Australian Competition and Consumer Commission v Nationwide News Pty Ltd Australian Competition and Consumer Commission v Smartcom Telecommunications Pty Ltd

[1996] FCA 762

CATCHWORDS

TRADE PRACTICES - fine - contravention of s 53(g) Trade Practices Act 1975 (Cth) - advertisement of "free" mobile phone - disregard of warnings by (then) Trade Practices Commission - only small monetary amount paid by individual consumer - whether apology or contrition - whether adverse publicity initiated by prosecuting authority

PROCEDURE - costs - failure by prosecutor on 18 out of 24 charges - discretion - statement of applicable principles

Crimes Act 1914 (Cth): s 19B

Trade Practices Act 1974 (Cth): ss 53(g) and 79(1) and (2)

Australian Conservation Foundation v Forestry Commission (1988) 81 ALR 166

Eva v Southern Motors Box Hill Pty Ltd (1977) 30 FLR 213

Hartnell v Sharp Corporation of Australia Pty Ltd (1975) 5 ALR 493

Hughes v Western Australian Cricket Association (1986) ATPR 40-748

Queensland Wire Industries Pty Ltd v Broken Hill Pty Co Ltd (1987) 17 FCR 211

Thompson v JT Fossey Pty Ltd (No.2) (1978) 20 ALR 503

Trade Practices Commission v Cue Design Pty Ltd (1996) ATPR 41-475

Australian Competition and Consumer Commission v Nationwide News Pty Limited
(No. NG 709 of 1995)
Australian Competition and Consumer Commissioner v Smartcom Telecommunications Pty Limited
(No. NG 708 of 1995)

Judge:    Heerey J
Date:          30 August 1996
Place:    Melbourne (heard in Sydney)

IN THE FEDERAL COURT OF AUSTRALIA )
  )
NEW SOUTH WALES DISTRICT REGISTRY )      No. NG 709 of 1995
  )
GENERAL DIVISION                 )

B E T W E E N:

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
  Prosecutor
  - and -

NATIONWIDE NEWS PTY LIMITED
  Defendant

No. NG 708 of 1995

B E T W E E N:

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
  Prosecutor
  - and -

SMARTCOM TELECOMMUNICATIONS PTY LIMITED
  Defendant

JUDGE:    Heerey J

DATE:        30 August 1996

PLACE:    Melbourne (heard in Sydney)

MINUTES OF ORDER

The Court orders that:

1. In respect of each of the six informations found proved there will be a conviction and an order that the defendant Nationwide News Pty Ltd pay a fine of $20,000, a total of $120,000.

2. The defendant Nationwide News Pty Ltd pay the costs of the prosecutor, including reserved costs.

3. The prosecutor pay the costs of Smartcom Telecommunications Pty Ltd, including reserved costs.

NOTE:     Settlement and entry of orders is dealt with in Order
         36 of the Federal Court Rules

IN THE FEDERAL COURT OF AUSTRALIA )
  )
NEW SOUTH WALES DISTRICT REGISTRY )      No. NG 709 of 1995
  )
GENERAL DIVISION                 )

B E T W E E N:

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
  Prosecutor
  - and -

NATIONWIDE NEWS PTY LIMITED
  Defendant

No. NG 708 of 1995

B E T W E E N:

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
  Prosecutor
  - and -

SMARTCOM TELECOMMUNICATIONS PTY LIMITED
  Defendant

JUDGE:    Heerey J

DATE:        30 August 1996

PLACE:    Melbourne (heard in Sydney)

REASONS FOR JUDGMENT

On 8 August 1996 six informations against Nationwide News Pty Ltd alleging contraventions of s 53(g) of the Trade Practices Act 1974 (Cth) were found proved. I now have to consider questions of fines and costs.

The contraventions were committed in the course of a promotion for the Daily Telegraph Mirror in July and August 1994 which centred around the offer of a "free" mobile phone. Details of the promotion are contained in my reasons for judgment of 8 August. All contraventions appear to have been of the same nature. They occurred at about the same time. Section 79(2) of the Act therefore applies and the maximum aggregate of penalties is $200,000.

At the hearing on penalty on 19 August some further evidence was tendered concerning Nationwide's communications with the prosecutor's predecessor, the Trade Practices Commission, during the course of the promotion.  A serious issue of disputed fact emerged. 

On the morning of the hearing Nationwide filed affidavits by Mr Roger Coombs, who was in July/August 1994 Executive Chief of Staff of the Daily Telegraph Mirror, and Mr John Hartigan who was at the same time Editor-in-Chief of the paper.  Mr Coombs deposes that on the morning of Friday 29 July 1994 he received a phone call from "a person who identified himself as an officer of the Trade Practices Commission whose name I do not now recall".  Mr Coombs swears that to the best of his recollection the effect of the conversation was as follows:

TPC:

The Trade Practises [sic] Commission is concerned about the advertisement which reads "Free mobile phone for every reader.  Don't miss Monday's Telegraph Mirror" which appeared in the early editions of The Daily Telegraph Mirror today.  It does not make it clear that any conditions apply to the offer.

Coombs

We thought it made it clear that all details of the offer will be published in next Monday's paper.  The newspaper does not wants [sic] to mislead anybody.  To make it even clearer, if that is what you want us to, do we will endorse the advertisement with the words "Conditions Apply".

