JUDGMENT No. 3..88_. CATCHWORODS TRADE PRACTICES - prosecution - falsely representing goods are of a particular standard - children's nightdresses - mislabelled as "Styled to Reduce Fire Danger ~ para.53(a) Trade Practices Act - "particular standard" - whether generally recognised standard required - whether wholesaler supplying goods mislabelled by manufacturer falsely represents - to retailer - to public - s.85 defences - reasonable precautions - due diligence. Trade Practices Act 1974 Trade Practices Revision Act 1986 Taperell vVermeesch & Harland Trade Practices and Consumer Protection (3rd ed.) para.1456 Report of Trade Practices Review Committee 1976 paras. 9.64, 9.68 Dona and Heydon Trade Practices Law Vol. 2 para.12.3.1 Given v C.V. Holland (Holdings) Pty Ltd (1977) 15 ALR 439 Thompson Vv J.T. Fossey Pty Lt oO. (1978) 20 ALR 496 Thompson v ey McKay Pty L No. (1980) 31 ALR 507 T Itons Ltd broEty 39 ALR 40 Doolan v Wa 8 Ducret v Chaudhary's Oriental Carpet Palace Pty Ltd (1987) 76 ALR i: ce MacFarlane v John Martin & Co. Ltd [1977] ATPR 40-034 Gardam v Splendid Enterprises Pty Ltd (1987] ATPR 40-779 Yorke v Lucas (1985) sb CLR 661 Rile McKay Pty Ltd v Bannerman (1977) 15 ALR 561 Darwin Baker st Ltd v Sully (1981) 36 ALR 371 Wilkinson v Katies Fashions (Aust) Pty Ltd (1986) 67 ALR 137 Weitmann v Katies Ltd (1977) 25 FLR 346 Thompson v Riley McKay Pty Ltd (1980) 29 ALR 267 Tradin [4 Barton v Croner Pty Ltd (1984) 54 ALR 541 Korcezynski v Wes Loftus {Aus Pty Ltd (1985) 62 ALR 225 Brown v Riverstone Meat Co. Pty Ltd (1985) 60 ALR 595 Adams v Eta Foods Limited (Ise) ATPR 40-831 VERNON JOHN GARDAM v GEORGE WILLS & CO. LTD NO. WAG 185 of 1987 FRENCH J. PERTH 10 JUNE 1987 IN THE FEDERAL COURT ) OF AUSTRALIA ) WESTERN AUSTRALIA ) DISTRICT REGISTRY GENERAL DIVISION No. WAG 18 of 1987 BETWEEN: VERNON JOHN GARDAM Prosecutor and GEORGE WILLS & CO. LTD Defendant MINUTE OF ORDER JUDGE MAKING ORDER: PRENCH J. DATE OF ORDER: 10 JUNE 1968 WHERE MADE: Perth THE COURT ORDERS THAT: 1. The defendant is convicted of each of the three counts. 2. The defendant to pay the prosecutor's costs of the prosecution. 3. The hearing is adjourned to 16 June 1988 at 9.30 am for submissions as to penalty. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION NO. WAG 18 of 1987 BETWEEN: VERNON JOHN GARDAM Prosecutor and GEORGE WILLS & CO. LTD Defendant CORAM: FRENCH J. 10 JUNE 1988 REASONS FOR JUDGMENT George Wills & Co. Ltd ("Wills") carries on business in Western Australia as a wholesaler of clothing, including children's nightwear. One of its suppliers, of some 8 1/2 years' standing, is a clothing manufacturer, Splendid Enterprises Pty Ltd ("Splendid"). Splendid carries on business under the name "Jolie Manufacturing". One of Wills' regular customers is the retailer, D.S. & M.E. Cooksley Pty Ltd ("Cooksley"). Cooksley has a shop at Morris Place, Innaloo. On or about 6 November 1985, Cooksley placed an order with Wills for 36 nightdresses including 12 in size 0. On or about 27 November, Wills placed an order with Splendid for 218 children's nightdresses including 64 in size 0. That order was met on or about 20 February 1986 and on 6 March Wills' supplied Cooksley with 36 Jolie nightdresses, including 12 in size 0, according to its earlier order. ¢ On 2 July 1986 the prosecutor, who is a member of the staff of the Trade Practices Commission in Perth, purchased 6 nightdresses from Cooksley. Five of them had been among those supplied in March by Wills. That is to say, they were size 0 in style JN1. Each bore a tag reading "Styled To Reduce Fire Danger". To accord with the relevant consumer product safety standard prescribed pursuant to the provisions of s.63AA(1) of the Trade Practices Act, the garments should have been labelled with the words "WARNING HIGH FIRE DANGER KEEP AWAY FROM FIRE" surmounting a triangular logo containing a flame. On 2 July 1986 the prosecutor showed the garments he had purchased to David O'Brien, the manager of Wills' Women's and Children's Wear department in Perth and on 7 July wrote to the company confirming his purchase and warning that the size "0" nightdresses might not comply with the mandatory product safety standard. The letter sought an undertaking that the children's nightclothes supplied by the company would comply with the standard in future. The company gave a detailed written response on 17 July setting out a list of retailers to whom it had supplied the JN1 style nightdresses purchased from Splendid in February 1986. The letter accounted for all but 25 of the garments so supplied. It was pointed out by O'Brien that Wills had had a long association with Splendid and had not previously had any reason to question its judgment in labelling. He further advised that Wills had recalled all the stocks in question pending the results of the investigation by the Trade Practices Commission. Arising out of the supply of the nightdresses Cooksley and their subsequent display and purchase by prosecutor, Wills was charged with three offences set out in information:-— "1. THAT on or about 6 March 1986 at Innaloo in the state of Western Australia George Wills and Co. Limited of 573 Wellington Street, Perth aforesaid did commit an offence constituted by section 79(1) of the Trade Practices Act 1974 by contravening section 53(a) of the said Act in that, in trade or commerce in connection with the supply of goods, namely "Jolie" brand childrens (sic) nightdresses, the said George Wills & Co. Limited did falsely represent by means of labels attached to the said goods, that the said goods were of a particular standard, namely that they were "Styled To Reduce Fire Danger". AND FURTHER THAT on 2 July 1986 at Innaloo in the State of Western Australia George Wills and Co. Limited of 573 Wellington Street, Perth aforesaid did commit an offence constituted by section 79(1) of the Trade Practices Act 1974 by contravening section 53(a) of the said Act in that, in trade or commerce in connection with the supply of goods, namely "Jolie" brand childrens (sic) nightdresses, the said George Wills and Co. Limited