FOR LIMITED DISTRIBUTION IN THE FEDERAL COURT OF AUSTRALIA ) ) VICTORIA DISTRICT REGISTRY ) VG No. 316 of 1986 ) VG No. 317 of 1986 ) ) GENERAL DIVISION Between: RODNEY MICHAEL BROWN (Prosecutor ) And: GREG COTTON MOTORS PTY. LID. (Defendant ) MINUTES OF ORDER JUDGE MAKING ORDER: RYAN J. DATE OF ORDER: 2 OCTOBER 1987 THE COURT ORDERS THAT: 1. The summons numbered VG 316 of 1986 be dismissed. 2. The defendant be convicted of the charge contained in the summons numbered VG 317 of 1986 and fined the sum of $6,000 payable to the Registrar of this Court within 21 days this day. 3. The defendant pay the prosecutor's costs of the proceedings in VG 316 and 317 of 1986. E the Federal Court Rules. Settlement and entry of orders is dealt with in Order 36 of IN THE FEDERAL COURT OF AUSTRALIA ) ) VICTORIA DISTRICT REGISTRY ) VG No. 316 of 1986 ) VG No. 317 of 1986 ) ) GENERAL DIVISION Between: RODNEY MICHAEL BROWN (Prosecutor) And: GREG COTTON MOTORS PTY. LTD. (Defendant) Coram: Ryan J. . Date: 25 August 1987 Place: Melbourne REASONS FOR JUDGMENT The defendant in these proceedings is a motor car trader carrying on business under the name "Neilson Holden Ferntree Gully". The first summons against the defendant alleges that on 26 August 1985 it was guilty of an offence against s.79 of the Trade Practices Act 1974 ("the Act") in that in contravention of s.56(1) of the Act, the defendant advertised for supply at a price, goods that it did not intend to offer 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. The second summons alleges that the defendant between 26 and 28 August 1985 having advertised goods for supply at a special price, in contravention of s.56(2) of the Act failed 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 advertisement. Except those in respect of the intention required by s.56(1), the facts relied on as constituting each alleged offence were not substantially disputed. The defendant which dealt in vehicles manufactured by General Motors-Holden Ltd., and in used vehicles as well, had a practice, at least once a week, and sometimes twice weekly, of taking out large display advertisements in the "Sun" newspaper. It also had a policy that cars, known as "demonstrators" which were used by sales staff for demonstration purposes, should not be kept after they had travelled more than 10,000 kilometres or had been in the defendant's possession for more than six months. By way of implementing that policy the defendant paid to the salesman who sold a "demonstrator", and to the responsible manager a bonus of $50 and $100 respectively, over and above ordinary commissions. Each car advertised in the "Sun" was the cheapest of each model then in the defendant's stock, irrespective of whether it was a "demonstrator" or an unregistered new car. The model referred to in the particulars of each charge against the defendant was an "SL VK Holden Commodore 6 cylinder demonstrator". A car answering that description and having the registered number "CLI 492" was advertised for sale by the defendant in the "Sun" newspaper on thirty-one occasions between 16 May and 7 November 1987. The advertisement specifically relied on as an element in the proof of each charge appeared in the issue of that newspaper for 26 August 1985. The advertisement was in the "new and used cars" classified section of the newspaper and occupied a Panel two columns in width under the heading "HUGE SAVINGS UP TO $2272 AT NEILSON HOLDEN NOW". Four other models were also featured in the same advertisement, which, in respect of CLI 492, comprised an illustration, accompanied by the following text: "Save $2272 off new price. SL VK Commodore. (Demonstrator) 6 Cyl Seds CLI 492 3.3, 6 cyl., E.S.T. ignition, R.T.S., Cloth trim, AM/FM radio, mud flaps and pin striping. All low kms. Be quick - will sell fast. Less top trade-in price $9990.*" It appears that it was also the practice of the defendant to hold a meeting of its sales staff on each morning on which one of the defendant's advertisements appeared in the "Sun". At those meetings which were known as "Advertising Meetings", members of the sales staff were acquainted with the models which had been advertised that day, the price at which each model had been advertised, and the numbers of each model in stock, and were given general instruction in sales techniques. One such meeting occurred on the morning of 26 August 1985 at which a Mr. Danny Heffernan, then new car sales manager for the defendant, distributed photocopies of the defendant's advertisement in the "Sun" of that morning. Mr. Mark Scott who had commenced employment with the defendant on 5 August 1985 was one of the sales staff who attended the meeting of 26 August. Later on the same day he resigned from the defendant's employ. Mr. Scott testified that, Mr. Heffernan, in the course of the advertising meeting, referred to each of the models described in the advertisement and said, in effect, that it would be alright to sell the "Barina" and the "Astra", that sales staff should try to