HONEY NEW ZEALAND (INTERNATIONAL) LTD v MANUKA DOCTOR LTD [2015] NZHC 2764 [9 November 2015]

HONEY NEW ZEALAND (INTERNATIONAL) LTD v MANUKA DOCTOR LTD [2015] NZHC 2764 [9 November 2015]IN THE HIGH COURT OF NEW ZEALANDWELLINGTON REGISTRYCIV 2015-485-412[2015] NZHC 2764BETWEEN HONEY NEW ZEALAND(INTERNATIONAL) LIMITEDFirst ApplicantAND MANUKA DOCTOR LIMITEDSecond ApplicantAND DIRECTOR GENERAL OF THEMINISTRY FOR PRIMARYINDUSTRIESRespondentHearing: 28 September 2015Counsel: A H Brown QC and A I K Franks for ApplicantsR E Schmidt-McCleave and P H Higbee for RespondentJudgment: 9 November 2015JUDGMENT OF SIMON FRANCE JIntroduction[1] The applicants are producers and exporters of honey. Manuka Doctor Limited is an associate company of the first applicant, Honey New Zealand (International) Limited. For the purposes of these proceedings no different interests exist, and collectively they will be referred to as Honey NZ.[2] The production and export of honey is a controlled activity. Various pieces of legislation impact on it. The first key statute to note is the Animal Products Act 1999. Section 61(1) of that Act provides that the Director-General of the Ministry for Primary industries (MPI) may issue official assurances in respect of animal products that are to be exported overseas. An official assurance (commonly called an export certificate) is an attestation by New Zealand to the relevant foreigngovernment that certain processes have been met. Many importing countries will not accept a product in the absence of such an official assurance. The proceedings arise because the respondent (MPI) has agreed with the advice of a verifier not to issue official assurances in relation to Honey NZ's exports.[3] The reason MPI refuses to issue the assurances is because the Director-General takes the view that the labelling on Honey NZ's products is notpermissible. It is considered that the labels breach the Australia New Zealand Foods Standards Code 2002 (the Code) because they impermissibly claim health effects and therapeutic effects for manuka honey. The Code in question has been promulgated under s 11C of the Food Act 1981. It regulates what health claims can be made about food, and MPI's position is that presently none can be made about honey.1[4] Honey NZ agrees it cannot make health claims about manuka honey. It denies it is doing so. The dispute stems from Honey NZ's trademarks MANUKADOCTOR and MANUKA PHARM. It is these which MPI says are implied health claims. Honey NZ says they are only trademarks, do not involve any implicit claim about health benefits, and would not be perceived by members of the public to be a health claim. Further, if they do represent some sort of general claim, that type of claim is not prohibited.[5] The issue comes to the Court by way of an application for a declaration thatHoney NZ's trademarks are not health claims (or therapeutic claims) as defined inthe Code. The parties agree that the circumstances appropriately come within the Court's jurisdiction on declaratory judgments. Resolution turns primarily on the interpretation of the provisions of the Code, and then the application of that interpretation to a label, the contents of which are settled and not otherwise in dispute. I am content to proceed on this basis although I note that the judgment does not therefore consider or comment on the power to issue export certificates, and what the appropriate review role of the Court is in relation to reviewing such decisions.1 It should be noted this is limited to honey as a food. It is accepted manuka honey as a wound dressing has benefits that it is permissible to claim.Statutory scheme[6] In 1996 the New Zealand and Australian governments agreed to operate under a single food standard. Accordingly, in New Zealand the Food Act 1981 was amended by adding a new Part 2A entitled "Food Standards". Section 11B identifies the purposes of the new legislation:11B Purposes of this PartThe purposes of this Part are–(a) to provide for greater flexibility in the regulatory arrangements relating to food manufactured or prepared for sale or sold in New Zealand, or imported into New Zealand, having due regard to the following matters:(i) the need to protect public health:(ii) the desirability of avoiding unnecessary restrictions on trade:(iii) the desirability of maintaining consistency between New Zealand's food standards and those applyinginternationally:(iv) the need to give effect to New Zealand's obligationsunder any relevant international treaty, agreement, convention, or protocol; and(b) in particular, to give effect to the Australia - New Zealand Joint Food Standards Agreement.[7] The joint Australia New Zealand Food Standards Code came into force on 20 December 2002.2 There are two parts of it that are relevant to these proceedings. First, Standard 1.1.1 which is the general part and includes matters of interpretation, application, and general prohibition. Second, Standard 1.2.7 which is called"Nutrition, Health and Related Claims". This Standard was introduced in June 2013 at which point an overlap situation was created with an existing standard. There was allowed a three year window during which time persons affected could adopt the new standard or continue to operate under a transitional standard which reflected much of the existing standard. The overlap situation ends on 18 January 2016.2 It was introduced via the New Zealand (Australia New Zealand Food Standards Code) Food Standards 2002. Parts of the Code, including the provisions in issue, will be replaced by new provisions on 1 March 2016. Counsel agree that there are no material changes in terms of the issues arising here.Honey NZ has already committed to the new standard, so that is the only one being considered here.