Trade Practices Commission v Dunlop Australia- Ltd & John Anthony Steele

[1980] FCA 95

Re: TRADE PRACTICES COMMISSION
And: DUNLOP AUSTRALIA LIMITED; JOHN ANTHONY STEELE (1980) 43 FLR 434
VG No. 1 of 1980
Trade Practices

COURT

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY
GENERAL DIVISION
Keely J.(1)

CATCHWORDS

Trade Practices - practice - determining pecuniary penalty where admissions made - whether agreed facts constitute sufficient material for court

Trade Practices - resale price maintenance - manufacturer attempting to induce retailer not to sell or advertise goods below specified prices - matters in mitigation of penalty - pecuniary penalty

Trade Practices - resale price maintenance - employee of manufacturer knowingly concerned in or party to contravention - matters in mitigation - pecuniary penalty - Trade Practices Act 1974 ss.48, 76, 96

Trade Practices - Practice - Determining pecuniary penalty where admissions made - Whether agreed facts constitute sufficient material for court - Resale price maintenance - Matters in mitigation of penalty - Employee of manufacturer knowingly concerned in or party to contravention - Pecuniary penalty - Trade Practices Act 1974 (Cth), ss. 48, 76, 96.

HEADNOTE

In an application by the Trade Practices Commission for orders for pecuniary penalties in respect of contraventions of s. 48 of the Trade Practices Act 1974, an agreed statement of facts was tendered. It was admitted that Dunlop was a corporation supplying sporting wear: that Mr. Steele was the national sales manager of its Adidas division; and that Mr. Steele had attempted to induce a retailer not to sell or advertise Adidas products at prices less than those specified by Dunlop.

Held: (1) The proceedings, although not criminal, had a special character, since the Trade Practices Act is concerned with the protection of the public interest.

World Series Cricket Pty. Ltd. v. Parish (1977), 16 ALR 181, referred to.

(2) Section 76 (1) of the Act requires the court to have regard to all relevant matters; including the nature and extent of the act or omission, and of any loss or damage suffered as a result of the act or omission; the circunstances in which the act or omission took place; and whether those persons involved had previously been found by the court to have engaged in any similar conduct.

(3) The agreed statement of facts before the court was insufficient to enable it to comply with s. 76 (1), and the applicant should adduce evidence of the matters therein referred to.

(4) It was proper to take into account in mitigation of the contravention by Dunlop the following matters, although the weight to be accorded to some was slight: (a) the fact that the act constituting the contravention was an attempt which did not succeed in inducing the retailer to increase his prices; (b) there was only one attempt; (c) there was no interruption in, or withholding of, supplies to the retailer by Dunlop; (d) there was no tangible damage and no substantial intangible damage to the retailer; (e) the general manager had apologized to the retailer; (f) the contravention caused no damage to any member of the public, and the market place had not been distorted; (g) the principal wrongdoer, the manager, was not one of the policy makers of Dunlop; (h) the manager had been rebuked by a director of Dunlop; (i) Dunlop had not previously been found by the court, in proceedings under Pt IV of the Act, to have engaged in any similar conduct.

(5) Other matters put forward on behalf of the corporation were discussed, but held not to constitute mitigating circumstances.

(6) In determining the penalty to be imposed, the following matters were taken into account: (a) the attempt consisted of an ultimatum, intended to ensure that the public would be prevented from obtaining Adidas products discounted below the prices specified by Dunlop; (b) the ultimatum by the manager telling the retailer that his long history of dealings with another division of Dunlop had nothing to do with his dealings with the Adidas divison; (c) the contravention was effected by an employee of seniority within Dunlop; (d) the manager had sought to deter the retailer from contacting the applicant and from taking court action in respect of the contravention; (e) a general manager and a director of Dunlop knew of the contravention, but took no steps to lift the ultimatum until the receipt of a letter from the solicitor for the retailer; (f) no real consideration was given to taking disciplinary action against the manager, apart from the "rebuke": (g) Dunlop took no satisfactory action to prevent repetition of the contravention until after service on it of a notice under s. 155 of the Act.

(7) It was proper to take into account in mitigation of the contravention by the manager: (a) the manager did not stand to gain financially from the attempt; (b) the retailer suffered no financial harm as a result of the contravention; (c) the manager had not previously been involved in resale price maintenance; (d) the manager did not deny the breach, and had given an undertaking to the court which would continue to act as a deterrent from further such breaches.

(8) Appropriate penalties would be $25,000 for the corporation; and $4,000 for the manager.

HEARING

Melbourne, 1980, May 28-30; June 3, 25. #DATE 25:6:1980

APPLICATION.

Application for orders that each of the respondents pay to the Commonwealth a pecuniary penalty in respect of alleged contraventions of s. 48 of the Trade Practices Act 1974.

C. A. Sweeney, for the applicant Commission.

M. E. J. Black, for the respondent Dunlop.

P. Hayes, for the respondent Steele.

Cur. adv. vult.

Solicitors for the applicant Commission: B. J. O'Donovan, Deputy Crown Solicitor.

Solicitors for the respondent Dunlop: Moule Hamilton & Derham.

Solicitors for the respondent Steele: Mallesons.

R. R. BOADEN

ORDER

1. The respondent Dunlop Australia Limited pay to the Commonwealth, in respect of the contravention of s.48 of the Trade Practices Act 1974 alleged in paragraph 7 of the statement of claim herein, a pecuniary penalty of $25,000.

