and discussed subsequent trial data. The minutes of the meeting also record that further tests were to be carried out and that discussion of the method and the RPR reactivity assessment model would be carried forward to the next meeting with a view to setting a recommended distinguishing limit for RPR.
[43] Also, the revision of the Fertmark Code as at January 2020 records in the industry agreed test methods “Watkinson Dissolution Test for RPR” and concludes:9
This test is suitable for RPR products in their pure form.
[44] However, the short and important point for present purposes is that the Watkinson Dissolution Test has not yet been incorporated in the meaning of RPR under the product classification section of the Fertmark Code. The sole test for that purpose at present remains the Citsol Test.
Criticism of the Citsol Test
[45] A number of the Quin witnesses criticised the Citsol Test. Dr Quin, Dr Rajan, Director of UltraPhos Fertilizer Research Ltd, and Mr Harold were all critical of it.
[46] It may well be that, as Dr Quin and Dr Rajan argue, there are better and more accurate tests for determining whether phosphate rock is RPR. It is also correct that both the requirement for 30 per cent P and particularly the 30-minute time limit are arbitrary.
[47] The degree of artificiality about the test is highlighted by the Quin counterclaim discussed below at [156]-[161].
[48] However, again, the short point is the Citsol Test remains the only currently approved test for RPR by the FQC and the Fertmark Code.
[49]I return to the principal issues in the case.
9 The Fertmark Code of Practice, cl 2.11.
What is RPR and is Algerian phosphate rock a RPR?
[50] The evidence concerning what is RPR was given by a number of witnesses. Mr Catto, and Dr Blennerhassett, the Innovation Leader at Ballance gave evidence for Ballance. Mr Catto discussed the FQC, Fertmark Code, Fertmark certification scheme and the Citsol Test. He concluded by saying:
In summary, a product is only a RPR if the product scores at least 30% according to the Citric Solubility Test in an as received or unground state. In New Zealand, aside from the Fertmark Code, there are no other bodies, schemes or entities in New Zealand that produce any definitions or guidance for what constitutes a RPR in New Zealand.
[51] As Mr Catto’s evidence suggests, his focus was on the meaning applied to RPR in New Zealand by the Fertmark Code, rather than on the nature of a RPR as such.
[52] In his evidence-in-chief, Dr Blennerhassett agreed that different countries will ascribe different meanings to the term RPR, with many of those meanings having common threads, but he disagreed that RPR is a generic phrase. In his opinion, in New Zealand, RPR means something different than it means in other countries. Like Mr Catto, he considered that to be referred to as RPR in New Zealand the “absolute bottom line” is that the product must meet the Citsol Test. He accepted this did not mean the same product could not be considered as RPR in another country. If a fertiliser was advertised as a RPR in New Zealand he considered farmers would think it met the Citsol Test.
[53] In cross-examination, Dr Blennerhassett sought to suggest that RPR has a very specific meaning because it is only used in New Zealand. As Mr Dalkie. counsel for Quin, put to him, that was the first time he had expressly said that. It was apparently based on a Google search and was contrary to his evidence-in-chief noted above that other countries refer to RPR.
[54] On the issue of what is a RPR, Quin relies on the evidence of Dr Quin and Dr Rajan in particular. Dr Quin is an acknowledged expert in phosphate fertiliser. He has been involved in investigating the suitability of RPR as a direct application natural phosphate fertiliser as an alternative to the use of superphosphate from as early as 1976. Between 1980 and 1987, he designed and coordinated a number of national
trials comparing RPR against superphosphate when employed with the Ministry of Agriculture and Fisheries.
[55] Dr Quin said RPR’s are a specific class of naturally occurring phosphate mineral found in at least a dozen locations around the world. They formed originally on the sea floor, generally agreed to be through a process of amalgamation of seashells (calcite) and fish and marine skeletons (tri-calcium phosphate) usually in interaction with sea water containing unusually high concentrations of phosphate. In Dr Quin’s opinion, RPR’s are correctly defined, not by short-term laboratory tests (such as the Citsol Test), but by their geological and geochemical make-up and most specifically by their crystallographic composition and crystal-axis dimensions.
[56] Dr Quin explained that the reason the Algerian phosphate rock does not meet the Citsol Test is that it contains elevated levels of dolomite. Dr Quin’s theory, in general terms, is that the dolomite contains magnesium oxide which affects the rate at which the phosphorous moves from the rock into the citric acid. Quin’s V2 of the Algerian phosphate rock contains less dolomite and passes the Citsol Test.
[57] Quin also called Dr Rajan whose evidence was admitted by consent. Dr Rajan is an expert in soil science and agricultural chemistry. His evidence addressed:
(a)what makes a phosphate rock a reactive phosphate rock?; and
(b)the methods to estimate the reactivity of a phosphate rock to determine its suitability for direct application.
[58] Dr Rajan said he was one of the people who introduced the terms reactive and unreactive phosphate rock into New Zealand instead of the more “nebulous” terms such as hard or soft rocks. There are two important components of commercial phosphate rocks: phosphate rock crystals called apatite, and accessory minerals or impurities present in it.
[59] Dr Rajan confirmed there are four ways to test the reactivity of phosphate rocks:
(a)field tests, which are the best method but are also expensive;
(b)the a-dimension or a-axis laboratory test generally applied to ground phosphate rock, which again is expensive because of the equipment required;
(c)the Citsol Test; and
(d)the Watkinson Dissolution Test.
[60] Dr Rajan cited two field trial tests that had evaluated Algerian phosphate rock. In his opinion, those tests showed Algerian phosphate rock to be at least as reactive as Tunisian and Moroccan phosphate rock which are both recognised as highly reactive.
[61] Dr Rajan also reviewed a-dimension tests of the apatite by a 1977 authority from the International Fertilizer Development Centre (IFDC). The research grouped the phosphate rocks originating from the following sources as highly reactive phosphate rocks:
(a)Algeria;
(b)Sechura;
(c)North Carolina; and
(d)Minjingu (Tanzania).
[62] In addition, a European study based on the a-dimension of some phosphate rocks, also ranked Algerian phosphate rock as a highly reactive phosphate rock.
[63] Dr Rajan was critical of the Citsol Test used in New Zealand. He considers the limited 30-minute duration and the single extraction to be a poor choice of test for the reactivity of phosphate rock.
