Thorp, D.A. v Brian Lawlor Automotive Pty Ltd

[1987] FCA 417

Re: DAVID AUBOURNE THORP
And: BRIAN LAWLOR AUTOMOTIVE PTY. LIMITED
Nos. G381 and 382 of 1986
Trade Practices - Pleas of Guilty

COURT

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Einfeld J.(1)

CATCHWORDS

Trade Practices - Prosecutions - False misrepresentations concerning compliance of imported sunglasses with Australian Standard 1067 of 1983 - facts on which penalty should be decided - appropriate standard of proof in relation to fact finding leading to the imposition of penalties - criteria on which penalties should be imposed.

Pleas of Guilty - Assessment of penalties - Discretion and factors relevant to the exercise thereof.

Trade Practices Act 1974: ss 53(a), 79.

HEARING

SYDNEY

#DATE 24:7:1987

Counsel for Prosecutor Mr. Yates instructed by Director of Public Prosecutions (Mr. White)

Counsel for the Defendant Mr. Cutler instructed by Michie Shehadie & Co. Solicitors, Sydney

ORDER

I convict the defendant of a contravention of section 79 of the Trade Practices Act 1974, being the offences against section 53 (a) alleged in the informations filed in this Court on 3 September 1986.

I order that the defendant pay to the Registrar of this Court within twenty-one (21) days of this day a fine of six thousand dollars ($6,000), being

(i) Two thousand dollars ($2,000) in respect of summons No. G 381 of 1986, and

(ii) Four thousand dollars ($4,000) in respect of summons No. G 382 of 1986.

NOTE: Settlement and entry of orders is dealt with in accordance with

Order 36 of the Federal Court Rules.

JUDGE1

Brian Lawlor Automotive Pty. Limited ("the defendant"), an importer and distributor of automotive accessories, pleaded guilty to two charges of offences against section 79(1) of the Trade Practices Act ("the Act") brought by the prosecutor, an officer of the Trade Practices Commission ("the Commission"). The admitted offences were that in contravention of section 53(a) of the Act, the defendant was a corporation which in trade or commerce, in connection with the supply of certain sunglasses, falsely represented that the sunglasses complied with Australian Standard 1067 of 1983 ("AS 1067"). The sunglasses concerned did not comply with that Standard.

1. The actual summonses which the defendant answered through its Managing Director, Mr. Brian Lawlor, with pleas of guilty particularise only three pairs of sunglasses, two purchased on 4 November 1985 at Chester Hill from a retail outlet and one sold on 20 November 1985 at a Campbelltown retail outlet supplied by the defendant. These purchases were made by officers of the Commission. The prosecution case was proved by an agreed statement of facts and by some evidence given by Dr. Stephen John Dain, a senior lecturer in the School of Optometry within the Faculty of Science of the University of New South Wales.

2. The agreed facts go far beyond the material necessary to prove the allegations made in the two summonses. In substance, they reveal the following material matters:
   
   

1. At relevant times the defendant operated under a business name "BriLaw".

2. For a number of years it has been importing what are described as "driving glasses", but are in fact sunglasses, which it has sold under the brand name "Le Mans by BriLaw" to some 1,200 retail outlets throughout Australia.

3. On 19 August 1985, the defendant imported 3,600 pairs of sunglasses from a Taiwanese company invitingly named Shake Hands Company Limited ("Shake Hands"). There was a further shipment from Shake Hands to the defendant of some 1,800 pairs of sunglasses on 27 September 1985. Both of these shipments were organised by the defendant's Managing Director, Mr. Brian Lawlor. Each of these pairs of sunglasses contained the words "Le Mans" on one lens and carried a triangular cardboard swing tag attached to the bridge of the sunglasses by a plastic tie. Each swing tag bore the following representations:

"Manufactured to Australian Standard 1067"

'Sunglasses'

"These sunglasses are intended to reduce

sunglare in ordinary circumstances."

"Le Mans by 'Brilaw'".

4. The swing tags contained the logo and certified trademark of the Standards Association of Australia (SAA). Neither the defendant nor Shake Hands was licensed by that Association to use its mark as required by the Trade Marks Act 1955.

5. The two pairs of sunglasses purchased on 4 November 1985 at Chester Hill were chosen from ten pairs which were supplied to that outlet by the defendant. The one pair sold on 20 November 1985 at Campbelltown was amongst nineteen pairs of sunglasses sold by the defendant to that outlet. All three pairs of sunglasses, as well as the remainder of the units from which they were selected by the respective retailers, had the "Le Mans" inscription and the swing tag to which I have referred.

