JUDGMENT No. 1 3/1. CATCHWORDS Trade Practices - prosecution under section 79(1) for alleged contraventions of s8s.53(a) of the Act - substitution of meat species in "beef" pies - meat supplied by third party -— no knowledge of substitution on part of accused - whether defences under s.85(1) of the Act available - effect of amendment to section 85(1) following Swanson Committee report - whether defence of "reasonable mistake" available in the circumstances - construction of s.85(1)(a) of the Act - whether "information" "supplied" to accused by third party in circumstances of purported performance of long standing contractual dealings for purposes of s.85(1)(b) of the Act. Practice and Procedure - factual admissions proferred by accused - whether appropriate - operation of s.80 of the Judiciary Act 1903 - "the common law of England" - applicability of provisions of Crimes Act 1900 (NSW) Trade Practices Act 1974 ss. 53(a) 79(1) and 85(1) Trade Practices Revision Act 1986 Trade Practices Amendment Act 1977 Australia Act 1986 Crimes Act 1900 (NSW) s.404 Rv Maes [1975] VR 541 referred to. Warman International Ltd. v Envirotech Australia Pty. Ltd. (19586) 67 ALR 253 referred to. R v Drury (1983) 50 ALR 159 referred to. Australian Consolidated Press Ltd. v Uren [1969] 1 AC 590 referred to. The Queen v Longford (1970) 17 FLR 37 referred to. Chiou Yaou Fa v Morris (1987) 46 NTR 1 referred to. Proudman v Dayman (1941) 67 CLR 536 referred to. He Kaw Teh v The Queen (1985) 157 CLR 523 followed. Guthrie v Doyle Dane and Bernbach Pty. Ltd. (19 0 FLR 116 const dered. acaentay, Brown v Riverstone Meat Co. Pty. Ltd. (xXQ¥ 595 ceferred to. : RECEIVED = 9 NOV 1987 FEDERAL COURT OF AUSTRALIA PRINCIPAL REGISTAY Re Bolton; Ex parte Beane (1987)61 ALJR 190 referred to Given v C.V. Holland (Holdings) Pty. Ltd. (1977) 29 FLR 212 considered. Guthrie v Universal Telecasters Queensland Ltd. [1977] ATPR 40-0 referred to. Universal Telecasters (Qld) Ltd. v Guthrie (1978) 32 FLR 360 considered. Doolan v Waltons (1981) 39 ALR 408 Doolan v Waltons (1982) 61 FLR 427 Wilkinson v Katies Fashions (Aust.)Pty. Ltd. [1986] ATPR 40-721 In @a.Solicitor [1945] 1 KB 368 referred to. Minnesota Mining and Manufacturing Co. v Beiersdorf (Australia) Ltd (1980) 144 CLR referred to. RONALD EDWARD ADAMS v- ETA FOODS LIMITED Nos. 78, 79, 80, 81, 82 of 1987 Gummow J. 6 November 1987 Sydney IN THE FEDERAL COURT OF AUSTRALIA ~~ we SS NEW SOUTH WALES DISTRICT REGISTRY Nos. 78,79,80,81,82 of GENERAL DIVISION 1987 BETWEEN: RONALD EDWARD ADAMS Prosecutor AND: ETA FOODS LIMITED Defendant GUMMOW J. REASONS FOR JUDGMENT The Charges The Prosecutor was authorised by the Trade Practices Commission to institute proceedings in this Court by Summons against the Defendant, Eta Foods Limited ("Eta") for five offences against sub-s.79(1) of the Trade Practices Act 1974 ("the TP Act") in respect of contraventions of s.53(a) of the TP Act. Section 53(a) provides: 53. A corporation shall not, in trade or commerce, in connexion with the supply or possible supply of goods or services or in connexion with the promotion by any means of the supply or use of goods or services -— (a) falsely represent that goods are of a particular standard, quality, grade, composition, style or model or have had a particular history or particular previous use; 2. The five prosecutions (matters G78, 79, 80, 81 and 82 of 1987) have been heard together. The evidence in each has been treated as evidence in the others. The substance of the charge in each matter is that Eta, in trade or commerce, in connexion with the supply of goods, falsely represented that the goods were of a particular quality or composition. The charge in matter No. G.78 arises out of purchase on or about 26 February 1986 at Sydney of a manufactured by Eta. Eta also was responsible for packaging. The particulars of the charge are:- A pie contained in a carton bearing the words Country Fair Beefsteak Pie was a "Beefsteak Pie" composed of "Wheat Flour, beef, margarine, thickener, seasoning, soya flour, salt, whey powder, food colour, baking powder, onion powder, sodium metabisulphate, water added" whereas the said pie contained some sheep meat. the pie the The charge in matter No. G.79 of 1987 again arises from the purchase of on or about 26 February 1986 at Sydney, a pie manufactured by Eta. Again Eta was responsible for packaging. The particulars of the charge are:- A pie contained in a carton bearing the words Country Fair Pumpkin and Potato Beef Pie was a "Pumpkin and Potato Beef Pie" composed of "Beef, wheatflour, pumpkin, dried instant mashed potato, margarine, thickener, texturised vegetable protein, spices, full cream milk powder, salt, soya flour, baking powder, whey powder, onion powder, emulsifier, food colour, sodium metabisulphate, water added" whereas the said pie contained some sheep meat. the In matter No. G.80 of 1987, the charge arises from the purchase on 27 February 1986 at Melbourne of a pie again manufactured by Eta and again with packaging for which Eta was responsible. The pie was marketed as a "Country Fair Pumpkin and Potato Beef Pie" and the particulars of this charge follow those in matter No. G.79. The charge matter G.81 arises from the purchase on 27 February 1986 at Melbourne of a pie again manufactured by Eta and again sold in packaging for which Eta was responsible. The product was marketed as a "Country Fair Beefsteak Pie" and the particulars of charge follow those in matter No. G78 of 1987. In matter No. G.82 of 1987, the charge arises out of the purchase on or about 27 February 1986 at Melbourne of a meat pie manufactured by Eta and in packaging for which Eta was responsible. The particulars of the charge are:- A pie contained in a carton bearing the words Safeway Beefsteak Pie was a "Beefsteak Pie" composed of "Beef, wheat flour, margarine, thickener, herbs, spices, salt, whey powder, colouring, baking powder, sodium metabisulphate, water added" whereas the said pie contained some sheep meat. The Admissions The pies referred to in matters G.78, G.79 and G.80 had been sold by Eta to G.J. Coles and Co. Limited and they were s0ld by retail by G.J. Coles Limited on the dates referred 4. to in the Summonses. The pies referred to in matters G.81 and G.82 had been sold by Eta to Australian Safeway Stores Pty.Ltd. and that company had sold them by retail on 27 February 1986. In each case the subject pies were packaged in individual cartons and the cartons had been labelled by the servants or agents of Eta with the words in quotation marks set out in the particulars to each of the charges. Further, in each case, the pie contained some sheep meat of a not insignificant amount. The factual material set forth in the immediately preceding paragraph of these reasons was the subject of admissions made by