Trade Practices Commission v Bamix Australia Pty Ltd

Re: GEORGE ZARAVINOS
And: DAIRY FARMERS CO-OPERATIVE LIMITED and PURE PAK AUSTRALIA PTY. LIMITED
Re: OURIANA ZARAVINOS
And: DAIRY FARMERS CO-OPERATIVE LIMITED and PURE PAK AUSTRALIA PTY. LIMITED
(1985) 7 FCR 195 Nos. G277 and G278 of 1983
(1985) ATPR para 40 - 559
Trade Practices

COURT

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Lockhart J.(1)

CATCHWORDS

Trade Practices - preliminary question of law - whether the Court has jurisdiction to hear the proceedings - whether the provisions of the Pure Food Act 1908 (N.S.W.) answer the description of a prescribed consumer safety standard within the meaning of para. 62(1)(a) of the Trade Practices Act 1974 - whether the applicants answer the description of "a person who suffers loss or damage by conduct of another person that was done in contravention of" s. 82 of the Trade Practices Act - costs.

Trade Practices Act 1974: ss. 62, 74B, 74D, 74G and 82.

Pure Food Act 1908 (N.S.W.): ss. 10, 13(1).

Trade Practices - Consumer protection - Product safety and information standards - Applicability of standard prescribed under State law - Breach of Pure Food Act 1908 (NSW) - Contravention of Trade Practices Act 1974 (Cth), s 62(1) - Pure Food Act 1908 (NSW) - Trade Practices Act 1974 (Cth), s 62(1).

Trade Practices - Enforcement and remedies - Actions for damages - Conditions and warranties - Breach - Statutory right to recover for loss by conduct contravening Act - Breaches not conduct in contravention of Pt V, Trade Practices Act 1974 (Cth) - Trade Practices Act 1974 (Cth), ss 74B, 74D, 74G and 82.

HEADNOTE

Held: (1) The Pure Food Act, ss 10, 13(1) cannot prescribe consumer product safety standards for the purposes of the Trade Practices Act, s 62(1).

(2) Breaches of the conditions and warranties implied by ss 74B, 74D and 74G of the Act are not conduct in contravention of Pt V within the meaning of s 82 of the Act.

Arturi v. Zupps Motors Pty Ltd (1980) 49 FLR 283; Zalai v. Col Crawford (Retail) Pty Ltd (1980) 2 NSWLR 438, applied.

HEARING

Sydney, 1985, March 13-14. #DATE 14:3:1985
TRIAL OF ACTION

On the trial of an action for alleged breaches of the Trade Practices Act 1974, ss 62, 74B, 74D and 74G the first respondent contended that the court did not have jurisdiction.

F Gormly QC and P Blacket, for the applicants.

B Toomey QC and D T Kennedy, for the first respondent.

T J Clarke, for the second respondent.

Cur adv vult

Solicitors for the applicants: Turner Freeman.

Solicitors for the first respondent: Aitken & Pluck.

Solicitors for second respondent: Henry Davis York.

BAG

ORDER

The proceedings G277 and G278 of 1983 be dismissed.

There be no order as to the costs of any party to these proceedings.

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

Orders accordingly

JUDGE1

When the hearing of these two matters began yesterday, counsel for the first respondent, Dairy Farmers Co-Operative Limited ("Dairy Farmers") contended that the Court had no jurisdiction to hear them. It was agreed that I should hear the argument on that question as a preliminary question of law.