[64] Although critical of the Citsol Test, Dr Rajan tested the Algerian phosphate rock imported by Dr Quin using the Citsol Test. The test returned a result of 29.4% P. He considered that given the impurities (the dolomite) which impaired P release, that still indicated the Algerian phosphate rock was highly reactive.
[65] Finally, Dr Rajan referred to studies involving the Watkinson Dissolution Test. Under that test, the Algerian phosphate rock performed better than North Carolina phosphate rock, which is acknowledged as a RPR and which also satisfies the Citsol Test.
[66] In Dr Rajan’s opinion, the Algerian phosphate rock imported by Quin is properly described as a RPR based on field trials, a-axis laboratory analysis, chemical extractable P and the rate of P dissolution measurements.
Summary – what is a RPR?
[67] Phosphate rock is a natural mineral comprising apatite rock crystals and a mix of associated impurities.
[68] The feature of phosphate rock which makes it a RPR is the extent of its reactivity. There are a number of ways to test that reactivity. Each of the tests is designed to provide an indication of the likely agronomic performance of the phosphate rock in issue.
[69] The term RPR is used by a number of countries outside New Zealand to describe phosphate rock which releases phosphate efficiently and effectively to the soil. RPR is thus a descriptive or generic term for reactive phosphate rock which provides the appropriate agronomic performance.
[70] While the Algerian phosphate rock imported by Quin does not meet the Citsol Test, it has the properties of a RPR and meets various other tests for a RPR. A number of accredited and recognised international agencies describe and recognise Algerian phosphate rock as RPR.
Does RPR have a particular meaning in New Zealand?
[71] The real issue is whether, as Dr Blennerhassett and Ballance say, the descriptive or generic term RPR means something different in New Zealand in that it has acquired a secondary meaning through FQC’s product classification of a phosphate rock as RPR only if it meets the Citsol Test.
[72] The issue of what is required to establish a secondary meaning of an otherwise generic or descriptive term in the passing off or Fair Trading Act context has been considered in a number of cases. The focus of the cases has generally been on business or product names which are generic or descriptive.
[73] The starting point is that courts will generally be reluctant to grant a monopoly over a descriptive or generic term. In Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd, Stephen J in the High Court of Australia noted:10
To allow this section of the Trade Practices Act to be used as an instrument for the creation of any monopoly in descriptive names would be to mock the manifest intent of the legislation. Given that a name is no more than merely descriptive of a particular type of business, its use by others who carry on that same type of business does not deceive or mislead as to the nature of the business described.
[74] The law does, however, acknowledge that words with a generic or primarily descriptive meaning may acquire a secondary meaning which indicates they originate from a particular vendor or, as in the present case, have a particular characteristic.11
[75] Lockhart on The Law of Misleading Conduct suggests that reputation or secondary meaning is nothing more than customer familiarity with a marketing symbol or name as a means of identifying a particular product.12
10 Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd (1978) 140 CLR 216 at 230.
11 Auto (BM) Sales Pty Ltd v Budget Rent A Car System Pty Ltd (1976) 12 ALR 363 at 369; and Dominion Rent A Car Ltd v Budget Rent A Car Systems (1970) Ltd [1987] 2 NZLR 395 (CA) at 408.
12 Colin Lockhart The Law of Misleading or Deceptive Conduct (5th ed, LexisNexis Butterworths, Australia, 2015) at [6.16].
[76] There are a number of examples where New Zealand courts have considered whether a generic or descriptive term can be said to have acquired a particular or secondary meaning.
[77] In Vodafone NZ Ltd v Freedom Ltd, the plaintiff sought an injunction to prevent the defendant from using the word “PREPAY”.13 Vodafone had been in the market for 13 months while Freedom had only just launched its product. Smellie J found that Vodafone had not sufficiently established distinctiveness in the word PREPAY to the point it could effectively claim a monopoly for the use of such a general term.14
[78] In DB Breweries Ltd v Lion Nathan Ltd, DB unsuccessfully sought an injunction restraining Lion from marketing or distributing a brand of beer as Mac’s Sun Dance Summer Ale.15 DB alleged that the use of the words “Summer Ale” constituted passing off and was a breach of the Act when compared with its own product, Monteith’s Summer Ale. Harrison J dismissed the application. The argument that consumers might be misled was based on the common use of the words “Summer Ale” and Harrison J found that was as a result of DB’s election to use a descriptive rather than a particular name for its product.16 Harrison J concluded:17
[36] In my judgment a descriptive or generic name does not indicate the source but only the nature of goods. I agree with Mr Brown; a claim for passing off cannot be sustained solely upon a descriptive or generic term where there is no proof of, first, an exclusive or secondary reputation and, second, a misrepresentation arising from labelling or packaging get-up. …
[37] In my judgment also there is no justification in policy or principle for providing DB with what is in effect a monopolistic or quasi monopolistic right, equivalent to the protection of a trademark, to a descriptive or generic name. To the contrary, such a result would be inimical to commercial freedom and competition, and could only ever be rationalised if DB was able to show the words “Summer Ale” have acquired a secondary meaning, connoting a degree of exclusivity, as denoting its goods. There is no evidential foundation for that argument here.
[79] Importantly, for present purposes, while finding that the claim failed on its facts, Harrison J recognised that a generic term could acquire a secondary meaning.
13 Vodafone New Zealand Ltd v Freedom Ltd (1998) 8 TCLR 546 (HC).
14 At 552-553.
15 DB Breweries Ltd v Lion Nathan Ltd (2007) 12 TCLR 25 (HC).
16 At [27].
17 DB Breweries Ltd v Lion Nathan Ltd, above n 15.
[80] A further relevant consideration will be whether the name is distinctive or not. In Airport Rentals Ltd v Airport Car Rentals (Southern) Ltd, Tipping J made the point that:18
… the more distinctive a trading name is, both in itself and as identifying the plaintiff’s business, the further away competitors must keep in the names they adopt. On the other hand, if the plaintiff’s trading name is generic or descriptive (ie made up of words which describe common things and are in common use) the nearer the competitors may approach. …
[81] In Co-operative Bank Ltd v Anderson, the Co-operative Bank were unsuccessful in an application for an interim injunction to restrain a New Zealand association of credit unions from using certain names that included “co-op”.19 Asher J was not satisfied that co-op had acquired a secondary meaning which indicated the plaintiff was the source of the service provided:20
[37] A word which is both generic and descriptive such as “co-operative” or “co-op” does not indicate the source of the service to be provided. Rather, it identifies a key feature of the service, and the nature of the operator. The use of such a generic and descriptive name cannot give rise to a claim in passing off unless the use of the word in that context has acquired a secondary meaning so that its use by others will constitute a misrepresentation.