Eta in these proceedings for the purposes of these proceedings only. This was done, by arrangement between Counsel, with a view to shortening the hearing and to direct attention to what both sides agreed was the real issue viz the existence or otherwise of a defence under sub-s. 85(1) of the TP Act. The question arises as to whether it is open to the Court to give effect to that agreement. The answer depends upon the operation of the Judiciary Act 1903 and upon the English common law. In the present proceedings, counsel for Eta properly drew attention to the apparent rule in England that formal admissions of particular facts, as opposed to the plea of guilty, are disallowed at a criminal trial because the rules of evidence cannot be waived once the trial has started: R v Maes [1975} VR 541 at 550. The importance of this rule for the present proceedings flows from the operation of s.80 of the Judiciary Act. This provides that all courts exercising federal jurisdiction in civil and criminal matters are governed by "the common law of England" as modified by the Constitution and by the statute law in force in the State or Territory in which the Court in question is held, so far as the laws of the Commonwealth are inapplicable or their provisions are insufficient to carry them into effect, and so far as that common law is applicable and not inconsistent with the Constitution. It is by this route that this Court may find itself called on to apply the English common law: Warman International Ltd. v Envirotech Australia Pty. Ltd. (1986) 67 ALR 253 at 262; R v Drury (1983) 50 ALR 159 at 161-163, 167-170. Section 80 rests upon the premise, which would have been accepted without question in 1903, that the common law was universal and indivisible in character. However, at least since Australian Consolidated Press Ltd. v Uren [1969] 1 AC 590, it has been plain that this premise no longer is true and that the common law as evolved in this country may diverge from that of England. The preservation of s.80 in its original form thus has become an anachronism. This is so a fortiori since the coming into effect of the Australia Act 1986; see generally Sir Anthony Mason" Future Directions in Australian Law", being the Wilfred Fullagar Memorial Lecture 1987, pages 5-12. The result is that the application of s.80 now, strictly, may 6. require evidence of foreign law, to be proved as a factual matter (Cross on Evidence 3d Aust. Ed. §21.2); a strange situation. The need for this evidence does not arise in the present case. This is because state and federal law operates to modify common law and, in the result, s.80 has effect before one reaches English common law. The Court, in this case, was held in New South Wales. The Crimes Act 1900 (NSW) s.404 provides: Every accused person on his trial may, if so advised by counsel, make any admissions as to matters of fact, whatever the crime charged, or give any consent which might lawfully be given in a civil case. In The Queen v Longford (1970) 17 FLR 37, Gibbs J. (as he then was) held that s.404 extended to any matters of fact, including conclusions as to matters of fact. In my opinion, s.404 is made applicable to the present proceedings by ss.79 and 80 of the Judiciary Act, thereby making it unnecessary to follow s.80 through to the English common law. Further and alternatively, the making and receipt of the admissions in the present case may be supported by Order 18, Rule 1 of the Rules of this Court. The general applicability of that Order to proceedings in this Court is not limited to what are strictly civil proceedings: cf RSC (NSW) Part 75. Accordingly, the Court may, in my view, act upon the admissions to which I have referred, and I do so act. The result is to hold in each case that, save for what follows, Eta has, in trade or commerce, in connection with the supply of goods, falsely represented that the pies were of a particular quality or composition, within the meaning of s8.53(a) of the TP Act, and was thus guilty of an offence punishable under sub-s. 79(1). Construction of Sub-s. 85(1) In 1985 Eta was registered proprietor of the business name "Country Fair Food Products" and carried on manufacturing operations under that name at its premises at Liverpool, New South Wales. This state of affairs continues. The beef and sheep meat included in the pies was in the form of mince. The meat was not minced by Eta. It was supplied to Eta in purported performance of contracts between Eta and a third party for the sale and delivery to Eta of "minced beef". The third party was St.George Meat Markets of 235 Kingsgrove Road, Kingsgrove, New South Wales. The pies were made using mince that had been delivered to Eta at its Liverpool premises over a four month period ending in January 1986. Eta relies in respect of each charge on defences provided by sub-s.85(1) of the TP Act. This provides, so far as material:- 85(1)...{In] a prosecution under this Part in relation to a contravention of a provision of Part Vv, 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 precautions and exercised due diligence to avoid the contravention. Section 85 has been amended since the commission of the alleged offences (by the Trade Practices Revision Act 1986, which came into force, so far as would be relevant if the amendments applied to these prosecutions, on 1 June 1986). Eta relies upon each of paragraphs (a),(b)and (c) of sub-s.85(1). A considerable body of evidence was led by each side upon the issues presented by Eta's reliance upon s.85. Before dealing further with that evidence it is appropriate to turn to questions of construction of sub-s. 85(1) which were debated in addresses. 9. Section 85(1) first appeared in the TP Act in the following form:- 85(1) Subject to sub-s.2, in a prosecution under this Part in relation to a contravention of a provision of Part Vv 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 the 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. By the Trade Practices Amendment Act 1977 (which received the Royal Assent on 16 June 1977, and, relevantly, came into force on 1 July 1977) paragraphs (a) (b) were removed. They were replaced by (a),(b) and (c) their present terms. In the explanatory memorandum circulated by the Minister for Business and Consumer Affairs in respect of the Trade Practices Amendment Bill 1977 when it was before the House of Representatives, the Minister said (paragraph 37): Section 85(1) which provides that reasonable conduct may be a defence to a consumer protection prosecution, is restructured into separate defences of reasonable mistake, reasonable reliance on information supplied by another person, and default of another person which could not reasonably have been prevented (Clause 44). 