get anyone interested in the "Gemini" into a manual rather than an automatic and that "we could not possibly sell the 'Camira' and the 'Commodore' at those prices - they owed us too much money". Mr. Scott also recalled that the question was raised by two other salesmen, Tony Deans and Guy Elliott, of what should be done if customers insisted on seeing those particular cars. According to Mr. Scott, Mr. Heffernan replied, "Try to steer them into another vehicle. If they ask and insist on seeing those cars, tell those customers they were being test driven, were being prepared for sale, or were being refuelled". It was also Mr. Scott's recollection that Mr. Heffernan amplified his answer by saying that it was the salesmen's "duty as professional people to steer them into another vehicle, that we were not order takers, that we were professional people and it was part of our jobs to direct them to another car". Mr. Scott further attributed to Mr. Heffernan, the statement that the cars detailed in the advertisement "were an incentive, a means of getting the customers into Neilson's and it was up to us to sell them a cac". Mr. Scott conceded, under cross-examination, that Mr. Heffernan had said at the meeting, in answer to a question, that, if customers were to insist on seeing a particular advertised car, and overbear the salesman's excuses for its being unavailable, "Well, we would have to show it to them". Mr. Scott also indicated that he understood that "if that situation came up we would hand that over to Danny and leave it at that" Mr. Deans gave evidence that he attended the advertising meeting on 26 August 1985 in the second of the two weeks during which he was employed by the defendant. Like Mr. Scott, he recalled that Mr. Heffernan had referred to the cars detailed in the advertisement in the "Sun" of that morning. Mr. Deans went on to say that Mr. Heffernan had given instructions that "any inquiries on any of the advertised cars ... were to go to him". Another employee of the defendant who recalled the meeting of 26 August 1986 was Mrs. Cristine Conlin who had worked on the sales staff of Neilson Holden since October 1983. In 1985 she was responsible for answering telephone inquiries generated by the defendant's newspaper advertisements. She disagreed with the suggestion that at the meeting of 26 August Mr. Heffernan had said that the Commodore CLI 492 was not to be sold, or could not be sold at its advertised price, because it owed the defendant too much. Mr. Van t'Hooft who, in August 1985, was employed as a new car salesman by the defendant, and who has since been promoted to new car sales manager, gave evidence that he was present at the advertising meeting on 26 August 1986 but had no specific recollection of it. Mr. Heffernan, who was new car sales manager for the defendant in August 1985, and who has since been appointed its used car sales manager, also gave evidence. He was largely responsible in 1985 for writing the "copy" for the defendant's advertisements including that of 26 August. He also chaired the advertising meetings at that time, but claimed that he did not specifically recall the meeting of 26 August. However, he asserted that he would not have given the instruction at that meeting, attributed to him by Mr. Scott, that the "Commodore" was not to be sold at the advertised price because that would have been "totally against all company policy that I was taught". On the other hand, Mr. Heffernan accepted that he may have told the defendant's salesmen at the meeting of 26 August 1985 that, if there were inquiries about advertised cars, the customer should be referred to him. After resigning from the defendant's employ on 26 August 1985, Mr. Scott on the same day spoke by telephone to Mr. Snow who was then an investigations officer in the Trade Practices Commission. As a result of that contact, Mr. Snow on the following day telephoned the premises of Neilson Holden in Ferntree Gully and enquired about the "demonstrator Commodore which had been advertised". He was given, presumably by Mrs. Conlin, some details about that car, and later on the same day attended at the defendant's premises in company with a Miss Howard who was then employed by the Trade Practices Commission as an assistant research officer. Mr. Snow and Miss Howard, on arriving at the premises of Neilson Holden, first looked inside and outside the showroom for the vehicle CLI 492 but were unable to find it. They were then approached by a Mr. Hanson who made it clear that he was a novice salesman. Mr. Snow referred Mr. Hanson to a copy of the advertisement from the "Sun" of 26 August and pointed to the part which referred to CLI 492 saying, "I am particularly interested in this car here because of the price". Mr. Hanson replied "I think that one has been sold but I will check on this". He then spoke with two unidentified men in an office to the left of the showroom and on returning said to Mr. Snow, "That one has been sold yesterday morning. The man has put a deposit on