CATCHWORDS Trade Practices ~ Bait Advertising ~- advertisement of 3.3 Falcon at special price which the defendant aid not intend to supply 1n reasonable quantities at that price in accordance with s.56(1) of the Trade Practices Act 1974 - failure by the corporation to offer the advertised 3.3 Falcons for sale at that price in accordance with s.56(2) of the Trade Practices Act 1974 - elements necessary to constitute offences - establishment of mens rea by circumstantial evidence ~ Section 56(1)(2) of the Trade Practices Act 1974. MICHAEL JOSEPH REARDON v. MORLEY FORD PTY. LIMITED (V.G. Nos. 21, 22, 23, 24, 25, 26, 27, 28, 29 and 30 of 1980) SMITHERS J. 2 December 1980 Melbourne ene {IN THE FEDERAL COURr OF AUSTRALIA VICTORIA DISTRICE REGISTRY GENERAL DIVISION VG Nos. 21, 22, 23, 24. 26, 27, 28, ?9 and 30 of 1980. www ww In the matter of The Trade Practices Act 1974 Between: MICHAEL JOSEPH RFARDON Prosecutor And: MORLEY FORD PLY. LIMITED Defendant Judge Making Order: Smithers J. Date of Order: 2 December 1980 Where Made: Melbourne ORDER The Court Orders That: 1. In Matter VG No. 21 of 1980 the defendant is convicted of committing a contravention of s.56(1) of the Trade Practices Act l 2. In Matters VG Nos. 22, 24, 2 974. 5, 27, 28, 29 and 30 of 25, r a 1980 the defendant is convicted of committing contraventions of s.56(1) of the Trade Practices Act 1974. 3. In Matters VG Nos. 23 and 26 of 1980 the defendant is convicted of committing contraventions of s.56(2) of the Trade Practices Act 1974. 4. The defendant shall pay the costs of and incidental to the proceedings. 5. The matter is adjourned to hear submissions concerning the fines to be imposed pursuant to s.79(1) of the Trade Practices Act 1974. Re er emCE, Sere = at a tty oe ee cs 8 - -- se ee ee ee oe ae eee a, ne Se ee ne te VICTORIA DISTRIC? RECIST RY VG Nos. 21, 22, 23; 24, 26, 27, 28, 29 and 30 of 1980. CENERAL DIVISION In the watter of The Trade Practices Act 1974 Betwe o nh: MICHAEL JOSEPH REARDON Prosecutor And: MORLEY FORD FrY. LIMST &D Defendant Coram: Smithers J. 2 December 1980 REASONS FOR JUDGMENT The defendant corporation carries on business in 2 large way as a deaier in Ford Motor cars. Its places of business are at Yarrabank Road, South Melbourne (Yarrabank) and Whitehorse Road, Nunawading (Nunawading). 1t 1S a member of a group of twenty 'three Ford car dealers known as the Ford Southern Region Dealer Council. In the latter part of 1979 the advertising commictee of this Counci] being concerned at the nacure and extent of an advertising campaign being conducted by General Motors with 25, respect to e certain Kingswood model dccided that 1t would be beneficial for Ford dealers to conduct intensive advertising with respect to a particular Ford modei. The model wae an XD Falcon GL 3.3 manual sedan, (3.3 Falcon). It was decided to advertise this model for sale at "$6,600 plus on-road costs and delivery fees". It was open to all members of the Council to participate in this advertising venture. Ten membe:s including the defendant decided to do so. As a result prominent advertisements appeared in Melbourne newSpapers stating the names and addresses of the ten dealers, the text of which was as follows: "Ten Top Ford Dealers have united under the banner of the Price Freezers to bring you this first censational offer. Start your negotiations for this popular Falcon GL Sedan while the maximum price is still frozen at the March Recommended introductory price. But a {frozen price can't last forever. Get in before it melts on December 31st AVAILABLE FROM THESE TEN TOP DEALERS *At the above Dealers you'll pay no more than $6,600 plus on-road costs and delivery fees. HURRY! LIMITED OFFER." These advertisements appeared in the Melbourne "Sun" and "Herald" newspapers on 26th, 28th, and 20th November 1979 and 6th, 7th anc 12th December 1979. In addition, two advertisements in connection with this camapign in respect of Vere mee mee ee the 3.3 Falcon were published by the dcfendant on its own account, One of these was published in the "Sun" on 306th November 1973 which so far as material was in the following form:~- "Another TOP OFFER from Morley Ford THE PRICE FREFZERS $6,600* *FROZEN AT THE MARCH INT ROGUCFORY PRTCE UNTIL DECEMBER 31ST 1979 Here's a really sensational Pre-Christmas Offer - We've frozen the price of the popular XD FALCON "GL" Sedan at the March introductory price. But a frozen price can't last forever. Get in before it melts on December 31st. 325 WHITEHORSE RD, NUNAWADING Our Big Used Car Location Ask for Colin Morley 878 0299 YARRABANK ROAD CirY SOUIH Ask for Chas Richardson Country Clients, reverse charges. 62 0321 This offer is not available to fleet buyers. *Falcon GL 3.3 manual sedan. Plus on-road costs. Stock at advertised price as at 29,11.79" The second advertisement was published in the "Sun" on 7 December 1979, which so far as material was in the fcllowing form; "'My dealership is out to get the lions share with Falcon' This year Falcon has proven itself to be one of Australia's most successful cars and it's helped make uS number one around here. We're determined that's the way it's gaine to stay. So bring your family 1 and eheck our changeover deai on AuSstraliiée@'s world clacs family cars and wagons. Sec if you can Cind another meke that offers the same etvle, comfort, space, performance and equiprent level at our kind of price. We don't think you will XD Falcon 'GL' Sedan 3.3 litre economy six, P/B radio "child proof" door locks, quarts halcacn head lights, soft feel steerina wheel. S/No. 93752 Retail Jist price $7278 MORLEY FORD PRICE $6600 SAVE $67e ..." Arising out of the publication of cach of these advertisencnts an information was laid against the defendant company pursuant to s.56(1) of the Trade Practices Act 1974 (the Ac.) cherqung the defendant that being a corporatios which advertised ior supply, at a special price, goods, namely new 3.3 Falcons rt did not intend to offer for supply at that price for a period that was, and jin quantities that were, reasonable baving regard to the nature of tne market in which 1t carried on business and the nature of the advertisenent. There were eight advercise- ments and there were eight informations in which this charge is made. Section 56 of the Act provides:- "SEC.56 Bait advertising (1) A corporation shall net, in trade o21 commerce, advertise for supply at a special price goods or services that the corporation does not intend te offer tor supply at that price for a period that 1s, and in guantities that are, reasonable having regard to the nature of the market in which the corporation carries on business and the nature of the advertisement. (2) A corporation that has, in trade or commerce, advertised goods or services for supply at a special price shall offer such goods or services for Supply at that price for a period that is, and in quantities that are, reasonable having regard to the nature of the market in which the corporation carries on business and the nature of the advertisement. (3) In a prosecution of a corporation under Part VI in relation to a failure to offer goods or services to a persor, (in this sub-section referred to as the 'customer') in accordance with sub-section (2), 1t is a defence if the corporation establishes that - (a) it offered to supply, or to procure another person to supply, , goods or services of the kind . advertised to the customer within a reasonable time, in a reasonable quantity