2. Pursuant to s.77 of the Trade Practices Act 1974 judgment be entered for the Trade Practices Commission on behalf of the Commonwealth of Australia against the respondent Dunlop Australia Limited for the sum of $25,000.

3. The respondent Dunlop Australia Limited pay to the applicant the costs of and incidental to the proceedings against it including any costs previously reserved by the court.

4. The respondent John Anthony Steele pay to the Commonwealth, in respect of the contravention of the Trade Practices Act 1974 alleged in paragraph 10 of the statement of claim herein, a pecuniary penalty of $4,000.

5. Pursuant to s.77 of the Trade Practices Act 1974 judgment be entered for the Trade Practices Commission on behalf of the Commonwealth of Australia against the respondent John Anthony Steele for the sum of $4,000.

6. The respondent John Anthony Steele pay to the applicant the costs of and incidental to the proceedings against him including any costs previously reserved by the court.

Orders accordingly.

JUDGE1

This is an application by the Trade Practices Commission (the Commission) for orders that each respondent pay to the Commonwealth a pecuniary penalty in respect of certain alleged contraventions of s.48 of the Trade Practices Act 1974 (the Act). At the hearing Mr C.A. Sweeney of counsel appeared for the applicant, Mr M. Black of counsel for the first respondent (Dunlop) and Mr P. Hayes of counsel for the second respondent (Mr Steele).

It was admitted by both respondents that at all material times:

(a) The first respondent was incorporated pursuant to the Companies Acts of the State of Victoria and was a corporation within the meaning of the Act;

(b) As part of its business the first respondent carried on the business of the supply throughout Australia of Adidas brand products of sporting wear, including footwear (Adidas products);

(c) The second respondent was employed by the first respondent as the National Sales Manager of its Adidas Division in respect of the supply of Adidas products;

(d) M.W. Amusements Pty Ltd, trading as A 1 Sports Centre (A 1 Sports Centre) was incorporated pursuant to the Companies Acts of the State of Victoria and carried on business at Chapel Road, Moorabbin, including the business of a retailer of sporting goods, sporting wear and footwear;

(e) In the course of its business, the first respondent supplied and sold Adidas products to A 1 Sports Centre which, in the course of its business, advertised for sale and sold such Adidas products;

(f) On 17 August 1978 the first respondent by its servant or agent Mr Steele acting on its behalf attempted to induce A 1 Sports Centre not to sell or advertise for sale Adidas products at prices less than prices specified by the first respondent.

It was admitted that on 17 August 1978 the first respondent had engaged in the practice of resale price maintenance contrary to the provisions of s.48 of the Act and the second respondent was knowingly concerned in or party to the contravention of the Act by Dunlop.

Before the matter first came on for hearing the Commission filed affidavits by Jill Elizabeth Chalmers, a solicitor employed in the office of the Commonwealth Crown Solicitor, and Michael Gerrard Woods, the Managing Director of M.W. Amusements Pty Ltd; Dunlop filed affidavits by Trevor Gladstone Hewitt, its Company Secretary, and David Leslie Stevenson, the General Manager of its Adidas Division.

At the first day of the hearing on 10 April 1980 Mr Black said:

"It is conceded by my client that a contravention of section 96(3) of the Act has occurred in the circumstances outlined in paragraph 7 of the statement of claim. The parties have prepared an agreed statement of facts concerning the actual circumstances of the contravention and that agreed statement of facts, in substance, follows the form of the particulars given under paragraph 7."

Mr Hayes stated that his client was also a party to the agreement as to facts and adopted what Mr Black had said.

Mr Sweeney, on behalf of the Commission, stated that he would not be relying upon the affidavit of Mr Woods and that his client was a party to the agreed statement of facts. He also stated that his client's willingness to have the matter proceed upon the basis of the agreed statement of facts "is and was, of course, subject to your Honour's views and directions" and that he was prepared to put other material before the Court and to call Mr Woods as a witness, if asked by the Court to do so. After hearing counsel for all parties the Court made the following statement:

"In this matter the parties have tendered an agreed statement of facts and the applicant Trade Practices Commission has tendered an affidavit by Jill Chalmers and the first respondent Dunlop Australia Limited has tendered affidavits by David Leslie Stevenson and Trevor Gladstone Hewitt. Mr Sweeney of counsel on behalf of the applicant did not seek to rely upon an affidavit of Michael Gerrard Woods sworn 8 April 1980 and filed in the registry, and stated that his client is content to proceed on the basis of the other material subject to the court's views and directions.

I accept the submissions by Mr Black of counsel, on behalf of the first respondent, Dunlop Australia Limited, that these proceedings are not criminal proceedings and that the common law system is a non-inquisitorial one. However, as Sir Nigel Bowen said in the World Series Cricket v. Parish 1977, ATPR, 40-040: 'Proceedings under the Act have a special character in that the Act deals with the protection of the public interest'.

Section 76(1) of the Act, in dealing with the determination of an appropriate penalty in this case, in my view requires the court to have regard to all relevant matters including the nature and extent of the act or omission and of any loss or damage suffered as a result of the act or omission, the circumstances in which the act or omission took place and whether the person has previously been found by the court in proceedings under this part to have engaged in any similar conduct. Having considered the material in the case, in my view it is not practicable for the court to comply with that statutory direction on the basis of the material before it at this stage. Accordingly, I consider that I should express the view to the applicant that, in the circumstances of this case, it should call oral evidence before the court as to the matters referred to in section 76(1) of the Act: for example 'the nature and extent of the act and the circumstances in which the act took place' including but not necessarily limited to evidence as to the conversation between Mr Steele and Mr Woods."

