Kiley, M.J. v Lysfar Pty Ltd Michael John Kiley Pty Ltd v International Management Group of America Pty Ltd
[1985] FCA 399
•21 AUGUST 1985
Re: MICHAEL JOHN KILEY
And: LYSFAR PTY. LIMITED and INTERNATIONAL MANAGEMENT GROUP OF AMERICA
Nos. ACT G57, 59, 61, 63, 83, 85, 87, 89, 91, 93, 95, 97, 99, 102, 103, 180,
105, 182, 184, 186, 188, 190, 192, 194, 196, 198, 200 and 202 of 1984
Trade Practices
COURT
IN THE FEDERAL COURT OF AUSTRALIA
AUSTRALIAN CAPITAL TERRITORY
DISTRICT REGISTRY
GENERAL DIVISION
Neaves J.
CATCHWORDS
Trade Practices - Consumer protection - Prosecutions - Advertisements promoting tennis tournament - False representations that services of a particular quality - Pleas of guilty - Factors relevant to penalty.
Trade Practices Act 1974, ss. 53(aa), 79, 163
HEARING
CANBERRA
#DATE 21:8:1985
ORDER
In the matter ACT No. G 57 of 1984, the defendant Lysfar Pty. Limited be convicted of an offence against sections 53(aa) and 79 of the Trade Practices Act 1974 being the offence alleged in the information in that proceeding and pay a fine of $2,000 in respect of that offence.
In each of the matters ACT Nos. G 59, 61, 83, 85, 87, 89, 91, 93, 95, 97, 99, 102, 103, 105, 180, 182, 184, 186, 188, 190, 192, 194, 196, 198, 200 and 202 of 1984 the defendant Lysfar Pty. Limited be convicted of an offence against sections 53(aa) and 79 of the Trade Practices Act 1974 being the offences respectively alleged in the information in each such proceeding and pay a fine of $100 in respect of each such offence.
The fines be paid to the District Registrar of the Court within 21 days from the date of this order.
The defendant Lysfar Pty. Limited pay the costs of the prosecutor of and incidental to the proceedings in respect of the offences of which it has been convicted. 5. The defendant International Management Group of America Pty. Limited be convicted of an offence against sections 53(aa) and 79 of the Trade Practices Act 1974 being the offence alleged in the information in this proceeding.
The defendant International Management Group of America Pty. Limited pay a fine of $2,000 in respect of that offence.
The fine be paid to the District Registrar of the Court within 21 days from the date of this order.
The defendant International Management Group of America Pty. Limited pay the costs of the prosecutor of and incidental to this proceeding.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
JUDGE1
Prosecutions have been brought in the Court pursuant to sections 79 and 163 of the Trade Practices Act 1974 ("the Act") against Lysfar Pty. Limited and International Management Group of America Pty. Limited in respect of contraventions of the provisions of section 53 of the Act which, so far as material, provides -
"A corporation shall not, in trade or commerce, in connexion with the supply or possible supply of . . . . services or in connexion with the promotion by any means of the supply or use of . . . . services -
. . . .
(aa) falsely represent that services are of a particular standard, quality or grade;
. . . ."
Lysfar Pty. Limited is charged with 27 offences, International Management Group of America Pty. Limited with one.
The defendants pleaded guilty to the charges against them and the proceedings against both defendants were, by consent, heard together.
The prosecutions arise out of a series of advertisements which were published in the "Canberra Times" newspaper between 24 August and 16 November 1983 (both dates inclusive) promoting a tennis tournament called the Rio International Challenge which was to be held, and which was in fact held, at the National Indoor Sports Centre at Bruce in the Australian Capital Territory on 24, 25 and 26 November 1983.
Each of the charges alleges that the defendant falsely represented in a specified advertisement published in the "Canberra Times" that the Rio International Challenge would be of a particular quality namely that "Ivan Lendl would play John McEnroe in a tennis match on each of the three nights of the said Rio International Challenge whereas the said Ivan Lendl and John McEnroe were scheduled to play each other on one only of the three nights of the competition which comprised the said Rio International Challenge".
Lysfar Pty. Limited ("Lysfar") was incorporated in the Australian Capital Territory on 11 February 1982. It was apparently a shelf company. As from 1 March 1982 Coralie Faye Wood and Edgar James Hutchins became its only shareholders and directors and have remained such at all times since that date. The company's business consists in the promotion by advertisement in the press and otherwise of theatrical and other functions and events taking place in the Australian Capital Territory and is said to be the major such business in the Territory. The company continued the business which had previously been conducted in partnership over a period of some 10 years by its present shareholders and directors.