6. The three pairs of sunglasses, together with four other pairs of sunglasses chosen from the two shipments were tested by Dr. Dain. Only one met the requirements of AS 1067, although the actual defects varied from pair to pair. Dr. Dain's evidence explained the various defects. Some of them were relatively minor, but others not only touched the quality of the unit itself, but carried the possibility of injury to the member of the public who sought to wear them.

1. The case for the defence was largely based on the evidence of Mr. Brian Lawlor, the defendant's Managing Director. The essential features of his evidence are as follows:
   
   

1. The company's first purchase from Shake Hands was in about January 1985. Compliance with AS 1067 was not required at the time of this shipment.

2. Its second purchase was negotiated and organised by him in July

1985. This was the order for 3,600 pairs which arrived in Australia in August of that year.

3. Immediately after returning to Australia, Mr. Lawlor instructed his company's artist to prepare new artwork for the triangular swing tag containing the reference to compliance with AS 1067. He did not instruct the artist to include the logo of the SAA and the artist did not do so.

4. The artwork was sent to Shake Hands which had the swing tag was printed. The manufacturer inserted the SAA logo on his own initiative and without consulting the defendant.

5. In his negotiations, Mr. Lawlor informed Shake Hands that he required the compliance of the sunglasses with AS 1067, although he did not supply them with a copy of that standard. He knew that Shake Hands supplied other Australian wholesalers and believed that they knew what the standard required.

6. Shortly after returning to Australia, presumably after giving instructions to the artist and seeing his design, Mr. Lawlor fell seriously ill and entered hospital where he remained for about one month. He thereafter convalesced at home for about another two months not returning to work until early October 1985 on medical advice. In the intervening period the business was conducted and managed by his son, Mr. Terry Lawlor, who was about 23 years old at the time and a salesman in the business. Mr. Terry Lawlor reported to his father on the progress of the business during his convalescence. He did not give evidence in the matter because he was interstate.

7. The September 1985 order to Shake Hands for an additional 1,800 pairs of sunglasses was placed by Mr. Terry Lawlor. This was done without any consultation or contact with Mr. Brian Lawlor.

8. When Mr. Brian Lawlor returned to work in October, he first saw the swing tag bearing the logo or trademark of the SAA. He immediately contacted Shake Hands by telephone to Taiwan to obtain the necessary licence number to use the SAA trademark. There were language difficulties but he was told by the Taiwanese manufacturer that although he did not have the licence number, he would be obtaining it shortly.

9. Mr. Brian Lawlor then immediately gave instructions that the tags were to be cut off the sunglasses. Although the evidence is not clear on this point, it appears that the sunglasses in the defendant's premises when Mr. Brian Lawlor returned to work would have consisted of part of the August shipment (3,600 pairs) and part or all of the September shipment (1,800 pairs).

10. The sale of the glasses to the retail outlets at Campbelltown and Chester Hill particularised in the charges were effected during Mr. Brian Lawlor's absence through ill health, and he knew nothing particularly about them.

11. The price of the sunglasses to the retail outlets was the same whether they did or did not have the triangular tag. Thus although the defendant had no control over the sale price to the public, there was no justifiable reason for charging the public more for the glasses that had the tag.

1. Some of Mr. Brian Lawlor's evidence is difficult to accept. The apparent placement of blame for these offences on the shoulders of his son arouses considerable suspicion. I do not accept that Mr. Terry Lawlor was seriously responsible for the events in question. His absence interstate, in respect of a proceeding of which the parties had considerable notice, appears to be convenient to the defence rather than essential for its commercial well-being. I also find it difficult to imagine that as late as September - some two months after Mr. Brian Lawlor had first fallen ill - Mr. Terry Lawlor would, as a "mere saleman", have lodged an order for a further 1,800 pairs of sunglasses without first consulting and discussing the matter with his father. The arrival of the 1,800 pairs of sunglasses on 22 September 1985 was after all just before Mr. Brian Lawlor returned to work. He must by then have been taking more than a passing interest in the progress and activities of the business.

2. I am also unable to understand why Shake Hands would on its own initiative add the logo of the SAA, an Australian organisation, to a tag designed in Australia by Australians for Australians, at any rate without first consulting its principals for instructions. As the price from Shake Hands was the same whether or not the logo appeared, I cannot see anything which Shake Hands would gain by wrongly adding the logo on its own initiative.