[8] At the heart of the case is the assessment of the respondent that the applicants' trademarks represent an unauthorised health claim and an unauthorisedtherapeutic claim about manuka honey. These concepts of "health claim" and"therapeutic claim" are defined.[9] First, a "claim" is defined in the general standard as meaning:An express or implied statement, representation, design or information in relation to a food or property of food which is not mandatory in this Code.[10] The parties agree that the labels on the product are a claim within this definition. They disagree on what is being claimed. The applicants acknowledge MANUKA DOCTOR and MANUKA PHARM are claims about the source of the honey; MPI says it is also a health claim and a therapeutic claim.[11] One then moves to Standard 1.2.7 for the provisions which MPI says are being breached. The starting point is cl 17(1) which provides that a health claim cannot be made other than in accordance with cl 17. Clause 17 has two routes by which health claims can be made. First there is a schedule which sets out permissible claims. These are situations where it has been proved health effects result. Second, there is set out a process which needs to be followed in order to have a new claim recognised. It is not suggested that a health claim about manuka honey comes within either of these options. Accordingly, if the labels DOCTOR and PHARM are health claims, they are prohibited.[12] The relevant definitions are found in cl 2 of Standard1.2.7:Health claim: a claim which states, suggests or implies that a food or a property of food has, or may have, a health effect.Health effect: an effect on the human body, including an effect on one or more of the following–a) a biochemical process or outcome;b) a physiological process or outcome;c) a functional process or outcome;d) growth and development;e) physical performance;f) mental performance;g) a disease, disorder or condition.General level health claim means a health claim that is not a high level health claim.High level health claim means a health claim that refers to a serious disease or a biomarker of a serious disease.[13] There is a blanket prohibition on the making of therapeutic claims. The relevant provision appears in an early part of the Schedule where absolute positions are established. For example, clause 3 prohibits health claims about kava, and about any products that have an alcohol content greater than 1.5 per cent. Clause 7 is the therapeutic claim prohibition and it states:7 Claims not to be therapeutic in natureA claim must not–(a) refer to the prevention, diagnosis, cure or alleviation of a disease, disorder or condition; or(b) compare a food with a good that is–(i) represented in any way to be the therapeutic use; or(ii) likely to be taken to be for therapeutic use, whether because of the way in which the good is presented or for any other reason.The issues[14] It is convenient first to focus on the issue of whether Honey NZ is making a health claim. Any remaining separate issues concerning whether it is also making a therapeutic claim can then be addressed if necessary.[15] If there is a health claim being made by Honey NZ, it is a claim that can only be implied from the labels MANUKA DOCTOR and MANUKA PHARM. Nothing else on the label could be seen as a health claim. Further, it seems clear that if thereis an implied claim, it can only be of a general nature. My suggested formulation (not being one advanced expressly by MPI) is that it would be a claim that in an unspecified way manuka honey has properties that will be good for your health.Honey NZ's position on that is that it is not making such a claim, but that in any event such general unspecific claims do not come within the Code, and are not prohibited. It is submitted that a specific identified benefit must be being claimed before the Code applies. The applicants achieve this outcome by interpreting health claim to always require an identified benefit.[16] MPI's position is that general claims are caught by the Code and are prohibited. As an alternative, the Director-General contends that a general claim is to be treated as being a claim about all of the specific effects identified in the definition; that is, a general claim must be taken to be a claim about growth and development effects, and a claim about physical performance effects, and a claim about mental performance effects and so on. As for whether a claim is being made, MPI says that the members of the public would see the use of DOCTOR and PHARM as claiming the product has health effects.[17] It is convenient to first consider whether the general type of claim being alleged is a "health claim", and, if so, then to assess whether Honey NZ's labelsrepresent such a claim.Issue one – need there be a specific identified effect before a claim is a "health claim"? Alternatively, are generalised health benefit claims caught by the Code?