International Management Group of America Pty. Limited ("I.M.G.") is a subsidiary of a company incorporated in the United States of America. Its business consists, in the main, of managing sporting personalities and entertainers and, on a smaller scale, the promotion of sporting events. It has carried on business in Australia for approximately 6 years. It was the organiser of the Rio International Challenge, that tournament being sponsored by Rio, a division of Dunlop Olympic Limited.
I.M.G. entered into a contract with Lysfar under which the latter company undertook, in relation to the Rio International Challenge, to arrange press conferences, to publish advertisements and to provide other related promotional services. Mr James Erskine, a director of I.M.G., informed officers of the Trade Practices Commission at an interview on 4 July 1984 in relation to the matter that the terms of the contractual arrangement between I.M.G. and Lysfar provided for the payment to Lysfar of a fee of $3,000 plus costs incurred.
Mr Erskine also said that on 26 April 1983 a meeting was held at which Miss Wood, Mr Hutchins, Mr Graham Hannan, an employee of I.M.G., and himself were present. Miss Wood and Mr Hutchins were then informed that Mr John McEnroe and Mr Ivan Lendl and two other top tennis players would play each other in a round-robin singles competition in Canberra. It was only ever envisaged that Mr McEnroe and Mr Lendl would play against each other on one occasion during the competition.
On 22 August 1983 a luncheon for the press was held at which some details of the tennis tournament were announced. What was called a press kit or handout was supplied by I.M.G. to those attending. The following extract is taken from one of the documents included in the kit -
"Rio is pleased to announce their sponsorship for the third year of the RIO INTERNATIONAL CHALLENGE.
. . . .
To be played as a round-robin four-man tournament, Rio is pleased to announce that the 1983 Challenge will feature a clash between the two giants of world Tennis, John McEnroe and Ivan Lendl.
The rivalry between these two great players is now legendary and their meeting in Canberra will be yet another shot in the psychological warfare that these two have conducted over the last two years.
Both McEnroe, the world's No. 1 player and current Wimbledon Champion, and Ivan Lendl, the world's No. 2 ranked player are using the event as part of their preparation for their attack on the 1983 Australian Open.
Two further world class players will join McEnroe and Lendl to complete the field. The announcement of these players will take place after the U.S. Open.
The Rio International Challenge will be played on Thursday 24, Friday 25 and Saturday 26 November, with play commencing at 7.30 p.m. It will be televised nationally by the Seven Network.
Prizemoney for this year's Rio International Challenge has been dramatically increased to $100,000 with players competing for a first prize of $50,000.
. . . ."
Another document included in the kit read as follows -
"McENROE v. LENDL
HEAD TO HEAD
In one of the most publicised rivalries of modern tennis Czechoslovakia's Ivan Lendl holds a 7 - 6 advantage over John McEnroe in career head to head matches.
Lendl dominated McEnroe in 1982 winning all four contests:
semi final of Volvo Masters final of WCT finals (Dallas) semi final of Canadian Open semi final of U.S. Open
McEnroe in 1983 has again asserted his superiority winning 3 out of 4 contests. After losing to Lendl in the final of the Volvo Masters, he won their next 3 encounters:
final of U.S. Pro Indoors final of WCT finals (Dallas) semi final at Wimbledon
The stage is now set for these two champions to continue their rivalry in New York, Canberra and Melbourne.
Lendl more than ever is determined to regain the momentum he has lost in 1983 and McEnroe is equally determined to maintain his world number one ranking."
On 24 August 1983 the first of a series of advertisements appeared in the "Canberra Times". Evidence was given by Mr William Brassell, who was at the time employed by Lysfar as a publicity officer, that he was present at the press luncheon on 22 August 1983 and that at that time or immediately thereafter he was handed by Mr Hannan a graphic artist's rough sketch to be used as the basis for advertising material. That sketch bore the words "The greatest clash outside Parliament" above line drawings of faces representing Messrs McEnroe and Lendl and below those representations the words "Be there Nov. 25, 26, 27" and "Rio International Challenge". Mr Erskine, in his interview with officers of the Trade Practices Commission on 4 July 1984, stated that, while I.M.G. did not authorise any particular advertisement to be published, it did provide advertising copy and information to be included in the advertisements.
Mr Brassell added additional wording to the graphic artist's rough sketch, altered the dates of the tournament and composed the layout of the advertisement. He then arranged for the advertisement to be published on 24 August 1983. The wording appearing below the facial representations in the advertisement as published was as follows -
"LENDL v McENROE
NATIONAL INDOOR ARENA
Be there Nov 24, 25 26
John McEnroe and Ivan Lendl will face each other here in Canberra over three gruelling days. There'll be no love lost as each player fights for his reputation.