it". Mr. Hanson then tried to interest Mr. Snow and Miss Howard (who represented herself to be Mr. Snow's wife) in other models and took them for a test drive in a "Camira" sedan. On their return, Mr. Hanson pointed out the Commodore CLI 492 which was then parked outside the defendant's showroon. Mr. Snow inspected that vehicle and noted that no "K" form was affixed to it, and Mr. Hanson insisted that "it has definitely been sold... The fellow came in keen as mustard this morning with a fist full of dollars". Also on 27 August 1985, Mr. Mineely another officer of the Trade Practices Commission telephoned Neilson Holden of Ferntree Gully to ask about the Commodore which had been advertised in the "Sun" of the previous day. That call was made on Mr. Snow's instructions. Mr. Mineely spoke to Mrs. Conlin who told him the colour of CLI 492 and quoted him an "on-road" price for it of $11,030. Later on the same day, when Mr. Snow returned from the defendant's premises he told Mr. Mineely to telephone again to ask whether the vehicle was still available. Although he then asked to speak to Mrs. Conlin, the call was taken by Mr. Hanson who told Mr. Mineely that the advertised Commodore had been sold. - On 28 August 1985, another officer of the Trade Practices Commission, Mr. Sest, telephoned Neilson Holden to inquire about the "Commodore" advertised on 26 August. He too spoke to Mrs. Conlin and was told that the vehicle was still available. Later that day, Mr. Sest attended at the respondent's premises where he met Mr. Deans to whom he showed a copy of the "Sun" advertisement of 26 August and asked whether the "Commodore demonstrator" described in it was still available. Mr. Deans replied "Yes, I think it is". Mr. Deans then consulted another employee of the defendant in an office on the left of the showroom and returned to tell Mr. Sest that the "demonstrator you are after ... is out, picking up a trade-in". Later Mr. Deans, according to Mr. Sest, indicated that the trade-in being picked up was to be traded-in for the "Commodore" itself which had been sold. Mr. Deans, in his evidence, indicated that the other employee whom he consulted about Mr. Sest's inquiry was Mr. Heffernan "because he had instructed us ... we were to see him before we sell" any of the advertised cars. Mr. Deans went on to testify that Mr. Heffernan had told him that the "demonstrator Commodore" had been sold. When Mr. Deans pointed out that he had just seen the car, Mr. Heffernan replied "No, you are wrong; it has been sold". Mr. Deans continued to dispute the accuracy of Mr. Heffernan's statement whereupon, according to Mr. Deans, Mr. Heffernan instructed him to "tell the chap it has been taken to be demonstrated and is sold on demonstration by one of the employees of the company", and "to sell him up to a new Commodore" as there was not much of a price difference. When taxed with that evidence, Mr. Heffernan claimed not to recall any discussion with Mr. Deans about the vehicle CLI 492, but said that the instruction attributed to him "would be going against everything I have been taught over the years whilst employed by Neilson Holden". Mr. Black Q.C., for the defendant conceded that if I were to accept the substance of the evidence of the officers of the Trade Practices Commission who made telephone calls to, and visited, the defendant's premises, the prosecution would have made out its case that a breach of s.56(2) of the Act had been committed. The evidence of the officers of the Commission was not seriously challenged, and I see no reason to disbelieve it. Accordingly, the defendant must be convicted on the summons in VG 317 of 1986 of an offence against s.56(2). By s.56(1) of the Act, as in force in August 1985, it was provided that: "A corporation shall not in trade or commerce, advertise for supply at a special price goods or services that the corporation does not intend to offer 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." Section 84 of the Act, before its amendment by Act No. 17 of 1986, was in the following terms: "(1) Where, in a proceeding under this Part in respect of any conduct engaged in by a _ hody corporate, being conduct in relation to which a provision of Part V applies, it is necessary to establish the intention of the body corporate, it is sufficient to show that a servant or agent of the body corporate by whom the conduct was engaged in had that intention. (2) Any conduct engaged in on behalf of a body corporate by a director, agent or servant of the body corporate or by any other person at the direction or with the consent or agreement (whether express or implied) of a director, agent or servant of the body corporate shall be deemed, for the purposes of this Act, to have been engaged in also by the body corporate." The language of s.56(1) as reproduced above casts on the prosecution the onus of proving a negative, the absence of intention to offer the relevant goods for supply at the advertised price for a period that is, and in quantities that are, reasonable