Larmer, Lawrence O'Hara v Power Machinery Pty Ltd

, >

IN THE FEDERAL

COURT;

OF AUSTRALIA	)
1

VICTORIA DISTRICT )

Nos.

VG.

15. 18, 2 1 of 1977

REGISTRY	) )
GENERAL DIVISION )

BETWEEN : LAWRENCE 0'

H.4RA

I ARMER

Informant

AND :

POWER MACHIKERY

PROPRIETARY LIM'LTED

Defendant

ORDER

JUDGE MAKING ORDER: Nimmo J.

D4TE

ORDER:

13th

May

1977

Melbourne

MADE:

WHERE

THE COURT ORDERS THAT:

The Defendant pay

a penalty of One thousand

dollars ($1,000) in respect of the first of the contraventions

of section 53(c) of the Trade Practices Act 1974 and a

penalty of Two thousand dollars

($2,000)

in respect

of each of

the second and third contraventions

of the said provision.

The

Defendant

pay

the

Informant's

costs

agreed o r in default of agreement

as taxed.

3 .

There be a stay of 28 days to

10 June 1977

for payment of the penalties.

4 .

The time for appeal to the High Court

of Australia

or to a Full Bench of the Federal Court	f Australia be
enlarged to 10 June 1977.

Until

the

time

for

appeai

expires,

namely

June 1977, the exhibits in	the three cases be retained
by this Court.

l	.
I

FEDERAL COURT OF )

VG No. 15 of 1977

AUSTRALIA

VG No. 18 of la77

VG No. 21 of

1977

General

Division I

In the matter

o f the

TRADE PRACTICES ACT 1974

Between

LAWRENCE 0 'HARA LARMER

Inf ornant

and

POWER MACHINERY PROPRIETARY LTMITED

Defendant

REASONS FOR JUDGPENT :	N I P N O ,	J.
13 May 1977

The

Defendant,

Power Machinery Proprietary Limited (the

Company)

i s

corporat ion regis tered under the provis ions

the Vic tor ian

Companies Act 1961.

4 and 5 May

1977 I found the

Company g u i l t y o f th ree

contraventions of Section 53(c) of the Trade Practices

Act

1974.

I s t a t e d a t the

t ime

I made my f ind ings

tha t

I would

publish my reasons	and	f i x p e n a l t i e s l a t e r .	This	I	now
proceed t c do.

Each of the contravent ions ai leged that the

Company

did

in trade or commerce in connection with the promotion by

advertising of the supply of goods, to wit, 'Powamac!

mobile A.C. electric welding machines represent that three

of the models of the said machines

so advertised, the

'Powamac Junior Model', the 'Powamac Minor Model' and

the'Pcwamac Major Model' had approval, namely, State

Electricity Commission of Victoria Certificate of Suitability

No. C.S.1768, they did not have.

The first

of the contraventlons was alleged

to have occurred

on 18 August 1975 st South Melbourne and the representation

to have been made

In a brochure headed 'Powarnac Long Life

Universal Mobile A.C. Electric Welders! depicting on one slde

four different models	of the said machines and designated
'P.M.12'.

The second and third contraventions were alleged. to have

occurred on

20 August 1975 at Richmond and Port Melbourne

respectively and the representation

in both instances to have

been made in

a brochure headed 'Powamac Long Life Heavyweight

Mobile A.C. Electrlc Welders! depicting on one side three

different models

of the said machines and designated 'P.M.12'.

Although the three charges were heard separately, most of the evidence and Counsels' submissions were common to all thres cases.

The Coinpan).

supplies a wide range of products of which the

welders constitute about six per cent of its annual financial

turnover.

It does nearly all

of its business

thrmgh

nationwide agents numbering

In excess of 2,000, to whom

it issues annually

a roneod loose-leaf price list catalogue.

The catalogue is effective as from

1 Decenber each year and

is up-dated during the ensuing year by replacement leaflets

if price

or data changes warrant it.

About1966 the Company decided to issue,

in addition to the

catalogue, a glossy single sheet brochure, printed on both sides, advertising the range of weldlng machines and containing information similar to that in the price list

catalogue sheets but without reference to price.

