\\ ey IN THE FEDERAL COURT OF AUSTRALIA ) ) NORTHERN TERRITORY DISTRICT REGISTRY Nos. 7, 8, 9 & 10 of 1980 GENERAL DIVISION ) BETWEEN: PETER JULIAN SULLY Prosecutor AND: DARWIN BARKERY PTY. LIMITED Defendant 13 February 1981 Coram: Gallop J. REASONS FOR JUDGMENT Corrigendum Page 10, line 8 delete section as quoted, and insert. "(1) Subject to sub-section (2), in a prosecution under this Part in relation to a contravention of a provision of Part V, it is a defence if the defendant establishes- (a) that the contravention in respect of which the proceeding was instituted was due to reasonable mistake; (b) that the contravention in respect of which the proceeding was instituted was due to reasonable reliance on information supplied by another person, or (c) that - (i) the contravention in respect of which the proceeding was instituted was due to the act or default of another person, to an accident or to some other cause beyond the defendant's control, and (ii) the defendant took reasonable pre- cautions and exercised due deligence to avoid the contravention. (2) If a defence provided by sub-section (1) involves an allegation that a contravention was due to reliance on information supplied by another person or to the act or default of another person, the defendant is not, without leave of the Court, entitled to rely on that defence unless he has, not later than 7 days before the day on which the hearing of the proceeding commences, served on the person by whom the proceeding was instituted a notice in writing giving such information that would identify or assist in the identification of the other person as was then in his possession." 20-3-2! IN THE FEDERAL COURT OF AUSTRALIA ) ) NORTHERN TERRITORY DISTRICT REGISTRY ) No. 7 of 1980 ) GENERAL DIVISION ) BETWEEN - PETER JULIAN SULLY Prosecutor AND DARWIN BAKERY PTY. LIMITED at Defendant Coram Gallop J. REASONS FOR JUDGMENT GALLOP J. On 13 February 1981 I recorded convictions against the defendant for four offences against s.53(e) of the Tride Practices Act 1974. On 6 March 1981 evidence was received on behalf of the prosecutor and the defendant in respect of the question of penalty and certain submissions were made. It is necessary to restate briefly the facts giving rise to the convictions and to add some further facts. In respect of two offences the defendant was convicted on account of advertisements in identical terms which appeared in che "Northern Territory News'' newspaper on 3 December 1979 and in "The Star' newspaper on 6 December 1979, which advertisements were misleading in that bread products previously sold at weights of 750 grams and 500 grams respectively were offered for sale at 680 grams and 450 grams respectively, but they were not reduced in price to accord with the reductions in weight in the way the advertisements stated that they would be reduced. In respect of the other two offences the defendant was convicted on account of notices displayed on 6 December 1979 at Woolworths Supermarket, Cavenagh Street, Darwin, and Andrews Food Fair, Westralia Street, Stuart Park, which advertisements were misleading in that bread products previously sold at weights of 750 grams and 500 grams respectively were offered for sale at 680 grams and 450 grams respectively, but they were not reduced in price or according to Gazette controlled prices as claimed in the advertisements. The Trade Practices Act is designed to permit conditions of trade which are fair and honest and in which reliance can be placed on statements made which are material to transactions which are being promoted. In consideration of the factors relevant to the assessment of the appropriate punishment for breaches of the Act it is important to consider the degree to which the misleading advertisements departed from the truth. The degree of wilfulness or carelessness in the making of the misleading statements is another consideration (Juris Wilde v Mendville Pty. Ltd & Ors., an unreported decision of Smithers J. delivered on 9 January 1981). The penalty should constitute a real punishment proportionate to the deliberation with which the defendant contravened the provisions of the Act It should be sufficiently high to have a deterrent quality and it should be kept in mind that the Act operates in a commercial environment where deterrence is not likely to be achieved by penalties which are not realistic. It should reflect the will of Parliament that the commercial standards laid down in the Act must be observed, but not be so high as to be oppressive (Trade Practices Commission v. Stihl Chain Saws (Aust.) Pty Ltd. (1978) 5 TPC 61 at 80, (1978) ATPR 40-1091 at 17,896). These principles are equally applicable to the imposition of fines for offences against s.53(e) of the Act. In relation to the advertisements 1n the newspapers the defendant has admitted through its Managing Director and Mr. Graham Lewis, another Director and Secretary of the defendant, that the advertisements were drafted bv the Managing Director and settled by Mr. Lewis. Those Directors must have known that