Collector of Customs (NSW) v Brian Lawlor Automotive Pty Ltd

[1979] FCA 21

TRADE PRACTICES COMMISSION v. MADAD PTY. LTD. (1979) 40 FLR 453
Trade Practices

COURT

FEDERAL COURT OF AUSTRALIA

GENERAL DIVISION
Keely J.(1)

CATCHWORDS

Trade Practices - Practice - Determination of pecuniary penalty - Admissions by defendant - Facts to be taken into account for assessment of penalty - Whether sworn evidence of those facts required - Whether affidavits to be filed and served before hearing - Whether deponents to attend court - Trade Practices Act 1974 (Cth.), ss. 48, 76(1), 77, 78(a), 96(1), (3)(b).

Trade Practices - Resale price maintenance - Attempt to induce retailers not to sell goods below specified price - Pecuniary penalty - Trade Practices Act 1974 (Cth.), ss. 48, 76(1), 77, 78 (a), 96(1), (3)(b).

HEADNOTE

The defendant was a manufacturer of mattresses which it sold to any retailer. In or about March 1977 the defendant attempted to induce each of three named retailers not to sell at a price less than the price specified by the defendant. The Trade Practices Commission instituted proceedings in the Federal Court of Australia against the defendant claiming that the defendant had contravened s. 48 of the Trade Practices Act 1974 and seeking orders that the defendant pay to the Commonwealth pecuniary penalties in respect of the alleged contraventions. At the hearing the defendant admitted the facts stated above.

Held: (1) The defendant had engaged in the practice of retail price maintenance in respect of each of the three retailers in contravention of s. 48.

Hartnell v. Sharp Corporation of Australia Pty. Ltd. (1975), 5 ALR 493, referred to.

(2) Judgment should be entered for the Trade Practices Commission on behalf of the Commonwealth of Australia for $21,000 pursuant to s. 77.

(3) In general, each party which wishes the court to take into account in determining a penalty any matter of fact should establish that fact by sworn evidence. The facts should be placed on affidavit and filed and served upon the opposing party in sufficient time to enable the checking of the accuracy of the statements in it.

Trade Practices Commission v. Stihl Chain Saws (Aust.) Pty. Ltd. (1978), T.PRS. 305.14; R.v. McIntosh, (1923) QSR 278, approved. (4) Even where a notice to attend for cross-examination has not been given it is desirable that the deponents be available both for cross-examination and for the purpose of answering any questions from the court intended to clarify matters dealt with in the affidavit.

HEARING

Melbourne, 1978, May 11; August 22; December 13; 1979, February 27; March 15. #DATE 15:3:1979

ACTION.

The Trade Practices Commission proceeded in the Federal Court of Australia against the defendant claiming a pecuniary penalty.

D.K. Derrington Q.C. and J.O. Jerks, for the plaintiff.

G.E. Fitzgerald Q.C. and R.E. Cooper, for the defendant.

Cur. adv. vult.

Solicitor for the plaintiff: Alan R. Neaves (Commonwealth Crown Solicitor).

Solicitors for the defendant: McCullough & Robertson

E.F. FROHLICH

JUDGE1

March 15.

KEELY J. delivered the following judgment.

This is a claim by the plaintiff Trade Practices Commission for orders that the defendant pay to the Commonwealth pecuniary penalties in respect of certain alleged contraventions of s. 48 of the Trade Practices Act 1974. The defendant, Madad Pty. Ltd., was at all material times a company incorporated in the State of Queensland trading under the registered business name of Sealy of Australia. The defendant did not maintain dealerships or franchise agreements and sold to any retailer (subject to normal credit checks) a range of mattresses under the trade name of Sealy Posturepedic. The court was not informed as to the numbers of retailers to whom sales were made by the defendant. (at p454)

1. At the hearing Mr. Derrington Q.C. appeared with Mr. Jerks for the plaintiff and Mr. Fitzgerald Q.C. appeared with Mr. Cooper for the defendant. It was admitted by the defendant that "in or about the month of March 1977 at Brisbane the defendant attempted to induce" each of three retailers "not to sell at a price less than a price specified by the defendant (the price specified by the defendant being a price which represented ten per cent off the price recommended by the defendant) Sealy Posturepedic mattresses supplied to" each of the three retailers "by the defendant". The three retailers were: Sandman Slumber Centre Pty. Ltd., B. W. Coles (Discount Furniture) Pty. Ltd. and A-Mart International Pty. Ltd. It was also admitted that the defendant was at all material times a supplier within the meaning of Pt VIII of the Act of mattresses to each of the said three retailers. Having regard to the provisions of s. 96(1) and (3)(b) of the Act, I find that the defendant engaged in the practice of resale price maintenance by its acts in respect of each of the three retailers and such acts in each case contravened s. 48 of the Act which provides that: "A corporation or other person shall not engage in the practice of resale price maintenance." (at p454)