Mr Coombs says that the person he spoke to made no comment as to the manner of display of the words "Conditions Apply".  Mr Coombs
then immediately informed Mr Hartigan of the conversation.  Mr Hartigan said to him, in effect:

We do not want to mislead anyone.  Do whatever the Trade Practises [sic] Commission wants us to do.

Mr Coombs says he then instructed relevant staff to include the words "Conditions Apply" in all subsequent editions of the newspaper that day and in all future publications. 

Mr Hartigan deposes that on 29 July he was informed by Mr Malcolm Noad, General Manager of Mirror Australian Telegraph Publications, that Mr Kenneth Cowley, Managing Director of News Limited, had received that afternoon a fax from Mr Neill Buck, New South Wales State Director of the Trade Practices Commission.  (As will later appear, that fax was received at 4.00 pm.)  Mr Hartigan deposes that he was then "aware of the mobile phone promotion and of the terms of the advertisement which read `Free mobile phone for every reader.  Don't miss Monday's Telegraph Mirror' which had appeared in that day's early editions of The Daily Telegraph Mirror".  He was also then aware that the endorsement of the words "Conditions Apply" on the advertisements in later editions of the newspaper on 29 July

"had appeared following a conversation I had with Roger Coombs late that morning to the following effect:

Coombs

I have had a call from the Trade Practices Commission claiming that (the advertisement) did not inform readers that any conditions apply to the mobile phone offer.  They want us to endorse it to make sure that is made plain.

Hartigan

I think it already does that but we do not want to mislead anyone.  Do whatever the Trade Practises [sic] Commission wants us to do."

There is a dispute as to whether the alleged conversation between the Commission officer and Mr Coombs (hereafter "the TPC/Coombs conversation") in fact took place.  The evidence is as follows.

After lunch on 29 July Mr Robert Williams, an Assistant Director of the Commission, became aware of the advertisement in the Daily Telegraph Mirror.  It was brought to his attention by one of the Commission's staff whose identity he can no longer recall.  Mr Williams spoke to Mr Buck.  Mr Buck said in evidence that this was prior to about 2.45 pm on the  Friday and was the first he had heard of the promotion.  After a brief discussion between M Buck, Mr Williams and the other Assistant Director, Mr Drajan (Charlie) Trkulja, the three made a decision to proceed.

Mr Buck telephoned the Daily Telegraph Mirror and asked for the Circulation Manager.  Mr Buck gave his name and said he was from the Trade Practices Commission.  He was referred to the Promotions Manager, Ms Trish Wadley.  After the conversation, which concluded at 2.55 pm, Mr Buck immediately dictated a note which was in these terms:

I said:Good afternoon, my name is Neill Buck from the Trade Practices Commission, telephone number 230 9104.  I am ringing in regards to an advertisement that has appeared in today's Tele Mirror regarding Free Mobile Phones on Page 7.

She said:Yes, that's right.  Free Mobile Phones, we will be putting the promotion out on Monday.

I said:Does that mean that every reader will be getting a free mobile phone?

She said:No, there are conditions that apply and we will be letting people know that tomorrow and on Monday.

I said:Don't you think that there is a problem with putting
in an ad like this, where there is an unqualified statement?

She said:No, we ran it yesterday and we are running it again today.  We don't want to mislead anybody, we are going to say "That conditions apply" on Monday.

I said:Well, what happens?

She said:You have to sign up for a contract and you will get the telephone free, if you sign up for the contract, but we will tell the readers that on Saturday and on Monday.  On Saturday we will be letting people conditions [sic] apply and on Monday we will explain the whole deal.

I said:Well, I am quite concerned about this.  I think that there is potential here for a large number of consumers to be misled into buying the newspaper, when they think that they are going to get a free telephone.

She said:No, no this is how we did it all the time.  This is just the way we operate.  We cleared it with our legal section.

I said:Well, I am concerned and I will be writing to you about it this afternoon.

She said:I don't think that there is anything to be concerned about.

I said:Yes, I think there is.  Who should I write to?

She said:You should write to:  Trish Wadley, Promotions Manager, the Telegraph Mirror.  You should also copy it to Allan Cole, The Editor.

I said:Well, I wanted to draw it to your attention at this stage.

She said:What is your name?

I said:Neill Buck, BUCK, my telephone number is 230 9104.

She said:Well, Okay.

I said:Well, I will be sending you a letter this afternoon but I wanted to raise it with you as quickly as possible, when it came to my attention so that you could meet any deadlines.

She said:Okay.

At about 4.00 pm Mr Buck signed a letter addressed to Mr Kenneth Cowley, the Managing Director of News Limited.  By this stage Ms Lisa Perkins, an investigator on the staff of the Commission, had also become involved.  At Mr Williams' suggestion she was
appointed case officer.  She took part in the discussions between Mr Buck, Mr Williams and Mr Trkulja and typed the letter.  It was sent by fax at 4.00 pm.  The covering sheet advised that it was "for the urgent attention of Mr Cowley or, in his absence, the next most senior officer of News Limited".  It was in these terms:

Dear Mr Cowley

I refer to the advertisement which appeared on page 7 of The Daily Telegraph Mirror on 28 and 29 July 1994, offering a free mobile phone for every reader.  A copy of the advertisement is attached for your information.  [The copy attached does not contain the words "conditions apply".]  I also refer to my telephone conversation of 29 July 1994 with Ms Trish Wadley, your Promotions Manager, in relation to these advertisements.

