FEDERAL COURT OF AUSTRALIA Australian Competition & Consumer Commission v Dimmeys Stores Pty Ltd [1999] FCA 1175 TRADE PRACTICES – prosecution – supply of children's bicycles – non-compliance with product safety standard – guilty pleas entered – appropriate penalties – relevant matters to be taken into account in sentencing – defendants related companies – whether relevant to sentencing. Trade Practices Act 1974 ss 65C(1)(A), 79 Crimes Act 1914 (Cth) ss 16A, 16C R v Ferrer-Esis (1991) 55 A Crim R 231 at 237 referred to R v Gallagher (1991) 23 NSWLR 220 referred to R v Sinclair (1990) 51 A Crim R 418 referred to Gardam v Splendid Enterprises Pty Ltd (1987) ATPR ¶40-779 at 48,502-48,503 referred to Miller v Cunningham's Warehouse Sales Pty Ltd (1994) ATPR ¶41-321 at 42,269 referred to Pugh v Clark Rubber Ltd (1993) ATPR ¶41-258 referred to AUSTRALIAN COMPETITION AND CONSUMER COMMISSION v DIMMEYS STORES PTY LTD V 187 OF 1999 AUSTRALIAN COMPETITION AND CONSUMER COMMISSION v STARITE DISTRIBUTORS PTY LTD V 188 OF 1999 WEINBERG J 26 AUGUST 1999 MELBOURNE IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY V 187 OF 1999 BETWEEN: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION Prosecutor AND: DIMMEYS STORES PTY LTD Defendant V 188 OF 1999 BETWEEN: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION Prosecutor AND: STARITE DISTRIBUTORS PTY LTD Defendant JUDGE: WEINBERG J DATE OF ORDER: 26 AUGUST 1999 WHERE MADE: MELBOURNE THE COURT ORDERS THAT: 1. In proceeding V 187 of 1999 Dimmeys Stores Pty Ltd be convicted and fined $60,000. 2. In proceeding V 188 of 1999 Starite Distributors Pty Ltd be convicted and fined $30,000. 3. The defendant in each proceeding pay the prosecutor's costs. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY V 187 OF 1999 BETWEEN: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION Prosecutor AND: DIMMEYS STORES PTY LTD Defendant V 188 OF 1999 BETWEEN: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION Prosecutor AND: STARITE DISTRIBUTORS PTY LTD Defendant JUDGE: WEINBERG J DATE: 26 AUGUST 1999 PLACE: MELBOURNE REASONS FOR JUDGMENT 1 Prosecutions have been brought under s 79 of the Trade Practices Act 1974 (Cth) ("the Act") against Dimmeys Stores Pty Ltd ("Dimmeys") and Starite Distributors Pty Ltd ("Starite") for contraventions of s 65C(1)(a) of the Act. Each defendant has pleaded guilty and the two matters, which are closely related, have been heard together. The relevant legislative background 2 Section 65C(1)(a) of the Act provides as follows: "65C(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; …." 3 Section 79 of the Act provides that a person who contravenes a provision of Pt V (s 65C is such a provision) is guilty of an offence punishable on conviction in the case of a person being a body corporate, by a fine not exceeding $200,000. 4 The proceedings in matter number V 187 of 1999 ("the Dimmeys offence") and matter number V 188 of 1999 ("the Starite offence") were commenced (pursuant to O 49 r 1(1) of the Federal Court Rules ("the Rules")) in each case by: (a) summons dated 21 April 1999; (b) information for an offence dated 21 April 1999. 5 The Rules provide that the person bringing the prosecution is to be called a prosecutor, and the person against whom a prosecution is brought is to be called a defendant: O 49 r 1(2). 6 As both the Dimmeys offence and the Starite offence are federal offences, the provisions of the Crimes Act 1914 (Cth) ("the Crimes Act") which deal with sentencing persons for federal offences are applicable. 7 Section 16A of the Crimes Act provides, in part: "16A(1) In determining the sentence to be passed, or the order to be made, in respect of any person for a federal offence, a court must impose a sentence or make an order that is of a severity appropriate in all the circumstances of the offence. (2) In addition to any other matters, the court must take into account such of the following matters as are relevant and known to the court: (a) the nature and circumstances of the offence; … (e) any injury, loss or damage resulting from the offence; (f) the degree to which the person has shown contrition for the offence; (i) by taking action to make reparation for any injury, loss or damage resulting from the offence; or (ii) in any other manner; (g) if the person has pleaded guilty to the charge in respect of the offence – that fact; (h) the degree to which the person has co-operated with law enforcement agencies in the investigation of the offence or of other offences; (j) the deterrent effect that any sentence or order under consideration may have on the person; (k) the need to ensure that the person is adequately punished for the offence; (m) the character, antecedents, cultural background, age, means and physical or mental condition of the person; (n) the prospect of rehabilitation of the person; …" 8 Section 16A sets out a list of matters which must be taken into account by sentencing judges. It does not, however, require sentencing judges to refer to each of the matters each time a sentence for a federal offence is imposed: R v Ferrer-Esis (1991) 55 A Crim R 231 at 237; R v Gallagher (1991) 23 NSWLR 220. 