O'Neill, Michael John v El Camino Autos Pty Ltd

CATCHWORDS

Trade Practices - false representatlon In relation to sale

of motor vehxcle - plea of gullty by director and executlve

and by comp&y

- imposxtxon of pecuniary penalty.

IN THE FEDERAL COURT OF AUSTRALIA	No. G. 7 of 1979
GENERAL DIVISION	No. G. 8 of 1979

In the matter of -

THE TRADE PRACTICES ACT 1974

BETWEEN :

blICHpEL JOHN 0 'KEILL

Appllcant

and

EL CAYINO AUTOS PTY. LIMITED

Respondent

MICHAEL JOHN 0 I NEILL

Applicant

and

TH0W.S KENNE!DY

MACKENZIE

Respondent

REASONS FOR JUDGMENT

7 February 1980

Brisbane

LOCICKART J.

The respondent El Camino Autos Pty. Limited ("the

company") IS charged wIth the offence under S . 79 of the

Trade Practlces Act 1974 ("the Act") of contravening S. 53 (a)

of the Act in trade or commerce in connection with the

promotion by any means af the supply of goods, in that the

company falsely represented

that the goods had had

particular history, namely, that on or about 2'3

November

1978 at Southport In the State of Queensland,

the company

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represented to Sara Bessle Landman

that a iclazda sedan

reglstered number 798-NIY

supplied by the company had

travelled approxlmately 41,000 miles, which representation

was false, in that the vehlcle had

travelled substantially

in excess of that mlleage. The company pleaded guilty to

this charge.

The respondent, Thomas Kennedy

Mackenzle ("Mackenzie")

is charged wlth the offence of belng knowingly concerned

In the commlssion of the offence

by the company to which I

have referred.

The foundation for

thls charge 1s S. 5 of the

Commonwealth Crimes Act 1914. Mackenzie pleaded gullty to the charge.

By consent both charges were heard together,

the

evldence In one being evldence in the other. At the outset of

the hearing I was lnformed by counsel

for the informant and

f o r E.lackenzle, and by the solicitor for the company, that the

course that they Intended to follow was to place before the

court material relevant to penalty by statements from the

bar table.

No sworn evldence, elther oral

or by affidavit,

was to be adduced unless a

statement by one counsel

solicitor as to the facts was dlsputed by hls opponent.

That proposed course of conduct was sald to be in accordance with the practice of the Supreme Court of

Queensland In considering penalty

in crimlnal proceedings.

In Trade Practices Commission

v. Madad Pty. Ltd. (1979)

A.T.P.R.

40-105, p. 18,054, Keely 3. dealt with the proper

practice to follow where admissions have been

made In

placlng materlal

before this court on the questlon of penalty.

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HIS Honour said at p. 18,056:-

"Accordlngly, I consxder it preferable

that evidence of the facts which either

party proposes to rely on

should be placed

on affidavlt and filed and

served upon the

opposing party in sufficient tune to enable

it to check the accuracy of the statements in

it.	It may be necessary for It to seek

detailed instructions as to the facts asserted

in order to enable cross-examinatlon of a

deponent or for the preparatlon of affidavits

In reply.

Parenthetically, I mlght add that

In the present proceedlngs, because

of the

late stage at whlch the Court learnt of the

course proposed by the parties, the tune

fixed was much shorter than

is desirable.

The obtaining of sufficiently detailed

instructions may well take a considerable time as It may require the plaintiff, for example, to discuss with persons affected by the alleged contraventions (such as the

three retallers in the present proceedings) the

contents of any affidavits filed on behalf

of a defendant. ''

HIS Honour gave full reasons for hls

conclusion

that there is a need for sworn evxdence m respect of

matters of this nature.

I entirely agree with what his

Honour said. Adoption of the course suggested by his Honour In proceedlngs before me may, however, have led to an adjournment to enable affldavlts to be prepared or

oral evidence to be glven.

At the request of all parties,

I acceded to the course of procedure suggested by them.

Following a recital of the facts by counsel for the

Informant, it became apparent that further instructions had to be sought by counsel for Mackenzie and by the sollcltor for the company. Those instructlons were

forthcomlng, but only

after I adjourned for a time, and led

to the calling of oral evldence from Mackenzie and the

tendering of documents. At one stage, it appeared that it

. .

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might be necessary for the proceedlngs to be adJourned,

but the good sense and

co-operation of counsel and the

solicitor for the company prevailed, and

an adJournment

was avoided. Thls emphaslzed the desirablllty of following

the practice suggested by Kelly J. in Madad (supra) in

cases of this nature.