[82] Finally, in National Mini Storage Ltd v National Storage Ltd, National Mini Storage Ltd unsuccessfully sought an injunction restraining four companies within the National Storage Group from using the trade mark “National Storage” in the greater Auckland area.21 Muir J referred to a concern not to grant a monopoly over a descriptive term, and also cited with approval the above passage of Stephen J in Hornsby Building Information Centre Pty Ltd.22 Muir J considered that there was a danger in attempting to extrapolate some overriding legal principle from findings particular to individual cases.23 At the end of the day, it was essentially a question of fact for the trial Judge to determine on all the material before him whether the likelihood of deception and damage had been established by the plaintiff. Muir J rejected the plaintiff’s claim, noting:24
18 Airport Rentals Ltd v Airport Car Rentals (Southern) Ltd (1995) 6 TCLR 664 (HC) at 665.
19 Co-operative Bank Ltd v Anderson [2014] NZHC 2686.
20 Co-operative Bank Ltd v Anderson, above n 19.
21 National Mini Storage Ltd v National Storage Ltd [2017] NZHC 1775.
22 At [54].
23 At [69].
24 National Mini Storage Ltd v National Storage Ltd, above n 21.
[281] Although the plaintiff has established some level of reputation in its name, albeit in a generally low-brand environment, it is not such a level of distinctiveness as in my view entitles it effectively to appropriate the descriptive words “National” and “Storage” for its exclusive use. …
[83] The particularly relevant features that inform whether a generic or descriptive term has acquired a particular or secondary meaning are its repetition, the period of time that it has been used and whether it has enjoyed exclusive use over a period of time.25
[84] The above cases involved business competitors using similar names to market their product. While Ballance and Quin are in competition, Ballance does not suggest it has any proprietary rights in the term RPR. Rather, to the extent there is a right in the use of RPR, it is FQC’s right as the fertiliser industries regulator. To that extent, the theme running through the authorities of the concern not to provide one business competitor with a monopoly in the use of a generic name is not so directly relevant. I note that the purposes of the Act, apart from contributing to a trading environment in which businesses may compete effectively, are said to be to protect the interests of consumers and to enable consumers in businesses to participate confidently.26 For the fertiliser industry, FQC has a role in those areas.27
[85] There are a number of factors which support a conclusion that, in New Zealand, RPR has acquired a particular meaning namely that it meets the industry standards set by the Fertmark Code.
[86] First, the Fertmark Code has been in place for almost 30 years from approximately 1993. Mr Dalkie made the point that Dr Quin was the first to start researching RPR as a fertiliser when at the Ministry of Agriculture and Fisheries between 1976 and 1987. That may well be correct, but the important point is that it was the FQC which first sought to apply a standard for RPR, through the Fertmark Code. The Code’s requirement for phosphate rock to meet the product classification as a RPR is that it pass the Citsol Test. Dr Rajan acknowledged that the Citsol Test
25 Halsbury’s Laws of Australia (2017, online ed) at [240–4600].
26 Fair Trading Act 1986, s 1A.
27 Mr Dalkie referred to the prohibition against the registration of a fertiliser with a generic name under the Fertiliser Act 1982, but that prohibition applied to proprietors, not to the industry body.
has been used since 1991 and that it was adopted in response to strong interest from farmers.
[87] Next, Dr Quin’s own evidence also supports the conclusion that, in New Zealand, the term RPR has acquired a particular meaning, namely that products described as RPR comply with the Fertmark Code. Dr Quin accepted in cross- examination that the Fertmark definition of a RPR is the current industry agreed standard for defining what a RPR is in New Zealand. While he sought to qualify that answer on the basis of his perception that Ravensdown and Ballance dominate the industry, as noted, the right to regulate the use of RPR lies with the FQC.
[88] Dr Quin also accepted that achieving 30 per cent under the Citsol Test was important because that was what was required by the Fertmark Code. Again, Dr Quin sought to explain that acknowledgment by saying that “the parties using Quin product didn’t wish to fall out with Fertmark”.
[89] Despite the reservations and qualifications Dr Quin advanced in his evidence, his actions and contemporaneous communications also suggest he accepted the importance of Algerian phosphate rock being able to comply with the Citsol Test. When negotiating with Mr Sisson in relation to the first major importation of the Algerian phosphate rock Dr Quin told Mr Sisson, “Of course Citsol P is a minimum of 30 per cent”. Dr Quin also accepted that Mr Sisson would certainly have preferred the Algerian phosphate rock to have 30 per cent citric solubility. That is recognition that 30 per cent citric solubility was the requirement for recognition of a RPR in New Zealand.
[90] In this context, I note that in reference to the SGS tests (which were not conducted in conformity with the Citsol Test) and which returned in excess of 30 per cent citric solubility, Dr Quin said in an email update to his supplier:
[w]e are weathering the anti-Quinfert attack from Ballance over the low citric solubility of the product. The SGS official analysis of the shipment are worthless, and I have been badly misled regarding the solubility of the product
…
[91]Dr Quin’s attempt to explain that statement was not convincing.
[92] The record of Dr Quin and Mr Sisson’s contemporaneous communications also confirms the importance to Mr Sisson that the Algerian phosphate rock met the Fertmark Code for RPR. In an email to Dr Quin, Mr Sisson noted:
… we really need some assurances that the minimum level of 30% Cit Sol is achieved on the proposed shipment.
[93] Also, Mrs Sisson prepared a draft advertisement or flyer for approval by Quin. Dr Quin approved a draft which stated:
Not all RPRs are the same
There can be a variety of RPR and RPR based products available with varied nutrient, Cadmium (Cd) and solubility levels. The generally accepted NZ standard for use of the RPR title requires; no less than 10% phosphate (soluble in mineral acids) and at least 30% citric solubility. …
[94] Although Dr Quin sought to explain the draft was perhaps not the final version, the email chain suggests it was.
[95] Next, in his “Quin facts”, published on his website on 17 April 2018, Dr Quin referred to the Citsol Test as being sufficiently strongly industry recognised in both New Zealand and Australia so that using the term RPR to describe direct application phosphate rocks (DAPRs) that do not meet the Citsol Test is unacceptable in the market. Again, Dr Quin sought to qualify that statement by suggesting it contained a typo. It should have referred to “was” instead of “is” as it was referring to the historical position. I did not find Dr Quin’s attempt to explain his comment very convincing as the website has been regularly updated without that reference being changed. The header suggests the web page was last updated on 4 January 2019.