(After a short discussion)

"Paragraphs 7 and 8 of the statement of claim make it quite clear that the contravention that is alleged here occurred in a phone conversation on 17 August 1978. The agreed statement of facts does not purport to give the full conversation. By the full conversation, I mean inso far as it is relevant to this matter. In fact it would appear from other material that is before the court at this stage that the statement of facts gives a very much abbreviated version of that phone conversation, the relevant part of it. The second thing is that the statement of facts does not purport to give direct speech at all in connection with that conversation, it is a paraphrased version. And the third thing is that it does not, in my view, give the order in which things were said in that conversation. For example, it does not say - it may be a matter of interpretation, but it does not say - that Mr Steele had become angry before saying that Adidas would make it difficult if Mr Woods did not raise his prices, and that Mr Woods would suffer the consequences and so on.

I perhaps should add that, if it did say that, then it would appear to be inconsistent with the version given in the solicitor's letter which is part of the material before the court. So that the position that the court is faced with at this stage is that there are three versions of the conversation. First of all there is Mr Steele's unsworn recollection of the conversation, or part of the conversation, given in answer to the section 155 notice, and that is parallelled in turn by the answer by the other respondent, Dunlop. Secondly, there is the hearsay version of the conversation set out in the affidavit of Mr Stevenson and thirdly, there is the hearsay version set out in the solicitor's letter which purported to summarise four pages of notes by Mr Woods. Now those versions of the conversation are certainly not the same . . ."

Mr Black then submitted that an agreement had been entered into between the parties before and at the summons for directions hearing, on 7 March 1980, that the evidence to be placed before the court "would be confined to a statement of facts to be agreed, affidavits by the respondents and the affidavit exhibiting the s.155 responses". He called evidence. The existence of such an agreement was denied by Mr Sweeney. That issue was not determined as by consent the matter was adjourned to enable the parties to endeavour to reach agreement on a considerably more detailed statement of facts to be submitted to the court - designed to supply sufficient information to enable the court to perform its function under s.76 of the Act. At the resumption of the hearing on 28 May 1980 no such statement of agreed facts was tendered and Mr Woods was cross examined by Mr Black and Mr Hayes; then Mr Hewitt and Mr Stevenson were both cross examined by Mr Sweeney.

It is convenient to deal at this stage with one other matter. During the course of his cross examination of the last witness (Mr Stevenson) called by Dunlop, Mr Sweeney applied for leave to tender in evidence an affidavit of John Andrew Vanlieshout as to certain events alleged to have occurred in Queensland. The application was opposed by Mr Black and Mr Hayes. Mr Sweeney said that he would also seek leave to tender in due course further affidavits which were in the course of preparation. The court did not see any of the affidavits but Mr Sweeney said that they were directed towards showing breaches of the resale price maintenance provisions of the Act by Dunlop and also towards showing that Dunlop's policy "was one of resale price maintenance". Asked whether he was proffering any explanation as to why leave was being asked to tender the affidavit at such a late stage in the proceedings, Mr Sweeney said "I do not think that any explanation which I am able to offer your Honour (would show) that my client was unaware of the existence of this matter". Mr Sweeney also stated that until lunchtime on that day he did not know that Mr Stevenson would "deny any knowledge of any of the matters with which we are concerned to enquire". The latter statement, taken at its highest, did not appear to me to be any ground for granting the leave sought at such a late stage in the hearing. Further, as Mr Black pointed out, Dunlop's case had been revealed to the Commission some six weeks previously. Having regard to the history of the proceedings, the application for leave was refused.

About 6 August 1978 A 1 Sports Centre placed an advertisement in Melbourne in "The Sunday Press" for Adidas tracksuits at $27.95 when Dunlop's recommended retail price was $39.95. On 17 August 1978 Mr Woods returned a telephone call from Mr Steele but Mr Woods in cross examination agreed that Mr Steele's call may have resulted from a message Mr Woods had left at Dunlop's asking for "somebody in authority" to telephone him.

I regard Mr Woods as an honest and reliable witness, although I consider that his estimates of the length of the conversation - ranging from two minutes to ten minutes - are not accurate. He gave his evidence in an impressive manner and withstood a carefully prepared and searching cross examination by Mr Black, followed by further cross examination by Mr Hayes. He agreed that there might be a few minor points in his conversation with Mr Steele that he had not put in his affidavit. I accept his detailed evidence as to what was said by Mr Steele and himself during the conversation.

Statements made by Mr Steele during the conversation included words to the following effect:

"Look, raise your prices on Adidas gear to suggested retail price or we will make things difficult for you . . . We are not interested in supplying anybody who discounts."

At one stage during the conversation Mr Woods said: "That's illegal under the Trade Practices Act" and Mr Steele said:

"It would be unwise to take it to the Trade Practices Commission. I know more about the Trade Practices Act than you'll ever know. It will cost you a lot to do anything about it but it won't cost me a cent personally. I hope you're not taping this conversation because tapes are not admissible in court. . . . I'm not interested in bargaining with you and I'm not giving you a choice, I'm giving you an ultimatum. Either stop advertising discounts or suffer the consequences."

When Mr Woods said that he had been dealing with Dunlop for years and had never had any problems regarding prices, Mr Steele said:

"That's totally irrelevant - we are two separate operating divisions".

