Plant Extracts Pty Ltd & Ross Macdougald admit misleading conduct – ordered to publish corrective notices

On 23 October 2023, in the matter of Native Extracts Pty Ltd v Plant Extracts Pty Ltd [2023] FCA 1265 Justice Downes issued an initial judgement and made orders for declaratory relief and the publication of eight (8) corrective notices by Plant Extracts Pty Ltd ACN 613 551 349 (Plant Extracts) and skincare brand Biologi Pty Ltd ACN 618 697 297 (Biologi).  Dundas Lawyers proudly acted for Native Extracts and the other applicants in these proceedings.  The Court also issued permanent injunctions against Mr Ross Macdougald and made various declarations that representations made by both Plant Extracts and Biologi in relation to their botanical plant extracts and skincare products published on their own websites and replicated on various third party websites amounted to misleading and deceptive conduct and were in fact, false and misleading.

This article discusses the misleading and deceptive conduct and false and misleading representations made by Plant Extracts, Ross Macdougald being knowingly concerned in the contraventions and the corrective notices that Plant Extracts has been ordered to publish on its website and various of its social media channels.

Commencement of the proceedings in the Federal Court

Lisa Carroll and Ross Macdougald founded and operated Native Extracts between 2012 and 2016.  This dispute had at its core an agreement for the sale of Mr Ross Macdougald’s (Macdougald) interest in Native Extracts Pty Ltd ACN 161 185 913 (Native Extracts) (and related parties) to Ms Lisa Caroll (Carroll).  The terms of the sale were contained in a deed of settlement (Deed of Settlement) executed on 31 March 2016.  The Deed of Settlement contained usual commercial terms and included a contractual restraint of trade prohibiting Ross Macdougald from competing with Native Extracts.

In July 2020 Native Extracts led by Carroll initiated legal proceedings in the Federal Court of Australia against Plant Extracts Pty Ltd ACN 613 551 349, Macdougald, Phytoverse Pty Ltd ACN 603 360 112, FPI Oceania Pty Ltd 089 947 482, Biologi Pty Ltd ACN 618 697 297 (Macdougald Respondents) and Mr Jordan Ross Radley Macdougald (Ross’s son).

Justice Downes neatly summarised the allegations made by the Native Extracts parties at paragraph 6 of the judgement as:

“By this proceeding and in summary, the applicants’ case against the respondents (other than the fifth respondent) was that:

(1) the restraint of trade clause and confidentiality clause in the deed of settlement had been breached;

(2) Mr Ross Macdougald also breached his statutory and equitable duties of confidence which arose by reason of his position as a director of Native Extracts and a trustee of the Native Extracts Holding Trust;

(3) Plant Extracts had infringed Native Extracts’ copyright in circumstances where Plant Extracts modified scientific documents that belonged to Native Extracts before sending them to customers;

(4) Plant Extracts and the sixth respondent had engaged in misleading or deceptive conduct.”

At the last minute, (during the trial), the Macdougald Respondents admitted many of the allegations against them.  The orders made on 19 October 2023 and amended on 23 October 2023 (Orders) by Justice Downs were made with the consent of the Macdougald Parties.

Misleading & deceptive conduct, false and misleading statements made by Plant Extracts

Engaging in misleading and deceptive conduct is prohibited by section 18 of the Australian Consumer Law (ACL).  Businesses are also prohibited from making various classes of false and misleading statements pursuant to section 29(1)(a) to 29(1)(n) of the ACL.  In this article we focus on the admitted conduct of Plant Extracts and the corrective advertising that the Court ordered to be published.

False and misleading independent testing representations by Plant Extracts – Annexure A

In order 1, the Court declared that since 8 July 2016 Plant Extracts had sent certain certificates of analysis belonging to Native Extracts that it had commissioned from Southern Cross University (SCU) to its customers and prospective customers that it had modified from the original obtained from Native Extracts by removing:

• the date;
• the customer name;
• the customer reference number;
• the laboratory reference number; and
• the job number,

and falsely represented that:

• it had conducted its own independent testing when in fact it had not; and
• each of its botanical plant extracts was of the standard, quality, value, grade or composition, or contained the characteristics depicted in the Infringing SCU Certificate or Purported SCU Certificate for that botanical plant extract, when they were not.

The SCU Certificates in question that belonged to Native Extracts were:

• Chamomile Extract dated 7 July 2015;
• Grapefruit Seed Extract dated 27 October 2014;
• Green Tea Extract dated 14 July 2015;
• Gotu Kola Extract dated 12 August 2015;
• Licorice Extract dated 21 April 2015;
• Oat Extract dated 15 December 2015;
• Papaya Extract dated 18 August 2015;
• Emu Apple Extract dated 11 May 2015; and
• Hops Extract dated 21 May 2015.

