FEDERAL COURT OF AUSTRALIA Director of Consumer Affairs Victoria v Daiso Industries (Australia) Pty Ltd (No 2) [2017] FCA 720 File number: VID 950 of 2016 Judge: MOSHINSKY J Date of judgment: 23 June 2017 Catchwords: CONSUMER LAW – product safety of consumer goods – alleged contraventions of product safety standards – where disputed issue resolved adversely to respondent – where respondent otherwise admitted contraventions – application by the parties for the making of declarations in relation to admitted contraventions Legislation: Australian Consumer Law and Fair Trading Act 2012 (Vic), Australian Consumer Law (Victoria), ss 106, 136 Competition and Consumer Act 2010 (Cth), Sch 2, Australian Consumer Law, ss 106, 136 Federal Court of Australia Act 1976 (Cth), s 21 Cases cited: Australian Competition and Consumer Commission v Coles Supermarkets Australia Pty Ltd [2014] FCA 1405 Australian Securities and Investments Commission, in the matter of NSG Services Pty Ltd v NSG Services Pty Ltd [2017] FCA 345 Director of Consumer Affairs Victoria v Daiso Industries (Australia) Pty Ltd [2017] FCA 683 Date of hearing: 15 June 2017 Date of last submissions: 22 June 2017 Registry: Victoria Division: General Division National Practice Area: Commercial and Corporations Sub-area: Regulator and Consumer Protection Category: Catchwords Number of paragraphs: 10 Counsel for the Applicant: Ms H Symon QC with Mr S Bhojani Solicitor for the Applicant: Solicitors to the Director of Consumer Affairs Victoria Counsel for the Respondent: Mr T Mitchell Solicitor for the Respondent: Ainsworth Albright Lawyers ORDERS VID 950 of 2016 BETWEEN: DIRECTOR OF CONSUMER AFFAIRS VICTORIA Applicant AND: DAISO INDUSTRIES (AUSTRALIA) PTY LTD (ACN 160 576 134) Respondent JUDGE: MOSHINSKY J DATE OF ORDER: 23 JUNE 2017 THE COURT DECLARES THAT: Projectile Toys 1. On 14 November 2013, Daiso contravened s 106(1) of the Australian Consumer Law, being Sch 2 to the Competition and Consumer Act 2010 (Cth) (the ACL) and s 106(1) of the Australian Consumer Law (Victoria), being the Australian Consumer Law text applied by the Australian Consumer Law and Fair Trading Act 2012 (Vic) (the ACL (Vic)) in that Daiso, in trade or commerce, did supply consumer goods of a particular kind: (a) for which a safety standard was in force, namely the Consumer Product Safety Standard: Children's Projectile Toys, Consumer Protection Notice No. 16 of 2010 (Projectile Toys Standard); and (b) those goods did not comply with the Projectile Toys Standard, because: (i) contrary to [4.18.1(b)] of AN/NZS ISO 8124.1:2002 the consumer goods failed to have the high speed propeller or rotor in the form of a ring in order to reduce the risk of injury; and (ii) contrary to [4.18.2] and [4.18.3] of AN/NZS ISO 8124.1:2002 the consumer goods failed to have any warnings or labels drawing attention to the potential danger of misuse in aiming them at a person's eyes or face; or using projectiles other than those supplied or recommended by the manufacturer. 2. On 14 November 2013, Daiso contravened s 106(2) of the ACL and s 106(2) of the ACL (Vic) in that Daiso, in trade or commerce, offered for supply (other than for export) consumer goods the supply of which is prohibited by s 106(1), because: (a) contrary to [4.18.1(b)] of AN/NZS ISO 8124.1:2002 the consumer goods failed to have the high speed propeller or rotor in the form of a ring in order to reduce the risk of injury; and (b) contrary to [4.18.2] and [4.18.3] of AN/NZS ISO 8124.1:2002 the consumer goods failed to have any warnings or labels drawing attention to the potential danger of misuse in aiming them at a person's eyes or face; or using projectiles other than those supplied or recommended by the manufacturer. 3. During the period 5 November 2013 to 26 January 2014, Daiso contravened s 106(3) of the ACL and s 106(3) of the ACL (Vic) in that Daiso, in or for the purposes of trade or commerce, did possess or have control of consumer goods the supply of which is prohibited by s 106(1), because: (a) contrary to [4.18.1(b)] of AN/NZS ISO 8124.1:2002 the consumer goods failed to have the high speed propeller or rotor in the form of a ring in order to reduce the risk of injury; and (b) contrary to [4.18.2] and [4.18.3] of AN/NZS ISO 8124.1:2002 the consumer goods failed to have any warnings or labels drawing attention to the potential danger of misuse in aiming them at a person's eyes or face; or using projectiles other than those supplied or recommended by the manufacturer. Toys for children up to and including 36 months of age 4. During the period 26 March 2015 to 2 May 2016, Daiso contravened s 106(1) of the ACL and s 106(1) of the ACL (Vic) in that Daiso, in trade or commerce, did supply consumer goods of a particular kind: (a) for which a safety standard was in