10. The second reading speech on the Trade Practices Amendment Bill 1977 in the Senate contained the following:- The purpose of this Bill is to implement the proposals of the Government for amendment of the Trade Practices Act. This Bill has_ been developed following a long and fruitful period of detailed examination of the present Act and proposals for its amendment. In April 1976 the Government established a Committee to review the operation of the Act. That Committee - the 'Swanson' Committee ~ reported last August and the report was immediately made public. In December 1976 the Government announced its Proposals in relation to certain recommendations of the Committee. It did so with the specific intention of encouraging and fostering public scrutiny and debate. Since that time, most proposals have, in fact, been closely scrutinised by the community and aie great number of submissions have been received. This Bill represents the Government's decisions in relation to the manner in which the Act should be amended, taking into account all the views which have been put to it. Paragraphs 9.143 and 9.144 of the Report of the Trade Practices Act Review Committee, ("The Swanson Committee") read as follows: 9.143 It was also suggested to the Committee that the two-part defence provided in sub-section 85(1) be divided into two alternative defences by replacing the word "and" before paragraph (b), by "or". The Committee would not favour this amendment. Sub-section 65(1) at present incorporates and extends the defence known as honest and reasonable mistake. The Committee does not consider that either element of that defence is alone sufficient. 9.144 However, the Committee does consider that sub-section 85(1) currently operates unduly harshly. For example, some concern was expressed to the Committee that the requirements of 11. "reliance on information supplied by another person", and "the exercise of due diligence" were uncertain and could make excessive demands upon operations for preventive measures. The Committee considers that the sub-section should be restructured to provide a defence to a criminal prosecution when the defendant establishes that the contravention in respect of which the proceeding was instituted was: (a) due to an honest and_= reasonable mistake, or (b) due to reasonable reliance on information supplied by another person, or (c) due to the act or default of another person or to an accident or some other cause beyond his control and in which case he took reasonable precautions and exercised due diligence to avoid the contravention. The Committee would consider this to be a major change to the law on this matter. The reference in The Swanson Committee's report to "the defence known as honest and reasonable mistake" was to a significant doctrine which, as a matter of construction, may Operate to qualify what otherwise would be so-called absolute liability in statutory offences. In an appropriate case a statute may be construed as removing from the prosecution the obligation to establish mens rea but nonetheless so as to permit the accused to raise matters which may give rise to a reasonable doubt that he acted under an honest and reasonable mistake of fact. The doctrine has recently been described as a "half-way house": Chiou Yaou Fa v Morris (1987) 46 NTR 1 at 18. It had as a most influential proponent Dixon J. in Proudman v Dayman (1941) 67 CLR 536 at 540-1. 12. The doctrine was explored in He Kaw Teh v The Queen (1985) 157 CLR 523, where Gibbs C.J. (at 533) described it asa middle course between imposing absolute liability and requiring proof of guilty knowledge or intention. The judgments in that case recognised that where, on a proper construction of the provision in question, the doctrine applies and the evidence raises a likelihood of honest and reasonable mistake, the prosecution must rebut that beyond reasonable doubt. By way of significant contrast sub-s. 85(1), both in its original and present form, in terms places the onus upon the defendant. The standard of proof is not specified. It was decided in respect of s.85 in its old form that the defendant need only satisfy the civil standard of proof upon the balance of probability: Guthrie v Doyle Dane and Bernbach Pty. Ltd. (1977) 30 FLR 116 at 120. The same construction has been placed upon sub-s. 85 in its present form: Brown v Riverstone Meat Co. Pty. Ltd. (1985) 60 ALR 595 at 603. -The correctness of that construction was accepted by both parties to the present proceedings. Of the defence known as honest and reasonable mistake, Dawson J. in He Kaw Teh v The Queen (1985) 157 CLR 523 at 592 said: 13. It is also understandable in the current context of statutory interpretation (whatever may have been the explanation in a wider, historical setting) why the mistake to be exculpatory must be not only honest but also based upon reasonable grounds. For it is one thing to attribute to the legislature an intention to retain, as part of an offence, a mental element which does not have to be proved by the prosecution but may be negated by proof of a mistaken belief held upon reasonable grounds. It is another thing to say that the legislature intended a mistaken belief, however unreasonable, to have the same effect. I readily admit that there is an element of rationalization in this explanation, but I think that it puts the emphasis in the right place. The defence of honest and reasonable mistake stems from the common law requirement of a guilty mind and it is not, as it is sometimes put, a defence based solely or even primarily upon the absence of negligence: cf. Reg. v Sault Ste. Marie (1978) 2 SCR 1299; Howard, "Strict Responsibility in the High Court of Australia", Law Quarterly Review, vol. 76 (1960), p. 547. Wilson J. (at 559), speaking of a statutory offence of importing narcotic goods, said he would not draw a distinction between a defence of honest and reasonable mistake and one of honest and reasonable ignorance of the presence or nature of the goods in question. The recommendation in paragraph 9.144 of the Swanson Committee's Report was very largely adopted in the drafting of the Trade Practices Amendment Act (1977). The only substantive departure from the recommendations of the Committee as to the "restructuring" of s.85({1) involved paragraph (a). The Committee recommended the words "due to an honest and reasonable mistake"; in the legislation the expression is "due to reasonable mistake". Mistakes may be unreasonable but a 14. dishonest mistake is something of a contradiction in terms; this may explain the shorter form of words in the legislation, cf He Kaw Teh v The Queen (1985) 157 CLR 523 at 592. I conclude that the mischief to which the recast sub-s. 85(1) was directed is to be understood as follows. In its original form, the provision was taken to incorporate and