Brown, R.M. v Greg Cotton Motors Pty Ltd

FOR LIMITED DISTRIBUTION

JUDGMENT No. %?h$%

- .

IN THE FEDERAL COURT OF AUSTRALIA

)

VICTORIA DISTRICT REGISTRY

)	VG No. 316 of 1986
)	VG No. 317 of 1986

GENERAL DIVISION

)

Between: RODNEY MICHAEL BROWN

(Prosecutor)

m: GREG COTTON MOTORS

PTY. LTD.

(Defendant)

MINUTES OF ORDER

JUDGE MAKING ORDER:	RYAN J.
DATE OF ORDER:	2 OCTOBER 1987
THE COURT ORDERS THAT:

The summons numbered VG 316

of 1986 be dismissed.

2. The defendant be convicted of the charge contained in the

summons numbered VG 317

of 1986 and fined the sum

of $6,000

payable to the Registrar of this Court within

days of

this day.

3. The defendant pay the prosecutor's costs of the proceedings

in VG 316 and 317

of 1986.

Settlement and entry of orders is dealt with in Order 36 of

the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA

)

VICTORIA DISTRICT REGISTRY

)	VG No. 316 of 1986
)	VG No. 317 of 1986

)

GENERAL DIVISION

Between: RODNEY MICHAEL BROWN

(Prosecutor)

And: GREG COTTON MOTORS PTY.

LTD.

(Defendant)

Coram:

Ryan

Date:

25 August

1987

Place:

Melbourne

REASONS FOR JUDGMENT

The

defendant in these

proceedings

a motor

car

trader carrying on business under the name "Neilson Holden

Ferntree

Gully".

The

first

summons

against

the

defendant

alleges that on

26 August 1985

it was guilty of

an offence

against

6.79

of the Trade Practices Act 1974 ("the Act") in

that in contravention of s.56(1) of the Act, the defendant

advertised for supply

price, goods that

it did not

intend to offer for supply at that price for

period that

was, and in quantities that were, reasonable having regard to

the nature

of the market in which the defendant carried on

business and the nature

of the advertisement.

The second summons alleges that the defendant between

26 and 28 August 1985 having advertised goods

for supply at a

special price, in contravention of

s.56(2) of the Act failed

to offer such goods for supply at that price for

period

that

was,

and

quantities

that

were,

reasonable

having

regard to the nature of the advertisement.

Except those in respect of the intention required

s.56(1), the facts relied on as constituting each alleged

offence were not substantially disputed. The defendant which

dealt in vehicles manufactured by General Motors-Holden Ltd.,

and in used vehicles as well, had a practice, at least once a

week, and sometimes twice weekly, of taking out large display

advertisements in the "Sun" newspaper. It also had a policy

that cars, known as "demonstrators" which were used

sales

staff for demonstration purposes, should not be kept after

they had travelled more than 10,000 kilometres or had been in

the defendant's possession for more than six months. By way

of implementing

that

policy

the

defendant

paid

the

salesman who sold

a "demonstrator", and to the responsible

manager a bonus of $50 and $100 respectively, over and above

ordinary commissions.

Each car advertised

in the "Sun" was the cheapest

each model then in the defendant's stock, irrespective of whether it was a "demonstrator" or an unregistered new car.

The

model

referred

the

particulars

each

charge

against

the

defendant

was

"SL

Holden

Commodore

cylinder demonstrator".

A car answering that description and

having the registered number "CL1 492" was advertised for

sale by the defendant

in the "Sun" newspaper on thirty-one

occasions

between

May

November

1987.

The

advertisement specifically relied on as an element in the

proof of each charge appeared in the issue of that iewspaper

for	26 August 1985. The advertisement was in the "new and

used cars" classified section of the newspaper and occupied

panel two columns in width under the heading "HUGE SAVINGS UP featured in the same advertisement, which, in respect of CL1

492, comprised an illustration, accompanied	by	the following
text:

"Save $2272 off new price.

SL VK Commodore.

(Demonstrator)

6 Cyl

Seds

CL1	492 3.3, 6 cyl., E.S.T. ignition, R.T.S:,

Cloth

trim,

AH/FM radio,

mud

flaps

and

striping.