force, namely the Consumer Product Safety Standard: Toys for Children up to and including 36 months of age, Consumer Protection Notice No. 14 of 2003 (Toys for Children up to and including 36 months of age Standard); and (b) those goods did not comply with the Toys for Children up to and including 36 months of age Standard, because, when tested in accordance with the required testing provisions, the consumer goods either contained or liberated small parts which fitted entirely into the small parts cylinder without compression and in all possible orientations, thereby failing the reasonably foreseeable abuse test and small parts test in cl 4.2 and 4.4 of the Australia/New Zealand Standard AS/NZS ISO 8124.1:2002 Safety of Toys. 5. During the period 26 March 2015 to 2 May 2016, Daiso contravened s 106(2) of the ACL and s 106(2) of the ACL (Vic) in that Daiso, in trade or commerce, offered for supply (other than for export) consumer goods the supply of which is prohibited by s 106(1), because those consumer goods did not comply with the Toys for Children up to and including 36 months of age Standard, because, when tested in accordance with the required testing provisions, the consumer goods either contained or liberated small parts which fitted entirely into the small parts cylinder without compression and in all possible orientations, thereby failing the reasonably foreseeable abuse test and small parts test in cl 4.2 and 4.4 of the Australia/New Zealand Standard AS/NZS ISO 8124.1:2002 Safety of Toys. 6. During the period 22 November 2013 to 2 May 2016, Daiso contravened s 106(3) of the ACL and s 106(3) of the ACL (Vic) in that Daiso, in or for the purposes of trade or commerce, did possess or have control of consumer goods the supply of which is prohibited by s 106(1), because those consumer goods did not comply with the Toys for Children up to and including 36 months of age Standard, because, when tested in accordance with the required testing provisions, the consumer goods either contained or liberated small parts which fitted entirely into the small parts cylinder without compression and in all possible orientations, thereby failing the reasonably foreseeable abuse test and small parts test in cl 4.2 and 4.4 of the Australia/New Zealand Standard AS/NZS ISO 8124.1:2002 Safety of Toys. Luggage Straps 7. During the period 26 March 2015 to 3 June 2015, Daiso contravened s 106(1) of the ACL and s 106(1) the ACL (Vic) in that Daiso, in trade or commerce, did supply consumer goods of a particular kind: (a) for which there was a safety standard in force, namely the Trade Practices (Consumer Product Safety Standards) Regulations 1979 (Cth): Statutory Rules 1979 No. 134 as amended (Elastic Luggage Strap Standard); and (b) those goods did not comply with the Elastic Luggage Strap Standard because, contrary to cl 11C(3), (4) and (5), the elastic luggage straps did not have permanently attached the requisite prescribed warning as required by cl 11C(3) and in the prescribed manner as required by cl 11C(4) and (5). 8. During the period 26 March 2015 to 3 June 2015, Daiso contravened s 106(2) of the ACL and s 106(2) of the ACL (Vic) in that Daiso, in trade or commerce, offered for supply (other than for export) consumer goods the supply of which is prohibited by s 106(1) because, contrary to cl 11C(3), (4) and (5), the elastic luggage straps did not have permanently attached the requisite prescribed warning as required by cl 11C(3) and in the prescribed manner as required by cl 11C(4) and (5). 9. During the period 14 November 2013 to 3 June 2015, Daiso contravened s 106(3) of the ACL and s 106(3) of the ACL (Vic) in that Daiso, in or for the purposes of trade or commerce, did possess or have control of consumer goods the supply of which is prohibited by s 106(1) because, contrary to cl 11C(3), (4) and (5), the elastic luggage straps did not have permanently attached the requisite prescribed warning as required by cl 11C(3) and in the prescribed manner as required by cl 11C(4) and (5). Cosmetics 10. During the period 14 November 2013 to 2 May 2016, Daiso contravened s 136(1) of the ACL and s 136(1) of the ACL (Vic) in that Daiso, in trade or commerce, did supply goods of a particular kind: (a) for which there was an information standard for goods of that kind in force, namely the Trade Practices (Consumer Product Information Standards) (Cosmetics) Regulations 1991 (Cth): Statutory Rules 1979 No. 134 (Cosmetics Information Standards); and (b) for which Daiso failed to comply with the Cosmetics Information Standards because: (i) the cosmetic product did not list the ingredients on the container or packaging or in another way that ensures that a consumer can be informed about the ingredients as required by cl 5(1) and 5(3); and (ii) the list of ingredients was not prominently shown and clearly legible in their English names or their international Nomenclature cosmetic ingredient names as required by cl 6(1) and (2). 