Case: McGrath v Australian Naturalcare Products Pty Ltd [2008] FCAFC 2 , 165 FCR 230
Outcome: applied
More recently, in McGrath v Australian Naturalcare Products Pty Ltd [2008] FCAFC 2 , 165 FCR 230 the Full Court revisited the construction of s 51A(2). Emmett J, one of the members of the Full Court, there observed: [44] Under s 51A(1) of the Trade Practices Act , a representation is to be taken to be misleading if it is a representation with respect to any future matter and the maker of the representation does not have reasonable grounds for making the representation. Under s 51A(2) , the maker of the representation with respect to any future matter is to be deemed not to have had reasonable grounds for making the representation unless it adduces evidence to the contrary. However, if evidence is adduced by a representor to the effect that the representor had reasonable grounds for making the representation, the deeming provision will not operate. Where the representor adduces such evidence, it is then a matter for the Court to determine, on the balance of probabilities in the ordinary way, whether or not the representor had reasonable grounds for making the representation. This is understood to be the same approach that His Honour had previously expressed. In McGrath Allsop J also referred to the views previously expressed by Emmett J in Universal Sports and continued: [192] If evidence is adduced by the representor that is said to be evidence to the contrary, it will be for the Court to determine whether it is to the contrary in the sense just discussed. If it is, the deeming provision will cease to operate. That was the view of Emmett J, as understood by Keane JA [Downey v Carlson Hotels Asia Pacific Pty Ltd [2005] QCA 199]. That is my view. That was not, however, an expression of the view that the legal or persuasive onus has been changed by s 51A(2) , as some of the judgments in the "trend of established authority" referred to by Keane JA have stated. For instance, if evidence "to the contrary" is adduced by the representor, and if the representee itself adduces evidence tending to the lack of reasonable grounds, the matter might be equally poised. In such a case, there has been evidence "to the contrary" adduced by the representee, thereby eliminating the operation of the deeming provision, and, on the totality of the evidence, the proof of the reasonableness (or lack thereof) of the grounds is evenly balanced. Section 51A(2) does not, in my view, mean that in those circumstances the representor has not met an onus. The section does not cast the legal or persuasive onus, in such a case, on the representor. Its terms do not say so. The enactment history makes clear that the terms were deliberately chosen not to say so. Keane JA, despite his reference to the "trend of established [first instance] authority", does not say so. In my respectful view, to the extent that decisions such as IMB Group (1999) ATPR 41-704 ; Blacker [2000] FCA 681 ; Kaye [2004] FCA 1363 ; Lewarne [2007] FCA 1136 and Emerald Ocean [2006] ATPR 42-096 say, or may be taken as saying, that the legal or persuasive onus of proof is shifted to the representor by s 51A(2) , they are wrong. None examined the enactment history of s 51A. If it be thought, contrary to my reading of Keane JA's reasons, that his Honour's reference to Kaye [2004] FCA 1363 as "established authority" was a conclusion that s 51A(2) effected a reversal of the legal and persuasive onus of proof, I would be driven to the respectful view that his Honour was plainly wrong for the reasons that I have given. Perhaps not surprisingly, Emmett J also agreed with Allsop J as to the operation of s 51A(2): [2008] FCA 2 at [6] , 165 FCR at 233 4. The third member of the Full Court, Stone J, considered that the issues thrown up by s 51A(2) were best left to be resolved by a Full Court where there had been full argument and where the outcome depended on the view taken of the section: [2008] FCAFC 2 at [76] , 165 FCR at 247 8. 99 The construction given to s 51A(2) by Emmett and Allsop JJ in McGrath , it is respectfully considered, should now be applied. On the facts of the present case, however, it would not have mattered which approach was followed. 100 In the present proceeding, the bases upon which Mr Wieland believed the SLP 1100 was both a reliable machine and would prove to be a reliable machine were summarised in the following exchange with his cross-examiner: Can I go back to the penultimate proposition that I took you to that is that the Wieland SLP 1100 has proved to be a reliable crusher and you said to me that that was an accurate statement as at September 2002, correct?---Mm. What are the facts, matters and circumstances upon which you rely to allow you to express the view as at September 2002 that the Wieland SLP 1100 had, at that stage, proven to be a reliable crusher?---Well, we had one running in Australia and Peter had no issues with it. It was based on a design of a very well-known crusher, the Telsmith 25 by 40 which, you know, you can find everywhere around the world in use, so it was well-proven technology. So those two factors are the two that you've identified, one, that there was one machine that was already running in Australia?---Yes. Secondly, it was based, to use your words, on a design of another machine that had a proven track record of reliability, correct?---Correct. Now, aside from those two matters, are there any other things that spring to mind?---Yes, I mean we've got a good workshop in China with new machine tools and we make other types of equipment so they had a good level of experience for building high tolerance machines. 101 The grounds upon which Mr Wieland relied to assert that the SLP 1100 would be a reliable machine thus essentially reduced themselves to two, namely: (i) the fact that it was " heavily based " upon a design of another proven crusher, the " Telsmith 25/40 Single Toggle Jaw crusher " -- and, as Mr Wieland would have it, was not only based upon this design but was " over designed ". The SLP 1100 was said to be " an enhanced and improved design to the Telsmith " and a machine " reverse engineered " from the Telsmith; and (ii) the confidence that he had in his Chinese factory to manufacture the machine to a reliable standard. It is considered that the former ground may have gone some way towards making out the reasonable grounds for the representation that the SLP 1100 would prove to be a reliable machine; but the confidence placed upon the Chinese factory was misplaced. 105 Upon the basis of such evidence, it is considered that there were no reasonable grounds upon which any representation could be made that the SLP 1100 would be a reliable machine. Had the former approach as to the construction of s 51A(2) been applied such that there was an onus upon the Respondents to establish reasonable grounds for the making of the representation, that onus would not have been discharged. Upon the approach of Emmett and Allsop JJ in McGrath , and acting upon the basis that the Respondents did adduce " evidence to the contrary ", it is considered that there was no reasonable basis upon which Mr Wieland could have made the representations as to reliability that he in fact made. 106 It is also considered that there were no reasonable grounds for the other representation as to a future matter, namely the representation that " by installing the Second SLP 1100 Readymix Holdings and Readymix Indonesia would not have any further problems with the operation of a SLP 1100 machine ". 107 It is thus considered that there has also been a contravention of s 52 of the 1974 Act by the First Respondent, Wieland Equipment , in respect to those " future matters " relied upon by the Applicants.