x 4" COPY OF JUDGMENT oe @ CCH Australia Limited TAX AND BUSINESS LAW PUBLISHERS P.O. BOX 230, NORTH RYDE, N.S.W 2113 CNR. TALAVERA & KHARTOUM ROADS PHONE 888 2555 (8 LINES) Dalle, Reaue + Bentacl. PIL NAME OF CASE ones Qutkvie v. Guewesat—lelecasteus "(in brief, for identification of judgment only) DATE OF JUDGMENT ©. oes. 02 '8%,,,, Sephemmboes | 1A COUNSEL for oe MA DMCLE: Bewinaton OC. instructed by . .COMMmeaccalt. CGousnr Sclicater COUNSEL for sense ee, As Tiago OO the Deferdors! instructed by .... . Herwhesean + bales). fo. SIGNED... .AR?, Ateton, | Associate pate.. . 22:9 Te IN THE FEDERAL COURT OF AUSTRALIA No. B.226. of 1976 .QUEENSEANR ... 2.2.2... DISTRICT REGISTRY wesw ww GENERAL DIVISION In the matter of - THE TRADE PRACTICES ACT 1974 BETWEEN 2: .eeeeee eee eee crn erences essesenre ... TERENCE, JAMES, GUTURIE ... - beter eeee cece cence enh OrmANt .-. BOYLE .DANE & BERNBACH, PTY. LIMITED ee i ry oe+- Defendant-:-: ORDER JUDGE(S) MAKING ORDER : ST. JOHN J. DATE OF ORDER : 21 SEPTEMBER, 1977. WHERE MAUE : BRISBANE THE COURT ORDERS THAT: 1. The defendant company is convicted. , 2. The defendant company is to pay a penalty of $2,000 (TWO THOUSAND DOLLARS). 3. The defendant company is to pay the informant's costs. Date Entered: DISTRICT RECISTRAR, re ee ee IN THE FEDERAL COURT ) ) B. No. 226 of 1976 OF AUSTRALIA ) . GENERAL DIVISION In the matter of - THE TRADE PRACTICES ACT 1974 BETWEEN: TERENCE JAMES GUTHRIE Informant - and - DOYLE DANE AND BERNBACH PTY.LIMITED Defendant REASONS FOR JUDGMENT ST.JOHN J. WEDNESDAY, 21 SEPTEMBER, 1977. The defendant company is charged pursuant to Section 53{(e) ; of the Trade Practices Act 1974 (the Act) in that, it did, in contravention of that section, in trade or commerce, in connection with the promotion by advertising of the supply of goods, to wit Ford Falcon motor cars, make a misleading statement concerning the existence of price reductions. It is alleged that the misleading statements were made in an advertisement published and screened over television station TVQ Channel O at Brisbane in the state of Queensland. Consent to bring the proceedings was given by the Attorney- General on 8 April, 1976. . By consent the transcript of certain of the evidence in proceedings B. No.224 of 1976 between the same informant and Metro Ford Pty. Limited has been tendered. Certain additional documentary evidence has been tendered and the defendant company has cailed one further witness. The advertisement in question was made for Metro Ford Pty. Limited and was recorded on video tape. A person, known as a presenter, spoke the words set out hereafter in a didactic and declamatory manner and specially emphasised the word "only" where it appears before "April 30". At various stages throughout the advertisement certain printed words and sums of money in figures appeared on the screen and various motor cars were pictured on the screen, the Ford Falcon 500 appearing after the words "April Fool" where first used. --/2 : For the purposes of the prosecution the relevant words in the advertisement were:- "Dr. Jim's lovely tax cuts are guaranteed till ' only April 30, so if you haven't been out to Metro Ford by then you could be a deadset April ' Fool. Metro Ford offer immediate delivery of 1 automatic Falcon 500 sedans that save you $335.00. T£ you don't take delivery by April 30 you're up for an extra 335 bucks in tax." The reference to "Dr. Jim's lovely tax cuts" was a reference to a reduction in the percentage of sales tax payable on motor- vehicles announced by the Commonwealth Treasurer, Dr. J. FP. Cairns, by way of a press release on 31 January, 1975. F Those reductions included a reduction from 27%% to 15% on private passenger vehicles for a period from 29 January to 30 April, 1975 and after that date a monthly increase of 24% bringing the sales tax back to a percentage of 275% { on 1 September, 1975. Subsequently legislation was enacted i in order to effect such reductions in sales tax. ' The relationship between the defendant company and Metro Ford Pty. Limited commenced in or about October, 1974. On 22 October, 1974 Metro Ford Pty. Limited wrote to the defendant company confirming the appointment of that company as advertising agents for Metro Ford Pty. Limited. In the initial conversation preceding appointment Mr. Morris, the -/3 managing director of Metro Ford Pty. Limited, used words to the effect that it would be necessary in the performance of the agency contract that he had to finally approve every advertisement before publication of it. No written contract was entered into between Metro Ford Pty. Limited and the defendant company. Metro Ford Pty. Limited were, given on each occasion that an advertisement was prepared, the opportunity of approving or disapproving its