and at the advertised price; or {b) ic offered to supply immediately, or to procure another person to supply within a reasonable time, equivalent goods or services to the customer in a reasonable quantity and at the price at which the first-mentioned goods or services were advertised, and, in either case, where the offer . was accepted by the customer, the ' corporation has so supplied, or . procured another person to supply, goods or services ." To establish the charge under s.56({1) of the Act in respect of Coersewrmrre © oye lee ee ae - - - - - a eee wate one any one of the advertisements it is necessary for the prosecutor to show beyond reasonable doubt that when that advertisement was published 3.3 Falcons were goods which the defendant did not intend to offer for supply at the price of "$6600 plus on-road costs and delivery fees" during the period from the date of publication until 31 December 1979 in quantities that were reasonable having regard to the nature of the market un which the defendant carried on business and the nature of the advertisement. In addition to the charges under s.56(1) two charges were laid against the defendant pursuant to s.56(2) of the Act. Yhe first, (V.G. No. 23 of 1980) was that between 29 November 1979 and 4 December 1979 the defendant having advertised as set out above, did fail to offer 3.3 Faicons at the specified price, for a period that was, and in quantities that were, reasonable having regard to the nature of the market in which the defendant carried on business and the nature of the advertisement. Particulars stated in respect of that charye were that between 29 November 1979 and 4 December 1979, the Gefendant, being a corporation that had advertised geeds as aforesaid did fa1l, when requested by Michael Josepn Reardon, to offer such gcods for supply at the price spec:fied in the relevant advertisements. The second such charge (V.G. No. 26 of 1980) related to the per1rod between 3 December 1979 and 6 December 1979 and was in similar terms to those of the charge in proceeding V.G. No. 23 of 1980. The stated particulars of the charge were to the effect that between 3 December 1979 and 6 December 1979 the defendant did fail, when requested by Juris Wilde, to offer 3.3 Falcons for supply at the special price stated in the advertisements. In connection with these two charges under s.56(2) of the Act it is necessary to consider whet is the nature of the duty cast thereby upon a defendant who has advertised in terms such as those published by the defendant. Nejther party contended that the advertisements themselves constituted an offer for the purposes of $.56 (2) of the Act and it is clear that a duty to offer goods for supply on certain terms involves something more than merely being ready to accept an offer made by another to purchase the goods on those terms. It would seem that some positive action on the part of the defendant is required. He must do something the doing of which constitutes an offer of the goods on the specified terms. Mr. Caston contended that the provision in the section cannot require that the defendant make an offer to the whole world. He said that to operate rationally the section must be read as contemplating an cffer in some context, the nature of which had to be found by implication from the section and the purposes of the Act. I understand him to submit that the contemplated context wos that there must be a situation in which there is within reach so to speak, to the knowledge of the 'defendant, a person with a real interest in' the purchase of the motor vehicle advertised. He contended that the defendant need do nothing until such a situation arose, in which event it was incumbent upon him to communicate to that person an offer to supply the car at the special price. But to my mind the duty created by s.56(2) rests on the defendant immediately he advertises and is independent of the existence of any situation such as that described above. Just as the advertisement was addressed to the whole world the offer should be te the whole world. That does not mean that the offer should be communicated to the whole world. In this connection he relied on the provisions of s.56(3) and in particular the reference therein to "the customer". J do not consider that s.56(3) is of assistance in determining what 1s required by s.56(2) in relation to the duty to offer the goods. The suggestion wes that the reference to the customer indicated that the offer contemplated in s.56(2) was to some particular person identifiable as a customer. But "the customer" is used with respect to a situation which arises where there is an offer on foot but the defendant is in genuine difficulty wiih respect to making an immediate delivery to that particular person. It does not appear to me that the reference is of assistance in determining what is required to constitute an offer for the purposes of s.56(2). The duty to offer the goods extends to the taking of Ae Re ee + - . - - - costae such reasonable steps in the way of offering the goods for supply as a trader genuinely intending to supply the goods to any person at the special price in the course of his business and to offer them at such price in the course of his business would, apart from the provisions of a law such as s.56 of the Act, take to make such offer known, and to continue to do so during the relevant period, in this case until 31 December 1980. If the defendant did those things it could reasonably be said that he offered the goods and services for supply as required by the section. If one measures the duty to offer to supply imposed by s.56(2) by the assertions in the advertisement no more could reasonabiy be imposed on the trader. Anything iess could not constitute an offer to supply. The obligations imposed by the section would seem to accord with what the public to whom the advertisement 158 addressed would assume, from its terms that the advertiser was undertaking. To measure the obligations in this way accords with the purpose of providing consumer protection in line with the general purposes of Part V of the Act. There is no obligation on the advertiser to do more than offer to supply. He does not have to encourage persons to accept the offer. And there is no objection to him explaining the benefit of entering into some other deal instead of accepting the offer made. It is immaterial that the trader may hope that he will selj few or a ee eos - — -—- - es . 