All

low

kms.

quick - will

sell

fast. Less top trade-in price $9990.*"

It appears that it was also the practice of the defendant to

hold

meeting of its sales staff on each morning on which

one of the defendant's

advertisements appeared in the "Sun".

At those meetings which were known as "Advertising Meetings",

members of the sales staff were acquainted with the models

which had been advertised that day, the price at which each

model had been advertised, and the numbers of each model In

stock,

and

were

given

general

instruction

isales

techniques. One such meeting occurred on the morning of 26

- .-

August 1985

at which a Mr. Danny Heffernan, then new car

sales manager for the defendant, distributed photocopies of

the

defendant's

advertisement in the "Sun" of that morning.

Mr. Mark

Scott

who

had

commenced

employment

with

the

defendant on

August 1985 was one of the sales itaff who

attended the meeting of 26 August. Later on the same day he

resigned

from

the

defendant's

employ.

Mr.

Scott testified

that, Mr. Heffernan,

the

course

the

advertising

meeting, referred to each of the models described in the

advertisement and said,

in effect, that

it would be alright

to sell the "Barina" and the "AStTa", that sales staff should

try to get anyone interested in the "Gemini" into

manual

rather than an automatic and that "we could not possibly sell

the 'Camira' and the 'Commodore' at those prices - they owed

us too much money".

Mr.

Scott also recalled that the question was raised

two

other

salesmen,

Tony

Deans

and

Guy

Elliott,

what

should

done

if customers

insisted

seeing

those

particular

cars.

According

Mr. Scott, Mr. Heffernan

replied, "Try to steer them into another vehicle.

they

ask and insist on seeing those cars, tell those customers

they were being test driven, were being prepared for sale, or

were being refuelled". It was also

Mr.

Scott's

recollection

that Mr. Heffernan amplified his answer by saying that

it was

the

salesmen's

"duty as professional people to steer them

into another vehicle, that we were not order takers, that we

were professional people and

was part of our jobs to

direct them to another car".

Mr.

Scott further attributed to

Mr.	Heffernan, the statement that the cars detailed in the

advertisement "were an incentive,

means of getting the

customers into Neilson's

and it was up to us to sefl them a

car". Mr. Scott conceded, under cross-examination, that

Mr.

Heffernan had said at the meeting, in answer to

a question,

that, if customers were to insist on seeing

particular

advertised car, and overbear the

salesman's

excuses for its

being unavailable, "Well, we would have to show

it to them".

Mr.	Scott also indicated that he understood that "if that

situation came up we would hand that over to Danny and leave

it at that"

Mr. Deans

gave

evidence

that

attended

the

advertising meeting

on 26 August 1985 in the second of the

two weeks during which he

was

employed by the defendant.

Like Mr. Scott, he recalled that

Mr.

Heffernan had referred

to the cars detailed in the advertisement in the "Sun" of

that morning.

Mr. Deans went on to say that

Mr. Heffernan

had given instructions that "any inquiries on any of the

advertised cars ... were to go to him".

Another

employee

the

defendant

who

recalled

the

meeting of 26 August 1986 was Mrs. Cristine Conlin who had

worked on the sales staff of Neilson Holden since October

1983. In 1985 she was responsible for answering telephone

inquiries

generated

the

defendant's

newspaper

advertisements. She disagreed with the suggestion that at

the meeting of

26 August Mr. Heffernan had said that the

Commodore CL1 492 was not to

be sold, or could not b;

sold at

its advertised price, because it owed the defendant too much.

Mr. Van t'Hooft

who, in August 1985, was employed as a

new car salesman by the defendant, and who has since been

promoted to new car sales manager, gave evidence that he was

present at the advertising meeting on 26 August 1986 but had

no specific recollection of it.

Mr.	Heffernan, who was new car sales manager for the

defendant

August 1985, and who has since been appointed

car largely responsible in 1985 for writing the "copy" for the

sales

manager,

also

gave

evidence.

was

its

used

defendant's advertisements including that of

26 August. He

also

chaired

the

advertising

meetings

that

time,

but

claimed that he did not specifically recall the meeting of 26

August. However, he asserted that he would not have given

the instruction at that meeting, attributed to him

MC.