As I understand it from my conversation with Ms Wadley, in order to receive the "free" mobile phone consumers will have to purchase a contract with a third party carrier.  The advertisements in question do not, however, in any way alert consumers to the existence of this, or any other, condition.  They do however entreat consumers not to miss Monday's Daily Telegraph Mirror.

I was further informed by Ms Wadley that the advertisement to be run in tomorrows Daily Telegraph Mirror will alert consumers to the fact that conditions apply but without saying what they are.  Ms Wadley also informed me that it is only when consumers purchase a copy of the Daily Telegraph Mirror on Monday 1 August 1994 that they will be informed of all of the conditions attached to this offer. 

In these circumstances I am very concerned that breaches of sections 52, 53(e), 53(g) and/or 54 of the Trade Practices Act 1974 ("the Act") may have occurred, particularly given the operation of s 51A of the Act, copies of which are attached. I seek your advice as to what action your company proposes to take to prevent any additional consumers being misled and to honour the representations it has already made.

Because of the urgency, and my desire to ensure that no further misleading representations are made I contacted Ms Wadley in order to raise my concerns.  Whilst she advised me to write to the Editor and herself in relation to this matter, I feel it sufficiently serious to necessitate bringing it to your personal attention.

Please contact Mr Charlie Trkulja of this office on 230 9130 to advise what action your company proposes to take in this matter.

Yours sincerely

(sgd)Neill Buck

NEILL BUCK

State Director 

Mr Buck then left the office to attend a conference in Wollongong.
Thereafter Mr Trkulja was the Commission officer responsible for the matter.  

At 5.20 pm Mr Coombs telephoned Mr Trkulja.  Mr Coombs said that he was calling in relation to the fax sent by Mr Buck.  According to his contemporaneous note, Mr Trkulja said:

The reason Neill Buck has written to you is because we are concerned about this advertisement for free mobile phones.  I have been having a look at this matter over the last few hours and I understand that another advertisement has appeared later on this afternoon which does have an asterisk that advises that conditions apply. 

Mr Coombs replied:

That's right, the new ad has that asterisk, so does that satisfy your concerns?

Mr Trkulja said that it did not and that it raised potential problems under ss 47(6) and 47(7), the third line forcing provisions.

There then followed a discussion about the effect of those provisions and the fact that the maximum penalty was $10 million.  At one stage the following exchange took place:

Mr Trkulja

The problem that I am envisaging is that there will be a lot of people going out there buying the paper on Monday, trying to figure out how they go about obtaining one of these phones for free.  What we are doing is getting in touch with you now in order to let you know that there could be a problem. 

Mr Coombs

As far as I know, no consumer has raised any problems.

Mr Trkulja

Presumably there could be a problem because if someone was to get in touch with you guys now and say, the advertisement that you have now says free mobile phone for ever reader and I want one please.  And if you do not supply it you might have a problem. 

Mr Coombs

But we will go on and tell people exactly what the conditions are and we have started to do that.  As you know this afternoon's ad had an asterisk that stated Conditions Apply.

Mr Coombs

Well I think the term "conditions apply" could lead to other problems in relation to what I said before, sections 47(6) and 47(7). Now if I were you I would talk to one of the top solicitors around town to figure out if and how you can get around that. But in relation to the advertisement that has already been running, that simply says free mobile phones for every reader don't miss Monday's paper. I don't know what you are going to do about that one, because if a consumer rings up and says "Look yes, I am a reader of the Telegraph Mirror and I would like one". I do not know what you are going to do about that. I do not know how many people you will have making a call. They are the issues. They are the concerns. So what we wanted to do is to get in touch with you. Let you know now rather than come back to you on Monday and say look we have this problem.

Mr Coombs

I'll get in touch with our legal people. 

Mr Trkulja then gave details as to how he could be reached.   Mr Coombs asked:

When did you become aware of this and when did you send the fax?

Mr Trkulja replied:

It was faxed to you 4.41 pm. [He stated this when he was looking at the time the fax machine took to process the fax and of the time it was sent.  According to the fax slip the fax was sent at 4.00 pm.]  We only became aware of it at about 2.00 pm by a person contacting us and saying "Have you seen this.  I think I want a free mobile phone".

At 6.05 pm Mr Noad telephoned Mr Trkulja.  Mr Trkulja told Mr Noad that he had just been speaking to Mr Coombs about the letter and that Mr Coombs was making some enquiries and would get back to him.  Mr Noad then said "So is everything under control?"  Mr Trkulja said: 

Not exactly, as a matter of fact there may have been a complication. Late this afternoon I noticed another ad in the Telegraph Mirror in relation to this offer of free mobile telephones. That ad indicated that conditions may apply to that offer. Depending upon what those conditions are there could be a possible breach of ss 47(6) or 47(7). These sections carry a
maximum penalty of ten million per breach. 

Mr Noad expressed surprise.  Mr Trkulja told him that was a maximum figure and that he was in the process of putting together a fax and would send it to the company as soon as it was finished.  At Mr Noad's request Mr Trkulja agreed to send the fax straight to him.  At 7.45 pm Mr Trkulja sent a fax to Mr Coombs which stated:

Further to our telephone conversations about the letter dated 29 July 1994 from our Mr Buck to Mr Cowley and my concerns about possible braches [sic] of sections 47(6) and 47(7) of the Trade Practices Act (the Act) by News Limited in relation to any conditions associated with the free mobile phone advertisement I am forwarding the appropriate parts of section 47 of the Act.