the advertisements in the newspapers were misleading and that any member of the public reading the advertisements would not detect a concealed price rise in the bread products. The notices which were displayed in the supermarkets were likewise drafted by the Managing Director and he must have known when he caused them to be displayed on 6 December 1979 that any member of the public would not detect concealed price rises in those supermarkets for the defendant's bread products. In my view the offences were quite deliberate and accordingly the penalties which I impose should constitute real punishment proportionate to the deliberation. I do not accept the statements set out in the Managing Director's affidavit sworn on 19 September 1980 to the effect that the advertisements and notices were not intended to mislead. I accept that when the notices were drafted it was to meet a completely different purpose, but at the time of there publication all the material facts were known to the Managing yirector and Mr. Lewis, and the notices had then become inappropriate and likely to mislead if published without amendment. Furthermore, the statements in the newspaper advertisements and the notices in the supermarkets departed substantially from the truth in vital respects. A large proportion of the defendant's bread products except for milk bread unsliced, which remained subject to price control, were either increased in price or sold at the same price for a lesser weight, which is in effect a price increase because the purchaser gets less bread for the old price. On the respective dates of publication of the advertisements the "Northern Territory News" had a circulation of 15,314 and "The Star' newspaper had a circulation of 8,189. The Woolworths supermarket in Cavenagh Street, Darwin, is, as a matter of common knowledge, a large supermarket catering to a large section of the public. Andrews Food Fair, Westralia Street, Stuart Park is a smaller supermarket. The maximum penalty for each offence is $50,000. It was urged on behalf of the defendant in a plea of mitigation that the defendant's sales figures for the periods immediately after the advertisements had been placed in the newspapers and supermarkets respectively were not increased and in fact as a result of the increases in price the defendant did not gain any additional incor It was further argued that I should take account of the costs whicl the defendant will have to pay, including the prosecutor's costs ne defendant has no prior convictions Taking into account all the circumstances, I order that in resnect of each offence the defendant pay a fine of $4000, such fine to be paid to the Registrar of the Court within 30 days of this date or such later date as may be fixed by this court. I order that the defendant pay the prosecutor's costs and grant liberty to apply in this respect. {| CATCHWORDS Trade Practices - Consumer protection - Prosecution - False or misleading statement with respect to price of goods or services - Sale of bread products - Meaning of "Reduced" and "Misleading" - Mens rea - Mistake. Trades Practices Act s.53(e) AUSTRALIA PRINCIPAL IN THE FEDERAL COURT OF AUSTRALIA ) ) NORTHERN TERRITORY DISTRICT REGISTRY ) No. 7 of 1980 ) GENERAL DIVISION ») BETWEEN: . PETER JULIAN SULLY Prosecutor ! AND: DARWIN BAKERY PTY. LIMITED Defendant 13 February 1981 Coram: Gallop J. REASONS FOR JUDGMENT GALLOP J. : The defendant has pleaded not guilty to four informations charging contraventions of s.53(e) of the Trades Practices Act 1974. The informations may be divided into two pairs. The first pair charge two offences of making a misleading statement with respect to the price of bread, in that the defendant caused to be published in the "Northern Territory News" on 3 December 1979 and in "The Star" newspaper on 6 December 1979 identical statements in the following terms: "As from Monday 3rd December, 1979 certain products of the Darwin Bakery Pty Ltd previously packed in - 750 gm and 500 gm weights will be altered to 680 gm and 450 gm weights. Prices will be adjusted accordingly. For a limited period of time, some products may bear wrappers pre-printed with old weights. The Management of Darwin Bakery apologises for this transitional difficulty. Any enquiries as to weights may be directed to the Darwin Bakery on phone 843500." Particulars of the offences in each case were: "The said statement was misleading in that notwithstanding that products previously sold at a weight of 750 grams were offered for sale after the said 3rd day of December 1979 at a weight of 680 grams and that products previously sold at a weight of 500 grams were offered for sale after the said 3rd day of December 1979 at a weight of 450 grams the products so offered for sale at the weights so reduced were not offered for sale at a reduced price adjusted according to the said reduction in weight." The second pair of informations charge that on 6 December 1979 at Woolworths Supermarket, Cavenagh Street, Darwin, and at Andrews Food Fair, Westralia Street, Stuart Park, respectively