Keith Harris & Co Ltd v Bryant, Betty Veronica

[1980] FCA 99

Re: KEITH HARRIS & CO. LIMITED, UNITED BEVERAGES PTY. LIMITED, JUSFRUTE
LIMITED
And: BETTY VERONICA BRYANT, BRYANTS HOTELS PTY. LIMITED (1980) 43 FLR 183
No. G 76 of 1979
Contempt of Court

COURT

IN THE FEDERAL COURT OF AUSTRALIA

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

CATCHWORDS

Contempt of Court - trap orders - no notice to trapped respondent until well after trap sprung - nevertheless on the evidence in the instant case respondents found in breach of undertaking.

Contempt - Undertaking settling action - Defective service of notice of undertaking - Jurisdiction of court - Breach of undertaking - Weight of evidence obtained by trap - Failure to notify trapped respondent immediately after trap sprung - Construction of undertaking - Reasonable steps - Punishment - Costs - Federal Court of Australia Rules, O. 40, r. 13 (3).

HEADNOTE

The applicants, distributors and marketers of Orchy orange juice, in December 1979 commenced an action against the respondents, a director of a company conducting the business of a licensed hotel and the company itself, alleging breaches of ss. 52 and 53 (c) of the Trade Practices Act 1974. The action was settled prior to trial and pursuant to the terms of settlement the respondents gave an undertaking to the court and by par. 1 thereof in part undertook "not to supply (in the conduct of the business of hotelier) in response to a request for 'Orchy' orange juice . . . any other brand of orange juice . . . without taking steps to bring to the attention of the person who made the request, either prior or subsequent to that request, that the orange juice intended to be supplied is not 'Orchy'".

Subsequently the applicants brought a notice of motion seeking orders that the respondents be dealt with for contempt of court for alleged breaches of that undertaking.

Held: (1) Although notice of the undertaking had only been served in accordance with O. 40, r. 13 (3) of the Federal Court of Australia Rules on the respondents on 17th and 19th May, 1980, and an earlier document served on 8th January and 14th February, 1980, had not carried the required endorsement, the applicants could rely upon breaches of the undertaking committed prior to 19th May, 1980, because: (a) the respondents' attention had been drawn to the terms of the undertaking when the earlier document had been served and it appeared that the general manager of the second respondent was well aware of the need to comply with the undertaking and no prejudice as a result of the earlier defective service was suggested; (b) failure to comply with the relevant rule as to service went to the discretion of the court not its jurisdiction. Sunibrite Products (Aust.) Pty. Ltd. v. Jabuna Pty. Ltd. unreported (Federal Court of Australia, Bowen C.J., 8th February, 1980), applied.

(2) The evidence on which the applicants relied should be accepted as: (a) although it had been obtained by trapping the respondents and the rule of practice of drawing the respondents' attention to such breaches soon after their occurrence to provide an opportunity for checking the position had not been observed; (b) there had been an absence of cross-examination of much of the applicants' evidence and the respondents had not called all the evidence open to them. Cellular Clothing Co. v. G. White & Co. Ltd. (1953), 70 RPC 9, discussed.

(3) The respondents did not take reasonable steps to do what was required of them and were in contempt of court because: (a) the steps taken before a request for Orchy orange juice was made were limited to the erection of signs and the wearing of badges by some attendants which did not have the required effect, and (b) steps taken after such a request were limited to the signs referred to in (a) and instruction and monitoring of staff of which there was insufficient evidence.

(4) The fact that the applicants' witnesses were not deceived did not necessitate a different finding.

Showerings Ltd. v. Fern Vale Brewery Co. (No. 2), (1958) RPC 484, applied.

(5) The punishment of the respondents should be limited to an order for costs because the general manager of the second respondent: (a) had endeavoured to institute a satisfactory system to comply with the undertaking, and (b) since the breaches had instituted a monitoring system, changed the form of one sign and was anxious to see the undertaking was observed.

HEARING

Sydney, 1980, June 19-20, 25. #DATE 25:6:1980

NOTICE OF MOTION.

The applicants sought an order that the respondents be dealt with for contempt of court.

M. H. McHugh Q.C. and W. M. C. Gummow, for the applicants.

R. B. Murphy Q.C. and P. Jacobson, for the respondents.

Cur. adv. vult.

Solicitors for applicants: Allen, Allen & Hemsley.

Solicitors for respondents: Dare Reed.

T. J. GINNANE

Orders accordingly.