[96] Finally, Dr Quin accepted that “10% of farmers have got some figure in their head that 30% somehow means something for RPR”s.
[97] Dr Quin’s evidence suggests that there is a sufficiently established distinctiveness in the term RPR as it has acquired a particular meaning, namely that it meets the standard set by the Fertmark Code.
[98] The Court also heard evidence from a number of farmers and a fertiliser consultant.
[99] Ballance called a farmer from South Canterbury, Mr Hurst. Mr Hurst said that while he was not familiar with the specific standards of the Fertmark Code, he was generally aware that it was the only standard for fertiliser in New Zealand. Mr Hurst’s evidence was general and not particularly helpful on the point. He had never bought RPR himself.
[100] Mr Riddiford, a farmer called by Quin, said that he was aware that citric solubility for a RPR should be around the 30 per cent mark. He did qualify his position by saying if it was on either side of that it did not much matter to him since he bought RPR specifically for its ability to get a slow delivery of phosphorus into the soil over a number of years at the cheapest cost per unit of P.
[101] In cross-examination, Mr Riddiford accepted that Fertmark was in the back of his mind and that he had picked up the 30 per cent minimum he had asked for from the Fertmark Code. I consider it relevant that in email correspondence with Quin, regarding his purchase of the Algerian phosphate rock, he had asked for the analysis of it as he had been working on the basis of Dr Quin’s explanation of P of 13 per cent and citric solubility over 30 per cent. That suggests Dr Quin had told him, consistent with his earlier advertisements, that the Algerian RPR had a citric solubility of 30 per cent, and that was important to them both.
[102] Mr Riddiford confirmed that he was generally aware of Fertmark through the rural media, and, while he was not particularly aware of the details of the Fertmark Code, he went on to say:
my familiarity with the Fertmark scheme would be similar to knowing that a fence post should be H4 if its [to go] into the ground.
[103] That was an important acknowledgement that, in Mr Riddiford’s mind, the Fertmark Code set industry standards. As noted, he was aware the industry standard for RPR was passing the 30 per cent Citsol Test.
[104] Quin also called Mr Harold, a fertiliser consultant. Mr Harold has a degree in soils and agronomy, and over 30 years’ experience in fertilisers. Mr Harold is a director of Fert Wholesale which supplies and sells fertilisers to farmers and some
fertiliser on-sellers. Fert Wholesale and Mr Harold recommend and sell Algerian phosphate rock. Mr Harold said he did not consider that farmers recognised the Citsol Test as the industry standard. But when asked a supplementary question in evidence- in-chief about what the 30 per cent Citsol meant to him, he answered:
The 30% citric soluble meant to me it basically was an RPR. But more importantly that I took a lot into account around the dolomite content that was also in there and principally any product that has an acid added to it and it’s got an alkaline in it, will the basically citric soluble level will be lower than if there was no alkaline product in it.
[105] While he went on to qualify his statement, Mr Harold’s answer that the 30 per cent citric soluble meant to him that basically it was a RPR is telling. It is a recognition of industry acceptance that if phosphate rock met the Citsol Test it was a RPR.
[106] Ballance also called evidence from Dr Starr, a senior lecturer in marketing at the graduate school of management of the University of Auckland Business School. Dr Starr gave expert evidence about marketing and the impact of advertisements on consumers. In his opinion, farmers and other consumers reading the statements by Quin would form the view that the testing standard for RPRs in New Zealand was the Fertmark Code but that Quin considered the standard and tests were obsolete and due for replacement.
[107] Dr Starr also noted that both Synlait Milk Limited, in its marketing documents and the Northland Regional Council, in its proposed Northland Regional Plan, referred to the Fertmark Code and certification scheme. That suggested to him the Fertmark Code and certification scheme were more broadly recognised than even by farming consumers, and provided a recognised standard.
[108] Mr Dalkie criticised aspects of Dr Starr’s evidence. Mr Dalkie suggested that Dr Starr invariably spoke outside his area of expertise, was evasive and his answers favoured and advocated Ballance’s case. He was not a truly independent expert witness. Importantly, Dr Starr accepted that his evidence assumed that anybody in New Zealand can only use RPR if the product passed the Citsol Test.
[109] I agree that at times Dr Starr appeared trenchant in his evidence under cross- examination and determined to support Ballance’s case rather than fulfilling the role of an independent expert witness to assist the Court.
[110] Dr Starr was not alone in that respect however. A number of the other witnesses in this case are experts in their particular area: Dr Blennerhassett, Dr Quin and Mr Harold. But they were all partisan. Even Dr Rajan’s brief included a degree of advocacy in support of Quin’s position.
[111] In summary, the evidence confirms that the FQC is a recognised and established body. It has a role to set standards for the marketing and sale of fertiliser in New Zealand albeit it does not have a legislative basis to do so. Farmers are generally aware of the FQC and its role.
[112] I conclude that the term RPR when used in conjunction with fertiliser has acquired a particular meaning in New Zealand so that when a New Zealand farmer or fertiliser wholesaler or retailer sees a product marketed as RPR in New Zealand, he or she will assume it does meet industry standards for RPR. They may not be aware of the detail of the standard, but the only applicable industry standard in New Zealand is the Fertmark Code which requires a result of 30 per cent on the Citsol Test. The use of the term RPR indicates that phosphate rock has a particular characteristic, in that it meets the Citsol Test.
Is Quin’s marketing of its Algerian phosphate rock as Algerian RPR and/or as having phosphorous levels of at least 30 per cent citric solubility misleading as alleged?
Fair Trading Act 1986
[113]Ballance claims that Quin’s advertisements breach ss 9, 10 and 13 of the Act:
9Misleading and deceptive conduct generally
No person shall, in trade, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.
10Misleading conduct in relation to goods
No person shall, in trade, engage in conduct that is liable to mislead the public as to the nature, manufacturing process, characteristics, suitability for a purpose, or quantity of goods.
13 False or misleading representations
No person shall, in trade, in connection with the supply or possible supply of goods … or with the promotion by any means of the supply or use of goods
…,—
(a)make a false or misleading representation that goods are of a particular kind, standard, quality, grade, quantity, composition, style, or model, or have had a particular history or particular previous use; or
…
(e) make a false or misleading representation that goods or services have any sponsorship, approval, endorsement, performance characteristics, accessories, uses, or benefits; or
…
[114] The focus is on the allegation of breach of s 9. Mr Edwards accepted that if Ballance could not succeed in its claim under s 9, it would not succeed under ss 10 and 13.
