O'Bryen, G.L. v Coles Myer Ltd
[1992] FCA 986
•8 Dec 1992
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JUDGMENT NO, om.o.w,....~.~, 9 B l J.29.a
I IN THE FEDERAL COURT OF AUSTRALIA ) I
VICTORIA DISTRICT REGISTRY NO. VG 229, 230, 231,
1 232, 233, 234, 237,
1 238, 239, 240 of 1992
GENERAL DIVISION 1 B E T W E E N : GAIL LOUISE O'BRYEN
Prosecutor
A N D:
COLES MPER LTD
Defendant
JUDGE MAKING ORDER KEELY J PLACE ORDER MADE MELBOURNE DATE ORDER MADE 8 DECEMBER 1992
MINUTES OF ORDER
THE COURT ORDERS THAT:
In VG 237 of 1992 the defendant is fined $7000. The defendant is convicted of the offences alleged in the . . informations in matters VG 229, 230, 231, 232, 233, 234, 237, 238, 239 and 240 of 1992. In VG 230 of 1992 the defendant is fined $2000. In VG 229 of 1992 the defendant is fined $2000. In VG 231 of 1992 the defendant is fined $2000. In VG 232 of 1992 the defendant is fined $2000. In VG 233 of 1992 the defendant is fined $5000. In VG 234 of 1992 the defendant is flned $5000.
9. In VG 238 of 1992 the defendant is fined $7000.
10. In VG 239 of 1992 the defendant is fined $10,000. 11. In VG 240 of 1992 the defendant is fined $10,000.
Note: Settlement and entry of orders is dealt
with in Order 36 of the Federal Court Rules.
General distribution not rewired I
IN THE FEDERAL COURT OF AUSTRALIA ) 1 -
VICTORIA DISTRICT REGISTRY ._. N.Ov<.~:-229, 230, 231, .
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) - ' 232, -233, 234, 237, 1 238,-239, 240 of 1992
GENERAL DIVISION 1 B E T W E E N : GAIL LOUISE O'BRYEN
Prosecutor
COLES MPER LTD
Def endSnt
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REASONS FOR JUDGMENT
8 December 1992 KEELY J Coles Myer Ltd ("the defendant") has pleaded guilty to 10 charges of contravening the Trade Practices Act ("the Act");
two other charges were withdrawn by the prosecutor. Five of the 10 charges were for contraventions of s.53(a) and five were for contraventions of s.65C(l)(a) of the Act. Section
53(a) provides, so far as is relevant:-"A corporat~on shall not, Ln trade or commerce, ln
connexlon with the supply ... of goods ...
(a)
falsely represent that goods are of a partrcular standard ... [or] style ..."
Section 65C(l)(a), so far as is relevant, provides:-
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"A corporation shall not, in trade or commerce, supply I. goods that are intended to be used, or are of a kind I , llkely to be used, by a consumer if the goods are of a kind : (a)
in respect of which there is a prescribed consumer product safety standard-and which do not comply with that standard;"
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The nightdresses were wrongly labelled with ?a label, which was
appropriate for a different category of garments and was not
red in colour, which read:
"STYLED TO REDUCE FIRE DANGER"
The prescribed standard required the nightdresses to be
labelled with a distinctive: red---laber :whikhihad':printed' -* on it -E - -
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a fire danger symbol and the words:
"WARNING
HIGH FIRE DANGER
KEEP AWAY FROM FIRE"
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A statement of agreed facts ("the agreed facts") with 14 annexures was placed before the court. It included the
"1. The Defendant has been charged consequent upon the
mislabelling of a specific batch of "N~ghtw~nks"
brand infants' nightdresses ("the nlghtdreases")
3.7
Upon goods arrivrng rn Australia, it is the Defendant's usual practice to take a sample of the goods to the Quality Control Inspectlon Section of its Drstribution Centre. The sample 1s there checked for conformity wlth the requirements of the Qualrty Control Report and a Local Garment Inspection Report 1s comprled. That process was undertaken in relation to the nlghtdresses, however, the Local Garment Inspectlon Report erroneously listed the nrghtdresses as belng correctly labelled as to fire hazard (see Annexure 6).
4.1
The nightdresses were drstributed and retarled in each of K-Mart's 137 stores throughout Australia from February 1990.
4.2
Approxrmately 6,000 of the nightdresses were sold prror to the mislabelling berng detected by the Federal Bureau of Consumer Affarrs ("FBCA") on 13 June 1990.
