Henderson, C.J. v Australasian Conference Association Ltd

Re: CRAIG JACKSON HENDERSON
And: AUSTRALASIAN CONFERENCE ASSOCIATION LIMITED
No. G79 of 1986
Trade Practices

COURT

IN THE FEDERAL COURT OF AUSTRALIA

SOUTH AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION
Fisher J.

CATCHWORDS

Trade Practices - consumer Product Safety Standards - Unsafe Goods Orders - Prosecution for supply of goods declared to be unsafe - Fine imposed.

Trade Practices Act s.62, s.79

HEARING

ADELAIDE

#DATE 8:7:1987

Counsel for the Prosecutor: Mr T.P. Kavanagh

Solicitors for the Prosecutor: Director of Public Prosecutions

Counsel for the Defendant: Mr C.H. Goodall

Solicitors for the Defendant: Mollison Litchfield

ORDER

The defendant is convicted on its plea of guilty to the charge in the information.

The defendant is fined the sum of $l,000, which sum is to be paid to the District Registrar of this Court in South Australia within 21 days of this date.

The defendant pay to the prosecutor his costs the same to be taxed if not agreed.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

JUDGE1

Australasian Conference Association Limited ("the defendant") has entered a plea of guilty to a charge for an offence against para.62(1)(b) of the Trade Practices Act 1974 ("the Act"). The offence relates to the supply of certain goods, namely Glucomannan in tablet form, which goods had been declared by the Attorney-General to be unsafe goods. The offence was alleged to have been committed on 6 May 1986. Section 62 was repealed by the Trade Practices Revision Act 1986 which took effect from 1 July 1986.

By sub.s 62(2D) of the Act, as it then was, the Attorney-General was empowered to declare goods unsafe. The sub-section, in brief, provided that if it appeared to him that goods of a particular kind would or might cause injury to persons using the goods he might by notice under his hand published in the Gazette declare the goods to be unsafe goods. Sub-section (1) of that section then, to the extent relevant, stated as follows:

"62(1) A corporation shall not, in trade or commerce, supply goods that are intended to be used, or are of a kind likely to be used, by a consumer if the goods are of a kind -

(a) ...

(b) in respect of which there is in force a notice under this section declaring the goods to be unsafe goods."

By notice dated 6 May 1985 and published in the Commonwealth of Australia Gazette No. S159 of 13 May 1985 the Attorney-General declared the goods specified above, namely Glucomannan in tablet form, to be unsafe goods.
Sub-section 79(1) of the Act provided at the relevant time that a person who contravenes a provision of Part V in which s. 62 is to be found is guilty of an offence punishable on conviction, in the case of a body corporate, by a fine not exceeding $50,000. Prosecutions for such offences are to be brought only in this Court which is by s.163 of the Act given jurisdiction to hear and determine these prosecutions. Proceedings however shall not be instituted except with the consent of the Minister, or a person authorised by the Minister to give such consents. It was not disputed that the consent required by s.163 to the institution of these proceedings was duly given.
The defendant is charged -

"l. On the 6th day of May 1986 at Glenelg in the State of South Australia AUSTRALASIAN CONFERENCE ASSOCIATION LIMITED a corporation being a company incorporated under the Companies (New South Wales) Code and having its registered office situate at 148 Fox Valley Road, Wahroonga in the State of New South Wales in contravention of Section 62(1)(b) of the Trade Practices Act 1974 in trade or commerce supplied goods that were intended to be used by a consumer being goods in respect of which there was in force a notice under section 62 of the said Act declaring the goods to be unsafe goods.

2. The particulars of the charge are:-

(a) The defendant trading as Sanitarium Health Food Co supplied Glucomannan in tablet form from its shop premises situate at 120 Jetty Road Glenelg by selling to Frederick John Miller a container of 60 tablets of Hedway Fibre Diet Glucomannan Tablets.

(b) By notice published in Gazette No. S159 of 13 May 1985 the Attorney-General of the Commonwealth of Australia declared the said goods to be unsafe goods."

The defendant has been described by one of its officers as "the legal body" of the Seventh Day Adventist Church. Under the registered business name "Sanitarium Health Food Company" the defendant operates in Australia a chain of health food stores, four of which are in or about Adelaide. It manufactures its own health food products and in addition sells in its retail outlets products manufactured by other people.
The prosecutor and the defendant have pursuant to O 49 r 5 of the Rules of Court each filed detailed affidavit material to enable the court to determine the appropriate penalty. The deponents of these affidavits were not required to attend for cross-examination. There were also in evidence extensive notes of an interview of officers of the defendant by officers of the Trade Practices Commission on 8 August 1986. The following facts were also agreed by the parties, namely

"l. Locally Glucomannan was marketed in both tablet and capsule forms.

