OF AUSTRALIA AN ed: © Ke LhAt IN THE FEDERAL COURT) 4 "A wl VICTORIA DISTRICT REGISTRY Nos. VG. 15. 18, 21 of 1977 Ne eed GENERAL DIVISION BETWEEN: LAWRENCE O'HARA LARMER Informant AND: POWER MACHINERY PROPRIETARY LIMITED Defendant ORDER JUDGE MAKING ORDER: Nimmo J. DATE OF ORDER: 13th May 1977 WHERE MADE: Melbourne THE COURT ORDERS THAT: 1. The Defendant pay a penalty of One thousand dollars ($1,000) in respect of the first of the contraventions of section 53(c) of the Trade Practices Act 1974 and a penalty of Two thousand dollars ($2,000) in respect of each of the second and third contraventions of the said provision. 2. The Defendant pay the Informant's costs as agreed or in default of agreement as taxed. a ieee 8 ee ee ee 3. There be a stay of 28 days to 10 June 1977 for payment of the penalties. 4. The time for appeal to the High Court of Australia or to a Full Bench of the Federal Court of Australia be enlarged to 10 June 1977. 5. Until the time for appeai expires, namely 10 June 1977, the exhibits in the three cases be retained by this Court. FEDERAL COURT OF ) VG No. 15 of 1977 AUSTRALIA VG No. 18 of 1977 General Division VG No. 21 of 1977 In the matter of the TRADE PRACTICES ACT 1974 Between LAWRENCE O'HARA LARMER Informant and POWER MACHINERY PROPRIETARY LIMITED Defendant REASONS FOR JUDGMENT : NIMMO, J. 73 May 1977 The Defendant, Power Machinery Proprietary Limited (the Company) is a corporation registered under the provisions of the Victorian Companies Act 1961. On 4 and 5 May 1977 I found the Company guilty of three contraventions of Section 53({c) of the Trade Practices Act 1974. I stated at the time I made my findings that I would publish my reasons and fix penalties later. This I now proceed te do. Each of the contraventions aileged that the Company did ek a a a ett at re edi ae te Ae shee era A ae 8 pelea aoe me ae ee ee eR ee NT ad oe ON ee in trade or commerce in connection with the promotion by advertising of the supply of goods, to wit, 'Powamac! mobile A.C. electric welding machines represent that three of the models of the said machines so advertised, the 'Powamac Junior Model', the 'Powamac Minor Model! and the 'Powamac Major Model' had approval, namely, State Electricity Commission of Victoria Certificate of Suitability No. C.S.1768, they did not have. The first of the contraventions was alleged to have occurred on 18 August 1975 at South Melbourne and the representation to have been made in a brochure headed 'Powamac Long Life Universal Mobile A.C. Electric Welders! depicting on one side four different models of the said machines and designated 'P.M.12'. The second and third contraventions were alleged to have occurred on 20 August 1975 at Richmond and Port Melbourne respectively and the representation in both instances to have been made in a brochure headed 'Powamac Long Life Heavyweight Mobile A.C. Electric Welders! depicting on one side three different models of the said machines and designated 'P.M.12'. Although the three charges were heard separately, most of the evidence and Counsels' submissions were common to all three cases. The Company supplies a wide range of products of which the welders constitute about six per cent of its annual financial turnover. It does nearly all of its business through te ee emt ne a ea nationwide agents numbering in excess of 2,000, to whom it issues annually a roneod loose-leaf price list catalogue. The catalogue is effective as from 1 December each year and is up-dated during the ensuing year by replacement leaflets if price or data changes warrant it. About1966 the Company decided to issue, in addition to the catalogue, a glossy single sheet brochure, printed on both sides, advertising the range of welding machines and containing information similar to that in the price list catalogue sheets but without reference to price. In reprints of brochures of this kind between 1971 and June 1973 (the date of the last reprint) the Company claimed that the three welders pertinent to these charges were covered by the State Electricity Commission of Victoria (the S.E.C.) Certificate of Suitability No. C.S.1768. The undisputed fact is that the three welders concerned were not at any time material to these proceedings covered by that Certificate of Suitability. On 30 July 1974 the S.E.C. wrote to the Company notifying it that none of the three welders concerned was covered by its Certificate of Suitability, and about the same time, a similar notification was conveyed by telephone to the Company by a member of the S.E.C.'s staff. Shortly afterwards the Company issued a replacement leaflet relative to welding machines for its price list catalogue. This roneod sheet, effective as from 1 September 1974, contained no reference to 4, any S.E.C. Certificate of Suitability, whereas the sheet it replaced did. Two directors of the Company stated in evidence that this replacesent leaflet, which was sent to the Company's agents, was accompanied by a roneod loose slip requesting that the previous price list leaflet be removed from the catalogue. It also mentioned that the new leaflet was thenceforth to be the only leaflet applicable to the welder. No specific mention was made in the replacement leaflet, the loose slip which accompanied it, or otherwise, to the agents that the reason for the issue of the replacement leaflet was to rectify the false claim that the three welders were covered by the S.E.C. Certificate of Suitability. In relation to the first charge, when two officers of the Trade Practices Commission called at the Company's