JUDGE1

The notice of motion in this matter seeks orders that the respondents be dealt with for contempt of court. On 10 December last, the applicants commenced proceedings against the respondents in which they alleged breaches by the respondents of the provisions of ss.52 and 53(c) of the Trade Practices Act 1974.

The applicants are associated companies. They are and have been for some years, engaged in the distribution and marketing of an orange juice known as Orchy. The second respondent conducts the business of the Strata Motor Inn at Cremorne. The inn is a licensed hotel and has a number of bars where liquor is sold. The first respondent is a director of the second respondent. At all material times, the second respondent sold an orange juice known as Berri from each of its bars. It did not sell the applicants' product, Orchy orange juice.

The complaint which the applicants made in their application filed in December 1979 was that the respondents were supplying to customers who asked for Orchy orange juice, orange juice of another brand, without the customer being informed that the inn did not stock Orchy, so that their order could not be fulfilled.

The matter did not proceed to a hearing. It was settled. The terms of settlement provided for the giving by the respondents of an undertaking to the court. The undertaking was in the following terms:

The Court Notes:

"1. The undertaking to the court by the Respondents by their Counsel that in relation to their conduct of the business of hotelier at the Strata Motor Inn not to supply in response to a request for "ORCHY" orange juice, or for "ORCHY", or for "ORCHY" or "ORCHY" orange juice mixed with any other drink, any other brand of orange juice or any beverage containing any other brand of orange juice, without taking steps to bring to the attention of the person who made the request, either prior or subsequent to that request, that the orange juice intended to be supplied is not "ORCHY" or "ORCHY" orange juice.

2. That it will be sufficient compliance with the requirement to take steps as specified in the above undertaking, if the bar attendant to whom the request is made either or both:

(i) points out to the person placing the order a sign displayed on the premises or on his person containing the words, 'We sell Berri Orange Juice not 'ORCHY' ', or 'We sell (name of brand or other description) orange juice not 'ORCHY' ' and

(ii) says to that person words including the sentence, "We sell Berri Orange Juice not 'ORCHY' ', or 'We sell (name of brand or other description) orange juice not 'ORCHY' ', or 'We don't sell 'ORCHY' ', or the substance of any of those expressions."

It is of alleged breaches of the terms of that undertaking that the applicants now complain. No representatives of the respondents, other than legal representatives, were in court when the undertaking was given, but there is no issue between the parties that it was given on their behalf, and was intended to be given by them to the court.

Formal service of notice of it was effected on the first respondent on 8 January, 1980, and on the second respondent on 14 February, 1980. The service was not in accordance with the rules in that the documents served were not endorsed with statements that in the event of failure to observe the undertaking, the respondents might be liable to be punished for contempt of court; see Order 40, Rule 13(3) of the Rules.

It was apparently this omission which led to the reservice of the undertaking on the first respondent on 17 May, 1980, and on the second respondent on 19 May, 1980. This time, the rule was complied with. The significance of failure to comply with it initially lies in the fact that a number of the breaches of the undertaking were alleged to have been committed before service was effected a second time, namely on 9, 10, 12 and 17 May, the last date being of relevance only insofar as the second respondent is concerned.

The judgment of the Chief Judge of this Court in Sunibrite Products (Aust.) Pty. Limited v. Jabuna Pty. Limited (unreported - 8 February, 1980) establishes that failure to comply with the relevant rule goes to discretion, not jurisdiction. I refer to page 6. I am satisfied that I should permit the applicants in the present case to rely on breaches of the undertaking committed prior to the second service of the undertaking on each respondent.

In reaching that conclusion, I have taken into account the facts that the respondents had had expressly drawn to their attention the terms of the undertaking when the earlier service was effected, and that they have acted throughout on legal advice. Furthermore, the evidence of Mr. A.C. Bryant, who is, among other things, the general manager of the second respondent, does not suggest any prejudice as a result of the omission, from the documents which were first served, of the statement required by the rule. The general purport of his evidence was that he was well aware of the need to comply with the terms of the undertaking and that he had done his best to do so.

The applicants were suspicious that the terms of the undertaking were not being observed. They set out to trap the respondents. For this purpose, the applicants' solicitors directed a number of clerks in their part-time employ (they are all law students) to visit the premises and place orders for Orchy or Orchy orange juice. This they did on 9, 10, 12, 17, 22, 24 and 29 May. The effect of their evidence was that on each occasion they were served with an orange juice dispensed from a Berri orange juice container. On no occasion did any of the bar attendants say that the establishment did not sell Orchy or that it only sold Berri orange juice. Nothing was done to draw their attention to the fact that only Berri orange juice was sold, except insofar as certain signs stating this fact were hung or placed in various parts of the bars. I shall say more of those signs in due course.