The further reason for

following

this practice is that It would avold the question arising

in any subsequent proceedings under S . 82 of the Act whether

there has been a "fmding of any fact" by	thls court m
proceedings for an offence under S . 79.

I turn now to the facts and matters whlch the partles

agreed I should take xnto account In determlnlng the

appropriate penalty.

In or about August 1971 Anthony Ian Bates of Maryborough

In the State of

Queensland purchased a new Nazda

Capella

1600 sedan, being the vehicle the subject of the proceedings.

He drove the vehicle continuously until 1 1 May 1978 when

he traded it In on a new vehicle at a business known as

Heclcer Notors in Maryborough.

Mr. Bates did not retaln any

records in relation to the Mazda, but recalls

that the

odometer reading was

In excess of 7O,OOO miles when the

vehicle was traded in. He has slgned a statement to that effect. The vehicle came Into the ownership of a buslness trading as Brisbane Motor Auctions who sold It on 25 July

1978 to the company. At the time of purchase of the vehlcle

by Brisbane Motor Auctions from Its

prevlous owner, a

form titled t'Statutory

Declaratlon and

Contract of Sale"

was completed by an employee of Brlsbane Motor Auctions,

. . ./5

one Nichael Richard Wilson, who has igned a statement

to the effect that the details on the form concerning the

subject vehlcle, including the odometer reading, were

completed by him,

and that the odometer reading of 71,147

miles was placed by him on

the form after physically

checking the odometer reading.

Maxwell Blake has slgned a statement in which he says

that he is

employed by Brlsbane Motor Auctions, that he tested

the subject vehlcle prior to Its sale to the company, and

that he completed a mechanlcal report in respect of It.

He recognised the odometer reading of 71,155 miles on the

report as being in his own handwriting.

He states that he

checked the odomcter to record the reading and that the

practice 1 s that a copy of a report of this nature is placed

In the vehlcle for lnspectlon by prospective purchasers.

In the last week of November 1978, Mrs. Landman, as a

result of

meeting blackenzle socially and mentlonlng to him

her interest In buying a Hazda car,

and belng invlted by hlm

to attend his car yard

to inspect two

Mazdas, attended at

the premises of the company at Perry Road,

Southport. She

saw Nackenzle there who showed her the SubJeCt vehicle.

M r s .

Landman lnspected It and sat In the front seat.

She

observed that the

speedometer showed the vehlcle as having

travelled only approxlmately 41,000 mlles.

Mrs. Landman has made a slgned statement and In it she

says that she then said to Mackenzle

words to the effect:

. .

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"It IS a 1971 model and it has only done about 41,000 miles. Is there any chance

that the speedometer reading is not

correct?"

She states that Mackenzie replied to the effect,

"There is no chance of that.

It IS a low

mileage car.	You can see that from Its
condltion."

Mrs. Landman then saxd

that she would like to have

an inspection of the vehicle by the Royal Automobile

Club

of Queensland (R.A.C.Q.)

to which Mackenzie replied:

"1 think you would be wasting your money.

It would cost $27.00. We are friends. I

will look after you.	You do not need to
worry about it.

He valued the motor car she then owned at X600.00

as a	trade-ln on the subJect vehicle. She was Interested

in the offer, but wished to think further about It.

Durlng the next day or so she took a friend to the

yard to inspect the vehicle and to test-drive It. After her frlend test-drove the vehicle, they returned to the

car yard

where she spoke to Mackenzle agaln about

purchaslng the car. Mackenzle reassured her about the car

and said words to the effect:

"It is a low-mileage unlt In good conditlon.

If there are any problems, I will look after

you.

Mrs. Landman then

told Mackenzie she would

purchase the car. On 30 November 1978, Mackenzie

delivered the car to Mrs. Landman's residence.

She paid

him $1,926.00 belng the difference between the purchase

prlce of $2,526.00 and the trade-in allowance of $600.00.

As a result of something she was told by the mechanlc at a

. .

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flrm called Southport

Mazda, Mrs. Landman arranged for an

R.A.C.Q. Inspection to be carrled out on the vehicle. She then made Inqulrles concernlng the previous ownership of

the vehlcle and located Mr.	Bates, the original owner.	;
i

As a result of what he told her, she made a complaint

to the Trade Practices Commission. On 5 October 1979

Mackenzie and one Donald Theodore Reynolds were interviewed

by the informant, an officer of the Trade Practices

Commission, In the presence of the solicitor of the

company and another Trade Practices Commlssioner officer,

Terence James Guthrie.

kFter the informant had stated the nature of the

complaint of Mrs. Landman, Reynolds identified himself as

the managlng director of the company, and Mackenzle ldentlfled

himself as a dlrector of the company. Reynolds stated

that he was entitled to speak for the company. He admitted

that the SubJect vehicle had been sold by the company to

Mrs. Landman.

