CATCHWORDS Trade Practices - false representation in relation to sale of motor vehicle - plea of guilty by director and executive and by company ~- imposition of pecuniary penalty. ", . IN THE FEDERAL COURT OF AUSTRALIA No. G. 7 of 1979 GENERAL DIVISION No. G. 8 of 1979 In the matter of - THE TRADE PRACTICES ACT 1974 BETWEEN: MICHAEL JOHN O'NEILL Applicant and EL CAMINO AUTOS PTY. LIMITED Respondent AND BETWEEN: MICHAEL JOHN O'NEILL Applicant and THOMAS KENNEDY MACKENZIE Respondent REASONS FOR JUDGMENT 7 February 1980 Brisbane LOCKHART J. The respondent El Camino Autos Pty. Limited ("the company" ) aus charged with the offence under s. 79 of the Trade Practices Act 1974 ("the Act") of contravening s. 53 (a) of the Act in trade or commerce in connection with the promotion by any means af the supply of goods, in that the company falsely represented that the goods had had a particular history, namely, that on or about 23 November 1978 at Southport in the State of Queensland, the company ' «2/2 represented to Sara Bessie Landman that a Mazda sedan registered number 798-NIY supplied by the company had travelled approximately 41,000 miles, which representation was false, in that the vehicie had travelled substantially in excess of that mileage. The company pleaded guilty to this charge. The respondent, Thomas Kennedy Mackenzie ("Mackenzie") is charged with the offence of being knowingly concerned in the commission of the offence by the company to which I have referred. The foundation for this charge is s. 5 of the Commonwealth Crimes Act 1914. Mackenzie pleaded guiity to the charge. By consent both charges were heard together, the evidence in one being evidence in the other. At the outset of the hearing I was informed by counsel for the informant and for Mackenzie, and by the solicitor for the company, that the course that they intended to follow was to place before the court material relevant to penalty by statements from the bar table. No sworn evidence, either oral or by affidavit, was to be adduced unless a statement by one counsel or solicitor as to the facts was disputed by his opponent. That proposed course of conduct was said to be in accordance with the practice of the Supreme Court of Queensland an considering penalty in criminal proceedings. In Trade Practices Commission v. Madad Pty. Ltd. (1979) A.T.P.R. 40-105, p. 18,054, Keely J. dealt with the proper practice to follow where admissions have been made in placing material before this court on the question of penalty. -.-/3 His Honour said at p. 18,056:~ "Accordingly, I consider it preferable that evidence of the facts which either party proposes to rely on should be placed on affidavit and filed and served upon the opposing party in sufficient time to enable it to check the accuracy of the statements in it. It may be necessary for 1t to seek detailed instructions as to the facts asserted in order to enable cross-examination of a deponent or for the preparation of affidavits in reply. Parenthetically, I maght add that in the present proceedings, because of the late stage at which the Court learnt of the course proposed by the parties, the tame fixed was much shorter than is desirable. The obtaining of sufficiently detailed instructions may well take a considerable time as 1t may require the plaintiff, for example, to discuss with persons affected by the alleged contraventions (such as the three retailers in the present proceedings) the contents of any affidavits filed on behalf of a defendant," His Honour gave full reasons for his conclusion that there is a need for sworn evidence in respect of matters of this nature. I entirely agree with what his Honour said. Adoption of the course suggested by his Honour in proceedings before me may, however, have led to an adjournment to enable affidavits to be prepared or oral evidence to be given. At the request of all parties, I acceded to the course of procedure suggested by them. Following a recital of the facts by counsel for the anformant, it became apparent that further instructions had to be sought by counsel for Mackenzie and by the solicitor for the company. Those instructions were forthcoming, but only after I adjourned for a time, and led to the calling of oral evidence from Mackenzie and the tendering of documents. At one stage, it appeared that it wee /lt might be necessary for the proceedings to be adjourned, but the good sense and co-operation of counsel and the solicitor for the company prevailed, and an adjournment was avoided. This emphasized the desirability of following the practice suggested by Kelly J. in Madad (supra) in cases of this nature. The further reason for following this practice is that it would avoid the question arising in any