Doolan, B.J. v Waltons Ltd

[1982] FCA 89

Re: BARRY JOHN DOOLAN
And: WALTONS LIMITED (1982) 61 FLR 427
Nos. G136 and 137 of 1981
Trade Practice

COURT

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Ellicott J.(1)

CATCHWORDS

Trade Practice - False representation under s.53(a) of Trade Practices Act 1974 (Cth) - Defendant offers for sale tables made partly of medium density fibreboard and particle board with imitation oak lamenate and partly of natural timber - Goods advertised as being "solid timber with an oak finish" - Whether a false representation as to quality or composition - Meaning of "solid timber" - Whether the false representation due to reasonable reliance on information supplied by another person - Whether the false representation due to reasonable mistake - Effect of ignorance of ordinary meaning to public of description "solid timber".

Trade Practices Act 1974 (Cth).ss.53(a), 79, 85(1)(a) and (b), 85(2).

Trade Practices - Consumer protection - Representation that goods of particular quality or composition - Whether goods "solid timber" - Reliance on information supplied by another person - Whether "reasonable" reliance - Whether "reasonable mistake" - Trade Practices Act 1974 (Cth), ss. 53(a), 79, 85(1)(a), (b).

HEADNOTE

The defendant, a retailer of furniture, published advertisements for the sale of "solid timber with an oak finish" tables. The advertisements were approved by an employee of the defendant after consultation with the wholesaler. The turned legs of the tables were of solid timber but the tops were covered with a malamine imitation wood laminate to represent oak and bonded to fibreboard.

The defendant was charged pursuant to s. 53(a) of the Trade Practices Act 1974 in that it had falsely represented the goods were of a particular quality or composition. The defendant relied on s. 85(1)(a) and (b) as a defence.

Held: (1) The phrase "solid timber" to the ordinary member of the public means natural timber, that is, timber in its natural state and not in an artificial or reconstituted state.

Doolan v. Waltons Ltd. (1981) 39 ALR 408, referred to.

(2) In circumstances where the defendant failed to bring a relevant Trade Practices Commission information circular to the attention of the employee authorizing publication of the advertisement and, had it been available, the error would not have occurred, on the balance of probabilities it cannot be said that the defendant acted in "reasonable reliance" on the information supplied by another person or that the contravention was due to a "reasonable mistake".

HEARING

Sydney, 1982, April 22; June 1. #DATE 1:6:1982

SUMMONS UPON INFORMATION.

The defendant company was prosecuted for an offence under s. 59 of the Trade Practices Act 1974 being charged with contraventions of s. 53(a).

The facts appear in the judgment.

K. Mason Q.C. and A. Hewitt, for the informant.

M.H. McHugh Q.C. and J.D. Heydon, for the defendant.

Curv. adv. vult.

Solicitor for the informant: B.J. O'Donovan, Commonwealth Crown Solicitor.

Solicitors for the defendant: Dawson Waldron.

H.W. FRASER

ORDER

1. Waltons Limited is convicted of committing two contraventions of s.53(a) of the Trade Practices Act 1974.

2. Waltons Limited is ordered to pay a fine of $750.00 in respect of the contravention on 8 February 1981 and of $750.00 in respect of the contravention on 22 February 1981.

3. The fines are to be paid to the District Registrar of this court within 21 days of this day.

4. Waltons Limited is to pay to the prosecutor his costs with respect to the information and charges, the same to be taxed if not agreed.

5. The exhibits may be returned. Orders accordingly.

JUDGE1

Waltons Limited ("the defendant") is charged with committing two offences against s.79 of the Trade Practices Act, 1974 ("the Act"), it being alleged that it did on two occasions in contravention of s.53(a) of the Act in trade or commerce in connection with the promotion of the supply of goods falsely represent that the goods were of a particular quality or composition. The offences are alleged to have occurred on 8 and 22 February 1981 respectively. By consent the charges were heard together. Each of them is brought with the written consent of the Minister then administering the Act, the Minister for Business and Consumer Affairs.

The offences alleged arise out of advertisements circulated by the defendant early in 1981. The defendant arranged for a catalogue advertising a large number of its products to be inserted in and distributed with the "Sunday Telegraph" of 8 February 1981. A similar catalogue was inserted in and delivered with the "Sun-Herald" of 22 February 1981. As a result both catalogues were widely distributed.