10. even none of the goods as advertised. But he must continue, genuinely, at all times, to offer to supply the goods on the terms advertised. But of course, overt acts ostensibly evidencing such an offer to supply the goods at the special price would not constitute an offer unless the offer phe genuine, that is, that it is accompanied by an intention io supply the goods if the offer be accepted. It is clear that by each of the advertisements the defendant advertised 3.3 Falcons for supply at a special price. Accordingly a duty arose pursuant to s.56(2) to offer such goods for supply at that price for a period that was, and in quantities that were, reasonable having regard to the nature of the market in which the defendant carried on business and the nature of the advertisement. So far as the period during which the duty so to offer was on foot, it extended from the date of the first advertisement, namely 30 November until 31 Decembec 1979. The advertisement itself specified the period. So far as quantities were concerned there can be no doubt that the required quantity would have extended to multiple vehicles of the specified kind. And in this case, if the will to supply had been present, the defendant could have met a demand for at least thirty or forty vehicles. The potential demand was unpredictable. The question is what kind of steps and what degree of performance in taking such steps will satisfy the minimum Sr a ot nr is ~- VW. requirements of the duty imposed by s.56(2). It is for the defendant te do something which will constitute the offering of the goods fur the period and in the quantities specified. To my mind a trader like the defendant really disposed to offer the goods according to the plan outlined in this advertisement would at least during the advertised period of the offer publicise 1t to ail and sundry at his chief place of business. And it could be said that the defendant did this. There was a 3.3 Falcon in the showroom with the $6600 price label on it. As such in the circumstances that conduct could be regarded as evidence of an offer to sell it for the stated price. The display of goods in the shop window o1 shelf, complete with price markings 1s usually interpreted as an invitation to treat. Whether it is such or an offer depends on the intention of the trader to be gathered from all the circumstances. An offer may be described as an expression of willingness to contract, made with the intention, actual or apparent, that it shalt become binding on the person making it as soon as it is accepted by the person to whom it is addressed, It may be made to an individual, to a specified group of persons or to the world at large. It may be made expressly by words or by conduct. (see Chitty on Contracts (Genera] Principles) 24th ed. at p.41) Lia tied atiehaeee cinema ome . 5 - - - - - on a ae . 4 . ~ - 12. Subject to the existence of a genuine intention that the display was to operate as an offer, I do not think that it could be found on a balance of probabilities that the steps taken in displaying the vehicles with its price marking was not an offer. So far as price was concerned it was stated; so far as the period was concerned, it wasS apparently continuing in position during a material period, and so far as quantity was concerned there was no inference of non-availability of Supplies in that only one vehicle was displayed. Such conduct would be all that was required of a trader genuinely offering the vehicle in quantity to all and sundry. But the steps taken did not constitute an offer unless they were accompanied by an intention that 1t should become binding as soon as it was accepted. The proper inference from the conduct of Mr. Burchell on 6 December and Mr. Iguanti between 30 November and 4 December 15 that at those times the defeidant did not intend the presence of the 3.3 Falcon on the floor with the price marked thereon to be au offer. They tade it perfectly clear that no 3.3 Falcon was for sale at that time. The one on the floor was said to be sold subject to finance being confirmed and no other was available. On the Material days those persons were the servants of the corporation appointed to deal with persens in relation to the sale of new cars by retail. Mr. Burchell was actually the new car retail manager. Such persons must be regarded as being authorised to deal with enquiries from persons ostensibly 13. interested in purchasing a 3.3 Falcon and to explain to them whether or not it was on offer for supply at the special price. The critical question in relation to the charges under s.56(1) of the Act is whether it has been shown beyond reasonable doubt that the goods with respect to which the defendant company published the advertisements were goods which the defendant did not intend to offer for supply at the price and for the period stated therein and in quantities that were reasonable having regard to the nature of the market in which the defendant carried on its business and the nature of the advertisements. The expression "goods or services that the corporation Goes not intend to offer for supply at that price" in s.56(1) of the Act requires consideration. It may be approached first by considering what would be the state of mind, so to speak, of a corporation which in respect of certain goods and services it did intend to offer for supply at the special price. In the light of the foregoing discussion of what is involved in offering goods for supply at the special price for the relevant period and in the required quantity, a corporation which did intend to offer goods tor supply would intend to make known the availability of the goods at the special price and intend to be willing and ready, with respect to a reasonable quantity of such goods to supply them to persons expressing a willingness and readiness to purchase them at that price. ape ree "~ - ~ -- -- - -_— 14, If with respect to any goods there is absent from the mind of the corporation, or more earthily, from the minds of the person or persons who for that purpose are the corporation, the intention to offer the goods as advertised, that is, there is absent either the intention to make known that the goods are on offer to the extent that a genuine trader would, or to treat an offer ostensibly made by it as binding when accepted by some person, then those goods are not goods that the corporation does intend to offer for supply at the special price. Equally they are goods which the corporation does not intend to offer for supply at the special price. In that case, it would be a contravention of s.56(1) for the corporation to advertise them for supply at the special price. It appears therefore that for the prosecutor to succeed in the proceedings brought by him under s56(1) he must prove beyond reasonable doubt that at the time of a relevant advertisement there was absent from the relevant mind either the intention to make known the offer to supply the goods at the special price during the relevant period and in reasonable quantities, or the intention to honour 1t, or both. The question then is, whose mind was the relevant mind? In relation to the sale of vehicles at particular prices the ultimate controlling mind in the defendant corporation was, no doubt, that of the managing director. For the purpose of eevee me coo 1 - - - - - el ascertaining whether the goods were goods which the corporation did not intend to offer for supply in the retevant sense I think it is his mind which was the relevant mind. To ascertain the state of his mind it is necessary to have regard to his evidence, his conduct and the surrounding circumstances. I think it is necessary also to consider as a matter of probability what would have been the conduct of a managing director of the defendant who did intend to offer the goods for supply in the relevant sense. The decision to publish the advertisements was that of Mr. Morley the Managing Director. He gave evidence that at the time he decided to publish there were ample supplies of 3.3 Falcons available. He said it was his intention that they should be sold to persons requiring them at the special price of $6,600 and that they should be offered for sale accordingly. If that evidence 1S accepted, or unless the Court is not satisfied that it cannot be accepted, then the cherges against the defendant which are laid under s.5€ {1) vf the Act must be aismissed. It was contended on the one hand that Mr. Morley's credibility