Trade Practices Commission v Parker, S

[1990] FCA 471

JUDGMENT No. .. .... %.-S

C A T C H W O R D S

TRADE PRACTICES - pyramid selling - whether defendant a principal - whether scheme constituted trade or commerce - order sought under s.199 Crimes Act - whether inexpedient to inflict punishment.

PRACTICE AND PROCEDURE - amendment of summonses sought - whether amendment can be made without injustice to the defendant.

Trade Practices Act 1974, s.61(2A)

Crimes A c t 1914, ss.l5C, 199

Trade Practices Commission

v. Steven Parker

PINCUS J .
DARWIN

18 July 1990

R E O I M

u

F A \	RECEIVED
- 5 SEP 1990
FEDERAL COURT OF

PRINCIPAL

IN THE FEDERAL COURT OF AUSTRALIA	1
NORTHERN TERRITORY DISTRICT REGISTRY	1 DG22 of 1989
INDUSTRIAL DIVISION	)

BETWEEN :  TRADE PRACTICES COMMISSION

Applicant

AND:  STEVEN PARKER

Respondent

MINUTES OF ORDER

JUDGE MAKING ORDER:	PINCUS J.
DATE OF ORDER:	18 JULY 1990
WHERE MADE:	DARWIN
THE COURT ORDERS THAT:

1.   All the charges be dismissed.

IN THE FEDERAL COURT OF AUSTRALIA	)	DG22 of 1989
NORTHERN TERRITORY DISTRICT REGISTRY	)
GENERAL DIVISION	)

BETWEEN: TRADE PRACTICES COMMISSION

Applicant

AND: STEVEN PARKER

Respondent

CORAM: PINCUS J.

PLACE: DARWIN

m: 18 JULY 1990

EX TEMPORE REASONS FOR JUDGMENT

Five summonses have been issued, directed to the

defendant, alleging contraventions of s.61(2A) of the Trade
Practices Act 1974. At the outset counsel for the
prosecution, Mr Ibbotson, announced that he would consent to
the dismissal of two of the summonses and during the course of
the hearing a third was added to that category; in the result

only two of the cases were contested. They were the first and

last summonses alleging the commission of offences on 9 .r

November 1988 and 2 December 1988.

The defendant, who was unrepresented, pleaded guilty

but I pointed out to counsel that there had to be some doubt
whether the summonses, and the information on which they were
based, were correctly framed and I questioned whether the
facts alleged constituted offences.After some discussion on
the first point, Mr Ibbotson asked leave to amend the two
informations and summonses in a way which is discussed below
and I reserved my decision on that application.

He also argued the substantive point, namely whether

there was any offence, and I reserved my decision on that.
Evidence was called as to penalty on both sides and an
application was then made by the defendant to have the two
remaining charges dealt with under s.19B of the Crimes Act
1914. Mr Ibbotson informed me that the prosecution had no
objection to that course.

In these circumstances the whole proceedings have

acquired a slightly academic air but it is necessary to deal
with the points raised. The first summons alleged against the

defendant:

"That on or about the 9th day of November 1988
at Darwin in the Northern Territory you did
commit an offence pursuant to section 79 of the
Trade Practices Act 1974 by directly or
indirectly being a party to the contravention
of section 61(2A) of the said Act, by virtue of
the extended operation given to that section by
section 6 of the said Act, in that you promoted

a scheme to which the said section 61(2A)

applies. "

The amendment sought is as follows:

"That on or about the 9th day of November 1988

at Darwin in the Northern Territory you did

commit an offence pursuant to paragraph

79(l)(a)of the Trade Practices Act 1974 by
contravening section 61(2A) of the said Act, by
virtue of the extended operation given to that
section by paragraphs 6(2)(b)(iii) and 6(2)(h)
of the said Act, in that you did take part in
the promotion of a scheme to which the said

section 61(2A) applies."

It will be noted that the amendment, if allowed, would vary

the summons in three ways, which I discuss below. It is also

sought to amend the other summons which is being pursued, in
corresponding ways.

The three ways are that, firstly, in its original

form the summons alleges the commission of an offence "by
directly or indirectly being party to" a contravention. As

was conceded by Mr Ibbotson, this language appears to be based

on s.79(l)(d) of the Act, which deals with what might be

described as the liability of an accessory. It appears that the prosecution originally intended that the defendant would be charged as an accessory. The amendment is intended to

treat him as a principal offender, i.e. a person falling

within s.79(l)(a) of the Act.

The second respect in which the amendment would

alter the summons is that in its original form the document
referred to an extended operation, given by s.6, without
identifying which part of the section was intended. It
appears that reference was intended to be made by the
prosecution to s.6(3) but that plainly does not apply. After
discussion, Mr Ibbotson informed me that the prosecution had
decided to rely upon the paragraphs mentioned in the

amendment.

