Nicholas Kiwi Pty. Ltd. v. Federal Commissioner of Taxation.
Judges:Jenkinson J
Court:
Federal Court
Jenkinson J.
Appeal against a decision by the respondent on an objection by the applicant against an assessment under sec. 25AA of the Sales Tax Assessment Act (No. 1) 1930.
The applicant had requested the respondent, in accordance with that section, to make an assessment in respect of a sale effected in this country by the applicant during October 1987 of a carton of goods manufactured in Australia by the applicant. The goods consisted of a substance called ``Staminade'', contained in glass bottles capped by plastic lids, each bottle
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containing 250 grams of the substance. It was common ground that, by reason of the operation of sec. 17 and 19 of the Sales Tax Assessment Act (No. 1) 1930 and sec. 3 and 4(d) of the Sales Tax Act (No. 1) 1930, the assessment made by the respondent in compliance with the request - of sales tax due by the applicant at the rate of 20% of the sale value of the goods - was correct unless those goods were of a description contained in the first column of item 38 in the First Schedule to the Sales Tax (Exemptions and Classifications) Act 1935, in which case, it was again common ground, sec. 5(1) of that Act so operated that no sales tax was payable in respect of the sale.The first column of item 38 reads:
``Drugs and medicines (including patent and proprietary medicines) used in the prevention, cure or treatment of sickness or disease in human beings, and in the compounding or preparation of such drugs or medicines, but not including -
- (i) Drugs and preparations put up and sold for the purposes of photography;
- (ii) Toilet preparations and goods in the nature of toilet preparations, including soaps, cleansing creams, hair lotions, anti-dandruff foams, anti-dandruff shampoos, skin repair creams, skin repair lotions, tooth pastes, cosmetics, powders, pomades and perfumes;
- (iii) Dyes, naphthaline, carbonate of soda, caustic soda, sodium chloride, cloudy ammonia, alum, borax, glycerine, petroleum jelly, lead salts, zinc salts, citric acid, chromic acid, formic acid, hydrochloric acid, hydrofluoric acid, nitric acid, pyrogallic acid, stearic acid, sulphuric acid and tartaric acid;
- (iv) medicated confectionery; or
- (v) goods of the following kinds put up for sale as antiseptics, namely, sterilizing solutions, household disinfectants, combined sterilizing solutions and disinfectants, combined sterilizing solutions and antiseptics, combined disinfectants and antiseptics and combined sterilizing solutions, disinfectants and antiseptics''
Mr de Wijn of counsel for the applicant submitted, but Mrs Moshinsky Q.C. for the respondent denied, that Staminade was a medicine used in the prevention, and in the cure, and in the treatment of sickness and of disease in human beings, within the meanings of those several expressions in item 38. It was common ground that those expressions bear in item 38 the meanings they respectively bear in common parlance in this country.
The substance looks like a dry powder. It is sold in bottles of which the get-up is either orange or green, the former labelled ``orange flavour'' and the latter labelled ``lemon/lime flavour''. The powder in the bottles of the former labelling is pink in colour, the powder in the other bottles is pale lime green. I find that the substance is a mixture of the following ingredients:
Ingredient Lemon/Lime Orange
Sodium Chloride 1.94 1.94
Potassium Chloride 2.45 2.45
Sodium Citrate 6.43 6.42
Dried Magnesium Sulphate 1.01 1.01
Anhydrous Dextrose 80.03 79.64
Soluble Saccharin 0.16 0.16
Tartaric Acid 7.35 7.31
Colloidal Silicon Dioxide 0.035 0.04
Blue FCF Dye 0.00112 -
Tartrazine Dye 0.01238 -
Green BS Dye 0.0005 -
Sunset Yellow FCF Dye - 0.14
Lemon/Lime Flavour 0.11 -
Juicy Orange Flavour - 0.49
Orange Flavour - 0.22
Starch 0.25 0.18
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The numerals represent the percentages which the ingredients respectively constitute of the substance.