2. One of its applications is as a diet aid because of its characteristic swelling upon coming into contact with moisture, i.e. it swells in the stomach and creates a "full" feeling.

3. In capsule or powder form the product apparently represents no problems. However in tablet form glucomannan poses a risk, because it absorbs moisture quickly and accordingly swells quickly.

4. Prior to the product being declared an unsafe good five cases of oesophageal obstruction in people attempting to swallow glucomannan tablets were reported in Australia. This was due to the tablet beginning to swell in the person's oesophagus before reaching the stomach. All cases posed a life threatening risk of oesophageal rupture and required a general anaesthetic for removal of the swelling tablets.

5. Because of the health risks associated with glucomannan in tablet form the Attorney-General declared the good to be unsafe by notice dated the 6th day of May 1985.

6. The contents of the pamphlet entitled "Glucomannan What ?" annexed hereto."

A copy of the annexure accompanies these reasons. There was no evidence that the defendant or any of its officers or employees were aware at the relevant time of the facts set out in paragraph 4 above.

Furthermore the prosecutor required the defendant to admit the following facts for the purpose of these proceedings, namely

"l. That the defendant is a company duly incorporated within the meaning of the Companies (New South Wales) Code.

2. That the name 'Sanitarium Health Food Company' is a business name registered within the meaning of the Business Names Act 1963 (South Australia).

3. That the defendant is the registered owner of the name 'Sanitarium Health Food Company'.

4. That the defendant trades under the name of 'Sanitarium Health Food Company' at 120 Jetty Road, Glenelg in the State of South Australia.

5. That the product on sale in the defendant's store at Glenelg on the 6th day of May 1986 displayed as Hedway Fibre Diet Glucomannan Tablets was Glocomannan in tablet form."

There being no notice served on the prosecutor disputing any of these facts they were, in accordance with the prosecutor's notice, deemed to have been admitted.
The offence occurred in the following circumstances.
The Attorney-General's notification appeared, as previously related, in the Government Gazette of 13 May 1985. At that time the stores of the defendant in South Australia had in stock several different brands of Glucomannan tablets including "Slim Plan F" supplied by Southern Health Foods, "Nature's Way" supplied by a body of that name and "Hedway" supplied by Adelaide Health Foods - Hedway Laboratories. The latter was the brand name attaching to the tablets in question in this matter, which were in the charge more particularly identified as "Hedway Fibre Diet Glucomannan Tablets". The first named tablets, "Slim Plan F" were by far the most popular selling line and the "Hedway" brand was stated to be a low volume seller. Only 48 packs of this latter brand were purchased by the Adelaide stores of the defendant between July 1984 and March 1985.
Shortly after the relevant notification by the Attorney-General the Retail Manager of the four Adelaide Health stores became aware that the particular tablets had been declared unsafe and should be withdrawn from sale.
By a memorandum dated 5 June 1985 to the supervisors of the shops he directed that these tablets be withdrawn from sale. This memorandum was in the following terms:

" 5th June 1985 SHOP SUPERVISORS

You will have received notification from various firms that Glucomanin (sic) Tablets are to be withdrawn from sale. In most cases, we understand, these will be replaced by Capsules which appear to present no problems.

Next time the van comes round please give the driver any stocks you may be holding. We will be handling their return from here.

You would know that there have been some cases where people have not followed the instructions which state the tablets should be taken with a full glass of water. The result of not following the instructions can be quite disastrous."