[18] A "health claim" is a claim which states, suggests or implies that honey has, or may have, an effect on the human body. The effects that are caught include effects on:(a) a biological process or outcome;(b) a physiological process or outcome;(c) a functional process or outcome;(d) growth and development;(e) physical performance;(f) mental performance;(g) a disease, disorder or condition.The primary contention by Honey NZ is that to be a claim within the meaning of the Code there must be claimed some specific effect such as those identified above. Forexample, "makes you run faster" would be a claim about physical performance.[19] Looking at the text and language of the Code, Honey NZ submits the ordinary meaning of "effect" is "something accomplished, caused or produced; aresult, a consequence".3 When that definition is inserted into the definition of health effect, the following meaning can be identified:health effect means a change to, consequence for, or result on, the human body, including a change to, consequence for, or result on:a) a biochemical process or outcome;b) [20] It is submitted that the concepts of change, consequence and result, when considered alongside the provision of a list of identified processes, mean that a health claim is to an identifiable change, consequence or result of the type identified.[21] Honey NZ takes support from the purposes of the scheme. The primary purpose is recognised as being consumer protection.4 But a clear other purpose is the facilitation of trade and the avoiding of unnecessary restrictions on trade.5 Here Honey NZ emphasises that the alleged implied claim flows solely from its use of its registered trademarks, one of which has been held since 2010. The Code should not be interpreted loosely so as to interfere with the legitimate use of these marks. That3 Citing from Lesley Brown ed The New Shorter Oxford Dictionary on Historical Principles, (Clarendon Press, Oxford, 1993) Vol 1 at 786.4 For reasons to be discussed later, Honey NZ submits its trademarks do not carry any risks.5 This purpose is identified in various places, including s 11B of the Food Act 1981 and Annex A to the original 1992 joint agreement which led to the Code.would unnecessarily interfere with trade, and be contrary to an important purpose of the scheme.[22] The applicants next draw support from the manner in which permitted health claims are expressed. Clause 17 of the Code, which recognises some health claims are permitted, cross-references to a schedule which sets these permitted claims out. An extract from the relevant schedule follows:SCHEDULE 2Conditions for permitted high level health claimsColumn 1 Column 2 Column 3 Column 4 Column 5Food or propertyof foodSpecifichealth effectRelevantpopulationContext claimstatementsConditionsA high intake of fruit and vegetablesReduces risk of coronary heart diseaseDiet containing a high amount of both fruit and vegetables(a) claims are not permitted on–(i) fruit juice or vegetable juice as standardised in Standard 2.6.1; or(ii) the food must contain no less than 90% fruit or vegetable by weight.Calcium Enhances bone mineral densityDiet high in calciumThe food must contain no less than 200 mg of calcium per serving.Reduces risk of osteoporosisPersons 65 years and overDiet high in calcium, and adequate vitamin D statusThe food must contain no less than 290 mg of calcium per servingReduces risk of osteoporotic fracture[23] Mr Brown QC places considerable reliance on the second column (specifichealth effect) as providing support for Honey NZ's contention that the Code is aimedat controlling claims about identified health benefits, and not general vague claims that are at most puffery. It is noted that in the definitions, the relevant health risksare identified in broad categories such as "growth and development" and then onegets to a most specific level in the Schedule – e.g. enhance bone density. Common throughout, however, is the identification of a specific benefit.[24] Honey NZ finally focuses on the process for seeking approval to make non-listed health claims. An applicant is required to comply with a systematic review process set out in the Schedule. Briefly this is a requirement to identify the health effect claimed, and provide the research said to establish the claim. The point on which Honey NZ relies is that again there is a need for a specific health effect to be identified.Discussion[25] At issue is what attitude the Code takes, if any, to unspecific general claims that a product "is good for you". The applicants' analysis convincingly establishesthat any permissible health claim will always require an identified benefit. That is to be expected since the specific benefit will be sourced in science, and will have been verified by proper research and testing, including the quantity of the element (e.g. calcium) that is required before the heath effect will be produced.[26] As MPI rhetorically asks, however, can these strict requirements be circumvented simply by making an unsubstantiated general claim that a particular food will affect a person's health in a positive way?6 Put that way, the answer canonly be "no".[27] The legislation is consumer protection legislation. It is designed to achieve uniformity and accuracy in food presentation, and to ensure consumers are properly informed. Misleading statements are to be prevented. A regime of authentication is6 Mr Brown notes positive is a gloss on the Code. That is so, but in the unlikely event a food is promoted for its capacity to have a negative health effect, the same issue would arise.established and must be met before a health claim can be made. It is instructive to detail these requirements:7(a) there must be a description of the search strategy used to identify the scientific evidence relied on;(b) the studies must include studies about humans – studies about the effect on animals and in vitro studies are not enough;(c) rules are prescribed for how studies are to be analysed and presented;(d) the conclusions drawn must include verifiable data about the amount of the food or food product required to produce the claimed benefit.