11. During the period 14 November 2013 to 2 May 2016, Daiso contravened s 136(2) of the ACL and s 136(2) of the ACL (Vic) in that Daiso, in trade or commerce, did offer for supply goods the supply of which is prohibited by s 136(1) because: (a) the cosmetic product did not list the ingredients on the container or packaging or in another way that ensures that a consumer can be informed about the ingredients as required by cl 5(1) and 5(3); and (b) the list of ingredients was not prominently shown and clearly legible in their English names or their international Nomenclature cosmetic ingredient names as required by cl 6(1) and (2). 12. During the period 1 November 2013 to 2 May 2016, Daiso contravened s 136(3) of the ACL and s 136(3) of the ACL (Vic) in that Daiso did in or for the purposes of trade or commerce, possess or have control of goods the supply of which is prohibited by s 136 (1) because: (a) the cosmetic product did not list the ingredients on the container or packaging or in another way that ensures that a consumer can be informed about the ingredients as required by cl 5(1) and 5(3); and (b) the list of ingredients was not prominently shown and clearly legible in their English names or their international Nomenclature cosmetic ingredient names as required by cl 6(1) and (2). Sunglasses and Fashion Spectacles 13. On 14 November 2013, Daiso contravened s 106(1) of the ACL and s 106(1) of the ACL (Vic) in that, in trade or commerce, Daiso did supply consumer goods of a particular kind: (a) for which there was a safety standard in force, namely the Consumer Product Safety Standard: Sunglasses and fashion spectacles, Consumer Protection Notice No. 13 of 2003 (Sunglasses Standard); (b) those goods did not comply with the Sunglasses Standard because the sunglasses and fashion spectacles did not provide information of the lens category number and description and the number of Australian Standard AS/NZS 1067 in the form of an indelible marking on the sunglasses frame, removable label affixed to the lens, or a removable label securely attached or tied to the frame in contravention of cl 4.2.1, or at all, in contravention of cl 4.1.1(b) and (d) of Australia/New Zealand Standard AS/NZS 1067:2003 Sunglasses and Fashion Spectacles as required by Div 2 of that Standard. 14. On 14 November 2013, Daiso contravened s 106(2) of the ACL and s 106(2) of the ACL (Vic) in that Daiso, in trade or commerce, offered for supply (other than for export) consumer goods the supply of which is prohibited by s 106(1) because the sunglasses and fashion spectacles did not provide information of the lens category number and description and the number of Australian Standard AS/NZS 1067 in the form of an indelible marking on the sunglasses frame, removable label affixed to the lens, or a removable label securely attached or tied to the frame in contravention of cl 4.2.1, or at all, in contravention of cl 4.1.1(b) and (d) of Australia/New Zealand Standard AS/NZS 1067:2003 Sunglasses and Fashion Spectacles as required by Div 2 of that Standard. 15. During the period 14 November 2013 to 8 January 2014, Daiso contravened s 106(3) of the ACL and s 106(3) of the ACL (Vic) in that Daiso, in or for the purposes of trade or commerce, did possess or have control of consumer goods the supply of which is prohibited by s 106(1), because the sunglasses and fashion spectacles did not provide information of the lens category number and description and the number of Australian Standard AS/NZS 1067 in the form of an indelible marking on the sunglasses frame, removable label affixed to the lens, or a removable label securely attached or tied to the frame in contravention of cl 4.2.1, or at all, in contravention of cl 4.1.1(b) and (d) of Australia/New Zealand Standard AS/NZS 1067:2003 Sunglasses and Fashion Spectacles as required by Div 2 of that Standard. AND THE COURT ORDERS BY CONSENT THAT: 1. By 4.00 pm on 22 September 2017, the respondent file and serve any evidence it intends to rely upon with respect to relief. 2. By 4.00 pm on 3 November 2017, the applicant file and serve any evidence in reply. 3. By 4.00 pm on 17 November 2017, the parties file and serve objections to evidence in tabular form listing the deponent's name, paragraph reference, sentence line and basis of objection. 4. By 4.00 pm on 17 November 2017, the parties file and serve outlines of submissions. 5. By 4.00 pm 14 days prior to the hearing, the applicant file and serve a court book containing all affidavits (together with annexures) relied upon in relation to the question of relief. 