The clear glass bottle in which the substance is sold is a cylinder of about 7 cm diameter and about 12 cm high, narrowing from a height of about 9 cm to a grooved neck of about 6 cm diameter on to which is screwed a plastic cap. The label, which is almost 6 cm high, covers all but about 3 cm of the circumference of the bottle, which is about 23.5 cm. The label is white. The printing on the label is in three vertical panels. Most of the central panel, which is about 9.5 cm wide, is coloured light green in the case of the ``lemon/lime flavour'' bottles, as is the plastic cap, and is coloured orange in the case of the ``orange flavour'' bottles, which have orange caps. Across that central panel is inclined at about 25 degrees to the horizontal a white band, the upper and lower borders of which are navy blue, and across which is printed in the same colour the name of the substance in letters about 1 cm high. Above that band are, from left to right of a person regarding the bottle, a white stylised figure of an adult human running, then in the same navy blue colour the legend ``Makes 32 doses per jar'', and then the legend denoting flavour. Below the band are, from left to right, the legend ``Staminade contains Dextrose 80.0%, Sodium Citrate 6.42%, Potassium Chloride 2.45%, Sodium Chloride 1.94%, Magnesium Sulphate 1.01%'', in letters and numerals about 1 mm high, then on a higher level the legend ``Replaces body salts... helps restore energy'', in letters about 2 mm high, then on a higher level the legend ``Net 250g'' in letters and numerals about 3 mm high, and then a similarly stylised figure of an adult human pushing a lawn-mower. Each of the two figures, one in the top left corner of the panel and the other in the bottom right corner, is between 2 and 3 cm high. The panel to the left of the centre panel is about 5 cm wide. Printed on this panel in navy blue are the following:
``DIRECTIONS: Mix one heaped teaspoon in a glass of chilled or ice water. When the product is required to be made in bulk the contents of the jar makes 5.5 litres.
DOSAGE: Adults: One heaped teaspoon (8g) dissolved in a glass of water. Not more than 6 times a day. 2-4 years: No more than 2 separate teaspoons a day. 5-9 years: No more than 3 separate teaspoons a day. Do not administer to children under 2 years of age.
INDICATIONS: STAMINADE* is indicated in cases of excessive water and electrolyte depletion due to physical exertion or heat. It may be helpful in mild cases of gastroenteritis, vomiting and diarrhoea.
NOTE: STAMINADE* should not be taken by children under 2 years, diabetics or by those on a `salt free' diet. Close lid tightly after use. Do not use a wet spoon. Store below 30°C.''
The word ``Staminade'' is printed in letters just over 1 mm in height. The other three words typed in capitals are about 2 mm high. The other letters and the numerals are about 1 mm high. In the lower left part of the panel is printed a bar code. At the bottom of the right side of the panel is printed the word ``Nicholas'' and, further to the right the words ``Regd. Vic.'', below which are printed, in the case of the green label ``No. 16945'' and in the case of the orange lable ``No. 18048''. Below those numbers are printed other letters and numerals. In the case of the ``lemon/lime flavour'' bottles the panel to the right of the centre panel has in print of similar size to that on the left panel the following:
``STAMINADE* scientifically replaces those body salts lost through sweating or other excessive fluid loss. Failure to do so may cause cramp.
STAMINADE* is a lemon/lime flavoured mineral/glucose medicinal preparation. It is valuable during and after strenuous activity or sports, or with elderly and young people who become electrolyte depleted in hot weather conditions.
FORMULA: When diluted according to instructions this solution contains glucose and the following electrolytes expressed in mmol/litre.
Sodium 45.0 Citrate 10.0 Chloride 30.0 Magnesium 2.5 Potassium 15.0 Sulphate 2.5One heaped teaspoon (8g) contains 102.6 kilojoules. Artificially coloured and flavoured.
STAMINADE* is a registered trade mark.
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STAMINADE* is also available in orange flavour.
Made in Australia by:
NICHOLAS AUSTRALIA
699 Warrigal Road, Chadstone, Victoria 3148''
In the case of the ``orange flavour'' bottles the references to flavour are appropriately varied, but the text is otherwise the same as that on the ``lemon/lime flavour'' bottles. In the space at the right-hand border of the panel is stamped an expiry date. Across the base of the panel are four stylised figures of adult humans, each framed by a square formed by a blue line. Under each square is a word. The figure at the left side of the panel is reclining in a chair under a stylised representation of the sun. Beneath is the word ``Heat''. The next figure is digging with a spade. Beneath is the word ``Sweat''. The next figure is a female pushing a shopping trolley. Beneath is the word ``Fatigue''. The figure at the right side of the panel wields a racquet, which might be either tennis or squash. Beneath is the word ``Sport''. Each square encloses a little more than a square centimetre. The letters of the four words are about a millimetre high. The figures are coloured blue.