9 It will be noted that s 16A(1)(j) refers only to the deterrent effect that any sentence may have upon the offender. There is no reference in the section to general deterrence. It has been held that although the omission of any express reference to general deterrence is surprising, the importance of such deterrence as a factor in sentencing is implicitly recognised in s 16A(1): R v Sinclair (1990) 51 A Crim R 418. 10 Prior to the enactment of the sentencing provisions set out above, the principles governing the appropriate level of penalty to be fixed for a breach of the consumer protection provisions of the Act were well established. 11 In Gardam v Splendid Enterprises Pty Ltd (1987) ATPR ¶40-779 at 48,502-48,503 French J observed: "The appropriate level of penalty to be fixed will vary according to the circumstances of each case and the class of relevant considerations is not closed. Nevertheless it appears to be well established that the following matters are relevant to the punishment to be imposed. 1. The objectives of the Act. 2. The importance of any untrue statement made. 3. The degree of wilfulness or carelessness involved in making such a statement. 4. The extent to which the statements in question depart from the truth. 5. The degree of their dissemination. 6. The resulting prejudice to consumers. 7. Whether any and if so what efforts have been made to correct the statements. 8. The need to impose deterrent penalties. … The sections of the Act which provide for the declaration of consumer product safety standards and their enforcement are plainly of the highest importance. … In the present case the offences were not committed wilfully or with any intention to deceive. Their commission was the product of carelessness and lax management. As Smithers J said in Geoffrey John Eva v. Mazda Motors (Sales) Pty. Ltd. [(1977) ATPR ¶40-020 at p 17,309]: "…contraventions due to carelessness are not permissible and must be punished. Of course such contraventions are not in the same order of culpability as those involving an intention to deceive."" 12 Although those observations relate specifically to punishment for the making of false statements, a number of the principles articulated by his Honour are, in my opinion, of general application. They remain relevant to the sentencing task with which I am confronted. The agreed facts 13 The parties have filed with the Court a statement of agreed facts. That statement reads as follows: "1. Dimmeys Stores Pty Ltd ("Dimmeys"), the defendant in proceeding No. V 187 of 1999, was incorporated in 1996 pursuant to the laws of Victoria and is a corporation within the meaning of the Trade Practices Act 1974 ("the Act"). 2. Starite Distributors Pty Ltd ("Starite"), the defendant in proceeding No. V 188 of 1999, was incorporated in 1984 pursuant to the laws of Victoria and is a corporation within the meaning of the Act. 3. Dimmeys has at all material times operated discount retail stores throughout Victoria New South Wales and Queensland under the business names of Forges, Dimmeys, and Best Buys, selling goods including apparel, homeware and variety goods. 4. Starite Distributors Pty Ltd ("Starite") has at all material times carried on business as an importer and wholesaler of goods including apparel, homeware and variety goods. 5. By Consumer Protection Notice No. 4 of 1994 dated 8 December 1994 published in the Commonwealth of Australia Gazette No. GN 50 of 21 December 1994 ("the Notice") the then Minister for Consumer Affairs, using the power vested in her by virtue of section 65E(1) of the Act, declared the standard specified in Division 2 of the Schedule to the Notice, namely Australian Standard 1927‑1989, "Pedal bicycles for normal road use-Safety requirements" approved by the Standards Association of Australia on 9 March 1989 and published on 19 May 1989, with variations as specified in Division 3 of the Schedule to the Notice to be a consumer product safety standard for the purposes of section 65C of the Act ("the Standard"). The goods to which the Notice declared the Standard to apply as set out in Division 1 of the Schedule of the Notice were: "Pedal bicycles, including fully assembled or partially bicycles, but not including: (1) bicycles having a wheel base of less than 640 mm; (2) bicycles which are designed, promoted and supplied primarily for use in competitions; (3) one-of-a-kind bicycles, being bicycles which are uniquely constructed to the order of an individual consumer; (4) bicycles which are designed to be hinged or folded, or to be taken apart beyond removal of the front wheel, for ease of storage or portability; (5) tandem bicycles; and (6) bicycles showing signs of appreciable wear". 