Mr Black in his final address invited me to infer that the purpose of the telephone call by Mr Steele to Mr Woods was "in relation to the new season's tennis range". However, despite the fact that the new tennis range was mentioned by Mr Steele at the beginning of the conversation, I find that Mr Steele's primary purpose in telephoning Mr Woods was to induce Mr Woods not to sell or advertise Adidas products for sale at prices less than the prices specified by Dunlop. For example, I consider that in referring to the Adidas tracksuits, Mr Steele's purpose was to induce Mr Woods to raise his price to the public for that item from $27.95 to $39.95, i.e. by approximately 40 per cent. On the evidence I also reject Mr Black's submission that the contravention only occurred after Mr Woods had complained to Mr Steele about Dunlop service.

Various statements by Mr Woods during cross examination are relevant to the case in mitigation of penalty put on behalf of one or both of the two respondents. For example: (1) As to whether Mr Steele's statements were made in anger, Mr Black asked:

"When he said that he sounded angry, did he not?

A. No, I do not think - during the whole course of the conversation, if you ask me, I would say he sounded fairly cool. . . .

He did not sound to me as if he was angry. He sounded quite cool."

(2) As to the time in the conversation when Mr Steele told Mr Woods to raise his prices, Mr Woods said:

"I am sure that in the first couple of sentences he got straight into saying, 'Raise your prices'. He mentioned in the first couple of sentences about raising prices and they were not happy supplying people who discounted."

(3) As to the time at which Mr Steele referred to Adidas goods being in short supply, Mr Woods said:

"Towards the latter half of the conversation, I think. . . .

Q. They were at the beginning, were they not?

A. I can remember they were not at the beginning of the conversation."

(4) Mr Woods said in answer to Mr Black that his complaint about the quality of Adidas products also came "later on in the conversation". During cross examination by Mr Hayes as to his criticism of "the unsatisfactory nature of (Adidas) service" to him, Mr Woods gave the following evidence:

"Q. I suggest to you . . . you were quite concerned to ventilate that criticism when you telephoned Mr Steele?

A. No, I was returning his phone call - the criticism about his product only came in after the fact - after what he said about raising the prices or suffering the consequences . . ."

Mr Steele did not give evidence and accordingly none of the evidence given by Mr Woods as to the conversation was contradicted.

On the evidence as a whole I am satisfied that:

(1) Mr Steele delivered an ultimatum to Mr Woods to stop advertising discounted goods or suffer the consequences; it was the primary purpose of his telephone call to do so.

(2) Mr Steele's attempt to induce A 1 Sports Centre not to sell or advertise Adidas products at prices below the prices recommended by Dunlop was not done in anger.

(3) The attempt took place before Mr Woods criticised the quality of Adidas products or service; Mr Woods was told by Mr Steele "in the first couple of sentences" to raise his prices.

(4) The words constituting the contravention were not made as part of a statement by Mr Steele that Adidas products were in short supply; I accept Mr Woods' evidence that the reference by Mr Steele to "short supply" was made in the later part of the conversation and after a contravention of the Act had occurred.

(5) Mr Steele attempted to deter Mr Woods from going to the Trade Practices Commission by stating that "It will cost you a lot to do anything about it but it won't cost me a cent personally".

(6) Mr Steele also sought to discourage Mr Woods from taking action in respect of the contravention of the Act by asserting that tape recordings "are not admissible in court".

(7) Mr Steele endeavoured to ensure that his statement constituting the contravention would be taken seriously by Mr Woods by making it clear that the Slazengers division of Dunlop, with which Mr Woods had dealt for years without any difficulty as to discount prices, was a "separate operating division" from the Adidas division.

(8) The suggestion, appearing in the affidavit of Mr Stevenson, sworn 3 April 1980, that the contravention occurred "after Mr Woods had made some uncomplimentary remarks about Adidas and its products", and after Mr Steele had "lost his temper" must be rejected.

Mr Black on behalf of Dunlop put seventeen matters in mitigation for the court to consider in determining what pecuniary penalty is appropriate. I have given consideration to each of them and shall refer to them fairly briefly - some of them are dealt with elsewhere in these reasons for judgment.

(1) The nature of the act constituting the contravention - it was an attempt and it was not successful in inducing Mr Woods to increase his prices.

(2) There was only the one attempt - "a somewhat unusual circumstance" relative to other cases brought under this section.

(3) There was no interruption in, or withholding of supplies to Mr Woods by Dunlop.

(4) There was no tangible damage to Mr Woods and the intangible damage was not substantial on his own evidence.

(5) Mr Stevenson had apologised to Mr Woods.

(6) There was no damage to any member of the public at all and the market place was not distorted in any way as a result of the contravention.

(7) The principal wrong doer (Mr Steele) was not one of the policy makers of Dunlop.

(8) Mr Steele was rebuked by Mr Stevenson.

(9) Dunlop has not previously been found by the court in proceedings under Part VI of the Act to have engaged in any similar conduct.

I accept the facts relied upon in each of the foregoing nine matters and I consider each matter is proper to be taken into account in mitigation - although on the evidence in this case matters (5), (7) and (8) are of relatively little weight. (10) Strenuous efforts have been made of more recent times, (i.e. since the contravention) to ensure that the provisions of the Act are not broken. Certain steps have been taken since the service on Dunlop of the s.155 notice, dated 18 April 1979 and I have taken these into account in mitigation. However, in my view it can not be said on the evidence that Dunlop made "strenuous efforts" during the period of 8 months before the service of the s.155 notice brought home to Dunlop the fact that it was in danger of being proceeded against for a contravention of the Act. I consider the circular dated 24 August 1978, over Mr Stevenson's signature, was quite perfunctory - and yet it was issued after both Mr Stevenson and Mr Brass, the managing director of Dunlop's footwear division, knew of the contravention of the Act.