In reprints

of brochures of this kind between

1971 and June 1973 (the

date of the last reprint) the Company claimed that the three welders pertinent to these charges were covered by the State Electricity Commission of Victoria (the S.E.C.) Certificate

of Suitability No. C.S.1768. The undisputed fact is that the

three welders concerned were not at any time material to

these proceedings covered by that Certificate of Suitability.

On 30 July 1974 the S.E.C. wrote to the Company notifying

it that none

of the three welders concerned was covered by its

Certificate of Suitability, and about the same time,

a similar

notification was conveyed by telephone to the Company by

member of the

S.E.C.'s staff. Shortly afterwards the

Company issued

a replacement leaflet relative to welding

machines for its price list catalogue. This roneod sheet,

effective as from 1 September 1974, contained no reference t o

4 .

any

S.E.C.

Certificate

of Sui tabl l i ty , whereas the sheet

replaced did.

Two

d i r e c t o r s of

the

Company

s t a t e d i n

evidence

that

t h i s r e p l a c e d e n t l e a f l e t ,

which

was

s e n t t o

t h e Company's agents , was accompanied by

a roneod loose

s l i p reques t ing tha t the prev ious pr lce

l i s t

l e a f l e t be

removed from

the

catalogue.

It a l so mentioned

t h a t

t h e

new

l e a f l e t was

t h e n c e f o r t h t o

t h e

only

l e a f l e t a p p l i c a b l e

t o the welder.

s p e c i f i c mention

was

made

i n

the

rep lacement leaf le t ,

the

loose

s l i p which

accompanied

it, o r

o the rwise , t o t he agen t s t ha t t he r eason fo r t he i s sue

the

replacement

l e a f l e t was

t o r e c t i f y t h e f a l s e c i a l m t h a t t h e

three welders	were covered by the S.E.C.	C e r t i f i c a t e of
S u i t a b i l i t y .

I n r e l a t i o n t o t h e

first charge,when

two

o f f i c e r s of

the

Trade

Prac t ices

Commission

c a l l e d a t t h e

Company's

Tf f ice a t South

Melbourne on 18 August 1975 they saw two glossy brochures of

the kind descr lbed

above

a f f i x e d t o

wall of the entrance

f o y e r i n which

some

power

machines but not welders

were

d isp lay .

One brochure showed its obverse

side

and

the

other

i ts reverse

s ide.

The

obverse

side

contained

the

assertion

t h a t t h e

models on

the r eve r se s ide pe r t inen t t o th i s cha rge

were

covered

the

S.E.C.

C e r t i f i c a t e

Su i t ab i l i t y .

Counsel

f o r t h e

Company

a r g u e d t h a t , i n o r d e r t o e s t a b l i s h

tha t t he a l l eged o f fence

had been committed,

three

things

had

t o be

proved.

F i r s t l y , t h a t

representat ion had been mde,

secondly, that,

if a representation had been made, it must be

shown to have been made in trade

or commerce. Thirdly, that,

if a representation had been proved to have been made in trade

or commerce, it must then be shown to have been an incorrect

representation; furthermore, it must be shown to have been

made in connection with the promotion by advertlsing	of the
supply of the power welders.

In respect of the first polnt, Counsel conceded, quite correctly

in my view, that a representation had been made on

18 August

1974. On the second point he contended that the Crown had not

proved that the representation was made in trade

or commerce on

the ground that there was no evidence that any other person

had read a copy of the offending brochure on

18 August 1974

other than the Trade Practices Commission officers who visited

the premises of the Company on that date.

He further contended

that their reading of the brochure under the circumstances

obtaining to their visit did not involve the defendant maklng

a representation in trade or commerce. He stated that the

two officers of the Trade Practices Cornmisslon went to the

Company's premises, identified themselves as such, and stated

that they had come as a result

of a complaint. They did not

state that they wanted to buy a welder, and

in f ct did not buy

a welder, nor did they evlnce any interest

in buying a welder.

He submitted that they were there in their capacity as invest-

igating officers of the Trade Practices Commission at the time

the representation was made and consequently that the represent-

ation was not made

in the course of trade

or commerce or in

trade or commerce.

