Doolan v Waltons Ltd

[1981] FCA 225

Re: BARRY JOHN DOOLAN
And: WALTONS LIMITED
Nos. G74-76 of 1981
Trade Practices

COURT

IN THE FEDERAL COURT OF AUSTRALIA

GENERAL DIVISION
Lockhart J.

CATCHWORDS

Trade Practices - false representation under s. 53 (a) of Trade Practices Act 1974 (Cth.) - defendant offers for sale goods made partly of veneered particle-board and partly of pinus radiata - defendant advertises the goods as being made of "solid pine" or "natural pine" - whether such advertisement constituted a false representation as to "quality" - whether components of s. 53 (a) of Act mutually exclusive - whether the false representation due to reasonable mistake or accident or some other cause beyond defendant's control - whether defendant took reasonable precautions or exercised due diligence to avoid such false representation.

Trade Practices Act 1974 (Cth.) ss. 53 (a), 79, 85.

HEARING

SYDNEY

#DATE 4:12:1981

ORDER

1. Waltons Limited is convicted of committing three 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 or about 29 June 1980, of $750.00 in respect of the contravention on or about 7 July 1980 and $500.00 in respect of the contravention on or about 20 July 1980.

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.

JUDGE1

Waltons Limited ("Waltons") is charged with the commission of three offences against s. 79 of the Trade Practices Act for alleged contraventions of s. 53 (a) namely, that it, in trade or commerce, in connexion with the promotion of the supply of goods, falsely represented that those goods were of a particular quality.

The three charges were heard together by consent, the evidence in one to be evidence in the others.

The Minister for Business and Consumer Affairs has consented to the institution of these proceedings against Waltons.

Waltons caused an advertisement to be published in a lift-out colour catalogue in "The Sunday Telegraph" newspaper on 29 June 1980 advertising for sale by Waltons "Our solid pine Kitchen Nook". It was one of a number of advertisements for Waltons' products in the catalogue.

Waltons caused an advertisement to be published in "The Sun-Herald" newspaper on 20 July 1980, advertising for sale by Waltons a "natural pine kitchen nook".

A colour catalogue was also distributed to householders in certain areas of Sydney by being placed in letter boxes on behalf of Waltons, including a distribution to householders in the Emu Plains district on or about 7 July 1980. The catalogue contained an advertisement substantially the same as that which appeared in "The Sunday Telegraph" newspaper on 29 June 1980.

The goods referred to in the advertisements are described in the evidence as a kitchen nook comprising a table and seats. The seats are made of wood - pinus radiata and are padded. The main seat is constructed to fit into the corner of a room. There is a small piece of timber at the top of the corner of this seat, roughly triangular in shape and plainly visible to the eye. It is made of particle board with a veneer on the top. Initially the veneer was made of pinus radiata itself and later of a laminated pine veneer called melamine. The melamine has a pine finish in appearance. The table itself is an extension table, with a hidden draw leaf or extension piece located under the table top. The table frame is made of pinus radiata but the table top and the draw leaf are made of particle board with a veneer, again initially of pinus radiata and later of melamine.

It is impracticable and unsatisfactory to make the top of an extension table of solid timber because solid timber absorbs moisture and warps over a period of time unless air reaches it from all angles. As the draw leaf or extension piece is under the table top, except of course when extended, air reaches the top and the bottom but not in between. In the result, the table top and the extension top would warp if both were made of solid timber and there was evidence to the effect that the problem is not entirely solved when both are made of particle board with a veneer of pinus radiata. Hence the melamine veneer is used on the top of each.

There is no material difference in the cost of producing a kitchen nook made entirely (except of course for the padding on the seats) of solid pine and the cost of making it as it is namely, of solid pine but with particle board covered by veneer on the table top and the extension top and on the small triangular piece at the back of the main seat.

Counsel for Waltons submitted that there were no false representations because the representations, upon their proper construction, are that Waltons offered for sale a solid kitchen nook made of pine (in the 29 June 1980 advertisement and in the catalogue distributed on or about 7 July 1980) or a natural kitchen nook made of pine (in the 20 July 1980 advertisement).

I reject this submission. Plainly the words "solid pine" and "natural pine" describe the kitchen nook. In other words, the kitchen nook is represented as being made of solid pine or natural pine. The words cannot reasonably be construed otherwise. Persons reading the advertisements would assume that the goods being offered for sale by Waltons are kitchen nooks made of solid pine or of natural pine. I should add that I see no material difference between the words "solid" and "natural" in this context. They both convey the same or substantially the same meaning. The contrary was not contended.

Counsel for Waltons submitted that the alleged false representations were not that the goods "are of a particular quality" within the meaning of s. 53 (a); and that if they fell within any part of paragraph (a) it was the word "composition".