6. It therefore became a breach of section 65C of the Act to supply such goods if they did not comply with the Standard. 7. On or about 18 July 1998 Starite received from Hong Kong a container load consisting of 537 BMX styled children's pedal bicycles labelled Star Wheel in unassembled form which had a 20 inch wheel diameter ("the bicycles"). The bicycles had a wheel base of 840 millimetres and were not designed for off-road use. The bicycles arrived in unassembled form and were individually packaged. 8. Starite purchased the bicycles from Hangshi Garment Trading Co. ("Hangshi") of Hong Kong upon the direction of one of Starite's directors, Mr Douglas Zappelli, who negotiated the contract, and was a director of Dimmeys. Mr Zappelli arranged for Starite to purchase the bicycles after a representative of Hangshi showed him a photograph of the bicycles and informed him that they had been made for the Australian market and were a cancelled order. Starite paid $10.20 US for each bicycle, in addition to customs duty, freight and insurance costs. 9. On or about 21 July 1998 Starite supplied the bicycles in their packages to Dimmeys which purchased them from Starite at a cost of $25 plus tax of $5.50 per bicycle. 10. The bicycles supplied by Starite to Dimmeys failed to comply with the Standard in the following respects: (a) The bicycles were not marked with the registered name and address of the Australian distributor of the bicycles, contrary to clause 1.5(a) of the Standard which states as follows: "MARKING. Pedal bicycles shall be permanently and legibly marked with the following: (a) The registered name and address of the Australian manufacturer or assembler or the registered name and address of the Australian distributor of the pedal bicycle." (b) The bicycles were not marked with an identification number, contrary to Clause 1.5(b) of the Standard which states as follows: "MARKING. Pedal bicycles shall be permanently and legibly marked with the following: (b) The identification number of the pedal bicycle. The identification number shall be stamped or engraved on the bicycle frame. " (c) The bicycles did not carry a warning statement such as the following: "This bicycle is not designed for off-road use or for stunting", contrary to Clause 1.6.5 of the Standard; Clause 1.6.1 of the Standard provides as follows: "General. .... In addition, bicycles styled to look like off‑road bicycles but not designed for off-road use, competition or stunting shall carry informative labelling complying with Clause 1.6.5". Clause 1.6.5 of the standard states as follows: Off-road styled bicycles (e.g. BMX-styled bicycles, mountain bicycles). A warning statement such as the following shall be legibly and conspicuously printed on an adhesive label securely attached to the bicycle: This bicycle is not designed for off‑road use or for stunting. (d) The bicycles were not supplied with an owner's manual containing instructions for their use and maintenance, contrary to Clause 1.7 of the Standard which provides: "INSTRUCTIONS FOR USE, MAINTENANCE, AND ASSEMBLY. An owner's manual containing instructions for use and maintenance based on the details given in Appendix A shall be attached to the bicycle or, for a partially assembled bicycle, placed within the consumer package...." Appendix A of the Standard is annexed hereto and marked "Exhibit A" (e) The bicycles had a sharp edge at the front section of their respective chainguards, contrary to clause 2.2 of the Standard which provides as follows: "SHARP EDGES. Bicycles shall have no unfinished sheared metal edges or other sharp parts that are exposed to hands or legs. Sheared metal edges that are not rolled shall be finished so that any sharp feathering of edges, or any sharp burrs or spurs caused by the shearing process, are removed. This requirement is applicable to all parts of the bicycle that could come into contact with the hands and legs of the rider and to the following edges: (a) At each end of the front