There are two proceedings in this Court, G 277 of 1983 and G278 of 1983; the former is brought by George Zaravinos and the latter by Ouriana Zaravinos, his wife. By consent, the two proceedings are to be heard together.
Mr. and Mrs. Zaravinos allege in their respective statements of claim that on or about 29 July 1981 Mr. Zaravinos purchased a carton of milk on behalf of himself and Mrs. Zaravinos from a delicatessen in Rose Bay; that the carton was manufactured by the second respondent, Pure-Pak Australia Pty. Limited ("Pure-Pak"), and delivered by it to Dairy Farmers who filled it with milk before it was delivered to the delicatessen.
The statements of claim further allege that on the same day, 29 July 1981, Mrs. Zaravinos drank milk from the carton and that the milk contained the hind-quarters of a rat; that the milk was not therefore reasonably fit for human consumption and was not of merchantable quality.
The statements of claim also allege that Mrs. Zaravinos, as a result of drinking the milk herself and seeing both the remains of the rat in the residue of the milk being poured out of the carton and the apparent effect of those events upon her child, suffered gastroenteritis, hair loss, severe emotional reaction and nervous shock. She claims damages. Mr. Zaravinos claims consequential loss of consortium.
The claims of Mr. and Mrs. Zaravinos are founded upon (a) alleged breaches by Dairy Farmers of ss. 62, 74B, 74D and 74G of the Trade Practices Act 1974; (b) alleged breaches by Dairy Farmers of s. 10 and s. 13(1) of the Pure Food Act 1908 (N.S.W.) and (c) common law claims of alleged negligence on the part of each respondent.
Dairy Farmers and Pure-Pak deny all relevant allegations in the statements of claim. It is plain and, indeed, common ground that if the claims brought under the Trade Practices Act cannot, as a matter of law, be sustained there is no remaining federal element present in the claims; and that this Court, in those circumstances, has no jurisdiction. It is to this question that I now turn.
Section 62 of the Trade Practices Act provides, as far as is relevant:

"s.62(1) A corporation shall not, in trade or commerce, supply goods that are intended to be used or are of a kind likely 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.

The section also provides:

"s.62(2) The regulations may, in respect of goods of a particular kind, prescribe a consumer product safety standard consisting of such requirements as to -

(a) performance, composition; contents design, construction, finish or packaging of the goods; and

(b) the form and content of markings warnings or instructions to accompany the goods,

as are reasonably necessary to prevent or reduce risk of injury to persons using the goods or to any other persons."

Failure to observe the prohibition imposed by sub-section 62(1) constitutes a contravention of the Trade Practices Act and is an offence punishable on conviction pursuant to s. 79 of that Act. It is common ground that no relevant regulations have been prescribed under sub-s. 62(2).
It is also common ground that no provisions of s. 62 other than those to which I have just referred are relevant. I have not been referred by counsel to any decided cases which relevantly concern s. 62, nor have my own researches revealed any.
The particulars of the alleged breach of s. 62 are stated by Mr. and Mrs. Zaravinos in their respective statements of claim as follows:

"Breach by the first respondent of s. 62 of the Trade Practices Act (Commonwealth) 1974 - 1981 in that the First Respondent supplied a carton of milk that was intended to be used or was of a kind likely to be used by a consumer yet the carton of milk did not comply with a prescribed consumer product safety standard namely ss. 10 and 13(1) of the Pure Food Act (N.S.W.)."

Sections 10 and 13(1) of the Pure Food Act provide as follows:

"s.10 No person shall sell any article of food which is adulterated or falsely described, which contains any matter foreign to the nature of the food or which is packed or enclosed for sale in any manner contrary to any provision of this Act or the Regulations.

13(1) Where any person sells a food which is a mixture, the ingredients shall be pure and in an undeteriorated and sound condition and shall comply with the prescribed standards and such person shall deliver the mixture to the purchaser in a package on or attached to which shall be a statement or label, legibly and uniformly written stating that the food is a mixture and the names of the ingredients and the proportions of the ingredients when so prescribed provided that it shall not be necessary so to attach a statement or label in the case of -

(a) an article of food generally known to users as a compounded article mixed with any matter or ingredient not injurious to health, and not intended fraudulently to increase its bulk, weight, or measure, or to conceal its inferior quality; or

...

(c) a mixture exempted from this section by the regulations, which exemption may be applied to classes of articles."