[115]To make out its claim, Ballance must prove:
(a)Quin is “in trade”;
(b)Quin has engaged in the relevant conduct or made the representations; and
(c)the conduct and representations are misleading or deceptive or are likely to mislead or deceive.
[116] There is no issue as to (a) and (b). The focus in this case is on whether Quin’s representations that the Algerian phosphate rock meets the Citsol Test and is a RPR are misleading or deceptive or are likely to mislead or deceive.
[117] The leading authorities on the application of s 9 are Godfrey Hirst NZ Ltd v Cavalier Bremworth Ltd and Red Eagle Corporation Ltd v Ellis.28
[118] In Red Eagle Corporation, the Supreme Court confirmed that s 9 is directed at promoting fair dealing in trade by proscribing conduct, which examined objectively, is deceptive or misleading in the particular circumstances or is likely to deceive or mislead.29 It is unnecessary to prove the conduct actually misled anyone.30 Nor is it necessary to show the defendant had any intention to mislead or deceive.31 Whether s 9 is breached will depend upon the conduct in question, including the characteristics of the person or persons said to be affected.32
[119] The question in the present case is whether a reasonable person with characteristics either known to Quin or of which Quin ought to have been aware, would likely have been misled or deceived by Quin’s marketing of the Algerian phosphate rock as having 30 per cent citric solubility and/or being a RPR.
[120] The first issue is to identify the person or consumer the marketing was directed at. As the Supreme Court observed in Red Eagle, conduct towards a sophisticated businessman may, for instance, be less likely to be objectively regarded as capable of misleading or deceiving such a person than similar conduct directed towards a consumer or, to take an extreme case, towards an individual known by the defendant to have intellectual difficulties.33
[121] In Godfrey Hirst, the Court of Appeal endorsed, but clarified, the test it had previously laid down in Commerce Commission v Adair and Unilever New Zealand Ltd v Cerebos Gregg’s Ltd.34 It confirmed that the consumer encompasses all the consumers in the class targeted by the allegedly misleading representations, except
28 Godfrey Hirst NZ Ltd v Cavalier Bremworth Ltd [2014] NZCA 418, [2014] 3 NZLR 611; and Red Eagle Corporation Ltd v Ellis [2010] NZSC 20, [2010] 2 NZLR 492.
29 Red Eagle Corporation Ltd v Ellis, above n 28, at [28].
30 At [28].
31 At [28].
32 At [28].
33 At [28].
34 Commerce Commission v Adair (1995) 6 TCLR 655 (CA); and Unilever New Zealand Ltd v Cerebos Gregg’s Ltd (1994) 6 TCLR 187 (CA).
true outliers.35 In the present case, the target market are farmers and fertiliser wholesalers and retailers.
[122] In Geddes v New Zealand Dairy Board, the Court of Appeal considered the situation of an animal evaluation system the defendant was promoting for use by the Dairy Industry.36 As Chambers J said, after identifying the target audience as dairy farmers of New Zealand:37
[78] … It is reasonable to assume that those dairy farmers know a lot about cows and bulls. As well, virtually all would have a reasonably good knowledge of systems like the [Animal Evaluation System], as less sophisticated versions had been in use for decades. …
[123] The consumers in this case, farmers and fertiliser wholesalers and retailers, will have a reasonably good knowledge of fertiliser. Farmers can be expected to be discerning purchasers of fertiliser. They can spend significant sums of money, approximately over $50,000 a year, on fertiliser. A number of farmers would be interested in the K, P and S levels of the fertiliser they are considering purchasing. They can be generally expected to understand that RPR will meet certain criteria.
[124] Mr Harold confirmed that, given the importance of the spend on fertiliser, farmers would generally have a real discussion with him and ask questions before making a purchase decision. While Mr Harold was critical of the 30-minute test, he accepted that farmers do ask questions about the 30 per cent Citsol Test threshold. He agreed that if the phosphate rock did not meet the 30-minute test, he had to explain why it did not to farmers, and why it passed the two hour test. I note that also suggests farmers were generally aware of the Citsol Test and the requirement for the phosphate rock to pass that test to be a RPR.
[125] Mr Harold also gave evidence that apart from Ballance and Ravensdown, the remaining 10 per cent of the market probably account for 25 per cent of the RPR imported into New Zealand. Again, I infer from that the fertiliser wholesalers and retailers of RPR will be an informed market.
35 Godfrey Hirst NZ Ltd v Cavalier Bremworth Ltd, above n 28, at [20].
36 Geddes v New Zealand Dairy Board CA180/03, 20 June 2005.
37 Geddes v New Zealand Dairy Board, above n 36.
[126] Mr Dalkie noted that in Geddes v New Zealand Dairy Board, while accepting that evidence from specific farmers they had been misled was not essential, the Court of Appeal did say its absence was striking in that case.38 He made the point that none of the farmers who gave evidence in the present case said they were misled. But as noted, Red Eagle Corporation confirms it is unnecessary to prove the conduct actually misled anyone.39
[127] In addition to identifying the particular consumer, the following principles can be extracted from the authorities as relevant and applicable to this case:
(a)conduct is likely to mislead or deceive if it might well happen. There must be a real risk of this occurring not merely a possibility;40
(b)when determining whether advertising or promotional material is misleading or deceptive, the courts must adopt a robust approach;41 and
(a) the conduct of a defendant must be viewed as a whole. Where the conduct complained of consists of words, it would not be right to select some words only and to ignore others which provided the context which gave meaning to the particular words.42
[128] Ballance says that Quin’s campaign contained a number of express or implied representations that were false or misleading, particularly that Algerian phosphate rock:
(a)is a RPR;
(b)has phosphorous levels of at least 30 per cent citric solubility;
(c)is the best RPR in the world;
38 Geddes v New Zealand Dairy Board, above n 36, at [94].
39 Red Eagle Corporation Ltd v Ellis, above n 28, at [28].
40 Bonz Group (Pty) Ltd v Cooke [1994] 3 NZLR 216 (HC) at 229; and Bonz Group (Pty) Ltd v Cooke (1996) 7 TCLR 206 (CA) at 213.