Uncontradicted medical opinion evidence called on behalf of the applicant justifies the findings, which I make, that an abnormally low water content within the human body as a result of sweating will, if only is ingested while sweating continues, be followed by an abnormally low concentration within the body of electrolytes: sodium, potassium, calcium and magnesium ions and chloride, bicarbonate, phosphate and sulphate ions. The concentrations of electrolytes in sweat being lower than in the human body, sweating tends to raise those concentrations. But ingestion only of water while sweating continues will bring those concentrations below normal. Abnormally low concentrations of electrolytes result in abnormal physiological functioning of muscle tissue and of other body systems. Muscle cramp, abnormalities of cardiac function and sensations of physical malaise may in consequence occur. In the case of a person whose physical condition is apt to sustain the exertion, or to tolerate the environment, which is causing the sweating - or in the case of a person whose physical condition is apt to cope with whatever combination of exertion, ambient temperature, humidity, ambient air circulation, clothing and external heat sources is operating - the ingestion of water alone is likely to prove sufficient to preserve that person from harm and from any unpleasant sensation other than that of feeling very hot when the concentrations of electrolytes in his body become abnormally low while he is sweating, or shortly after he has sweated, profusely. The restoration of those concentrations will occur naturally, a normal diet providing the required electrolytes. But in relation to a number of the common activities of life in the Australian community some persons will, by reason of age or other circumstances, lack such a physical condition. Some of them will while sweating, or shortly after having sweated, profusely, suffer the discomfort of muscle cramp, or experience abnormal cardiac function, or experience sensations of physical malaise, in consequence of their abnormally low electrolyte concentrations, if they ingest only water. But ingestion of Staminade in water at the recommended dosage will tend to prevent the onset, or to diminish the intensity and duration of those discomforting sensations, if the Staminade is taken during or shortly after profuse sweating, by bringing those concentrations toward normal. If ingested by a person with the intention, and for the purpose of achieving one of those preventive or curative effects, the substance might be said on that occasion to fall within the ordinary meaning of one of the expressions in item 38, ``medicines... used in the prevention... of sickness'' and ``medicines... used in the... cure... of sickness''. But the inquiry which the legislation requires of the respondent in assessment, and of the court on appeal, is not primarily whether persons have ingested or will ingest the substance with that intention and for that purpose, but whether the jars of the substance are at the time when liability to sales tax is to be incurred goods which fall within such a description in item 38. In the resolution of that question the physiological effects of ingestion of the substance by human beings and the circumstances under which the goods will come into the hands of consumers are relevant.
Before proceeding further it is desirable to state findings about another therapeutic use to which the substance may be put. Medical treatment of children who have sustained
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substantial loss of body fluid by vomiting or diarrhoea in consequence of acute infective episodes includes oral administration of electrolytes in water. Staminade would be suitable for use in that therapy. The injunction on the label against administration to a child under two years of age is necessary because the administration of electrolytes to such a child should be supervised by a doctor.I turn to consider the circumstances under which the goods the subject of the appeal would have come into the hands of consumers.