Scott,

that

the

"Commodore"

was

not

sold

at the

advertised

price

because

that

would

have

been

"totally

against all company policy that

I was taught". On the other

hand, Mr. Heffernan

accepted

that

may

have

told

the

defendant's salesmen at the meeting of 26 August 1985 that,

if	there were inquiries about advertised cars, the customer

should be referred to him.

After

resigning

from

the

defendant's

employ

August 1985,

Mr.

Scott on the same day spoke by telephone to

Mr.	Snow who was then an investigations officer in the Trade

Practices Commission. AS

a result of that contact,

Mr. Snow

the

following

day

telephoned

the

premises

Neilson

Holden in Ferntree Gully and enquired about the "demonstrator

Commodore

which

had

been

advertised".

was

given,

presumably

by Mrs. Conlin, some details about that car, and

later on the same day attended at the defendant's premises

company with a Miss Howard who was then employed

by the Trade

Practices Commission as an assistant research officer.

M r .

Snow and Miss Howard, on arriving at the premises

Neilson

Holden,

first

looked

inside

and

outside

the

showroom for the vehicle CL1 492 but were unable to find it. They were then approached by a Mr. Hanson who made it clear

that he was a novice salesman.

Mr. Snow referred Mr. Hanson

copy of the advertisement from the "Sun" of 26 August

and pointed to the part which referred to CL1 492 saying,

am particularly interested in this car here because of the

price".

Mr.

Hanson replied

"I think that one has been sold but

I will check on

this". He

then spoke with two unidentified

- .-

men in an office to the left of the showroom and on returning

said to Mr.

Snow, "That one has been sold yesterday morning.

The man has put

a deposit on

it".

Mr.

Hanson then tried to

interest Mr.

Snow and Miss Howard (who represented herself to

be Mr.

Snow's

wife) in other models and took them fir a test

drive

in a "Camira"

sedan.

their

return,

Mr. Hanson

pointed out the Commodore CL1 492 which was then parked

outside the

defendant's

showroom.

Mr.

Snow inspected that

vehicle and noted that no

"K" form was affixed to it, and

Mr.

Hanson insisted that "it has definitely been sold.

The

fellow came in keen as mustard this morning with a	fist full
of dollars".

Also on 21 August 1985, Mr.

Mineely another officer of

the Trade Practices Commission telephoned Neilson Holden of

Ferntree Gully to ask about the Commodore which had been

advertised in the 'Sun"

of the previous

day.

That call was

made on Mr. SnowIs instructions.

Mr. Mineely spoke to Mrs.

Conlin who told him the colour of CL1 492 and quoted him an

"on-road" price

for it of $11,030. Later on the same day,

when Mr.

Snow returned from the defendant's premises he told

Mr. Mineely to telephone again to ask whether the	mhicle was
still available. Although he then asked to speak to Mrs.

Conlin, the call was taken by Mr.

Hanson who told Mr. Mineely

that the advertised Commodore had been sold.

- On

August

1985,

another

officer

the

Trade

Practices Commission,

Mr. Sest, telephoned Neilson Holden

inquire about the "Commodore" advertised on 26 August. He

too spoke to

Mrs.

Conlin and was told that the vehicle was

still available. Later that day,

Mr.

Sest attended

at the

respondent's

premises where he met

Mr.

Deans to whom he

showed

copy of the "Sun" advertisement of 26 August and

asked whether the "Commodore demonstrator" described

in it

was still available.

Mr. Deans replied "Yes,

I think it is".

Mr.	Deans then consulted another employee of the defendant in

an office on the left of the showroom and returned to tell

Mr.

Sest that the "demonstrator you are after

... is out,

picking up a trade-in". Later

Mr. Deans, according to

Mr.

Sest, indicated that the trade-in being picked up was to be traded-in for the "Commodore" itself which had been sold.

Mr.	Deans, in his evidence, indicated that the other

employee whom he consulted about

Mr. Sest's

inquiry was Mr.

Heffernan "because he had instructed us

... we were to see

him before we sell" any of the advertised cars.

Mr.

Deans

went on to testify that

Mr.

Heffernan had told him that the

"demonstrator

Commodore"

had

been

sold. when Mr. Deans

pointed out that he had just seen the car,

Mr.