mudguard. (b) At the rear end of the rear mudguard. (c) At each end of the chainguard. (d) At the end of the kickstand. " (f) The bicycles were not equipped with at least two brakes, contrary to Clause 2.14.1 of the Standard. The bicycles were only equipped with one brake being a pedal brake. Clause 2.14.1 of the Standard provides as follows: "General. All bicycles shall be equipped with not less than two brakes, one of which, on a children's bicycle, shall be a back‑pedal brake." (g) The wheels of the bicycles were not fitted with side reflectors, contrary to Clause 2.15.3 of the Standard which provides as follows: "Side reflectors. Each wheel shall be fitted with one yellow side reflector at least as follows: (a) The reflector or reflectors shall be visible from both sides of the bicycle. (b) The centre of the reflector or reflectors shall be within 76 mm of the inside of the wheel rim (c) The reflector or reflectors shall be mounted either flat on the spokes or within the spoke cage so that the angle between the optical axis and the normal to the plane of the wheel does not exceed the angle between the spokes and the plane of the wheel. (h) The bicycles were not fitted with a bell or some other suitable audible warning device, contrary to Clause 2.16 of the Standard which provides as follows: "WARNING DEVICE. An efficient bell or some other suitable audible warning device shall be fitted." 11. The bicycles were advertised by Dimmeys in its August 1998 Stocktaking Sale catalogue and from about 3 August 1998 Dimmeys commenced offering the bicycles for sale for $59.99 each. The bicycles were offered for sale in Victoria from Dimmeys' Forges store in Footscray and from its Dimmeys stores in Richmond, Ringwood, Geelong, Dandenong, Frankston, Coburg, and Mildura. In New South Wales Dimmeys offered the bicycles for sale from its Dimmeys store in Goulburn. 12. Some of the bicycles were offered for sale by Dimmeys in unassembled form and others were fully assembled. In all other respects the bicycles offered for sale and sold by Dimmeys were in the same form as they were supplied to it by Starite and failed to comply with the Standard in the manner referred to in paragraph 10 above. 13. On 6 November 1998 an officer of the Australian Competition and Consumer Commission ("ACCC") visited the Forges store in Footscray where he saw three of the bicycles on display in assembled form. The officer noticed that none of the bicycles were fitted with a bell or wheel reflectors and that there were no instruction manuals for the bicycles' use or maintenance nearby. He also observed that all of the bicycles were only fitted with one brake, being a back pedal brake. The officer purchased one of the bicycles on display ("the tested bicycle"). 14. On 11 November 1998 the ACCC arranged for the tested bicycle to be tested by ETRS Pty Ltd ("ETRS"), an independent testing authority, for compliance with the Standard. According to the results of the tests conducted by ETRS in relation to the tested bicycle, in addition to failing to comply with the Standard as set out in paragraph 10 above, it also failed to comply with the following provisions of the Standard: (a) Clause 3.4 of the Standard. ETRS found that the saddle of the seat was capable of moving before the commencement of the testing. Although adjustment clamps were supplied, the saddle could not be secured after the tightening of the locking mechanism. When a small vertical force of approximately 20 newtons was applied to a point within 25mm from the front end of the saddle, the seat pivoted around the clamp more than 50mm. Because of the movement in the saddle, a force equal to the one required by the Standard could not be applied to the seat of the bicycle. Therefore the bicycle failed to comply with Clause 3.4 of the Standard. Clause 3.4 of the Standard states as follows: "SEAT ADJUSTMENT CLAMPS. The seat adjustment clamps shall be capable of securing the seat in any position to which it can be adjusted. When the seat adjustment clamps are tested in accordance with Appendix G, there shall be no permanent movement greater than 10 mm at the point of application of the force." Appendix G of the Standard is attached hereto and marked "Exhibit B". (b) Clause 4.5.2(b)(i) of the Standard in that when tested in accordance with Paragraph K of the Standard, the handlebar of the bicycle moved relative to its stem when a load of 160 newtons was applied to each handlebar. Clause 4.5.2 (b)(i) of the Standard states as follows: "Handlebars and stem assembly strength. When tested in accordance with Paragraph K5, Appendix K, the handlebars and stem assembly shall comply with the following requirements: (i) There shall be no movement of the handlebar relative to the stem." Appendix K of the Standard is attached hereto and marked "Exhibit C". (c) Clause 4.7 of the Standard in that the drive chain did not withstand without failure a tensile force of 8 kilo newtons, as the maximum load that it supported before breaking was 5.3 kilo newtons. Clause 4.7 of the Standard states as follows: "DRIVE CHAIN. The drive chain, including the connecting link or join, for all bicycles shall withstand without failure a tensile force of 8 KN". 