Carter Holt Harvey Limited v Cotton Soft Limited

Harrison J, High Court, Auckland, CIV 2003-404-4809, 8 April 2004

This case concerned geographical origin claims in relation to a product partly manufactured in another country. Cotton Soft represented its toilet tissue and paper towel products as being made in New Zealand. Cotton Soft was importing processed tissue in bulk rolls from Asian countries, principally Indonesia, which it was converting into various brands of consumer sized products as its plant in New Zealand. Carter Holt Harvey, a competitor, commenced action against Cotton Soft under ss 9 and 13(j) of the Fair Trading Act 1986. S9 generally prohibits misleading and deceptive conduct in trade and s13(j) specifically prohibits the making of false or misleading representations concerning the place of origin of goods.

Cotton Soft admitted that at least some of its packaging represented that its products were made in New Zealand. It denied that this representation was misleading for three reasons:

(a) It used a “Buy New Zealand Made” certification trade mark in accordance with the licence applying to that mark;

(b) The manufacturing process applied in New Zealand by Cotton Soft to the imported tissue was what gave the products their essential character as consumer products; and

(c) The nature of the manufacturing and conversion processes applied by Cotton Soft in New Zealand were such that the place of origin of the products can properly be said to be New Zealand.

Both sides give expert evidence as to the process of turning wood fibre into tissue. Essentially, four stages were identified being:

(a) Growing trees to provide wood fibre;

(b) Conversion of wood fibre into pulp;

(d) Conversion from the large reels to consumer sized toilet rolls, facial tissues etc. This stage can also involve plying several sheets together, embossing, printing and colouring.

Cotton Soft carried out only the fourth step in New Zealand, the first three steps occurring in Asian countries. By contrast, Carter Holt Harvey carried out the entire process in New Zealand.

In determining whether Cotton Soft products were, as a matter of law, manufactured in New Zealand, a number of New Zealand and Australian cases were referred to. It was held that the average shopper would accept as true a statement that goods were made in New Zealand even if the raw materials originated elsewhere, provided that the manufacturing process occurred substantially in New Zealand. Determining whether this occurred requires a quantitative assessment of the origins of significant change in the product. It was held that “determination of whether or not goods were made in New Zealand is very much a question of fact and degree, and impression”.

The judge found that the critical stage in the manufacture of tissue products is when the pulp is turned into a sheet of tissue. This is a crucial change in form after which the basic characteristics of the product remain unchanged. Although the product is not in a form useable by consumers, it is recognisably tissue paper. The products in question could therefore not honestly be said to be made in New Zealand and Cotton Soft was in breach of the Act.