Those provisions were enclosed.  At 7.48 pm Mr Trkulja sent a further fax to Mr Noad (although it commenced "Dear Mr Cowley").  The fax referred to Mr Buck's letter and stated:

Since forwarding the letter mentioned above I have been informed that certain conditions may apply to the offer of a free mobile phone. I confirm that I am concerned that it is possible that certain conditions on the offer to supply the mobile phones may breach sections 47(6) and 47(7) of the Trade Practices Act (the Act) copies of which are attached.

The maximum penalties for a breach of section 47 of the Act is $10,000,000.

I would emphasise that at this stage the Commission has not formed a view as to whether News Limited has breached the Act or as to what, if any action to take in this matter. My purpose in writing to you is to advise you of my concerns and seek your advice as to what action your company proposes to take to prevent any possible breaches of the Act.

At 8.14 pm Mr Noad telephoned Mr Trkulja and put Mr Brian Gallagher, solicitor for Nationwide, on the line.  Mr Trkulja said:

Mr Gallagher I am not sure whether you are aware of the full situation so I will summarise for you.  We saw one of the advertisements run yesterday and one of the advertisements ran
later on today in relation to the free mobile phone offer. Initially we were concerned about the possibility of breaches of sections 52, 53 and 54. Then another advertisement appeared later on this afternoon which said conditions apply. That raised another possible concern, sections 47(6) and 47(7) of the Act, maybe. So I understand you gentlemen have all been sitting around having a look at all this and hopefully have a solution.

Mr Gallagher and Mr Trkulja then discussed the applicability of ss 52, 53 and 54.  Mr Trkulja said there was a concern that there had been a breach of those sections.  Mr Gallagher then said:

Have you seen the advertisement that we published this afternoon advising that conditions apply?

Mr Trkulja said:

We have and we are still concerned.  As I have said we have not made up our minds as to whether there is a problem or not.  If we had we would not be talking to you.  We would have gone off to the Federal Court.  But we do not want to go that far.  It is a question of advising you of our concerns and hopefully you are taking legal advice and taking whatever you feel is the appropriate course of action. 

There then followed a quite extensive discussion about the legal aspects of the advertisement.  Towards the end of the conversation the following exchange took place:

Mr Gallagher

But all the ads have stated that conditions apply.

Mr Trkulja

Well apparently there has been a series of advertisements that have not had any conditions stipulated in them.

Mr Gallagher

That can't be right?  We didn't print ads without any qualification.  Did we?

Mr Trkulja

Yes you did and I can fax you a copy of the one I have got. As I understand it there have been a number of such advertisements and then as I understand it only later on this afternoon there has been an asterisk placed that says conditions apply. It was that ad and the possibility that conditions apply that got me thinking about the possibility of sections 47(6) and 47(7).

Mr Gallagher

I haven't seen any advertisements without that conditions qualifier. 

Mr Trkulja

Have you seen the copy of the first advertisement that I am talking about?

Mr Gallagher

No I haven't.

Mr Trkulja then agreed to fax him a copy of the advertisement.

At about 8.50 pm Mr Gallagher telephoned Mr Trkulja. There was some discussion about s 47(6) in terms which indicated that Mr Trkulja was now satisfied as to that issue. The conversation continued:

Mr Gallagher

But what about this issue of a free mobile phone?

Mr Trkulja

Well looking at the advertisement that I have faxed to you.  It is quite plain and simple.  The section 52 test is very low and I can tell you I have talked to people today saying `Can this be right?  The Telegraph Mirror is telling me that I can get a free mobile phone for every reader, don't miss the Monday Telegraph Mirror.  So does that mean that if I buy the Telegraph Mirror on Monday I get a free mobile phone?'

Mr Gallagher

But there are conditions that apply.

Mr Trkulja

Well if that is so and it is clear to the consumer that there are conditions there may not be a problem.  But the first advertisement does not stipulate any conditions whatsoever and that is a worry. 

Amongst other things Mr Gallagher said:

The consumers will find out on Monday what the conditions are and they will realise what the conditions are.

Mr Trkulja replied:

But it is only at that point that they will realise that they in fact will not be getting a phone from the Telegraph Mirror for free.

There was in evidence a file note in the handwriting of Ms Perkins
bearing a date "29/7/94" which looks to have been changed from "3/8/94".  No time is indicated.  It reads:

Discussions with Susan Yee Kong AGS [Australian Government Solicitor].  Susan advised that there were good prospects for obtaining an injunction but that she doubted a Court would grant an urgent interlocutory injunction, given that the Mirror had amended the advertisements.

Ms Perkins was not called.  She is no longer employed by the Commission.  Since this issue only arose on the day of the hearing I do not draw any adverse inference from her non appearance.

On Monday 1 August Mr Noad telephoned Mr Buck at 2.40 pm.  In the course of that conversation Mr Noad said:

The reason I wanted to get in touch was to explain what we had done once we received your call on Friday.  As soon as we received your call we made changes to the advertisements to add "that conditions apply".  We put that into our 4.00 pm edition on Friday afternoon.