15. On 6 November 1998, after the ACCC purchased the tested bicycle, an officer of the ACCC telephoned Mr Brian Swersky, the joint managing director of Dimmeys, and advised him that the ACCC had purchased a Star Wheel branded bicycle from Dimmeys' Forges store at Footscray which failed to comply with the Standard in a number of respects and requested that Dimmeys immediately withdraw that particular model of bicycle from sale. 16. On 9 November 1998 the ACCC sent by facsimile transmission a letter to Mr Swersky confirming that the bicycle which it had purchased failed to comply with the Standard. The letter stated, inter alia : "The gazetted Standard requires that pedal bicycles shall be permanently and legibly marked with the name of the manufacturer of the bicycle, and an identification number. The bicycle does not carry these markings. Clause 1.6.5 requires that Off-road styled bicycles (eg BMX styled bicycles), carry the following warning: This bicycle is not designed for off-road use or for stunting. The bicycle does not carry such a warning. Clause 2.14.1 requires that all bicycles shall be equipped with no less than two brakes. The bicycle has only one back‑pedal brake fitted. Clause 2.15.3 requires that each wheel must be fitted with a yellow side reflector. The bicycle has no side reflectors. Clause 2.16 requires that bicycles be equipped with a bell or other audible warning device. The bicycle has no warning device fitted." 17. In its letter, the ACCC requested Mr Swersky's confirmation that Dimmeys had withdrawn from sale all stock of the bicycles. It further advised Mr Swersky that it considered it appropriate for Dimmeys to recall those bicycles which Dimmeys had already sold and requested Mr Swersky's advice as to whether Dimmeys intended doing so. 18. Immediately upon being advised by the ACCC that the bicycles failed to comply with the Standard, Dimmeys withdrew the bicycles from sale. 19. Dimmeys further conducted a product recall in respect of the bicycles. At the request of the ACCC, Dimmeys took the following action in recalling the bicycles: (a) It arranged for recall notices to be published in: (i) The Age and The Herald Sun newspapers for a period of 5 consecutive days commencing on 30 November 1998; (ii) One edition of each of 30 Leader newspapers covering the Melbourne metropolitan area; (iii) One edition of the local weekly paper distributed in the Goulburn area, and in the Geelong area. (b) It placed recall notices in its stores from about 17 November 1998 until 31 December 1998. (c) It provided a recall notice to all bicycle repair stores within a 5km radius of Dimmeys' stores which sold the bicycles requesting that the notice be displayed in their respective stores until 31 December 1998. 20. In the recall notices referred to in paragraph 19 above, Dimmeys offered a full refund to consumers who purchased the bicycles. 21. Dimmeys also wrote to all its known layby customers of the bicycles requesting that if they had previously finalised their layby that their bicycles be returned and that if they had not completed their layby to attend the store of purchase to receive a full refund of monies that they had already been paid for the bicycles. 22. Up until it withdrew the bicycles from sale, Dimmeys had sold 242 of the bicycles, not including layby sales. 23. At all relevant times Dimmeys and Starite have co-operated fully with the prosecutor." 14 Although each offence concerns only one 20 inch "Star Wheel" "BMX-styled bicycle", the defendants accept that it is relevant for sentencing purposes to take into account pars 7 to 12 of the statement of agreed facts. They acknowledge that all 537 of the 20 inch bicycles purchased by Starite and supplied to Dimmeys failed to comply with the relevant Standard in the various ways set out in par 10. 15 In addition to the statement of agreed facts, a number of affidavits have been filed on behalf of the prosecutor. Affidavits have also been filed on behalf of the defendants. None of the material contained in these affidavits has been the subject of challenge. 