did falsely represent by means of labels attached to the said goods, that the said goods were of a particular standard, namely that they were "Styled To Reduce Fire Danger". AND FURTHER THAT on or about 6 March 1986 at Innaloo in the State of Western Australia George Wills and Co. Limited of 573 Wellington Street, Perth aforesaid did commit an offence constituted by section 79(1) of the Trade Practices Act 1974 by contravening section 62(1)(a) of the said Act, in that the said George Wills and Co. Limited, in trade or commerce, did supply goods to D.S. & M.E. Cooksley Pty. Ltd. which were of a kind likely to be used by a consumer, namely, "Jolie" brand childrens (sic) nightdresses, being goods of a kind in respect of which there was a prescribed consumer Product safety standard in respect of childrens (sic) nightclothes declared in a notice under section 63AA(1) of the said Act and published in the Commonwealth of Australia Gazette No. $215 of to the the 4. 19 June 1985, which said goods did not comply with that standard." To each of these counts it pleaded not guilty. The facts set out in the preamble to these reasons were agreed between the parties. By way of defence, and invoking paras. 85(1)(b) and (c) of the Act, Wills contended that if the contraventions in counts 1, 2 and 3 were proven then they were:- 1. due to reasonable reliance upon information supplied by Splendid; and 2. due to the actual default of Splendid and that Wills had taken reasonable precautions and exercised due diligence to avoid the contravention. As to count 3, Wills further contended that there was a defence under sub-s.85(4) of the Act. In relation to these defences, evidence was given of procedures adopted in viewing samples, placing orders and checking garments received pursuant to such orders. Mr Donald Ramsey is the Merchandise Manager in the Women's and Children's Wear Department at Wills. He has been with the company for some 30 years and has held his present position for 20 years. He told the Court that it was the usual practice for those responsible for acquisition in women's and children's wear to view a forward range of samples before any orders were placed. If satisfied with the make of the sample garments so viewed and that they were correctly 5. labelled, Wills would procure advance orders or "pre-sales" from its retail customers and place orders with the manufacturer accordingly. Ramsey told the Court that ordinarily he would view the entire range of samples himself, although he could not be positive that he had done so in 1985. He was familiar with the obligation to observe correct labelling of children's nightclothes and with the fact that there were three categories of garments designated for that purpose. He recalled occasions when incorrect product safety labelling had been observed in goods purchased and in such cases Wills had contacted the manufacturer and not sold any of the mislabelled goods. He claimed that all of the company's representatives in children's wear "would be aware of the standards required and that staff handling children's wear in that division would be aware of it". The company had received leaflets from time to time about flammability labelling and as they arrived these were put on circulation to staff. Orders placed with Splendid were made out by Ramsey's superior, Mr David O'Brien, the Manager of the Women's and Children's Wear Department, who had worked for Wills for some 40 years. He had been manager for over 6 years. Upon taking up that appointment he had read booklets held by his predecessor and was familiar with the fire labelling requirements for children's nightwear. He had had occasion previously to question the flamability labelling of clothing supplied to Wills although this was largely in relation to imported goods. Where there was no 6. label or some item was mislabelled, Wills would refuse to accept supply until correct labelling was in place. O'Brien told the Court that he kept a rubber stamp which "ninety per cent of the time" he would apply to orders placed by the company so that they bore the following words"- "These goods must comply with the consumer care labelling requirements as provided under Section 63 of the Trade Practices Act." The only orders in evidence were photocopies of carbon copies which did not bear the stamp so that it is not possible to conclude that the stamp was applied to the original forms used in this case. Those orders covered about 2,500 items. They were delivered to Wills in a number of cartons which were unpacked and the garments laid out on tables according to style and size. O'Brien, along with one or two other staff members, usually participated in unpacking and laying them out. Owing to the size of the order not every garment would be checked individually, although spot checks were made on individual items in the size and style stacks. Statutory Framework Prior to 1 July 1986 s.63AA of the Trade Practices Act 1974 authorised the relevant Minister (in this case the Attorney-General), by notice in the Gazette, to declare that a standard prepared or approved by the Standards Association of Australia with additions or variations specified in the notice, was a consumer product safety standard for the purposes of s.62 of the Act. Sub-section 62(1) of the Act provided:- "62(1) A corporation shall not, in trade or commerce, supply goods that are intended to be used, or are of a kind likely to be used, by a consumer if the goods are of a kind - (a) in respect of which there is a prescribed consumer product safety standard and which do not comply with that standard;..." Paragraph (a) of s.53 of the Act provided at all material t as it does now:- "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". Sub-section 62(1) and para.53(a) imposed the prohibitions are material for present purposes. imes, which The penalties for the contravention of any of the provisions of Part V, other than ss.52, 52A, 65Q, 65R and 65F(9) are fixed by 5.79 which, prior to 1 June 1986, provided for a maximum fine of $50,000 where the contravention was committed by a body corporate. It was amended by the Trade Practices Revision Act 1986 with effect from 1 June 1986 to provide for accessorial liability and to increase the level of maximum penalties. The maximum penalty for a contravention by a body corporate since that time is $100,000. The amending act also repealed ss.62 and 63AA with effect from 1 July 1986 and, in lieu of these and related provisions, introduced into Part V of the Act, Division 1A designated "Product Safety and Product Information". The ministerial power to declare consumer product safety standards is now to be found in 8.655, forming part of the new Division. Prohibitions of the kind formerly imposed by s.62 of the Act are now to be found in s.65C. Para.53(a) is not directly affected by these amendments. Wills gave notice that it relied upon paras. 