Von Berg, Michael Gunther Baron v Trade Practices Commission (now known as the Australian Competition and Consumer Commission)
[1996] FCA 1140
•19 DECEMBER 1996
CATCHWORDS
TRADE PRACTICES - Offence to represent that goods of particular composition - Representation by wine manufacturer that wine 100% 1991 Cabernet Sauvignon - Representation false - Whether prosecution bound to prove actual composition of wine - Whether knowledge of falsity an element of offence - Representee aware of falsity - Whether a defence.
CRIMINAL LAW - Appeal - Trade practices - Offence to falsely represent that goods of particular composition - Trial by judge alone - Findings of fact based on credibility of witnesses - Power of appellate court to intervene - Whether conviction unsafe or unsatisfactory.
Trade Practices Act 1974, s 53(a), 79(1)
Australian Wine and Brandy Corporation Act 1980, ss 39D, 39F, 39X.
Doney v The Queen (1990) 171 CLR 207
Devries v Australian National Railways Commission (1993) 177 CLR 472
Reg v Byrnes and Hopwood (unreported, South Australian Court of Criminal Appeal, 2 May 1996)
Given v CV Holland (Holdings) Pty Ltd (1977) 29 FLR 212
Darwin Bakery Pty Ltd v Sully (1981) 51 FLR 90
Giorgianni v The Queen (1985) 156 CLR 473
Whitehorn v The Queen (1983) 152 CLR 657
Morris v The Queen (1987) 163 CLR 454
M v The Queen (1994) 181 CLR 487
Reg v Tait (1979) 24 ALR 473
Hughes v Western Australian Cricket Association (1986) 8 ATPR 40-748
Queensland Wire Industries Pty Ltd v Broken Hill Proprietary Co Ltd (1987) 17 FCR 211
MICHAEL GUNTHER BARON VON BERG and CLAUDIO VIRGILIO CURTIS v TRADE PRACTICES COMMISSION (now known as the ACCC) SG 42 of 1996
COURT:Foster, von Doussa and Sundberg JJ
PLACE:Adelaide
DATE:19 December 1996
IN THE FEDERAL COURT OF AUSTRALIA )
SOUTH AUSTRALIA DISTRICT REGISTRY ) No SG 42 of 1996
GENERAL DIVISION )
BETWEEN:MICHAEL GUNTHER BARON VON BERG and CLAUDIO VIRGILIO CURTIS
Appellants
AND:TRADE PRACTICES COMMISION (now known as the ACCC)
Respondent
COURT:Foster, von Doussa and Sundberg JJ
DATE:19 December 1996
PLACE:Adelaide
MINUTES OF ORDER
The Court orders that:
The appeal be dismissed.
The appellants pay the respondent's taxed costs of the appeal.
Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA )
SOUTH AUSTRALIA DISTRICT REGISTRY ) No SG 42 of 1996
GENERAL DIVISION )
BETWEEN:MICHAEL GUNTHER BARON VON BERG and CLAUDIO VIRGILIO CURTIS
Appellants
AND:TRADE PRACTICES COMMISION (now known as the ACCC)
Respondent
COURT:Foster, von Doussa and Sundberg JJ
DATE:19 December 1996
PLACE:Adelaide
REASONS FOR JUDGMENT
THE COURT:
Background
Section 53(a) of the Trade Practices Act 1974 provides that a corporation must not "falsely represent that goods are of a particular standard, quality, value, grade, composition, style or model ...". Under s 79(1)(a) a person who contravenes s 53(a) is guilty of an offence. Under s 79(1)(b) a person who aids, abets, counsels or procures a person to contravene s 53(a) is guilty of an offence. After a trial before O'Loughlin J, Vales Wine Company Pty Ltd ("the company") was convicted on four counts of contravening s 53(a) and each appellant on one count of aiding, abetting, counselling and procuring the commission by the company of one of those contraventions. Fines totalling $165,000 were imposed on the company and a fine of $10,000 was imposed on each appellant. At the relevant time the maximum penalty that
could be imposed on a body corporate under s 79(1) was a fine of $200,000. The maximum penalty that could be imposed on a natural person was a fine of $40,000.