I rejected the arguments of Counsel for the Company	for
the following reasons.

I do not think that the expression 'in trade

or commerce'

should be given the narrow interpretation contended for by of the Trade Practices Act, including the definltion given

to the expression

in Section 4 , demand that

a very wide ncanmg

be given to it. In my view, the expression is intended

cover the whole field in whlch the nation's trade

or commerce

is carried on. I reject the view that it is confined to any

particular event which may occur

in the conduct of

a business

which operates within that fleld.

In my opinion, the dlsplay of the offending brochure in the

foyer of the Company's premises, which was the main place of

entry thereto by the public, both dealers and potential cllents

alike, constituted

in itself a representation for the promotion

by advertising of the supply of the Company's welders in that

part of trade or commerce in which the Company functioned. I

therefore held that the contravention alleged had been

established.

In relation to the second charge, when an officer of the Trade

Practices Commission called at the premises of Genco Fittings

Proprietary Limited, an agent of the Ccmpany, at Richmond, on

20 August 1975, he asked for and received two brochures

?iliich

were affixed to

a wall of the showroom of that company

7 .

sides, to those which werr affixed to a wall of the foyer zt

the Company's South Melbourne premises. The ob-Jerse side of

this brochure contained the representation that the three

models referred to in the charge, and which appeared on the

obverse side, were covered by the S.E.C. Certificate of

Suitabllity No. C.S.1768 whereas in fact they were not.

similar fashion, that is, displaying the obverse and reverse twenty received by the managing director of Genco Fittings

Proprietary Limited from the Company

ln response to a telephone

call to one of the Company's directors in

April 1975. The

managing director stated that he obtained the brochures to

distribute to potential purchasers of welders. He informed

the Trade Practices

Cormnisslon's officer that

he had not

received advlce

from the Company to the effert that the brochure

concerned had been superseded.

Relevant evidence given, and exhibits tendered during the

hearing of the first charge and submlssions made by Counsel in

the course of that hearing, were, at Counsels' request,

adopted for the purposes of this charge.

In my opinion, and

for the reasons given in the first case, the

display of the brochure

in the showroom of Genco Fittings

Proprietary Limited constituted in itself a representation for the promotion by advertising of thc supply of the Company's

welders in tinst part of trade

o r commerce in which the Conlpany

functioned.

I also found that the representatlon that the

r l

welders concerned

were covered by the S.E.C.

C e r t i f i c a t e

S u i t a b i l i t y was

incorrect. Accordingly

held

t ha t the

contravention alleged had been proved.

I n r e l a t i o n t o t h e

t h i r d charge, an off lcer

the Trade

Prac t ices

Commisslon

at tended a t the premises of Elder

Smith

Goldsbrough

Mort

Limited, another agent of

the

Company, a t

Por t Melbourne on 20 August

1975 and Interviewed the nroduction

manager

who,

reques t , handed to the of f icer

one

the

Company's

brochures ident ica l to the

one

r e f e r r e d t o i n t h e

second

charge.

The

production manager

s t a t ed

in ev idence

tha t

had

received that brochure about July

1975

in r e sponse to

a request made by him t o a representat ive of

the

Company.

s t a t e d t h a t

he requested the brochure because he required as

much

information

he could obtain for the purpose of ass is t -

ing him

i n marketing the

power machinery range of equipment

his company had

f o r s a l e .

informed

the

officer

the

Trade Practices

Commission

that brochures of the kind produced

were handed

t o consumers on request and t h a t he had not receive1

any advice from the

Company

t h a t t h e y

had been superseded.

Again

i n r e l a t i o n t o

this

charge the relevant evldence glven

and

exhibi ts tendered during the hear ing of the

first

charge

and submissions made by Counsel

i n the cour se

t ha t hea r ing ,

were,	a t Counsels'	request,	adopted	for	the purposes of	t h i s
charge.

I n my

opinion the provis ion of the brochure to the

Company's

agent constituted

in itself a representation for the promotion

by advertising

of the supply of the Conpany's welders

in that

part of trade

o r commerce in which the Company functloned.