In each of these catalogues, under the heading "Our 1981 International Collection", there was advertised (inter alia) a group of six tables of varying shapes and ranging from $99 to $219 in price. Three of the tables had cabinets built into them. The other three did not but had a top and bottom platform. Underneath representations of the tables in the advertisements appeared the following:-

"From Canada. . . .

'Cambridge Collection' of tables Choose from our range with rattan
are solid timber with an oak finish inserts or our smart open series."

The prosecutor alleges that the statement in each catalogue that the collection of tables "are solid timber with an oak finish" was made by the defendant in trade or commerce in connection with the promotion of the supply of goods and falsely represented their quality or composition and therefore constituted a breach of s.53(a) of the Act.

The defendant admits that each catalogue was issued in trade or commerce in connection with the promotion of the supply of goods. Otherwise, it denies the breach in each case. It has also raised a defence against each charge under s.85(1)(a) and (b) of the Act. Under those paragraphs it is a defence if the defendant establishes:-
"(a) that the contravention in respect of which the proceeding was instituted was due to reasonable mistake;

(b) that the contravention in respect of which the proceeding was instituted was due to reasonable reliance on information supplied by another person."

The defendant gave notice under s.85(2) of its intention to rely on the defence under (b), as required by the Act, indicating, in that notice, that the information was allegedly supplied by Mr Lawrence Kelly, the Managing Director of D.V. Kelly Pty. Limited.

D.V. Kelly Pty. Limited is a manufacturer of lamps and lighting, an importer of occasional furniture and a wholesaler of its manufactured and imported goods. In its capacity as a wholesaler, it had, prior to September 1980 sold its goods to major retail stores including the defendant. In that month it had in its store at Lakemba samples of a range of furniture known as "Magnussen" which was manufactured in and available for import from Canada. The range was called "the Cambridge Collection".

Peter Rodney Swan is and has been, since December 1979, a furniture buyer for Waltons Stores Interstate Limited (which I assume to be a company associated with the defendant). As such he has been responsible under another employee for buying a wide range of furniture for approximately 60 of the defendant's stores in three States of the Commonwealth. In September 1980 he visited the premises of D.V. Kelly Pty. Limited where he saw two samples of the "Cambridge Collection". One sample was of what is termed "the open series" (those without cabinets) and the other was of those with cabinets. After looking at the samples he spoke with Mr Kelly and agreed to order a quantity of the "Cambridge Collection" on behalf of the defendant. D.V. Kelly Pty. Limited then placed an order with the Canadian manufacturer which included sufficient to meet the defendant's order. The furniture arrived in Australia towards the end of January 1981 and portion was invoiced to and delivered to the defendant early in February 1981. Shortly after that samples of the furniture were put on display in the defendant's stores for the purpose of sale.

Each table had a card attached to it, apparently put there by the manufacturer, which stated (inter alia):-
"These tables are of highly selected veneers and solids and should be treated as such to give you many years of enduring beauty."

The advertisement of the furniture in the "Sunday Telegraph" of 8 February 1981 caught the attention of a Mr and Mrs Draddy of Melrose Park and as a result they visited the defendant's store at West Ryde. There they inspected two of the "Cambridge Collection", one a rectangular table with a cabinet between its top and bottom. They noticed that the top and bottom sections of each table were not made of what they regarded as "solid timber" but of what looked like particleboard.

Apparently for this reason they did not regard them as conforming to the advertisement they had seen and complained to the Trade Practices Commission. As a result these prosecutions were instituted.

Evidence was given by Mr Gabb, an inspector appointed under the New South Wales Timber Marketing Act to inspect timber and timber goods including furniture, who had had a long experience as a cabinet maker. He inspected three of the items in the "Cambridge Collection" in the defendant's store in June 1981.

One of the items inspected by him was a small rectangular table which had been shown in the advertisements. He observed that the top was not in fact made of "solid timber", as he described it, but was covered with a melamine imitation wood lamenate to represent oak. The wood lamenate was bonded to what he said was medium density fibreboard. The underneath of the top surface also had a lamenate on it to balance construction in accordance with good trade practice.