We worked late on Friday night to take account of your views for Monday.  We didn't publish the advertisement on Saturday because we wanted to get it correct so we thought we would leave it until we were able to get all the conditions in.  We changed the Monday edition to take all of your concerns into account and to make sure that all the terms and conditions were clearly spelled out so that the readers would know what they were going to receive.  You would understand that it cost us a quite a significant amount to change all the advertisements and to keep advertising people working all weekend.  It was very expensive.  You know we had a TV campaign ready to go and after we received your call and the comments we changed that also.  So as you would appreciate we have taken seriously your concerns about the campaign.

After further discussions about the campaign and the use of the word "free" the conversation continued:

Mr Buck

I personally made the initial call, to your promotions manager, on Friday.  I had to go to a meeting in Wollongong on Friday night, it must have been about 2.45 pm on Friday afternoon, I made the initial call to her.  And I think we had a letter to you addressed to Ken Cowley about 4.00 pm.  It must have been 4.00 pm because I walked out of here at 4.05 pm and I signed the letter. 

Mr Noad

Ken wasn't here and so it was passed on to me to handle.  We did move very quickly to change it and that was an expensive exercise.

Mr Buck

I knew that.  I found out on the phone on the way down to Wollongong.

Mr Noad

I would want to make sure that the fact that we made all the changes was taken into account and we take very seriously the advice or views of the TPC.

Mr Buck

I hear what you are saying, I certainly wouldn't do other than represent that to the Commission in their consideration.  Bare [sic] that in mind and you would understand, I rang your person myself for that very reason that it seems to me that it is a reasonably serious thing for a newspaper, a prominent newspaper to have done.  I had in fact discussed it with my Chairman at that stage, and he took the same view that I did.  And therefore, this is why we have handled it the way we have. 

Mr Noad

Well, you should let them know that we moved very quickly to change as soon as you talked with us.

Mr Buck

Oh I see, I didn't know that.  Your Promotions Manager did not tell me she was going to anything about my concerns.

Mr Noad

Well we did and it was in the next edition

Mr Buck

Oh, my staff pointed that out, they showed me that there was a change.

Later in the conversation Mr Buck repeated the Commission's concern as to the use of the word "free".  One instance of this occurred when, after referring Mr Noad to the second paragraph of the letter of 29 July, Mr Buck said:

The whole issue seems to me to hang on the issue whether it is  free or not.  The fact is that our concern was and is the statement that it was "free" when there were conditions applied to it but our concern was also with the notion of saying that something was free when in fact it costs.

On 3 August Mr Gallagher wrote to Mr Williams.  The letter commences:

We refer to Mr Trkulja's letter to [sic] 29th July to Mr Roger Coombs, to the writer's telephone conversation with Mr Trkulja last Friday evening and to Mr Trkulja's telephone conversation that evening and on Monday last with Mr Malcolm Noad, General Manager, MATP. 

As you are no doubt aware, considerable efforts have been made to ensure that the promotion complies in all respects with the provisions of the law and is in no way deceptive of the newspapers readers. 

There follows quite a lengthy argument as to the legality of the promotion.  The letter then states:

The advertisement of Thursday and Friday last

We understand that you have also expressed concern at the failure of that advertisement to carry the words "conditions apply".  The advertisement read:

"Free Mobile phone for every reader.  Don't miss Monday's Telegraph Mirror"

If the reference to "Monday's Telegraph Mirror" is ignored, it is an offer to give every reader a free mobile phone without them doing anything at all. 

(a)We submit that that interpretation is absurd and not open to any reasonable reader.

(b)Moreover the law of contract provides that in the absence of consideration there can be no binding contract. How can a statement be "false and misleading" under the TPA when to be so it must be read as imposing a legal obligation which the law will not enforce? If the reference to "Monday's Telegraph Mirror" is not ignored it amounts to a statement that the terms and conditions of the free phone offer will be made clear in Monday's Telegraph Mirror which indeed they were. 

In either case we submit that the advertisement is not false or misleading or likely to deceive. 

Mr Buck, Mr Williams and Mr Trkulja all gave evidence in which they denied being the person involved in the TPC/Coombs conversation.  An officer of the Commission gave evidence that there was no note in the Commission's files of such a conversation.  There was evidence that it was the usual practice to make contemporaneous notes of discussions with persons outside the Commission concerning possible contraventions.  That practice was followed in the case of the conversations in which Mr Buck and Mr Trkulja took part and which are referred to above. 

I am satisfied that the TPC/Coombs conversation did not take place.

First, if this conversation occurred, it was important both for the Commission and Nationwide.  Since it related to future conduct, it would be important for the Commission to have a record of the conversation so that compliance with the agreement could be checked.  From the point of view of Nationwide, the TPC/Coombs conversation, at least arguably, indicated approval by the Commission to their campaign provided the suggested change was made.  Yet there is no trace of a record of the conversation at either end. 

Secondly, the contemporaneous statements of Nationwide personnel who would have known of the TPC/Coombs conversation had it taken place make no mention of it on occasions when it would have been in Nationwide's interests to do so.  Ms Wadley knew of the addition of "conditions apply", although she did not have the authority herself to direct such a change.  Had the change emanated from the TPC/Coombs conversation earlier that day she would have known that and would have told Mr Buck.  Yet what she says is only consistent with the change having been made on Nationwide's own initiative.  What she says indicates knowledge on her part that a change was to be made by the addition of "conditions apply" even though she appears to have believed the addition would not be made until the next day (Saturday). 

