Barton, Edwina Alice v Gary Lai Pty Ltd

[1984] FCA 358

Re: EDWINA ALICE BARTON
And: GARY LAI PTY LIMITED
Nos. G. 267 &0 G. 271 of 1984
(1985) ATPR para 40-495
Trade Practices

COURT

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Wilcox J.

CATCHWORDS

Trade Practices - Consumer Protection - Prosecutions - Offences admitted - False representation that goods have had a particular history - Imported goods packaged in bags stating that they were made in Australia - Whether false representation made with intent to deceive or inadvertently - Factors relevant to penalty.

Trade Practices Act ss.53(a).79

HEARING

SYDNEY

#DATE 24:10:1984

ORDER

The defendant is convicted of committing five contraventions of s.53(a) of the Trade Practices Act 1974, being the charges referred to in the proceedings Nos. G.267 of 1984, G.268 of 1984, G.269 of 1984, G.270 of 1984 and G.271 of 1984.

The defendant is ordered to pay a fine of $1,000 in respect of the contravention referred to in No. G.267 of 1984.

The defendant is ordered to pay a fine of $1.000 in respect of the contravention referred to in No. C.268 of 1984.

The defendant is ordered to pay a fine of $1,000 in respect of the contravention referred to in No. G.269 of 1984.

The defendant is ordered to pay a fine of $1,000 in

respect of the contravention referred to in No. G.270 of 1984.

The defendant is ordered to pay a fine of $1,000 in respect of the contravention referred to in No. G.271 of 1984.

Each of the said fines is to be paid to the District Registrar of this Court within twenty-one (21) days of this day.

The defendant is to pay the costs of the prosecutor with respect to each of the proceedings Nos. G.267 of 1984, G.268 of 1984, G.269 of 1984, G.270 of 1984 and G.271 of 1984.

Direct that the exhibits be handed out at the expiration of twenty-one (21) days unless a Notice of Appeal has been filed in the meantime.

JUDGE1

Five informations have been laid by Edwina Alice Barton, an officer of the Trade Practices Commission, against Gary Lai Pty Limited alleging contraventions of s.53 (a) of the Trade Practices Act 1974. In each case it is alleged that the defendant did, in trade or commerce, in connection with the promotion of the supply of bedding items falsely represent that the goods have a particular history, namely that they were made in Australia. The offences are all admitted. Each information arises out of the one set of facts and they all may be considered together.

Gary Lai Pty Limited carries on business in Melbourne as a manufacturer and distributor of items of manchester. In 1979 it registered the trade mark "Royal Vanity" in connection with, inter alia, textile sheets and other textile articles. Under the name "Royal Vanity" the defendant has regularly sold to retailers bedding sets (comprising sheets and pillow cases) which are dyed. printed, cut and sewn in Australia from imported undyed cloth. The packaging in which the defendant sold these sheet sets bore the words:

"Behold] The workmanship and artistry of the ROYAL VANITY Product. Designed in Australia to enhance every Womans Dream. Carefully selected fabrics printed & skilfully made in Australia, for service & longer life".

In early 1983 the company came under the control of Mr LT Williams, who is now a director. In July 1983 Mr Williams attended the premises of a textile merchant at Moorabbin, Hartley and Turner Pty Limited, and was shown by Mr DG Hartley a sample of bedding sets packaged under the "Hampshire House" brand name. Mr Williams visited Waltons Limited in Sydney. He saw the manchester buyer and showed him a set of sheets, which had been re-packaged in "Royal Vanity" packaging. The buyer gave him an order and Mr Williams then ordered 2000 bedding sets from Mr Hartley. Mr Hartley pointed out to Mr Williams that the goods would have to be re-packaged by Mr Williams as "Hampshire House" was a Grace Bros brand name. In satisfaction of the order Mr Hartley despatched 353 bedding sets packaged as "Hampshire House" - which sets had been fully manufactured in Hong Kong - and 1347 bedding sets packaged under another Grace Bros brand name "Nite Scene" - which sets had been manufactured in Australia from imported cloth. The "Hampshire House" packages stated that the contents were made in Hong Kong. Upon receipt of the sets on 19 August 1983 they were re-packaged by staff of the defendant, including Mr Williams, in "Royal Vanity" bags bearing the inscription set out above. In relation to the 353 "Hampshire House" sets the packaging therefore falsely asserted that the sets were designed in Australia and that they were "printed and skilfully made in Australia".

