Polo Textile Industries Pty Ltd v Domestic Textile Corporation Pty Ltd

[1993] FCA 203

Re: TRADE PRACTICES COMMISSION
And: ADVANCE BANK AUSTRALIA LIMITED
No. G681 of 1992
FED No. 203
Number of pages - 15
Trade Practices
(1993) ATPR 41-229

COURT

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Gummow J(1)

CATCHWORDS

Trade Practices - consumer protection - false or misleading representations in newspaper advertisements with respect to the price of home mortgage insurance - contravention of para. 53 (e) admitted - 5 charges - penalty.

Trade Practices Act 1974, ss. 53 (e), 79

Trade Practices Commission v Bata Shoe Company of Australia Pty Ltd (No. 2) (1980) 44 FLR 149

Dawson v World Travel Headquarters Pty Ltd (1981) 53 FLR 455

HEARING

SYDNEY, 9 March 1993

#DATE: 8:4:1993

Counsel and Solicitors Mr P. Johnson and
for the Prosecutor: Miss Frances Backman instructed by the

Director of Public Prosecutions.

Counsel and Solicitors Mr D.M.J. Bennett QC and
for the Defendant: Mr A.J.L. Bannon instructed by Norton

Smith and Co.

ORDER

THE COURT ORDERS THAT:

Advance Bank Australia Limited ("the Bank") is convicted of 5 contraventions of para. 53 (e) of the Trade Practices Act 1974 as charged in the Summons filed 17 September 1992.

The Bank pay a fine of $4,000 in respect of each conviction.

The fines be paid by the Bank to the District Registrar of this Court on or before 30 April 1993.

The Bank pay the Prosecutor its costs with respect to the proceedings, the same to be taxed if not agreed.
Note: Settlement and entry of orders is dealt with by Order 36 of the Federal Court Rules.

JUDGE1

GUMMOW J The defendant ("the Bank") pleads guilty to 5 charges, under para. 79 (1) (a) of the Trade Practices Act 1974 ("the Act"), of contravention of para. 53 (e) of the Act. This provides:

"53 A corporation shall not, in trade or commerce, in connexion with the supply or possible supply of goods or services or in connexion with the promotion by any means of the supply or use of goods or services - . . .

(e) make a false or misleading representation with respect to the price of goods or services . . ."

An offence in respect of Part V by a body corporate is "punishable on conviction" by a fine: para. 79 (1) (g). The maximum fine of $100,000 was increased to $200,000, with effect from 21 January 1993, by s. 11 of the Trade Practices Legislation Amendment Act 1992 ("the 1992 Act"). Section 10 of the 1992 Act increased to $10m. the maximum penalty under s. 76, which deals with contraventions of Part IV. Unlike s. 11, s. 10 expressly applies only to acts or omissions that happen after 21 January 1993.

1. The first charge concerns a representation in an advertisement caused by the Bank to be published on 12 May 1991 in the "Sun Herald" newspaper, the second an advertisement on the same date in the "Sunday Telegraph" newspaper, the third an advertisement on 19 May 1991 in the "Sun Herald", the fourth an advertisement on 19 May 1991 in the "Sunday Telegraph", and the fifth an advertisement published on 26 May 1991 in the "Sunday Telegraph". The first two advertisements are in the same form, and the remaining three are in the same form. A copy of the advertisement in the first form is annexed to these reasons as the First Schedule, and a copy of the second advertisement is the Second Schedule. The circulation figures for the "Sunday Telegraph" between 12 and 26 May 1991 were about 650,000 copies and for the "Sun Herald" about 560,000 copies.

2. Each advertisement is headed in bold and very large print:
   

"Home loan

protection

for $2 a week."

Underneath that heading there appears in each advertisement the statement, in large print:

"New 'Safety Net' Home Loans let you pick up a bargain now because your home loan repayments are paid even if you get retrenched or sick."

Other material then follows in smaller type. In very small print, it is indicated that the sum of $2 has been used with a mortgage for $60,250. Under the Heading "How it works", in the first advertisement there appears:

"If you can't work, due to redundancy, retrenchment, an illness, or an accident, your Safety Net Loan Insurance can pay 100% of your home loan repayments for you, for up to a year."