2. Before the hearing commenced a question arose as to the proper practice to follow, where admissions have been made, in placing material before the court on the question of penalty. As the matter was referred to by both counsel at the hearing it is perhaps desirable that I should express my view and my reasons for it. A relatively short time before the hearing my associate was informed by counsel for both parties that admissions as to certain allegations in the statement of claim would be made at the hearing by the defendant and that other allegations of contraventions would be withdrawn by the plaintiff. Counsel for both parties also informed my associate that they each intended to place before the court material relevant to penalty simply by statements from the Bar table. No sworn evidence, either oral or on affidavit, was to be placed before the court unless a statement by one counsel as to the facts, made in the course of his address, was disputed by the opposing counsel. That proposed course of conduct was said to be in accordance with the practice of the Supreme Court of Queensland in considering matters of penalty in criminal proceedings. (at p455)

3. At my direction my associate informed counsel for both the plaintiff and defendant that the court as presently constituted required the factual material on the question of penalty to be by affidavit filed and served no later than 3 p.m. on the day before the hearing with a right in each party to cross-examine deponents and to file affidavits in reply. (at p455)

4. Section 76(1) in empowering the court to make the orders sought in the present case requires that any pecuniary penalty shall be such amount "as the Court determines to be appropriate having regard to all relevant matters including the nature and extent of the act or omission and of any loss or damage suffered as a result of the act or omission, the circumstances in which the act or omission took place and whether the person has previously been found by the Court in proceedings under this Part to have engaged in any similar conduct". In my view, the statutory direction that the court have regard to the matters specified makes it desirable that each party which wishes the court to take into account in determining a penalty any matter of fact should establish that fact by sworn evidence - unless some reason is advanced which satisfies the court that particular facts, which have been expressly agreed upon by the parties, should be accepted by the court. I do not consider that it is satisfactory that counsel for either party should have to decide whilst opposing counsel is addressing the court whether to object to assertions in that address as to the facts. A properly informed decision as to whether those assertions are accurate might well require counsel to have discussions with officers of the plaintiff or the defendant (as the case may be) or with officers of one or more companies affected by the alleged contraventions. (at p455)

5. Accordingly, I consider it preferable that evidence of the facts which either party proposes to rely on should be placed on affidavit and filed and served upon the opposing party in sufficient time to enable it to check the accuracy of the statements in it. It may be necessary for it to seek detailed instructions as to the facts asserted in order to enable cross-examination of a deponent or for the preparation of affidavits in reply. Parenthetically, I might add that in the present proceedings, because of the late stage at which the court learnt of the course proposed by the parties, the time fixed was much shorter than is desirable. The obtaining of sufficiently detailed instructions may well take a considerable time as it may require the plaintiff, for example, to discuss with persons affected by the alleged contraventions (such as the three retailers in the present proceedings) the contents of any affidavits filed on behalf of a defendant. (at p456)