office at South Melbourne on 18 August 1975 they saw two glossy brochures of the kind described above affixed to a wall of the entrance foyer in which some power machines but not welders were on display. One brochure showed its obverse side and the other its reverse side. The obverse side contained the assertion that the models on the reverse side pertinent to this charge were covered by the S.E.C. Certificate of Suitability, Counsel for the Company argued that, in order to establish that the alleged offence had been committed, three things had to be proved. Firstly, that a representation had been made, secondly, that, if a representation had been made, it must be shown to have been made in trade or commerce. Thirdly, that, if a representation had been proved to have been made in trade or commerce, it must then be shown to have been an incorrect representation; furthermore, it must be shown to have been made in connection with the promotion by advertising of the supply of the power welders. In respect of the first point, Counsel conceded, quite correctly in my view, that a representation had been made on 18 August 1974. On the second point he contended that the Crown had not proved that the representation was made in trade or commerce on the ground that there was no evidence that any other person had read a copy of the offending brochure on 18 August 1974 other than the Trade Practices Commission officers who visited the premises of the Company on that date. He further contended that their reading of the brochure under the circumstances obtaining to their visit did not involve the defendant making a representation in trade or commerce. He stated that the two officers of the Trade Practices Commission went to the Company's premises, identified themselves as such, and stated that they had come as a result of a complaint. They did not state that they wanted to buy a welder, and in fact did not buy a welder, nor did they evince any interest in buying a welder. He submitted that they were there in their capacity as invest- igating officers of the Trade Practices Commission at the time the representation was made and consequently that the represent- ation was not made in the course of trade or commerce or in trade or commerce. I rejected the arguments of Counsel for the Company for the following reasons. I do not think that the expression 'in trade or commerce' should be given the narrow interpretation contended for by Counsel for the Company. On the contrary I think the provisions of the Trade Practices Act, including the definition given to the expression in Section 4, demand that a very wide meaning be given to it. In my view, the expression is intended to cover the whole field in which the nation's trade or commerce is carried on. I reject the view that it is confined to any particular event which may occur in the conduct of a business which operates within that field. In my opinion, the display of the offending brochure in the foyer of the Company's premises, which was the main place of entry thereto by the public, both dealers and potential clients alike, constituted in itself a representation for the promotion by advertising of the supply of the Company's welders in that part of trade or commerce in which the Company functioned. I therefore held that the contravention alleged had been established. In relation to the second charge, when an officer of the Trade Practices Commission called at the premises of Genco Fittings Proprietary Limited, an agent of the Ccmpany, at Richmond, on 20 August 1975, he asked for and received two brochures which were affixed to a wall of the showroom of that company in similar fashion, that is, displaying the obverse and reverse sides, to those which were affixed to a wall of the foyer at the Company's South Melbourne premises. The obverse side of this brochure contained the representation that the three models referred to in the charge, and which appeared on the obverse side, were covered by the S.E.C. Certificate of Suitability No. C.S.1768 whereas in fact they were not. Evidence established that these brochures were two of about twenty received by the managing director of Genco Fittings Proprietary Limited from the Company 1n response to a telephone call to one of the Company's directors in April 1975. The managing director stated that he obtained the brochures to distribute to potential purchasers of welders. He informed the Trade Practices Commission's officer that he had not received advice from the Company to the effect that the brochure concerned had been superseded. Relevant evidence given, and exhibits tendered during the hearing of the first charge and submissions made by Counsel in the course of that hearing, were, at Counsels!' request, adopted for the purposes of this charge. In my opinion, and for the reasons given in the first case, the display of the brochure in the showroom of Genco Fittings Proprietary Limited constituted in itself a representation for the promotion by advertising of the supply of the Company's welders in that part of trade or commerce in which the Company functioned. I also found that the representation that the we \ ee ee welders concerned were covered by the S.E.C. Certificate of Suitability was incorrect. Accordingly I held that the contravention alleged had been proved. In relation to the third charge, an officer of the Trade Practices Commission attended at the premises of Elder Smith Goldsbrough Mort Limited, another agent of the Company, at Port Melbourne on 20 August 1975 and interviewed the