to extend the principle that an honest and reasonable mistake of fact will be a ground of exculpation where actual knowledge is not required as an element of an offence. Nevertheless, the perception was that the provision operated unduly harshly and that amelioration in favour of defendants was appropriate. This was sought to be achieved by division of the sub-section s0 as to spell out three heads of defence. Whether the terms of the recast sub-section meet the mischief I have described is a question for the Court upon the construction of the words used: Re Bolton; Ex parte Beane (1987) 61 ALJR 190 at 191, 197-8. As stated above, the Swanson Committee reported in August 1976. Judgment in Given v C.V. Holland (Holdings) Pty. Ltd. (1977) 29 FLR 212 was delivered on 27 June, 1977. It was a decision upon a charge under s.79 for contravention of s. 53(a). Franki J. held that the presumption that mens rea is an essential ingredient in every offence had been displaced in these provisions. In reaching that conclusion Franki J. referred to the defences available and in particular to s.85(1) as it stood in its original form. His Honour said (29 FLR at 218) :- 15. The defendant argued that mens rea was a necessary ingredient which the informant had to establish and this argument was put on a number of grounds. In my opinion, it 18 very significant that it is not a defence to establish that a contravention of s.53(a) was due to a mistake, or to reliance on information supplied by another person, or to the act or default of another person, or to an accident or to some other cause beyond control of the defendant. It is also necessary for the defendant to establish that he took reasonable precautions and exercised due diligence to avoid the contravention. The observations concerning sub-s. 85(1) were directed to that provision in its original form. The first litigation anvolving reliance upon sub-s.85(1) in its original form arose out of an advertisement for Metro Ford Pty. Ltd. shown on television in Brisbane on 15 April 1975. Several prosecutions were involved. They were heard after passage of the 1977 amendments, but under the old law. On 9 August 1977, Metro Ford Pty. Ltd. was found guilty of contravention of s.53(e) of the TP Act making of misleading statements in the advertisement concerning the existence of price reductions: Guthrie V Metro Ford Pty. Ltd. [1977] ATPR 40-030. In Guthrie v Doyle Dane and Bernbach Pty.Ltd. (1977) 30 FLR 116, the Court, in a judgment delivered on 21 September 1977, dealt with a prosecution against the advertising agents for Metro Ford Pty. Ltd. Then, in Guthrie v Universal Telecasters Queensland Ltd. [1977] ATPR 40-038 (judgment delivered 12 October, 1977) the owners of the television 16. station which screened the offending advertisement were found guilty of contravention of s. 53(e) of the TP Act. An appeal against this third decision was upheld: Universal Telecasters (Qld) Ltd. v Guthrie (1978) 32 FLR 360. However, the members in the Full Court comprising the majority (Bowen C.J. and Franki J.) based their decision upon sub-s.85(3), which deals specially with the position of publishers of advertisements. They held the defence provided by sub-s.85(1) had not been established. There had earlier been a discussion of s.85(1) in the second of the three prosecutions, Guthrie v Doyle Dane and Bernbach Pty. Ltd. (1977) 30 FLR 116 at 120-121. There is a misprint on page 120 of that report. The reference to s.85(1)(d) should be to paragraph (b), in its original form. In considering what was said in this case it must be remembered that as the sub-section stood in its original form it was necessary in each case, in order to make out any defence under sub-s.85(1), for the defendant to establish that he took reasonable precautions and exercised due diligence to avoid the contravention. St.John J. (30 FLR at 120) said:- The first observation I wish to make is that practice in the advertising industry 1s not relevant unless it amounts to a precaution or it indicates the exercise of diligence within the meaning of the sub-section. I see nothing in Mr. Dennis' evidence which indicates that the defendant company took any precautions or exercised any diligence; in fact, if anything it indicates a lack of diligence. 17. In the Full Court in Universal Telecasters (QLD) Ltd. v Guthrie (1978) 32 FLR 360 at 363, Bowen C.J. (who also was dealing with s.85(1) in its original form) said of the expression "took reasonable precautions and used due diligence" in s.85(1)(b):- While these are plain English words, which have to be applied as they stand, it appears to me that two responsibilities which Universal Telecasters would have to show it had discharged, in order to establish this defence, would be that it had laid down a proper system to provide against contravention of the Act and that it had provided adequate supervision to ensure the system was properly carried out. Universal Telecasters did institute a system and did provide for supervision. The mere fact that its system and supervision has proved inadequate to prevent error, does not necessarily establish that its system is defective. Even the best systems may break down due to human error. It is necessary to make a judgment about the system and the provision for supervision. The taking of reasonable precautions and exercise of due diligence to avoid the contravention in question no longer is attached as a specific component in each defence provided for by sub-s. 85(1). It is now attached as an element in the defence provided for in paragraph (c). It is not attached to paragraph (a) and (b). They have their own elements. In particular, both mistake in paragraph (a) and reliance on information in (b) must be reasonable. No doubt reasonableness is an objective matter, having regard, however, to the circumstances of the case: cf He Kaw Teh v The Queen (1985) 157 CLR 523 at 575. 