41 Geddes v New Zealand Dairy Board, above n 36, at [79].
42 At [80].
(d)has the ideal combination of characteristics for a RPR; and
(e)is better than North Carolina RPR.
[129] Mr Edwards confirmed that Ballance’s focus was on the first two issues. Ballance says that the overall impression created by Quin’s marketing representations are false or misleading or likely to mislead because:
(a)the Algerian phosphate rock does not meet the definition of an RPR in the Fertmark Code and, as the product is not RPR:
(i)it cannot be ‘best all-round RPR in the world, bar none’;
(ii)it cannot have the ‘ideal combination of characteristics’ for a RPR; and
(iii)it cannot be better than North Carolina RPR; and
(b)there is no evidence that the Citsol Test is invalid or flawed (as claimed by Quin) and despite these claims Quin continues to reference and rely upon the claimed Citsol Test score to market and promote the product.
[130]I address the pre-injunction advertisements.
(a)An advertisement in the Waikato Times on 30 August 2018
The advertisement included the following statements:
(i)‘Simply the best all-round RPR in the world, bar none’ in Dr Quin’s expert view.
(ii)12.7% P, 30% citsol P, 5% dolomite, 1.1% S, 35% CA and only 18ppm cadmium (140 mg Cd/kg P – half the industry’s self-imposed limit).
(iii)STRAIGHT RPR ONLY.
(iv)Just get a group together and order a total of 800t Quinfert Algerian RPR (plus S if required) and specify which port you want it to be discharged at. We will do the rest!
(b)Statements on Quin’s website on 21 September 2018
The statements on Quin’s website included:
As a result, I have decided to get back into true RPR importing – at the wholesale level – and provide reputable companies with a product that has my full confidence and support. This RPR I have selected comes from the ‘Djelbel Onk” area of the Algerian RPR deposit. This is a truly massive RPR deposit – quite possibly the biggest in the world – and has the ideal combination of characteristics. It has a good total P level of 12.7%, 30.5% citric solubility, and only 18 ppm Cd (which equates to only 140 micrograms of Cd per kg of P, only half what the NZ industry regards as an acceptable limit.
(c)Amendments to Quin’s website on 2 October 2018
As amended the website contained the following statements:
(i)On the subject of RPR, Quinfert Algerian RPR is rated as a highly reactive phosphate rock suitable for direct application by the International Fertilizer Development Center (IFDC) in Muscle Shoals, Alabama, USA, the world authority on direct use of phosphate rocks as fertilisers.
(ii)At its minimum, the citsol is about 35%, at its maximum, the citsol can be only 28%. Either way, this has NO EFFECT on its effectiveness as an RPR fertiliser.
(iii)Reported percentages may vary (between 28-37%) due to the presence of phosphatic dolomite. No negative effect on field performance as a P fertiliser can be expected.
(iv)This RPR I have selected comes from the ‘Djelbel Onk’ area of the Algerian RPR deposit. This is a truly massive RPR deposit – quite possibly the biggest in the world – and has the ideal combination of characteristics.
(v)QUIN ENVIRONMENTALS NOW PROVIDES TWO QUINFERT RPR GRADES (V1 AND V2).
(vi)V1 or ‘HRPR’ was field-tested by the IFDC, and rated by them as a Highly Reactive Phosphate Rock. It performed even better than North Carolina RPR in published response trials conducted by the IFDC. It contains 12.7% P, 35% Ca,
0.8 % Mg (as free dolomite present in the deposit) and 1.3% S.
[131] In Dr Starr’s opinion, which I accept on this point, purchasers of fertiliser would rely on a number of cues as extrinsic indicators of product quality:
(a)what the product was called – a specific type of fertiliser such as RPR;
(b)the brand name – Quin and Algerian RPR;
(c)Fertmark certification or Fertmark Tick – not applicable in these advertisements); and
(d)any descriptors about this product – such as Citsol Test percentages.
The first and last considerations are particularly in issue in this case.
[132] The above advertisements are misleading. The only Citsol Test used and applied in New Zealand for fertiliser is the test approved by Fertmark. The Algerian phosphate rock did not meet that test. By referring to citric solubility at or above 30 per cent, Quin represented to farmers and fertiliser wholesalers and retailers that the Algerian RPR met the Citsol Test and inferentially complied with the Fertmark Code. To that extent at least, the advertisements were false and misleading.
[133] Further, while the Algerian phosphate rock is a RPR in that, apart from meeting the 30 minute Citsol Test, it meets the scientific tests for a RPR, marketing it for sale in New Zealand as a RPR without explaining it does not meet the definition of RPR under the Fertmark Code was also likely to mislead New Zealand farmers and fertiliser wholesalers and retailers.
[134] In Dr Starr’s opinion, which I accept on this point, farmers would expect any product designated RPR to be suitable for application as a quality fertiliser in accordance with New Zealand standards, and a significant number of farmers would expect any product designated RPR to comply with the Fertmark Code. He considered that allowing Quin to refer to its product as a RPR even though it did not meet the commonly expected standards for a RPR in New Zealand was inappropriate. I agree, at least to the extent that there is no further qualification or explanation in the same advertisement that it does not meet the Fertmark standard for a RPR.
[135] While Godfrey Hirst supports a general approach to determining the target consumer, Mr Edwards identified three categories of farmers if the Court was minded to differentiate between farmers. The three categories of farmers are:
(a)those who will be familiar with the Fertmark Code and the Citsol Test;
(b)those who will not be familiar with the Fertmark Code but will be generally aware of a requirement for 30 per cent citric solubility for RPR in New Zealand; and
(c)those who will not be familiar with the Fertmark Code or the 30 per cent citric solubility requirement but will expect fertiliser sold to meet the appropriate industry standard.
[136] As noted, I consider fertiliser wholesalers and retailers are more likely to fall into the first category of consumers and be familiar with the Fertmark Code and Citsol Test. The first and second categories will be directly misled by the references to RPR without qualification.
[137] Further, the third category are likely to be misled, as they will consider that, without qualification, the reference to RPR suggests that the Algerian RPR meets the industry standard which is the Fertmark Code.
[138] Quin provided an undertaking following the injunction hearing. There are two components to the undertaking. Quin undertook not to publish any reference to Algerian phosphate rock as being a RPR or calling it a RPR without either:
(a)obtaining independent laboratory testing in accordance with the Fertmark 30-minute citric acid testing regime, which demonstrated it met Fertmark’s definition; or
(b)without including the explanatory note that it had not yet been shown to meet the Fertmark 30-minute citric acid test and consequently was not a RPR as defined in the Fertmark Code.