In the view I have taken of the facts of this case, the remaining seven matters put by Mr Black are not matters which constitute mitigating circumstances in determining an appropriate penalty for the contravention. They were:

(11) The matter was immediately reported by Mr Steele to Mr Stevenson.

In my view it was only reported by Mr Steele because, by the end of his conversation with Mr Woods, he had realised that both his ultimatum to Mr Woods to raise his prices and his attempt to deter Mr Woods from contacting the Trade Practices Commission had failed. On the evidence, including Mr Stevenson's evidence of his conversation with Mr Steele on 17 August 1978, Mr Steele had come to the conclusion that Mr Woods was sufficiently strong-minded to report the contravention to the Trade Practices Commission despite Mr Steele's attempt to deter him.

(12) Senior management consisting of Messrs Jarman, Gough and Brass were informed very promptly by Mr Stevenson.

Mr Hewitt gave evidence that the information was given to Messrs Jarman and Gough for the first time at a monthly meeting. He said that he did not believe that the matter was on the agenda - it "was mentioned at the end under general business".

Further the very strongly worded letter from Mr Woods' solicitor to Mr Stevenson "was not read out" to the meeting of senior management. Mr Stevenson gave evidence of his present recollection of the terms of his "fairly brief" conversation with Mr Brass on 17 August 1978. He told Mr Brass "we may have a legal problem on our hands as a result of Tony Steele's conversation" and they agreed that they should get legal advice. In my view of the evidence as a whole, the reporting to senior management only occurred because of the possibility of proceedings being taken under the Act against Dunlop. It was not because of any concern at the fact that the Act had been breached - let alone any concern for the position of Mr Woods.

(13) The size of Dunlop, which employed almost 19,000 employees at the time, makes it difficult to avoid getting into trouble and it has succeeded (apart from this matter).

This aspect would have been of more assistance to Dunlop if I had not rejected the view advanced on its behalf that the contravention was a mistake which occurred contrary to its policy and despite its best efforts to prevent its occurrence. It does not assist Dunlop on the view of the circumstances relating to this contravention which I have expressed elsewhere in these reasons for judgment - particularly in dealing with matters (14), (15), (16) and (17) (post). In any event, it could only be a relatively minor factor in the court's consideration of all the factors relevant to penalty. Sheer size of operations may result in problems in ensuring compliance with the Act or any other law but the likelihood of those problems has to be recognised by management and the problems have to be solved.

Matters (14),(15),(16) and (17) can be dealt with together.

(14) Dunlop had taken steps by its directive of December 1974 and other notices to tell its employees to comply with the Act.

(15) The contravention was contrary to Dunlop's policy.

(16) On the evidence the court "can be satisfied that the attempt would never have resulted in the withholding of supplies in fact".

(17) Dunlop has conducted this litigation "with minimum fuss and inconvenience to the Commission and has just come here to be dealt with. Also it answered the s.155 notice, we would say fully".

Despite the directive of December 1974 and the other notices, on the evidence as a whole I am quite unable to accept that (i) the contravention of the Act was contrary to Dunlop's policy or that (ii) "the attempt would never have resulted in the withholding of supplies" - except in the sense that there may have been no likelihood of such withholding occurring once Mr Stevenson realised that Mr Woods was a man of sufficient determination to consult solicitors or to report the contravention to the Trade Practices Commission despite Mr Steele's ultimatum and his attempt to deter him.

The evidence called on behalf of Dunlop included that of Trevor Gladstone Hewitt, the company secretary. He gave evidence that it is and has been Dunlop policy that the Act, including the resale price maintenance provisions "must be strictly obeyed at all times, and that staff . . . are made aware of them". He exhibited to his affidavit a lengthy "trade practice compliance directive", dated December 1974, which had been prepared in conjunction with Dunlop's solicitors with copies being sent to all divisions of Dunlop. The directive was accompanied by a letter which included the statement:

"No employee has any authority to deviate from the rules stated in this directive. Each and every breach of this instruction will be severely disciplined. All executives of . . . have the full responsibility for ensuring that all their employees whose activities touch on trade practices matters become familiar with and comply with these requirements"

In considering the importance to be attached to this evidence it must be remembered that Mr Steele was not "severely disciplined" and there was no evidence to suggest that any consideration at all was given to the question of whether Mr Steele should be dismissed for his conduct. Further, Mr Hewitt did not know whether anyone had ever been disciplined for such a breach and Mr Stevenson, the general manager of the Adidas division, said that, until it was mentioned in court, he had "not remembered" the words about disciplinary action in that directive.

Mr Hewitt said in his affidavit, sworn 3 April 1980, that he "was most concerned to learn that Dunlop . . . had been proceeded against for a breach of the resale price maintenance provisions of the Act" and that he was "aware that this concern was widely shared by the senior executives". He went on to say that "the company proposes to send . . . a memorandum with an accompanying directive" and he wished:

". . . to make it clear that these documents are not being sent out only for the purposes of being produced to the court, but would have been sent out in any event in an endeavour to do everything possible to see that a repetition of such an incident does not re-occur"

I make two comments as to this evidence. Firstly, the "concern" of both the witness and the senior executives is expressed by him as having been directed to the fact of proceedings being taken against Dunlop - it is not expressed as having been a concern at the fact that Dunlop and its national sales manager had contravened the Act. This aspect can not in my view be attributed to a lack of precision in the drafting of the affidavit. On all the evidence I consider that the affidavit correctly records the fact that Dunlop's senior executives were "concerned" that proceedings had been taken against Dunlop - not at the fact of Dunlop's contravention.