subsequent proceedings under s. 82 of the Act whether there has been a "fanding of any fact" by this court in proceedings for an offence under s. 79. I turn now to the facts and matters which the parties agreed I should take into account in determining the appropriate penalty. In or about August 1971 Anthony Ian Bates of Maryborough in the State of Queensland purchased a new Mazda Capella 1600 sedan, being the vehicle the subject of the proceedings. He drove the vehicle continuously until 11 May 1978 when he traded it 1n on a new vehicle at a business known as Hecker Motors in Maryborough. Mr. Bates did not retain any records in relation to the Mazda, but recalls that the odometer reading was in excess of 70,000 miles when the vehicle was traded in. He has signed a statement to that effect. The vehicle came into the ownership of a business trading as Brisbane Motor Auctions who sold iat on 25 July 1978 to the company. At the time of purchase of the vehicle by Brisbane Motor Auctions from its previous owner, a form titled "Statutory Declaration and Contract of Sale" was completed by an employee of Brisbane Motor Auctions, 2/5 one Michael Richard Wilson, who has signed a statement to the effect that the details on the form concerning the subject vehicle, including the odometer reading, were completed by him, and that the odometer reading of 71,147 miles was placed by him on the form after physically checking the odometer reading. Maxwell Blake has signed a statement in which he says that he is employed by Brasbane Motor Auctions, that he tested the subject vehicle prior to 1ts sale to the company, and that he completed a mechanical report in respect of it. He recognised the odometer reading of 71,155 miles on the report as being in his own handwriting. He states that he checked the odometer to record the reading and that the practice is that a copy of a report of this nature is placed in the vehicle for inspection by prospective purchasers. In the last week of November 1978, Mrs. Landman, as a result of meeting Mackenzie socially and mentioning to him her interest 1n buying a Mazda car, and being invited by him to attend his car yard to inspect two Mazdas, attended at the premises of the company at Ferry Road, Southport. She saw Mackenzie there who showed her the subject vehicle. Mrs. Landman aunspected it and sat in the front seat. She observed that the speedometer showed the vehicle as having travelled only approximately 41,000 miles. Mrs. Landman has made a signed statement and in it she says that she then said to Mackenzie words to the effects 2/6 -6- "Tt as a 1971 model and it has only done about 41,000 miles. Is there any chance that the speedometer reading is not correct?" She states that Mackenzie replied to the effect, "There is no chance of that. It 1s a low mileage car. You can see that from ats condition." Mrs. Landman then said that she would like to have an inspection of the vehicle by the Royal Automobile Club of Queensland (R.A.C.Q.) to which Mackenzie replied: "Tl think you would be wasting your money. It would cost $27.00. We are friends. I will look after you. You do not need to worry about it." He valued the motor car she then owned at $600.00 as a trade-in on the subject vehicle. She was anterested in the offer, but wished to think further about it. During the next day or so she took a friend to the yard to inspect the vehicle and to test-drive it. After her friend test~drove the vehicle, they returned to the car yard where she spoke to Mackenzie again about purchasing the car. Mackenzie reassured her about the car and said words to the effect: "It is a low-mileage unit 1n good condition, If there are any problems, I wili look after you." Mrs. Landman then told Mackenzie she would purchase the car. On 30 November 1978, Mackenzie delivered the car to Mrs. Landman's residence. She paid him $1,926.00 being the difference between the purchase prace of $2,526.00 and the trade-in allowance of $600.00. As a result of something she was told by the mechanic at a «0/7 farm called Southport Mazda, Mrs. Landman arranged for an R.A.C.Q. anspection to be carried out on the vehicle. She then made ianquiries concerning the previous ownership of the vehicie and located Mr. Bates, the original owner. H As a result of what he told her, she made a complaint to the Trade Practices Commission. On 5 October 1979 ' Mackenzie and one Donald Theodore Reynolds were interviewed by the informant, an officer of the Trade Practices Commission, in the presence of the solicitor of the company and another Trade Practices Commissioner officer, : Terence James Guthrie. . After the informant had stated the nature of the complaint of Mrs. Landman, Reynolds identified himself as