is high and that there is really no reason to doubt that his intention was at all times that described by him. On the other hand it was said on behalf of the prosecutor that the surrounding circumstances were such that this critical evidence 16. cannot be accepted. And it is said that if this evidence is not accepted those same surrounding circumstances give rise to an inevitable inference that at the time of the publication of the advertisements the defendant did not intend to offer the 3.3 Falcon for supply at the special prices. The defendant corporation carries on a large business, and Mr. Morley takes a very active part in 1ts management and control. There are 147 members of staff. The main business is dealing in ford motor cars both new and second hand. In the new car section of the organization at the relevant time, the Sales Manager having authority over all new car sales was one Richardson. Under him was one Burchell who was described by himself in the presence of Mr. Morley in an interview with the representative of the Prosecuter as "Manager for new cars" but was later described by Mr. Morley in evidence as Retail Sales Manager "who lcoks after all the retai} business". There would seem to have been therefore a chain of authority from Mr. Morley hamself, through Mr. Richardson the new car Sales Manager, to Mr. Burchell as retail Sales Manager, and from him te at least one salesman, Mr. Iguanti. It is the custom for the company to hold what MKr. Morley called a weekly sales training meeting for the sales personnel and a weekly management meeting to train the Managers. In Mr. Morley's words:- "Every Monday morning we have an advertising a eer Sone ~ see ere Few meme ee er me , . 17. meeting when we examine figures and every Wednesday evening ve have a management meeting where we examine the figures of every department including the new car department, so at least twice a week I am fully informed as to exactly what sort of performance we are achieving. But that is not to say FY look at how many LT Ds, how many Escorts we have sold etc." In the course of the management of the business after the date of the first advertisement one 3.3 Falcon was placed on the showroom floor at the Company's only showroom for new cars in Yarrabank,. It was marked with the pricr $6,600. It does not appear on whose authority this was done. The probability is that it was done with the authority ot Mr. Morley by way of implementation of the messege in the advertisement. Had it appeared that on a roquest for the supply of a car of that kind for that price the defendant's staff would comply therewith there would he no reason for doubtina Mr. Morley's statement that it was at all times his intention and therefore the defendant's intention that the 3.3 Falcon should be offered for supply during the period stated in the advertisement, namely between 26 November and 31 December 1979 at the price of $6,600. But the inference from the evidence is that at least from 30 November to 6 December 1979 the retail sales staff did not have authority to satisfy a request for the supply of a 3.3 Falcon at the special price and would only refer such a reavest to higher authority if the person concerned wouJd enter into a commitment to purchase a car if management agreed. The evidence is that in the course of negotiations which took 18. place between Mr. Reardon and Mr. Igquanti, 1n which Reardon purported to seek the supply of a 3.3 Falcon for $6,600 in accordance with the advertisements, Mr. YTyuanti refused to enter into negotiations with him with respect to such a transaction, at first absolutely, but ultimately unless Reardon would first give a binding undertaking to purchase the car for $6,600 if Iguanti was ahle to secure theo authority of management to sell it to him for that price. On attending the showroom on Friday, 30 November 1979 Mr. Reardon asked for Mr. Richardson who was referred to un the advertisement. He was told Mr. Richardson was not available but Mr. Joe Iguanti would attend him. Mr. Iguanti approached Mr. Reardon and a conversation substantielly as follows occurred. Mr. Reardon said that he had come to check the availability of the Falcon as advertised. He produced the advertisement and referred to the advertised price of the vehicle. Mr. Iguanti informed him that they only had one such vehicle; namely the green one on the showroom floor and that 3t had been sold subject to confirmation of finance. Mr. Reardon asked if Mr. Iguanti had any other vehicles available at all and he repeated that they had only the one and that it had been sold. He said he could interest Mr. Reardon in another vehicle suggesting a Ford station wagon. Mr. Reardon said that he had no interest in a station wagon and repeated the question to Mr. Iguanti as to whether he had any more vehicles at the price of $6,600 and he said, "No". 19. Mr. Reardon said that the advertisement referred to two locations, nemely Yarrabank and Nunawading. He asked if the defendant had any other vehicles out at Nunawading 1f he went out there. Mr. Iguanti said "No", that Morley Ford had only the one vehicle and it was a matter as to who sold the vehicle first. They found that Yarrabank had sold the vehicle first and that there were no more available at that price. He repeated this a number of times. Mr. TIguanti said to Mr, Reardon that the $6600 offer was a special offer by Ford and that the ten top dealers had only one each of the vehicles at that price. After further discussion Mr. Reardon left, Mr. liguanti arranging to telephone him on Saturday morning te find out if Mr. Reardon was further interested. In a telephone conversation on Monday 3 December Mr. Iguanti confirmed that the green Falcon which had been on the floor was definitely sold because finance had been approved. They discussed supplying a 3.3 Falcon at a price higher than $6,600. Mr. Iguanti said that he could still do a deal with Mr. Reardon and told him not to be fooled by the $6,600 price. He could probably arrange the deal whe.e there would be only $200 difference between the advertised price and the price of a vehicle on the road. After Mr. Reardon indicated that he was not interested in such a deal Mr. Iguanti, in a final effort to do business with Mr. Reardon said: "If you could guarantee me an order for $6,600 I will speak to Management or speak to other people and see what I can do". He said it would be up to management, but "if I could peewee ne ' 20. convince management to put pressure on other people, on Ford, and get another one for $6,600 would you guarantee me an crder?". Mr. Reardon said he did not really think he coulda guarantee an order and did not think he could really afford the car so perhaps the whole thing should be forgotten. This latter part of the conversation was omitted from Reardon's evidence in chief but it was brought to his notice in cross-examination. The passage 1s as follows:- "I suggest to you that you finished up having a discussion, which you have not deposed to in the course of your examination-in-chief, in which he specifically said to you, 'Look, J can get hold of one for 6600, but will you give me an order?'?--~I believe wnat he said at that stage, sir, 'If you can guarentee me an order for 6600, I wili Speak to management or speak to other people', and I think he did use the word, Ford, 'and we will see what we can do'. So, he asked you to guarantee him an order and he would see what he could do at $6,600?