685(1)(b) and (c) and sub-s.85(4) of the Act which provide for certain defences to prosecutions in relation to contraventions of Part V. The relevant parts of the section are as follows:- "85(1) Subject to sub-section (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 reasonable mistake; 9. (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. (1A) In paragraphs (1)(b) and (c), "another person" does not include a person who was - (a) a servant or agent of the defendant; or (b) in the case of a defendant being a body corporate, a director, servant or agent of the defendant, at the time when the contravention occurred. (4) In a proceeding under this Part in relation to a contravention of Part V committed by the supplying of goods that did not comply with a consumer product safety standard or in relation to which the supplier did not comply with a consumer product information standard, it is a defence if the defendant establishes - (a) that the goods were acquired by him for the purpose of re-supply and were so acquired from a person who carried on in Australia a business of supplying such goods otherwise than as the agent of a person outside Australia; and (b) that he did not know, and covld not with reasonable diligence have ascertained, that the goods did not comply with that standard or that he had not complied with the standard in relation to the goods, as the case may be, or he relied in good faith on a representation by the person from whom he acquired the goods that a consumer product safety standard or a consumer product information standard, as the case may be, had not been prescribed in respect of the goods." 10. Sub-section (1A) was introduced into the section by the Trade Practices Revision Act 1986 and came into effect on 1 June 1986. The Minister's Notice On 19 June 1985 and acting pursuant to his powers under sub-s.63AA(1), the minister declared a Consumer Product Safety Standard for Children's Nightclothes, the relevant standard being Australian Standard 1249-1983 subject to deletions which are not material for present purposes. The standard was prepared by the Committee on Burning Behaviour of Textiles and Textile Products established by the Standards Association of Australia. It 158 divided into various sections and by cl.1.5 of section 1 it defines three categories of children's nightclothes:- "1.5 CLASSIFICATION. Children's nightclothes shall be classified for the purpose of labelling as follows: Category 1 - garments made from fabric of the low fire hazard type and which comply with Section 2. These garments include pyjamas, pyjama-style overgarments, nightdresses, dressing gowns, infant sleepbags, and the like. Category 2 - garments designed to reduce fire hazard and which comply with Section 3. These garments include pyjamas and pyjama-style overgarments. Category 3 - garments such as pyjamas, pyjama-style overgarments, nightdresses, dressing gowns, infant sleepbags which comply with Section 4 but do not comply with Section 2 or Section 3." il. Sections 2, 3 and 4 of the standard then set out requirements for Category 1, 2 and 3 garments respectively. Section 3, which relates to category 2 garments, specifies the features of style and design (3.1), fabrics (3.2), dimensions (3.3), trims (3.4) and fastenings (3.5) necessary for classification of garments as Category 2. As to style and design, section 3.1 provides:- "The style and design of children's nightclothes classified as Category 2 shall be of a form-fitting style. Examples of Category 2 garments are illustrated in Figs.3.2 to 3.9." Section 5 prescribes labelling requirements for each category. In particular cl.5.1.1 provides: "Pire Hazard. Children's nightclothes shall be labelled with a durable and permanently fixed label indicating the fire hazard in accordance with the classification stated in Clause 1.5. The label shall bear the words and symbols set out in Table 5.1 and shall comply with the label specification stated in Appendix B." Table 5.1 requires Category 1 garments to be labelled "LOW FIRE DANGER" and Category 2 garments to be labelled "STYLED TO REDUCE FIRE DANGER". Category 3 garments, however, must bear a warning in the following terms: "WARNING HIGH FIRE DANGER KEEP AWAY FROM FIRE" 12. and its text is to surmount a triangular logo incorporating a Stylised flame. The Offences The supply of the mislabelled Jolie nightdresses to Cooksley is alleged in count 1 to constitute a false representation that they were of a particular standard. A _ like representation is attributed to Wills by count 2 in connection with the supply of the goods to the prosecutor. The rationale for laying two charges under para.53(a) is not clear. The third count arises under para.62(1)(a) and has as its principal element the supply of goods which did not conform to the mandatory standards. Counsel for Wills suggested that there was substantial overlap between counts 1 and 3 but stopped short of contending that the prosecutor must elect between them. In my opinion, these two counts do address different issues even though they arise out of the one transaction and substantially the same conduct. Central to count 1 is a positive act of misrepresentation said to flow from the incorrect labelling of the goods. Count 3 on the other hand is concerned with a failure to comply with the mandatory standard. The offence charged in that case does not require proof that any particular message was conveyed by the labels but rather that the labels required by the standard were not affixed. 