the defendant caused to be displayed the following statement "We are in the process of changing the size of some varieties of our products to facilitate bagging in the near future when the bagging machine on order arrives. The 750 gram loaf becomes 680 gram and the 500 gram loaf to 450 gram. Prices have been reduced according to the gazetted controlled prices. teens apologises for any inconvenience." It was alleged that in each case the said statement was misleading in that: "(a) notwithstanding that products previously sold at a weight of 750 grams were offered for sale after the said 6th day of December 1979 at a weight of 680 grams and that products previously sold at a weight of 500 grams were offered for sale after the said 6th day of December 1979 at a weight of 450 grams the products (save and except milk bread unsliced) so offered for sale at the weights so reduced were not offered for sale at a price reduced according to gazetted controlled prices or at all, and (b) insofar as gazetted controlled prices were applicable to the products of the defendant they were so applicable only to Milk Bread Unsliced in weights of 680 grams and 450 grams." _——_——-- - ope Pursuant to directions given on 27 June 1980 the prosecutions came on for hearing on 27 October 1980. By consent all informations were heard together. The evidence of both parties was in affidavit form. , In relation to all informations the informant had to establish beyond reasonable doubt that: (1) the defendant was a corporation; (2) in trade or commerce in connection with the possible supply of goods, namely bread, (3) the defendant did, on the occasion alleged, make a statement with respect to the price of the said goods, and (4) the said statement was misleading. At the conclusion of the evidence the defendant did not dispute that the first three elements had been established beyond reasonable doubt in relation to each information. In respect of the fourth element the defendant submitted that the court could not be satisfied beyond reasonable doubt that the statements referred to in each pair of informations were misleading. It was further argued that in relation to offences against s.53(e) of the Act mens rea is an element and in all the circumstances the court could not be satisfied beyond reasonable doubt that the defendant had the necessary guilty state of mind in respect of any statement referred to in the informations. : I turn to consider the evidence proved by affidavit and not in dispute. At all material times the defendant was a manufacturer and supplier of bread products in the Darwin area, having been incorporated on 31 May 1974. Prior to December 1979 most of the defendant's bread products were sold at weights of 750 grams and 500 grams. All other bakeries in the Darwin area -oe, made their bread in 680 gram and other sizes including 450 gram weights. For reasons connected with the Prices Regulation Act of the Northern Territory and the powers of the Controller of Prices thereunder the defendant decided to 'change the weights of its bread products from 750 grams and 500 grams to 680 grams and 450 grams respectively. A new bagging machine was ordered and other equipment purchased by the defendant for that purpose. Prior to December 1979 the defendant distributed bread to various retail outlets, including Woolworths Supermarket, Cavenagh Street, Darwin and Andrews Food Fair, Westralia Street, Stuart Park, and circulated a retail price list identifying the various types of bread by description and weight. During 1979 Mark Finocchiarowas the Managing Director of the defendant. In anticipation of the introduction of the new bread products weighing 680 grams and 450 grams respectively Finocchiaro arranged in October 1979 for signs to be printed for distribution to retailers and public display in the retail outlets. In October 1979 there was in force Order No. 5 of 1979 made by the Controller of Prices (hereinafter called "the Controller") on 7 September 1979 which fixed the maximum price at which bread could be sold within the Darwin area by reference to type and weight. It was a fairly extensive list of fixed prices. In a news release dated 13 November 1979 the Controller announced that the price control established by Order No. 5 of 1979 was to be relaxed and that a new prices order was contemplated whereby a maximum retail price would be set for what was referred to as a "standard loaf", being a wrapped unsliced milk loaf in two sizes. It was stated that the new order would set a maximum retail price for the controlled loaf at 63¢ for 680 gram loaves and 50¢ for 450 gram loaves. The Controller advised the defendant to the same effect by letter of the same date. By Order No. 8 of 1979 published in the Northern Territory Gazette on 30 November 1979, the Controller revoked Order No 5 and fixed the maximum price at which milk bread unsliced could be sold in the Darwin Town Area (as defined) by retail (inter alia) at 63 cents for 680 grams and 50 cents for 450 grams. By revocation of Order No. 5, price