[28] The clear import is that unsubstantiated and insufficiently ratified claims about the health benefits of food are not permitted. There is no policy reason to support the proposition that these strictures do not apply to general vague claims. It would be a surprising situation. The better interpretation of the scheme is that theonly health claims that are permitted are substantiated claims about identified benefits. A general claim about unidentified benefits is a health claim, just not a permitted one.[29] The purpose provision of Standard 1.2.7 identifies its aims as being to set out the claims that can be made and to describe the conditions under which such claims can be made. This articulated purpose in Standard 1.2.7 reflects the wider purposes that were identified in the background documents and agreements, such as the original inter-government agreement. The annex to that Joint Agreement included amongst its purposes the provision of adequate information to allow informed choice, the prevention of misleading or deceptive conduct, and the facilitation of access to markets including by the promotion of fair trading. None of this is suggestive of allowing unproven general claims about the health effects of a food.7 Standard 1.2.7, Sch 6.[30] It is important not to impose a gloss on the core definition of health claim. It is defined as a claim which states, suggests or implies that a food has or may have an effect on the human body. What follows thereafter are examples, but they do not qualify or limit this general definition. It does not stretch this general definition atall to regard claims such as "this food will be good for you" as coming within it. It is not credible that it was intended that it would be permissible to make a general claim to a benefit as long as one avoids saying how it would be good for you. The fact that the definition goes on to identify numerous categories of effects that come within the definition should not be seen as limiting the definition. Rather they emphasise its broad all encompassing nature.[31] I do not consider it is relevant at this point that the alleged general claim is being made by the use of a trademark. Mr Brown accepted that a trademark could be an implied health claim, and illustrated the point very well. His example was a calcium product sold under the trademark NO MORE BREAKS. The fact that it is conveyed by a trademark may influence whether consumers might see it as implied health claim, but does not deny that it could be amount to a claim of that type.[32] I therefore do not accept the proposition that to be a health claim, the alleged claim must identify a particular claimed benefit. A generalised wellness claim is nevertheless a health claim. It would, however, be prohibited by the Code. The only issue that arises, therefore, is whether Honey NZ is making a generalised wellness claim by the use of MANUKA DOCTOR and MANUKA PHARM.Issue two – do MANUKA DOCTOR and MANUKA PHARM represent implied general health claims, such as that taking manuka honey will be "good for your health" in an unspecified way?(a) Competing submissions[33] Honey NZ disputes that the labels represent such a claim or will be viewed as making such a claim. Emphasis is placed on the fact that they are trademarks, and therefore likely to be seen as identifying the source. It is noted that each time the label is used, there is the ® symbol next to it. Further, the accompanying text is said to reinforce this:Manuka Doctor – the specialists in quality New Zealand harvested Manuka honey;And:With levels certified by an independent validated laboratory, you can be assured of the rating in every batch of Manuka Doctor honey.[34] Mr Brown submits the relevant consumer group who it is asserted will infer this health claim is the general buying public. As a group the public is well familiar with the idea of trade marks, and their purpose of identifying the source of the product.[35] Honey NZ refers to apparently well known overseas marks such as DR PEPPER (soft drink) and DOCTOR KRACKER (crackers and crisps). It is submitted no one would infer that these marks are making health claims about their products.[36] Emphasis was also placed on what is said to be the changing articulation by MPI of the implied claim. The fact that there are variations is said to reflect a difficulty that arises because a clear likely inference to be taken by the public is not really there.[37] In reply, MPI submit the applicant's approach gives too little regard to themanuka honey context. It is submitted that there has long been a claimed association of manuka honey with health advantages. This is reflected in the premium price one pays for manuka honey over other honeys.[38] The second factor MPI emphasises is the association of DOCTOR and PHARM with health. In general terms a doctor is someone who heals; "pharm", it is submitted, is the root of pharmacy, pharmaceutical and pharmacist all of which are commonly associated with medicine.