13. Arising as they do out of one transaction, the offences, if both proven, would, in the ordinary course, attract penalties reflecting that fact. They are, however, distinct offences with distinct elements. It is desirable first to turn to counts 1 and 2, alleging, as they each do, a breach of para.53(a). The elements of the offence charged in each case are:- (i) That Wills is a corporation. (ii) That it has made a representation in connection with the supply of goods. (iii)That the representation was in trade or commerce. (iv) That the representation was that the goods were of a "particular standard". (v) That the representation was false. It is one of the agreed facts that Wills is and was at all material times a trading corporation within the meaning of the Trade Practices Act 1974. Nor is there any doubt that the transaction out of which these charges arise involved the supply of the goods in question and was a transaction in trade or commerce. Accepting as I do that the message on the labels conveyed a representation for the purposes of para.53(a), the questions to be determined are whether it was a representation that the goods were of a particular standard, whether that representation was false and whether on each of the occasions alleged, it was a representation made by Wills. at 14. Interpretation of "A Particular Standard" There seems to have been some difference of view among commentators as to the significance of the word "particular" in the expression "particular standard" in para. 53(a). In Taperell Vermeesch & Harland's 3rd edition of Trade Practices and Consumer Protection at para.1456, it is suggested that it imports reference to some generally recognised standard. This view derives some support from the report of the Trade Practices Review Committee (The Swanson Committee) published in August 1976 where reference was made at para.9.68 to the suggested deletion of "particular" from para.53(a). As to that suggestion the Committee said that it was concerned:- "that such a deletion may widen the scope of the paragraph s50 as to encompass general standards, qualities, grades, styles or models and thereby create a great deal of uncertainty as to the application of the paragraph". And for that reason the Committee did not favour the deletion. This opinion must be seen against its general view of s.53 as a section with criminal law sanctions which should not apply to the full range of misleading and deceptive conduct:- "Section 53 should deal only with conduct which has demonstrably led to abuses and involves a real potential for harm. Section 52, which has sanctions of a_ civil nature, provides a more appropriate approach to a general prohibition of undesirable practices". (para.9.64) is. Donald and Heydon in Trade Practices Law Vol. 2 at para.12.3.1, on the other hand, express the view that "particular" in this setting refers to "an indicated" or "a certain" rather than "a_ precise" standard. In Given v C.V. Holland (Holdings) Pty Ltd (1977) 15 ALR 439, to which they refer, the defendant, a motor vehicle dealer who displayed for sale a vehicle with a false mileage reading on its odometer, was charged under para.53(a) with falsely representing that the vehicle was of a "particular...quality...". Accepting the Oxford English Dictionary definition of a quality as "An attribute, property, special feature. The nature, kind or character (of something)." Franki J. held that the number of miles a particular vehicle has travelled describes a particular attribute or special feature of that vehicle and therefore describes a particular quality (at p.442). His Honour applied like reasoning in Thompson v J.T. Fossey Pty Ltd (No.1) (1978) 20 ALR 496 to hold that a claim that a motor vehicle was a "demonstrator" was a representation of a "particular quality". And in Thompson v Riley McKay Pty Ltd (No. 2) (1980) 31 ALR 507 (at p.510), Keely J. held a statement that a plant stand was made of "wrought iron" to be such a representation. Similar reasoning was applied by Lockhart J. in Doolan v Waltons Ltd (1981) 39 ALR 408 at p.411 in relation to the appellations "solid pine" and "natural pine" used to describe a kitchen nook made partly of particle board and pine veneer. More recently in Ducret v Chaudhary's Oriental Carpet Palace Pty Ltd (1987) 76 ALR 183, Ryan J. considered a charge brought under ny 16. para.53(a) against a carpet dealer who represented that a Princess Bokhara rug had a current value of $1,675. This was said to falsely represent that the rug was of a "particular quality". Ryan J. reviewed the authorities already mentioned, concluding that a wide meaning has been given to "quality" in para.53(a) and went on to observe in relation to the word "standard" (at p.199):- "In my opinion "standard" as used in 5.53 of the Act connotes a narrower concept than "quality". "Standard" is defined in the relevant sense in the Shorter Oxford English Dictionary as "a definite level of excellence, attainment, wealth or the like, or a definite degree of any quality, viewed as a prescribed object of endeavour or as the measure of what is adequate for some purpose". An example of a representation that goods were of a particular standard within the meaning of s.53(a) of the Act is to be found in Gilmour v Bannister Nominees Pty Ltd (1982) 4 ATPR 40-325 where a statement was made that a concrete pumping machine was "to contractors' standard"." His Honour considered that a representation as to both quality and standard in respect of goods is capable of being made by attributing to the goods a value expressed as an amount of money. The word "particular" cannot, in my opinion, change its meaning in para. $3(a) according to which of the terms standard, quality, grade, composition, or style it is taken to qualify. The Shorter Oxford English Dictionary defines "particular" in the relevant sense as:- "2. Relating to a single definite thing or person, a_ set of things or persons, as dist. from others; of one's (its, etc) own; special; not general... 