the managing director of the company, and Mackenzie identified himself as a director of the company. Reynolds stated that he was entitled to speak for the company. He admitted that the subject vehicle had been sold by the company to Mrs. Landman. Reynolds and Mackenzie were then warned by the anformant against self-incrimination. Reynolds stated that they had no documents to substantiate from whom the vehicle had been purchased by the company. In answer to a question from the informant as to whether he had any records in relation to the transaction, Reynolds said: "Sure we have." He was then asked to produce the copy of the Brisbane Motor Auctions mechanical report previously referred to. Mackenzie then stated: .-/8 : "We do not keep copies of those; they are only auction mechanical reports." The anformant then said: "Mrs. Landman states that when she took possession of the vehicle, the odometer reading was approximately 40,000 miles. By comparison, the records of Brisbane Motor Auctions show the vehicle was sold by your company with 71,155 miles. Can you explain the difference?" Reynolds replied: "No, I cannot." He then consulted with the company's solicitors and said: "I dad not alter any odometer." He further stated that he did not know anyone who did. He admitted the vehicle was in the care and control of the company from the time it was sold to the company by Brisbane Motor Auctions until 1t was sold to Mrs. Landman by the company. Mackenzie was asked if he had any explanation and he replied: "No." After discussion in private with their solicitors, Reynolds and Mackenzie declined to be interviewed further. In addition to those facts and matters, I make the following findings of fact based on the exhibits tendered in evidence before me and the oral evidence of Mackenzie. The company carried on business as a dealer in motor cars at Southport, Queensland. At all material times its issued and paid up capital was $2,000.00. Its directors were Reynolds, Alma Reynolds and Mackenzie. Mackenzie's wife was the company secretary. The shareholders were Reynolds 22/9 Holdings Pty. Lamited, Mackenzie and his wife, their shareholdings being 1200, 400 and 400 ordinary shares respectively. The company's trading account for the year ended 30 June 1979 shows sales of $429,963.00 less purchases of stock and other items referable to the cost of sales of $414,320.00 and closing stock of $45,280.00 leaving a trading profit of $60,922.00. After deducting expenses, the company sustained a net operating loss of $1,054.55. Mackenzie gave evidence that he was a director and shareholder in name only, and that in truth he was merely an employee, that he had the responsibility for the day-to-day operations of the car sales business carried on by the company and was the only person at the company's premises. He said that Reynolds controlled the company. He said that he had been engaged in the business of selling cars since 1965 and left the company's employ in the First week of December 1979 of his own choice. He said that he was served with a summons initiating these proceedings about one month before he left the company's employ and that the two were not connected. He conceded that Reynolds was upset about the proceedings, but said that that was not the reason for his leaving the company's employ. Mackenzie said that he noticed at some stage after the company acquired the subject vehicle that 1ts odometer was broken, that he took 1t out of the car and tried to get «+ /10 ~10— a second-hand one. He said that because it was a second-hand car, he could not get one, so he arranged for a man who was not an officer of the company, whom he described as an "odd-job man", to repair the odometer and paid him a few dollars for his services. He said: "The odometer was broken. I did take the odometer out of the car and I did ask someone to try and repair it. The thing about it was when it came back it did have only 41,000 miles on it, when in actual fact I suppose really basically what I should have done - when you think about it - was either get a new one - complete new one or have it put back to the proper mileage on what it was originally instead of leaving it - what it came back as." I do not believe Mackenzie's explanation as to how the odometer reading came to be altered. The facts which I have stated earlier render it improbable that the odometer was broken at the time the company acquired the vehicle. There is no evidence as to how it came to be broken thereafter. When anterviewed by officers of the Trade Practices Commission, Mackenzie said that he did not know who altered the odometer. That was a false statement on Mackenzie's own admission in evidence before me. However, whether Mackenzie