Each of the applicants' witnesses attempted to give a description of the bar attendants who had served them. They were, of course, unable to supply their names. Despite a challenge which was made to the evidence of the various witnesses, I have no hesitation in saying that I accept the general purport of it. Only one was cross-examined. In the course of the cross-examination it emerged that notes had been made on the days in question describing the bars, what had occurred when an Orchy orange juice had been asked for and the appearances of the bar attendants of whom the requests were made. After it became apparent that there were notes in existence the cross-examination came quickly to an end.

The following inter-change then took place:

"MR McHUGH (of counsel for the applicants): For the purpose of the affidavit, your Honour, whatever concessions my learned friend has got out of this witness can be taken as concessions in respect of the other witnesses.

HIS HONOUR: In other words you will not comment on any failure to cross-examine the other witnesses if he relies upon the answers he got from the last witness?

MR McHUGH: That is so, your Honour."

The respondents did not seek to cross-examine any other witness. One was, however, called to give some formal evidence in chief.

There was nevertheless a strong criticism made of the evidence called on the applicants' behalf. It was said that the applicants were under an obligation to draw the breaches, soon after they occurred, to the respondents' attention; otherwise they had no hope or opportunity of checking with their own employees the accuracy of what was supposed to have occurred. A bar attendant, asked for an Orchy during a busy shift, would not be likely to have any recollection, even at the end of a shift, of what his reaction to a request for Orchy orange juice might have been, or whether indeed such a request had been made of him. No notice of the breaches was given the respondents until the first week or so of June, when the various affidavits were served.

I think there is force in this criticism. I refer to what was said about the similar situations in Cellular Clothing Co. v. G. White and Co. (1953) 70 R.P.C.9 at p.14 and O.T. Co. v. Muir (1914) 31 W.N. (N.S.W.) 87. It is to be noted, however, that Harman J. (as he was) who decided the Cellular Clothing case, refers to an alternative practice of supporting trap orders "by some written evidence". It would seem to me that the notes made by the various witnesses here would fall into that category.

What is said in the cases to which I have referred is a rule of practice. It is not a principle of law. In the end, the question is whether one accepts the evidence that has been led. What the learned judges in the cases cited have emphasised is the very difficult position a trapped respondent is placed in if his attention is not soon drawn to the matter. He has no means of checking the position for himself by ascertaining his own employees' version of what transpired.

My decision to accept the applicants' evidence rests partly upon the absence of cross-examination to which I have referred, but also upon the evidence led on behalf of the respondents. Mr. Bryant was called. His evidence was mainly concerned with steps taken to alert customers that the inn did not sell Orchy orange juice. He dealt with the signs already mentioned, and also with instructions given the staff. He does not serve in the bar himself, so he could give no evidence of what the usual practice of bar attendants was if confronted with an order for an Orchy. He said that of all the bar attendants, descriptions of whom were given in the evidence, only one had been identified, a Miss van Ness. She was called. He said that there were three bar managers responsible to him, five permanent bar attendants and approximately 45 casually employed bar attendants at any given time. The turnover of these casual employees was high. No witness other than Mr. Bryant and Miss van Ness was called. It would have been open to the respondents to call the three bar managers who are regularly in the bars, and one or more of the bar attendants, to say what the usual practice was when an Orchy orange juice was asked for. Such evidence would have been admissible and may have been deserving of great weight in the light of the respondents' unquestionable difficulty in identifying the actual occasions relied upon as breaches of the undertaking; but there was no such evidence, except some given by Miss van Ness. It was as follows: -

"What particular form of words was given to you? - - - We had a little poem, 'We sell Berri and not Orchy'.

HIS HONOUR: You had a little what? - - - A little poem. 'We sell Berri and not Orchy'. It is just a little phrase.

MR MURPHY: It has currency at the hotel, I think, your Honour.

You are told to tell the customers this? - - - Yes.

What is your response to that? - - - Well, as far as I am concerned it is orange juice.

- - - would you say anything? - - - If I have got time, yes - like, if you are actually listening to one person.

HIS HONOUR: May there be occasions when Orchy orange juice is ordered and simply give them Berri? - - - If you are very busy you would not hear 'Orchy' but just hear 'orange juice'.

But what if you hear it? - - - Then you stop and you tell them.

Do you always do that? - - - Yes, as far as I can."

That evidence on its face does not suggest to me that Miss Van Ness always recited her poem. I am confirmed in that view by a certain hesitancy she displayed when giving her answers.