having regard to the stated criteria. Section 84(1) assists in the positive proof of the intention of a body corporate but says nothing about proof of the absence of a specified intention. However, s.84(2) assists 12. the prosecution in a case like the present in the sense that the acts which constitute advertising, if engaged in by a director, agent or servant of the body corporate, are to be deemed to have been conduct of the body corporate itself. Accordingly, if it is proved that a director, agent or servant of the defendant procured the insertion of the advertisement of 26 August 1985 and at that time did not intend that the defendant should offer "CLI 492" for sale at the advertised price for a reasonable period, the defendant will be fixed with liability for that conduct. It may be necessary to inquire, in an appropriate case, whether the relevant director, servant or agent had the capacity to give effect to his lack of intention that the defendant should offer the goods for supply at the advertised price for a reasonable period and in reasonable quantities. However, the need for that inquiry does not arise on the facts which have been proved in this case because I am satisfied that Mr. Heffernan's was the directing mind behind the insertion of the advertisement on 26 August 1985, and that he was ina position to determine whether or not CLI 492 should be offered for sale and, if so, for how long. The evidence reveals that Mr. Heffernan selected the cars which were featured in each of the defendant's relevant advertisements, and that he did so by reference solely to which was the cheapest then in stock of each model to be advertised. Mr. Cotton, the managing director of the defendant gave evidence that although he "approved the format" of its advertisements, he was not specifically aware of those which featured the vehicle CLI 492. Mr. Richardson in 1985 was the defendant's new car Manager to whom Mr. Heffernan as new car sales manager reported. Although his attention was directed specifically to the advertisement of 26 August 1985, and to other advertisements featuring CLI 492, Mr. Richardson had no distinct recollection of that car. Mr. Heffernan acknowledged that he was responsible, in and about August 1985, for writing the "copy" for the defendant's advertisements including those which featured CLI 492. When Mr. Heffernan was cross-examined about' the incantation in those advertisements "Be quick will - sell fast" the following exchange is recorded: "MR GINNANE: Did you put in the words, "be quick - will sell fast"? --- Yes, I would have. Did you think that that was the case, that the car would sell fast at that stage? --- When we put in an ad, our intention is to sell that car. Did you think at that stage that the car would sell fast at that price? --- Naturally we hope it would. Did you think it would, based on your experience? --- We would not advertise a car if we did not think it would sell." Later in the same cross-examination this passage occurs: "MR GINNANE: When you put the advertisement in relating to CLI 492, what was your intention behind putting that advertisement in? What did you hope to achieve --- To sell motor vehicles. To sell motor vehicles? --- Yes. What motor vehicles? --~ Obviously, to sell that singularly but also - most people that come in - they do not always want manual so I always had a number of vehicles to offer them, anyhow." It has been accepted by counsel for the prosecutor that the relevant intention to be examined for the purposes of the information under s.56(1) of the Act is that of Mr. Heffernan. Mr. Ginnane referred to the judgment of Smithers J. in Reardon v. Morley Ford Pty. Ltd. (1980) 49 FLR 401 at 420 as providing some guidance to the approach to be taken in determining whether it has been proved beyond reasonable doubt that Mr. Heffernan lacked the requisite intention that the defendant should offer CLI 492 for sale for a reasonable period at the advertised price. His Honour there said: "To my mind a person in his position genuinely having that intention would certainly have given instructions to his sales staff that the vehicles must be offered 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 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 on 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 the defendant had at hand the means to provide it, then I do not doubt the situation is one in which according 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 with his sales 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 and his staff reflects 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 rise to any consideration that raises questions as to the validity of that inference." It has been submitted that a similar inference is equally inescapable in this case. Mr. Ginnane invited me to find, primarily on the basis of Mr. Scott's evidence, that, at the advertising meeting of 26 August, Mr. Heffernan had given a positive instruction that the Commodore CLI 492 was not to be