In
Customs & Excise v. Beecham Foods Ltd. (1972) 1 W.L.R. 241 the House of Lords considered the meaning of the word ``medicines'' in a statutory context in which, as the House of Lords held, a substance would be exempt from a purchase tax on the wholesale value of goods purchased if the substance were within the meaning of that word. The substance was Ribena, a fluid which Lord Wilberforce described as ``in a frontier zone of some width between food or nutrition and medicine''. I do not think that Staminade would be conceived as within the realm of food or nutrition, and for that reason care in the use of the judgments in Beecham's case is necessary. On the other hand, it may be - Mrs Moshinsky submitted it was - the case that Staminade falls in a category to which Lord Wilberforce assigned
Ribena (1972) 1 W.L.R. at p. 251): ``a category, perhaps the creation of our age but undoubtedly a thriving creation, of health food, something which modern man takes not therapeutically, or prophylactically, but as part of his way of better living''. If not a health food, Staminade may perhaps be called a health food, Staminade may perhaps be called a health drink. The trial Judge, Ungoed-Thomas J., expressed a similar view, in a passage from his reasons for judgment which Lord Wilberforce described as ``exactly right'' and with which Lord Pearson expressed his agreement, thus ((1969) 1 W.L.R. 1518 at p. 1532):
- ``Ribena seems to me, in accordance with the refrain of those advertisements, to be on the market as a `health drink', a health drink for everyone however healthy. On the evidence, including in particular that of the advertisements and sales to which I have referred, it would seem to me to flout common sense to conclude otherwise than that it is mainly and generally, at any rate, on the market for, and sold to and for, normally healthy persons; sold, neither therapeutically nor prophylactically but as a diet supplement, to those not shown to need vitamin C, in particular, more than any other element of normal diet, i.e., to the ordinary reader of or listener to such advertisements as I have mentioned.''
I should reiterate that I cannot conceive that, either in common parlance or in medical discourse, the electrolytes of which Staminade supplies a deficiency or Staminade itself would be called food, or nutrition, or diet supplement, or health food. But, like the ingestion of Ribena, the ingestion of Staminade does in certain circumstances correct - and is advertised as correcting - a deficiency within the human body of substances the presence of which in ``normal'' concentrations is an element of ``normal'' good health. That being so, the reasoning in the Beecham case is helpful. Lord Reid said ((1972) 1 W.L.R. at pp. 243-244):
``One must look at the whole picture and decide whether, even giving to medicine a wide meaning, Ribena can be so regarded.
It is said for the appellants that Ribena is a mere dietary supplement. I do not think that that is at all helpful. Suppose a person needs or thinks he needs more vitamin C than he is likely to get from his ordinary diet. He may take orange juice which, to my mind, is plainly not a medicine, or he may take tablets of ascorbic acid which, to my mind, plainly is a medicine. Ribena comes somewhere between the two. Whether it is a medicine must I think be decided on wider grounds.
No doubt it is capable of being used as a medicine. The label on the bottle tells you how much to take if you need or think you need a particular quantity of vitamin C. But equally one could by inquiry discover how much orange juice to take to get a particular amount of the vitamin.
It appears to me that really the only points in favour of the respondent's contention are that Ribena is carefully prepared according to a pharmaceutical formula and that it contains a fairly large amount of the vitamin. So it is more convenient for use for medicinal purposes than other natural or manufactured foods or drinks which contain this vitamin. But I do not think that that
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makes it a medicine. The fact that a preparation contains some substance which by itself or in a different preparation would clearly be a medicine does not get one very far. Indeed I think that the same preparation sold with one get-up, method of marketing and advertising and user might not be a medicine while the same preparation sold with a different get-up and method of marketing, advertising and user might properly be regarded as a medicine. As with so many English nouns there is no clear limit to the denotation of the word medicine. All the circumstances must be considered and there may be cases where it is extremely difficult to decide whether or not the term medicine is properly applicable. But here I think that, however one approaches the matter, it would be a misuse of language to call Ribena a medicine and I would therefore allow the appeal.''