Reynolds and Mackenzle were then

warned by the

Informant against self-lncrlmlnation. Reynolds stated that they had no documents to substantlate from whom the vehlcle

had been purchased by the company.

In answer to a questlon

from the informant as to whether he had any records in

relation to the transaction, Reynolds said:

"Sure we have. "

He was then asked to produce the

copy of the Brisbane

Motor Auctions mechanical report previously referred to.

Mackenzie then stated:

...

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"We do not keep copies of those;

they

are only auction mechanical

reports."

The Informant then said:

Wrs. Landman states that when she took

possesslon of the vehicle, the odometer

readlng was approximately

40,000 miles.

By comparlson, the records

of Brisbane

Motor Auctlons

show the vehlcle was sold

by your company wlth 71,155 mlles.

Can

you explain the dlfference?"

Reynolds replied:

"No, I cannot

.'I

He then consulted with the company's sollcltors

and sald:

"I dxd not alter

any odometer."

He further stated

that he did not

k n o w anyone who

did.

He admitted the vehlcle was in the care and control

of the

company from the time It was sold to

the company by

Brlsbane Motor Auctions until

It was sold to Mrs. Landman

by the company. Mackenzie was asked if he had any

explanatlon and

he replied:

"No .

After dlscussion In prlvate wlth thelr solicitors, Reynolds and Nackenzie decllned

to be Interviewed further.

In addition to those facts and matters,

I make the

following flndings of fact based on the e-xhlbits tendered in evidence before me and the oral evidence of Mackenzie. The company carrled on business as a dealer in motor cars at

Southport, Queensland.

At all material times its issued

and paid up capital was $2,000.00.

Its directors were

Reynolds, Alma Reynolds

and Mackenzle. Mackenzie's wife

was the company secretary.

The shareholders were Reynolds

. .

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Holdings Pty. Lxmited, Mackenzie and hls wife, their shareholdings being 1200, 400 and 400 ordxnary shares

respectlvely.

The company's trading account for the

year ended 30 June 1979 shows sales of $429,963.00 less

purchases of stock and other items referable to the cost

of sales of $414,320.00 and closing stock

of $45,280.00

leavlng a tradlng proflt of $60,922.00. After deducting

expenses, the company sustained	a net operating loss	of
$1,054.55.

Nackenzle gave evldence that he was a dlrector

and shareholder in name only, and that In truth he was merely an employee, that he had the responsibllity for the day-to-day operatlons of the car sales buslness

carrled on by the company and was the only person at the

company's premises. He sald that 2Pynolds controlled

the company. He sald that he had been engaged In the

business of selling cars slnce 1965 and left the company's

employ in the fllrst week of December

1979 of hxs mm choice.

He said that he was served with a summons initxatxng

these proceedlngs about one month before

he left the

company's employ and that the two were not connected.

He conceded that Reynolds was upset about

the proceedings,

but said that that was not the reason for his	leaving
the company's employ.

Nackenzle said that he notlced at some stage after

the company acquired the subject vehicle that Its odometer was broken, that he took xt out of the car and tried to get

. .

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a second-hand one.

He said that because it was a

second-hand car, he could not get one, so he arranged for a man who was not an officer of the company, whom he described as an "odd-job man", to repalr the odometer

and paid him a few dollars for hls services. He said:

"The odometer was broken.

I did take the

odometer out of the car and I did ask someone

to try and repalr It.

The thlng about it

was when It came back It did have only 41,000

miles on It, when

in actual fact I suppose

really basically what I should have done - when you thlnk about it - was either get a new one - complete new one or have it put back to the

proper mileage on what it was origlnally

instead of leaving it

- what it came back as.

I do not believe Mackenzie's explanatlon as

to how the odometer reading came to be altered.

The

facts whlch I have stated earller render it improbable

that the odometer was broken at the time the company

acquired the vehlcle. There is no

evldence as to how It

came to be broken thereafter.

When Interviewed by

officers of the Trade Practlces Commisslon, Mackenzle

said that he dld not know who altered the odometer.	That
was a false statement on Mackenzie's own admisslon in

evidence before me.

However, whether Mackenzle altered

the odometer hlmself or asked the "odd-job man" to

do so or

merely notlced the alteratlon after the odometer was

returned to hlm is not

critical. On any view of the facts,

Mackenzie dellberately decelved Mrs. Landman on two consecutlve days as to the correctness of the odometer readlng .