contents and in particular that company was given the opportunity of approving or disapproving the advertisement in question. However, a script of the particular advertisement was altered from that approved by Mr. Packard of Metro Ford Pty. Limited without his authority. Mr. Slade, who was in charge of the making of the advertisement by the defendant company, and who described himself as a retail creative director of the defendant company made alterations. The most significant change effected by Mr. Slade was to change the words "you could be up for" to "you're up for". Mr. Slade stated that this and other changes were made in order to compress the advertisement within the desired time schedule. It has been argued for the defendant company that the words in the advertisement, firstly do not relate to price reductions and secondly, are not misleading. It is submitted that the advertisement relates to future price increases and not to reductions at all. In my view this argument is without substance. The advertisement is to the effect that there is a price reduction in existence and that it will exist only until April 30. In my view it is clearly a statement --/4 concerning the existence of price reductions within the meaning of the relevant section. "Price" is defined in Section 4 of the Act as including a charge of any description. The umposition of sales tax is, of course, a matter of law and expert evidence was tendered to the effect that sales tax was levied on the last wholesale transaction in respect to the goods in question. It is clear that sales tax is a component in the retail price of the vehicles being advertised and I am satisfied that the advertisement concerned a reduction in price. The use of the words "that save you $335" to a prospective purchaser clearly relate to price and would be so understood by that prospective purchaser. As to the sentence, "Dr. Jim's lovely tax cuts are guaranteed till only April 30" it was submitted that it is an accurate statetment of the situation and that argument is based upon a press statement of the treasurer dated 28 January, 1975. It is contended that the question of sales tax after 30 April is left in a situation of doubt because of the content of this statement. In my view the statement deals with broad questions relating to unemployment and the motor industry generally and does not detract from the press statement of 31 January wherein the precise tax reductions up till 30 April and the gradual reimposition of the full rates is set out. In any event the sentence has to be read in its context and if the prospective purchaser were left in any doubt after listening to that sentence that doubt would be dispelled by two following sentences, "Metro Ford offer immediate delivery of automatic Falcon 500 sedans that save you $335.00. If you don't take delivery by April 30 you're up for an extra 335 bucks in tax." ~-/5 al Counsel for the defendant company has submitted that the application of Section 5 of the Crimes Act 1914 has the effect of producing a further ingredient in the offence under Section 53(e) of the Act, that further ingredient being knowledge in the defendant company that the statement was misleading. In Kurutz v Mayne 1966 S.A.S.R. 82 the appellant was charged and convicted of having aided and abetted, counselled and procured the commission of an offence, namely, the offence of having driven a motor vehicle whilst so much under the influence of intoxicating liquor as to be incapable of exercising effective control of the vehicle. For the appellant it was contended that it was necessary for the prosecution to prove that at the time of the commission of the offence the appellant knew that the person who drove was so much under the influence as to be incapable of exercising effective control. This contention was rejected. Walters A.J. held that a provision similar to Section 5 of the Crimes Act (namely Section 53 of the Justices Act 1921-1960 (S.A.)) was purely declamatory of the common law and did not create any new offence, relying upon Lenzi v Miller 1943 V.L.R. 44. Similar conclusions were reached by the New South Wales Court of Criminal Appeal in Reg. v Gliennan 91 W.N. (N.S.W.) 609. It appears clear that where an offence is one of strict liability the application of Section 5 of the Crimes Act does not have the effect of introducing an element of mens rea or an additional ingredient. - The defendant company relies upon Section 85 of the Act. The defendant company gave the requisite notice pursuant to Section 85(2) of the Act alleging that the defendant company reasonably relied on information supplied to it by Mr. Morris, the managing director of Metro Ford Pty. Limited, in relation to the prices of vehicles offered for sale and in the incidence