control on all other types of bread was effectively removed at least with effect from Friday, 30 November 1979. It was agreed, on the hearing before me, that for practical purposes Order No. 8 of 1979 would have applied to sales on and after Monday 3 December 1979. On 3 December 1979 the defendant caused to be published in the "Northern Territory News" newspaper the statement set out in information numbered 7 of 1980 and on 6 December 1979 in "The Star" newspaper the identical statement set out in information numbered 10 of 1980. On 6 December 1979 the defendant caused to be displayed at Woolworths Supermarket, Cavenagh Street, Darwin and Andrews Food Fair, Westralia Street, Stuart Park, identical statements in the form set out in informations numbered 8 and 9 of 1980 respectively. Notwithstanding the terms of the statements the prices of the defendant's products on and after 3 December 1979, except for milk bread unsliced in weights of 680 grams and 450 grams arene in respect of which the defendant adopted the maximum fixed price of 63 cents and 50 cents respectively, did not alter so as to reflect the reduction in weight of the particular products. The prices of some products were actually increased, e.g. milk bread sliced, which sold before 3 December 1979 in weights of 500 grams at 54 cents and after that date in weights of 450 grams at 57 cents. It is clear that on and after 3 December 1979 the defendant strictly applied the gazetted maximum price for the only product left under price control, namely, milk bread unsliced, and calculated prices for its other products not under price control by reference to that product. The defendant was entitled in law to do so, there being no restriction by way of price control on the distribution of those products. The question is whether the statements in the newspapers and supermarkets were, in the circumstances, misleading. The defendant's first argument was that the statements were not misleading in fact. It was submitted that in relation to all informations the gravamen of the prosecution's case was that the products offered for sale were not reduced or offered for sale at the reduced price adjusted according to their reduction in weight and that this allegation was not, in fact, true. The defendant's argument was that in relation to milk bread unsliced there was a reduction in price and that all the defendant's other products were "reduced" in price according to one of the ordinary meanings of that word. I was referred to the meaning of "reduced" as it appears in the Concise Oxford Dictionary New Edition 1976-1978 Reprint. Counsel relied upon meanings of "converted", "altered", or "calculated". Thus, so the argument ran, whilst the prices of the non price-controlled products were not the same as before 3 December 1979, they were, in fact, prices which had been converted, altered or calculated in accordance with the order of the Controller which came into effect on that date and in that sense they were "reduced". In my view, this argument misconceives the nature of the allegation in each case. The allegation is that the subject statements were misleading in that they asserted (a) in the case of informations numbered 7 and 10 of 1980, that the prices would be adjusted to accord with the different and lesser weight of the bread products to be sold by the defendant as from 3 December 1979, and (b) in the case of informations numbered 8 and 9 of 1980, that the prices had, in fact, been reduced to accord with the different and lesser weights of the bread products as from the same date. In relation to the meaning of "misleading", Mason J. said in re Credit Tribunal ex Parte General Motors Acceptance ' Corporation Australia (1977) 14 A.L.R. 257 at pp.267-8 with respect to its meaning in section 52(1) of the Trade Practices Act - "'Misleading' is a word which is capable of expressing various shades of meaning, some- times signifying that which is subjectively misleading and at other times that which is objectively misleading. Its meaning therefore is apt to be influenced, indeed decisively influenced, by the context in which it is found. Here the setting in - which s.52(1) appears is shown by the headings "Part V - Consumer Protection' and 'Division 1 - Unfair Practices'. In this context the prohibition contained in the sub-section emerges as an important general prohibition against a corporation in the course of trade or commerce engaged in a form of conduct, a trade practice, which is unfair." In Hornsby Building Information Centre Pty. Limited v. Sydney Building Information Centre Limited (1978) A.L.R, 639 Stephen J. said at p.647 - "When as in s.52(1) the focus is upon the misleading of others rather than upon the injury to a competitor it becomes of particular importance to identify the respect in which there is said to be any misleading or deception." . His Honour went on to explain that a statement which is literally true and accurate may nevertheless be misleading because it conveyed to others something more than the literal meaning which the