The Court declared that by sending SCU certificates of analysis where Plant Extracts had not done the required independent testing, that it had engaged in misleading and deceptive conduct pursuant to section 18 of the Australian Consumer Law (ACL) and made false and misleading statements in breach of section 29(1)(a) and (g) of the ACL.  The judgement refers to this breach by Plant Extracts as the “Independent Testing Representation”.

False and misleading organically certified representations by Plant Extracts  – Annexure B

The Court declared at paragraph 3 that between 8 July 2016 and May 2018, Plant Extracts had in trade or commerce, in connection with the supply or possible supply of goods, or in connection with the promotion of the supply of goods, by depicting the Organic Food Chain (OFC) logo on its products, represented to the public that it was certified as organic by the OFC (OFC Representation), when in fact:

• Plant Extracts was not certified as organic by OFC; and
• the OFC logo published by the Plant Extracts on its website belonged to Phytoverse Pty Ltd the third respondent in the proceedings.

Again by doing this the Court held that Plant Extracts had breached section 18 of the Australian Consumer Law and section 29(1)(a).

False and misleading representations about the fake compound and its qualities, Byangelicin – Annexure C

The Court declared at paragraph 4 that between 20 June 2018 and 2020, that Plant Extracts represented that:

• its Finger Lime and Desert Lime extracts contained a compound called “Byangelicin”; and
• that Byangelicin:
  • improves collagen and elastin production in the skin;
  • is a potent anti-ageing active; and
  • reduces the potential of early ageing.

 In fact Byangelicin does not exist!  By making the statements about the existence of Byangelicin and its ‘supposed qualities’ the Court declared that Plant Extracts had:

• engaged in conduct that was misleading or deceptive or likely to mislead or deceive, in contravention of section 18 of the ACL; and
• made false or misleading representations that the Plant Extracts’ extracts were of a particular standard, quality, value or grade, when in fact they were not, in contravention of section 29(1)(a) of the ACL.

The Court also declared at paragraph 5 of the Judgement that Ross Macdougald was directly or indirectly knowingly concerned with Plant Extracts contraventions of section 18 of the ACL and section 29(1)(a) and (g) of the ACL.

Corrective notices to be published by Plant Extracts

The Court ordered at paragraph 22 that the three (3) corrective notices shown in Annexure A, B and C (above) must appear:

• on the homepage of its website located at the URL http://www.plantextracts.com.au in a form that is crawlable (i.e. its contents may be indexed by a search engine);
• on its official Instagram page located at: @plantextractsofficial ; and
• on its official LinkedIn page located at: https://www.linkedin.com/company/plant-extracts-australia.

Is this case ongoing?

No.  The trial is over.  The opportunity for the applicants or the respondents to adduce further evidence has passed.  Justice Downes has made orders in relation to the matters that have been admitted by the Macdougald Parties in the interests of consumer protection.

A final judgement concerning the quantum (amount) of the Native Extracts parties loss and damage as a result of the admitted conduct of Mr Ross Macdougald and the Macdougald Parties and the extent of involvement by Mr Jordan Ross Radley Macdougald (Fifth Respondent) is still to be made by Justice Downes.

Links and further references

Other related insights

Entrepreneur proves ex-boyfriend faked ‘natural’ cosmetics range – by Aaron Patrick, Australian Financial Review, 9 November 2023.

Byron cosmetics baron found to be spruiking fake ingredient – by Byron News, 13 November 2023.

BioLIEgi: Unpacking the recent Biologi court findings and what it means for the cosmetics industry – by Jennifer, Skincare Business Foundations, 15 November 2023.

Biologi Court Order: Unveiling The Truth Behind Misleading Claims In The Skincare Industry – by Lyndall Murray, 16 November 2023.

Other links

Home page of the Bilogi website: https://www.biologi.com.au/ – where the corrective notices can be found.

Home page of the Plant Extracts website: https://plantextracts.com.au/ – where the corrective notices required to be published by Plant Extracts can be found.

Legislation

Competition and Consumer Act 2010 (Cth) – Schedule 2

Competition and Consumer Act 2010 (Cth)

Competition and Consumer Regulations 2010 (Cth)

See this matter on the Federal Court website at: QUD215/2020

Cases

Native Extracts Pty Ltd v Plant Extracts Pty Ltd [2023] FCA 1265

Further information about misleading and deceptive conduct

If your business needs advice on misleading and deceptive conduct by a competitor or whether statements made are false and misleading, contact us for a confidential and obligation-free discussion:

Disclaimer

This article contains general commentary only.  You should not rely on the commentary as legal advice.  Specific legal advice should be obtained to ascertain how the law applies to your particular circumstances.

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