Heffernan

replied "No, you are wrong;

it has been sold".

Mr. Deans

continued to statement whereupon, according to

dispute

the

accuracy

Mr.

Heffernan's

Mr. Deans, Mr. Heffernan

instructed him to "tell the chap

has been taken to be

demonstrated and is sold on demonstration by one of the taxed with that evidence, Mr. Heffernan claimed not to recall any discussion with M r . Deans about the vehicle CL1 492, but said that the instruction attributed to him "would be going

employees of the company", and "to sell him up to a new

against everything

have been taught over the years whilst

employed by Neilson Holden".

Mr. Black Q.C.,

for the defendant conceded that

if I

were to accept the substance of the evidence of the officers

of the Trade Practices Commission who made telephone calls

to, and visited, the defendant's premises, the prosecution

would have made out its case that a breach of s.56(2) of the

Act	had been committed. The evidence of the officers of the

Commission was not seriously challenged, and I see no reason

disbelieve

it.

Accordingly,

the

defendant

must

convicted on the summons in	VG	317 of 1986 of an offence
against s.56(2).

By s.56(1) of the Act, as

in force in August 1985,

was provided that:

"A corporation shall not in trade

commerce,

advertise for supply at a special price goods or services that the corporation does not intend to offer for supply at that price for a period that is, and in quantities that are, reasonable having

regard to the nature of the market in which the

corporation carries on business and the nature of

the

Section 84 of the Act, before its amendment by Act NO. 17 of

1986, was in the following terms:

advertisement."

. -

"(1) Where, in

a proceeding under this Part

respect

any

conduct

engaged

a body

corporate, being conduct in relation to which

provision of Part

applies, it is necessary to

establish the intention of the body corporate, it

is sufficient to show that a servant or agent of

the body corporate by whom the conduct was

engaged in had that intention.

(2)

Any conduct engaged in on behalf of

a body

corporate by a director, agent or servant of the

body corporate or

any other person at the

direction

with

the

consent

agreement

(whether express or implied) of

a director, agent

or servant of the body corporate shall be deemed,

for

the

purposes

this

Act,

have

been

engaged in also by the body corporate."

The language of

s.56(1)

as reproduced above casts on the

prosecution the onus

of proving a negative, the absence of

intention

offer

the

relevant

goods

for

supply

at the

advertised price for a period that is, and in quantities that

are,

reasonable

having

regard

the

stated

criteria.

Section 8 4 ( 1 )

assists in the positive proof of the intention

body corporate but says nothing about proof of the

absence of

specified intention. However,

s . 8 4 ( 2 )

assists

1L.

the prosecution in a

case like the present in the sense that

the acts which constitute advertising, if engaged in by

director, agent or servant of the body corporate, are to be

deemed to have been conduct of the body corporate itself.

Accordingly,

if it is

proved

that

a director,

agent or

servant

the

defendant

procured

the

insertion

the

advertisement of

August 1985 and at that time did not

intend that the defendant should offer "CL1

492" for sale at

the advertised price for

reasonable period, the defendant

will be fixed with liability for that conduct. It may be

necessary to inquire, in an appropriate case, whether the

relevant director, servant or agent had the capacity to give

effect to his lack of intention that the defendant should

offer the goods for supply at the advertised price for

reasonable

period

and

reasonable

quantities.

However,

the need for that inquiry does not arise on the facts which

have been proved in this case because

I am satisfied that Mr.

Heffernan's

was the directing mind behind the insertion of

the advertisement on

August 1985, and that he was in

position to offered for sale and, if so, for how long.

determine

whether

not

CL1 492 should

The evidence reveals that

Mr. Heffernan selected the

cars which were featured in each of the

defendant's relevant

advertisements, and that he did

by reference solely to

which was the cheapest then in stock of each model to be

advertised.

Mr.

Cotton,

the

managing

director

the

defendant

gave

evidence

that

although

"approved

the

format" of its advertisements, he was not specifically aware

of those which featured the vehicle

CL1 492.

Mr. Richardson in 1985 was the

defendant's new car

manager

whom

Mr. Heffernan

new

car

sales

manager

reported. Although his attention was directed specifically

the

August

1985,

and

other

advertisements

featuring CL1 492, Mr. Richardson

had

distinct recollection of that car.