In my opinion the relevant matters to be taken into

account on the question of penalty In cases of this nature

include the following:-

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(1)	the objectives of the Act;

(2) the extent to which the false representatlon

influenced the supply of the relevant goods;

(3) the degree of falsity of the representatlon;

(4) the degree of wllfulness or carelessness in

the makxng of the representation;

(5) the extent of the dissemination of the

representatlon,and

(6) the efforts, If any, made to remedy any false

lmpresslons whlch have

been crated and to compensate

any person who sustained loss by rellance upon

the representation.

I respectEully agree wxth what was sald

by Smithers

J. about these matters In m v. Mazda Motors (Sales) Pty.

Ltd. 1977 ATPR 40-020 and & v. southern Motors

Box H111

Pty. Ltd. (1977) 15 A.L.R. 428. See also

v. Preston

Motors Pty. Llmlted 1977 A.T.P.R.

40-048; Glven v. C. V.

Holland (Holdings) Pty. Limited (1977) l5 A.L.R.

439;

Flnger v. Malua Motors Ptv. Limlted 1978 A.T.P.R.

40-062;

Given v. Snuffa Pty. Llmlted and Quinn

1978 A.T.P.R. 40-083;

Thompson v. Magnamall Pty. Limited (1) 1977 1 A.T.P.R. 40-032; Thompson v. Hagnamall Pty. Limited (2) 1977 1 A.T.P.R. 40-033;

Wise v. Greenslade and C.L.M. Holdings Pty. Limited the

judgment of the trial judge being reported in 1977 A.T.P.R.

40-035; and Given v. Optional Extras Pty. Ltd. 1976 1 A.T.P.R.

40-051

The contraventlon in the present case is serious.

. . ./l2

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The public must be protected and the respondents

and others deterred from committing like offences. and, by the very nature of the commodity in whlch it

deals, opportunities

for unscrupulous dealers to mislead

the publlc are considerable. As Smithers J. said In

Exa V. Southern Motors

Box Hxll Pty. Ltd. (supra) at

436:-

"The car industry is very large; the goods

in which It deals are essentlal to almost

every famlly and business; as slngle ltems of purchase they are expensive and In nearly every purchase there are lnevltable

uncertainties.

For a salesman to tell a purchaser that a

particular car

has a reassurlng history

when

the reverse is the case IS not only dishonest

but thoroughly unfair to the victlm.

Good

faith is required also to protect honest

traders.

To a great extent the trade is conducted by

large, successful

groups with very high

turnovers.

Perhaps the required standards

are unattalnable In large organisations. If

so, compllance wIth the requirements of the

Trade Practices Act w11l be achieved only by the lnstltutlon of procedures designed in recognitlon of the human frailties of a proportlon of their employees. Accordingly,

m order to reflect the wlll of Parllament,

substantlal penaltles must be imposed. In thls class of case the deterrent aspect of punlshment IS most Important."

I take Into account the fact that neither the

company nor Mackenzie have any prlor convictlons and

that

the representatlon was to one person and concerns

one

transaction. It was submitted by the solicltor for the company that the company had suffered and would suffer from

. / l 3

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adverse publlcity in relation to these proceedings, but

I was not referred to any particular instances of previous

adverse publlcity.

I also take into account that there is no

quantificatlon of any damage that Mrs. Landman may have suffered by reason of the misrepresentation; but it is

obvious that a 1971 model Mazda car with

a mileage of

about 71,000 mlles is worth less than	one with a mileage
of about 41,000 mlles.

There xs no suggestlon that Reynolds o r any other

director o r offlcer of the company, except Mackenzle, was privy to the deception practxsed on Mrs. Landman. But the company chose to conduct Its car sales business

in Southport by employing only one person to be in charge

of the company's actlvities and premises and as a

salesman.

The company is responsible for what Mackenzle did.

Mackenale has left the employ of the company, but the clrcumstances In whlch he did s o are not clear.

I have

referred earlier to hls evldence.

It is not necessary to

decide whether I accept hls evxdence on thls aspect of the

matter. The important point IS that it 1 s not a case of

a company choosing to retain in its employ a man whom xt

k n o w s to have practised a wllful deception on a customer.

The fact is that soon after the conduct of Mackenzle came to the knowledge of Reynolds, Mackenzie left the company's employ and ceased to be a director. The company properly

cal ls thls matter In aid of

mitlgatlon of penalty.