[139] The object of the undertaking was to qualify Quin’s statement that the Algerian RPR was a RPR. If the advertisements were qualified in such a way that it was clear the Algerian RPR did not meet the Fertmark Code then they would not be misleading. An appropriate qualification can cure a potentially misleading use of a descriptive word. As stated in Laws of New Zealand:43
… the fact that such words, if used on their own without differentiation or explanation, will deceive does not mean that they cannot fairly be used with distinguishing words or in a context where their meaning is descriptive.
[140] In relation to the post-injunction advertisements, the issues are whether the advertisements comply with the undertaking and whether, even if the wording is strictly used, in context, the qualifying information is sufficiently prominent having regard to the dominant message. The Court of Appeal in Godfrey Hirst said that includes consideration of:44
(i)the proximity of the qualifying information;
(ii)the prominence of the qualifying information; and
(iii)whether the qualifying information is sufficiently instructive to nullify the risk that the headline claim might mislead or deceive.
[141] Ballance alleges Quin has breached the undertaking in a number of subsequent advertisements:
(a)Advertisement in the Rural News on 2 April 2019
The advertisement contained the following claims:
(i)Does not usually pass the Fertmark 30-minute test used only in NZ (due to dolomite).
(ii)Better or equal agronomic performance than North Carolina RPR (IFDC).
(iii)Like all RPRs, it has a short crystal a-axis, and high substitution of phosphate by carbonate.
(iv)Rigorously assessed by the IFDC in Alabama as a ‘Highly Reactive Phosphate Rock’.
43 Laws of New Zealand Intellectual Property: Trade Marks (online ed) at [275] (citations omitted).
44 Godfrey Hirst NZ Ltd v Cavalier Bremworth Ltd, above n 28, at [59] (citations omitted).
(v)Quinfert RPR range: Quinfert RPR (7% dolomite), Quinfert RPR/EF (eco-gypsum), Quinfert RPR/low S, Quinfert RPR/med SB, Quinfert RPR/hi SB.
This advertisement was issued before the final form of the injunction was settled. It is misleading to the extent that it suggests the Algerian RPR could pass the Citsol Test. Apart from V2, it does not.
(b)An advertisement in the Rural News with an amended price list on 24 April 2019
The following statements were made:
(i)It is not likely to meet the definition of an RPR used by Fertmark, which requires 30% solubility in the 30-min citric acid test. This test is not used by other RPR-using countries.
(ii)It has relatively low dust compared to some other RPRs and mixes of RPR and non-RPRs and even the lost dust level it has can be eliminated with only 3% Controlled Moisture (CM) water.
(iii)It has passed rigorous XRD crystallographic testing conducted by the IFDC, who have consequently defined it as a ‘Highly Reactive Phosphate Rock’.
(iv)Like all true RPRs, it has a short crystal a-axis which creates instability or ‘reactivity’, greatly increasing its dissolution in even slightly-acid soils. This is caused by its high substitution (>20%) of phosphate bicarbonate in the crystal lattice.
While this advertisement follows the wording of the undertaking, the qualification to the reference to the Citsol Test undermines the clarity and purpose of the message associated with the undertaking. The difference is between an advertisement, in which criticism of the Citsol Test should not be included, and a website where Dr Quin can debate the issue and pursue his challenge to the appropriateness of the test. The reference to “true” RPR is also likely to mislead.
[142] During the course of the hearing, Ballance identified further statements and advertisements by Quin which it said also breached the undertaking. Mr Edwards referred to the following advertisements:
(a)Advertisement in the Rural News dated 19 May 2020. There is an insert by Quinfert headed:
Eight basic facts Regarding whether granulating RPR is a good idea to meet the 2025 water quality limits
Fact (iii) says:
Quinfert Algerian RPR is the only low-cadmium, internationally- recognised true RPR available in New Zealand. Available throughout New Zealand.
Fact (iv) says:
It doesn’t meet the obsolete Fertmark 30-minute citric acid solubility test. So what. This test is used nowhere outside New Zealand; it has been widely criticised as not being fit for purpose. Far better alternatives are available.
Again, the same two issues apply. To refer to it as true RPR is potentially misleading and the qualifier is undermined by the attack on the Citsol Test.
(b)The Dairy News of 20 August 2019, contained an article:
Quinfert First Anniversary Newsletter August 2019
[143]It referred to:
And then there is the wasted time spent fighting off Ballance’s anticompetitive High Court action attempting to get an injunction against Algerian RPR, even though Ravensdown now use Algerian RPR …
It contained a reply slip inviting expressions of interest in the product.
(a)The Rural News of 19 November 2019 in which Quin has placed an advertisement for Algerian RPR, including:
Contains 7% dolomite, so if you want it to pass the Fertmark 30- minute test (used nowhere else in the world), we will screen out some Mg for you!
[144] There was no reference to the qualifier in either items even though there was a reference to Algerian RPR. As such, they were in breach.
[145] There are a number of aspects of the advertising that Ballance complains about which are, however, strictly correct. The suggestion that it has better or equal agronomic performance than North Carolina RPR is correct on the evidence before the Court. The representation that, like all RPRs, it has a short crystal a-axis is, on the evidence, also correct. The statement it has been rigorously assessed by the IFDC as a highly reactive phosphate rock is also supportable on the evidence.
[146] But these are subsidiary representations. The main objection to Quin’s advertisements remain. That is, the Algerian RPR does not meet the Citsol Test. To refer to it as RPR in New Zealand without a qualifying explanation that it does not meet the Fertmark Code for a RPR is misleading or, at the least, potentially misleading.
[147] I also note that in one of the advertisements the qualification disclaimer is seen in very small print which also defeats the purpose of the disclaimer.
Summary – Plaintiff’s case
[148]On the principal matters in issue on the plaintiff’s case I conclude:
(a)for the reasons given above, Algerian RPR could properly be described as a RPR in a number of overseas jurisdictions but in New Zealand RPR has a specific meaning to the relevant consumers (farmers and fertiliser wholesalers and retailers). That is, it refers to a phosphate rock that meets the industry standards. In New Zealand, the industry standard is the Fertmark Code, which requires the product to pass the 30-minute Citsol Test;
(b)references by Quin to Algerian RPR (apart from V2) meeting the Citsol Test or having 30 per cent citric solubility is misleading and an injunction should issue to prevent that in the future; and
(c)to advertise Algerian RPR in New Zealand without a qualification confirming that it does not meet the Fertmark Code for RPR is likely to mislead and an injunction to prevent that should issue.