6. Other matters which appear to me to reinforce the need for sworn evidence may be briefly summarized as follows: (a) Having regard to the object of the Act, the determination of an appropriate penalty is a matter of considerable importance to the public. As Smithers J. said in Trade Practices Commission v. Stihl Chain Saws (Aust.) Pty. Ltd.: "So far as resale price maintenance is concerned the object of the Act is to create conditions in which the public will benefit from traders competing with each other in respect of prices unfettered by price restraints imposed by suppliers of goods upon retailers" (1978) TPRS 30514, at . (b) Full and accurate material as to all matters relevant to penalty is important because of the wide range of the penalty prescribed - " . . . not exceeding $250,000 in the case of a body corporate in respect of each act . . . to which this section applies". (c) The Queensland practice referred to was as to criminal proceedings and both counsel agreed that this present matter is not a criminal proceeding (s. 78(a)). However, even in criminal proceedings the court in considering the appropriate penalty normally has before it the sworn evidence given at the trial or, if there has been a plea of guilty, the sworn evidence contained in the depositions taken at the committal proceedings. The sworn evidence would normally deal in some detail with matters similar to those specified in s. 76(1) e.g. "the nature and extent of the act", "the circumstances in which the act . . . took place" and the "loss or damage suffered as a result of the act". By way of contrast the course proposed by the parties in this matter would have left the court to determine penalties without any sworn evidence at all - unless some assertion of fact by one side was expressly put in issue by the other side. (d) In any event, even as to criminal proceedings where the court normally already has sworn evidence before it, in R. v. McIntosh (1923) QSR 278 p 30532 the Queensland Court of Criminal Appeal, specially constituted by five judges (McCawley C.J., Shand, Lukin, Blair and Douglas JJ.) said: "We think it desirable to emphasise that the circumstances relevant to punishment should be fully placed before the trial Judge by Crown counsel and counsel for the accused, and that fuller details than it has been customary to furnish should be afforded, particularly in regard to first offenders" (1923) QSR, at pp 282-283 . (at p456)

7. It was submitted by Mr. Fitzgerald Q.C. that it is a matter for the parties what matters are put before the court in relation to penalty. In my opinion, in order to be able to determine an appropriate penalty under s. 76 of the Act, the court should have the benefit of sworn evidence as to all material in the plaintiff's possession which is relevant to penalty. In this connexion I adopt with respect, as being equally applicable to the function of this Court in determining a penalty under s. 76, the following words of the Queensland Court of Criminal Appeal in R. v. McIntosh: "We . . . emphasise that the circumstances relevant to punishment should be fully placed before the trial Judge by Crown counsel . . . The grave responsibility cast upon the Judge cannot be satisfactorily discharged if the necessary data are not placed at his disposal" (1923) QSR, at pp 282-283 . Perhaps I should add that in the present case Mr. Derrington Q.C., on behalf of the Trade Practices Commission, stated quite specifically that "the arrangements we have made with our friends are not in any way directed towards keeping information from the court". (at p457)

8. As I said at the hearing there is no duty upon counsel for a defendant to place any evidence before the court. It must always be a matter for him to determine what evidence if any he places before the court in respect of his submissions on the question of penalty. He may choose to rely upon his address alone and it will be given appropriate consideration even though it is not evidence. (at p457)

9. Mr. Derrington Q.C. sought a ruling as to whether a party's right to cross-examine the deponent on an affidavit filed by the other side as to penalty is dependent upon the giving of a notice that it requires the deponent to attend for cross-examination at the hearing. In my view even where a notice to attend for cross-examination has not been given, it is desirable that the deponents be available both for cross-examination by the opposing party and for the purpose of answering any questions from the court directed towards removing any ambiguities in the affidavit and clarifying matters dealt with in it. (at p457)

10. Each party filed and served one affidavit but called no oral evidence at the hearing and neither party sought to cross-examine. As to the nature of the acts constituting the contraventions in respect of the three retailers, Mr. Fitzgerald Q.C. on behalf of the defendant accepted the statements in the affidavit of Dawn Margaret McKay including the following:
    
    (1) Mr. Dyer, the managing director of the defendant and Mr. O'Shea, its general manager, spoke to Mr. Weller, a director of Sandman Slumber Centre Pty Ltd. "in terms as follows or similar terms thereto:
    
    

"Mr. O'Shea: I am very concerned with the way Sealy is being marketed in regard to price. Not necessarily by your company or yourself but we want to get Sealy back up to a level where everybody can get a good profit margin. Do you agree with this?

"Mr. Weller: Yes.

"Mr. O'Shea: Would you be prepared to stick to a recommended retail price?

"Mr. Weller: What do you mean? So much off recommended retail price?

"Mr. O'Shea: Yes.

"Mr. Weller: Only if others agree to it, but I cannot see them doing it.

"Mr. O'Shea: We will get all the others in to ask them and it will benefit you all as it will mean more profit to you all.

"Mr. Weller: What sort of margin could you make it?

"Mr. O'Shea: What about ten per cent below recommended retail?

"Mr. Weller: Well if the others agree. Okay, but I cannot see it.