The Shorter Oxford English Dictionary gives the following meanings, amongst others, of the word "quality" in relation to things:-

"1. An attribute, property, special feature . . .
2. The nature, kind, or character (of something); hence the degree or grade of excellence, etc. possessed by a thing . . ."

Webster's New World Dictionary 2nd Edition gives the following meanings, amongst others, of the word "quality" in relation to things:-

"1. Any of the features that make something what it is; characteristic elements; attribute.
2. Basic nature; character; kind. 3. The degree of excellence which a thing possesses . . ."

In Given v. C. V. Holland (Holdings) Pty. Limited (1977) 15 A.L.R. 439, a prosecution under s. 79 before the 1977 amendment to the Act which introduced, amongst other words, the word "composition", Franki J. construed the words in s. 53 (a) "particular quality" as meaning a particular attribute or a special feature. His Honour took the same view in Thompson v. J. F. Fossey Pty. Limited (No. 1) (1973) 20 A.L.R. 496 and did not regard the 1977 amendments as requiring a different construction. Keely J. adopted a similar view of the words "particular quality" before the 1977 amendments in Thompson v. Riley McKay Pty. Limited (No. 2) (1980) 31 A.L.R. 507. His Honour held that to represent goods as "wrought iron" was to represent that they included decorative scroll work of solidity and rigidity, and that such a representation was one that the goods were of a "particular quality".

I take the same view as Franki and Keely JJ. Indeed, to construe "quality" in paragraph (a) in the sense of an attribute, property or special feature is in accordance with a generally understood and accepted meaning of the word. One is reminded of the words of Portia in "The Merchant of Venice" Act IV, Scene I:-

"The quality of mercy is not strain'd, It droppeth as the gentle rain from heaven Upon the place beneath: it is twice bless'd; It blesseth him that gives and him that takes: . . ."

It may be correct to say, as Waltons does, that the representations alleged here are more precisely described as representations that goods are of a "particular composition" rather than of a "particular quality"; but the components of s. 53 (a) are not mutually exclusive. They may overlap; indeed one can think of many instances where they do.

I turn now to the submissions of counsel for Waltons that certain of the defences provided for in s. 85 of the Act have been established by Waltons.

Section 85, so far as relevant, provides:-

"85. (1) Subject to sub-section (2) in a prosecution under this Part in relation to a contravention of a provision of Part V, 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; . . .

(c) that -

(i) the contravention in respect of which the proceeding was instituted was due . . . to an accident or to some other cause beyond the defendant's control; and

(ii) the defendant took reasonable precautions and exercised due diligence to avoid the contravention."

It is necessary to relate the facts relevant to these submissions.

Mr. P. R. Swann, the national buyer for the furniture department of Waltons since December 1979, gave evidence that when he was appointed to this position the number of buyers was cut "quite dramatically". He said that in his view, in the middle of 1980 the buying section of his department was understaffed and this lead to problems. Staff were forced to "cut corners". He complained about this to his superior; but there was no change in the position. He told his superior that the lack of staff was leading to trouble and that the staff were overworked. He said that the buying office was "cut down in size by huge numbers and you had more things to do". He said that this retrenchment of staff did affect the relevant advertisements because the remaining staff were "rushing more".

As to the procedures in force in Waltons at relevant times with respect to the preparation of advertisements, Mr. Swann said that a document was brought into existence called a "Merchandising Information Form" which was prepared by him or at his direction. A copy of it went to the advertising department, to a lay-out artist and to a copywriter. The lay-out artist then submitted a rough drawing to Mr. Swann and the copywriter submitted a rough copy to him. If Mr. Swann approved the document, he initialled the copy and returned it to the advertising department. The approved copy then went to the typesetter and was returned to the advertising department. The advertising department then prepared a composite advertisement which was sent to an outside art studio for assembly, and thereafter it was returned to the advertising department and sent to the buying department for a final check. After Mr. Swann finally checked it, it went to the engraver for engraving and for the preparation of a block.

Mr. Swann said that an advertisement for Waltons' furniture evolves after discussion between the buying department and the advertising department.

Mr. Swann said that some months after an advertisement appeared in "The Sun-Herald" newspaper of 10 February 1980, which described the kitchen nook as "natural pine", he became aware that a number of complaints had been made about the product bowing. He then spoke to Mr. Bowen, whose firm made the kitchen nook. Mr. Bowen gave evidence that the decision to change the table tops from pine veneer to melamine veneer was made after discussion with Mr. Swann.

Mr. Swann said that he had no recollection of playing any role in relation to the 29 June 1980 advertisement; that he had no recollection of suggesting the expression "solid pine Kitchen Nook" and no recollection of anybody in the advertising department doing so.