4.3
The Defendant co-operated fully with the Prosecutor at all times and during a Record of Interview conducted with the Defendant on 31 July 1990 the Prosecutor was advised that rn the normal course of events the Defendant's qualrty control staff, who usually vrsit K Mart Stores approximatelv every -two months, would have detected the nrghtdresses as berng mislabelled. However pressure of work precluded qualrty control staff from undertaking their usual store vrsit prior to the detection of the mrslabellrng on 13 June 1990.
On 13 June 1990 Mr Graeme Stevens, an officer of the FBCA. conducted a check of children's nightwear for compliance with the said Standard. at the. Hurstville INSWl K Mart
- . .. store. ,pe noticed a rackof. a&rax&ately -40 jf L -. of the -iahtdresses which were .awarentlv in'- - .
breach of the Standard. ~cc&drn~l~,- he purchased a srze 1 and size 2 nightdress from that store. These nightdresses are the subject of charaes VG 229-232 of 1992. Mr ~te;ens informe; the Store Nanager of the apparent mislabelling of the nightdresses.
On 22 June 1990- Mr Ian Pugh, an offrcer of the FBCA, attended the Brunswrck (Victorra) K Mart store to check whether the nrghtdresses were still on sale. He discovered 15 nlghtdresses that appeared incorrectly labelled. Accordingly, he purchased a size 2 nightdress from that store. Thrs purchase led to charges VG 233-234 of 1992. Mr Pugh advised the Manager responsrble for, inter alia, infants' wear, Mr Cannrzzaro, of the apparent breach of .the said Standard. Mr Cannizzaro advrsed Mr Pugh that he had
received an Actron Lrne on 21 June 1990 whrch indicated that the nightdresses were to be removed from sale but he had not yet responded to the Action Lrne. After Mr Pugh's purchase, attempts were made by the Brunswrck K Mart store an his Presence. to rdentrfv and remove all - remainrng mislabelled nrghtdresses. The Brunswrck K Mart store manaaement belleved that all the mrslabelled nrghtdresses were rdentrfled and removed on that day. In fact they had not all been removed. On 22 June 1990 the Defendant, after belng advlsed by the Prosecutor of the purchases at the Brunswick store earlier that day, arranged for all State Regional Managers to telephone all stores immediately to recheck that all of the subject nightdresses had been removed from sale.
5.11 On 27 June 1990 the Prosecutor visited the same Brunswick K Mart store to check that the nightdress had been removed from display. She found approximately 30 of the nightdresses on display. The Prosecutor purchased a srze 2 nrghtdress. This nightdress is the subject of charges VG 237- 238 of 1992. The Prosecutor approached the Store Manager, Mr Wynne, and advrsed him of the apparent breach of the Standard.
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5.17 On 26 July 1990 Mr Graham Alderton, . , officer of the FBCA, attended the Fairfield I (NSW) K Mart store to check that all , ' nightdresses had been removed from display. He found approximately 3 of the nightdresses on display. Mr Alderton purchased a size 2 nightdress. This nightdress is: the subject
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of. chargea VG 239-240- of-.199L- ~r Alderton - - :-L:. - - . -
then approached- the' st6re- Manager - and" ...
lnformed h ~ m of the apparent breach of the t said Standard. The Manager advised that he 1. had believed that all of the nrghtdresses in . - hls store had- been remove8;- -During the
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Record of Interview conducted with the Defendant the Prosecutor was rnformed that the nightdresses had inatially--been removed -
from sale at the Falrfield K Mart store but that for stocktaking purposes they had been returned to the shop floor and had inadvertently remained on sale.
5.20
The recall and correction processes in relatlon to the mislabelled nightdresses commenced on 13 June 1990 and were completed on 27 July 1990, a period of about 6 weeks. The number of nightdresses returned as a result of thls recall is unknown."
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Senior counsel for the defendant advanced a carefully prepared
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and presented plea that the court should show that it "places
as high a value on prevention as it does on deterrence". He I . referred to (1) passages from the agreed statement of facts , , ~ (2) both the affidavit and the oral evidence (transcript 47- ,. . ! , 60) of Mr Dalziel, an Associate Director of the defendant and Managing Director of its K Mart division, and (3) the oral I T .
c . ! evidence (transcript 81-88) of M r Miller-Randle, the Quality Control Manager for K Mart, who had "been involved in quality
control" work with the defendant for nearly 16 years. - -
It is not necessary to refer to each of the many matters dealt with in that material. It detailed, amongst other things, the steps taken to ensure that a contravention of the Act did not - . - occur, the nature and size of the defendant's operation and the facts that: (a) the defendant had not on any other
. occasion been charged with an offence of mislabelling
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I , ,:- : ga.rments ; (b) it "did nof? delibe~ate2y~:-xstS:.wilf u-lly rnisiab%l'=:l':- '-
the garments", (c) it had co-operated fully with the .
prosecutor at all times and (d) neither the prosecutor nor the . . - defendant had any reason to beliewe that any- child "had- been ::-- . . injured as a result of the mislabelled garments".