In the second advertisement, the sentence reads:

"If you can't work, due to redundancy, retrenchment, or you're unemployed due to an illness or an accident, your Safety Net Loan Insurance can pay 100% of your home loan repayments for you, for up to a year."

1. The gravamen of the particulars to all of the charges is to like effect. It is that the advertisements asserted that one could obtain from the Bank home mortgage insurance for $2 a week, and would lead the reader to conclude that for that sum, on a mortgage of $60,250, one could obtain insurance cover both against unemployment, however brought about, and sickness or disability, even if unrelated to unemployment, whereas in truth one could obtain insurance cover with respect to unemployment for $2 a week but not unemployment together with sickness and disability unrelated to unemployment.

2. The point is illustrated by the evidence of one of the witnesses, Mrs J.J. Baird. She had a mortgage loan from the Bank over her property at Beacon Hill for about $52,000. She read the advertisement in the "Sun Herald" dated 19 May 1991 and was interested to obtain cover both for unemployment and sickness. However, upon inquiry of the Bank, she was told that for the mortgage protection insurance she wanted, the cheapest cover that the Bank could offer would be about $301 a year, and not the $104 a year as advertised in the newspaper.

3. Evidence for the Bank was given by a number of officers and employees. Mr E.F. Abreu and Miss M.G. Dyball were, at the relevant time, employed by the Bank as solicitors. Their offices were at the Bank's premises at North Sydney. Mr P.R. Coles was Chief Manager, Marketing. Mr S.T. Partington has been employed by the Bank as General Counsel and Group Secretary for approximately 7 years. He is responsible, among other things, for the coordination and review of the provision of legal advice to the Board and management of the Bank. Mr E.A. Ross at the relevant time was Marketing Manager of the Insurance Division of the Bank. Mr C.R. Stuart was Administration Manager of Advance Insurance Agencies Pty Limited, a wholly owned subsidiary of the Bank, concerned with what was described as the Bank's "insurance products" and their competitiveness in the "marketplace". Mr Abreu, Miss Dyball, Mr Coles and Mr Ross were cross-examined upon their affidavits.

4. Miss Karen Brown left the Bank in August 1991 and presently lives in Singapore. She did not give evidence. She had been employed by the Bank in its Marketing Department, and was the Project Manager responsible for the implementation of the Bank's "Safety Net" campaign.

5. On 3 April 1990, the Bank entered into a marketing and administration agreement. The other parties included Sun Alliance Australia Limited and Sun Alliance Life Assurance Limited (collectively defined as "Sun Alliance") and a related company of the Bank, Advance (N.S.W.) Insurance Agencies Pty Limited (defined as "the Agent"). The agreement recited that Sun Alliance wished to market conjointly with the agent certain "insurance products" to customers of the Bank, and for this purpose to utilise the debiting and collection facilities of the Bank for the payment of insurance premiums. Miss Brown has no recollection of any such agreement but it was her practice to send a copy of any advertisements involving "insurance products" to Sun Alliance.

6. The admitted contraventions of s. 53 (e) of the Act came about in the following way. The Safety Net insurance cover was designed to provide protection against the risk of unemployment caused by dismissal or retrenchment consequential upon illness or sickness. The Bank had certain procedures for the approval of advertisements for such new species of cover. There were two components to the procedure. First, the responsible person within the Marketing Department was to liaise with the officers in the relevant division of the Bank with the responsibility for and technical knowledge of the insurance cover, and to obtain the approval of that person to any marketing material. Miss Brown was the Project Manager in the Marketing Department, and the marketing of Safety Net was her responsibility.

7. The second component of the procedure was the need for approval of all advertisements by the Legal Department. Miss Dyball was the solicitor in the Bank's Legal Department who "signed off" Marketing Department advertisements. On 5 May 1991, an advertisement was published for the "Safety Net" against which no complaint is made. It made no reference to the particular points which gave rise to the contravention by the later advertisements. This advertisement appears to have been arranged by Miss Brown and approved by Mr Ross, Mr Coles and Miss Dyball.