words spelled out. I adopt, with respect, the approach of Northrop J. in Annand & Thompson Pty. Ltd. v. Trade Practices Commission (1979) 25 A.L.R. 91 at p.113, where he said that the conduct is to be considered in the context of the business being conducted by the defendant and as being understood by persons contemplating purchase of bread products. See also Weitmann v. Katies Ltd. (1977) 29 F.L.R. 336 per Franki J. at p.343 and Keehn v. Medical Benefits Fund of Australia Limited (1977) 14 A.L.R. 77 at p.81. In this context it seems to me that on the undisputed evidence a person contemplating purchasing the defendant's bread products after the publication of the statements set out in the respective informations would be misled into believing that there had been a reduction in the price of the products to accord with the reduction in packaging sizes and, furthermore, that in relation to the statements referred to in informations numbered 8 and 9, those prices did not exceed the gazetted controlled prices. In relation to informations numbered 7 and 10 of 1980, I considered whether the statement "prices will be adjusted accordingly" appearing in the statements could be said to be misleading or whether it should merely be construed as a statement of future intention and that a change of intention took place before the prices were implemented (See for example, ex parte Calvin; re Watson (1961) 2 F.L.R. 269). But, on the facts, these statements were made, in the case of both informations, after the adjustment of prices in accordance with the alteration of the packaging sizes. They were, therefore, a clear statement in effect that the prices had been adjusted accordingly and to that extent they did not accord with fact. There is no question, to my mind, that they were even literally true. I am satisfied beyond reasonable doubt that in relation to each information the statements were misleading. The defendant next argued that mens rea was a necessary ingredient of a contravention of s.53(e) of the Trades Practices Act 1974. Counsel for the defendant was undeterred by the fact that Given v. Holland (1977) 15 A.L.R. 439, is an authority of this Court directly against the argument. In that matter Franki J. held that mens rea is not an element of an offence against s.53(a) of the Act. Counsel submitted that the matter is now governed by Cameron v. Holt 28 A.L.R. 490. I reject this submission. Cameron v. Holt is clear authority for the proposition that mens rea is an element of the offence created by s.138(1)(d) of the Social Services Act. The High Court, on my reading of the respective judgments, did not attempt to lay down any principles in respect of the Trade Practices Act. Indeed there is some suggestion in the judgment of Murphy J., at p.496, that mens rea is not an element of offences found under consumer protection legislation. If anything, that dictum is directly against the defendant's argument also. rere en 10. I have considered the reasons of Franki J. in Given v. C.V. Holland Holdings Pty. Limited, and adopt with respect his reasoning and conclusion that mens rea is not an element of an . offence against s.53. The defendant finally submitted that the publication of the statements in each case was due to mistake and raised the statutory defence created by s.85 of the Act. This section reads: "(1) Subject to sub-section (2), in a prosecution under this Part in relation to a contravention of a provision of Part V, it is a defence if the defendant establishes - (a) that the contravention in respect of which the proceeding was instituted was due to a mistake, to reliance on information supplied by another person, to the act or default of another person, to an accident or to some other cause beyond his control, and (b) that he took reasonable precautions and exercised due diligence to avoid the contravention. (2) If a defence provided by sub-section (1) involves an allegation that a contravention was due to reliance on information supplied by another person or to the act or default of another person, the defendant 1s not, without leave of the Court, entitled to rely on that defence unless he has, not later than seven days before the day on which the hearing of the proceeding commences, served on the person by whom the proceeding was instituted a notice in writing giving such information that would identify or assist in the identification of the other person as was then in his possession," This submission misconceives the nature of the statutory defence. The publication of the statements in each case was quite deliberate and not due to any mistake in the sense of an administrative slip or mishap or breach of authority by one of the defendant's employees. Ultimately, counsel for the defendant abandoned the defence for mistake. In any event, I reject any such defence as it has no factual basis whatever in the present case. 11. I record a conviction against the defendant in respect of each information. I adjourn the further hearing of the proceedings for consideration of the question of penalty.