As to (d) it may be added that it is not known how many of the (approximately) 6000 nightdresses sold by the defendant have been returned and, accordingly, it is not known how many of them are still in the community. However, in this connexion
Mr. Dalziel gave the following unchallenged evidence (transcript 55-56):- "... What was the slgnifrcance of goods in this
srze range as far as the perlod of use would go for
a child in a house?---General experrence,
particularly for the low value item in this area, rs that it rs not sornethmg that would be kept. It would generally be expected to be a, not a hand me down, but something that would be disposed of or worn out, lndeed, m its one person's life.
When you say ln one person's life?---Of the child.
What do you mean there?---In common we talk of aproduct l i f e cycle , In a technical sense. These
items would not be seen t o usually go through two
seasons because they are only for the age of the
chrld appropriate during that one stage." , .
The defendant's material also showed a number of steps taken
by the defendant "to ensure that members of the public were , ' made aware of the mislabelling", the steps taken after the I ' offences occurred to ensure that no future labelling problems occurred and the fntroduction of recall flags in all stores so I , that items that have been withdrawn from sale "will not scan at the registers and as a consequence cannot be sold". !
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, . . Evidence- was given. by q:: - Dalziel 'f(p&eaph;~--12) of 'the .:c-- - ~ -
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successful way in which the new steps were successfully tested
in January 1992 in relation to K Mart's potting:mix.
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Very detailed evidence was given in M r Dalziel's affidavit (paragraphs 13, 13.8) as to the K Mart division's contribution "to the community on the issue of children's flammability" (sic) and its assistance "in the framing of legislation, the performance characteristics of garments and fabrics and sampling requirements".
There was also evidence as to the defendant's contributions to the community, in both materlal and other ways, including "donations exceeding $650,000.00 relatlng to children" in the period from June 1990 to December 1991 and almost $100,000 recently raised by K Mart for a drug education programme for primary schools.
The matters put by the defendant's counsel raised a strong I - case for the court to grant as much leniency as could be given
consistently with the court's responsibility under the Act.
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All of those matters, and the defendant's pleas of guilty have I been taken into account, together with the absence of any convictions other than that by this court on 27 March 1987 (see exhibit "A" to the affidavit of M s pavleka) for selling i goods which had been declared to be unsafe goods. - .
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. . . Howeqes, senior counsel f&- the defehdant;k'&ated "that;..there'=-
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is no doubt about the seriousness of the offences." The
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seriousness of the offences was also acknowledged by Mr
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Dalziel, whose affidavit included statement's-that:- - "... a large number of our products are purchased for
children. We recognise the posrtion of trust that children's parents hold us in when purchasrng products for their children. We value that position of trust and understand its importance. The safety of children must be paramount to all other consrderations. The proper labelling of children's clothing rs an essential element of maintaining that trust." (italics added)
I agree, with respect, with the observation by Woodward J in
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Clarke v Pacific Dunlo~ Limited (1989) ATPR 40-983 at 50,736
that: - . , I "... instead of bearing the clear warning they should
have borne, the garments were actually labelled in such a way as to to grve some degree of reassurance to a potential purchaser who might have been alert to fire hazards. To this extent it could be argued that the wrong labels used were worse than no labels at all. Be that as it may, it was in my view appropriate for charges to be laid under both sec. 53(a) and 65C(l)(a), but I note the considerable degree of overlap between them and will take that into account in fixing approprrate fines." (italics added)
In relation to the two offences committed on 13 June 1990 I
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agree entirely with the following observations (at 50,737) by ! ' I-
-. . his Honour in that case as to the seriousness of the
contraventions:"On the other hand, the offences are serious, and could
have resulted rn tragic consequences by creating a false sense of security, rather than an awareness of real danger, in the mrnds of those responsible for the welfare of the wearers of the nightdresses.
