Australian Competition and Consumer Commission; v MHG Plastic Industries Pty Ltd
[1999] FCA 950
•28 JUNE 1999
FEDERAL COURT OF AUSTRALIA
Australian Competition & Consumer Commission
v MHG Plastic Industries Pty Ltd [1999] FCA 950TRADE PRACTICES – consumer protection – non-compliance with consumer product safety standard – appropriate relief – declaration - injunctions – relevance of whether respondent will continue to supply the goods if not restrained – policy of Pt V Trade Practices Act and associated remedial provisions – whether risk to members of public in using non-complying goods – relevance of past industry testing practice to question of relief – relevance of claim of selective enforcement to question of relief – relevance of asserted hardship to respondent if injunction granted – whether balancing exercise between public safety and asserted hardship permitted when determining appropriate relief
Trade Practices Act 1974 (Cth) s65C, s80(1), s80(4) and s80(5)
Commodore Business Machines Pty Limited v Trade Practices Commission (1990) 92 ALR 563, referred to.
Campomar Sociedad Limitada v Nike International Limited (1998) 156 ALR 316, referred to.
AUSTRALIAN COMPETITION & CONSUMER COMMISSION v
MHG PLASTIC INDUSTRIES PTY LTD
N 418 OF 1999
EMMETT J
28 JUNE 1999
SYDNEY
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
N418 OF 1999
BETWEEN:
AUSTRALIAN COMPETITION & CONSUMER COMMISSION
ApplicantAND:
MHG PLASTIC INDUSTRIES PTY LIMITED
RespondentJUDGE:
EMMETT J
DATE OF ORDER:
28 JUNE 1999
WHERE MADE:
SYDNEY
THE COURT DECLARES THAT:
1.Motor cycle helmets model “EXR”, “MXR” and “RXR” manufactured by the respondent since 1 July 1996 do not comply with Australian Standard AS1698-1988 in that they do not satisfy the performance requirements specified in clauses 6.1 and 6.3 of that Australian Standard.
2.The respondent, by supplying to wholesalers and other purchasers motor cycle helmets models “EXR”, “MXR” and “RXR” manufactured by the respondent since 1 July 1996, has in trade or commerce supplied goods that were intended to be used, or were of a kind likely to be used, by consumers and which did not comply with the prescribed consumer product safety standard relating to the goods, namely Australian Standard AS1698-1988, contrary to s65C(1) of the Trade Practices Act 1974.
THE COURT ORDERS THAT:
3.The respondent, by its servants or agents or otherwise howsoever, be restrained from supplying to wholesalers and other purchasers motor cycle helmets models “EXR”, “MXR” or “RXR” manufactured by the respondents since 1 July 1996.
4.The respondent, at its own expense, establish a 1800 telephone number within 14 days of the date of these orders and cause that telephone number to be answered at all times until 31 December 1999.
5.The respondent, at its own expense, cause to be published in a major daily newspaper in each State or Territory and in each of the magazines “Two Wheels”, “Live to Ride” and “Performance Streetbike” an advertisement in the form of Annexure A hereto and further that the respondent take all reasonable steps to ensure that each advertisement be:
(i)of a size not less than three columns wide by 20cm deep;
(ii)in text which is in a type size not less than 12 point;
(iii)within the first six pages of the newspaper or magazine;
(iv)published in newspapers once per week over three consecutive weeks with the first advertisement appearing in the first issue appearing within 14 days of the making of these Orders in which advertising space is available; and
(v)published in magazines once per issue over two consecutive issues with the first advertisement appearing in the first issue appearing within two months of the making of these Orders in which advertising space is available.
6.The respondent pay to any person who:
(i)telephones the 1800 number established by the respondent in accordance with Order 3 on or before 31 December 1999; and
(ii)quotes the serial number of a model “EXR”, “MXR” or “RXR” helmet having a date of manufacture after 1 July 1996;
an amount equal to the greater of:
(iii)the purchase price of that helmet where the person provides to the respondent proof of purchase; or
(iv)the respondent’s recommended retail price at the date of manufacture.