---He said he woud speek to Management about that. I put it to you that what was said was - "TI would be up to management, but if I could convince management to put pressure on the other pcovle, on Ford, and get another one for 6600 would you guarantee me an order?"?~-- That sounds correct, Yes." It is said that the conduct of Mr. Iguanti in answer to the enquiries by Mr. Reardon is compelling evidence that it was Iguanti's state of mind, that to seJ]l a 3.3 Falcon for Soir ew - - con @ ' . 21. $6,600 would be contrary to his instructions and that for such a deal he needed to speak to management, and to have some good reason by which he could persuade management to authorise it. It is of importance to observe that it was sought to be established by the defence, and it seems to me correctly on the evidence, that the conduct of Reardon in what had taken place between himself and Iguanti in the course of their negotiations, until at any rate Reardon had to suggest that they should forget the whole affair, was conduct which had every appearance of being that of a person genuinely interested in the purchase of the 3.3 Falcon for $6,600. And it is important that Mr. Iguanti obviously believed it to be so. It is pointed out also that the evidence of Mr. Wilde concerning his approach to Mr. Burchell of 6 Decembor 1979 is to the effect that Mr. Burchell refused to have anything to do with a proposition that the defendart should sell a 3.3 Falcon tor $6,600. He also said that the deferdant only had one such vehicle for sale at the special price and it had been sold subject only to confirmation of finance. But when Wilde suggested that he would make enquiries about a similar kind of Holden Vehicle the following exchange took Place. Mr. Burchell said:- " "hook if you are prepared to commit yourself, I will probably be able to sell you a Falcon for $6,600, but you will have to make up your mind pretty er me ee eee - -- ~- ~ soon'. I said, "What would it b2, one straight off the production line?" He said, 'We will have to see about that'. I said, 'You mean that I can now have a Falcon for $6,600?' he said, 'We could make some sort of deal, but I am nor going to commit myself on that'. I said, 'Before I make a decision I would like to have all the facts so that I can assess what 1s best. 1 am an accountant and I am not going to commit myself in any sort of way at this stage. I may be a bit conservative, so I think I will leave it. Tt will probably go and have a Jook at tne Holdens'. He said, 'Before you decide on anything, I am sure that we could come to an arrangement that would be satisfactory for both of us'. I said, 'Yes, maybe, but I will think about it'. He said, 'Come back and see me when you have decided'. I then asked him for a business card." It thus appears that between 30 November and 3 December 1279 Iguanti rejected the proposition that the vehicle should be sold for $6,600 and indicated in the most convincing way and only as a last resort that if the potential customer was insistent on having a vehicle at that price he would seek the authovtity of management to make such a sale. It 1s said therefore that if Iguanti's con@uct reflected the intention of management in relation to the sale of the 3.3 Falcon at $6,600 3t 1s clear that the vehicle was not offered, Or on offer at that time, at that price. And it is said also that if his conduct reflected his own state of mind the inevitable inference must be that he had been instructed that the 3.3 Falcon was not on offer for $6,600. The same contention is made with respect to the conduct and state of Sawer - - - - - ' 23. mind of Burchell as evidenced in the interview hetween him and Wilde. It is made of course with additional force in his case because he was the retail sales manager. And it is put that the concurrence of similar conduct of two salesmen indicating that each knew that the 3.3 Falcon was not on offer for $6,600 is of special significance. There can be no doubt that Burchell and lguanti genuinely believed that they would be required to refer to higher authority a proposal that the defendant supply a 3.3 Falcon for $6,600. There must have been a source for that belief from within the Company itself. The most likely source would be indications express or implied from higher authority. The fact that when Reardon and Wilde rejected the notion that they should purchase a vehicle other than the 3.3 Falcon both Burchell and Iguanti in their several negotiations with Reardon and Wilde proposed referring the proposition that a 3.3 Falcon should be found for them for $6,600 to higher authority if in the one case Reardon or in the other case Wilde had been willing to bind himself to buy a 3.3 Falcon for $6,609, displaces any notion that in refusing to supply for $6,600 either Burchell or Wilde was was engaged in a frolic of his own. Clearly they were implementing the company line as they understood it. It is clear that the real problem was not one of supply. It was one of price. Indeed Reardon was offered a 3.3 Falcon at the list price which was some $800 in excess of $6,600. It is apparent therefore thac when Iguanti and 24. Burchell informed Reardon and Wilde that there was only one 3.3 Falcon they meant that they only had one for sale at the special price of $6,600. I accept the evidence of Mr. Morley that if the defendant were minded to sell a 3.3 Falcon for $6,600 it would have had no real difficulty in obtaining vehicles for any such transaction. From the evidence of Mr. Morley it would appear that the business of the defendant is one which is conducted upon business like lines. It is said that if it had really been the intention of Mr. Morley that 3.3 Falcons should be offered for supply to people willing to pay that sum for them it would have been impossible for Iguanti and Burchell to be under the impression that they had no authority to sell suci: a vehicle at such a price. And impossible also that if they had ary thought of so selling they would have thought it necessary to refer the matter to high management authority. It may have been possible that some salesman might have picked up the wrong idea through some administrative slip-up but it is said that it is quite unreasonable to think that that would have occurred in relation to two salesmen and most unlikely that the retail sales manager should be under such a misapprehension. It was also pointed out that if there had been such an administrative slip~up or an accident of some kind, the means to explain it were completely within the power of the defendant. It would have taken, so it is said, but a few words from Burchell to explain how it all happened. And TT Arar ane ee ee ~ — ae - - oe - ce tem eee ee ' 25. it is emphasised that Burchell was well within reach having actually been in the court room when the proceedings in this case commenced. {t is pointed out also that the whereabouts of Iguanti would appear to have been known to the defendant when these proceedings were on foot as they were in February 1980 when his address was stated as Werribee and the defendant had his telephone number. It was pointel out also that the defendant was well instructed as to the terms of Iguanti's conversation with Reardon. This is apparent from the cross-examination of Reardon. No explanation was tendered to the Court as to why Iguanti was not called. In view of the comments above this is really significant. But the defendant prefered