Counsel for Mr. and Mrs. Zaravinos contended that those provisions of the Pure Food Act answer the description of a prescribed consumer product safety standard within the meaning of para. 62(1)(a) of the Trade Practices Act. It is not necessary for me to decide whether goods encompassed by sub-s. 62(1) are only those of a particular kind which may be prescribed from time to time by the regulations made under the Trade Practices Act, or whether such goods could also encompass those, if any, in respect of which certain other Commonwealth statutes prescribed consumer product safety standards. However, it is not suggested that there are any other relevant Commonwealth statutes save the Trade Practices Act.
I reject the argument that the Pure Food Act (N.S.W.) could prescribe consumer product safety standards for the purposes of sub-s. 62(1) of the Trade Practices Act. It cannot have been within the contemplation of the Commonwealth Parliament when enacting s. 62 that the failure by a corporation in trade or commerce to observe the requirements of the law of a State or Territory of the Commonwealth in respect of consumer product safety standards shall, without more, constitute a breach of Commonwealth law. The contrary view necessarily involves acceptance of the proposition that the Commonwealth Parliament intended to create offences against Commonwealth law for breaches of State law which may vary from time to time and from State to State without any national element, and in respect of State prescribed safety standards which are beyond the reach of Commonwealth control.
Properly construed, on no view of the matter can sub-s. 62(1) encompass State law. In my opinion, insofar as the case of Mr. and Mrs. Zaravinos is based on sections 10 and 13(1) of the Pure Foods Act (N.S.W.) as a source of the relevant standards for the purposes of s. 62, it cannot succeed.
I turn to ss. 74B, 74D and 74G of the Trade Practice Act. Those three sections appear in Division 2A of Part V of the Trade Practices Act. That division is a revolutionary code of products liability: see Gregg and Tzovaras, "The Liability of Manufacturers and Importers Under the Trade Practices (Amendment) Act 1978", (1979) 10 Fed.L.Rev. 398; and Ahmed, "Products Liability in Australia", (1979) 6 U. Tasm.L.Rev. 189.
The rationale behind Division 2A is that liability for defects in goods should be borne by the manufacturer rather than the retailer because of modern methods of packaging, labelling, distribution and promotion of goods. Division 2A does not apply where there is a contract between the manufacturer and a consumer. It applies where the manufacturer supplies goods to another person, usually a distributor or retailer, who acquires the goods for the purposes of re-supply. The Division applies to the supply of goods which are of a kind ordinarily acquired for personal, domestic or household use or consumption (para. 74A(2)(a)) - that is, consumer goods. There is an extended definition of "manufacturer" to include, for example, a corporation that is not the actual manufacturer of goods which imports them into Australia provided that at the time of importation the real manufacturer has no place of business in Australia: sub-s. 74A(4). The Division therefore is capable of operating in respect of two different corporations - the actual manufacturer and the notional one. If the goods supplied by the manufacturer are not reasonably fit for a particular purpose expressly or impliedly made known to the manufacturer, then the manufacturer is liable to the consumer for loss or damage suffered by him: sub-s. 74B(1). No liability attaches where the consumer did not rely on the skill or judgment of the manufacturer; para. 74B(2)(b). If goods are supplied to a consumer by description by a person who acquires the goods for resupply from the manufacturer and the goods do not correspond with that description, the manufacturer is liable for any loss or damage suffered by the consumer as a result: sub-s. 74C(1). But the description must have been applied to the goods by or on behalf of the manufacturer or with his consent, express or implied, for a liability to arise on the part of the manufacturer: sub-s. 74C(3).
The Act does not define the expression "supply by description" beyond stating that self-selection by the consumer does not prevent the supply being by description: sub-s. 74C(5).
If the goods supplied to a consumer are not of merchantable quality and the consumer or any person who derives title to the goods through or under the consumer suffers loss or damage as a result, the manufacturer is liable to compensate that person for the loss: sub-s. 74D(1).
Where goods are supplied to a consumer by reference to a sample and the bulk does not correspond with the sample in quality or the goods have a defect, rendering them unmerchantable, that is not apparent on reasonable examination of the sample, the manufacturer is liable to the consumer for loss or damage thereby suffered: sub-s. 74E(1). There is no liability, however, if the sample is not supplied by the manufacturer or if the supply by sample is made without his concurrence, express or implied: sub-s. 74E(2). In the case of these various statutory warranties the manufacturer is not liable if the relevant problem arises through the act or default of another person by reason of a cause independent of his control.