18. But in my view it 1s not necessarily fatal to a defence of reasonable mistake within the meaning of paragraph (a) that the defendant cannot show that he took reasonable precautions and exercised due diligence to avoid the contravention. The question, more directly, is whether the contravention was due to reasonable mistake. Likewise, a defendant may be able to show that, within the meaning of paragraph (b), the contravention was due to reasonable reliance on information supplied by another person, even though the defendant cannot also show that he took reasonable precautions and exercised due diligence to avoid the contravention. Again, in my view, a defendant may make out a defence under paragraph (c) (that, for example, the contravention was due to a cause beyond his control and he took reasonable precautions and exercised due diligence to avoid the contravention) even though he cannot show the contravention was due to reasonable mistake. Conversely, the fairly complex verbal structure of paragraph (c) brings with it a number of integers and this may produce results that a contravention may fall within the more general terms of paragraph (a) and outside the more complex criteria in paragraph (c). The present, as I will later explain, is such a case. Implicit in the foregoing,is my view that each of Paragraphs (a) (b) and (c) has its own operation, although in a given situation a defendant may be able to rely on more than 19, one of those paragraphs. As I have mentioned, Eta relies on paragraphs (a),(b) and (c). The significance of the 1977 amendments to s.85(1) in the light of the general background I have outlined and to which the parties in the present case directed attention, apparently was not stressed in arguments put in such cases after 1977 as Doolan v Waltons Ltd. (1981) 39 ALR 408, Doolan v Waltons Ltd. (1982) 61 FLR 427, Brown v Riverstone Meat Co. Pty. Ltd. (1985) 60 ALR 595 and Wilkinson v Katies Fashions (Aust.) Pty. Ltd. [1986] ATPR 40-721. The Evidence I have already referred shortly to some salient features in the evidence. Three officers of Eta gave evidence. All of them were satisfactory witnesses and I found Mr. Horton particularly impressive. Mr. Bluzmanis has been since February 1987 National Operations Manager in charge of the Country Fair Products Division of Eta. Prior to that he was General Manager of Country Fair Food Products. Mr. Horton is the Purchasing Manager at Country Fair and has been such for nine years. His responsibilities extend to the purchase of all ingredients used in the manufacture of Country Fair food products. That range, at all material times included beef pies and various dessert products. In 1985 Country Fair was manufacturing approximately 3,000 dozen beef pies per week; about 55 persons were employed 20. at the Liverpool premises in the manufacturing operations there, There were some 250 to 260 ingredients purchased and some 50 suppliers. The third officer to give evidence, Mr. Methven, has a Bachelor of Science degree. He has been "Quality Assurance Manager" at Country Fair's Liverpool premises since mid-1985. His duties included appraising supplies of minced beef for fat and moisture content. The pies in question were made using raw minced meat supplied to Country Fair by St. George Meat Markets and delivered to it at Liverpool over a four month period ending in February 1986. Country Fair had ordered "Beef Mince". There were no facilities at Liverpool to bone and mince meat. "St. George Meat Markets" is registered under the Business Names Act 1962 (NSW) as the business name for a butchery business carried on, as the registration stood in 1985 and 1986, at Kingsgrove, by persons including, Benito Bruno Perusivich (known as "Ben") and Guerrino Mario Perusich (known as "Garry"). In early September 1985 that firm had received supplies of sheep meat from Peare Meat Industries Pty. Ltd., carcass butchers at Homebush Abattoirs. At this time sheep meat was considerably cheaper than beef. I find that (a) the sheep meat in the pies in question in these prosecutions was contained in mince supplied by St. George Meat Markets to Eta, trading as Country Fair,(b) the contraventions for which Eta is charged were due to the 21. mistaken belief that raw mince supplied to Eta was unadulterated raw beef mince, and (c) Eta remained ignorant of what had happened until alerted by a letter from the Trade Practices Commission. This was received on 15 September 1986, some six months after the dates of the conduct, the subject of the charges. But were the contraventions due to "reasonable" mistake? This was the main ground on which the proceedings were fought. Eta submits that "reasonable" in this context should not be construed so as to give effect to hindsight and submits that it means reasonable in regard to those existing circumstances of which Eta, called on to act reasonably, knew or ought to have known; cf In re A Solicitor [1945] 1 KB 368 at 371. The prosecutor did not strongly dispute the correctness of such an approach, the dispute rather being as to the result that should be reached on the evidence. To this I now turn. Eta has not made and does not make mutton pies. It has not used mutton knowingly for any trade purpose. The commercial objective in the manufacture and marketing of the Country Fair beef pies was to produce a beef pie at the "upper end" of the market. The fat content of meat pies permitted under the New South Wales pure food regulations was about 33%. The Country Fair specification permitted no more than 22% fat content. This character as a "quality product" was reflected in the price charged the consumer by the retailer. 22. In the period intervening between the manufacture of the pies in question in these prosecutions and 16 September 1986, Country Fair had used a second meat supplier. This was not because of any dissatisfaction as to the quality of what was supplied by St. George Meat Markets but because that firm was not large enough to cope with the growth Country Fair expected in its production of beef pies. After the revelation of what had happened in 1985, and exchanges between Mr. Horton and Mr. Garry Perusivich, after receipt of the Commission's letter of 16 September 1986, St. George Meat Markets ceased to be a supplier of Country Fair. St. George Meat Markets had supplied meat to Country Fair for some fourteen years. Mr. Bluzmanis and Mr. Horton had believed it to be an efficient supplier. All suppliers were visited at least once a year. Mr. Horton had twice visited the Kingsgove premises of St. George Meat Markets and had examined the quality control enforced there. Mr. Bluzmanis and Mr. Samad had also visited there at least twice. Mr. Samad was employed at Country Fair as Technical Manager from about 1984. Like Mr. Methven, he holds a Science degree. Within twelve months of commencement of his employment in 1978, Mr. Horton had delivered to Mr. Garry Perusivich a written specification for pie mince beef. In 1983 this was replaced by another written specification which contained specific requirements in respect of such matters as moisture and gristle levels and the 23. permitted fat content to which I have already referred. There had been some instances of impermissibly high levels of fat content in minced beef supplied by St. George Meat Markets and Country Fair had complained forthwith. There had never been any detection of artificial addition of water to minced beef so as to increase weight and reduce the amount of beef. Even in the ordinary course, without such tampering, the moisture content of mince will vary. In the period late 1985 the following procedure was followed with the obtaining of supplies by Eta from St. George Meat Markets. Eta, acting by Mr. Horton, placed an oral order by telephone; this was followed by a written purchase order describing what was required as "minced beef". The meat was delivered to the Liverpool premises in tubs containing about 41 kilos. On delivery a store supervisor of Eta received an invoice from St. George Meat Markets. The invoices described the goods as "C. Mince". The store supervisor signed a "Goods Received Note" on a form which, although Mr. Bluzmanis' evidence on this aspect of the procedure is not entirely clear, appears on its face to have been printed by Eta. The description of goods on the Notes in evidence is "beef mince" and this appears in what seems to be the same handwriting as that of the supervisor who thereon acknowledged receipt. These procedures are of particular importance in considering the defence based on para (b) of sub-s. 85(1) viz reasonable reliance on information supplied by St. George Meat Markets. 