After the advertisement of 29 June appeared he became aware of complaints that the kitchen nook was not a "solid pine" kitchen nook. He was concerned about it and decided not to run the advertisement again in that form, but to put it back to the format of the earlier advertisement of 10 February 1980. He made the relevant decisions as to the insertion of the advertisement on 20 July 1980, and he thought it was "quite O.K." because "we had heard a lot about this other one" (i.e. the advertisement of 29 June) "and there had been no complaint or problem about the others . . ." (i.e. the advertisement of 10 February).

He said that the "job bags" relating to the advertising in question were destroyed following the moving of offices.

Mr. Swann said that it was not until some weeks had passed after the catalogue advertising the goods as "solid pine" had been in circulation that he realised that it was not an accurate description. He said that it first became apparent to him that it may not be accurate to describe the goods as "natural pine", "after we had all these problems", that is after the publication of all the relevant advertisements.

Evidence was given by Mr. D. A. Stobart, the general manager of the advertising department of Waltons. He has held that position for the last five years. In about December 1979 he received instructions from the managing director of Waltons to reduce the staff in his department "down to the number of people that I could still adequately handle the advertising operation with". He then had sixty people in the department. It was geared for the highest periods namely, October and May. In the result, the staff was reduced to about thirty people.

He said that he spoke to members of his department as to their recollection of preparing any advertisements the subject of these proceedings and that he has been unable to find any with any recollection.

He said that fairly strict procedures were adopted in Waltons in compiling advertisements. Each matter is given a job number which carries through. Each job has a separate "job bag". The "job bag" is a large manilla envelope in which all documents relating to the job are kept. His department has been searched for the "job bags" for the advertisements of February and the subject of these proceedings and they have not been able to find them. About 200 to 250 "job bags" are in the advertising department in any particular month. There is a practice as to the destruction of "job bags" namely, that they are kept for three months. It was either late 1979 or early 1980 that the system changed to the present. Previously "job bags" were kept up to three years.

Mr. Stobart described the procedures relating to the preparation and publication of advertisements by Waltons in much the same way as Mr. Swann did.

Mr. Stobart said that the only relevant documents which he has been able to find in the advertising department are "advertising job cost ledgers" for the February 1980 advertisement in "The Sun-Herald", the June 1980 advertisement in "The Sunday Telegraph" and the July 1980 advertisement in "The Sun-Herald". All they show is the amount of money spent in respect of the preparation of the advertisements. They say nothing about "letter box drops" in the first six or seven months of 1980.

I turn to the submissions of counsel for Waltons that certain of the defences afforded by s. 85 have been established by Waltons.

First, it was submitted that the contraventions were due to "reasonable mistake" (s. 85 (1) (a)).

Few words in the English language are susceptible to more meanings or more misuse than the word "mistake". The Shorter Oxford English Dictionary gives a wide meaning of the word:-

"A misconception of the meaning of something; hence, an error or fault in thought or action".

In Boyle v. Wright 1969 V.R. 699, Smith J. considered the meaning of "mistake" in a not dissimilar context to s. 53 (a) and said at p. 702:-

"For I take the word 'mistake' in the section to include an error in conduct consisting of an unintended failure to perform correctly and effectively a task intended to be duly performed: compare Sandford v. Beal (1895), 65 L.J.Q.B. 73; Garrett v. Toohey's Ltd. (1949) 23 W.C.R. (N.S.W.) 80; Shorter Oxford English Dictionary, 'mistake' . . ."

In my opinion, no mistake of any kind has been established as to the representations of 29 June and 7 July 1980. The evidence is silent as to the relevant conduct surrounding those representations. As to the representation of 20 July 1980 Mr. Swann may have been "mistaken" in thinking that it was "quite O.K." to authorise the relevant advertisement because there had been no complaint about the earlier (i.e. February 1980) advertisement ("natural pine"); but in my opinion that was not a mistake within the meaning of paragraph (a) and, even if it were, it was not a "reasonable" mistake.

Next, it was submitted on behalf of Waltons that the contraventions were due to "an accident" (s. 85 (1) (c)).

The Shorter Oxford gives as the meaning of the word "accident", so far as relevant; an "unforeseen contingency"; a "disaster".

Webster gives as its meaning, so far as relevant; "a happening that is not expected, foreseen or intended; an unpleasant and unintended happening, sometimes resulting from negligence, that results in injury, loss, damage, etc.".

In Boyle v. Wright (supra) Smith J. said at p. 702:-

" . . . I take the word 'accident' to include 'an unlooked-for mishap, or an untoward event which is not expected or designed';"

In my opinion, on no view of the facts in this case can it be said that the contraventions were due to an accident.

Finally, it was submitted on behalf of Waltons that the contraventions were due to "some other cause beyond the defendant's control". Again, this is not established by the facts.