16 In substance, the evidence taken as a whole enables the following conclusions to be drawn: · The average age of a child riding a 20 inch bicycle would be between 7 and 14 years. · A total of 537 bicycles failed to comply with the relevant Standard in the eight respects ((a) to (h) inclusive) set out in par 10 of the statement of agreed facts. · The bicycle which was tested by experts also failed to comply with three performance requirements of the relevant Standard in the ways set out in the three sub-paragraphs of par 14 of the statement of agreed facts. These concerned the seat, the handlebars and the chain. · The cumulative effect of these breaches of the Standard was that the bicycles in question were potentially dangerous, and posed particular risks to the children for whose use they were intended. · While no injuries are known to have occurred, and the majority of the defective bicycles sold to the public have been recalled, not all have been accounted for. It is likely that a number of those bicycles are still in use. Application of the relevant sentencing principles 17 There was little, if any, difference between the positions taken by counsel for the prosecutor, and counsel for the defendants, concerning the sentencing principles which should govern this matter. 18 The object of the Act is set out in s 2. It is to "enhance the welfare of Australians through the promotion of competition and fair trading and provision for consumer protection". Section 65C is headed "Product safety standards and unsafe goods". As French J observed in Gardam v Splendid Enterprises Pty Ltd (supra) at 48,503 "[t]he sections of the Act which provide for the declaration of consumer product safety standards and their enforcement are plainly of the highest importance". 19 In Hamlyn v Norman Ross Stores Pty Ltd (1985) ATPR ¶40-514, a case which also concerned the supply of defective bicycles, Wilcox J stated at 46,162: "The policy behind Pt V is that corporations engaged in trade and commerce bear the responsibility of compliance with the standards prescribed by or under that Part for consumer protection: of which personal safety is perhaps the most fundamental matter." 20 It is common ground that the commission of these offences by the defendants was the product of carelessness, and of lax management, rather than any deliberate attempt to flout the relevant Standards. 21 Neither defendant had imported or sold bicycles at any previous time. This does not absolve them from their obligations to comply with the Act. 22 Neither defendant made any inquiry as to whether there may have been a consumer product safety standard applicable to bicycles generally, or to bicycles of this type. Both defendants were aware of the existence of product safety standards in relation to other merchandise typically handled by them. Their failure to make the appropriate inquiries in relation to a large consignment of children's bicycles is simply inexcusable. 23 Mr Zappelli, who acted on behalf of Starite as the importer of the goods into Australia, was not entitled simply to assume that bicycles of this type, purchased in China for next to nothing, would comply with Australian product safety standards merely because he had been told they had been made for the Australian market, and were part of a cancelled order. Dimmeys took no steps to ensure that the bicycles imported by Starite on behalf of Dimmeys complied with any such standards. That was an act of gross irresponsibility on its part. It was a breach of the Act which was separate and distinct from the breaches of the Act committed by Starite. 24 Among the matters which I am required to take into account when imposing a penalty for offences of this kind is the need for general deterrence. In relation to crimes which lack premeditation, and which are committed in highly emotional circumstances, the question of general deterrence has sometimes seemed to me to be accorded greater weight than it should properly bear. In such cases there is no real likelihood that a substantial penalty will, in fact, deter others from committing similar offences. That is not, in my view, the position in relation to offences under Pt V of the Act. The imposition of substantial penalties, particularly those which are well publicised, can heighten the business community's awareness of the need to comply with product safety standards, and the dire consequences of any failure to do so. 25 In Miller v Cunningham's Warehouse Sales Pty Ltd (1994) ATPR ¶41-321 at 42,269 von Doussa J observed: "I accept that since learning