24. The store supervisor would receive the meat off the delivery truck, and notify the "Quality Assurance" section. Staff in that section would then assess the product, including the containers and the delivery truck, for hygiene standards, and proceed to take samples for analysis. When unloaded, the mince went to cold rooms at the Liverpool premises. The analysis conducted was to ascertain fat and gristle content, and moisture level, in particular to ascertain addition of water to make up weight. Checks would also be made for the colour of the meat and the size of the mince and also for smell. Colour was assessed because old beef could dehydrate and assume a dark colour with a crust surface. If the meat was delivered at 7.00 a.m. or 8.00 a.m. it would be sampled and the analysis completed by lunch time or early in the afternoon of that day. An oral report would be made to Mr. Horton of the results of tests for fat level and gristle; he would then be supplied with a result sheet. If the product was passed, then it would be used on the following day; if not passed, Mr. Horton would get in touch with the supplier. This was a rigid procedure. A delivery temperature was specified between 5° and 7°C. Minced meat has a large surface area and oxidises fairly easily. The effect of mincing is to accelerate deterioration or spoilage of the meat. 25. Eta had, in late 1985, and indeed until the complaint by the Trade Practices Commission in September 1986, no knowledge of any supply to it as minced beef of meat being other than the minced meat of that specified species. As I have said, it regarded St. George Meat Markets as an efficient supplier; "species substitution" would have been regarded as a serious breach of the contractual obligations of the supplier In late 1985 Mr. Bluzmanis and his staff were not aware of any system for testing of the species of raw meat. If Eta had been aware of a system which involved learning of the results only two or more days after delivery of the meat by the supplier it would not have been practicable for Eta to use that system. This is because Eta's specification was that minced beef must be used within 36 to 48 hours at a maximum. I find that further storage would have introduced into the minced beef an unacceptable level of deterioration or at least a real risk of such deterioration. The mince was kept within 5°C and 7°C. If the temperature were lower, and in particular at or below 0°C, the liquid in the mince would freeze. The mince then would have to be thawed out before use in production with risk of deterioration at that stage. This is of importance in assessing the submission of the prosecution in effect that in 1985 it was unreasonable of Eta not to have known of and implemented a procedure for testing raw meat species with the "gel diffusion" technique. I will return to this shortly. 26. After receiving the complaint from the Trade Practices Commission in September 1986, Eta approached a company named Foodlab Lipid Research Pty. Ltd, located at Homebush Abattoirs. Eta briefed that firm with its need to be made aware of an effective and quick method of analysing raw meat for species. Eta had no prior knowledge of such methods, or of their existence. For several months a procedure was adopted whereby samples were sent out by Eta to Foodlab Lipid Research. After two or three months, the procedure was changed and Eta commenced to analyse duplicate samples in tandem with Foodlab Lipid Research, the object being to train the Eta technical department in the procedures involved. In April 1987, Eta commenced using the Specitek method of analysis. It first heard of this procedure through Foodlab Lipid Research. The reaction period using the Specitek procedure is approximately two and a half hours. Eta presently uses the procedure to test for horse, buffalo, kangaroo, sheep and pork. Between receipt of the letter from the Trade Practices Commission in September 1986 and the commencement of the present proceedings in February 1987, Mr. Bluzmanis had oral and written communications with Mr. Adams of the Commission to secure the date codes of the products in question. No one from the Trade Practices Commission mentioned Specitek to Mr. Bluzmanis. Eta had two tasks in this period. The first, which was discussed with the Commission, was the location of a suitable firm to analyse the pies in question in this case. 27. The second was to evaluate procedures for the testing of raw minced meat. The Specitek procedure involves use of a kit prepared by the Commonwealth Serum Laboratories. Mr. J.C. Cox, who gave evidence for the prosecution, was one of the members of a research team which commenced in 1982 the work which culminated in the release of the Specitek Kit upon the market in August 1984. Some 220 kits were sold in the first year and 250 in the next year, public bodies being major customers. Supply ceased in August 1987 when a government tender went elsewhere. There was some general publicity in 1982 of the work of Mr. Cox's team, including newspaper items, but it did not reach Eta. The prosecution also tendered a quantity of writing in learned journals upon species testing and related technology. But the prosecution fell far short of showing that as at 1985 the information therein had entered the sphere of common general knowledge or knowledge reasonably to be attributed to manufacturers of foodstuffs made with raw meat (cf Minnesota Mining and Manufacturing Co. v Beiersdorf (Australia) Ltd. (1980) 144 CLR 253 at 294-298). A rival product to Specitek is marketed as "Checkmeat". It was developed by a team at the Benalla Regional Veterinary Laboratory within the Victorian Department of Agriculture and Rural Affairs. Dr. Terence Spencer, who gave evidence for the prosecution, was a member of that team. 