Secondly, Dunlop was "proposing" on 3 April 1980 to take certain action to prevent a repetition of such an incident - some 19 months after its senior management became aware of Dunlop's breach of the Act and nearly 12 months after Dunlop received a s.155 notice. In those circumstances and in the light of the evidence as a whole I am quite unable to accept Mr Hewitt's evidence that the documents "would have been sent in any event . . . to see that a repetition" did not occur.

In both his demeanour and the expression of some of his answers Mr Hewitt revealed a lack of frankness with the court and at times he gave evasive answers. For example, he said that he did not know "whether any disciplinary steps had been taken in respect of Mr Steele". One of his answers (Transcript p.131) on this subject matter was in my view correctly described by Mr C.A. Sweeney in final address as being "completely misleading to the witness' clear knowledge at the time he made the answer". In addition, Mr Hewitt was lacking in frankness in answering a number of questions in cross examination as to whether Mr Steele's departure from the company on 31 December 1979 was in any way connected with Mr Steele's conversation with Mr Woods on 17 August 1978. Having regard to both his demeanour and his answers to those questions, I have concluded that his answer that "I know it was not the major factor" was quite misleading. The matters to which I have referred in this paragraph are relevant to whether the court should believe Mr Hewitt's evidence as to Dunlop's policy but they also make it almost impossible for Dunlop to gain any assistance from matter (17) - its conduct of the litigation "with minimum fuss . . .". I consider that Dunlop decided to so conduct the litigation in an endeavour to create the atmosphere most conducive to an acceptance of its contention in this court that Mr Steele's action was contrary to Dunlop policy and occurred in a fit of temper.

In this connection I should add that Mr Stevenson also showed a lack of frankness - although to a lesser degree - in some of his answers in cross examination. For example, asked whether Dunlop had given Mr Steele any assurance as to the payment of any penalty imposed by the court and any order that he pay the costs of the proceedings, initially Mr Stevenson said:

"We have said that if it is basically a company matter the company will pay any penalty. . . . And costs.

Q. Was that intended to convey to Mr Steele that whatever the outcome of these proceedings your company would pick up the tab for his penalties and costs?

A. It was intended to convey the meaning that if it was very much a company matter, the company would pay the penalty, yes."

However, shortly afterwards he answered without equivocation that Dunlop will pay Mr Steele's penalty and costs and made it clear that those payments are not dependent upon it being "very much a company matter" as he had previously said.

Certain other aspects of the case also run counter to Dunlop's claim that Mr Steele's action was contrary to Dunlop policy.

(a) It is inherently improbable that Dunlop's national sales manager (even accepting that his title was "somethat grandiose" as Mr Stevenson said) would make the statements he did if they were untrue and contrary to company policy to his knowledge.

(b) If Mr Steele's act was "completely contrary to company policy" as Mr Stevenson said in evidence, Mr Stevenson could have contacted Mr Woods by telephone or letter immediately after his conversation with Mr Steele and allayed any fear - resulting from the "ultimatum" by Mr Steele - that his supplies of Adidas products would be cut off by Dunlop. He could have assured Mr Woods that what Mr Steele had said was untrue and was said in a fit of temper. He did not do so, nor did Mr Steele or any other employee of Dunlop. The court raised this aspect with Mr Black whilst hearing submissions (on 10 April 1980) as to whether the court had sufficient information to enable it to perform its function of determining appropriate penalties. Having had some weeks to consider an explanation on this aspect, Mr Stevenson in his evidence in chief (29 May 1980) said that ". . . in retrospect it would have been a better thing to do but at the time I just did not think of it".On the evidence I consider that Mr Stevenson did not do so, not because he "did not think of it", but because it is not true to say, as Mr Stevenson said, that Mr Steele's action on 17 August 1978 was "completely contrary to company policy".

(c) In his earlier affidavit Mr Stevenson said that on 17 August 1978 he immediately reported what Mr Steele had told him to Mr Brass "who expressed his grave concern". Mr Stevenson's oral evidence as to this "fairly brief" conversation with Mr Brass said nothing of Mr Brass expressing "grave concern" although apparently he said "something fairly strong" suggesting that Mr Steele was a fool. Further, Mr Brass did not take any steps to ensure or direct any of his subordinates to ensure that Mr Woods was told that the threat by Mr Steele was contrary to company policy and assured there was no danger of his supplies being withheld by Dunlop. I consider it more likely that Mr Brass' "failure" to take such steps was because Mr Steele's action was not contrary to Dunlop policy.

(d) Mr Stevenson's evidence of his conversation with Mr Steele and his conversation with Mr Brass on the same day (17 August 1978) leads me to believe that neither Mr Stevenson nor Mr Brass reacted in the way that he could reasonably have been expected to react if it had been true that Mr Steele's action was "completely contrary to Dunlop's policy".

(e) In cross examination Mr Stevenson was asked whether Mr Brass suggested any disciplinary measure should be taken against Mr Steele and answered: "he may have; I do not recall". I am satisfied that no real consideration was given at any time at any level of Dunlop management to taking disciplinary action against Mr Steele save that Mr Stevenson "rebuked" him in terms which he could not recall during his evidence.