[149] During the course of his evidence, Dr Quin proposed to provide a further undertaking to address the issue if the Court found against Quin:
Neither I nor Quin will publish any reference to Quin’s RPR product unless it contains the following explanatory note:
Quinfert Algerian RPR has not yet been shown to meet the Fertmark 30- minute citric acid test and consequently is not entitled to be advertised with the Fertmark Tick since it does not meet the Fertmark standard.
[150] I consider there are difficulties with that proposed undertaking. As Quin’s conduct following the injunction hearing has shown, Quin has failed to fully comply with the spirit of the previous undertaking. Related to that, as Mr Edwards submitted, both the placement and prominence of the proposed form of the wording in the undertaking are relevant to whether the undertaking can address the gravamen of the issue, which is whether the undertaking can cure the misleading advertising.
[151] However, I consider a suitably phrased qualification can meet the reasonable interests of both parties and the relevant consumers in this case. Mr Edwards resisted that suggestion and noted that in Godfrey Hirst the Court found it was not sufficient to “cure” a misleading representation after the fact.45 He also noted that Dr Starr had pointed out difficulties with the undertaking proposed by Dr Quin.
[152] In Godfrey Hirst, the Court disagreed with the trial Judge and found that the wording in that case was not sufficiently prominent to draw the customers’ attention to the qualifications, and nor was the misleading dominant message averted.46 It is implicit in the reasoning of the Court however, that an appropriately worded qualifier could be sufficient.
[153] I do not accept Dr Starr’s opinion that a disclaimer will not be sufficient in this case or that, by referring to the Algerian RPR not meeting the Fertmark Code, Quin is somehow associating the Algerian RPR with the Fertmark Code. As noted, the consumers in this case will generally be knowledgeable and discerning.
45 Godfrey Hirst NZ Ltd v Cavalier Bremworth Ltd, above n 28, at [82].
46 At [83].
[154] Apart from the Citsol Test, the Algerian RPR meets the other tests for RPR. The consumers of rock phosphate in New Zealand should have the Quin product available to them, provided it is made clear it does not satisfy the Fertmark Code requirements for RPR. The Court should not shut out competition in this area provided the terms of the injunction can properly inform the relevant market participants.
[155] A final consideration is that any injunction should be in terms which can be enforced if necessary.
Counterclaim
[156] In its counterclaim, Quin alleges that Ballance’s product Hi P RPR is not a RPR. It is not a natural product because it is a blend of Sechura RPR and a waste product from the beneficiation of boucroa rock, PB3. PB3 is not a RPR.
[157] As such, Quin says Ballance’s marketing Hi P RPR as RPR and as a RPR which has at least 30 per cent citric solubility and with the Fertmark Tick is misleading and deceptive.
[158] Mr Dalkie noted that Ballance conceded that its Hi P RPR was a blend of Sechura RPR and PB3. He submitted that according to the Fertmark Code, all blends must be made at a Fertmark registered blending station or mixing station. Ballance’s plants were not registered. Therefore, the Hi P RPR did not comply with the requirements for a RPR.
[159] Ballance blends its Sechura RPR with the PB3 because, while Sechura RPR measures high on the Citsol Test it is also high in cadmium. In New Zealand, the cadmium limit is 280 mgs per kilogram of phosphate. PB3 does not on its own meet the Citsol Test of 30 per cent P but it has the advantage of low cadmium levels. The blended result, which Ballance calls Hi P RPR, meets the Citsol Test and also has acceptable levels of cadmium.
[160] I accept Dr Blennerhassett’s evidence that the requirements for certification of a blended product relate to the situation where the producer is taking a number of quite different products such as superphosphate and a potash or a nitrogen product and
blending those different products together in different ratios for a farmer’s particular requirements. By contrast, the blending of Sechura RPR and PB3 is blending together two different types of phosphorous rock. Even though the PB3 is apparently a waste product, it is still the waste product from a phosphate rock. The resultant phosphate rock blend is still a phosphate rock. That resultant product passes the Citsol Test and so Ballance is entitled to market it as RPR. I understand that it has been licensed and could be marketed with the Fertmark Tick.
[161]Quin’s counterclaim must be dismissed.
[162] The Hi P RPR example does however show the rather arbitrary nature of the reliance on the Citsol Test for determining what is RPR in New Zealand. The Algerian phosphate rock could be blended with a more highly reactive phosphate rock, given a new product name and marketed as RPR which passes the Citsol Test. Alternatively, if (as I understand Quin has done with its V2) the dolomite was removed or reduced, the Algerian phosphate rock would meet the Citsol Test and can be marketed as RPR.
Result/orders
[163]The Court makes the following orders:
(a)that by advertising its Algerian phosphate rock without any explanation that it did not meet the Fertmark Code standard of RPR in New Zealand and by advertising it as having citric solubility of at least 30 per cent phosphorous, Quin's conduct constituted a contravention of ss 9, 10 and 13 of the Fair Trading Act 1986;
(b)that by advertising its Algerian phosphate rock as a RPR without including a qualifying explanation that it did not meet the Fertmark Code meaning of RPR Quin’s conduct was likely to mislead and constituted a contravention of ss 9 and 10 of the Fair Trading Act 1986;
(c)a permanent injunction under s 41 of the Fair Trading Act 1986 preventing Quin from marketing its Algerian phosphate rock (other than V2) as having citric solubility of at least 30 per cent;
(d)a permanent injunction under s 41 of the Fair Trading Act 1986 preventing Quin from marketing its Algerian phosphate rock as a RPR without also including in the same advertisement, in as prominent a form and manner as the reference to Algerian RPR, wording to the effect that the Algerian RPR does not meet the Fertmark Code meaning of RPR;
(e)a permanent injunction under s 41 of the Fair Trading Act 1986 preventing Quin from referring to its Algerian RPR as a “true” RPR; and
(f)leave is reserved for the parties to seek any further order(s) that may be necessary to implement the above.
Costs
[164] The issue of costs is reserved. Category 2 is to apply. I certify for second counsel. Ballance has largely succeeded, but Quin has successfully resisted an absolute prohibition on the use of the term RPR in conjunction with its product. An apportionment would seem appropriate. In the event counsel cannot agree memoranda may be exchanged (limited to three pages).
Venning J
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