"Mr. O'Shea: You are not to give pillows and blankets away however to get the sale (This has been my usual practice to get sales)." (at p458)

1. Later in March 1977 lists of prices were handed to Mr. Weller by Mr. O'Shea, who said: " . . . everybody has agreed to a price as from next Monday at ten per cent below our normal recommended retail price . . . . Will you stick by it? Give it a go. You may lose sales initially, but in the long run it will benefit you."
   
   (2) Mr. O'Shea handed a list of prices to a director of B.W. Coles (Discount Furniture) Pty. Ltd. in the course of a conversation which included the following:
   
   

"Mr. O'Shea: We wish you to make a reasonable mark up on your Posturepedic range . . . There is the list. Don't go under those prices.

"Mr. Vann: Does this apply to everybody or just to the discounters?

"Mr. O'Shea: No, every store selling Posturepedics has that list.

"Mr. Vann: How are you going to know if everybody is sticking to this rule?

"Mr. O'Shea: I will have people going to the stores, acting as customers and also ringing up. That will be the policing of it."

(3) Messrs. Dyer and O'Shea also had a conversation with Mr. Van Lieshout, a director of A-Mart International Pty. Ltd., and sent him a list of prices in an attempt to induce that company not to sell at a price less than the price specified by the defendant Sealy Posturepedic mattresses supplied to the company by the defendant. (at p458)

1. The affidavit filed by the defendant, sworn by its managing director Mr. Dyer, stated that the defendant is a family company which is effectively controlled by Mr. Dyer who personally supervises the day to day running of the defendant company and the implementation of policy. Certain matters were dealt with in the affidavit rather briefly and without elaboration. However, as the affidavit was not challenged in any way by counsel for the plaintiff I accept all the statements of fact in it as they are not inherently improbable but, in the absence of further explanation by the deponent, I am not prepared to accept the statements of opinion contained in par. 7 of Mr. Dyer's affidavit as being necessarily correct. (at p459)

2. Mr. Fitzgerald Q.C. submitted that, although "the defendant does not under-estimate the seriousness of the contraventions . . . which is reflected by the penalty which the legislature has fixed as the maximum", there is no minimum penalty prescribed by the Act and in the circumstances of this case the penalty should be at the lower end of the scale. In supporting the latter submission he relied upon various matters including the following: (1) the contraventions are limited to acts consisting of attempts and there is no evidence of loss or damage suffered as a result of the conduct; (2) the evidence shows that the conduct was not persisted in after it became known to the defendant that its conduct was in contravention of the Act, and it has taken steps to ensure that it does not breach the Act in the future. An undertaking has been given by Mr. Dyer on behalf of the defendant that there will be no further breaches of the Act and it no longer maintains any recommended retail price list and does not publish any price card for the use of its customers; (3) the defendant has never been convicted of any offence. I also note that there is no evidence that the defendant "has previously been found by the Court in proceedings under this Part to have engaged in any similar conduct" (s. 76(1)); (4) there are no circumstances of aggravation. I accept without qualification each of the foregoing matters and have taken them into account in determining penalties. (at p459)

3. Mr. Fitzgerald also submitted that the defendant was a minor company in a relatively minor industry. On the evidence I am not able to accept that submission in its terms although I accept that, as Mr. Derrington conceded, it is plainly not one of Queensland's largest manufacturing companies. Mr. Dyer's affidavit shows that the defendant is and has been since its incorporation in 1956 a mattress manufacturer and that its business "includes the distribution in Queensland and northern New South Wales of 'Sealy' mattresses which it manufactures in Brisbane under license from the Sealy company of the United States of America", but no other evidence was led as to the size of the defendant's operations or the size of the industry. Mr. Fitzgerald submitted that the number of mattresses sold by the defendant or by the three retailers and the total number of retailers to whom the defendant sold Sealy mattresses were all irrelevant. (at p459)

4. I accept the submission for the defendant that the conduct had been engaged in in the belief that such conduct would be in the interests of all concerned in the industry including the financial interests of the defendant. (at p459)

1. Mr. Fitzgerald also submitted that there was really only one contravention, not three, because these were obviously associated matters. I accept and take into account the fact that the contraventions arose out of the one course of conduct. It would not be proper to consider each of the three contraventions against a maximum penalty of $250,000. However, it is not correct in my view to treat the acts as constituting only one contravention because the evidence establishes that the acts constituting the contravention were taken not merely in respect of one retailer but in respect of each of the three retailers (cf. s. 79(2) and also Smithers J. in Hartnell v. Sharp Corporation of Australia Pty. Ltd. (1979) 5 ALR 493 relating to offences - not to contraventions of Pt IV of the Act). (at p460)