I accept Mr Black's submission that the court should be careful not to judge a businessman's actions - or failure to take action - by reference to what a lawyer would do or consider doing. It may also be true, as Evatt and Dixon JJ. said in Haevecker v. Haevecker (1936) 57 C.L.R. 639 at p.661, that:

". . . people are seldom found in fact conducting themselves as, according to general reasoning, they are expected to do"

However, on all the evidence in this case, I am quite unable to accept that Mr Steele's statements to Mr Woods on 17 August 1978 were "contrary to Dunlop policy" (matter (15)) or "would never have resulted in the withholding of supplies" (matter (16)).

Resale price maintenance has been prohibited by Commonwealth legislation since 1971, although until the 1974 Trade Practices Act came into effect an authorization for such conduct could be sought and granted. Since that time the Act has prohibited resale price maintenance in all circumstances and it can not be authorized. On Mr Hewitt's evidence Dunlop has always been aware of its obligations to comply with the provisions of the Act, has sought legal advice in respect of each amendment to the Act since 1965 and was aware that Mr Steele's conduct constituted a contravention of the Act by the company. Dunlop's conduct was contrary to Parliament's intention "that traders operate in competitive conditions and that the public has the benefits which flow therefrom" (per Smithers J. in Trade Practices Commission v. Stihl Chain Saws (Aust.) Pty. Ltd. (1978) A.T.P.R. 17,896.

In determining the appropriate penalty, in addition to the matters put in mitigation, I have given consideration to the need to deter similar contraventions of the Act and to the following matters which include, inter alia, matters relevant to the nature and extent of the act and the circumstances in which it took place:

(i) The attempt consisted of an ultimatum intended to ensure that Mr Woods would stop selling and advertising Adidas products below the prices specified by Dunlop - plainly with the intention of preventing the public from obtaining Adidas products from Mr Woods at prices discounted below the prices specified by Dunlop. As I have said earlier, in referring to Adidas tracksuits as an illustration, it was an attempt to induce Mr Woods to increase his price to the public for Adidas tracksuits by approximately 40 per cent.

(ii) Mr Steele endeavoured to ensure that his words would be taken seriously by Mr Woods by making it clear that the Adidas division of Dunlop was a separate operating division from its Slazengers division and accordingly that Mr Woods could gain no comfort from the fact that he had dealt with the Slazengers division for years without any difficulty as to discount prices.

(iii) The contravention was not carried out by some junior clerk, but by Mr Steele, the national sales manager of Dunlop. Mr Stevenson agreed in cross examination that Mr Steele was given that title partly so that persons dealing with him would believe they were dealing with someone of seniority - a matter likely to convey to Mr Woods that Dunlop, a large public company, attached considerable importance to the price specified by it.

(iv) Mr Steele sought to deter Mr Woods from contacting the Trade Practices Commission regarding his contravention by saying that it would cost him a lot.

(v) Mr Steele also sought to deter Mr Woods from taking action in respect of the contravention by asserting that tape recordings are not admissible in court.

(vi) Although the contravention was known to Mr Stevenson, the general manager of the Adidas division, and to Mr Brass, the managing director of it, on 17 August 1978, no action whatever was taken by either of them to mitigate the effects of the contravention until the receipt of the letter from Mr Woods' solicitor, dated 24 August 1978. During that time Mr Woods remained subject to the ultimatum - "Either stop advertising discounts or suffer the consequences".

(vii) No real consideration was given to dismissing or otherwise taking disciplinary action against Mr Steele - apart from the "rebuke". Mr Stevenson said that Mr Steele's subsequent departure from Dunlop "was not in any respect a disciplinary measure" and "came about because he was . . . seeking to progress from his capacity as national sales manager with Adidas. We did not have any other position within the company . . .". Mr Black in his final address said that there is "an air of hardness" about the suggestion that Mr Steele should have been sacked and continued "if Mr Steele had been sacked he would have found it very, very difficult to obtain another job". The question of whether to dismiss an employee for contravening the Act is of course one which must be decided at the appropriate level of management and in the light of all relevant circumstances. However, the failure by management to even consider - let alone decide upon - the dismissal of Mr Steele, is relevant both to the claim by Dunlop that "it is and has been company policy that . . . the R.P.M. provisions must be strictly obeyed at all times" and to the question of whether Dunlop was sufficiently aware of the gravity of its situation as a result of Mr Steele's action.

(viii) During the period from when Mr Brass and Mr Stevenson both became aware of the contravention (17 August 1978) until the service of the s.155 notice, dated 18 April 1979, Dunlop did not take satisfactory action with a view to preventing a repetition of the contravention.

In my opinion the contravention of the Act is one which calls for a substantial penalty but not for one "in the near vicinity of the maximum prescribed by the Act" as submitted by Mr Sweeney. Very considerable weight must be given to the matters in mitigation which I have dealt with earlier. In all the circumstances I have determined that the appropriate pecuniary penalty is $25,000. Dunlop is also ordered to pay to the Commission the costs of and incidental to the proceedings against it including any costs previously reserved by the court.

Mr Hayes, on behalf of Mr Steele, put six matters in mitigation of penalty. They can be dealt with fairly briefly in the light of what already appears in these reasons: -

1. Mr Steele, being an employee and not the supplier of the products, did not stand to gain financially from the attempt constituting the contravention.