production manager who, on request, handed to the officer one of the Company's brochures identical to the one referred to in the second charge. The production manager stated in evidence that he had received that brochure about July 1975 in response to a request made by him to a representative of the Company. He stated that he requested the brochure because he required as much information as he could obtain for the purpose of assist- ing him in marketing the power machinery range of equipment his company had for sale. He informed the officer of the Trade Practices Commission that brochures of the kind produced were handed to consumers on request and that he had not receive: any advice from the Company that they had been superseded. Again in relation to this charge the relevant evidence given and exhibits tendered during the hearing of the first charge and submissions made by Counsel in the course of that hearing, were, at Counsels' request, adopted for the purposes of this charge. In my opinion the provision of the brochure to the Company's fe ce a ee nt aaah mentees Late en on a en te ee at Ae te oe, we ee eee ee ine met agent constituted in itself a representation for the promotion by advertising of the supply of the Company's welders in that part of trade or commerce in which the Company functioned. I also found that the representation on the obverse side of the brochure that the welders described on the reverse side were covered by the S.E.C. Certificate of Suitability No. C.S.1768 was incorrect. Accordingly I again held that the contravention alleged had been proved. I turn now to the question of penalties. The Act provides for a maximum penalty of $50,000 for each of the contraventions by the Company of Section 53(c). At the outset it should be pointed out that the Company was not obliged to obtain a S.E.C. Certificate of Suitability in order to sell its welders. Although such a Certificate is issued after tests to ensure that the item submitted to the S.E.C. is safe for use by members of the public, it was conceded in these cases that use of the Company's welders did not constitut a safety hazard. The Company did not engage in any form of advertising through media channels or by direct distribution of its brochures to the public. The last initiative taken by the Company to distribute an offending brochure to all its agents took place early in 1974 and before the Trade Practices Act became law. Unless requested otherwise, the practice of the Company was tc as ete eee ener nen enn me eneretdeninateimet eileen, to eetsmneenotnse Ds Ae an a eld aS et riarenmmtenernni ss hate ws 2 (eae enenn cng « Ce iene: 10- send only one brochure to each agent. Prior to the commission of the contraventions at least two replacement leaflets for the catalogue accompanied by a roneod loose slip of the kind previously described were sent by the Company to its agents. Neither of these replacement sheets contained the offending representation. In this connection it is ny view that the Company should have expressly drawn the attention of its agents to its untrue claim that its welders were covered by the Certificate of Suitability as soon as it was informed by the S.E.C. in July 1974 that they were not so covere By not making a specific reference to the offending brochures an by continuing to display and distribute them its untrue representation in its brochures was permitted to continue. The replacement sheets to the catalogue did not in my opinion constitute an effective notification to the Company's agents that the claim in respect of the S.E.C. Certificate of Suitability was no longer tenable. I am satisfied that the representation in the Company's brochure that the welders were covered by the S.E.C. Certificate of Suitability was a sales attraction to potential purchasers. The Company is a family company with four shareholders. Its business is conducted by two shareholder directors and a small staff. The wives of the directors are the other shareholders. The two directors have for years worked long hours for relatively small salaries and directors' fees. The net profits derived by the Company over the last three years have been of a modest nature, and as far as possible, have been invested ene Ne he one re 11. I do not think that the Directors of the Company deliberately planned to mislead its Agents and potential purchasers of its welders but due to their preoccupation with the task of developing the Company's business with limited funds they failed to take proper care that the Company's brochures were true in all respects particularly after the S.E.C. had informed them that the statement in their brochures in relation to the S.E.C. Certificate of Suitability was untrue. I regard all three contraventions as serious but consider the second and third more serious than the first because of its lesser promotional potential. I am conscious of the legislative intent to maintain high standards of business integrity in order to protect the consumer as indicated by the magnitude of the maximum penalty of $50,000 for each contravention of Section 53(c) by a body corporate. However, I do not think that the contraventions by the Company warrant the imposition of penalties which would be oppressive to it in its present financial circumstances. I therefore impose in respect of the first contravention a penalty of $1,000 and in respect of each of the second and third contraventions a penalty of $2,000. I order the Company to pay the Informant's costs as agreed or in default of agreement, as taxed.