The Court must ind~cate the serious vrew it takes of the - V matter, and brrng that home both to the staff of the
defendant who were neglrgent in thelr duties and to all , . others who have similar responsibilities in the garment
~ndustry. ..., > But, as French J. sard in [Gardam (1989) ATPR 40-7791 at p.48,503:
l . "The sections of the Act which provide for
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the declaratiop- of consumer - producs safety - . -. .
standards . . .:. are . . . of the highest- - _.. importance. " I agree, and the penalties I am rmposrng on an otherwrse
reputable and responsible corporation should serve to
underline that view." (italics added)
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There were three "mistakes" by the defendant before the initial offences were committed. The first, according to the
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agreed facts, paragraph 3(b), was when "a K Mart buyers S . . assistant erroneously specified category 2, instead of category 3 labels on the Buying Office Specification (Annexure . , I 3)" (italics added); the evidence was that such an employee was usually employed at a salary of "around 30 to $35,000" (transcript 49). The second mlstake was when a sample carton of the nightdresses was checked but "the Local Garment Inspection Report erroneously ticked the nightdresses as being correctly labelled as to fire hazard (see Annexure 6)" (italics added). The third mistake was when pressure of work prevented the Defendant's "quality control staff from r undertaking their usual store visit". (par. 4.3 of agreed facts). I reject the defendant's submission that the precautions were reasonable.
Senior counsel for the defendant submitted (transcript 71-72) that the court should adjourn the ten cases for 12 months, with liberty to the prosecutor to bring the matters on if any further offences or infringements occurred, "the intent being that, in the absence of any further offence, the matter be discharged without recording conviction". Alternatively, he submitted that the defendant should be released upon a good . -
. . - . ,.,.behavhur -bond. - I have- co&s-idered tlie??aa~f.~~~ss'pu by- 'c6-eI:.:'-: --
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in support of those two alternative submissions. In my opinion in the circumstances of these cases it would not be a proper exercise of the court's discretion to accede to either - - . of those submissions.
In my opinion in matters VG 229, 230, 231 and 232 of 1992 each of the four offences ("the initial offences") was serious, but there is, as Woodward J said, overlap between the charges under s.53(a) and the charges under s.65C(l) (a); the four
charges related to only two garments. That overlap must be
taken into account as to penalty in respect of all of the ten
offences - not only the initial offences. In all the circumstances, including all the matters advanced in mitigation, but taking lnto account (i) the inherent seriousness of the offences, (ii) the "tragic consequences" that "could have resulted" (Woodward J.) and (iii) the "position of trust" of the defendant (referred to by M r DalZiel ixi a passage cited later in these reasons, in my opinion the fines should be $2000 for each of those four
offences .
The two offences in matters VG 233 and 234 of 1992 occurred at 7 ,
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Brunswick (Vic) on 22 June 1990 i.e. 9 days after the offences : :
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on 13 June. These two offences were significantly more !... , .
serious by reason of the defendant's failure to take any I. adequate steps to prevent any such further offences; the fines , -
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, .. . -. . . ,. .. -will be $5000 in respect:fof- each oE'-t?i6Sf% ~GO'- offences ' at- G.- - : - Brunswick.
The next two offences, also at Brunswick, occurred on 27 June 1990 i.e. after the elapse of an additional further 5 days.
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They were even more serious offences because of the continued
failure of the defendant to take adequate steps to prevent - L their occurrence, despite the passage of further time; the
fines will be $7000 for each of those two offences.
, . . The last two offences occurred at Fairfield (N.S.W.) on 26 July 1990 i.e. 43 days after the existence of the false
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representation on the nightdresses had been brought to the attention of the defendant. These contraventions occurring so long after the initial offences on 13 June 1990, must be treated as the most serious of the offences; the fines will be
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$10,000 in respect of each of those two offences at Fairfield.
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Having formcd thc opinion that the fincs set out above were a proper exercise of the court's sentencing discretion for the offences considered individually, I then considered the overall amount of the fines ($52,000) in the light of all the circumstances including, the number of the offences, the degree of "overlapping", the period of 6 weeks during which they were committed and the many matters advanced on behalf of the defendant in mitigation. In my opinion the total of $52,000 is appropriate in all the circumstances. The defendant took some steps in an endeavour to prevent a
- , . .,.. . recurrence of the offence* but . t h p s e : ~ s ~ e w r - ' plainly 'not:----
effective; further offences were committed on 22 June in
Brunswick (Victoria), on 27 June in Brunswick, and on 26 July t : !. in Fairfield (N.S.W.). The court accepts the evidence of Mr. Dalziel (paragraph 9) that:-
"Coles Myer Ltd personnel spent in excess of 2,000 hours in t a k ~ n g the necessary steps to ensure the smooth, orderly and expedrtlous wrthdrawal of the mrslabelled garments."
However, on the evidence of the later offences, it must be said that the 2000 hours spent were not effective.