Together with two other champions, they'll turn on the best tennis this city has seen."
The words "LENDL v McENROE" were in large block type and were the most prominent part of the letterpress.
The nightly starting time of play in the tournament was omitted from the advertisement published on 24 August 1983. In advertisements subsequently published that information was added. The format of the advertisement was changed so that the words "LENDL v McENROE" were inserted, again in prominent block type, between the line drawings of the two faces. In the same space and immediately below the players' names were the words "NIGHTLY AT 7.30". The following letterpress which had appeared in the first advertisement was deleted from the next two advertisements which were published on 27 and 31 August 1983 -
"John McEnroe and Ivan Lendl will face each other here in Canberra over three gruelling days. There'll be no love lost as each player fights for his reputation."
It is clear that those words were deleted solely to reduce the size of the advertisement and hence its cost.
Advertisements also appeared in the "Canberra Times" on 3, 7, 10, 14, 17, 21, 24 and 28 September 1983 and 1, 5, 6, 8 and 12 October 1983. Those advertisements were similar in format and wording to the advertisements published on 27 and 31 August 1983 but with the deletion of the following letterpress which had formed part of those advertisements -
"Together with two other champions, they'll turn on the best tennis this city has seen."
The purpose in deleting those words was, again, to reduce the cost of the advertisement.
Further changes were made in the form of advertisement that was published on 15, 19, 20, 22, 26 and 29 October 1983 and 2, 5 and 10 November 1983. Those advertisements included words to the effect that after the singles game each night there would be a doubles match featuring members of the Australian Davis Cup team.
The wording was again altered in the advertisements published on 12 and 16 November 1983. Those advertisements followed the same general format as those lastly referred to in that they included references to a doubles match to be played each night but they included, after the words "LENDL v McENROE" and the reference to the time and place of the tournament, the following -
"IN A ROUND-ROBIN COMPETITION WITH TWO OTHER INTERNATIONAL PLAYERS"
The advertisements, however, still contained the words prominently displayed -
"LENDL v McENROE
NIGHTLY AT 7.30".
The change in the wording of the advertisement to refer to a round-robin competition took place following a complaint to Miss Wood by an officer of the Consumer Affairs Bureau of the Department of Territories and Local Government by telephone on 9 November 1983. That complaint was also the subject of a letter to Miss Wood dated 11 November 1983.
Lysfar is charged in respect of each of the 27 advertisements to which I have referred. I.M.G. is charged in respect of the advertisement which was published on 24 August 1983.
Mr Brassell was informed on 16 November 1983 by an officer of the Consumer Affairs Bureau that the form of the advertisement was still unsatisfactory. Thereafter the advertisement was altered so as to contain the names of the four singles players who were to participate in the round-robin competition and, in the case of the advertisements published on 23, 24, 25 and 26 November 1983, the names of the players who were to oppose each other in each singles match. I am left with the impression that Mr Brassell did not, even on 16 November 1983, appreciate the respects in which the advertisements were misleading and that the form of the advertisements which were published after that date was suggested by the officer of the Consumer Affairs Bureau.
I have already referred to what Mr Erskine said to Miss Wood and Mr Hutchins on 26 April 1983 and to the material appearing in the press kit issued on 22 August 1983. Miss Wood and Mr Hutchins were questioned by officers of the Trade Practices Commission in relation to the matter on 20 February 1984. It is clear from what then took place that certainly by 22 August 1983, that is to say before any of the advertisements were published, it was not the understanding of either Miss Wood or Mr Hutchins that Mr McEnroe and Mr Lendl would play each other a game of singles tennis on each night of the tournament. Mr Hutchins also said that the draw was to be arranged by I.M.G., his understanding being that Mr McEnroe would play Mr Lendl on the Thursday night, 24 November 1983.
Mr Brassell agreed that it was always his understanding that, although Mr McEnroe and Mr Lendl would play on each night of the tournament, they would only play each other once during the tournament. He said that it was intended, from the beginning, that there be two other singles players in the tournament but their names did not become known to him until much closer to the opening date of the tournament. He also said that it was intended that Messrs McEnroe and Lendl would meet on the Thursday night, 24 November 1983, but that Mr McEnroe declined to play against Mr Lendl on that night because of illness. The draw was changed a few days before the opening of the competition and the match between those two players was then scheduled for Saturday night, 26 November 1985, when it did, in fact, take place.