Mr.

Heffernan acknowledged that he was responsible,

and

about

August

1985,

f o r

writing

the

"copy"

for

the

defendant's

advertisements including those which featured

CL1

492. When fir. Heffernan

was

cross-examined

about

incantation in those advertisements "Be quick will	- sell
fast" the following exchange is recorded:

"MR	GINNANE: Did you put in the words, "be quick

- will sell fast"? --- Yes, I would have.

Did	you think that that was the case, that the

car would sell fast

at that stage?

--- When we

put in an ad, our intention is to sell that car.

Did you think at that stage that the car would

sell fast at that price? --- Naturally we hope it

would.

Did

you

think

it would,

based

on your

experience? --- We would not advertise	a car if
we did not think it would sell."

Later in the same cross-examination this passage occurs:

"MR GINNANE: When you put the advertisement in

relating

CL1

492,

what

was

your

intention

behind putting that advertisement in? What did

you hope to achieve --- To sell motor vehicles.

To sell motor vehicles? --- Yes.

what motor vehicles?

--- Obviously, to sell that

singularly but also - most people that come in - they do not always want manual so I always had a number of vehicles to offer them, anyhow."

It	has been accepted by counsel for the prosecutor that the

relevant intention

to be examined for the purposes

of the

information

under

s.56(1)

the

Act

that,

Mr.

Heffernan.

Mr.

Ginnane referred to the judgment of Smithers

J. in Reardon v. Morley Ford Pty.

Ltd. (1980) 49 FLR 401 at

420 as providing some guidance to the approach to be taken in

determining

whether it has

been

proved

beyond

reasonable

doubt that

Mr.

Heffernan lacked the requisite intention that

the defendant should offer CL1 492 for sale for a

reasonable

period at the advertised price. His Honour there said:

"TO my mind

a person in his position genuinely

having that intention would certainly have given

instructions to his sales staff that the vehicles

must be offered and must be supplied on request

at the special price. He did not do this. On

his evidence he left the situation to his sales

staff as though with respect to the

3.3 Falcon no

special situation had arisen as

result of the

advertisement. But his retail sales manager and

a	salesman were under the impression that the

vehicles were not on offer for $6,600.

This

could

never

have

happened

with

Mr. Morley in

command unless

were that he had not intended

to offer the 3.3

Falcons in quantity for $6,600.

In the absence of

explanation this fact,

in my

opinion,

cannot be reconciled

with

reasonable

probability unless

Mr.

Morley did not intend to

offer the

3.3

Falcons for supply at the special

price.

When

it is seen that, if there be any

such explanation the defendant had at hand the

means to provide

it, then I do not doubt the

situation is one in which according to the common

course

business

affairs,

the

degree

probability that such facts would not be found

unless Mr.

Morley had not intended that the

3.3

Falcons

should

offered

for

supply

the

special price is such that the contrary cannot

reasonably be supposed.

To my

mind

where

relation

a business

organization such as the defendant

it is found

that

the

retail

sales

manager

and

his

staff

genuinely understand that there

is no intention

on the part of the defendant to supply particular

vehicles at a particular price at a particular

time and genuinely believe that they must obtain

authority from

senior member of the staff and

that the policy in that matter was one which

depended

entirely

upon

the

decision

the

managing

director

who

was

regularly

and

frequently in touch with his sales staff and had

himself to make

decision as to the continuity

the

advertising

campaign

consequent

upon

developments following upon the campaign,

it is

proper,

the

absence

evidence

the

contrary, to infer and to do

so beyond reasonable

doubt that the state of mind of the sales manager

and his staff reflects the instructions he has

received in the ordinary channels of the company

and reflect the decisions of management at its

highest level.

bserved

that

whereas

every

probability supports the inference

I have drawn,

there

not

one

the

objective

facts

evidence which gives rise to any consideration

that raises questions as to the validity of that

inference.

It has been submitted that

similar inference is equally

inescapable in this case.

Mr.- Ginnane invited me to find,

primarily on the basis of Mr. Scott's

evidence, that, at the

advertising meeting of 26 August, Mr. Heffernan had given

positive instruction that the Commodore

CL1 492 was not to be

[1987] FCA 536

2 Oct 1987