of the offences each of the defendants has taken appropriate steps to put in place compliance programs. … The likelihood of similar offences occurring in the future at the hands of either defendant is therefore reduced accordingly. It is, however, important when imposing a penalty for an offence of the kind now before the Court to remember the purpose of Pt V of the Trade Practices Act, and to impose a penalty that not only has a deterrent effect upon the particular defendants before the Court, but is seen as having a deterrent effect on other suppliers into the consumer market for like goods. It is for that reason that substantial penalties are prescribed by the Trade Practices Act." 26 The offences committed by Starite and Dimmeys must, in my opinion, be regarded as being extremely serious. The conduct of the defendants has resulted in a significant number of defective bicycles being supplied to children, among the most vulnerable members of our community. The appearance of these bicycles is calculated to entice those who use them into still more danger. It may fairly be said that each of the bicycles supplied was, and is, an accident waiting to happen. 27 The cumulative effect of the many defects identified in evidence before me makes the breaches in this case significantly more serious than those which were the subject of prosecution in Hamlyn v Norman Ross Stores Pty Ltd (supra). I note that in that case the principal defendant was fined $20,000. This was at a time when the maximum penalty was $50,000. I note also that the maximum was raised from $50,000 to $100,000 in 1986. It was raised again in 1992 to the current figure of $200,000. The case provides a useful illustration of the gravity with which such breaches of the Act should be viewed. 28 In Pugh v Clark Rubber Ltd (1993) ATPR ¶41-258 the defendant was prosecuted for having failed to affix a warning notice and child resistant fasteners to bean bags which it had supplied. Heerey J was invited by counsel for the defendant to exercise his discretion under s 19B of the Crimes Act and to discharge the defendant without conviction, upon its entering into a recognisance. Alternatively, counsel for the defendant submitted, an appropriate penalty was a fine of $2,000. 29 His Honour responded as follows at 41,473: "In my view the seriousness of these offences renders either proposal quite inadequate. As I have noted, the consumer product safety standard that was breached in the present case was one designed to protect human life and, moreover, human life at a stage of special vulnerability. In the present case the products sold were doubly dangerous. The presence of either the childproof fastener or the warning label would have lessened the risk, but these goods had neither. Seventy-one of the defective bean bags have passed into the community and are practically speaking beyond identification and recall. Some of them at least can be expected to remain in Victorian households for an indefinite period. The evidence does not disclose any harm that has occurred thus far. But that circumstance is a matter of good fortune rather than the consequence of any ameliorative conduct by the defendant which might tell significantly in its favour. Were a light penalty to be imposed because of this factor and some tragic event occurred subsequently, it would be too late to adjust the penalty. The defendant was a retailer experienced with goods of this description. No satisfactory explanation has been established as to just how the breach occurred. In all the circumstances I consider a penalty of $25,000 on each charge to be appropriate." 30 The maximum penalty applicable at the time of the commission of the offences in that case was $100,000. 31 A number of the points made by Heerey J in the passage set out above are directly applicable to the present case. One factor which is different is the lack of any prior experience on the part of either defendant in dealing with bicycles. As against that, however, both Starite and Dimmeys are well acquainted with product safety and product information standards. 32 Mr Wheelahan, on behalf of the defendants, submitted that I ought to differentiate in the penalties which are to be imposed by extending leniency to Starite. He submitted that Dimmeys had always been the intended recipient of the bicycles. Starite had, in effect, acted as no more than a conduit for Dimmeys. He submitted that having regard to Starite's limited role, it would be appropriate that I exercise my discretion under s 19B(1) of the Crimes Act, and that I discharge Starite without proceeding to conviction. Dimmeys alone would then be subjected to the imposition of a pecuniary penalty. 