8. The impetus for the advertisement of 12 May 1991, which introduced the reference to "$2 a week" appears to have been the publicity for a Housing Industry Association proposal which had been described in the issue of the Sunday Telegraph of 5 May 1991 as costing "$2 a week". Miss Brown arranged for the new advertisement but did not show it to Mr Coles or Mr Ross. Miss Dyball was on leave and Mr Abreu took over her role.

9. Mr Abreu normally was involved in the retail side of the Bank's operations. He was approached at lunch time, or shortly after lunch, on the Friday immediately preceding 12 May. He was not familiar with the file and relied on an assurance by Miss Brown that the statements contained in the proposed advertisement were accurate.

10. What should have happened is that Miss Brown should have made certain that the advertisement was looked at by Mr Coles and Mr Ross. Further, if Mr Abreu had followed the procedures of Miss Dyball, he himself would have consulted Mr Ross about the advertisement. He also could have obtained a copy of the "Product Specification" and particulars of the price listings in order to satisfy himself that the statement as to the $2 price was accurate.

11. So far as the Bank can ascertain, there was no "sign off" obtained from the Legal Department by Miss Brown in relation to the second advertisement, first published on 19 May 1991.

12. There was a belated appreciation within the Marketing Department that a real problem had arisen. However, this was only after the publication of the advertisement on 26 May 1991, the subject of the last of five charges.

13. The Bank relies upon the following matters as relevant to penalty. First, there was no intention to mislead. Plainly, there was no such intention. Secondly, at the material time the Bank had procedures to ensure a proper review of proposed advertisements; the operation of those procedures broke down and, in part, human error was involved. Thirdly, not a large number of "Safety Net" policies were issued. The total is 456, of which 177 were for unemployment only.

14. Fourthly, it is said that apart from the complaint by Mrs Baird, to which I referred earlier in these reasons, the Bank is unaware of any complaint having been made by any customer of the Bank in relation to the Safety Net policy or the advertisements to promote it. Mrs Baird ultimately was not deceived in that she was informed by the Bank, when she inquired, of what was the true cost of the policy.

15. Fifthly, in a typical week, the Bank has about 30 different press advertisements throughout Australia, and in the course of a year it places approximately 1,000 different advertisements in newspapers throughout Australia. There have not been any other complaints against the Bank of contravention of the Act, notwithstanding this large amount of advertising.

16. Then it is said, as is in fact the case, that the Bank acted promptly when it became aware of what had happened. It has conscientiously engaged in a reinforcement of its procedures and is seeking to invoke the assistance of the Prosecutor to ensure that such procedures are adequate. The matter is dealt with in considerable detail in the affidavit of Mr Partington.

17. Further, in the address by the Chairman of the Bank at the Annual General Meeting in 1992, the Chairman referred to the action taken by the Prosecutor and continued:
    

"This was simply an ordinary human error. We withdrew the product immediately we became aware of the mistake. With the active cooperation of the insurance company involved we have made sure that not a cent has been lost by any customer. The fact is that your Bank is run by human beings. Sometimes we will make mistakes. The more complex the law becomes the more that is likely, and the more our compliance efforts will cost you.

I can assure our customers and share-holders that we are committed to the rule of law and to honest and fair behaviour.

We may be prosecuted for mistakes - but we are not and will not be in the business of dishonesty."

Counsel urged that from the this material and from a press report which is in evidence that the events in question may be assumed already to have caused the Bank significant damage to its reputation.

1. I take into account all these matters put forward by the Bank. Finally, counsel for the Bank submitted that the publication of correcting advertisements would have achieved little, the crucial point being that on inquiry to the Bank the true cost would have been immediately revealed to the inquirer, as it was to Mrs Baird. I am not satisfied that the absence of public correction is to be discounted in this way.