3. On the other hand, I accept Mr. Lawlor's evidence that he told Shake Hands of his requirement that the glasses comply with AS 1067. I can understand, therefore that Shake Hands might print the requested tag containing an assertion that the goods complied with an SAA standard even though it did not know and had not checked whether that was correct - or perhaps even knew it was incorrect. Shake Hands might well feel that if it failed to assert compliance, the defendant might renege on the purchase altogether or at least seek to pay less for it. I think it probable that the defendant intended, at the time of ordering the sunglasses, that they comply with AS 1067 as a precondition to an assertion of compliance on the swing tag, but I am unable to discern any steps taken by the defendant to see that they did comply.

4. Section 79 is a penal section and suspicions are not and ought not to be enough to found the basis of fact finding for the imposition of penalties. At the relevant time of these offences, the maximum fine for a body corporate was $50,000 per offence. The Act has since been amended to increase the maximum fine for a body corporate to $100,000, indicating that Parliament views these offences seriously.

5. The facts show that this company has been in business for more than twenty years and that Mr. Lawlor himself has been wholesaling automotive accessories for twenty eight years. In that time he says that he has never had a complaint against his products, although of course for a considerable amount of that period there was little or no legislation which would have permitted significant complaints to be effectively pursued, especially against wholesalers of relatively inexpensive items. The effect of Mr. Lawlor's evidence is that his ordering of the removal of the tags on all the remaining sunglasses prevented further misrepresentations to the public after his return to work and that the error would not have occurred if he had not taken ill. He also says that virtually since his return to work, he has been regularly in touch with and seeking the advice of Dr. Dain's School of Optometry in the testing of imported sunglasses and that whatever units failed the tests were now immediately discarded. There is no evidence that any member of the public was injured or even complained.

6. One of the difficulties in fixing an appropriate penalty in this case is that the actual summonses refer to only three pairs of sunglasses all of which failed to comply with AS 1067 and the Statement of Agreed Facts refers to only four other pairs of which three failed the Standard. On the other hand, the case appears to have been partly conducted on the basis that I should be considering and making some unsupported assumptions about all 5,400 pairs in the two shipments. Even if this was a legitimate basis on which to proceed, the problem is that an unknown number of these units apparently had the tag removed and were therefore not sold in contravention of section 53(a) of the Act. It is then left open by way of inference that presumably a similar proportion of those sold with the offending tag failed the standard as occurred with the tests to which the seven pairs were subjected. If this were so, the argument is, almost ninety per cent (90%) of those sold before Mr. Brian Lawlor had the tags removed were equally in breach of section 53(a).

7. There is no evidence or other means by which I could even reliably guess at how many sunglasses were sold with the tag. For example, there is neither oral evidence nor the documentary material offered by Mr. Brian Lawlor in his record of interview with officers of the Trade Practices Commission, such as, for example, orders, invoices and delivery dockets covering sales and deliveries before Mr. Brian Lawlor returned to work, which would provide a basis for calculation or estimation. In these circumstances, it does not seem that I can, in a quasi criminal matter such as this, legitimately proceed on any tortuous path of assumption or guesswork, such as I have been invited to do.

8. There is considerable authority on the standard of proof appropriate in relation to fact finding leading to the imposition of penalties or sentences.
   
   

"On the sentencing of an offender, the Crown bears no onus of proving beyond a reasonable doubt facts alleged by it and relevant to sentence or at excluding beyond a reasonable doubt matters which might come in mitigation.

The sentencing judge is entitled to act on probability; however, he would necessarily be guided or influenced in his acceptance or rejection of particular facts by having regard to the significance of their bearing upon the increasing or reducing of what might be regarded as an average or normal sentence. If differing versions of relevant events have like probability that one of them which is favourable to the accused will be accepted."

Per Campbell C.J., Matthews, McPherson JJ in R v Welsh (1983) 1 Qd R 592.

1. In that case the Court had to consider the question of the burden and standard of proof when facts before a sentencing judge are of a nature likely to mitigate sentence or, as in a case such as this, make consideration of the offence more serious.

2. Because they deal with deceptive conduct and false and misleading representations ordinarily covered by the criminal law, breaches of consumer protection laws - such as Part V of the Trade Practices Act - require the prosecution to establish the elements of the offence beyond reasonable doubt. If it does so, then unless the accused can satisfy the court of the validity of any statutory defence on the balance of probabilities, the defendant will be convicted: Ballard v Sperry Rand Australia Ltd. (1975) 6 ALR 696; Guthrie v Doyle Dane & Bernbach Pty. Ltd. (1977) 30 FLR 116. However, a plea of guilty is only an admission of the offence charged (R v Riley (1896) 1 QB 309) and does not of itself necessarily establish the facts for sentencing.