33 I am clearly of the view that Mr Wheelahan's submission should be rejected. The offence committed by Starite was entirely separate from, though related to, the offence committed by Dimmeys. To import into Australia a large number of bicycles, designed for children, without even having inspected them (other than by seeing them in a photograph) and without having endeavoured to ascertain whether they complied with product safety standards was, in my view, an extremely serious breach of s 65C of the Act. None of the criteria set out in s 19B(1)(b) of the Crimes Act make it appropriate to exercise the powers contained therein. 34 I turn then to the question of penalty. It was common ground before me that each defendant has substantial assets. Each defendant is well able to pay any fine which might be imposed in relation to these offences. Section 16C of the Crimes Act requires a Court to take into account the financial circumstances of the person who is to be fined before imposing any such fine. I have examined the financial statements tendered on behalf of each defendant. They confirm the strong financial position of each of Starite and Dimmeys. I take these matters into account. 35 Ms Strong, who appeared for the prosecutor, conceded as she was bound to do that there were a number of mitigating circumstances which each defendant was entitled to call in aid. These include their pleas of guilty, which were entered at the earliest possible time, the extent of their cooperation with the investigating and prosecuting authorities, their lack of any prior convictions, and the steps taken by Dimmeys to recall the defective bicycles when their dangerous condition was drawn to its attention. The evidence discloses that Dimmeys spent approximately $25,000 in publicising the defects as part of its recall process. That too, is a matter properly to be taken into account. 36 Mr Wheelahan submitted that the evidence showed that neither defendant had any intention of importing or supplying bicycles in the future. Moreover, since these offences were committed, Dimmeys had taken steps to ensure that its buyers were aware of all relevant product safety standards. It was unlikely that there would be a recurrence of the breaches of the Act. 37 Ms Strong responded by submitting that it was really a case of too little too late. She submitted that little weight should be given to Dimmeys' belated acknowledgment of the need to instruct its staff in the importance of complying with the Act. 38 In my view, Dimmeys has taken reasonable steps to ensure that the conduct which is the subject of this proceeding is not repeated. I noted the presence of Mr Zappelli on behalf of Starite, and of Mr Swersky on behalf of Dimmeys, in Court during the course of the proceedings. I accept Mr Wheelahan's submission that each defendant is remorseful for its actions. I propose to take that remorse into account in reducing the penalties which would otherwise have been imposed. 39 Ms Strong submitted that I should not differentiate between the penalties imposed upon each defendant. I reject that submission. The evidence establishes clearly that Starite is beneficially owned by Mr Zappelli and the members of his family. He and his family also have a substantial interest in Dimmeys. By fining each defendant separately, the Court is, in effect, punishing Mr Zappelli and his interests twice. Their conduct may warrant separate punishment, but some recognition should be accorded to the fact that the two offences are closely related. In my view these factors warrant the imposition of a somewhat lower penalty than would otherwise be merited upon one of the defendants. I accept Mr Wheelahan's submission that the defendant to benefit should be Starite. 40 Having regard to all of the circumstances, I consider that, in proceeding number V 187 of 1999, Dimmeys Stores Pty Ltd should be fined the sum of $60,000. In proceeding number V 188 of 1999, Starite Distributors Pty Ltd should be fined the sum of $30,000. There will be orders in each proceeding that the defendant pay the prosecutor's costs. I certify that the preceding forty (40) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Weinberg. Associate: Dated: Proceeding No V 187 of 1999 and Proceeding No V 188 of 1999: Counsel for the Prosecutor: Ms EA Strong Solicitor for the Prosecutor: Commonwealth Director of Public Prosecutions Counsel for the Defendants: Mr MF Wheelahan Solicitor for the Defendants: Brian Swersky Date of Hearing: 12 August 1999 Date of Judgment: 26 August 1999