Lord Wilberforce said ((1972) 1 W.L.R. at pp. 250-251):
``Beechams contend that vitamins ipsa natura are drugs or medicines; the commissioners argue that they are not, or at least not necessarily so. The extreme arguments on either side are, in my opinion, fallacious or at least inconclusive. It does not follow that because vitamins in food `are good for you' (if they are) they are drugs or medicines, any more than what originates from the River Liffey. Nor are they drugs or medicines because a doctor advises that their intake be increased. Nor because they are pharmaceutically prepared, or because they are prepared from ingredients which conform with the British Pharmaceutical Codex, are they necessarily drugs or medicines: for the Codex sets a standard for many things (e.g. syrup B.P., blackcurrant juice, and even blackcurrants) which, by themselves, cannot be drugs or medicines. They are in the Codex because they may be used as ingredients in making drugs or medicines. An argument much relied on was to say that Ribena must be looked at in the wholesale stage and that what is decisive is what is in the bottle. As the bottle discloses the presence of 75 mg of vitamin C per fluid ounce, this makes it a drug or medicine. This argument contains multiple fallacies. First, it does not follow from the fact that purchase tax is levied on the wholesale price that the goods in question must be isolated at the wholesale stage. To do so would be arbitrary and irrelevant. What is taxed is goods: the method of manufacture and the market to which they are directed and in which they are used can surely not be neglected. Secondly, it cannot be right to concentrate attention on an analysis of what is in the bottle. The range between say, morphine and a placebo is infinitely varied and mere analysis will often fail to give an answer. In this frontier area very similar products, or even products chemically the same, may be drugs or medicines or beverages according to how they are presented, or how they are sold. Thirdly, the mere presence of vitamin C is insufficient to constitute a drug or medicine. The vitamin itself is not necessarily either.
On the other hand, the appellants' extreme argument is unappealing. They say that Ribena is and is marketed as a dietary supplement and that this shows that it is not a drug or medicine. But this is too simple. One cannot encapsulate a complex situation in a phrase. A dietary supplement may be a medicine or it may not. A health food, or health drink, may be a medicine or it may not: to call a product one of these things does not solve the problem. What it does, and this may be valuable, is to call attention to the existence in the time in which we live, and in which Ribena is sold, of the wide frontier zone to which I have called attention and which includes products which other times might have considered either clearly food or clearly medicine. The description health drink is helpful and relevant but not yet decisive.
The respondents' strongest argument, to my mind, which has to be met, is based on the actual content of vitamin C in Ribena - 75 mg per fluid ounce, which is made up by an addition to the natural vitamin C of laboratory-produced ascorbic acid (another name for the same thing) and which quantity corresponds with the standard set by nutritional authorities in the United States of America for the intake necessary for daily health. The scientific validity of this is in fact precarious: both the `saturation' theory, in itself, is doubtful and even if it is accepted the saturation figure is one on
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which experts disagree - the United States of America has, it appears, come down to 60 mg while the British experts think that 30 mg are enough. But laying scepticism aside and assuming that a daily intake figure has some scientific validity, the question remains whether goods which are sold with this quantity in them are medicines or not.Again, as often happens with frontier cases, each side tried a sorites argument. A doctor prescribes vitamin C pills - clearly a medicine: next time the patient buys the same or similar pills at the counter - still a medicine: then he buys a liquid concentration of the same vitamin - still a medicine: finally a neighbour suggests Ribena. The appellants start at the other end. Their consumer buys oranges to give him his daily vitamin C: then natural orange juice: then concentrated orange juice, or blackcurrant juice: finally Ribena with added vitamin C. Each argument may be forensically satisfying, but each fails to conclude the matter. The question remains where the invisible line is crossed.
We must, in my opinion, look at the whole picture: the learned judge has done just this and that is why I agree with his judgment. On the respondents' side is the fact I have mentioned of the degree of concentration of vitamin C: on their side, too, is the fact that Ribena sells more in winter than in summer, showing at least that it is not an ordinary soft drink, and that it costs more than ordinary soft drinks. The label on the bottle, with its reference to ingredients and suggestion as to `dose' (though the word is not used) is on the respondents' side. It is sold in chemists or pharmaceutical departments of great stores, though much more is sold in grocers. On the other hand its advertisements, directed at the normal healthy person and aspiring athletes, the scale of consumption (thirty million bottles a year) and its key description `the great natural health drink of our time' seem to me to place it in a category, perhaps the creation of our age but undoubtedly a thriving creation, of health food, something which modern man takes not therapeutically, or prophylactically, but as part of his way of better living.''