A manufacturer is liable for loss or damage to a consumer if he acts unreasonably in failing to ensure that repair facilities or spare parts are reasonably available to the consumer who acquired the goods and who later finds that they need repair; sub-s. 74F(1). A manufacturer can contract out of his liability under this provision in certain circumstances; sub-s. 74F(2) and (3).
A manufacturer is liable to compensate a consumer for loss or damage suffered by him if the manufacturer fails to comply with an express warranty given by him in relation to the goods; sub-s. 74G(1). A person who supplies goods direct to a consumer has a right of indemnity from the manufacturer in certain circumstances; s. 74H. Further, any term of a contract that purports to exclude, restrict or modify the liability of the manufacturer or other person under Division 2A is void: sub-s. 74K(1). A term of a contract shall not be taken to exclude, restrict or modify the application of that Division unless it does so expressly or is inconsistent with its provisions: sub-s. 74K(2).
Counsel for Mr. and Mrs. Zaravinos contended that each of his clients answered the description within s. 82 of "a person who suffers loss or damage by conduct of another person that was done in contravention of" ss. 74B, 74D or 74G of the Trade Practices Act.
The question arises whether ss. 74B, 74D or 74G are concerned with conduct that may contravene the Trade Practices Act. I now turn to this question.
Division 1 of Part V of the Trade Practices Act is concerned with unfair practices in trade or commerce. The Division contains, first a general prohibition against misleading or deceptive conduct in trade or commerce, s. 52; and second, a large number of more specific prohibited practices; for example, ss. 53, 53A, 53B, 54 and 55. A breach of any of the specifically prohibited practices may attract a fine of up to $50,000 in the case of a corporation and $10,000 in the case of an individual; s. 79. Other relief may be granted, for example, by way of injunction - s. 80 - and damages may be awarded where a person suffers loss and damage by conduct of another person that was done in contravention of a provision of Part IV or V: s. 82. Section 74B creates a right in a consumer to recover loss or damage from the manufacturer of goods which are not reasonably fit for a particular purpose made known to the manufacturer, but, contrary for example to s. 52, the section does not prohibit conduct of any kind by anybody. Hence, there is no conduct prohibited by that section which may constitute a contravention. It follows that no claim can be brought under s. 82. Similar considerations apply with respect to ss. 74D and 74G. My conclusion is supported by the judgments of Brennan J., when he was a member of this Court, in Arturi v. Zupps Motors Pty. Limited (1980-1981) 33 ALR 243, and Rogers J. of the Supreme Court of New South Wales in Zalai v. Col Crawford (Retail) Pty. Limited (1980) 32 ALR 187.
In the result, none of the federal claims made by Mr. and Mrs. Zaravinos are soundly based in law. As the other claims asserted by them against Dairy Farmers and Pure-Pak are based on non-federal elements, this Court has no jurisdiction to hear the proceedings which must, therefore, be dismissed. There remains the question of costs.
The proceedings were commenced in this Court after proceedings had been commenced in the Supreme Court of New South Wales by Mrs. Zaravinos. I have been informed that no similar proceedings have yet been instituted by Mr. Zaravinos. The proceedings instituted in the Supreme Court by Mrs. Zaravinos were adjourned generally pending the determination of the proceedings in this Court.
Notwithstanding directions hearings conducted in this Court from time to time, when any question of want of jurisdiction could have been raised by the respondents, the first occasion on which this question was raised was in informal discussion between counsel on Monday of this week. Nor was any jurisdictional challenge raised or foreshadowed by the defence. Pure-Pak was joined as a cross-respondent by Dairy Farmers early in the proceedings. As late as last week, however, leave was sought by Mr. and Mrs. Zaravinos, and granted, for them to join Pure Pak as a respondent to the proceedings. No federal claim has been propounded against Pure-Pak by any other party.
I have heard full argument on the question of costs. The applicants must, of course, prima facie, bear the responsibility for instituting proceedings in this Court which has no jurisdiction to hear them, but the other considerations to which I have referred must also be taken into account on this question of costs. In my opinion the appropriate order for costs is that no order be made for the costs of any party to the proceedings.
It is regrettable that these proceedings should be disposed of solely on a jurisdictional point. The Court feels sympathy for Mr. and Mrs. Zaravinos in their predicament, whatever the soundness of their claim may be upon the merits.
The order of the Court is that proceedings G277 and G278 of 1983 be dismissed and that there be no order as to the costs of any party.

[1985] FCA 90

14 MARCH 1985