2. Mr. Dyer stated in his affidavit that he and his manager "attended two seminars . . . to familiarize ourselves with the" Trade Practices Act 1974 but that "despite this, at the time the discussions took place with the retailers named in the statement of claim, Madad was not aware that such conduct contravened a provision of the Trade Practices Act". The affidavit did not state what was the belief at the material time of Mr. Dyer or of Mr. O'Shea as to the relevant law and did not state whether the defendant obtained or gave any consideration to the desirability of obtaining legal advice as to the proposed conduct. As I have said earlier Mr. Dyer was not cross-examined at all by counsel for the plaintiff and I accept this statement at its face value. I take it into account as establishing that the defendant's conduct did not constitute a conscious defiance of the will of Parliament as expressed in the Act but in my view ignorance of the law cannot operate to reduce a penalty which the court considers to be appropriate by reason of other relevant matters. (at p460)

3. Resale price maintenance has been forbidden since 1971 - although until the 1974 Act came into effect an authorization of such conduct could be granted. Since the 1974 Act commenced, resale price maintenance has been prohibited by the Act in all circumstances and cannot be authorized. Accepting the defendant's lack of awareness that as a matter of law its conduct contravened the Act, it is none the less clear that as a matter of fact the defendant deliberately entered upon a course of conduct which was contrary to Parliament's intention "that traders operate in competitive conditions and that the public has the benefits which flow therefrom" (per Smithers J. in Trade Practices Commission v. Stihl Chain Saws (Aust.) Pty. Ltd. (1978) TPRS, at p 30532 ). That course of conduct by the defendant included the following: (a) an attempt was made to ensure that each of the three retailers should not sell below a minimum price specified by the defendant - plainly with the intention of preventing the public from obtaining from any of the three retailers Sealy Posturepedic mattresses at prices discounted below that price specified by the defendant. The evidence of the conversations includes a statement to one of the retailers: "You are not to give pillows and blankets away however to get the sale" (as had been the retailer's "usual practice to get sales") and a statement to another retailer: "There is the list. Don't go under those prices"; (b) the acts constituting the contraventions were carried out personally by both the managing director and the general manager of the defendant as to two of the retailers and by the general manager as to the other retailer - a situation likely to indicate to the three retailers that the defendant attached considerable importance to the minimum price which it had specified to the retailers; (c) a system was organized by the defendant to "police" the specified price by checking on the prices being asked by the three retailers in their stores both by: (i) telephoning the retailers for prices; and (ii) having persons "acting as customers" call at the retailers' stores asking for prices; (d) the defendant's conduct was partly in the interests of its own financial position and partly "to get Sealy back up to a level where everybody can get a good profit margin". No evidence was placed before the court as to the profit margin for the defendant - or the profit margin for the three retailers, apart from Mr. Dyer's somewhat vague reference to having heard that they were selling "at or near cost". The price specified by the defendant represented ten per cent below the "normal recommended retail price". (at p461)

4. In my view these contraventions were not minor breaches and it is not suggested that they arose from any accident, or any failure of employees to properly understand instructions. Having regard to all the circumstances, including all of the matters raised by Mr. Fitzgerald Q.C. on behalf of the defendant, and the importance of deterring similar contraventions of the Act, I have determined in respect of each of the three contraventions that the appropriate pecuniary penalty is $7,000. In determining the amount of the penalty I have taken into account that there are to be three penalties and in my view the sum of $21,000 represents the appropriate total penalty to be paid by the defendant in respect of the three contraventions. (at p461)

5. Although the affidavit evidence as to the contravention in respect of A-Mart International Pty. Ltd. did not set out the conversation in any detail (as was done in respect of the other retailers) there was nothing in the evidence to suggest - nor was it suggested at the hearing - that any one contravention was different in any significant way from the others. On the evidence both the managing director and the general manager had the conversation with the director of A-Mart International Pty. Ltd. and the list of prices was sent to him. In the circumstances I have decided that the same penalty should be imposed in respect of each of the three contraventions. (at p461)

6. The defendant is also ordered to pay to the plaintiff the costs of and incidental to these proceedings including all costs previously reserved by the court. (at p461)

ORDER

Orders accordingly.