4. That is a unit or definite one among a number; taken or considered re 17. by itself; individual, single, separate... 5. Distinguished among others of the kind; marked; special 6. Relating to or dealing with the separate parts, elements, or details of a whole; detailed, minute, circumstantial". As Franki J. used it in Given v C.V. Holland (Holdings) Pty Ltd (supra) and as used in the later cases, the word has borne the meaning for which Donald and Heydon contend, that is to say an "indicated" or "certain" standard. This approach, in my respectful view, is consistent with the ordinary meaning of the word. It is not necessary therefore to import into the collocation "particular standard" the requirement that the standard be, as Taperell Vermeesch & Harland suggest, "generally recognised". It may be that "particular" has little more function than the indefinite article in qualifying "standard". It may be that it excludes global descriptions embracing a_ range of standards or qualities such as "This item is of a very high standard" (cf.MacFarlane v John Martin & Co. Ltd [1977] ATPR 40-034). The limits of its operation need not be decided here. It follows and is consistent with the view that I expressed in Gardam v Splendid Enterprises Pty Ltd [1987] ATPR 40-779 at 48,501 that it is not necessary to show that the represented standard has any statutory significance. In particular, it is not necessary to establish that it is a declared consumer product safety standard. As to the word "standard" itself, I respectfully adopt the meaning attributed to it by Ryan J. in Ducret v Chaudhary's Oriental Carpet Palace Pty Ltd (supra), and in particular the concept of "a i 18. definite degree of any quality viewed as a prescribed object of endeavour." I should not leave this topic without observing that para.53(a) was amended in 1977 on the recommendation of the Swanson Committee to introduce references to "composition", "history" and "previous use". The repetition of the word "particular" before "history" and "previous use" might be taken to suggest that it was not intended to qualify the words "quality, grade, composition, style or model" (see Donald and Heydon Trade Practices Law Vol.2 para.12.3.1). A possible corollary of that view is that the word has a special limiting role in its application to standards. That is an interpretation which would lead to the rather awkward reading "falsely represent that goods are of a ...quality etc" and would be at odds with the consistent assumption to the contrary in the cases mentioned above. The repetition of the word in para.53(a) can, in my opinion, be explained simply as a matter of syntax. That is borne out by reference to the paragraph as it stood prior to the 1977 amendment :~ "(a) falsely represent that goods or services are of a particular standard, quality or grade, or that goods are of a particular style or model". 19. Whether the Labels asserted any and if so what Particular Standard It was contended by counsel for the prosecutor that' the use on the labels of the text prescribed by the Australian Standards Association standard for Category 2 garments, amounted to a representation that the goods complied with the standard for that category. The labels do not refer to that standard, however, and, in my opinion, do not assert compliance with it. The substance of the representation made in them is that conveyed by the express terms of their text. Its truth or falsity is not established by a mechanical comparison with the terms of the standard. The words "Styled to Reduce Fire Danger" do however imply that there is some criterion by which the fire danger of such garments may be assessed and that those bearing the labels embody features designed to reduce or obviate it according to that criterion, And relating as it does toa design criterion for reduced fire danger, the text of the labels in my opinion, represents that the goods are of a "particular standard" in the sense contemplated by para.53(a). Whether the Representation was False From the statement of agreed facts it emerged that the garments in question had been submitted by the prosecutor to the Textile Testing Division of the Australian Wool Testing Authority. The report of that Authority, which is exhibited to and forms part 20. of the agreed statement of facts, contained comments about the combustion characteristics of the garments including ease of ignition, fabric description and fibre type. The report concluded that they fell into neither Category 1 nor 2 of the A.S.A. Standard. In relation to Category 2 the comment was made that "Garments do not comply with design/style requirements of section 3" of the standard. Although I do not construe the representation on the label as expressing or implying compliance with the mandatory standard, I have regard to that standard as evidence of the criteria by which fire danger and mitigating design features may be assessed. Its history as set out in its preface indicates that it was prepared by a committee of the Australian Standards Association on which a wide range of government, consumer and industry bodies were represented, as well as the CSIRO Divisions of Textile Physics and Protein Chemistry respectively. Also represented were the Australian Wool Testing Authority Limited, the National Safety Council of Australia (Victorian Division), the Royal Children's Hospital, Melbourne, and the University of New South Wales. The preface indicates that the principles set out in the standard were first published in 1969 as a Code of Recommended Practice for Children's Nightclothes. A subsequent revision following several years of research led to the publication of a Product Specification which formed the basis of regulations in all States and a mandatory standard under the Trade Practices Act 1974. 