Lord Pearson said ((1972) 1 W.L.R. at p. 255):
``The facts have been amply, and I think very accurately, summarised by the learned judge, and I will only state the general impression which they convey to my mind, taking into account the appearance of the bottle and its contents and the statements on the label as well as the known taste of the contents. Ribena when diluted with water provides a drink which is (a) thirstquenching (b) pleasant in appearance and taste (c) rich in vitamin C. It is bought and consumed for those three reasons, and I think they are all operative and effective reasons. Though taken by adults as well as children, Ribena is to a large extent a family drink, and I think it is reasonable to infer that in the typical case, when a child asks for and is given a drink of Ribena, he is glad to have it because he is thirsty and he likes the taste, and he is allowed and encouraged to have it because it may be good for him. It may be good for him because by virtue of its content of vitamin C it acts as a safeguard and a harmless safeguard: if there would otherwise be a deficiency of vitamin C in the diet, the regular or frequent drinking of Ribena makes good the deficiency: if (as is usually the case) there is already enough vitamin C in the other ingredients of the diet, the surplus intake of vitamin C resulting from the inclusion of Ribena in the diet does no harm. The possible benefit to the health which may result from including Ribena in the diet is naturally stressed in the label on the bottle and in the general advertising and presumably plays an important part in inducing customers to pay the rather higher price which is charged for Ribena (now 22½p for the smaller bottle). It is significant that the sales are greater in winter than in summer: the rest of the diet is more likely to be deficient in vitamin C in the winter when fresh vegetables and fruit are less readily available. It is also significant that the makers of Ribena fortify its naturally good content of vitamin C with a synthetic addition. It is reasonable to suppose that the health element in this drink plays a considerable part in making it attractive to customers. But I do not think this fact makes it a medicine.
It seems to me that in deciding whether or not Ribena is a medicine as well as a
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beverage, the broad general question is whether it is only an article of diet, included in the diet as being conducive to general health, or a medicine taken for the cure or prevention of some particular disease.''
After quoting the passage from the judgment of Ungoed-Thomas J. which I have set out, Lord Pearson continued ((1972) 1 W.L.R. at p. 256):
``I think the learned judge was right in directing attention mainly to the main body of consumers of Ribena. There are, however, some special cases. Expectant mothers and nursing mothers may be advised to take Ribena in order to increase their intake of vitamin C. But in such cases Ribena is not being used as a medicine. There is no disease or illness involved, but only a special dietary requirement, because in a sense the diet was to provide for two persons instead of one. Similarly, in the case of bottle-fed babies, the milk which they get may be deficient in vitamin C, and, if so, the addition of Ribena as an element in the diet will correct the deficiency, but there is no disease or illness involved. On the other hand there are cases in which a bachelor or an elderly person may have an unbalanced diet, deficient in vitamin C, and if continued long enough this can produce illness and even a disease - sub-clinical scurvy or, in an extreme case, frank scurvy. In such a case Ribena is not strong enough to be prescribed as a cure for the disease. The disease is cured by means of vitamin C tablets of the required strength. There is however the later stage when some vitamin C may be required to stabilise the cure and prevent a recurrence of the disease, and for these purposes either mild tablets or, if the expense is not a deterrent, Ribena can be used. It seems to me that in such a case the use of Ribena is on the borderline between the medicinal and the dietary. Even if the use in some of these cases can be reckoned as medicinal, it forms such a minute proportion of the total use that it should not affect the decision.''
Although glucose (or dextrose) is a substantial part of Staminade and may be said to be popularly conceived as a nutrient, and although the appellant's advertising claims that Staminade restores energy must find their justification principally in the physiological effects of glucose, it was not submitted on behalf of the appellant that the presence of glucose in Staminade or any effect that substance has in enhancing the capacity to expend energy brought Staminade within the meaning of the exempting words in item 38. Nor in my opinion could such a submission have been accepted, if it had been advanced. A lack of the normal capacity to expend energy is not in itself a sickness or a disease. Nor are feelings of exhaustion to be described as a sickness, as I find, unless associated with other sensations such as pain, nausea, dizziness or faintness, or unless they are so severe as to induce distress. There was evidence, which I accept, that glucose facilitates, and accelerates the rate of, absorption of electrolytes through the wall of the intestine into the blood, and is for that reason a desirable part of a mixture intended to restore to normal the concentrations of electrolytes in the body.