6. The matter be set down for hearing on relief on an estimate of one to two days on a date after 24 November 2017. 7. Costs be reserved. 8. Liberty to apply. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT MOSHINSKY J: 1 The applicant, the Director of Consumer Affairs Victoria (the Director), brings this proceeding against the respondent (Daiso), alleging contraventions of product safety and product information provisions of relevant legislation. 2 On 15 June 2017, a hearing took place before me on a contested issue of liability. Apart from that issue, the contraventions alleged by the Director were admitted by Daiso. 3 On 16 June 2017, I published reasons for judgment on the contested issue: Director of Consumer Affairs Victoria v Daiso Industries (Australia) Pty Ltd [2017] FCA 683 (the Reasons). In summary, I decided the issue in favour of the Director. These reasons should be read together with the Reasons. I will adopt in these reasons the same abbreviations as used in the Reasons. 4 At the hearing on 15 June 2017, senior counsel for the Director handed up a proposed form of declarations regarding both the agreed contraventions and the alleged contraventions that were the subject of the disputed issue. Counsel for Daiso requested the opportunity to consider the form of the proposed declarations. It was envisaged that there may need to be some discussion between the parties as to the precise form of the declarations. Subsequently, on 22 June 2017, the parties provided to my chambers an agreed form of the proposed declarations (Minutes of Proposed Declarations). These deal with both the agreed contraventions and the contraventions that follow from my decision on the disputed issue. The parties request that I make declarations in the terms proposed. 5 For the reasons that follow, I am prepared to make declarations substantially in the terms of the Minutes of Proposed Declarations. 6 As I noted in Australian Securities and Investments Commission, in the matter of NSG Services Pty Ltd v NSG Services Pty Ltd [2017] FCA 345 at [11], the applicable principles as regards the making of orders by agreement and as regards declarations are well established. They were summarised by Gordon J in Australian Competition and Consumer Commission v Coles Supermarkets Australia Pty Ltd [2014] FCA 1405 at [70]-[79] as follows: 2.3.1 Orders sought by agreement … 70 The applicable principles are well established. First, there is a well-recognised public interest in the settlement of cases under the Act: NW Frozen Foods Pty Ltd v Australian Competition & Consumer Commission (1996) 71 FCR 285 at 291. Second, the orders proposed by agreement of the parties must be not contrary to the public interest and at least consistent with it: Australian Competition & Consumer Commission v Real Estate Institute of Western Australia Inc (1999) 161 ALR 79 at [18]. 71 Third, when deciding whether to make orders that are consented to by the parties, the Court must be satisfied that it has the power to make the orders proposed and that the orders are appropriate: Real Estate Institute at [17] and [20] and Australian Competition & Consumer Commission v Virgin Mobile Australia Pty Ltd (No 2) [2002] FCA 1548 at [1]. Parties cannot by consent confer power to make orders that the Court otherwise lacks the power to make: Thomson Australian Holdings Pty Ltd v Trade Practices Commission (1981) 148 CLR 150 at 163. 72 Fourth, once the Court is satisfied that orders are within power and appropriate, it should exercise a degree of restraint when scrutinising the proposed settlement terms, particularly where both parties are legally represented and able to understand and evaluate the desirability of the settlement: Australian Competition & Consumer Commission v Woolworths (South Australia) Pty Ltd (Trading as Mac's Liquor) [2003] FCA 530 at [21]; Australian Competition & Consumer Commission v Target Australia Pty Ltd [2001] FCA 1326 at [24]; Real Estate Institute at [20]-[21]; Australian Competition & Consumer Commission v Econovite Pty Ltd [2003] FCA 964 at [11] and [22] and Australian Competition & Consumer Commission v The Construction, Forestry, Mining and Energy Union [2007] FCA 1370 at [4]. 73 Finally, in deciding whether agreed orders conform with legal principle, the Court is entitled to treat the consent of Coles as an admission of all facts necessary or appropriate to the granting of the relief sought against it: Thomson Australian Holdings at 164. 2.3.2 Declarations 74 The Court has a wide discretionary power to make declarations under s 21 of the Federal Court Act: Forster v Jododex Australia Pty Ltd (1972) 127 CLR 421 at 437-8; Ainsworth v Criminal Justice Commission (1992) 175 CLR 564 at 581-2 and Tobacco Institute of Australia Ltd v Australian Federation of Consumer Organisations Inc (No 2) (1993) 41 FCR 89 at 99. 