Medium density fibreboard is a reconstituted wood panel brought into existence by processes in which the timber is pulverised to fibre and is reconstructed by compression and glue to form a panel. The melamine surface is made of a polymer. It is applied in sheet form under heat and pressure possibly with a glue.

The turned legs on this table he found to be "of solid timber". They were fastened to a base which was made in the same fashion as the top.

Another of the series he inspected was a long rectangular table also shown in the advertisements with four legs between the top and the base and a cabinet with two doors in the middle between that top and base. He noticed that the type of construction was virtually the same as the smaller rectangular table, the only difference being, it contained the cabinet in the centre. The only "solid timber" that he could find in it other than the legs and possibly some blocks they fitted into, was in the little doors of the cabinet which had imitation rails and stiles in a timber species which he identified as oak.

He inspected another of the series, a hexagonal chest also shown in the advertisements. This he found to be similarly constructed.

A sample of one of the collection - a hexagonal table was tendered in evidence. It has a top and bottom platform with four legs joining them. Mr Gabb inspected this table and said that the only "solid timber" he could find was in the four turned legs. He thought the top was made of medium density fibreboard and the base of particleboard.

Particleboard is different from medium density fibreboard. In making particleboard the timber is cut up and left in particles of two different sizes, the finer particle being left on the top and bottom surfaces and the coarser in the interior. The particles are reconstituted into a board using heat and compression.

Up until the early sixties it had been common for furniture to be manufactured out of natural timber but since then the trend in the furniture trade has been to use low pressure lamenates which are fixed to composition cores. Composition cores include particleboard, medium density fibreboard, plywood and solid core. Low pressure lamenates are thin layers which are applied to the particular composition core as a veneer. In more recent years there has to some extent been a return to the use of natural timbers particularly pine.

I accept Mr Gabb's evidence as to the construction of the various tables he inspected.

The initial question to answer is whether the "Cambridge Collection" of tables were falsely described. Were they "solid timber with an oak finish"? In my opinion the phrase "solid timber" would mean, to the ordinary member of the public, natural timber and would not include particleboard or fibreboard. Tables so constructed may be just as strong as some made of natural timbers. They could well be described as "solid" tables but in my view they are not "solid timber". I think the phrase "solid timber" to the ordinary member of the public, means natural timber that is timber in its natural state and not in an artificial or reconstituted state. This was the sense in which Mr and Mrs Draddy understood the phrase and I think they are, in this respect, representative of ordinary members of the public. It is the sense in which Lockhart J. interpreted the word "solid" in the recent case of Doolan v. Waltons Limited (4 December 1981 - not yet reported). His Honour was there dealing with a representation by the defendant that a kitchen nook was a "natural pine kitchen nook". The table top of the nook was in fact made of particleboard with a veneer on top of it. His Honour said:-
"Persons reading the advertisements would assume that the goods being offered for sale by Waltons are kitchen nooks made of solid pine. I should add that I see no material difference between the words 'solid' and 'natural' in this context".

His Honour's judgment in that case does not, of course, determine the meaning of the word "solid" in this case. It is merely illustrative of a similar use of the word.

The evidence to which I have already referred, and which I accept, clearly establishes that none of the collection was wholly or substantially of "solid timber with an oak finish" in the sense in which I consider those words were used. It may be that, if an article was made almost wholly of natural timber with only a small quantity of laminates and/or composition core used in its construction, it would satisfy that description. However, this was not the case here for only the legs were "solid timber" in the sense in which I consider the public would understand the phrase.

I am therefore satisfied beyond reasonable doubt that the defendant has in trade or commerce in connection with the promotion of the supply of goods, that is to say, the "Cambridge Collection" of tables, falsely represented that they are of a particular quality or composition, namely, "solid timber with an oak finish". This does not mean, of course, that the tables are necessarily of any lesser quality in strength or appearance than if wholly made of solid timber. If made of oak they probably would be, but, if made of radiata pine, they may not be. I should also add that I do not regard the use of the phrase "with an oak finish" as indicating that the solid timber referred to was oak.

As stated earlier, the defendant claims that if there was a contravention of s.53(a) it is entitled to rely on the defences provided by s.85(1)(a) and (b) of the Act. It is convenient to deal first with the defence under paragraph (b), i.e. that the contravention was due to reasonable reliance on information supplied by another person.