Between 40 and 50% of the retail sales of Staminade were made in 1987 in grocery shops (by which expression are comprehended supermarkets). A little less than one-quarter of retail sales occurred in chemists' shops and the rest was sold at sports centres or for consumption in places of work. Less than 1% of Staminade consumed in 1987 was consumed in hospitals. More than 70% of retail sales of another well-known article manufactured by the appellant, called ``Aspro'', which it was sworn the respondent treats as within the exemption conferred by item 38, occur in grocery shops.
Staminade has been sold in this country since 1971. During the first decade in this market consumption and expenditure on advertising increased steadily and substantially. Advertising has been in newspapers, on radio and television, by display boards and sheets in shops and sports centres, and by brochures mailed to chemists, doctors, those who conduct sports centres and those who employ people in physical work. There has been since early 1983 ``no mainstream media advertising of'' Staminade, except a television campaign in Queensland in or about December 1988. The principal themes in advertising have been the replacement by Staminade of the fluid and electrolytes lost by sweating, the restoration by Staminade of energy and ``stamina'' diminished by vigorous or sustained physical activity and by the effect of physical activity in
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a relatively hot environment. References occur in the printed advertising material of which examples could be found in 1989 by the appellant's ``marketing manager, personal care'', who had since the middle of 1987 been responsible for the advertising, promotion and marketing of the appellant's products, to ``exhaustion'', ``fatigue'' and ``cramps'', to ``harm'' in the case of ``a small baby or someone very old'', and, in a brochure for doctors, to the occurrence of ``death... unless the essential electrolytes are replaced as well as water''. But, except in printed matter sent to employers of industrial workers and other printed matter sent to doctors, the strong emphasis of the advertising is on the benefits to health and well-being of replacing by ingestion of Staminade what has been lost by sweating (water and electrolytes or ``body salts'' and, sometimes, ``stamina''), not on the unpleasant sensations (other than fatigue or exhaustion) or harmful effects of omitting to replace what has been lost. During Staminade's first decade on the market there was in newspaper and magazine advertising a textual theme that drinking water alone during or after profuse perspiration ``can cause an uncomfortable, bloated feeling'' and ``may further reduce the electrolyte concentration in your body'' and ``can leave you exhausted and fatigued for longer than you should be''. The theme was given apt and concise expression in one advertisement: ``Staminade helps to do in minutes what rest and water take much longer to achieve''. The general public advertising material published from 1977 until 1985 which the marketing manager could find and produce to the Court, particularly display boards in shops and sports centres, is concentrated on recreational activity and so on the benefits to persons portrayed as in vigorous good health, although sweating profusely as a result of their activity.The marketing manager explained the substitution in 1980, for a relatively prominent line of print reading ``Electrolyte (Body Salt) Replacer'' on the original label, of an equally prominent line of print reading ``Body Salt Replacement Drink'', and the elimination in 1985 of the latter line of print from the lable and the inclusion of the present, relatively less prominent legend ``Replaces body salts... helps restore energy'', as instances of the application of a marketing technique, common to medicinal and other packaged goods, of eliminating from the texts on labels and packages, or of diminishing the prominence in those texts of, all but the simplest words and concepts. The marketing manager admitted that the modifications of the text on the Staminade label were intended by the appellant's servants to attract the custom of more categories of persons engaging in activities likely to induce sweating, but he denied that those modifications had been intended to diminish reference to what the questioner called ``the clinical aspect of the product so as to appeal to a broader sector of the community''. Whatever the intention, the effect of those textual changes would have been to lessen, if only slightly, any subliminal impression likely to be given by the label that Staminade was for therapeutic use.
Although in some advertising texts Staminade is described as ``pleasant-tasting'', and although it is asserted in some advertising texts that Staminade ``mixes deliciously in chilled water'', no prominence is given to any gustative encomium. There is no trace of an attempt to attract custom to the product as a soft drink.
It was proved that Staminade is registered as a proprietary medicine under Div. 3 of Pt XIV of the Health Act 1958 (Vic.). The definition of the expression ``proprietary medicine'' for the purposes of that Division comprehends more than is comprehended by item 38. Within the meaning of the expression is, inter alia, ``any substance or mixture... of substances... which is intended to be administered... internally... to persons for the purpose of preventing... curing or alleviating any disease, ailment, defect, or injury'': sec. 259(1). A manufacturer of a proprietary medicine responsible for placing it on the market in Victoria is required to apply for registration under the Division, which makes detailed provision for the evaluation and registration and labelling of proprietary medicines.