The evidence called on behalf of the applicants having been accepted, what is the consequence? It is that it is established that the respondents did not on the occasions relied upon by the applicants do as they might have done and follow out the procedure provided for in paragraph 2 of the undertaking. In the applicants' submission that is the end of the matter; the respondents are in breach and thus in contempt. I reject that submission. My reasons for doing so stem from what I conceive to be the proper construction of the undertaking.

In my opinion the substance of the undertaking is contained, and only contained in paragraph 1. Paragraph 2 provides a method selected by the parties for carrying it out. If what is provided for in paragraph 2 is done, there can be no breach. But, if it is not done, the question still remains whether the respondents have complied with the undertaking otherwise. Paragraph 2 does not provide the only means of compliance.

The proper construction of the undertaking is, I think, made clear by the words in paragraph 1, "either prior or subsequent to that request". It is thus contemplated that the undertaking may be complied with by the taking of steps prior to any request for Orchy orange juice being made. Paragraph 2 is only applicable where a request has been made. If it is complied with, as I have said, the respondents will not be in breach because they will have taken steps, but taken those steps subsequent to and, not prior to, the request. There will be no breach because of the parties' agreement that, if there is compliance with paragraph 2, steps within the meaning of paragraph 1 have been taken. But that does not mean that the respondents may not comply with the undertaking given by them in paragraph 1 by taking steps prior to any request being made.

It is next necessary to consider whether the respondents did take steps prior to the requests being made. It is also necessary to consider, if I am against the respondents on their submission that they did, whether subsequent to such requests they did take steps within the meaning of paragraph 1 even though those steps were not those provided for in paragraph 2 of the undertaking. The starting point for the consideration of the problem is to determine whether one needs to understand "steps" as being steps which are sufficient or reasonable. In my opinion the steps which are to be taken must be steps which are reasonable in the circumstances. The undertaking, although given to the court, is the expression of an agreement by the parties engaged in a commercial dispute and who stand in a sense in a commercial relationship. To read the undertaking without supplying the word "reasonable" would leave it open to the construction that any step at all, however ineffective, would constitute a compliance with the respondents' obligation.

Then, it ought to be noticed that the problem which the parties sought to solve was the supplying to a customer of an orange juice which was not the applicants' product, notwithstanding his request was for Orchy. That was the only problem. It was not suggested that the respondents in any other way pretended to sell Orchy orange juice. The reasonable steps to be taken must therefore be steps designed to deal with that situation. It is a situation which is expressly mentioned, not only in paragraph 2, but also in paragraph 1 of the undertaking.

What then are the steps upon which the respondents rely? The question should be looked at in two parts. The first part concerns steps taken, before a request for Orchy is made, to bring to the attention of the person who orders the Orchy orange juice the fact that he cannot purchase it at the respondents' establishment. The only steps upon which the respondents can rely are the placing of the signs earlier mentioned. Other steps taken to instruct staff as to what to do if a customer orders an Orchy orange juice relate to the second part of the question, that is, steps taken to inform a person subsequent to the placing of an order that Orchy is not sold in the respondents' establishment.

There are three different types of signs which are in question. The first of these, in the form in which they were prior to the commencement of these proceedings, that is the proceedings for contempt, bore the words, "We sell Berri orange juice, not Orchy". The words "We sell Berri" appear in black print, the words "orange juice" in brown print, and the words "not Orchy" in grey print. The word "Berri" was in larger print than any other word and was circled with an orange circle. Although the words "not Orchy" are in slightly larger print than the words "We sell" or the words "orange juice", they are, because they are printed in grey, fainter than any other words on the sign. The signs were printed on an off-white background and were about 16 inches by 4.5 inches in size.

The second type of sign was placed on each of the Berri orange juice dispensers. Each said, "We sell Berri orange juice not Orchy". Again, the emphasis of the sign is on the word "Berri", the other words being printed in a less bold print although this time all in black apart from the words "orange juice" which are in an orange colour.

The third type of sign comprises badges worn by some members of the staff. They said, "We sell Berri orange juice, not Orchy". The words "not Orchy" were in a substantially smaller print than any of the other words on the badge. The word "Berri" was in larger and more emphatic print than any other word on them and was circled.

The first type of sign was hung at intervals over the bars. They were hung above head height so that they were not easily seen by persons at the bars where all drinks were purchased. There was no table service.

There was one dispenser in each bar so that only customers purchasing orange juice close to the dispensers would be likely to notice the signs placed on them. The bars were all large.