75 Where a declaration is sought with the consent of the parties, the Court's discretion is not supplanted, but nor will the Court refuse to give effect to terms of settlement by refusing to make orders where they are within the Court's jurisdiction and are otherwise unobjectionable: see, for example, Econovite at [11]. 76 However, before making declarations, three requirements should be satisfied: (1) The question must be a real and not a hypothetical or theoretical one; (2) The applicant must have a real interest in raising it; and (3) There must be a proper contradictor: Forster v Jododex at 437-8. 77 In this proceeding, these requirements are satisfied. The proposed declarations relate to conduct that contravenes the ACL and the matters in issue have been identified and particularised by the parties with precision: Australian Competition & Consumer Commission v MSY Technology Pty Ltd (2012) 201 FCR 378 at [35]. The proposed declarations contain sufficient indication of how and why the relevant conduct is a contravention of the ACL: BMW Australia Ltd v Australian Competition & Consumer Commission [2004] FCAFC 167 at [35]. 78 It is in the public interest for the ACCC to seek to have the declarations made and for the declarations to be made (see the factors outlined in ACCC v CFMEU at [6]). There is a significant legal controversy in this case which is being resolved. The ACCC, as a public regulator under the ACL, has a genuine interest in seeking the declaratory relief and Coles is a proper contradictor because it has contravened the ACL and is the subject of the declarations. Coles has an interest in opposing the making of them: MSY Technology at [30]. No less importantly, the declarations sought are appropriate because they serve to record the Court's disapproval of the contravening conduct, vindicate the ACCC's claim that Coles contravened the ACL, assist the ACCC to carry out the duties conferred upon it by the Act (including the ACL) in relation to other similar conduct, inform the public of the harm arising from Coles' contravening conduct and deter other corporations from contravening the ACL. 79 Finally, the facts and admissions in Annexure 1 provide a sufficient factual foundation for the making of the declarations: s 191 of the Evidence Act; Australian Competition & Consumer Commission v Dataline.Net.Au Pty Ltd (2006) 236 ALR 665 at [57]-[59] endorsed by the Full Court in Australian Competition & Consumer Commission v Dataline.Net.Au Pty Ltd (2007) 161 FCR 513 at [92]; Hadgkiss v Aldin (No 2) [2007] FCA 2069 at [21]-[22]; Secretary, Department of Health & Ageing v Pagasa Australia Pty Ltd [2008] FCA 1545 at [77]-[79] and Ponzio v B & P Caelli Constructions Pty Ltd (2007) 158 FCR 543. 7 In the present case, the Court has the power to make the declarations proposed: Federal Court of Australia Act 1976 (Cth), s 21. Daiso has admitted the relevant contraventions in its amended concise response (see the Reasons at [13]-[22]) and in its consent to the Minutes of Proposed Declarations. The Court is entitled to treat this as an admission of all facts necessary or appropriate to the granting of the relief sought against Daiso. Further, the requirements for the making of declarations referred to by Gordon J are satisfied. The proposed declarations relate to conduct that contravenes the ACL and the ACL (Vic) and the matters in issue have been identified and particularised by the parties with precision. The proposed declarations contain sufficient indication of how and why the relevant conduct contravened the legislation. 8 It is in the public interest for the Director to seek to have the declarations made and for the declarations to be made. There is a significant legal controversy which is being resolved. The Director, as a public regulator, has a genuine interest in seeking declaratory relief and Daiso is a proper contradictor. Additionally, the declarations sought are appropriate because they serve to record the Court's disapproval of the contravening conduct, vindicate the Director's claim that Daiso contravened the legislation, assist the Director in carrying out his regulatory duties in the future, inform the public of the contravening conduct, and deter other corporations from contravening the legislation. 9 Accordingly, I will make declarations substantially in the form of the Minutes of Proposed Declarations. 10 The parties have not reached any joint position with respect to pecuniary penalties. This matter will likely need to be resolved by way of a contested hearing. The parties have put forward, and I will make, orders by consent setting out a timetable of steps in connection with such a hearing. I certify that the preceding ten (10) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Moshinsky. Associate: Dated: 23 June 2017