21. Background information relating to the development of the standard is set out in its Appendix E. The Code of Safe Design Practice first published in 1969 recognised that the most useful approach for the prevention of fires involving children's nightclothes, was to promote garments free from flowing fabrics which were prone to ignite when coming into contact with fires or heating appliances. Close fitting garments tend to burn more slowly because of restricted air space surrounding the fabric. In further elaboration of this principle, it was stated that loose flowing garments, whether in the form of night dresses, dressing gowns, pyjamas with bell-bottom trousers or loose sleeves, sloppy jackets or shirts, are likely to come into contact with inadequately guarded home heating appliances. Frills and appliques attached to garments, especially along the edges, are more readily ignited than the bulk of the fabric. The standard was designed to overcome these hazards. While Category 1 garments are defined largely by reference to the combustion characteristics of their fabrics and dimensional requirements for trims and appliques, Category 2 is concerned principally with design features. It is plain from inspection of one of the nightdresses which was put in evidence, that although not having == any substantial trim, unless the cuffs and collar can be so regarded, it is a flowing garment and does not possess the style and design features required by section 3. That is to say, as a _ loose 22. flowing garment, it does not possess that fundamental design feature to which the codes of safe design practice have been directed since 1969. As the AWTA Textile Testing Report shows, its danger is not mitigated in this case by the use of a low fire-hazard type fabric. Having regard to the long established and central importance of close fitting design as a criterion of reduced fire danger it is not possible, in my opinion, to describe this garment as "Styled to Reduce Fire Danger". I am satisfied that the representation conveyed by the labels attached to the five subject garments was false. Whether Wills made the Representations It is clear from the statement of agreed facts that Wills purchased the five garments in question from Splendid for supply to Cooksiey, that they were so supplied and that they carried labels with the message "Styled to Reduce Fire Danger". Counts 1 and 2 allege breaches of para. 53(a) of the Act being false representations made "by means of the labels attached to the said goods". The first count characterises the supply of the mislabelled goods to Cooksley as one such representation. The second count treats the occasion of the display or sale by Cocksley to the prosecutor as another such representation by Wills. The prosecutorial policy underlying the inclusion of both, 23. rather than the selection of one of these two counts is not apparent and was not explained. Counsel for Wills submitted that it was a complete defence to the first two counts that his client was not the author of the text which appeared on the labels and neither knew of nor adopted it. In support of this submission he relied upon observations in the joint judgment of Mason ACJ, Wilson, Deane and Dawson JJ., in Yorke v Lucas (1985) 158 CLR 661 at 666:- "It is, of course, established that contravention of that section [5.52] does not require an intent to mislead or deceive and even though a corporation acts honestly and reasonably, it may nonetheless engage in conduct that is misleading or deceptive or is likely to mislead or deceive: Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd [(1978) 140 CLR 216, at p.228); Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd [(1982) 149 CLR 191, at p.197). That does not, however, mean that a corporation which perper 6 to do no more than pass on information supplie another mus nevertheless be engaging in misleadin or deceptive conduc e information turns out to e alse. If the circumstances are such as _ to make it apparen a e corporation Ss not the source o the ormation and tha t express or implie isclaims any Deiier in ts tru Or tals ty, merely aera it on or wha 8 worth, we ver muc oubt tha the corporation can properly be said to be itself engagin in conduct that is sisteadin or deceptive." (emphasis The observations relied upon were incidental to the principal question in that case which concerned the need to show knowledge and intent to establish accessorial liability under s.75B of the Act. That is, accessorial liability in relation to misleading and deceptive conduct, a term which covers a wider 24. range of behaviour than the term "falsely represent" used in para.53(a). And the question in this case is whether that term applies to the supply of a false label without knowledge of its text. It is well settled that for contraventions of s.53, as for s.52, there is no requirement for a guilty mind - Given v C.V. Holland (Holdings Pty Ltd) (supra), 443 (Franki J.); Riley McKay Pty Ltd v Bannerman (1977) 15 ALR 561, 566 (Bowen CJ); Darwin Bakery Pty Ltd v Sully (1981) 36 ALR 371, 376 (F.C.) In each of the cases cited, the question whether a guilty mind was an element of the contravention followed upon a finding or hypothesis that the respondent had made the relevant representation. In Given v Holland (Holdings) Pty Ltd (supra) the dealer's conduct in placing a motor vehicle in his yard with a certain mileage displayed on the odometer was held to be a representation that the vehicle had travelled that number of miles (at p.442-443) and in Riley McKay Pty Ltd v Bannerman (supra), which concerned the validity of a notice issued under s.155 of the Act, the comments made by Bowen CJ about para.53(a) proceeded upon the express hypothesis that a representation had been made. In Darwin Bakery Pty Ltd v Sully (supra) which arose under para.53(e), the question of mens rea was predicated on the common assumption that the Bakery had made a misleading statement upon the publication of certain advertisements in newspapers circulating in the Northern Territory. 