The evidence of Mr. Bryant and Miss Van Ness established that not all attendants wore badges. She wore hers on her waist which would not always be visible to customers at a bar.

I am satisfied that the signs did not amount to the taking of reasonable steps by the respondents to warn customers that Orchy orange juice was not sold.

The signs seem to me to be more of an advertisement for Berri than an indication that Orchy was not sold. This is hardly surprising when one considers that the signs were printed by Berri free of charge to the respondents. It is not for me to give advice to the respondents but the least they should have done was to see to it that there was no disparity in the size, colour or boldness of the print when it came to the critical part of the message, namely, that the establishment did not sell Orchy. The grey print on the first type of sign is the most substantial offender in this respect. To be added to the considerations so far mentioned is the positioning of the signs. They could not be seen by every person in the respondents' bars nor would they necessarily come to the attention of customers when they approached the bars themselves.

I am therefore satisfied that reasonable steps were not taken to bring to the attention of customers prior to their making a request for an Orchy orange juice the fact that the establishment did not sell Orchy orange juice.

I am also satisfied that reasonable steps, other than by complying with paragraph 2 of the undertaking, were not taken to bring the fact that Orchy was not sold to the attention of customers after an order had been placed. The steps relied upon are the signs already mentioned and the steps taken to instruct the staff as to what to do. I must have regard to the totality of what was done in order to come to a conclusion as to whether the steps were reasonable. But the signs had the deficiencies which I have already mentioned and the evidence of the applicants' witnesses plainly established that the steps were not having their intended effect.

There is no evidence from Mr. Bryant that steps were taken to monitor the position so as to see whether staff were carrying out their instructions. That is now being done but only since the commencement of the proceedings for contempt. There is no evidence of supervision otherwise, yet the bulk of the staff employed are transient casual employees who must in the nature of things be very difficult to control. In all the circumstances I am satisfied that the respondents did not, as I say, take reasonable steps to do what was required of them. The breaches relied upon are therefore established; the respondents are in contempt of this court.

Before determining what should be done there is one other matter to be mentioned. The applicants' witnesses were not in fact deceived. They saw, on each occasion that an Orchy orange juice was ordered, the drink dispensed from a Berri container. Does that make any difference? Counsel for the applicants said not because the test was an objective one: had the respondents taken the steps required of them by the undertaking. Alternatively, he submitted I should be satisfied that breaches were being committed in relation to other sales of orange juice that must have taken place on the days in question. The fact that on no occasion did any bar attendant draw to the witnesses' attention that Orchy was not available, coupled with the inadequacy and positioning of the signs, were eloquent pointers to this being the probable state of affairs.

In the course of argument I was referred to Showerings Ltd. v. Fern Vale Brewery Company, (1958) R.P.C. 484. There the evidence was in large measure the evidence of trappers. It seems clear to me that Danckwerts J. (as he was) who decided the case viewed the evidence there in much the same way as I have done here. His Lordship was not troubled by the fact that the trappers were not deceived. I should take the same view.

I pass then to the question of what should be done. In my opinion this is not a case for any punishment other than will be inflicted by an order for costs. I think Mr. Bryant endeavoured to institute a satisfactory system to ensure that the provisions of paragraph 2 of the undertaking would be complied with. I think the probabilities are that insufficient supervision of the system was carried out, particularly as the year went on. It is, no doubt, difficult to maintain supervision because of the frequent changes that occurred in the identity of the second respondent's staff and the extreme busyness of the bars at various times. But that is no excuse for not complying with the undertaking which was given freely and voluntarily to the court as a means of settling the litigation between the parties. However, Mr. Bryant has since instituted a monitoring system and has changed the form of one of the signs, although not, in my opinion, sufficiently. He appears to be anxious to see that the undertaking is complied with.

I would say, however, that my decision not to impose a fine is not to be taken as indicating that the court does not view the contempt seriously. It may be expected that a far less lenient view will be taken if conduct of the kind complained of is repeated. The respondents will need to be ever-watchful that their obligations are met.

The respondents submitted that I ought not to make an order as to costs. Their submission was based principally on the failure of the applicants to notify them immediately of the breaches as they occurred. I have already said something of that matter. I would have been more receptive of the argument if there had been some credible evidence that at least some of the attendants did as they were supposed to do, or if the signs, particularly the first of those described, had been less an advertisement for Berri and more a clear indication that Orchy was not sold on the premises.

I have reached the conclusion that the respondents must pay the applicants' costs as between solicitor and client. The order of the court is that the respondents pay the applicants' costs as between solicitor and client. I make no other order on the motion.