-14 -

Maclcenzie knew that the odometer on the car in

question wrongly showed its

mileage as about 41,000 mlles

and that It should have been shown as

71,155 males yet he

told Mrs. Landman, after she had

enqulred whether there was

any chance that the speedometer readlng was

not correct:

"There IS no chance of that. It IS a low

mlleage car.

You can see that from Its

cond~tion"

When Nrs. Landman sald she would h k e to have the car

Inspected by the R.A.C.Q.	and obtain a medical report
he sald:

"I think you would be wasting your money.

It would cost $27.00. We are fraends. I

w ~ l l

look after you.

You do not need to

w o r r y

about

It.

The following day Mackenzie again told Mrs. Landman

that it was a low mileage car.

The representation by Eiackenzle was wilfully false.

The maximum fine for an offence of this nature

in the case of a corporation is fifty thousand dollars

($5O,OCJO.00) and in the case of a natural person ten

thousand dollars ($10,000.00).

The flne applies to

any contravention of any provas~on

(except S . 52) in Part V

of the Act. Thls Part comprises the sections of the Act

which deal with consumer protection and they

prohibit a

large number of diverse

unfalr practices.

In m y opinion the flne should be the same amount

in the case of each respondent. In my opinion the approprlate fane to be imposed upon the company as

$6,000.00 and upon Mackenzie

IS $6,000.00.

. . / I 5

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Immedlately prior

to giving judgment in these

proceedings, counsel

for the Informant sought an order

that, in default of payment of whatever fine

I should

impose against Mackenzie,

a term of imprisonment should be

awarded. T~IS

raises the questlon of the application

of S. 18A of the Commonwealth CrImes	Act and of S. 19
of the Queensland Crlmlnal Code.

Counsel for Mackenzie Informed me that he had no

knowledge of the Intention of the Informant to raise thls

matter until shortly before comlng into court thIs

afternoon.

Accordingly, I defer maklng any formal orders today in

elther matter and stand both matters over to a date to be

fixed by arrangement with the parties' legal representatives.

I indicate that in my opinion the matter should be relisted

for hearing as soon as

possible.

Ur. JustkB Lockhad

Datul: 7

In the matter of -

THX TRADE PRACTICES ACT 1974

BETWEEN :

MIC~IAEL

JOHN

o 'NEILL

Applicant

- - .

and

EL CANINO AUTOS PTY. LIMITED

Respondent

AND BETWEEN:

MICHAEL J O H N O'NEILL

Applicant

- and

THOMAS KENNEDY MACKENZIE

.. . . Respondent

REASONS FOR

JLTDGNENT

28 March 1980

Sydney

L O C I W T J.

These are two charges under

S. 79 of the Trade

Practices Act

1974'for contraventlon of

S . 53 (a) which

were heard by me in Brisbane In February last.

I delivered

my reasons for judgment but deferred maklrig f0rma.l orders

;

so that the parties could cbnslder, amongst other things, the

application foreshadowed by counsel for the informant namely,

that the informant would seek the imposition

of a term of

imprisonment in the event of the fine to

be imposed upon the

respondent Mackenzle not being

paid.

./2

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This morning I have been Informed by Mr. Jolliffe

who now appears for the informant that the informant no

longer seeks an order for imprisonment in default of

payment of the fine.

Mr. Jolliffe informed me also that, by arrangement

between the parties, .ancillary orders for the payment of the

flnes and of costs are to be made by consent.

- .

I impos-e a flne on,

each respondent

in tlie sum of

six thousand dollars ($6 ,000.00) .

By consent of all parties I allow the respondent

El Camlno Autos Pty. Llmited two months from today to pay

the f l n e imposed on it

and the respondent Thomas Kennedy

_ -

Nackenzie six months from today to pay the fine Imposed on hlm.

By consent I reserve liberty

to any party to apply

. .

to vary the time allowed for payment

o f the flnes.

I .

By consent I order each respondent to pay

to the

Informant the sum of two hundred and fift(y dollars ($250.00)

on account of hIs costs.

Otherwise I make no order as to

. *

costs.

1. .

ERRATUM

MICHAEL JOHN OpNEILL v. EL CAMINO AUTOS PTY. LIMITED No. G7 of 1979 '-

MICHAEL JOHN OWEILL v. THOMAS KENNEDY MACKENZIE No. G8 of 1979

CORAM:

LOCKHART J.

DATE OF

RDER:

7 FEBRUARY 1980

WHERE MADE:

BRISBANE

In reasons	f o r judgment of Lockhart J. page 14 paragraph 2 ,
subs t i t u t e :
ttmechanical reporttt
f o r
Ifmedical reportt1

where

appearing.

ASSOCIATE

[1980] FCA 51

7 Feb 1980