On 19 and 22 August the bedding sets were despatched to various Waltons stores within the Sydney metropolitan area. They were put on display for sale to the public shortly thereafter. A few days later, on 25 August, Mrs NJ Nicholls purchased at Waltons Dee Why store four bedding sets, being different combinations of items. Each set was packaged in the "Royal Vanity" package bearing the inscription set out above. Mrs Nicholls was influenced by this inscription. In her affidavit evidence, the accuracy of which was not challenged, she explained:

"2. I was looking for some sheets at a reasonable price. I saw some sheets on display labelled "Royal Vanity". I looked at the packaging in which the "Royal Vanity" sheets were packaged and I noted that the packaging bore words which included "Designed in Australia . . ." and "Carefully selected fabrics printed and skilfully made in Australia, for service and longer life". I concluded from this that the sheets were made in Australia.

3. I prefer to buy Australian made goods when the price is reasonable and the quality is satisfactory because I am Australian and my invalid pension is paid by the Australian taxpayers. I therefore pefer to support Australian industry when price and quality permit me to do so."

On the day after purchase Mrs Nicholls opened two of the packages. She found on the pillowcases of both sets sewn-in labels stating that the goods were made in Hong Kong. She contacted the Trade Practices Commission. Miss Barton went to Waltons Bankstown store and purchased a further bedding set. similarly packaged, the contents of which bore "made in Hong Kong" sewn-in labels. Information C.267 of 1984 relates to the Bankstown purchase, information G.268-G.271 inclusive relate to Mrs Nicholls' purchases at Dee Why. It is agreed, in respect of all five purchases, that the goods were in fact made in Hong Kong but sold in packaging stating that they had been made in Australia.

Shortly after the Bankstown purchase Miss Barton contacted Mr Williams. He expressed concern and he took steps to have corrective over-stickers applied to the stock remaining in the Waltons stores.

The price paid by Waltons to the defendant for the 353 re-packaged "Hampshire House" sheet sets was $14.07 for each single bed set (of which there were 110 sets) and $19.92 for each double bed set (of which there were 243 sets), making a total wholesale value of $6,388.26. The price charged by Waltons to consumers for the 353 re-packaged "Hampshire House" sheet sets was $19.95 for each single bed set and $27.95 for each double bed set, making a total retail value of $8,986.35.

The defendant has no prior convictions for offences under the Trade Practices Act.

There has been an issue before me as to whether Mr Williams had any deliberate intention to deceive. Miss Barton gave evidence - the accuracy of which was conceded - that in a telephone conversation with her at the time of the first complaint Mr Williams said:

"I knew that the goods were imported, although I did not know that they had made in Hong Kong sewn into them".

He repeated this statement in a questionnaire which he completed at the request of the Commission on 2 November 1983. In response to a question whether he was aware, when he gave instructions for the re-packaging of the sheets, whether the sets were imported he replied:

"I was aware that they were imported. I was not aware that the merchandise had sew in labels attached to them, and I was not aware that the packaging had "Made in Australia" on it as well, but I am certainly most well aware of it now, and can assure you that it will not happen again."

However, in an interview with officers of the Commission on 16 December 1983 Mr Williams retreated from that position stating:

"I was aware that some may have been imported. More correctly I was aware that the cloth would be imported but the manufacturing into actual sheet sets - I was not aware where that was done".

In his evidence before me Mr Williams said that after Miss Barton had contacted him and he had spoken to Mr Hartley he was aware "that we had some imported sheets in our consignment". He would not concede that he had know this before the complaint. He went on to say that before the complaint the place of manufacture had no importance to him.

There is no doubt that if Mr Williams had turned his mind to the question he would have realised, or easily ascertained, the place of manufacture. Not only did the sheets, which he personally helped to re-pack, have sewn-in labels showing that they were made in Hong Kong but the "Hampshire House" packages in which they were delivered to his company expressly so stated. His early statements to officers of the Commission seem to concede actual knowledge of the place of manufacture at the time of re-packaging. However, giving to the defendant the benefit of some doubt on the question. I am not prepared to find that Mr Williams consciously adverted to the matter and deliberately set out to deceive. I think that it is more likely that he was concerned mainly with quality and price and that he re-packed the goods in the company's standard bags without considering the accuracy in relation to those goods of the wording on the bags and that the false packaging was the product of carelessness rather than an intention to deceive.

The submission was put, on behalf of the defendant, that although there are five informations before the Court, in respect of each of which the offence is admitted, the correct approach would be to treat the whole matter as a single incident. Each of the five informations relates to one of the bedding sets the subject of the transaction between the defendant and, firstly, Hartley and Turner Pty Limited and, secondly, Waltons Limited. The submission is put that I should regard the matter as being a single oversight in respect of the packaging of 353 sets of "Hampshire House" bedding. It is conceded that, upon this approach, it is proper to look at the total distribution of bedding sets, ie 353 sets, rather than to confine attention to the five sets in relation to which informations have been laid. I think that this is a proper approach and I propose to consider the appropriate penalty for the totality of the matter and then to divide that sum by five in order to fix a penalty in respect of each specific offence.