The defendant claims that Mr Swan, it's buyer, checked the alleged offending description with Mr Lawrence Kelly, the managing director of D.V. Kelly Pty. Limited, that he approved it and that, in the circumstances, what was done was in reasonable reliance on information supplied by Mr Kelly.

Mr Swan, apart from arranging to buy furniture, prepares the advertisements to go to press relating to it. An advertising information sheet and a storyboard page are prepared and presented to the defendant's advertising department. The sheet contains the advertised selling price, the normal selling price and facts about the item, what it is made of, its value and what the story will be in relation to it. The storyboard page gives the advertising people a rough layout, the suggested main headlines or theme.

In this instance the storyboard page prepared by Mr Swan had on it the heading "Our 1981 International Collection". It had some rough sketches of the six pieces of furniture but it did not contain the offending words.

The advertising department prepared the layout for the advertisement and when a copy was received by Mr Swan in December 1980 it had the offending words on it. The furniture had not then arrived. He decided to ring Mr Kelly and read out to him what was written to see if it was correct. According to Mr Swan, Mr Kelly replied - "Yes it is O.K. to use it". Mr Swan then signed the copy signifying his approval of it and sent it back to the advertising department. Mr Swan says that he would not have approved it unless he felt it was right and by what Mr Kelly said he thought it was correct. He also said:-
"Well I would not have approved it unless I felt it was right, it was correct. If I had not had that statement, I would not have approved it."

Mr Swan denies that, as a result of looking at the samples at the wholesalers and speaking to Mr Kelly in September, he knew that the greater part of the tables were particleboard with melamine finish. He says the subject of whether they were natural timber hadn't really come up because the product was bought believing it would sell and represent value to the customer. When he went to the premises he says he looked at what he believed was timber and he first learned that the items were not timber after some enquiries were made following the advertisements in February. Prior to that he just had not formed an opinion that the tables were natural timber. He chose the product on the basis that it would sell, that it looked particularly strong and durable and had appeal to customers. In December 1980 he did not know the difference between natural timber and particleboard but he had learned since.

In evidence Mr Swan also explained why he rang Mr Kelly to check out the advertisement. He said:-
"We had a previous problem and I was extremely aware, the company had made it clear you had better be sure what you said was correct. I had a pine kitchen which I called solid and it was not, I found out later, so I wanted to make sure."

The trouble regarding the pine kitchen had arisen by December 1980 in relation to an advertisement he had authorised in July 1980. He went on to say in cross-examination:-
"Without going into too much detail, the trouble you were aware of in December 1980 was the fact that it was being suggested that to call the kitchen nook "natural" was an untrue statement when in fact the greater part of it was particle board?-----I was not aware of that then.

What was the trouble you were aware of in December 1980 relating to the kitchen nook?---- The word "solid".

Right. Now, what was the trouble you were aware of then about that word?----Well, the table, the whole frame, and the chair frame, a vast majority of it was solid pine. The table top was particle board with a pine veneer over.

That led to trouble by December 1980?---- There was some trouble, yes.

It was that trouble which led you to ring Kelly and check out the advertisement?----I was very aware of the fact that what I had to say was correct and that is why I rang him.

You knew that the goods that were being advertised as part of the Cambridge Collection were not made of natural timber?-----No, I did not.

When you rang Mr Kelly the form of the advertisement had already been drafted by the advertising department, had it not?----Yes, it had."

He did not carry out any inspection after the goods arrived at the defendant's store in February 1981. At no time apparently did he have a look under the surface at the material appearing under the top or bottom layer. He believed it was wood, it was strong and the defendant could sell it particularly well. His original understanding of the word "solid" was that it referred to the firmness of the structure rather than the material.

In 1977 the Trade Practices Commission had forwarded to the defendant its information circular No. 21. A copy of this is in evidence. It gave information and advice in relation to the advertising and promotion of wooden furniture. It had sections "Timber Furniture Products" and "Solid Timber" and drew a distinction between the following product categories - "solid wood", "wood veneered timber or particleboard" and "synthetic artificial or simulated wood veneers". Under the heading "Solid Timber" it stated:-
"As a general rule reference to timber species without qualification should be reserved for items of furniture wholly manufactured from solid timber of that species, e.g. oak dining room suit".