Even if I were satisfied that the contraventions were due to "an accident or to some other cause beyond the defendant's control", it has not been established that Waltons "took reasonable precautions and exercised due diligence to avoid the contraventions" (s. 85 (1) (c) (ii)).

Counsel for Waltons submitted that Waltons laid down a proper system to provide against contravention of the Act and provided adequate supervision to ensure that the system was properly carried out. Counsel relied on the following passage from the judgment of Bowen C.J. in Universal Telecasters (Qld.) Ltd. v. Guthrie (1978) 32 F.L.R. 360 at p. 363:

"The mere fact that its system and supervision has proved inadequate to prevent error, does not necessarily establish that its system is defective. Even the best systems may break down due to human error. It is necessary to make a judgment about the system and the provision for supervision."

Waltons did have office systems within the furniture-buying department and the advertising department; doubtless in other departments too. However, the evidence falls far short of establishing that the contraventions were due to a cause beyond the control of Waltons.

Waltons has not established defences under s. 85.

I refrain from entering convictions at this stage. The matters are adjourned to a date to be fixed for the purpose of enabling Waltons to present evidence relating to mitigation and fines and for the purpose of deciding costs.

HIS HONOUR: Counsel for Waltons Limited asks that the questions of fine and costs be dealt with today. The prosecutor raises no objection so I will adopt that course.

The maximum fines which may be imposed under the Trade Practices Act 1974 for breaches of Part V are substantial and reflect the concern of the legislature to protect the occurrence of misleading or deceptive conduct or the making of false representations in trade or commerce.

In the present case the most important aspect of punishment is the deterrence of Waltons Limited and other traders from making false representations when advertising their products. However, there is a sharp distinction between false representations arising from an established pattern of wrongful conduct and one or a few isolated incidents such as occurred here.

I need not refer to all the relevant matters which must be taken into account in determining fines in cases of this nature. It is sufficient if I simply refer to the principles stated by Smithers J. in Eva v. Mazda Motors (Sales) 1977 A.T.P.R. 40-020 and in Eva v. Southern Motors Box Hill Pty. Limited (1977) 15 A.L.R. 428; also to my own judgment in O'Neill v. El Camino Autos Pty. Limited, (1980) 42 F.L.R. 35.

The advertisements appeared in two Sydney Sunday newspapers having a wide circulation and the letter box distribution also covered a reasonably wide area of Sydney, hence they would have been read by a large number of people. However, there is no evidence that a lot of people were in fact misled or deceived by the errors in the advertisements.

It has not been established that there was any attempt by or on behalf of Waltons to deliberately mislead or deceive the public or deliberately make false representations about the goods described as a "kitchen nook", although the circumstances in which the offences were committed are somewhat unclear.

The change in the wording of the newspaper advertisements from "solid pine" to "natural pine" was, however, a decision deliberately taken by the relevant officer at Waltons but not with any intent to mislead, deceive or make a false representation. Quite the contrary, he thought that he was removing any vice in the advertisement that may previously have existed. On the other hand, although the evidence is unclear as to how the offences occurred, except in the case of the advertisement as to the nook being of natural pine, the fact is that they did occur and the systems employed by the relevant department of Waltons did not prevent them from occurring.

There is no satisfying evidence that steps have been taken to ensure that such errors do not occur again. However, no doubt, in large business enterprises such as Waltons, errors do occur but it is to be hoped that controls will be tightened in the future so as to ensure that there is no repetition of offences such as those involved here.

There is no suggestion that Waltons saved money by the false representations that were made in the various advertisements - the evidence is that the cost to Waltons of these kitchen nooks with or without pine board and veneer is much the same - nor is there evidence that, by making the false representations, Waltons have sold more kitchen nooks than they would have if representations had been accurate.

The offences appear to me to have been of a substantially similar nature and to have occurred at about the same time, hence, the Court must not impose fines on Waltons that in the aggregate exceed the maximum fine that would be applicable in respect of one offence by Waltons against s. 53 (a). (See s. 79 (2) of the Act). I do not regard the offences in the present case as trivial, but they are not at the upper end of the scale of seriousness.

Having taken these and other matters into account I propose to impose a fine of $750.00 in respect of the contravention on or about 29 June 1980, of $750.00 in respect of the contravention on or about 7 July 1980 and of $500.00 in respect of the offence on or about 20 July 1980. The orders of the Court are as follows:-

1. Waltons Limited is convicted of committing three 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 or about 29 June 1980, of $750.00 in respect of the contravention on or about 7 July 1980 and $500.00 in respect of the contravention on or about 20 July 1980.

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.

MR. MEAGHER: If it please the Court.

HIS HONOUR: Anything further arising?

MR. HEWITT: No, thank you, your Honour

AT 3.30 P.M. THE MATTER WAS ADJOURNED INDEFINITELY