I also found that the representation on the obverse side

gf the

brochure that the welders described on the reverse slde were

covered by the S.E.C. Certlficate of Suitability

No. C.S.1768

was incorrect. Accordingly I again held that the contravention

alleged had been proved.

I turn now to the question of penalties.

The Act provides

for a maximum penalty of

$50,000 for each of

the contraventions by the Company of Section

53(c).

At the outset it should be pointed out that the Company was not

obliged to obtain

a S.E.C.

Certificate of E-dtability in order

to sell its welders. Although such

a Certlficate 1 s issued

after tests to ensure that the item submltted

to the S.E.C.

is safe for use by members of the publlc, it was conceded

inthese mses that use of the Company's welders did not constitut(

a safety hazard.

The Company did not engage

in any form of advertising through

media channels

o r by direct distribution of Its brochures

t o the public. The last initiative taken by the Company to

distribute .m offending brochure to a31 its agents took place

early ir, 1971; and before the Trade Prrctices Act became

1 ~ .

Unless requested otherwise, the practice of the Company has tc

10.

send only

one brochure

each

agent

ior

the

commission of the contraventions

a t

l e a s t two

replacement

l e a f l e t s f o r the catalogue accompanied by

a roneod loose

s h p

of the kind previously described vere sent by the

Company

t o

i t s agents.

Nelther

these

replacement

sheets

contamed

the

fending

representa t ion .

I n

this

connect ion

it is my

view

t h a t t h e

Company

should have express1.y

drawn

the a t t en t ion

i t s agen t s t o

its u n t r u e c k i m t h a t

i t s welders

were

covered by

the Cer t i f i ca t e

S u i t a b i l l t y a s

soon

i t was

informed by the

S.E.C.

i n J u l y

1974 t h a t t h e y

were

not

s o covcre

not

making

specif ic reference to the offendmE brochures an

by cont inuing to display

and

d i s t r i b u t e

them

i t s untrue

representa t ion

i n i t s brochures was

pe rmi t t ed to

cor,tmnue.

i	"he	replacement sheets to the catalogue	d i d n o t i n	my	oplnlon
I

cons t i tu te an e f fe - t ive not i f ica t ion to the

Company's

agents

tinat

the claim

in r e spec t o f t he

S.E.C.

Cer t i f i ca t e o f

S u i t a b i l i t y was

longer tenable .

s a t i s f i e d t h a t t h e r e p r e s e n t a t i o n i n t h e

Company's

brochure

tha t the welders

were

covered by

the

S.E.C.

C e r t i f i c a t e

o f

S u i t a b i l i t y

was

sa l e s a t t r ac t ion to po ten t i a l pu rchase r s .

The

Company

is a family company with

four

shareholders.

Its

business i s conducted by

two shareholder d i rec tors

and a small

staff.

The

wives

t he d i r ec to r s we

the o the r sha reho lde r s .

The

two d i r e c t o r s have

for years worked long hours

f o r

r e l a t i v e l y

s m a l l

s a l a r i e s

and

directors'

f ees .

The

n e t p r o f i t s

derived by the

Company over the

las t three years have been

modest nature, and

far a s poss ib l e ,

have been invested

11.

I do not think that the Directors of the Company deliberately planned to mislead its Agents and potential purchasers of its welders but due to their preoccupation with the

task of developing the Company's business with limited funds they failed to take proper care that the Company's brochcres

were true in all respects particularly after the

S.E.C. had

informed them that the statement in their brochures in

relation to the

S.E.C. Certlfisate of Suitability has untrue.

I regard all three contraventions as serious but consider the

second and thlrd more serious than the first because

of its

lesser promotional potential. I am conscious of the legislat~ve

intent to maintain high standards of business integrity

order to protect the consumer as indicated by the magnitude

of the maximum penalty of

$50,000 for each contravention of

Section 53(c)

by a body corporate. However,

I do not thmk

that the contraventions by the Company warrant the imposltion

of penalties which would be oppresslve to

It in its present

financial circumstances. I therefore impose in respect of the first contravention a penalty of $1,000 and in respect

of each of the second and third contraventions

a penalty of

$2,000. I order the Company to pay the Informant's costs	a
agreed or in default of agreement, as taxed.

[1977] FCA 21

13 May 1977