28. The Checkmeat Kit was first used in "trial runs" in Queensland in January 1985, for tests at meat export works. Again, there had been some prior publicity. In July 1986, that is to say, after the events that gave rise to the prosecutions of Eta, the Checkmeat system was adopted for use at meat export establishments across Australia. Checkmeat Kits became available on the market in August 1986. It provides testing for fourteen species. Both Specitek and Checkmeat use the high technology enzyme-linked immunosorbent assay method, known by the acronym ELISA. The comparatively short time needed for testing and provision of results is of much utility to parties in the position of Eta with supplies of meat used promptly in manufacturing operations. The previous technology provided what was described by the witnesses as the "Gel-Diffusion Test". It operated in such a way that if set up at 9.00am on one day the result would be apparent to the person conducting the test by about the same time on the next day. This system was not as efficient as the ELISA method in distinguishing between closely related species such as sheep and goat, nor was it suitable for general application by kits as with Specitek and Checkmeat. The gel diffusion technique has been used by Dr. Doreen Clark in her business as professional analyst at Lilyfield in Sydney, since about 1977. She gave evidence that in ten years she has 29. conducted about twenty-five tests for species identification of raw meat. On 12 September 1981, the Governor-General issued to Sir Edward Woodward a Royal Commission to inquire, inter alia, whether malpractices were occurring in the handling of meat for export. This followed the sudden outbreak of the "meat substitution" scandal when, in the United States, horse and kangaroo meat was found in shipments of Australian beef. The Royal Commissioner reported in September 1982. He reported that before August 1981 the Department of Primary Industry had no system for the regular taking of samples from export meat for species testing. The recommendations included one that random sampling and species testing by government agencies of export meat should continue indefinitely. This provided the setting and the stimulus for the development of the Checkmeat and Specitek Kits. The first of these to reach the market (Specitek) did so, as I have said, in August 1984. The other followed in August 1986. In 1985, the year of the manufacture of the pies in question in these prosecutions, Mr. Hawken, a Bachelor of Vetinary Science and an officer with the Commonwealth Department of Primary Industries and Energy, as it is now styled (and a witness for the prosecution), had not heard of Specitek. He had been a field veterinary officer for a number of years at export abattoirs in New South Wales. At this stage, his department 30. used the gel-diffusion technique. These procedures were introduced early in 1983. Further, another specialist witness for the prosecution, Dr. Doreen Clark, to whom I have referred, had not heard of the Checkmeat procedure before she gave evidence at the present trial. These are persons far closer to the field of meat species testing than the officers of Eta. Indeed, these witnesses might be said to have been in that field. Mr. Methven, the Quality Assurance Manager at Country Fair, who has a science degree, was aware of the meat substitution scandal. But it had not crossed his mind that there was species substitution in the domestic market. The applicants called Mr. Dadd, the President of the Master Pastrycooks' Association of New South Wales. The membership of the Association includes very small businesses with one or two members and also businesses employing forty to one hundred persons. During 1986 the Association conducted four or five forums to make the industry aware of the meat pie specifications under the New South Wales pure _ foods legislation. They did not deal with species identification of meat used in the manufacture of pies. Mr. Dadd himself does not species test meat used by him in manufacture of meat pies in his business. He does not know of any pie manufacturer in New South Wales which carries out raw meat species tests. He 31. manufactures in his business between fifty to one hundred dozen meat pies on average twice every three weeks. Mr. Dadd was aware of the export scandal in 1981 but he understood that the problem related to meat exported from Australia in the form of sides of beef or lamb and not as minced or chopped meat. He always uses minced and chopped meat in meat pies. He sells his product as meat pies, not beef pies. After the meat substitution scandal he did not become aware of any technical developments for the testing of raw meat species, nor was his Association advised. The forums referred to above were attended by officers from the New South Wales Department of Health, who gave details of the legal requirements for contents of meat pies. As he understands the regulations, they permit the use of beef and lamb, their concern being the prohibition of the use of meats such as horsemeat and kangaroo meat. Some time after 1982, Victorian local government inspectors visited the premises of G.J. Coles and Co. and species tested some raw meat products. These revealed what Mr. Hocking, head since 1981 of the "Department of Food Standards" with Coles New World Supermarkets, described as "some non compliance", The result was "a flap" within the Coles organisation and Coles introduced testing for raw meat species. This is an example of a company taking up species testing because of a particular incident. What happened to Coles after 1982 is, if anything, comparable with what happened to Eta after September 1986, not indicative of what Eta should have 32. done at some earlier date. On the average it is a week to a fortnight before results are available to Coles, by which time the particular batch of meat from which the sample was taken has passed into the stream of commerce. Coles (and Woolworths) are not to any extent manufacturers of meat pies. They do not do species testing on meat piles supplied to them for retail to the public. In that setting it is unreasonable to say of Eta, as the prosecution seeks to do, that its mistake in accepting purported performance by its supplier of orders for raw beef mince was unreasonable because it ought to have (a) appreciated the risk of species substitution in domestic supplies (b) been aware or sought expert advice that would have made it aware of species testing using the ELISA technology and (c) implemented systems for such testing. To put the matter in the terms of the onus that rests upon Eta, what is urged in this respect by the prosecution does not overcome Eta's defence that the contraventions were due to reasonable mistake. It is