altered the odometer himself or asked the "odd-job man" to do so or merely noticed the alteration after the odometer was returned to him is not critical. On any view of the facts, Mackenzie deliberately deceived Mrs. Landman on two consecutive days as to the correctness of the odometer reading. In my opinion the relevant matters to be taken into account on the question of penalty 1n cases of this nature include the following:- «ee/11 -11- (1) the objectives of the Act; (2) the extent to which the false representation influenced the supply of the relevant goods; (3) the degree of falsity of the representation; (4) the degree of wilfulness or carelessness in the making of the representation; (5) the extent of the dissemination of the representation,and (6) the efforts, 1f any, made to remedy any false umpressions which have been crated and to compensate any person who sustained loss by reliance upon the representation. I respectfully agree with what was said by Smithers J. about these matters in Eva v. Mazda Motors (Sales) Pty. Ltd. 1977 ATPR 40-020 and Eva v. bouthern Motors Box Hill Pty. Ltd. (1977) 15 A.L.R. 428, See also Eva v. Preston Motors Pty. Lamited 1977 A.T.P.R. 40-048; Given v. C. V. Holland (Holdings) Pty. Limited (1977) 15 A.L.R. 439; Finger v. Malua Motors Pty. Limited 1978 A.T.P.R. 40-062; Given v. Snuffa Pty. Limited and Quinn 1978 A.T.P.R. 40-083; Thompson v. Magnamail Pty. Limited (1) 1977 1 A.T.P.R. 40-032; Thompson v. Magnamazl Pty. Limited (2) 1977 1 A.T.P.R. 40-033; Wise v. Greenslade and C.L.M. Holdings Pty. Limited the judgment of the trial judge being reported in 1977 A.T.P.R. 40-035; and Given v. Optional Extras Pty. Ltd. 1976 1 A.T.P.R. 40-051. The contravention in the present case is serious. oeef/12 -12- The public must be protected and the respondents and others deterred from committing like offences. The second-hand car industry in Australia is large, and, by the very nature of the commodity in which it deals, opportunities for unscrupulous dealers to mislead the public are considerable. As Smithers J. said in Eva v. Southern Motors Box Hill Pty. Lid. (supra) at p. 436:- "The car industry is very large; the goods in which 1t deals are essential to almost every family and business; as single items of purchase they are expensive and in nearly every purchase there are inevitable uncertainties. For a salesman to tell a purchaser that a particular car has a reassuring history when the reverse is the case 1s not only dishonest but thoroughly unfair to the victim. Good faith is required also to protect honest traders. To a great extent the trade is conducted by large, successful groups with very high turnovers. Perhaps the required standards are unatiainable in large organisations. If so, compliance with the requirements of the Trade Practices Act will be achieved only by the anstitution of procedures designed in recognition of the human frailties of a proportion of their employees. Accordingly, an order to reflect the will of Parliament, substantial penalties must be imposed, In this class of case the deterrent aspect of punishment 1s most amportant." I take into account the fact that neither the company nor Mackenzie have any prior convictions and that the representation was to one person and concerns one transaction. It was submitted by the solicitor for the company that the company had suffered and would suffer from oe /13 -13- adverse publicity in relation to these proceedings, but I was not referred to any particular instances of previous adverse publicity. I also take into account that there is no quantification of any damage that Mrs. Landman may have suffered by reason of the misrepresentation; but it is obvious that a 1971 model Mazda car with a mileage of about 71,000 miles is worth less than one with a mileage of about 41,000 miles. There 1s no suggestion that Reynolds or any other director or officer of the company, except Mackenzie, was privy to the deception practised on Mrs. Landman. But the company chose to conduct its car sales business in Southport by employing only one person to be in charge of the company's activities and premises and as a salesman. The company is responsible for what Mackenzie did. Mackenzie has left the employ of the company, but the circumstances in which he did so are not clear. I have referred earlier to his evidence. It is not necessary to decide whether I accept his evidence on this aspect of the matter. The important point 1s that it is not a case of a company choosing to retain in its employ a man whom 1t knows to have practised a wilful deception on a customer. The fact is that soon after the conduct of Mackenzie came to the knowledge of Reynolds, Mackenzie left the company's employ and