It was proved that the Commonwealth Department of Health publishes a ``Code of Good Manufacturing Practice for Therapeutic Goods'', compliance with which is encouraged by Commonwealth and State governmental authorities and is observed by the appellant in relation to the manufacture of Staminade.
It was proved that each of the substances of which Staminade is composed satisfies the
ATC 4671
standard of purity prescribed in the British pharmacopoeia. And it was proved that Staminade is included in the standard texts listing medicines for reference use by doctors and pharmaceutical chemists.Mrs Moshinsky relied on the presence in item 38 of the phrase ``used in'' as reinforcing her submission that the essential question in determining the appeal is: what is Staminade in the market? I accept that submission.
I find that Staminade, like Ribena, ``is mainly and generally, at any rate, on the market for, and sold to and for, normally healthy persons''. But, unlike Ribena, Staminade is not sold for use by those normally healthy persons, or for use by anybody else, when they are in normal physiological states and feel like, or when according to habit they take, a drink of Staminade. Even when it is bought by the fittest of well-trained athletes, Staminade is bought to drink when the consumer is in a physiologically abnormal state and for the purpose of restoring to normal in the relatively short time some at least of the abnormal elements of that abnormal physiological condition. On most occasions of use, as I would find, Staminade neither prevents nor tends to cure a sickness: the circumstances on most occasions of use are not such that abstinence from Staminade would have been followed by bodily harm or bodily discomfort of such severity as to merit the description expressed by the word ``sickness'' or the word ``disease''. Merely to feel uncomfortably hot or exhausted is not to suffer a sickness, as I find. Nor is an abnormally low concentration of electrolytes, unless the degree of electrolyte depletion in the particular person is such as is likely imminently to cause some harmful or distressing physiological occurrence. On the other hand, the purpose of the purchaser, and of the user, of Staminade at the time of purchase or use would, as I find, be in some cases not merely to preserve himself in a state of good health, but to prevent - in some cases to cure or treat - sickness. The use of Staminade by those working in environmental conditions likely to induce cramp or other seriously discomforting sensations, the use of Staminade by persons engaging in recreational or other activities which they think likely to induce in them, by reason of age or physical condition, seriously discomforting sensations attributable in whole or in part to electrolyte depletion by sweating, and the administration of Staminade to persons thought to be suffering electrolyte depletion in consequence of vomiting or diarrhoea, provide examples of those cases. The advertising of Staminade, particularly the text on the bottle labels, is calculated to induce use of the substance for those purposes as well as to induce use for other purposes.
The ingestion of Staminade replenishes the stock of substances found naturally in the body. So does a blood transfusion, but nobody would in ordinary parlance refer to whole blood or to blood components transfused into the body as medicine. I am inclined to doubt whether in ordinary speech a saline solution introduced intravenously into the body of a person seriously ill in consequence of dehydration to replenish the same stock of substances as Staminade replenishes would be called a medicine. But I do not know, and I do not weigh against the conclusion that Staminade is a medicine any of the considerations stated in this paragraph.
My conclusion is that Staminade was in October 1987 mainly and generally on the market for, and sold to and for, normally healthy persons for consumption when they were, although not in the physiological state normal for human beings in a temperate environment who are not engaging and have not recently engaged in vigorous physical exertion, in their normally healthy state and unthreatened by sickness or disease; sold, neither therapeutically nor prophylactically but as a health drink to maintain them in, or restore them to, the very best of health and energy. It can, as I think, be inferred that the use of Staminade to prevent, cure or treat sickness or disease was in October 1987 so small a proportion of the total use of the substance that it should not affect the decision that the substance is not a medicine. And, once that decision has been reached, the circumstance that some Staminade is used in the prevention, cure or treatment of sickness or disease does not bring that Staminade within item 38.
The appeal will be dismissed with costs.
THE COURT ORDERS THAT:
1. The appeal be dismissed.
2. The respondent's costs of the appeal be paid by the applicant.
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