then said that if not to the ELISA technology then recourse could and should have been had to the gel diffusion technique. This pre-dated the availability of the Checkmeat and Specitek Kits. But there are several difficulties in the path of that submission. The system was not marketed with any persistence. Wellcome, the chemical company dealing with production of materials for the gel te 33. diffusion technique advertised its product to a small degree at the time of the meat substitution scandal; it has not done so since. Again, as I have said, this technique was not as sophisticated as the ELISA systems. It required a longer period and laboratory testing. Dr. Clark, who has used the system in her business as a professional analyst, said that if special arrangements were made she might be able to complete raw meat species testing within one or two days of receipt of samples for testing. Other witnesses who conducted businesses as analysts spoke more optimistically of getting results out within 24 hours. I believe 24-48 hours is a more realistic view to take. This, of course, is significantly longer than that with the ELISA methods. Mr. Wilson for many years Chief Chemist of Woolworths Food Laboratory at Blacktown in the western suburbs of Sydney, between 1983 and the end of 1985, conducted about ten or twelve tests per year on raw meat, using the gel diffusion technique. The tests took at least one day. Species testing was not conducted on meat minced by Woolworths. Even if Eta had been made aware of the availability in 1985 of the gel diffusion technique to deal with a problem or risk associated with meat substitution, 1t would by no means immediately have followed that the gel diffusion technique could safely have been adopted, given the strict regimen I have earlier described with short storage periods for mince before its use by Eta in manufacture. That regimen was observed out 34. of concern for the freshness of the meat. Use of outside laboratories for testing would have involved a significant risk of excessive delay or delay into a period of hazard with deterioration. Eta would have been unreasonable to run that risk. Even if it had installed its own laboratory facilities the risk would still have been significant. Conclusions Eta reasonably regarded St. George Meat Markets as a reliable supplier of many years standing. Eta reasonably relied upon St. George Meat Markets for compliance with its contractual obligations to supply beef mince. It went further and relied upon its own examination and testing procedures upon and after delivery. Although Eta checked the meat for freshness, fat, gristle and moisture levels, it did not test for meat species but that was a reasonable omission on its part. In the event, Eta used beef mince with not insignificant amounts of sheep meat in the production of what it marketed as its beef pies. In these and the other circumstances I have outlined, I find that the contraventions were due to reasonable mistake and that the defence under sub-s. 85(1)(a) has been established. te 35. I should deal also with paragraphs (b) and (c) which also were relied upon by Eta. As to (b) the submission was that the contraventions were due to reasonable reliance on information supplied by St. George Meat Markets viz that the mince supplied was beef mince. I have accepted that, in the circumstances of the past history of dealings between Eta and St. George Meat Markets, it was reasonable for Eta to rely upon that firm as supplying meat to answer the description of that ordered viz "beef mince". However, the evidence did not establish that in supplying and delivering the mince to Eta's premises there was any written or oral assurance or indication by St. George Meat Markets that the goods did answer that description, although it was implicit in the conduct involved in delivering the goods that they were proferred in compliance with what had been ordered. It is true that the abbreviation "C. Mince" which did appear on the invoices from the supplier may have stood for "cattle mince", but, having regard to the state of the evidence, I am not satisfied that I should draw that inference. It follows that I cannot find that "information" was "supplied" by St. George Meat Markets, as Eta must show to bring itself within paragraph (b). It may be that in special circumstances conduct may amount to the supply of information, but in my view, the present is not such a case. Finally, reliance was placed on paragraph (c). In my view paragraph (c)(i) is directed to causes beyond Eta's control, instances of this being accidents and acts or defaults 36. of another; I read the concluding phrase as describing what goes before it. The supply of the defective mince was not within the control of Eta, in the sense that St. George Meats prepared and delivered these goods. But Eta took delivery and what happened thereafter was within the control of Eta. That control was not exercised by, for example, species testing, and the contraventions by Eta that followed cannot in my view be treated as due to an act or default of St. George Meat Markets, or to an accident or to some other cause beyond the control of Eta. That brings me to paragraph (c) (1i). Even if it could satisfy paragraph (c)(i), Eta also would have to show it took reasonable precautions and exercised due diligence, not as a general matter in its business, but "to avoid the contravention". The precautions and diligence must be directed at a result, the avoidance of a state of affairs. The defendant need not have in specific prospect the terms of the TP Act, but a party in the position of Eta could not be said to have taken precautions and exercised due diligence to avoid the perils of species substitution in raw mince supplied to it to fill orders for minced beef when it had no cognizance of any such peril. It had procedures to deal with fat and gristle content and excessive moisture levels. But, one cannot, in my view reason from that to decide that Eta took reasonable precautions and exercised due diligence to avoid the contraventions. 37. I conclude that Eta has not made out the defence under paragraph (c). However, it follows from what I have said as to the defences under sub-s. 85(1)(a) of the TP Act that the summons in each matter must be dismissed. I certify that this and the thirty-six (36) preceding pages are a true copy of the Reasons for Judgment of his Honour Mr Justice Gummow. Associate: path ule Date: 6 November 1987 Counsel and Solicitors for the Prosecutor: Counsel and Solicitors for the Defendant: Dates of Hearing: Date of Judgment: Miss M.J. Beazley instructed by The Director of Public Prosecutions. Mr. J.D. Heydon with Mrs. A.C. Bennett instructed by Messrs Dawson and Waldron. 14, 15, 16 and 17 September 1987. 6 November 1987