In Eva v Mazda Motors (Sales) Pty Limited (1977) ATPR 40-020 Smithers J summarized the matters relevant in that case - a contravention of s.53 - for consideration saying, at p 17,302:

"First, the importance of the untrue statements in relation to any transaction which may possibly proceed under the influence of the incorrect representation. Secondly, the degree that the representation departs from the truth, thirdly, the degree of wilfulness or carelessness in the making of the incorrect representation, fourthly the extent that the representation was disseminated, fifthly, whether any and what efforts have been made to correct any false impressions which may have been created. Finally, the objectives of the Act."

Although this passage must not be taken, and was not intended to be taken, as providing a list for universal application it does provide assistance as to the matters relevant to be considered in the present case.

In relation to the first matter, I think that the importance of the untrue statement in respect of any transaction would have varied with the purchaser, or potential purchaser. No doubt, many shoppers would be indifferent to the stated place of manufacture of manchester items. They may be concerned exclusively with the quality of the article, its suitability for their desired purpose and the price charged. In relation to such a person the false statement would have no effect. However, this would not be true of all. Mrs Nicholls has stated that her preference is to buy Australian made goods when the price is reasonable and the quality is satisfactory and she has explained her reasons for this preference. No doubt, there are other members of the community who would share her view that, other things being equal, one should prefer Australian made products. It would be surprising if this was not so; during recent years there has been a major effort by various commercial and government bodies to encourage such a preference and there is widespread community concern about unemployment and the run-down of the Australian manufacturing industry. The choice of wording for the defendant's packaging is, I think, indicative that the defendant itself perceived a marketing advantage in emphasising that the goods were both designed and manufactured in Australia. In relation to this first aspect, therefore, I conclude that although the untrue representation would not have affected each potential purchaser it was a representation likely to affect some potential purchasers, and thereby to increase the sales appeal of the product, and that the defendant intended the representation to have that affect.

The relevant representation, in respect of the 353 bedding sets, was a total departure from the truth. The goods were neither designed nor manufactured in Australia.

I have already expressed the view that the false representation was more probably the product of carelessness rather than a deliberate intention to deceive. The degree of carelessness was high. Mr Williams was himself involved in the re-packaging of the sets from their previous "Hampshire House" packets, upon which it was clearly stated that the goods were made in Hong Kong, into the "Royal Vanity" packages, in which the false statement was made. Mr Williams must have been aware that the "Royal Vanity" packaging had been designed so as to emphasise the place of manufacture of the goods. He would have realised, had he thought about it for a moment, that the goods which were about to be distributed in that packaging did not comply with the inscription on the packets themselves. Although inadvertent misrepresentation is less blameworthy than deliberate misrepresentation, in a matter so fundamental as the making og representations on packages in which the goods are to be displayed for sale, even inadvertent misrepresentation is a matter of serious concern. The philosphy behind s.53 of the Trade Practices Act is that there is a responsibility to ensure that representations made in connection with the supply of goods are in fact correct.

The representation was disseminated only to a limited audience, persons who inspected the goods in a Waltons store. There is no evidence of any media advertising of the goods.

The prosecutor concedes that Mr Williams displayed a high degree of concern when the complaint was first reported to him and that thereafter he took prompt and effective action to overcome the problem. Stickers were placed over those bedding sets which were still on display for sale in a Waltons store. Mr Williams' positive and prompt response is a significant factor in mitigation of penalty.

The maximum penalty fixed by Parliament for a contravention of Part V of the Act, in the case of a corporation is $50,000: see s.79. The amount of the maximum indicates the serious nature of such an offence. However, for a number of reasons - the non-deliberate nature of the breach, the fact of relatively limited dissemination of the false representation, the fact that the false representation did not affect the quality or utility of the goods, the prompt remedial action by Mr Williams and the lack of any prior conviction - this case falls well short of being one suitable to attract a penalty near to the maximum. The penalty should reflect that the offence is a serious one and it should be a penalty which will tend to deter the defendant and others in trade or commerce from contravening the Part. It ought not to be crushing or oppresive. Having regard to all of these matters it is appropriate to fix a total penalty in relation to all the informations in the sum of $5,000. There should be a penalty in respect of each of the five informations in the sum of $1,000. The defendant must pay the costs of the prosecutor.