2. There was no financial harm to Mr Woods as a result of the contravention.

3. There was no proven prior breach by Mr Steele of the resale price maintenance provisions of the Act, nor any allegation that he had previously been involved in the practice of resale price maintenance.

4. In the conduct of the litigation Mr Steele did not deny the breach. Further, he had given an undertaking to the court and it was not necessary in considering the appropriate penalty to have regard to the need to deter Mr Steele from any contravention in the future as the likely consequences of any breach of his undertaking would be such as to constitute sufficient deterrence. In my view these four matters are proper to be taken into account in mitigation.

5. Mr Steele immediately reported his conduct to his superiors.

As to this aspect (cp. matter (11) advanced by Mr Black) I do not consider that this fact is a reason for reducing the amount of the penalty which is otherwise thought to be appropriate. I am unable to accept Mr Hayes' submission that Mr Steele had done "all he could once he reported what he had done to his superiors". I am not prepared to draw the inference which Mr Hayes invited me to draw that Mr Steele felt that, having reported the matter to his superiors, "the matter best lay to be handled by those in authority". Mr Steele did not give evidence and there was not even hearsay evidence that Mr Steele ever gave any consideration at all to the possibility of telephoning Mr Woods and giving unequivocal assurances that Mr Woods was in no danger of having his supplies of Adidas products from Dunlop withheld or interfered with in any way - let alone assuring him that he was entitled to sell and advertise Adidas products at discount prices without fear of any "consequences" from Mr Steele or Dunlop.

In the light of the words used by Mr Steele in his conversation with Mr Woods, in my view it was incumbent upon him to take immediate steps to ensure that Mr Woods was not left in the position of feeling threatened by a large company. Instead, no action was taken until after the receipt of the letter from Mr Woods' solicitor and in the meantime Mr Woods was left under threat - a threat which had been expressed very clearly by Mr Steele in the conversation. As I have set out earlier in these reasons there was not only the attempt to induce Mr Woods to raise his prices "or suffer the consequences" but there were other comments made by Mr Steele in the conversation designed to deter Mr Woods from reporting the contravention to the Trade Practices Commission.

6. The conversation of 17 August 1978 occurred at a time when Mr Steele was under considerable pressure because the Adidas products were in short supply.

As I said earlier I consider that the words constituting the contravention were not made as part of a statement by Mr Steele that Adidas products were in short supply. Of course the fact of short supply could have operated upon Mr Steele's mind. However, Mr Steele did not give evidence and I consider the evidence by Mr Stevenson is not sufficient to support this point. In any event although pressure might conceivably explain why a contravention occurred it cannot justify it, as Mr Hayes conceded. I do not regard this factor as being a mitigating factor on penalty for Mr Steele.

I accept that paragraph 13 of the affidavit of Mr Woods, to which Mr Hayes objected and which related to a suggested slowing down in the supply of goods to Mr Woods, is not relevant to the determination of an appropriate penalty for Mr Steele. In any event on the evidence as a whole I am not satisfied that there was any deliberate slowing down of supplies of Adidas products to Mr Woods.

Mr Hayes referred to certain other matters for the purpose "of showing that they are irrelevant to penalty" for Mr Steele. He accepted that there was a policy by Dunlop that resale price maintenance should not be practised and that this incident was the fault of Mr Steele. Mr Hayes made it clear that he did not suggest that his client committed the contravention pursuant to any directions from Dunlop. He also submitted that, if the court found that there was no policy by the company against resale price maintenance or found that there was a positive policy of practising resale price maintenance, that "would not be a factor against Mr Steele" because he was not a policy maker. Asked whether it might be "a factor tending to lower the penalty for Mr Steele" Mr Hayes maintained that "it is irrelevant to the question".

Mr Hayes asked the court to consider imposing only a nominal penalty against Mr Steele for a contravention which he described as consisting of making "intemperate remarks which must have been offensive to Mr Woods and caused him to suffer some apprehension as to what might happen to his supplies. That . . . is the worst that can be said against Mr Steele . . .".

Such a description of Mr Steele's action bears little relation to reality. It is not necessary to repeat here what I have said earlier both in considering the evidence and in dealing with Mr Black's submissions in mitigation. I reject completely the submission that the words in question were simply intemperate remarks. It was an ultimatum deliberately delivered by Mr Steele with all the weight of the large company which employed him and it was intended, in contravention of the Act, to induce Mr Woods to raise his prices to the public for Adidas products.

The ultimatum was accompanied by additional words deliberately designed to deter Mr Woods from exercising his right to complain to the Trade Practices Commission. In doing so Mr Steele not only sought to deter Mr Woods by asserting that "it will cost you a lot to do anything about it" but added that "it won't cost me a cent personally". In addition, his assertion that "tapes are not admissible in court" must have been intended to convey to Mr Woods that, if he took any action about Mr Steele's contravention of the Act, Mr Steele would deny the facts and that Mr Woods might not be able to prove them because "tapes are not admissible in court".

I accept the matters in mitigation put by Mr Hayes to which I have referred earlier including Mr Steele's undertaking to the court. However, it is necessary in determining the appropriate penalty to have regard to the need to deter other employees from using their positions with companies to induce retailers to raise their prices.

In my opinion the contravention by Mr Steele is one which calls for a substantial penalty notwithstanding the matters in mitigation which I have taken into account. In all the circumstances I have determined that the appropriate pecuniary penalty is $4,000.00. Mr Steele is also ordered to pay to the Commission the costs of and incidental to the proceedings against him including any costs previously reserved by the court.