7.The respondent use its best endeavours diligently to obtain the helmet in question from any person who:
(i)telephones the 1800 number established by the respondent in accordance with Order 3 on or before 31 December 1999;
(ii)quotes the serial number of a model “EXR”, “MXR” or “RXR” helmet having a date of manufacture after 1 July 1996.
8.The respondent use its best endeavours to purchase or otherwise obtain from all wholesalers or retailers in Australia all model “EXR”, “MXR” or “RXR” helmets held by them and manufactured by the respondent after 1 July 1996.
9.The seal of the Court be affixed to the reasons for judgment dated 15 June 1999.
10.The respondent pay the applicant’s costs of the proceedings.
Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
His Honour has ordered that Orders 5(iv) and (v), 6 and 7 above be stayed up to and including 13 July 1999 pending further argument on that day as to final orders.
“Annexure A”
(Eldorado Logo)
Product Safety Recall
MHG Plastic Industries Pty Limited
Motor Cycle Helmets
Models “EXR”, “MXR” AND “RXR”Important Notice to Purchasers Of
MHG Eldorado Motor Cycle Helmets
Models “EXR”, “MXR” AND “RXR”The Federal Court, on 15 June 1999, found that the above model
helmets did not comply with the prescribed consumer safety standard,
namely Australian Standard AS1698-1988, which is
contrary to section 65C(1) of the Trade Practices Act, 1974.These model helmets do not comply with AS1698-1988 in that
they do not satisfy the performance requirements
specified in clauses 6.1 and 6.3 of the Standard.
This relates to penetration testing of the helmets.
The purpose of penetration testing is to measure the ability of a
motor cycle helmet to resist a striker passing
through the interior surface of the helmet.
The failure of the helmets to comply with AS1698-1988
so far as the penetration testing performance requirements
are concerned means that there is a significant risk of head
injuries to motor cyclists in the event of an accident.MHG have been directed by the Federal Court to recall all
Eldorado model “EXR”, “MXR” and “RXR” helmets manufactured
since 1 July 1996 and any purchaser of such a helmet
should not now continue to use that helmet and if any purchaser
wishes to obtain a refund they may do so
by calling MHG on Freecall number 1 800
to arrange a refund and collection of the helmet.
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
N418 OF 1999
BETWEEN:
AUSTRALIAN COMPETITION & CONSUMER COMMISSION
ApplicantAND:
MHG PLASTIC INDUSTRIES PTY LIMITED
RespondentJUDGE:
EMMETT J
DATE:
28 JUNE 1999
PLACE:
SYDNEY
EX TEMPORE REASONS FOR JUDGMENT (No.2)
On 15 June 1999, I delivered my reasons for concluding that each of the models of protective helmets for motorcycle riders marketed by MHG does not satisfy the performance requirements specified in clauses 6.1 and 6.3 of the Standard, as I defined that term in my reasons. As I indicated on 15 June 1999, I had not yet heard argument upon the relief that might be appropriate in the light of the conclusions that I then reached. Accordingly, I indicated to the parties that I would publish my findings on the question of compliance with the Standard and then give the parties the opportunity of addressing on the question of relief in the light of my findings. I have now heard the parties’ submissions on the question of relief.
The Commission's case is based on section 65C of the Trade Practices Act1974 (Cth) (“the Act”). Section 65C, which appears in Part V of the Act, relevantly provides as follows:
“(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.”
The findings which I have made indicate that there has been a contravention of section 65C, and that there is threatened further contravention in the event that there is no injunction restraining the respondent from supplying the models of helmet in question.
Section 80(1) of the Act relevantly provides as follows:
“Where, on the application of the Commission […], the Court is satisfied that a person has engaged, or is proposing to engage, in conduct that constitutes or would constitute:
(a) a contravention of a provision of Part V……….
………….
the Court may grant an injunction in such terms as the Court determines to be appropriate.”