25. These authorities do not therefore provide an answer to the question raised in this case. Where goods manufactured and mislabelled by one party are on-sold to a wholesaler who, without knowledge of the labels or their text, sells to a retailer, can it be said that the wholesaler has represented anything in relation to the labels? This does not raise an issue of mens rea. It is a problem of construction posed by the question - what conduct is encompassed by the words "falsely represent" in para.53(a)? In interpreting that phrase, it is necessary to bear in mind that para.53(a), unlike s.52, carries penal consequences and is addressed to a class of conduct more narrowly defined than that covered by the latter section. The innocent carriage of a false representation from one person to another in circumstances where the carrier is and is seen to be a mere conduit, does not involve him in making that representation. Nobody would expect that the postman who bears a misleading message in a postal article has any concern about its content or is in any sense adopting it. The same is true of the messenger boy or courier service. When, however, a representation is conveyed in circumstances in which the carrier would be regarded by the relevant section of the public as adopting it, then he makes that representation. It will be a question of fact in each case, but in my opinion the wholesaler who resells goods labelled without attribution of authorship can be taken in ordinary circumstances to adopt the text of those labels. Whether the position is different where the labels disclose the author of 26. their text does not arise in this case. This approach does not deny the application of the defences conferred by s.85. Indeed, by analogy with the argument in relation to mens rea, _ the availability of those defences supports the view that the term "falsely represent" as used in para.53(a) includes the innocent implied adoption of a false statement. Section 85 discloses a legislative concern with protecting reasonable, but not merely innocent, conduct. I have drawn a distinction between the guilty state of mind and the external elements of "representing". In Wilkinson v Katies Fashions (Aust) Pty Ltd (1986) 67 ALR 137, 141 it was contended for the defendant that the Darwin Bakery case is authority for the proposition that knowledge of the falsity of a statement one makes is not an element of a contravention of s.53, but is not authority for the proposition that knowledge of the content of a false statement is not an element of such contravention. In rejecting that distinction Jenkinson J. said:- ",..by associating itself with the representation made by another, whose existence is not disclosed to those to whom the representation is made, a corporation may itself make that representation. The act which constitutes the making by a corporation of a representation may be merely the disclosure to those to whom the representation is made of the identity of that corporation in circumstances which indicate to consumers that the corporation is thereby placing itself in the position of maker of the representation". Although his Honour may have referred to a narrower range of representational conduct than that propounded in these reasons, 27. they are, I think, consistent with his approach which while not purporting to be exhaustive was, in my respectful opinion, correct. I am concerned here not with the question whether a representation has been made to the ultimate consumer, but whether in the circumstances it can be said that a representation has been made at all. This requires a consideration of the external elements of the conduct of the alleged representee. On these principles applied to the circumstances of this case, the sale by Wills to cCooksley involved it in making a representation in the terms of the labels. The question now arises at what time or times and to whom the representations were made. When and to Whom the Representations were made. There seems to be little controversy that the display of labelled goods for retail sale can amount to a representation by the retailer in terms of the words appearing on the label without any specific attention being directed to the words and without any statement by the trader - Weitmann v Katies Ltd (1977) 29 FLR 336, 344 (Pranki J.). And if it is not the retailer's but a manufacturer's label that is in question, it will still amount to a representation by the retailer where the conjunction of the retailer's own label and that placed on an article by the manufacturer signifies an assumption by the retailer of responsibility for the factual assertion contained in the 28. manufacturer's label - Wilkinson v Katies Fashions (Aust) Pty Ltd (supra) at 144-145. The latter case involved the sale of garments bearing a misleading content label affixed by a manufacturer and a brand label attached by the retailer. Jenkinson J. left open the case where it appeared whether by label or otherwise, that a person other than the retailer was the manufacturer and that the retailer was not the source of the information or content of the label and did not profess to assert any belief in the truth of the information. But in the absence of an express disclaimer, it is difficult to imagine how the display by a retailer of goods bearing a content label with no clue as to the identity of its author, would not amount to a representation by that retailer. In the present case the label in question bears no indication of its author's identity but the bald assertion that the garment is "Styled to Reduce Fire Danger". It also seems well established that the making of a representation for the purposes of para.53(a) does not always require that it be communicated to or received by any specific person - Thompson v Riley McKay Pty Ltd (1980) 29 ALR 267, 273 (Franki J.), 276 (Deane J.), 286 (Fisher J.). On this basis the act of representation involved with the display of labelled goods by a retailer may be complete upon the display during a time that the goods are available for inspection by the public, whether or not the labels are read by any