The third change sought to be made is that in the

summonses originally drawn the defendant is alleged to have
promoted the scheme. The amendment merely says that he "did
take part in the promotion of the scheme". Section 61(2A)
reads as follows:

"A corporation also contravenes this section if the corporation promotes, or takes part in the promotion of, a scheme under which -

(a)	a payment is to be made by a person who participates, or who has applied or been invited to participate, in the scheme to or for the benefit of the corporation or another person who takes part in the promotion of the scheme or to or for the benefit of another person who participates in the scheme; and
(b)	the inducement for making the payment is the holding out to the person who makes or is to make the payment the prospect of receiving payments from other persons who may participate in the scheme."

The provision applies to a promoter as well as to a person who takes part in a promotion. The defendant, falling within that category, may be, as here, a participant other than the one

who is himself the promoter. The effect of those parts of 13.6
on which reliance is now placed, if they apply, is that
s.61(2A) may be applied to the defendant as if its reference
to a corporation included a reference to a person not being a

corporation.

That may be done where the section is read as

confining this operation to trade or commerce within this

Territory. The result is that in its proposed amended form

each summons would rely on the proposition that the defendant

is one who has taken part in the promotion of the scheme and is therefore able to be charged as a principal under s.61(2A) itself. And further, that the scheme constitutes conduct in the course of or in relation to trade or commerce in this

Territory.

Under s.15C of the Crimes Act, the Court has the
usual wide power to make amendments, but under subs.(3) the

power of amendment is not to be exercised where the Court
considers the required amendments cannot be made without
injustice to the defendant. In my opinion the proper course
is to allow the amendments sought. I have had some doubt
about this because, as I have said, in any event the
prosecution is not pressing for the imposition of any penalty,
but it seems to me that the amendments do not in fact

embarrass the defendant in any way and that they must be made.

Intermetation of Section

The prosecution's case is that the defendant was a

participant in a scheme of the pyramid type. The general idea
appears to have been to induce eight people to pay $125 each
to join an imaginary train. The money would then pass up the
pyramid to a man or a woman, at the apex, called the train
engineer, who would collect $1000. The original pyramid would
then split and each participant would move up a level.

Ultimately those who came in at the bottom of $125

would, it was said, hope to receive $1000; that is, eight
times $125 less their own original subscription of $125. The
whole scheme seems to have been something which could be

described as a minor racket. It seems to be common ground

that the defendant (although one might have thought from some of the evidence that he was an originator or a partner in the scheme) in fact took only a minor part in it.

He said, and was not challenged on this, that he

paid his $125 and received nothing himself. Mr Ibbotson very
fairly conceded that the defendant co-operated with the

Commission in the course of its acLion of suppressing the scheme by taking proceedings for an injunction. I may say that its action in that respect seems to me to have been taken very properly. The question which must be determined is whether the facts fall within ~.6(2)(b)(iii).

I have not been able to find any authority directly

on point to assist in determining whether this scheme would
constitute trade or commerce. Mr Ibbotson argued that gaming
activities should be distinguished from those in question

here. I notice that the American legislatures have attacked schemes of this general type by equating them to gaming.	But
that cannot be conclusive.

The scheme is in a way gaming, I suppose, because

each person who goes in gambles on the scheme lasting long
enough to win some money. He may rise to be engineer and get
some money out of it and in that sense it has chance attached

to it. I note that interstate lotteries have been regarded as

outside the scope of s.92 of the Constitution on various
grounds.

In The Kinq v. Connare: Ex uarte Wawn (1939) 61 CLR

at 596 and also in Mansell v. Beck where the question was
relitigated, (1956) 95 CLR at 550, there was some discussion
on the question whether lotteries are trade or commerce. In
the earlier case that is to be found in the judgment of the
late Mr Justice McTiernan at pages 631 and 632.

His Honour's view of the matter seems to have been

shared by the late Mr Justi.ce Taylor who discussed the point
at pages 593 and following. In a later case, McGraw-Hinds
IAust.) Ptv. Ltd. v. Smith, (1978) 144 CLR 633, the High Court
had to consider the application of s.92 of the Constitution to
an offence which could be broadly described as selling fake
invoices. The activity of the appellant was alleged to have

been, to put it simply, fraudulent.

That is, a document was sent asserting a right to

payment of a charge for the making of a directory when the
recipient, which was the Queensland Government Tourist Bureau,
had not ordered any entry. The question arose whether sending
of the invoice fell within the protection of s.92 and three of
the judges held that it did. So they must have regarded the
relevant section as conflicting with s.92 and the relevant

activity as constituting trade, commerce or intercourse.