Sections 80(4) and (5) relevantly provide as follows:
“(4) The power of the Court to grant an injunction restraining a person from engaging in conduct may be exercised:
a)whether or not it appears to the Court that the person intends to engage again, or to continue to engage, in conduct of that kind;
…………..
(5) The power of the Court to grant an injunction requiring a person to do an act or thing may be exercised:
a) whether or not it appears to the court that the person intends to refuse or fail again, or to continue to refuse or fail, to do that act or thing.
…………..”
In Commodore Business Machines Pty Limited v Trade Practices Commission (1990) 92 ALR 563 at 574-5, the Full Court said, inter alia, as follows:
“A final injunction should bear on the case alleged and proved against the defendant, and should indicate that conduct which is enjoined or commanded to be performed, so that the defendant knows what is expected of him as a matter of fact.
………….
[I]n some cases there is a risk that an injunction drawn too precisely may encourage evasion of the spirit but not the letter, while a wider form of injunction will not place the defendant in any real position of doubt as to what is expected of him.”
In Campomar Sociedad Limitada v Nike International Ltd (1998) 156 ALR 316, Sackville J, a member of the Full Court that decided that case, said as follows (at 340):
“Some judicial pronouncements suggest a more flexible link between the case proved and the form of injunctive relief. In ICI v TPC, Lockhart J (with whom Gummow and French JJ relevantly agreed) characterised section 80 of the TP Act as, "essentially a public interest provision". The section departed from the traditional basis for the grant of injunctions because an applicant need not establish a proprietary right or interest to gain standing, and because subss (4) and (5) empower the court to grant injunctive relief, notwithstanding that the defendant has not previously engaged in the prohibited conduct or does not intend to engage in it again. Lockhart J summarised the effect of subss (4) and (5) as follows:
In my opinion, subss (4) and (5) are designed to ensure that once the condition precedent to the exercise of injunctive relief has been satisfied (ie contraventions or proposed contraventions of Part IV or Part V of the Act) the court should be given the widest possible injunctive powers, devoid of traditional constraints, though the power must be exercised judicially and sensibly.
Notwithstanding the provision of subss (4) and (5), which permit an injunction to be granted whether or not there appears to be a likelihood of future contravention, the likelihood of future contravention by the defendant is regarded in the judgments of the court as a relevant factor.”
As I have indicated, I have found that there has been a contravention and that, if not restrained, there is no reason to assume that MHG would not continue to supply the helmets which it has manufactured to date in contravention of the Act.
The Commission has promulgated short minutes of the orders which it contends are appropriate in the light of the findings which I have made, and in the light of the principles which I have briefly summarised above. MHG not make any attack on the form of the short minutes of order, but rather disputes, as a matter of principle, the Commission’s entitlement to those orders. There are four bases upon which MHG seeks to resist the orders sought by the Commission.
The first concerns the question of public safety. It is clear, in my view, that the object of section 65C, coupled with the provisions of section 80 of the Act, is to ensure the protection of the public. The policy, which is to be found in Part V generally and in section 65C in particular, is the protection of members of the community. The Parliament has concluded that an appropriate way of doing that is, in effect, to make compliance with certain standards compulsory. The primary object, therefore, of a court, after it has been established that there is a possible contravention of section 65C, is the protection of the members of the community who might use products in respect of which standards have been prescribed.
The Commission relied on the evidence of Mr Andrew Stuart McIntosh, who is a lecturer in Biomechanics and Ergonomics at the School of Safety Science at the University of New South Wales. Mr McIntosh was asked to assume, in relation to the three models of motor cycle helmets in question, that it is very likely that the helmets will fail at test site G. Mr McIntosh said the following in his written report which was in evidence:
“Helmet impacts occur most frequently to the front of the helmet, followed by the rear and sides and least frequently to the top of the helmet.”
He then cited studies which supported that conclusion, and said:
“These results demonstrate that impacts at Crashlab sites E and F are infrequent and that impacts at Crashlab site G are more consistent with real accidents.”
