Director of Consumer Affairs Victoria v Abesta

IN THE SUPREME COURT OF VICTORIA	Not Restricted
AT MELBOURNE COMMERCIAL AND EQUITY DIVISION

No. 7465 of 2009

DIRECTOR OF CONSUMER AFFAIRS VICTORIA	Plaintiff
v
ABESTA INTERNATIONAL PTY LTD (ACN 116 650 643)	First Defendant
and
ZE MIN HU	Second Defendant

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JUDGE:	HABERSBERGER J
WHERE HELD:	MELBOURNE
DATE OF HEARING:	16 DECEMBER 2009
DATE OF RULING:	16 DECEMBER 2009
CASE MAY BE CITED AS:	DIRECTOR OF CONSUMER AFFAIRS VICTORIA v ABESTA INTERNATIONAL PTY LTD
MEDIUM NEUTRAL CITATION:	[2009] VSC 639

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TRADE PRACTICES – Consumer Protection – Sale by retailer of children’s toys in contravention of Fair Trading (Safety Standards) (Children’s Toys) Regulations 2004 and of baby’s dummy in contravention of the relevant product safety standard – Argument on scope of final order adjourned due to the illness of the second defendant, a director of the first defendant – Scope of interlocutory cease trading injunction pending final hearing.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr S Bhojani with	Lisa Tickell, Solicitor to the Director
Mr P Hiland	of Consumer Affairs Victoria
For the Defendants	Mr P Clarke	Rockman & Rockman

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HIS HONOUR:

On an originating motion dated 30 June 2009, the plaintiff, the Director of Consumer Affairs Victoria (‘the Director’), sought a number of orders against the first defendant and its principal director, the second defendant. The matter came before me on 29 October 2009. At first, it was thought that the matter would proceed to finality by way of consent orders but that eventually fell by the wayside when the plaintiff sought to amend the description of some of the items in the column headed, "Class of goods" in Annexure B to the proposed order.
As those amendments, in my view, broadened considerably the scope of the restraint sought with respect to the class of goods listed in Annexure B, I adjourned the matter to give the defendants the opportunity to respond to the new order sought to which they did not consent. The matter was listed before me again on 10 December 2009, but unfortunately I was not able to hear the matter on that day and it was then adjourned until today.
Regrettably, in the interim, it would appear that the second defendant has been experiencing severe mental difficulties which has meant that the lawyers acting for the defendants have been unable to receive proper instructions. Mr Clarke of counsel who appeared for the defendants has therefore sought an adjournment of the hearing today.
At first, it seemed to me that the matter could proceed by way of final hearing with respect to the first defendant, although clearly it could not continue at this stage against the second defendant. However, during the course of argument it became clear that by virtue of his position and his past history with respect to involvement in prior breaches of the Fair Trading Act 1999, the second defendant's evidence, or at least his instructions, were required in order to enable the first defendant to meet the case being advanced against it in respect of this broader cease trading order being sought.
Given the medical evidence, counsel for the plaintiff did not oppose the adjournment once it became clear that Mr Hu's evidence was relevant to the position of both defendants.
The issue remaining for determination then was what, if any, interlocutory orders should be made pending the matter coming back before me in the new year. A draft form of order was submitted by the plaintiff's counsel, which would have had the effect of prohibiting the first defendant from selling goods to the extent sought by the proposed amendment to Annexure B, to which I previously referred.
Perhaps the simplest way to explain that position is to refer to one item. In Annexure B there was a class of goods which read, "Children's toys containing lead", and then there were in the other columns of Annexure B, reference to the existing standard or ban orders, in this case in Victoria and nothing under Commonwealth legislation. What the amendments sought in respect of this item was to limit the words describing the class to “Children's toys”, which would, of course, be a very significant expansion of the scope of the prohibition. In other words, it would prohibit the first defendant from selling not just “Children's toys containing lead” or “Children's toys for under three year olds,” but prohibit it from selling any children's toys whatsoever.
That and four other items are now the only dispute remaining between the parties in respect of the scope of the cease trading injunctions sought by the plaintiff during the adjournment.
Apparently this issue arose out of some confusion in the reading of an order made by me in an earlier case, Director of Consumer Affairs Victoria v Midas Trading Australia Pty Ltd,[1] where the annexure to the order relating to the cease trading injunctions was worded in the way in which it was in the originating motion in this proceeding.
[1] [2009] VSC 141
My recollection of that case, as confirmed by paragraph 72 of the judgment, was that the cease trading order that I made in that case enjoined conduct which would in any event be a breach of the Act, and I refer to a passage from the judgment of Toohey J in Trade Practices Commission v Mobil Oil Australia Ltd,[2] and a passage from the judgment of French J, as his Honour then was, in ICI Australia Operations Pty Ltd v Trade Practices Commission.[3] As I understood the purpose of the order in that case, it was to superimpose on the existing safety regulations the additional punishment of putting the defendant company and its officers at risk of being in contempt of court if any of the safety regulations were breached with respect to the particular item as set out in Annexure B.
[2] (1984) 4 FCR 296, 300.
[3] (1992) 38 FCR 248, 268.
However that may be, the question is what is the appropriate order to make in this case in the period between now and mid to late February, which is the earliest when the matter can come back before me.
The evidence establishes that the first defendant has sold through various of its stores, three items which breached the relevant safety regulation. One item was a preschool plastic battery operated toy known as Happy Train, another was a preschool plastic battery operated interactive toy known as Lovely Baby. The defendants have conceded that both toys breached the Fair Trading (Safety Standards) (Children's Toys) Regulations 2004. The third item was a flashing pacifier whistle or imitation baby's dummy which the defendants have conceded did not meet the requirements of Appendix E of Australian Standard AS 2432-1991 Babies’ Dummies.
The fact that these goods were being offered for sale was established by the evidence put forward by the plaintiff as a result of numerous inspectors visiting the various stores of the defendants in February, March and April of this year. As I have said, this proceeding was then commenced on 30 June 2009, and the matter came on for hearing at the end of October.
Mr Bhojani, who appeared with Mr Hiland for the Director, submitted that the evidence of the first defendant taking steps to improve its procedures in an attempt to avoid any further breaches of the safety regulations was fairly thin. What is known is that in September 2009 a contract was entered into with a compliance officer who is to take steps to arrange for a compliance program consistent with the requirements of AS 3806-2006, part of which was to include a first year training session for relevant staff. However, very little is known as to what stage the implementation of a compliance program has advanced, or what training of staff has occurred.
It was, therefore, submitted on behalf of the plaintiff that, in order for the public safety to be ensured as far as possible, the only appropriate way to proceed was to prohibit the first defendant from trading in goods that fall within the category, class or kind "Children's toys".
On behalf of the defendants, Mr Clarke submitted that the first defendant has started to take steps. He pointed out that the transgressions were some time ago and that there has been no evidence put forward of any further sales in breach of any relevant safety legislation. He also submitted that if the plaintiff had such concerns about the first defendant's inability to comply with the safety legislation, then it was surprising that there had been no application for interlocutory relief at an earlier stage.
The matter is not an easy one for resolution, in my mind. Clearly the public interest in safety is very important. On the other hand, the effect of the order sought by the plaintiff would be to stop the first defendant from selling children's toys, candles, gas masks, safety pins, and toothpaste. The importance of the items, apart from children's toys, cannot be assessed because there is no evidence with respect to them. No doubt that is because the evidence establishes that children's toys are said to constitute approximately 12.5 per cent of the first defendant's turnover. Thus, the category of children's toys is a very significant one in the first defendant's operations, particularly so given the time of year with the retailing season reaching a peak in the remaining weeks of this year and early next year. The possibly unwarranted loss to the first defendant could be large.
No undertaking as to damages is offered by the Director and submissions have been made in the written outline of submissions that it is not appropriate for any undertaking to be required. What was submitted by the plaintiff's counsel was that the lack of the undertaking was one of many factors to take into account in the balancing exercise.
In my view, speaking generally, if I were satisfied that there was a real risk of injury or death to any person by virtue of a breach of various safety regulations, no amount of lost profits could outweigh that damage. However, I am not persuaded, at this stage, that the broad injunction sought by the plaintiff is necessarily the right relief permanently and, therefore, I am not prepared to make such an order on an interlocutory basis. There should be no misunderstanding, nevertheless, that the orders that I will make – which Mr Clarke said were not opposed by the defendants and which are in the terms which the defendants would have consented to on 29 October – are extremely important and that any breach of them would be a very serious matter for those concerned. That is, for example, if the first defendant notwithstanding the interlocutory orders that I will make, is subsequently found to have sold a children's toy containing lead, then such a step is clearly open to a claim that contempt of court has been committed with the very serious penalties that can follow any contempt of court namely, prison or fines or sequestration in the case of a company.
I am satisfied that an order limited in those terms will be sufficient incentive for the first defendant and its staff to take the appropriate steps, with the assistance of its compliance officer, to ensure that there are no breaches of the safety legislation in the interim period before the matter comes back before me early next year. I will adjourn the further hearing to Thursday 25 February 2010.

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[2009] VSC 639

16 DECEMBER 2009