(b) Discussion[39] I was provided with dictionary definitions of doctor and with a close analysis by both sides of the language, the role of trade marks, and the correct test for howone determines whether the ordinary member of the public would infer a health claim from the label. Generally I accept Honey NZ's approach that the relevant group is the general buying public, and I accept that the public will approach the product using a reasonable measure of common sense. Using Red Eagle Corp Ltd v Ellis8 as a source, Mr Brown framed the test as whether the labels:Objectively imply a health claim or therapeutic claim to a substantial number of relevant consumers [here the buying public] exercising reasonable care.I am content to apply that, and I also accept the buying public is to a certain extent able to discern what is mere puffery.9[40] Where I differ from Honey NZ is that I do not consider that approach assists its cause. The use of DOCTOR and PHARM carries the clear possibility they will be seen as suggesting the product is good for you. In concluding this I am influenced by:(a) the common association of these concepts of DOCTOR and PHARM with health, healing and medicine;(b) the absence of any alternative meaning that could be attributed to them;(c) the lack of any other connection between these concepts and the product that could explain the use of the words other than this health context. If these trade marks are seen by the consumer to contain any message, then in my view it is a health message that will be inferred by the consumer.[41] The trade mark context is neutral. It is often the case that trade marks are neutral, contain no obvious connection to the product and are just identifiers of source. McDonalds is an obvious example. Other marks, however, do seek to achieve more by linking the mark in some way to the product or an aspect of the product. Damp Rid is an example of this, and consumers are used to both types of8 Red Eagle Corporation Ltd v Ellis [2010] NZSC 20, [2010] 2 NZLR 492.9 Unilever New Zealand Ltd v Cerebos Gregg's Ltd (1994) 6 TCLR 187 (CA).mark. There is a clear possibility here that the applicants' marks will be seen as examples of the latter.[42] I consider PHARM is the more arguable of the two. It is a made up word that is, standing alone, not in common use. One does not usually speak of going to the"pharm" and so the strong connection to health that exists with doctor is less present.However, pharmacy is a very common term and the link to that is apparent. Perhaps less people will imply a connection but a substantial number in my view would still infer a link to "pharmacy" and "pharmacist". Once a link is drawn, there is no doubt it is an implied health claim linking manuka honey to a health benefit.[43] There is merit in MPI's emphasis on what it calls the manuka honey context.It is a product that sells at a significant premium over other honeys. It is recognised to have health benefits as a wound dressing. There have in the past been claims of antibacterial benefits even when consumed. The likelihood of a general health benefit claim being inferred from these marks is increased because of this context, especially given the price and the fact that it has advertised health benefits when used in a different way.[44] Addressing directly another aspect of Honey NZ's case, its submission that any implied health claim must be viewed obvious and capable of clear expression is met here. By employing terms such as doctor and "pharm" in a context where theyotherwise have no discernible link to the product, the vendor is implying that the product if consumed will have a positive effect on the consumer's health. This is a claimed effect other than just that the consumer will enjoy the taste.[45] At one point in the submissions the applicants noted the most that could be said, although even this was disputed, was that the labels amounted to a claim that the product had "some general goodness" about it. I agree that it is another way ofputting it. Honey NZ's point in relation to that is that such claims are too general and vague to come within the Code's prohibition. For the reasons given earlier Iconsider they are properly caught, and that there would be a considerable gap in achieving the consumer protection purpose if unproven general claims about health benefits could be made.Conclusion[46] I accordingly conclude that both MANUKA DOCTOR and MANUKA PHARM represent prohibited general health claims that the product may have abeneficial effect on one's health when consumed.[47] It is not necessary to consider the alternative challenge of therapeutic claim, but in fairness to Honey NZ I record my view that this was a rather more doubtful allegation. The definition identifies two types of prohibited claim. The first appears to require actual reference to a disease, disorder or condition and is not engaged here. The second limb of cl 7 (b) (para [13] above) is not an easy provision to understand or apply. It would require considerable analysis, something not merited given that my earlier conclusions are dispositive of the application.[48] The applications are declined. It is agreed that costs follow the event on a 2B basis. Reasonable disbursements may be claimed. They are to be fixed by the Registrar if agreement cannot be reached._________________________Simon France JSolicitors:Jackson Russell, AucklandCrown Law, Wellington