Mr McIntosh then went on to say:
“If it is assumed that it is very likely that MHG’s helmets will fail the resistance to penetration test at Crashlab site G, then this failure is of concern to safety given that this region receives a high proportion of impacts. Although the risk of injury is reduced due to the infrequent occurrence of impacts with a sharp object, impacts do occur against angled objects and there is a higher risk of injury associated with these impacts then against impacts against a flat surface. The penetration test is an indirect measure of the helmet's performance to resist these types of impacts. Finally, if it is recognised that head injuries causes by high localised loads with or without penetration are severe, then there is a considerable risk of injury which would be less if the helmet conformed to the Standard.”
The report contained the following summary of conclusions:
“1. High localised forces have the potential to cause severe head injuries. These forces can be modified through helmet design. Some of the associated helmet performance can be assessed using the resistance to penetration test.
2. Impact energy attenuation is an important helmet function with relationship to head injury.
3. Incidences of impacts resulting in helmet penetration are infrequent but are more likely to occur in off-road environments.
4.Failure of MHG’s helmets in the resistance to penetration test at site G presents a significant injury risk. Even though the likelihood of impacts of this nature is low, the likely injuries are severe.”
One of the studies relied on by Mr McIntosh was the study of helmet damage and rider head/neck injuries for crash-involved motor cyclists by B. Dowdell, G.J. Long, J. Ward and M. Griffiths (“the Dowdell Study”). It is significant that that is not the only material relied upon by Mr McIntosh. Senior counsel for the respondent drew attention to the fact that in the Dowdell Study there was no evidence of penetration impacts other than those that were associated with extreme helmet damage. I was invited to conclude, therefore, that the evidence of that study did not support a conclusion that a helmet which complied with the Standard, so far as the penetration test is concerned, was likely to be of any advantage to a wearer in the event of an accident which resulted in damage intended to be resisted by the helmet which would satisfy the tests in the Standard.
While there is much to be said for MHG’s submission concerning the material contained in the Dowdell Study, MHG is faced with the evidence of Mr McIntosh whose curriculum vitae indicates that he has had extensive experience in relation to the question of head injury resulting from motor vehicle accidents. There was no cross examination of Mr McIntosh on the conclusions to which he deposed in his affidavit. In those circumstances, I am not prepared to discount the conclusions which he reached concerning the risk of injury to a motor cyclist who wears one of the respondent's helmets in circumstances where, as I have said, the helmet does not satisfy the penetration test specified by the Standard.
I am satisfied on the evidence before me that there is a significant risk to members of the public in wearing protective helmets which do not satisfy the penetration test specified in the Standard and that that risk could be significantly reduced if the helmet did, in fact, comply with that test.
Secondly, reliance was placed by MHG on past practices (about which I said something in my earlier reasons). For reasons which I do not think have been satisfactorily explained, there appears to have been no practice within Crashlab prior to March of this year, of conducting penetration tests on helmets otherwise than at sites E and F. Further, MHG, in its own testing, which has been approved as I have indicated in my earlier reasons, has been accustomed to testing only at sites E and F.
However, there was evidence before me to indicate that industry practice should have required testing at other than those two sites. The QAS Technical Schedule, current as at the last quarter of 1994, contained the following paragraph:
“5.5 Testing.
Tests shall be conducted in accordance with the following clauses of AS1698-1988.
Impact energy intenuation Clause 6.2
Penetration resistance Clause 6.3
Retention system strength Clause 6.4
Marking Clause 8
Instructions for use and care Clause 9Laboratories that routinely test the same or similar models from one manufacturer will vary the test sites in order to test a variety of locations. Accordingly, manufacturers should ensure through their design verification activities that all possible test sites above the test line are capable of meeting the required performance level.”