3. So far as concerns this Act, there is also considerable authority on the way to approach the matter of penalty. In Hartnell v Sharp Corporation of Australia Pty. Limited (1975) 5 ALR 493 Smithers J., with whom Evatt J. agreed, listed six matters relevant to the determination of penalties in respect of breaches of section 53(a) of the Act:
   
   

1. The importance of the untrue statements and the extent of the departure from standards.

2. The degree of wilfulness or carelessness involved in the relevant conduct.

3. The degree that the statement departs from the truth.

4. The degree of dissemination.

5. What efforts have been made to correct the situation.

6. The deterrent effect of any penalty to be imposed.

1. Developing these themes in Eva v Mazda Motors (Sales) Pty. Limited (1977) ATPR 40-020 (page 17,302), Smithers J. said that the following factors are relevant on the question of penalty (page 17,309):
   
   

1. The importance of the untrue statements in relation to any transaction which may possibly proceed under the influence of the incorrect representation.

2. The degree that the representation departs from the truth.

3. The degree of wilfulness or carelessness in the making of the incorrect representation.

4. The extent that the representation was disseminated.

5. Whether any and what efforts have been made to correct any false impressions which may have been created.

6. The objectives of the Act.

1. Earlier at page 17,308, his Honour had declared, on the other hand, that "Parliament no doubt expected the Court to exercise care in particular cases that penalties be not oppressive." Smithers J. went on:
   
   

"The area of activity in which offences of significance may be committed is such that penalties which may be oppressive in relation to some defendants would be seen to be trivial in relation to others. The penalty in any particular case must be sufficient to reflect the gravity of the offence, and to reflect Parliament's unequivocal intention that its will is to be obeyed."

1. In illustrating the relevance of that comment to the case with which his Honour was dealing, a case involving the well known motor vehicle manufacturer and distributor, his Honour presented this typically powerful exposition:
   
   

"The gravamen of the defendant's fault in this case is that through negligence and preoccupation with other matters and enthusiasm for its product, it exercised no scrutiny of the accuracy of the statements it authorised for publication to the public and thereby failed to respond to the duty, resting upon it by reason of its own reputation and the extent of its business as an important unit in the motor vehicle trade, not to mislead the section of the public interested in purchasing a motor vehicle, and that it remained inattentive and complacent even after it knew that its assumption that the unverified statements it had authorised were true was invalid."

1. With appropriate variations to reflect the nature of particular charges, these criteria have been adopted in subsequent cases, for example: Queen v. Gibbon (1980) 41 FLR 416 at 421-2; Dawson v. World Travel Headquarters Pty. Limited (1981) 53 FLR 455 at 477; Adams v. Anthony Bryant & Co. Pty. Limited and Ors. (unreported decision of Wilcox J. delivered on 14 April 1987). See also Trade Practices Commission v. Stihl Chain Saws Pty. Limited (1978) 2 ATPR 40-091 at page 17,896. I agree with respect with these approaches.

2. When goods are in the lower price range, there is a greater inducement to purchase by a simple misrepresentation of this kind. The misrepresentation is the worse when, as here, it is patently false, knowingly or carelessly made and where danger to the public is likely to result. In addition, although in one respect, the defendant seems to have acted promptly to repair the error, a significant defect in the substance of the immediate action by this defendant taken to stop the misrepresentation was its failure to request the retail outlets, to which many pairs of sunglasses must have been sold with the misrepresenting tags attached, to cut the tags from them before selling to the public.

3. In all the circumstances, it seems to me that the appropriate orders are:
   
   

1. I convict the defendant of a contravention of section 79 of the Trade Practices Act 1974, being the offences against section 53

(a) alleged in the informations filed in this Court on 3 September 1986.

2. I order that the defendant pay to the Registrar of this Court within twenty-one (21) days of this day a fine of six thousand dollars ($6,000), being

(i) Two thousand dollars ($2,000) in respect of summons No. G 381 of 1986, and

(ii) Four thousand dollars ($4,000) in respect of summons No. G 382 of 1986.

NOTE: Settlement and entry of orders is dealt with in accordance with Order 36 of the Federal Court Rules.