Mr Swan did not see this document before February 1981. He was asked some questions about it in re-examination:-
"Would you look at that to yourself; are you familiar with that document now?----Yes.

If, prior to February 1981, you had read that document, would you still have contacted Mr Kelly concerning the advertisement?----No, I do not think so, because it would not be necessary.

I beg your pardon?-----No.

What would not have been necessary?---I would not have had to check about solid timber. I would not have had it in there.

What would you not have had in there?---Now I have learned there is no use having any doubt at all about what you are saying, so I would not have put anything in there that could have any possible doubt at all.

What was the doubt? ------ The word "solid".

If you had looked closely at the furniture, if you had looked closely at every piece of the furniture which was ultimately sold, would that have made any difference to your contacting Mr Kelly in respect of - - - ? ----No.

It is in these circumstances that the defendant claims the contravention was due to reasonable reliance on information supplied by another person.

It was submitted for the prosecutor that all that was supplied was an opinion and not information. It was also submitted that even if it was, it was not reasonable for Mr Swan to rely on that information.

As indicated earlier, Mr Swan,in December 1980, did not know the difference between natural timber and particleboard. He has learned since. He believed that what he saw at D.V. Kelly's store was "timber". He chose the product on the basis that it looked particularly strong and durable and had appeal to customers. His understanding of the word "solid", at the time he approved of the advertisement, was that it related to the firmness of the structure rather than to the material. To use his words, it described a "nice solid piece of merchandise". If he had looked closely at every piece of the furniture, it would not have made any difference to his contacting Mr Kelly as to whether he thought "solid timber with an oak finish" was a correct description of the tables. He was worried about the word "solid" and and that was why he checked to make sure he was right. The company had made it clear he had better be sure that what he said was correct. By December 1980 there had been trouble relating to the description of a kitchen nook which had a table of which the frame was natural pine and the top particleboard.

Although his evidence on these matters is not crystal clear, I think it is apparent that he didn't know the difference between natural timber and particleboard at the time he checked the advertisement with Mr Kelly. I tend to think he meant by this that he thought that the phrases "natural timber" or "solid timber" were apt to describe particleboard.

What does appear to be clear is that, at this time, he thought the word "solid" in the phrase "solid timber" referred to the strength of the structure not the nature of the material. This may have resulted from the view that "timber" "natural timber" "solid timber" were apt to describe particleboard. In other words, I think it is clear, based on his evidence, that as at December 1980 Mr Swan did not understand the ordinary meaning to a member of the public of the phrase "solid timber". To say the least, he was certainly confused about it.

Mr Kelly, when he answered him, apparently knew that the greater part of the tables was made of particleboard although he says he was not totally aware of the actual construction and material used. However he doesn't recall telling Mr Swan that. He relied on the information on the ticket put on the furniture by Magnussen, which stated that the tables were "of highly selected veneers and solids". And so, when asked whether it was an accurate description, he agreed it was.

Had Mr Swan understood the ordinary meaning of the phrase "solid timber" and asked Mr Kelly whether the tables were made of natural timber it seems likely that he would have been told that they were not and the falsity of the description in the advertisement would have been revealed.

In these circumstances, was it information which Mr Kelly supplied to Mr Swan, and if so, did the defendant act in reasonable reliance on it?

I am prepared to assume for the purpose of deciding the matter that it was "information" which was supplied. Mr Swan was, I think, entitled to assume, having regard to his state of mind, that he was getting information. Mr Kelly, on the other hand, may well have thought he was being asked for an opinion.

However, even if it was information that was supplied, I do not think it was reasonable for the defendant, in the circumstances of this case, not to know, through its agent, appointed for the task of buying furniture and settling advertisements relating to it, the ordinary meaning to members of the public of the words "solid timber". They are non technical words used in ordinary parlance and their meaning should be known to traders selling furniture to the public. Without such knowledge the defendant, through Mr Swan, was unable to appreciate properly the significance of any information it sought or received on the matter. Had he known, the offendinq words would probably not have been used.

In these circumstances, I am not satisfied that its reliance on any information it received was reasonable.