Mr Gibson, to whom I referred in my earlier reasons, said in one of his reports as follows:
“It is interesting to note in the Technical Schedule for AS1698 that a requirement is made for Batch Testing Section 5.5, that “Laboratories that routinely test the same or similar models from the one manufacturer should vary the test sites in order to test a variety of locations.” This accords with standard laboratory practice.”
In oral examination, Mr Gibson also said that he had been connected with several laboratories over the years and that the ones that he was referring to in that paragraph were Biokinetics and Associates Ltd in Canada and Imtest in New Zealand, both of which he said regularly test in a variety of locations on the helmet.
While I have a degree of sympathy for MHG in the practices which it has adopted in the past, I do not accept on the evidence before me that it was invariable in the industry to test only at sites E and F. Indeed, the material before me suggests that good practice (and commonsense also suggests the same) would require testing at various sites of the helmet. That, of course, is the construction of the Standard which I have said in my earlier reasons is the correct construction. In the circumstances, I do not consider that any past practice is a basis for resisting the orders sought by the Commission.
Thirdly, it was suggested that there has been some selective enforcement of section 65C of the Act. In reasons which I have already given this morning for rejecting certain affidavit evidence, I do not consider that to be material. Even if it be the case that there was selective enforcement, that may be a ground for reviewing the conduct of the enforcement authority. As a member of the community, one would be very much concerned if there was evidence of non-compliance with section 65C and that non-compliance was not investigated. Be that as it may, I do not consider that it is an answer to the Commission's claim to say, as MHG does, that there is no evidence of any testing of other manufacturers or of proceedings in relation to non-compliance by other manufacturers.
In this context, and also possibly in the context of the first basis for resistance, MHG referred to what it said was a small proportion of the market to which MHG is entitled. That appears to me to be irrelevant. It does not matter whether a supplier supplies a minuscule part of the market or a very substantial part of the market. Section 65C should be equally applicable to all participants in the market irrespective of their size and irrespective of whether, for whatever reason, the regulating authority chooses to enforce the law against all participants.
The final matter relied on by MHG was asserted hardship. I would accept that, in determining what relief is appropriate in a case such as this, the court must engage in a balancing exercise. That is to say, the court must balance the interest of the community against the cost to a respondent in complying with appropriate orders. However, where the item in the balance in favour of the community concerns safety in the context of what could be very severe head injury, it would need to be very, very significant hardship to outweigh that interest of the community.
Mr Hadanich, in oral evidence, said that in January of this year, a market survey indicated that MHG’s market share is approximately 5 to 5.2 per cent. He also said that since the Commission had approached MHG, MHG had taken action to quarantine all stock and had ceased production. Production was ceased at the beginning of March and MHG subsequently quarantined all stock at both dealers and stock that had been distributed. Mr Hadanich said that the value of that stock was in the vicinity of half a million dollars and that, if it cannot be sold, it would “certainly cause an enormous financial burden to the company.” He also said that it had already caused a severe amount of hardship with lay-offs at work. However, no quantification was offered of that financial burden and, in cross-examination, Mr Hadanich said that, so far as sales turnover is concerned, only about 10 per cent of the output of MHG is taken up with the production of motor bike helmets.
While I am prepared to accept that, in absolute terms, the cost of compliance with the short minutes proposed by the Commission would be quite significant, I have no way of knowing, in relative terms, what sort of an impact the cost of compliance would have on MHG overall. Even so, where the safety of the community is at risk, I am not satisfied that mere financial burden would be sufficient to outweigh the interest of the community in the light of the findings which I make, based on acceptance of Mr McIntosh’s evidence.
In all the circumstances, I consider that it is appropriate to make orders in accordance with the short minutes promulgated by the Commission.
I certify that the preceding twenty-five (25) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett. Associate:
Dated: 28 June 1999
Counsel for the Applicant: S.J. Gageler Solicitor for the Applicant: Australian Government Solicitor Counsel for the Respondent: G.A. Flick SC Solicitor for the Respondent: Freehill Hollingdale & Page Date of Hearing: 28 June 1999 Date of Judgment: 28 June 1999
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