Mr Buck's letter of 29 July, addressed to the highest possible
level at Nationwide, showed the strength of the Commission's concerns.  If the change to the advertisements had been made at the request of the Commission, resulting in implicit approval of the advertisements as altered, it was obvious that Mr Buck was not aware of that.  The first thing to do would be to bring this important fact to the attention of Mr Buck and anybody else at the Commission who might also be unaware.  Yet when Mr Coombs himself, the person supposedly a party to the TPC/Coombs conversation earlier on the same day, telephones back at 5.20 pm he makes no mention of the Commission's earlier approval.  He merely refers to the new advertisement and asks whether it satisfies the Commission's concerns.  This is the more surprising since if what Mr Coombs now says is true the words "Conditions apply" had been added at the suggestion of a Commission officer but somebody else at the Commission was saying that addition could result in a $10 million penalty. 

At 6.05 pm Mr Trkulja says to Mr Noad that he has noticed another advertisement indicating that conditions may apply, which opened up the possibility of breaches of ss 47(6) and (7) with a possible penalty of $10 million. Again, the obvious response from anybody at Nationwide was to say "But you agreed to us putting those words in. It was your idea". There was no such suggestion.

At 8.14 pm when Mr Gallagher says "Have you seen the advertisement that we published this afternoon advising that conditions apply"? he has either forgotten to convey the highly relevant fact that the Commission suggested the addition of those words, or Mr Coombs
forgot to tell him, or the TPC/Coombs conversation never occurred.  The last alternative is compelling.

Likewise Mr Gallagher's response "That [Mr Trkulja's statement that some advertisements appeared without reference to conditions] can't be right.  We didn't print ads without any qualification.  Did we?"  There Mr Gallagher is laying claim to the qualification "Conditions apply" as an initiative of Nationwide and something for which it should be given credit.  Mr Gallagher's letter of 3 August, which is a considered presentation of Nationwide's case to the Commission, makes no mention of the TPC/Coombs conversation. 

Mr Noad's reference in the conversation with Mr Buck on 1 August to adding the reference to conditions "(a)s soon as we received your call" does not carry sufficient countervailing weight.  Mr Noad was not called as a witness.  He seems to have been at some remove from the production of the paper.  In any event, Mr Noad is saying that Mr Buck's call on the Friday and his subsequent letter at 4.00 pm is what led to the alteration.  ("It [Mr Buck's letter] was passed on to me to handle.  We did move very quickly to change it and that was an expensive exercise".)  But by 4.00 pm the afternoon edition with the added words was already on the streets.  Mr Coombs' evidence is that the alteration would have to have been made by about 9.30 am that morning. 

Mr Noad's reference to making changes to the advertisement which cost a "significant amount" and "keep(ing) advertising people working all the weekend" is not supported by any other Nationwide witness.  If such changes were made, evidence of them would be relevant on mitigation.  On their face the advertisements do not suggest any great change in content or timing from what would have occurred without any intervention of the Commission. 

Mr Noad's reference to not publishing on the Saturday because Nationwide would "leave it until we were able to get all the conditions in" is at odds with the fact that an advertisement appeared in the Sunday Telegraph Mirror without "all the conditions in".  Mr Noad's statement is inconsistent with the contemporaneous statement of all other Nationwide personnel and is likely in my view to have arisen from some confusion on his part. 

Ms Perkins' conversation with Ms Yee Kong cannot be referring to an amendment at the request of the Commission.  If she was referring to the TPC/Coombs conversation she would have known about it at the time of her participation in the preparation of Mr Buck's letter and the earlier conversation obviously would have been mentioned in it. 

Thirdly, Mr Coombs said in evidence that in July/August 1994 the instruction for the words "Conditions apply" to be inserted in the advertisement in the afternoon editions would need to be given at the latest by 9.30 am.  He said he gave the instruction about 9.15 am yet according to Mr Hartigan the instruction was given following a conversation he had with Mr Coombs "late that morning".  Mr Hartigan commences work about 8.30 to 9.00 am.  It was put to him that "late that morning" would have to be a lot later than 9.00 am.  His answer was

The reason I say that is because the preparation of the afternoon edition began at 6 o'clock, I guess I might have a slightly different view of the morning.  

I do not find his explanation convincing. 

Fourthly, Mr Williams' evidence as to the way the matter was handled carries conviction. If concern emerged about a possible breach of the Act by a major metropolitan newspaper in connection with an expensive promotion it would make sense for the Commission's course of action to be discussed promptly at the most senior level, with Mr Buck and the two Assistant Directors. It seems inherently improbable that some officer of the Commission at a more junior level would take it upon himself to communicate directly with the newspaper, purporting to act on behalf of the Commission, and achieve an apparent resolution of the matter without leaving a trace of a record.