The defendant apparently had in its own hands the means of ensuring that Mr Swan did know the meaning of the words. It did not, prior to February 1981, bring to Mr Swan's attention the terms of the Trade Practices Commission document of September 1977. Had it done so, Mr Swan says he would not have contacted Mr Kelly concerning the advertisements. As he said in evidence, "it would not be necessary. I would not have had to check about solid timber. I would not have had it in there". The defendant's failure to bring the document to the attention of a person such as Mr Swan, in my view, makes it difficult to be satisfied that it acted reasonably in this matter. It was an official communication designed to ensure, as far as the Trade Practices Commission was concerned, that misrepresentations of this character would not be made. Had it been available to Mr Swan he says the error would not have occurred.

In all the circumstances therefore I am not satisfied on the balance of probabilities that the defendant acted in reasonable reliance on information supplied by another person.

The defendant also relies on s.85(1)(a), namely, that the contravention, in respect of which the proceedings were instituted was due to reasonable mistake. Here again the question of reasonableness arises. It may well be that Mr Swan was mistaken as to the ordinary meaning of the words which the advertisement contained and that on this basis he approved it. However, the mistake must be reasonable and having regard to the matters I have referred to in dealing with the defence under paragraph (b) I am likewise not satisfied on the balance of probabilities that the contravention was due to reasonable mistake.

I therefore propose to convict the defendant of committing the two contraventions of s.53(a) of the Act alleged in these proceedings. The question of penalty will be left until I have had the opportunity of considering any submissions counsel may wish to put to me on the matter.

JUDGMENT ON PENALTY

I delivered judgment earlier in which I indicated that I proposed to convict the defendant for the two contraventions of s. 53(a) of the Trade Practices Act alleged in these proceedings. I have now had the benefit of submissions from counsel for the defendant as to the penalties which I should impose on those convictions.

The relevant principles have been referred to in the judgment of Mr Justice Lockhart in an earlier judgment against the defendant, Doolan v. Waltons Limited Nos. G74 to G76 of 1981, 4 December 1981 unreported) and I have no need to repeat them.

Counsel for the defendant has pressed on me the view that this is not a serious case but one in which the penalty is at the lower end of the scale.

I think it is clear from the facts before me that there is no evidence of anybody having been deceived to the point of purchase in relation to the furniture in question, nor is there any evidence of any loss by members of the public, except perhaps the loss incurred by Mr and Mrs Draddy when they attended the defendant's store as a result of the advertisements.

Obviously these advertisements had very wide circulation in the "Sun-Herald" and the "Sunday Telegraph" in February 1981.

It is a fact, as I have found in my reasons for judgment, that efforts were in fact made to check the correctness of the advertisements in question. It appears to have been due to an unfortunate mistake, one that I have held not to be reasonable in the circumstances, yet a mistake.

It also appears to have arisen during a period where there was some difficulty in the mind of Mr Swan as to what the word "solid" in the phrase "solid timber" meant and a certain degree of confusion. However it was not confusion, as I have held, that it was reasonable, under the circumstances, for the defendant to have had.

There is nothing before me to suggest that the defendant or Mr Swan were deliberate in their action in inserting the advertisement to the extent that they wished thereby to attract custom by making a false representation. Indeed, the approach by Mr Swan to Mr Kelly, the wholesaler, appears to disprove any deliberate intention on the part of the defendant or on the part of Mr Swan.

Nor is there any indication that the defendant has gained anything financially as a result of the misrepresentations.

This is not to say, of course, that the breaches are not to be regarded seriously. Any breach of the Act, which operates widely as a result of the circulation of false representations throughout the print media, particularly in the manner in which they were circulated in this case, has to be regarded seriously.

In the circumstances I propose to treat these offences in the same way as Mr Justice Lockhart treated the offences in the earlier case to which I have referred and I propose to indicate the court's disapproval of the defendant's conduct by fining the defendant the sum of $750 in respect of each offence.

The orders I make are that Waltons Limited is convicted of committing the two offences as charged. Waltons Limited is ordered to pay a fine of $750 in respect of the offence on 8 February 1981 and a fine of $750 in respect of the offence of 22 February 1981. I order that the fines be paid to the District Registrar of this court within 21 days and I order Waltons Limited to pay the prosecutor's costs with respect to the information and the charges, the same to be taxed if not agreed. The exhibits may be returned.