ceased to be a director. The company properly calls this matter in aid of mitigation of penalty. oe e/1h et -~m- Mackenzie knew that the odometer on the car in question wrongly showed its mileage as about 41,000 miles and that it should have been shown as 71,155 miles yet he told Mrs. Landman, after she had enquired whether there was any chance that the speedometer reading was not correct: "There 1s no chance of that. It 1s a low mileage car. You can see that from its condition", When Mrs. Landman said she would like to have the car aumspected by the R,A.C.Q. and obtain a medical report he saids "TIT think you would be wasting your money. It would cost $27.00. We are friends. I w21i look after you. You do not need to worry about it." The following day Mackenzie again told Mrs. Landman that it was a low mileage car. The representation by Mackenzie was wilfully false. The maximum fine for an offence of this nature in the case of a corporation is fifty thousand dollars ($50,000.00) and in the case of a natural person ten thousand dollars ($10,000.00). The fane applies to any contravention of any provision (except s. 52) in Part V of the Act. This Part comprises the sections of the Act which deal with consumer protection and they prohibit a large number of diverse unfair practices. In my opinion the fine should be the same amount in the case of each respondent. In my opinion the appropriate fine to be imposed upon the company is $6,000.00 and upon Mackenzie 1s $6,000.00. ; 222/15 -15- Immediately prior to giving judgment in these proceedings, counsel for the informant sought an order that, in default of payment of whatever fine I should impose against Mackenzie, a term of imprisonment should be awarded. This raises the question of the application of s. 18A of the Commonwealth Crimes Act and of s. 19 of the Queensiand Criminal Code. Counsel for Mackenzie informed me that he had no knowledge of the intention of the informant to raise this matter until shortly before coming into court thas afternoon, Accordingly, I defer making any formal orders today in either matter and stand both matters over to a date to be fixed by arrangement with the parties' legal representatives. I indicate that in my opinion the matter should be relisted for hearing as soon as possible. 1 certify thet thie and the preceding pages are a true copy of the Reavens fer Judgment hersin ef his Henour Mr. Justice Leckhart. [ES IN THE FEDERAL COURT OF AUSTRALIA No. G. 7 of 1979 GENERAL DIVISION No. G. 8 of 1979 In the matter of - THE TRADE PRACTICES ACT 1974 BETWEEN: : MICHABL JOHN O'NEILL Applicant - and EL CAMINO AUTOS PTY. LIMITED Respondent AND BETWEEN: . MICHALL JOHN O'NEILL Applicant and — THOMAS KENNEDY MACKENZIE tote Respondent REASONS FOR JUDGMENT 28 March 1980 , ¢< Sydney , LOCKHART J. These are two charges under s. 79 of the Trade Practices Act 1974 for contravention of s. 53 (a) which were heard by me in Brisbane an February last. I delivered my reasons for judgment but deferred making formal orders so that the parties could consider, amongst other things, the application foreshadowed by counsel for the informant namely, that the informant would seek the imposition of a term of imprisonment in the event of the fine to be imposed upon the respondent Mackenzie not being paid. «../2 <- This morning I have been informed by Mr. Jolliffe who now appears for the informant that the informant no longer seeks an order for imprisonment in default of payment of the fine. Mr. Jolliffe informed me also that, by arrangement between the parties, ancillary 'orders for the payment of the fanes and of costs are to be made by consent. Ir impose a fine on each respondent in the sum of six thousand dollars ($6,000.00). By consent of ali parties I allow the respondent El Camino Autos Pty. Limited two months from today to pay the fine imposed on it and the respondent Thomas Kennedy Mackenzie six months from today to pay the fine umposed on him. By consent I reserve liberty to any party to apply to vary the time allowed for payment of the funes. By consent I order each respondent to pay to the anformant the sum of two hundred and fifty dollars ($250,00) on account of his costs. Otherwise I make no order as to costs. lecrt-sinatins andthe § PAC () é Ppreced 19 rage Lh & w"u2 copy cf the Reasens {21 vucgment here.a ¢7 ss Honour Mr. Justico Lockhart, ERRATUM MICHAEL JOHN O*NEILL v. EL CAMINO AUTOS PTY. LIMITED No. G7 of 1979 MICHAEL JOHN O'NEILL v. THOMAS KENNEDY MACKENZIE No. G8 of 1979 CORAM: LOCKHART J. DATE OF ORDER: 7 FEBRUARY 1980 WHERE MADE: BRISBANE In reasons for judgment of Lockhart J. page 14 paragraph 2, substitute: 'mechanical report" for "medical report" where appearing. T."I. /L' ESTRANGE ASSOCIATE x