to rely on the evidence of Mr. Morley without bothering to call evidence to explain the conduct of Ne. Burchell and Mr. Iguanti And it is a valid comment that the defendant having had the advantage of full discussion with both Burchell and Iguanti it is reasonable to think that it has enquired as to how it was that both of them had acquired the erroneous idea that the 3.3 Falcon was not for sale for $6,600 and that if so explanation could surely have been put by some witness. It was indicated by Mr. Morley that he had lost confidence both in Burchell and Iguanti after they had reported to him that they had separately told different enguirers that the vehicle on the floor had been sold and the deposit of $500 paid in respect thereof when in fact there had ae eee - 7 ~- -- va ee eee ete tami re me ene ee SNe ne Re Se tae, ve sues 6 Ne eau Ste nS eaten yew eeve mo es 26. been no such sale. In these circumstances his loss of confidence would be understandable. But to my mind it does not exvlain why both or one of them were not called to explain to the Court that their conduct on the shop floor in relation to the enquiries of Reardon and Wilde did not reflect their actual instructions or their states of mind, or if it did it was due to some error which had occurred and which had distorted the actual situation. Furthermore, it would appear to have been well within the ability of the defendant to have called Mr. Richardson. It was Mr. Richardson who was referred to in all the advertisements as the man to whom al] enquiries concerning the 3.3 Falcon should be directed. Surely he could have told the Court what the instructions to the sales staff were in relation to the 3.3 Falcons and ne would know if it be the fact, that it was nonsense for Burchell and Iguanti to think that they needed special authority to sell a 3.3 Falcon for $6,600. It is of course to be noted that if a salesman sold a 3.3 Falcon for $6,600 his commission would have heen $35, whereas to sell one at the list price, or for that matter any other vehicle at the last price, would almost certainly have netted him $100 or up to $200, It was therefore to the advantage of the salesmen not to sell a 3.3 Falcon to a potential customer if there was any chance of selling him something more expensive. This course would also have been advantageous from the point of view of the defendant: it 27. would have increased gross profit considerably. But when the salesman encountered what he thought was a potent2al customer of a 3.3 Falcon for $6,600 and of nothing else there was no point in him reserving that transaction for higher authority, ratner than clesing the deal there and then, unless of course, he had no authority to sell for $6,600. I am unable to think of a reasonable hypothesis which would explain the conduct of Iguanti or of Burchell in reserving that kind of a transaction for higher authority other than that they both knew that they were not authorised to make such a transaction on their own authority. There can be no doubt that their reaction to the enquiries of Reardon and Wilde were the genuine reactions of salesmen dealing with the situation according to what they believed. It is inevitable therefore that I find that between 30 November and 6 December 1979 the 3.3 Falcon was not on offer for $6,600. Whether this throws any light upon the real intention of the defendant and in particular of Mr. Morley on the dates when he inserted the advertisements with respect to supplying the 3.3 Falcon for $6,600 is a critical question. It appears that although the demand for 3.3 Falcons as a result of the advertisements was unpredictable Mr. Morley had not actually made arrangement with anybody to acquire any supplies of this model in addition to the one on the floor. eae tee ST cer up tee, ar Ae ea oad ce a SAE ROI NT ER 2s None ery nen 28. He said that he knew that there were some forty to sixty of such models available in Melbourne. Supplies of those could have been obtained either by operating what was called a "SIDO" system under which delivery could have been achieved in about four weeks from the Ford Motor Company or he would anticipate that under what are called "swap" aLttangements between dealers a car could have been obtained perhaps within hours and certainly two or three days had one been required. But it is surprising that with the prospect of numerous demands for 3.3 Falcons some channel of supplies had not actually been explered. The demand created by ten top dealers all advertising the vehicle for $6,600 may well have put strain on the situation. Mr. Morley said that he had not given his staff any instructions as to the obligation of the defendant actually to offer the Falcon cars for supply at the advertised price. He gave evidence that in the course of instruction to his sales Management at some time or times prior to 30 November 1979 he had instructed his salesman that the company would always sell at the price which was advertised in respect of ant particular vehicle. He said also that his salesmen were schooled by his organization as to their duties in the matter of selling. They were instructed to "Sell up" which meant to endeavour to interest a potential customer in the highest priced vehicle which the purchaser could be interested in and to promote the sale of accessories and options. He said also that his Te meee we rene cs e 3 > - - -~- - ~ eres 29. salesmen had been instructed in the requirements of the Conzumer Protection Department and the Trade Practices Commission. Nevertheless I did not understand him to say that he had ever endeavoured to acquaint his sales staff with the substance of the requirements of s.56(2) of the Act nor did I understand him to say that he had even discussed with his salesmen the advertising campaign which was teking place about the 3.3 Falcon at the price of $6,600. Morley was asked:- "when you decided to put these advertiscments in, were you familiar with the Trade Practices provisions? --- Yes. You knew that you had to be prepared to sell at this price, that you had to continue tc be, in effect, offering the vehicle at that price, during the whole time?---Yes. Did you give your staff any instructions about that?--- No, quite to tke contracy, and not in relation to that perticular ad, but in the past, quite to the contrary: if we advertised a motor vehicle at a given price, then we will sell that motor vehicle at that given price, and, as you will remember,... I indicated that we did in fact sell two of those vehicles subsequently, at close to that $6600... The Avt says - ... that once you have advertised you must offer the goods and a reasonable quantity during the period that is reasonable. That means that if it appears at any time tnat you were not offering those gecds at that price, you might quite well be in breach of the Act. That meant of course that 1f one of your salesmen went off on a frolic of his own and determined that he was not going to be Pe Tee ee ee - oe - - . oe 30. bothered offering those goods for sale, as a salatter of fact he would tell people they were not available, then you might possibly be in bother?---Yes, I understand. You did not explain any of that to any of Well, your salesmen, did you?