The Managlng Director of K Mart said in his affidavit that the defendant values its "position of trust" in relation to children's parents and that the "safety of children must be
paramount to all other considerations". Unfortunately, on the , evidence it must be said that the defendant breached its trust I
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first by failing to prevent the three "mistakes" referred to i earlier and, of greater importance, by failing to act in / ' accordance with its own stated principle that the "safety of children must be paramount" when it was deciding on measures to prevent a recurrence.
Before concluding these reasons, some brief observations should be made as to those remedial measures. In my opinion the notice dated 14 June 1990 (annexure 7 to the agreed facts) was in its terms quite inadequate as a means of communicating to the Regional Managers the importance of taking urgent and effective remedial action in order to remove the danger to
- .. ch:ildren which existed in:rthe. defendant*s+'R.- art stores -.on -2 . .
- -. that day.
Again, the "Action Line" notice (annexure 8 ) sent to all State Regional Managers on 21 June 1990, "requesting the return of the mislabelled nightdresses" in my view was quite inadequate. There was no statement in it that there was a danger to children or that the action to be taken was "urgent" or "important". Further, the "notice" appeared as the last item on a sheet dealing with apparently less important matters such
remainder" of Actil sheeting, and a request that the stores as " a Form must be completed", "stores are to consolidate the ensure that "Ninja Turtles apparel stock ... [be] placed on show". M r Dalziel gave evidence that the receipt of the notices "would be regarded as a matter of great urgency" but the later offences do not support that opinion evidence.
The next document sent ( annexure 9 ) , dated 27 June 199 0, i . e . 14 days after the four initial offences, was properly headed,
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in capitals, "Please action immediately". Further, it: asked
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for the return of the garments "immediately-to &sure the itern
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is off show". That was a distinct improvement on the , . -
defendant's previous attempts. On the same date the defendant r i. sent an "information poster" to all 137 K Mart stores I (annexure 10) and issued a news release (annexure 11). Nonetheless, as set out in the agreed facts, two further , .
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offences were committed on 26 July 1990 at Fairfield (NSW). -
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, , ; ; H. - . ; - ? cm3id.~ ---.P- i H a i n that ,.~&ewe&se1a1l;;-~x$g&~@~a~nf ri .- ---.- - .. : )S ::?emgdia~'>:{$:~ -: .
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actions af ter becoming aware of the initial- of fences, were not I
nearly good enough to remove the danger to children, created , -
by the. defendant by selling nightdresses- with false labels----. . - I L . " . _ I ,
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fixed to them. The action taken by the defendant on 27 June 1990 was, on its face, much better than the action taken
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previously - but it was still not effective and further offences were committed six weeks after the defendant knew of
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the initial offences.
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wrong to look at the matter with hindsight and that the court It was correctly said by the defendant's counsel that it was L. ' should not do so. However, these offences occurred because ! 8
the defendant did not use enough foresight, before the initial C . m , offences occurred, and because, after notice of those I c offences, it failed to take action quickly enough and it I ! I failed to take action that was effective to ensure that the dangerous nightdresses with the false labels were removed from
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sale; accordingly, some were still on sale and were sold at a
store of the defendant (a) nine days (b) 14 days and (c) 43 . . -
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days after the defendant had notice of the-initial - -offences.
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The principles underlying the standards for the labels to be
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fixed to children's nightclothes were first published in 1969
(see p.2 of Exhibit "B"). The purpose of having labels was so . , I that "if you select the nightwear carefully you can minimize L the chances of it being set alight near the family fire, ,
heater or barbecue" - see the video (Annexure.13 to the agreed -
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. facts),. , 7 .- . + - - ..=T ~ 7 - :. . .- . .- - -. . . . ..
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For the foregoing reasons the defendant is convicted of each i F '
. of the offences alleged in informations numbered-. VG- 229 ,- 230, - ._ q 1.
231, 232, 233, 234, 237, 238, 239 and 240. The fines imposed , , , I
, t , . in respect of those offences are those set out earlier in
these reasons, totalling $52,000.
preceding pages are a true copy of the Reasons I certify that this and the thirteen (13) for Judgment of Mr Justice Keely.
Associate: * B
Dated: j?&z'&.d / 4 9 ~ -
Counsel for the Prosecutor : . Mr R. M. Downing
Solicitors for the Prosecutor . : - -. ~irector -:'-of : Public '-
Prosecutions - -. . . . - .
Counsel for the Defendant
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Mr R. ' Merkel QC .with Mr J Ruskin
Solicitors for the Defendant Dunhill Madden Butler Date of Hearing 27 November 1992
Date of Judgment - 8 December 1992
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