The case is able to be explained despite the fact

that the sending of the invoice was what one might describe as
not normal commercial activity on the basis that the document
was at least a communication, but it seems to me that it gives
some slight support for the proposition that although what was being done could also perhaps be described as a racket, it was not outside the scope of trade or commerce.

The conclusion at which I have arrived is that the

pyramid selling scheme in issue here was not trade, but, with some doubt, I hold that it was commerce - although perhaps of a very unusual kind. The result is that I accept Mr

Ibbotson's contention that ~.6(2)(b)(iii) applies, which brings the defendant within the scope of s.61(2A) and the result is that he did in fact contravene the provision as alleged.

Order to be Made

The remaining dispute is within a narrow compass

because, as I have mentioned, it seems not to be disputed that
the appropriate course is to make an order under s.19B of the
Crimes Act. This contemplates the making of one of two quite
different sorts of orders. Firstly, under paragraph (c) of
sub-s.1 the charges may be dismissed. Secondly, under
paragraph (d) the person in question may be discharged without
proceeding to a conviction upon his giving security to comply

with certain conditions.

The ultimate question seems to be which of those

courses should be followed. It may not matter a great deal
The conditions upon which the section operates do not include,
however, the consent of the parties or the lack of opposition,
to put it more accurately, of the prosecution. And I must be
satisfied of the matters set out there. They are that

(a) there is a charge, as there is here, of an offence

against the law of the Commonwealth and (b):

"the court is satisfied that the charge is

proved, but is of the opinion, having regard to

(i) the character, antecedents, age,
health or mental condition of
the person;

(ii)	the extent (if any) to which the offence is of a trivial nature; or
(iii)	the extent (if any) to which the offence was committed under extenuating circumstances,

that it is inexpedient to inflict any

punishment, or to inflict any punishment other
than a nominal punishment, or that it is
expedient to release the offender on
probation".

I am satisfied that it is inexpedient to inflict any punishment. Mr Parker, who was an impressive witness, gave

evidence to the effect that his intention was innocent. I

must say that his participation in the scheme, as revealed by
the evidence, might have led one - and indeed might have led
the Commission - initially to think otherwise, but I accept
what he says. Mr Parker has produced evidence that he has an
important position with the Territory government as Acting
Superintendent of a camp at which Aboriginal youths, and

perhaps others who have committed offences, are confined.

The evidence is that the confinement is quite

different from that which takes place in an ordinary gaol and

I have material from a MS Sydenham, a government official,

that the defendant's activities as Acting Superintendent have
had a good effect on the offenders resident at the camp.

Generally the evidence suggests that Mr Parker is a useful

member of the community and a man of good character.

He says that he is concerned that if there is a

conviction his job may be in jeopardy and because of what I
regard as the sensible attitude of the prosecution in not
opposing a s.19B order, and because I am satisfied of the
matters set out in paragraph (b) of s.l9B(l), there is no need
for a conviction. The question really is which leg of the
provisions should be used. Submissions were not addressed to
the question whether the charge should be dismissed or whether
Mr Parker should be discharged on the basis set out in (d).

I have had some difficulty in determining what to do

about this, but it seems to me that the proper course is to
act under (c). The course which I take does not imply,
however, that the prosecution is to be criticised for bringing

these proceedings. I mentioned that there was evidence which

would suggest that Mr Parker's involvement in the matter was
more direct and closer than in the end it turns out to be.

His expansive and perhaps enthusiastic personality

might have given that impression. It can be seen, with the
benefit of hindsight, that his role, from the evidence which
has been placed before the court, was quite minor and in a
sense the prosecution has not turned out to have a great deal
of point. But I reiterate that it seems to me that a
dismissal of the charges should not be taken to involve a
criticism of the Commission for its role and I particularly
mention that Mr Ibbotson proved to be helpful in the way in
which he conducted the case.

All that having been said however, I think the

proper course is to act in respect to the two remaining

charges under s.l9B(l)(c). It has been agreed that the other

charges should be dismissed, in the result the same order
shall be made in respect of all the charges, viz. they are
dismissed.

In the circumstances which I have outlined in my

reasons, I do not propose to make any order for costs.

I certify that this and the
ten preceding pages are a
true copy of the reasons
for judgment herein of his

Honour Mr Justice Pincus.

'-7- Associat

Date 1% (450

Counsel for the applicant:	Mr. J.C. Ibbotsen
Solicitors for the applicant:	Australian Government Solicitor
Solicitors for the respondent:	Respondent appeared for

- -.

himself

Date of Hearing:  18 July 1990