consumer. The position of the wholesaler so far as ultimate display is concerned is similar to that of the retailer. It is no answer to a case against a 29. wholesaler, based upon retail display of mislabelled goods, for the wholesaler to say that it had no control over the goods beyond the point of sale to the retailer - Barton v Croner Trading Pty Ltd (1984) 54 ALR 541, 553; Korczynski v Wes Loftus (Aust) Pt Ltd (1985) 62 ALR 225, 229 (Jenkinson J.). In Barton v_ Croner Trading Pty Ltd (supra) and Korczynski v Wes Loftus (Aust) Pty Ltd (supra), the offending labels were fixed to the goods by the defendant. In the present case the labels were fixed by the manufacturer although there is no indication on the garment as to their source. In my opinion however, the sale of such anonymously labelled goods by a wholesaler without any disclaimer as to their content, amounts to a statement by the wholesaler to the retailer and to the ultimate consumer that the text of the labels is correct. I am prepared to accept as a matter of judicial notice that consumers today are aware that there are rules of law designed for their protection as consumers. It is in that contemporary legal and factual context that the conduct of the vendor of goods, whether he be manufacturer, wholesaler or retailer, must be viewed. Where the wholesaler sells goods bearing a label with the serious claim that they are "Styled to Reduce Fire Danger", he must be taken to have adopted or "assumed responsibility for" that claim, that is, to have made that representation, both to the retailer and, at the point of display, to the ultimate consumer. 30. I am satisfied therefore that Wills has made the representations attributed to it on 6 March 1987 at the time of the supply of the goods to Cooksley and on 2 July 1986 when the goods were displayed for purchase and purchased by the prosecutor. As to the third count against Wills, I have no difficulty in concluding that on 6 March it supplied goods to Cooksley which, in terms of the information, were of a kind likely to be used by a consumer and which did not comply with the prescribed consumer product safety standard. The Section 85 Defences The question that then arises is whether Wills has made out its defences under s.85. The defences common to all three counts are those provided by paras.85(1)(b) and (c). The defendant has the onus of establishing them on the balance of probability - Brown v Riverstone Meat Co. Pty Ltd (1985) 60 ALR 595, 603 (Wilcox J.); Adams v Eta Foods Limited [1987] ATPR 40-831, 48,964 (Gummow J.). In this case there is no evidence of the labelling of goods shown in the sample range and no evidence that any one from Wills actually read the labels on the goods delivered by Splendid. That is to say there is no evidence of reliance upon information provided by Splendid. In my opinion therefore, the defence under para.85(1)(b) cannot be made out. 31. The defence under para.85(1)(c) in this case depends upon two propositions:- i. That the contravention was due to the actual default of Splendid. 2. That Wills had taken reasonable precautions and exercised due diligence to avoid the contravention. Iam prepared to accept that the evidence shows that the mislabelling of the goods by Splendid was the sine qua non of the contraventions with which Wills is charged. The question then is whether Wills took reasonable precautions and exercised due diligence to avoid the contravention. The precautions and diligence required by the section must not be designed as a general matter in the business of the company but "to avoid the contravention". That is to say they must be directed to a result, the avoidance of a state of affairs which could give rise to a contravention - Adams v Eta Foods Limited (supra) at 48,972. It was the uncontradicted evidence of Ramsey, the merchandise manager for Wills, that he would usually view a forward range of samples before any order was placed. It was at this point that he would check their labelling. He was, in general terms, aware of the requirements for labelling of children's nightclothes and the three categories of garments designated for that purpose. When his superior, Mr David O'Brien, made out orders he would "ninety per cent of the time" apply to them a rubber stamp bearing the words:- 32. "These goods must comply with the consumer care labelling requirements as provided under Section 63 of the Trade Practices Act." It is not possible on the evidence to conclude that Mr Ramsey inspected the samples of the size 0 Jolie nightdresses, or that the order for the particular goods was stamped by Mr O'Brien. It is clear that beyond spot checks on individual items when garments arrived at Wills' premises pursuant to the order, there was no system of inspecting a sample of each size and style of the nightclothes supplied. What are "reasonable precautions" and "due diligence" with respect to possible mislabelling will depend upon the circumstances of the case. Where product safety labelling is involved, this standard is high and I am quite satisfied that Wills did not meet the necessary standard of care in this case. The defence under para.85(1)(c) also fails. In relation to the third count, Wills relies upon sub-s.85(4). But in my opinion that defence must also fail in this case because of the company's inability to satisfy the requirement that it "could not with reasonable diligence have ascertained" that the goods did not comply with the relevant standard. In my opinion therefore the offences are made out in respect of all three counts and the defendant will be convicted accordingly. I will allow the parties time to be heard as_ to penalty. 33. I certify that the preceding thirty two (32) pages are a true copy of the Reasons for Judgment of his Honour Justice French. Associate: @Dekevol. Wete Date: 10 "Sune \48§ Counsel for the Prosecutor: Mr S.W. O'Sullivan Solicitors for the Prosecutor: Director of Public Prosecutions Counsel for the Defendant: Mr K. Martin Solicitors for the Defendant: Messrs. Parker & Parker Date of Judgment: 10 June 1988