---Not on that occasion, but it has been explained on Many occasions previously of the problems that we could be confronted with - not only trade practices but with the Ministry of Consumer Affairs, and all sorts of other areas. of course, when you put this advertisement in 1 take it - you put me right if I am wrong - but I take it one of its objectives was to get people into the showroom and a good salesman would be wanting to sell, not particularly one of these things at 6600, he would much prefer to sell him something at 7, 8, 9 or 10,000, or whatever it was?---That 1s quite true. So there is quite a temptation on the part of a salesman to divert a customer from these 3.3s to something better. in the management of a business like yours, do you have to be aware that not every salesman may resist the temptation to do trings like that?---It becomes very strong and I said so to you a moment ago, but not on that particular occasion but prior, or during that programme, 1 did brief salesmen or sales managers on the necessity to be fully aware of what the trade practices requirements are and not to infringe them. I do not know about you, but this particular section of the Trade Practices Act - I do not know whether you think you understand it, it will be necessary for us to understand 1t before this case is over - but at 1s not particularly easy to quite understand what it means, 1S it? It 15 all right perhaps for intelligent people but you take the ordinary salesman, he is not - he might be - but ordinarily he is nol a very intellectual chap, is he? Me meer one 31. I am not saying that he is not a very capable man in his job --- I believe that a successful and capable salesman is a man of above-average intelligence. All right, but you would not have expected them to be very clued-up on the Trade Practices Act section 56, would you?--- No, I would not. I am just wondering then 1f it would not have been a good idea to give him a warning about 1t, give all of them a warning about?---Well you said to me, sir, I would not expect them to be intimately familiar with that section of the Act, and my answer to that was, no. But I had previously said to you that in broad terms, managers and salesmen, have all been given the outline of where we must stop, where we cannot go and with considerable pride I say to you, sir, that I run a very, very ethical business and I do not set out to set traps for fools and I will not allow my people to do it." Mr. Morley did not say but his evidence proceeded on the assumption that he understood that the defendant must offer to supply 3.3 Falcons as required, at the special price during the stated period. If he did and he wanted the staff to observe that duty I find it strange that, having regard to the temptation to his salesmen to divert people from a 3.3 Falcon deal at $6,600 to other models, he did not emphasise to them that whatever efforts they made in that direction the $6,600 deal must be really an offer at all times and that that deal was to be made with any person wanting it. It would have been expecting a lot of a salesman to understand the effect of s.56 even if he knew it existed, and there is no evidence that the section was ever brought to the notice of any of the sales ena 32. staff. If Morley did not know the general effect of s.56 then of course he would not know the importance of giving any special instructions to his staff. They might possibly remember from their earlier instructions that the company would always sell at the advertised price. But in this cease that would be a deal they would not greatly like and were more likely to remember to "sell up". But even in that situation they would not have had felt it necessary to refer the demand of a persistent customer for the 3.3 Falcon for $6,600 to higher authority. Of course if Mr. Morley himself was not acquainted with the requirements of s.56(2) of the Act he would not have had to form any intention as to whether or not ..3 Falcons would actually be offered for $6,600. In such case he might have thought that having one on the floor for sale for $6,600 would keep faith adequately with the public who reaG the advertisements. In these circumstances it would have been a contravention of s.56(1) of the Act for Mr. Morley to advertise as he did. And it would not be impossible that in such circumstances although Mr. Morley gave ta his staff instructions as to the course to be taken in the case of people seeking 3.3 Falcons for $6,600 an instruction along the lines of that reflected in the conduct of Burchell and Iguanti was given by someone other than Mr. Morley in circumstances in which it was felt that Morley would approve thereof. It is in the light of considerations of this kind that the absence of 33. evidence by Burchell, or Iguanti or Richardson is particularly significant. And it is a feature of the evidence given by Mr. Morley that one derives from 1t an impression that although the advertisements were expensive he displayed little curiosity as to the sales of 3.3 Falcons at $6,600. The problem before the Court is one in which there is an issue of fact and that fact has to be proved by the prosecution and which if proved at all can only be proved py circumstantial evidence and in the teeth of Mr. Morley's evidence. That fact is that at the time of the insertion of the advertisements the defendant represented in this case by Mr. Morley did not intend to offer 3.3 Falcons for supply for $6,600 during the period from 26 November 1979 to 31 Deceinber 1979. It was said in Martin v. Osborne 55 C.L.R. 367 at p. 375 by Dixon J. and repeated by him in Plonp v. The Queen 110 C.L.R. 234 at p. 243:- "'If an issue is to be proved by circumstantial evidence, facts subsidiary to or connected with the main fact must be established from which the conclusion follows as a rational inference. In the inculpation of an accused person the evidentiary circumstances must bear no other reasonable explanation. This means that, according to the common course of human affairs, the degree of probability that the occurrence of the facts proved would be accompanied by the occurrence otf the fact to be proved is so high that the contrary cannot reasonably be supposed. The circumstances which may be taken into account in this process of reasoning include all facts and matters which form constituent parts or ingredienrs of the transaction itself or explain or make intelligible the course of conduct pursued. any 6 ur + nee 34. »e. the class of acts and occurrences that may be considered includes circumstances whose relation to the fact in issue consists in the probability or increased probability, judged rationally upon common experience, that they would not be found unless the fact to be proved also existed.'" The relevant circumstances in this case include the repeated rejection by the sales staff of the proposition that 3.3 Falcons should be offered for $6,600, the nature and degree of control exercised by Mr. Morley in the affairs of the defendant, his peculiar relationship to the campaign to advertise the 3.3 Falcon at the special price, the likelihood that had he intended that the defendant actually offer the vehicle for supply, in the relevant sense, he would have ccoaveyed that to his sales staff in a way that would have made it impossible for Burchell and Iguanti to acquire the belief that they were not authorised to sell 3.3 Falcons for $6,600. These circumstances have led me to conclude beyond reasonable doubt that Mr. Morley did not intend to offer the 3.3 Falcon for supply in accordance with advertisements. There might have been a reasonable doubt had it been open on the evidence to think that in refusing to entertain the proposition that the 3.3 Falcon should be sold for $6,600 the salesmen may have been engaged in a frolic of their own. But the fact that they ultimately agreed to entertain it, but only as something to be referred to higher authority, and then only conditionally, is proof positive that they were not. Clearly they were operating according to the company line. ed eee ee - - - - +e - F . 