When it became apparent that Mr McEnroe and Mr Lendl would not be playing against each other on 24 November 1983 but on 26 November 1983 the public was informed on 22 and 23 November 1983 by advertisements in the "Canberra Times" and through the news service of television station CTC 7 of the change in the draw. Patrons who had purchased tickets for the Thursday night were not advised that they could return their tickets and obtain a refund if they were dissatisfied with the changed draw. However, patrons who took the initiative and complained were given the option of doing so. A few patrons, about 6 in all, took advantage of that option. A request for a refund made after the event by a person who had attended the matches on 24 November 1983 and complained that those matches did not include a match between Mr McEnroe and Mr Lendl was refused.
Mr Brassell, in his evidence, said that he was not informed that the tournament was to take the form of a round-robin competition until some time after the press luncheon on 22 August 1983 and by that time a number of the advertisements had been published. He agreed, however, that the press kit, a copy of which he received on 22 August 1983, clearly referred to the tournament as a round-robin tournament. His only explanation was that he could not have read the documents in the press kit properly and, in any event, he knew nothing about tennis and did not understand how a round-robin competition was played. He said he did not make enquiries as to what a round-robin competition was until some time later when it came to his attention that the tournament was, in fact, to be a round-robin competition. I did not find his evidence on this aspect of the matter convincing. I think he was aware at all times that it was to be a round-robin competition though I accept that he may not have fully appreciated what a round-robin competition involved.
Mr Brassell also said that in preparing the first advertisement he used the material contained in the press kit. He said that he took the sentence used in the advertisement, namely "John McEnroe and Ivan Lendl will face each other here in Canberra over three gruelling days", from the documents in that kit. However, he was unable to show from an examination of those documents where those words appeared. He denied that they were his own words and identified their source as being an employee of I.M.G. That that was their source was not disputed by I.M.G.
The capacity of the National Indoor Sports Centre as set up for the tournament was in excess of 3,500 persons. The number of tickets sold was 10,054 being 3,402 for the Thursday night, 3,106 for the Friday night and 3,546 for the Saturday night. The prices charged were $15.10 for a single ticket and $37.60 for a family ticket admitting 2 adults and 2 children. Group bookings could be made at the concessional rate of $11.90 per ticket. The gross takings were said by the prosecution to be in the region of $150,000. Counsel for the defendants said that this figure was too high but no details of the actual gross takings were put before the Court.
Following enquiries into the matter by officers of the Trade Practices Commission in February 1984 advertisements were placed in the "Canberra Times" on 2 and 5 May 1984. The advertisements stated that, if a ticket had been purchased for Friday, 25 November 1983 in the mistaken belief that a match would then be played between Mr McEnroe and Mr Lendl and the ticket holder was dissatisfied because that match did not take place on that night, a refund of the price paid would be made or, alternatively, the ticket holder might receive a free ticket for a tournament featuring leading tennis players to be held in Canberra in November 1984. To take advantage of the offer a ticket holder was required to produce his ticket butt or provide a statutory declaration attesting to the fact that he attended the tournament on 25 November 1983 and was dissatisfied. Some 18 persons or organizations claimed a refund in respect of tickets purchased and some 12 other persons accepted replacement tickets. No similar offer was made in respect of dissatisfied patrons who attended on Thursday 24 November 1983.
Counsel for the defendants relied on a number of matters which he submitted should be taken into account in mitigation. He relied on the circumstance that neither of the defendants and neither of the directors of Lysfar had been convicted of any offence against the Trade Practices Act 1974 or of any similar offence. He referred to Lysfar as a small proprietary company but no material as to its financial affairs was put before the Court. He also submitted that neither defendant had engaged in any deliberate attempt to mislead the public or to lead the public to believe that Messrs McEnroe and Lendl were to play each other on each night. He also referred to the fact that both defendants had pleaded guilty, thus avoiding a lengthy and potentially expensive hearing. It was also submitted that the series of advertisements should be seen as a single course of conduct. He also referred to the amendments made to the form of advertisement after complaint was made by the Consumer Affairs Bureau and to the small number of persons who sought refunds. Reliance was also placed on the moderately small outlay involved in purchasing tickets for the tournament.
It was also submitted for the defendants that anyone interested in, and with a knowledge of, tennis would not have been misled into believing that Messrs McEnroe and Lendl were to play each other on each night. This submission postulates that the reader of the advertisements knew that the tournament was to be a round-robin competition but those words did not appear in any of the advertisements until the one published on 12 November 1983 and they were only inserted because a complaint had been made that the prior advertisements were misleading.