In Hartnell v Sharp Corporation of Australia Pty Ltd (1975) 5 ALR 493 at 497 Smithers J, with whom Evatt J agreed, listed a number of matters as being relevant to the determination of penalties in respect of contraventions of s 53(a). Those matters are:

-The importance of the untrue statements and the extent of the departure from standards

-The degree of wilfulness or carelessness involved in the relevant conduct

-The degree that the statement departs from the truth

-The degree of dissemination

-What efforts have been made to correct the situation

-The deterrent effect of any penalty to be imposed

Those considerations have been applied in many subsequent cases and are equally applicable to s 53(g).  It goes without saying of course that they are not necessarily exhaustive of factors which might be relevant in a particular case. 

In my view this was a serious contravention of the Act. Nationwide is a subsidiary of a major public company and the publisher of a leading Australian metropolitan newspaper. As to the misuse of the powerful word "free" in promotions, I refer again to the passages from the American authorities referred to in my judgment of 8 August.

In the present case, to get a supposedly "free" mobile phone a person would have to part with $344.95 immediately and become committed for a further $1950.  At best such a person might get the advantage of calls to the value of $1800.  But such a person would only find out the catch after buying the newspaper, which was the object of the exercise.  Nationwide expended a "promotional commitment" on the campaign totalling $181,000 which included television and radio advertising costs of $85,000 and $50,000 respectively.  Expenditure of this magnitude is only made if it is thought that a substantial return will be achieved.  Mr Hartigan deposes that he has been informed by the Circulation
Manager at the time that there was no substantial increase in the number of newspapers sold by reason of the mobile phone offer.  No further detail was provided.  In any case this is perhaps no more than an indication that the Sydney public was more astute than Nationwide gave it credit for. 

Offences of this nature have the characteristic that an individual person who is misled into paying a small amount (like the 70 cents price of this newspaper) is not likely to take any action, but the total aggregate effective loss is potentially very substantial.  I do not accept the argument of counsel for Nationwide that

a consumer may be disappointed because the item which was offered for "free" cannot be obtained without satisfaction of the collateral obligations, but the consumer suffers no real economic harm. 

The economic harm is the purchase of a product, the newspaper, by persons who would not do so were it not for the misleading statement.  The small amount paid by any one individual as a consequence of this contravention should not lead to a conclusion that the contravention is trivial or minor.  The potential profits to be gained by the contravenor are anything but trivial. 

There is also the element that since the offence was committed very publicly, the penalty needs to have an element of vindication, so that the public, who saw the law broken, will see the law being enforced. 

The fact that the offences were committed in disregard of specific warnings from the Commission is a factor going to severity of penalty.  Nationwide was not being asked to abandon the promotion.  It would not have taken a great deal of ingenuity or expense to find a substitute for the offending word "free".  The reason this was not done, one can infer, is that the prospect of making money by the use of the word "free" was too good to miss. 

Mr Hartigan says in his affidavit:

On behalf of Nationwide News I express its sincere regret that any reader may have been misled as to the effect of the conditions which applied to the mobile phone offer. 

There was however no apology or expression of contrition.  An expression of regret that another has suffered damage can be consistent with a refusal to accept that one has done anything wrong, and is so in the circumstances of the present case.  Indeed most of Nationwide's case on the question of penalty was devoted to attempting to prove the TPC/Coombs conversation.  If accepted, that would have been an important factor in mitigation since it would have been consistent with Nationwide acting in good faith in reliance on what the enforcing authority had proposed.  For the reasons already mentioned, the factual basis of such a contention must be rejected. 

Nationwide complained of a press release issued by the Commission on the day after I pronounced findings on liability.  Counsel referred to a number of authorities dealing with the impact of adverse publicity initiated by a prosecuting authority.  In some circumstances this may be a matter going to mitigation of penalty:  Eva v Southern Motors Box Hill Pty Ltd (1977) 30 FLR 213 at 222-223, Thompson v JT Fossey Pty Ltd (No.2) (1978) 20 ALR 503 at 505. In Trade Practices Commission v Cue Design Pty Ltd (1996) ATPR 41-475 at 41,836 O'Loughlin J said:

I regard the use of the word "adverse" as meaning something more than fair reporting of the commencement of a prosecution.  I take it to mean the importing of some unfair or incorrect element into the publicity.  I would have thought that a moderately worded, accurate news release, such as that published by the Commission in this case, serves a very useful purpose.  To use the words of Smithers J it showed "appropriate restraint in tone and content".  Without it, the media is left to make its own inquiries and compile its own summaries.  In doing that there is an increased risk that, by accident, inaccuracies might occur and greater harm could be done to a defendant. 

I respectfully agree. 

In the present case Nationwide complained that the press release of the Commission diminished the importance of the acquittal on 18 charges, particularly those brought under s 54 where dishonest intent was an element of the charge.  Reference was made to a report in the Australian Financial Review of 10 August 1996 which omitted all reference to the acquittals.

However the Commission's press release included a second page headed "BACKGROUND". Under the heading "The Charges" it is stated that the Commission brought a total of 24 charges because there were three different sections of the Act which may have been breached for each of the eight advertisements. The three sections were summarised and it was then stated:

As the case was decided, Justice Heerey made comments on each section but found Nationwide News guilty only in relation to six
charges which concerned misleading statements as to the effect of conditions.

This was an accurate summary of the effect of the judgment.  The media had access to the judgment and the capacity to report more detail as to the dismissal of the charges.  The fact that some of the media might have chosen not report on the dismissal of most of the charges does not mean that the Commission's press release was unfair. 