2. The Bank submits that in all these circumstances any penalty should be in the low range.

3. If this were a case in which the appropriate penalty multiplied by the number of offences exceeded the statutory maximum, and if it appeared to the Court that the contraventions were of "the same nature or a substantially similar nature" and that they occurred "at or about the same time", sub-s. 79 (2) of the Act would apply. The Court would then be required not to impose fines which in the aggregate exceeded the maximum for the one offence specified in sub-s. 79 (2). The expression in sub-s. 79 (2), "at or about the same time" is to offences so close together in time that there is a basis in reality for attributing to them a unity in the commission of the actus reus of each: Ducret v Colourshot Pty Ltd (1981) 35 ALR 503 at 508-9.

4. The Bank further submits that independently of sub-s. 79 (2), it is permissible and appropriate in circumstances such as the present, where all the contraventions arise from a single cause, to apply a single penalty, or, at least, to have regard to the common factual substratum, when dealing separately with each charge. In a retail price maintenance case, Trade Practices Commission v Bata Shoe Company of Australia Pty Ltd (No. 2) (1980) 44 FLR 149, Lockhart J said at 176:
   

"Guidance is given in the field of sentencing for criminal offences by the well known principle that where several offences are heard together and arise out of the same transaction it is a sound working rule that the sentences imposed for those offences should be made concurrent; it is inappropriate to sentence consecutively when the offences were all really involved in the same episode . . . I accept that the contraventions arose out of the one course or pattern of conduct. Although it is necessary to look at each contravention separately, nevertheless consideration must be given to the facts common to each contravention . . ."

I accept as directly applicable to the present charges what his Honour said in the last portion of the extract.

1. Reference also was made, inter alia, to Doolan v Waltons Ltd (1981) 39 ALR 408 at 416, Trade Practices Commission v Kensington Hiring Co. Pty Ltd (1981) ATPR 40-256 at 43,288-9, and to the decision of the Full Court in Commodore Business Machines Pty Ltd v Trade Practices Commission (1990) 92 ALR 563 at 570-572. The second and third of these cases were actions for penalties for resale price maintenance.

2. Counsel for the prosecutor submitted that (a) the advertisements appeared over a period of 3 weeks, (b) they were not of the same nature or a substantially similar nature, and (c) they did not appear at or about the same time, with the result that they should be treated as separate and discrete offences. I accept propositions (a) and (c) (but not (b)), qualified so as to give effect to the reasoning of Lockhart J in the Bata Case, in the passage I have discussed above. Counsel also emphasised (in my view correctly) the scale of the advertising, the absence of corrective advertising and the pitching of the advertisements at the lower end of the market where persons might be expected to be less knowledgeable or worldly in the matters with which the advertisements were dealing.

3. In Dawson v World Travel Headquarters Pty Ltd (1981) 53 FLR 455, Fisher J dealt with the case where the defendant had been negligent in failing to ensure that its "fail safe" system achieved its intended objective of ensuring that consumers were not misled. Penalties under s. 79 were sought in respect of contraventions of s. 58 of the Act. At 477, his Honour said:
   

"In the somewhat exceptional circumstances surrounding these charges it seems proper to me that I take into account on the question of fines the following matters: (a) The objectives of the legislation and in particular its policy of consumer protection. (b) The absence of fraudulent or dishonest intent and of deliberation on the part of the defendant. (c) The degree of negligence in its conduct. (d) The extent of the carelessness and wilfulness of its conduct. (e) The extent to which its conduct has or is likely to have prejudiced consumers. (f) The efforts which it has made to correct the situation. (g) The deterrent effect of the conviction and fines."

See also O'Neill v El Camino Autos Pty Ltd (1980) 42 FLR 35 at 40-1, per Lockhart J, and the Crimes Act 1914 (Cth), s. 16A. As to the significance of general deterrence, see Tapper v R. (1992) 111 ALR 347 at 351.

1. Taking into account all the relevant circumstances, I do not regard the offences as trivial, but, on the other hand, they are not at the upper end of the scale. I propose, on each conviction, to impose a fine of $4,000, as of a severity appropriate in all the circumstances to the offence.