of sales tax andamy mis-statement as to the incidence of sales tax was due to the act or default of the said Mr. Morris in the supply of information concerning the incidence of sales tax. In order to succeed in such a defence it 1s necessary under Section 85(1)(b) for the defendant company to prove that it took reasonable precautions and exercised due diligence to avoid the contravention. It is to be noted that the onus, albeit a civil onus, is on the defendant company. The only evidence specifically directed to this issue would appear to be the evidence of Mr. Dennis a director and general manager of the defendant company from December, 1974 onwards. Mr. Dennis said that in his experience the practice of advertising agencies was to rely upon information given to the agency by the client and that the client was charged with responsibility of giving such information. If particular facts were to be used in an advertisement those facts would be obtained from the client. In his experience where the client was a responsible or well-managed organisation reliance on information supplied by it would be made. So far as the particular company, Metro Ford Pty. Limited, was concerned he said this: "We had put together a number of campaigns, the information had always been reliable and the management of Metro Ford in our view was quite excellent." He went on to repeat that it was common practice in the industry for the advertising agent to rely on factual information where the client was regarded as a responsible body. The first observation I wish to make is that practice in the advertising industry is not relevant unless it amounts to a precaution or indicates the exercise of diligence within the meaning of the sub-section. I see nothing in Mr. Dennis?® evidence which indicates that the defendant company took any precautions or exercised any diligence; in fact, if anything it indicates a lack of diligence. Similar words to those contained in Section 85(1){d) are contained in the English Trade Descriptions Act Section 24. In Sherratt v Geralds The American Jewellers Limited 1970 Sol. Jo. 147 the defendants were charged with supplying a wrist watch described as waterproof. The purchaser tested the watch for water-—proofness and found it lacking and the defendants contended that the watch had been bought from a reputable wholesaler with whom they dealt with for sometime and with whom they had had no previous trouble; that no precautions had been taken but they had relied on the reputation and experience of the wholesalers. The Divisional Court of the .-/8 Sr la ee ee ee eet Queen*s Bench Division consisting of Lord Parker C.Jd., Ashworth and Talbot JU. held that clearly there had -. been no precautions and to succeed they would have had to show that if no precautions had been taken there were none reasonable to be taken. Sherratt's case was followed in Naish v Gore (1971) 3 A.E.R. 737 by Lord Widgery C.J. at 741 where his Lordship said this: "The effect of that authority, as I see it, is to emphasise that the onus is on the defendant. It is for the defendant to prove that he took all reasonable precautions, and if he has taken none, that means he must prove 'that none could reasonably have been taken." In addition to there having been no precautions taken there is also no evidence of the exercising of any diligence. The incidence of sales tax and the treasurer's intentions in relation to it are matters of public knowledge available to those who took the trouble to enquire. No reasonable explanation could be advanced as to why in circumstances such as in the instant case the defendant company could not have made its own enquiries as to the incidence of sales tax and the duration of any sales tax cuts. There is no evidence of specific attention being given to avoiding contravention of Section 53(e) of the Act. TI have been asked to draw inferences in the defendant company's favour from certain records. These inferences do not clearly arise and therefore I gain no assistance from these documents. --/9 ao Rh ie A whee sant tare a ie. There being no defence established pursuant to Section 85, I convict the defendant. In doing so, I apply the criminal onus. The breach occurred within months of the Act coming into force. The defendant company was careless of its obligations rather than reckless. The advertisement related to the purchase of a substantial item, a motor car. To the submission that being mislead did not mean a loss to the purchaser it can be replied that the purchaser may have been induced to buy when he might not otherwise have done or may have been induced to buy the Ford vehicle in preference to another make. I impose a penalty of $2,000 and order the defendant to pay the informant's costs of the proceedings.