Counsel for Nationwide argued that the case would have been better handled by applications for particular variations to the advertisements at the time, followed, if necessary by applications for an injunction.  I do not agree.  What the Commission did was to make quite clear to Nationwide its concern about the advertisements.  On my findings, that concern was well based in law.  If Nationwide proceeded, it had to accept the risk.  The Commission cannot be criticised for failing to embark on expensive interlocutory injunction proceedings, which Nationwide would no doubt have contested vigorously. 

Counsel for Nationwide submitted that the case was appropriate for dismissal under s 19B of the Crimes Act 1914 (Cth) or at worst for the imposition of a very small fine. I do not agree. On a spectrum of culpability I think this was more than halfway towards the maximum. In respect of each of the six informations found proved there will be a conviction and a fine of $20,000.

As to costs, counsel for Nationwide argued that because the
Commission failed "on the bulk of the charges brought, including the charges which took up the most substantial period of time at the hearing, the prosecutor should be ordered to pay the bulk of the defendant's costs". 

It is true that the Commission succeeded on only six out of 24 informations.  However the discretion on costs is not confined to that simple arithmetic.  In Hughes v Western Australian Cricket Association (1986) 8 ATPR 40-748 at 48,136 Toohey J said:

1. Ordinarily, costs follow the event and a successful litigant receives his costs in the absence of special circumstances justifying some other order.  Ritter v Godfrey (1920) 2 KB 47.

1. Where a litigant has succeeded only upon a portion of his claim, the circumstances may make it reasonable that he bear the expense of litigating that portion upon which he has failed.  Forster v Farquhar [1893] 1 QB 564.

1. A successful party who has failed on certain issues may not only be deprived of the costs of those issues but may be ordered as well to pay the other party's costs of them.  In this sense, `issue' does not mean a precise issue in the technical pleading sense but any disputed question of fact or of law.  Cretazzo v Lombardi (1975) 13 SASR 4 at 12.

There is no difficulty in stating the principles; their application to the facts of a particular case is not always easy.  Also it is necessary to keep in mind the caveat by Jacobs J in Cretazzo v Lombardi at p.16. His Honour sounded what he described as "a note of cautious disapproval" of applications to apportion costs according to the success or failure of one party or the other on the various issues of fact or law which arise in the course of a trial. His Honour commented:

"But trials occur daily in which the party, who in the end is wholly or substantially successful, nevertheless fails along the way on particular issues of fact or law.  The ultimate ends of justice may not be served if a party is dissuaded by the risk of costs from canvassing all issues, however doubtful, which might be material to the decision of the case.  There are, of course, many factors affecting the exercise of the discretion as to costs in each case, including in particular, the severability of the issues, and no two cases are alike.  I wish merely to lend no encouragement to any suggestion that a party against whom the judgment goes ought nevertheless to anticipate a favourable exercise of the judicial discretion as to costs in respect of issues upon which he may have succeeded, based merely on his success in those particular issues."

That statement of principle was approved by the Full Court of this Court in Queensland Wire Industries Pty Ltd v Broken Hill Pty Co Ltd (1987) 17 FCR 211 at 222.

I would observe that the use of the word "may" by Toohey J makes it clear that he is not suggesting an encroachment on the essentially discretionary nature of a costs order, a conclusion made all the clearer by his Honour's reference to the remarks of Jacobs J in Cretazzo.  In Australian Conservation Foundation v Forestry Commission (1988) 81 ALR 166 at 169 Burchett J had to consider the case of a successful defendant who had failed in respect of some issues. His Honour said:

It does not necessarily follow that the costs orders otherwise appropriate should be affected.  A party against whom an unsustainable claim is prosecuted is not to be forced, at his peril in respect of costs, to abandon every defence he is not sure of maintaining, and oppose to his adversary only the barrier of one hopeful argument:  he is entitled to raise his earthworks at every reasonable point along the path of assault.  At the same time, if he multiplies issues unreasonably, he may suffer in costs.  Ultimately, the question is one of discretion and judgment.

In my respectful opinion the same reasoning applies to a successful prosecutor who fails on some issues. 

Perhaps surprisingly, there is little authority on ss 53 and 54. It is understandable that the Commission should have brought charges based on every reasonably arguable construction of the Act which might catch the unfair essence of this promotion. While I have dismissed 18 of those informations, they were in my view reasonably arguable. Viewed prospectively it would be imposing an unrealistic standard on the Commission to expect it to foresee
the result of the judgment and correctly pick the provisions which the promotion infringed and eschew all others.  There was some extra time taken up by the informations which failed, but not a disproportionate amount.  Due to the sensible co-operation of the parties and their solicitors and counsel the hearing was shorter than anticipated.  A week was allotted but the hearing finished inside three and a half days. 

In all the circumstances the Commission should not be deprived of its costs. 

As to SmartCom, it is now under administration but was represented throughout the interlocutory proceedings by solicitors.  There is no reason why the Commission should not pay its costs.

I certify that this and the preceding twenty seven (27) pages are a true copy of the reasons for judgment of his Honour Justice Heerey.

Dated:

Associate

Appearances

Counsel for the prosecutor:          Mr P W Neil

Solicitor for the prosecutor: Australian Government
  Solicitor

Counsel for the respondent:          Mr G Downes QC with Mr S

Wheelhouse

Solicitor for the respondent: Gallagher De Reszke

Date of hearing:             19 August 1996