35. There must have been some communication between Mr. Morley and his sales staff. It would be astonishing that in relation to the 3.3 Falcon special price campaign the intention of the Managing Director as to the policy would not be conveyed. As stated above the Company's affairs are run in a business like wey and one's impression of Mr. Morley is that he would not leave such a matter to chance or even to Mr. Richardson's or Mr. Burchell's discretion. The campaign must have taken a good deal of organizing and Mr. Morley was active in it. If he did leave the matter of policy to Mr. Richardson or Mr. Burchell, then, on the evidence their mind would be the mind of che Company and the goods advertised would be goods they and thus the Company, did not intend to sell at the special price in the required quantity. Also if Mr. Morley did leave the policy decisions to Mr. Richardson or Mr. Burchell that would be persuasive evidence that he himself did not have the positive intention that the defendant would, in reasonable quantity, supply the 3.3 Falcons is demanded at the special price. The advertisements were lawful only if he had that intention. To my mind a2 person in his position genuinely having that intention would certainly have given instructions to his sales staff that the vehicles must be orfered and must be supplied on request at the special price. He did not do this. On his evidence he left the situation to his sales staff as soe 36. though with respect to the 3.3 Falcon no special situation had arisen as a result of the advertisement. But his retail sales Manager and a salesman were under the impression that the vehicles were not an offer for $6,600. This could never have happened with Mr. Morley in command unless it were that he had not intended to offer the 3.3 Falcons in quantity for $6,600. In the absence of explanation this fact, in my opinion, cannot be reconciled with reasonable probability unless Mr. Morley did not intend to offer the 3.3 Falcons for supply at the special price. When it is seen that, if there be any such explanation tne defendant had at hand the means to provide il, then I do not doubt the situation is one in which accordiug to the common course of business affairs, the degree of probability that such facts would not be found unless Mr. Morley had not intended that the 3.3 Falcons should be offered for supply at the special price is such that the contrary cannot reasonably be supposed. To my mind where in relation to a business organization such as the defendant it is found that the retail sales manager and his staff genuinely understand that there is no intention on the part of the defendant to supply particular vehicles at a particular price at a particular time and genuinely believe that they must obtain authority from a senior member of the staff and that the policy in that matter was one which depended entirely upon the decision of the Managing Director who was regularly and frequently in touch for ae perre ee e eme 37. with his salas staff and had himself to make a decision as to the continuity of the advertising campaign consequent upon developments following upon the campaign, it is proper, in the absence of evidence to the contrary, to infer and to do so beyond reasonable doubt that the state of mind of the sales Manager anc his staff refiects the instructions he has received in the ordinary channels of the company and reflect the decisions of management at its highest level. It is to be observed that whereas every probability supports the inference I have drawn, there is not one of the objective facts in evidence which gives risee to any consideration that raises questions as to the validity of that inference. According to Mr. Morley there was a list kept of persons who enquired for the 3.3 Falcon but it is lost. Yet it is clear that not one 3.3 Falcon was sold. Mr. Morley says he knew that th>* campaign was a complete failure before he inserted his own private advertisement in the "Sun" of 7 December. This would indicate that he was keeping in touch. If there were a substantial number of names on the list of enquirers then, if there were no sales, the campaign was not a failure. But one would wonder how it was that not one of the enquirers bought a 3.3 Falcon. If there were as is suggested a trivial number of enquirers and the campaign was in that sense a complete failure one wonders why Mr. Morley went to the expense of advertising the same model and deal on 7 December. He said that he had to use his reserved space in coat ar ey : re 38. the "Sun". But one wonders why he would expensively waste that space on a failed campaign in respect of a modej, which if sold at the advertised price, produced »ut little profit; when he could have used it to advertise a model which was more likely to attract buyers and the sale of which would have been really profitable. The reality suggested by these considerations is that although no 3.3 Falcons were being sold, that was a state of affairs guite satisfactory to Mr. Morley - not even inducing him to make enquiries why. If he had, he could not have failed to discover the state of mind of his staff. He 1s obviously a keen business man and not one to be trifled with by his staff. It is impossible to think that he did not make such enquiries, unless of course he knew what was likely to be going on with respect to selling 3.3 Falcons at $6,600. It is involved in this that I have not accepted Mr. Morley's evidence on the critical point. 1 think he found that none could stand by him in the battle, and decided to fight it alone, persuading himself sufficiently to enable him to do it. In relation te this evidence I felt that he was playing a part rather than stating reality. I am satisfied that at and ahout the period from 30 November 1979 to 6 December 1979 the defendant did not intend to supply 3.3 Falcons at the price of $6,600. Accordingly, the advertisements published on 30 November 1979, 6 and 7 Se a = = - - sw ne eee er rare en - see ---- < tp x 39. December 1979 were published in contravention of the provisions of s.56(1) of the Act. Turning to the two informations brought under s.56(2) I draw the inference beyond reasonable doubt that between 29 November 1979 and 4 December 1979 the defendant being a corporation that had advertised goods being 3.3 Falcons for supply at a special price did fail to offer such goods at such special price when so requested by Michael Joseph Reardon. I also draw the inference beyond reasonable doubt that between 3 December 1979 and 6 December 1979 the defendant did fail to offer 3.3 Falcons for supply at the price being a corporation that had advertised qoods being 3.3 Falcons for supply at a special price did fail to offer such goods at such price when so requested by Juris Wilde. Having regard to the above I find the defendant guilty on all counts but will allow counsel for the defendant to put submissions to the Court on the question of fines prior to my assessment of the fines to be imposed pursuant to ¢.79(1) of the Act.