The matters to be taken into account in fixing the appropriate penalty for a contravention of the consumer protection provisions of the Act must, of course, depend upon the circumstances of the particular case. Helpful guidance is, however, to be found in what has been said in a number of decisions of this Court. In Eva v. Mazda Motors (Sales) Pty. Limited (1977) ATPR 40-020 Smithers J. at p. 17, 309 referred to the following as relevant factors in respect of a contravention of section 53 -
(a) The importance of the untrue statements in relation to any transaction which may possibly proceed under the influence of the incorrect representation;
(b) The degree that the representation departs from the truth;
(c) The degree of wilfulness or carelessness in the making of the incorrect representation;
(d) The extent that the representation was disseminated;
(e) Whether any and what efforts have been made to correct any false impressions which may have been created; and
(f) The objectives of the Act.
See also Dawson v. World Travel Headquarters Pty. Limited (1981) ATPR 40-193 (Fisher J.) at p. 42, 632. Another factor is the deterrent effect of any penalty imposed. The penalty, however, must not be so high as to be oppressive in the particular case.
I have taken into consideration the matters urged on the defendants' behalf by their counsel. Nevertheless it would not be proper, in my opinion, to treat the defendants' conduct as amounting to anything less than serious breaches of the Act. The advertisements conveyed in the clearest terms that Messrs McEnroe and Lendl were to play each other on each of the three nights of the tournament - indeed they are capable of no other meaning. They were totally inapt to convey to the public that four singles players were to compete in a round-robin competition. The first advertisement, that published on 24 August 1983, expressly stated that those players would "face each other . . . . over three gruelling days" and, although those words did not appear in the later advertisements, the message that they conveyed to the reader, was, to my mind, to the same effect and equally as clear.
To convey to readers of the advertisements as potential patrons that Messrs McEnroe and Lendl would play each other on each of the three nights would obviously be helpful in promoting the tournament. I find it hard to accept that the advertisements took the form they did because of Mr Brassell's ignorance or confusion as to the form of the competition contemplated. After all, it was fairly clearly set out in the documents comprising the press kit and, if he was confused as to what was involved in a round-robin competition, it would not have been difficult to find out. However, having said that, I am prepared to deal with the matter on the basis that Mr Brassell did not deliberately set out to mislead the public but was guilty of a high degree of carelessness in failing to ensure that the advertisements for which he was responsible did not contain representations that were false. I have not overlooked that I.M.G. accepted that the words which I have quoted from the first advertisement were supplied to Mr Brassell by an employee of that company.
As neither Miss Wood nor Mr Hutchins gave evidence it is not possible to say what part they played in promoting the tournament. Both were, however, present at the meeting with Mr Erskine on 26 April 1983 when they were made aware of the form the competition would take. It is fair to say that neither of them appears to have taken any initiative to have the advertisements corrected. This may be explained in the case of Mr Hutchins by the absence of any evidence that he saw the advertisements. Miss Wood, however, had her attention directed to them by an officer of the Consumer Affairs Bureau. It was following that complaint that Mr Brassell made some changes to the form of the advertisement but they were changes which left the advertisement in a misleading form. After the tournament had concluded Miss Wood addressed a letter dated 2 December 1983 to the Consumer Affairs Bureau commenting generally on the complaint that had been made. The letter failed to deal adequately with the real cause of complaint and did not acknowledge that she, as a principal in Lysfar engaged in the conduct of its business, had any responsibility in the matter.
The representation made in the advertisement was clearly of importance to those contemplating patronising the tournament. There was a substantial departure from the truth. The representation was disseminated to the public albeit only to the public within the circulation area of the "Canberra Times" newspaper. Some effort was made to correct the false impression which the advertisements gave but only days before the tournament was to take place and only at the instigation of the Consumer Affairs Bureau.
Taking all these matters into consideration I have reached the following conclusions. Lysfar is convicted of each of the 27 offences with which it is charged. I.M.G. is convicted of the offence with which it is charged. A total fine of $4,600 is imposed on Lysfar, being -
A fine of $2,000 in respect of the first charge, that is the charge relating to the advertisement published on 24 August 1983;
A fine of $100 on each of the remaining 26 charges.
A fine of $2,000 is imposed on I.M.G. in respect of the offence of which it has been convicted.
The fines are to be paid to the District Registrar of the Court within 21 days from the date of the orders herein. Lysfar and I.M.G. are to pay the costs of the prosecutor of and incidental to the proceedings in respect of the offences of which they have been respectively convicted.
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