A driver employed by the defendant shortly thereafter attended at each of the four Adelaide shops with instructions to collect all Glucomannan tablets. This was the only procedure adopted in Adelaide as a follow-up to the memorandum of 5 June 1985.
On 6 May 1986 a Project Officer of the Trade Practices Commission entered the premises of the defendant at 120 Jetty Road, Glenelg. He noticed in the centre of the store a display of Hedway Health Products. Included in the display were six packs of "Hedway Fibre Diet Glucomannan Tablets". He purchased one pack of the tablets at a price of $7.50 per pack of 60 tablets from a shop assistant. The defendant was advised by the prosecutor of this purchase on the same day and also that another shop of the defendant, situated in the Da Costa Arcade, Grenfell Street, Adelaide had two packs of the tablets on display. At a later interview the defendant agreed that there were tablets on display at its shop situated at 40 Degraves Street, Melbourne. However when an officer of the Commission sought to purchase a pack of tablets the shop supervisor declined to sell.
This interview was held at the registered office of the defendant in New South Wales on 8 August 1986. Four officers of the defendant were in attendance. There was no dispute as to what took place or was said at this interview. All of the officers, one of whom was the then Retail Manager in South Australia, were co-operative and contrite. They particularly expressed their concern that their procedures were not effective and the impact of this on the reputation of the company which had been operating for 80 years.
The officers of the defendant conceded that the declaration of the tablets was well publicized and that suppliers were happy to replace tablets with capsules. They said that branch managers were made aware that the tablets were to be withdrawn from sale. Those interviewed could give no acceptable explanation for the failure so to withdraw other than "human error". They did put forward the view that the Hedway product was not clearly labelled as "Glucomannan" in that more emphasis was given on the label to the words "Fibre Diet". Furthermore Hedway supplied "40 to 60" other products all with very similar packaging and labelling.
The only question before the Court is the amount of an appropriate penalty in the circumstances. Counsel for the defendant conceded that his client must pay the prosecutor's costs of these proceedings. Furthermore the defendant did not seek to rely upon any of the defences provided by s.85 of the Act.
During their submissions each counsel drew attention to and relied upon, if only to distinguish, the decision of Northrop J. in Ransley v. Coles Myer Ltd. an unreported judgment delivered on 27 March 1987. It was a prosecution relating to an offence under the same section of the Act and arising in somewhat similar circumstances. Coles Myer Ltd was fined $500. In that case as well as the present matter the breach of the law was the result of carelessness. Neither parties' contravention was deliberate or even particularly serious, though the consequences to third parties could well have been dangerous. It is fair to conclude that there was no moral turpitude, no dishonesty and no profit making involved.
However, in my opinion if the Coles Myer matter is used as a bench mark, this is a more serious offence and warrants a more substantial penalty. The following differences justify that view. In the case before him Northrop J. noted that there was no evidence of any publicity at the time the Minister made his declaration. Nor was there any evidence that any dangerous situation had occurred upon the taking of the tablets. In this matter the defendant conceded that there had been at the time of declaration much publicity and that it was well known that suppliers had agreed to replace the tablets which had to be withdrawn. There was also the evidence in paragraph 4 of the agreed facts that there had been 5 cases before the declaration in each of which there occurred a risk of oesophageal rupture. However there was no evidence that the defendant was aware of any of these 5 occurences at the time.
I am also of opinion that the steps which Coles Myer took to have the offending tablets withdrawn from sale in its stores were more thorough and more extensive. In effect, that company adopted the procedures laid down in its Product Recall Manual, whereas those adopted by the defendant were informal and slipshod. The circumstances of the incident which prompted the charge against Coles Myer disclosed that some steps were taken to withdraw the tablets from sale in the particular store. More particularly, six bottles were removed from the display shelves, wrapped and labelled and put in a store room. It was the subsequent failure on the part of the officers of the company to ensure that these bottles were not returned to the shelves which led to the offence.
By way of contrast, in the case of the defendant there was no evidence that any action was taken at the Glenelg store to remove from sale the tablets upon receipt of the Retail Manager's memorandum. The defendant had procedures established only for recall of its own manufactured products and it was not until after the contravention herein that these were applied to bought-in lines. Thus it may reasonably be inferred that the situation was the same in the Da Costa Arcade and Degraves Street, Melbourne stores. It is my opinion that merely to inform store supervisors that the tablets would be collected by a driver was a very haphazard procedure, especially if there was a complete absence of any follow-up. There was in fact no suggestion that any steps at all were taken by the stores or the drivers or management to check whether the instructions were carried out. The defendant could only attribute its failure to the similarity of labelling adopted in regard to the 40-60 Hedway products in its stock. I do not attach much significance to this submission.
The principles upon which the appropriate level of penalty is to be fixed are well known and need not be repeated. They were recently reiterated in this Court by French J. in Gardam v. Splendid Enterprises Pty. Ltd. an unreported decision of 16 April 1987 and I have taken them into account. His Honour was there also dealing with a contravention of s.62 of the Act.
In all the circumstances including the fact that the defendant has not previously contravened the Act I am of opinion that a fine of $1,000 is the appropriate penalty and I so order. The defendant must pay the prosecutor's costs the same to be taxed if not agreed. The fine is to be paid to the District Registrar of this Court within 21 days of this date.

[1987] FCA 370

08 JULY 1987