The charges
The four counts on which the company was convicted were in similar form. Count 11, which can be taken as the example, alleged that between dates in July and August 1992 the company falsely represented that goods were of a particular composition. The Particulars were:
The defendant did through its servants or agents, falsely represent that 198,000 litres of wine sold to Orlando Wyndham Pty Ltd pursuant to Order Number 8792 was 100% 1991 vintage Cabernet Sauvignon wine, when in fact the said wine did not contain at least 95% of the 1991 vintage as required by the P4 Standards (Wine and Wine Products) of the National Health and Medical Research Council's Food Standards Code 1987.
The count on which the appellants were convicted (count 10 against them) alleged that in the same period they aided, abetted, counselled and procured the company in representing that the wine the subject of count 11 against the company was of a particular composition. The Particulars were:
(a)The Vales Wine Co Pty Ltd ("the Vales") did through its servants and agents falsely represent that 198,000 litres of wine sold to Orlando Wyndham Pty Ltd pursuant to Order no 8792 was 100% 1991 Cabernet Sauvignon wine, when in fact the wine supplied contained
(i)less than 100% Cabernet Sauvignon and
(ii)less than the 95% vintage requirement contained within the P4 Standards ....
(b)The false representations referred to in paragraph (a) comprised descriptions of the wine as
(i)"100% 1991" vintage in a Statutory Declaration dated 19 August 1992 and
(ii)1991 Cabernet Sauvignon in oral and written communications including, purchase orders, cartnotes, invoices and other documentation pertaining to the said sale.
(c)The defendants were directors of the Vales at all relevant times
(d)By words and conduct the defendants authorised, sanctioned or permitted servants of the Vales to represent that wine sold on behalf of the Vales was of a particular variety and/or vintage notwithstanding that the 80% variety requirement and/or the 95% vintage requirement contained within the P4 Standards ... would not be met.
P4 Standards
The P4 Standards (Wine and Wine Products) of the National Health and Medical Research Council's Food Standards Code 1987 referred to in the charges ("the P4 Standards") were published in the Commonwealth of Australia Gazette No 27 on 27 August 1987. Their legislative force is to be found in regulations made under the Food Act 1985 (SA). Under the P4 Standards as they operated at the time of the relevant events, a wine could not be designated as being of a specific variety or from a particular locality unless it contained at least 80% of that variety or unless at least 80% of it came from that locality. Furthermore, it could not be designated as being of a specific year or vintage unless 95% of the wine was of that year or vintage.
Company's activities
From about 1988 the company had carried on business at McLaren Vale as a wine manufacturer. It owned some wine, but in the main used its storage tanks to hold its customers' wine. The customers were mostly the owners on whose behalf it crushed grapes and processed grape juice into wine. Its largest customer had been the McLaren Vale Marketing Group ("the Marketing Group"), a co-operative of grape growers. The individual growers delivered their grapes to the company but were paid by the Marketing Group. The
company also sold the wine it held in storage for its customers. Upon a sale it accounted to the Marketing Group which in turn accounted to the individual growers.
Sales Records
The company kept computer generated records which purported to show the wine it supplied in fulfilment of particular orders. A Sale Record contained the name of the purchaser, a description of the wine, the volume of wine supplied, the price per litre and the total price. Then followed a table showing the components of the wine. The Sale Record relating to the wine the subject of count 11 against the company described the purchaser as Orlando Wyndham, the wine as a 1991 Cabernet Sauvignon, the volume as 195,550 litres, the price per litre as $1.36 and the total cost as $265,948. The components of the wine were described as follows:
BLEND COMPONENTS
OWNER
VOLUME
%
WINE COST
% COST
TOTAL
COST
1992 CAB SAUV
VINO
20000
10.23
$1.450
0.1483
$29,000.00
1990 CAB SAUV
MVMGP
19199
9.82
$1.000
0.0982
$19,199.00
1991 CAB SAUV
MVMGP
129568
66.26
$1.200
0.7951
$155,481.60
1991 CAB SAUV
TVWC
1759
0.90
$1.200
0.0108
$2,110.80
1990 MERLOT
MVMGP
3317
1.70
$1.000
0.0170
$3,317.00
1990 SHIRAZ
MVMGP
17711
9.06
$0.900
0.0815
$15,939.90
1991 GRENACHE
MVMGP
1168
0.60
$0.600
0.0036
$700.80
1991 SAUVIGNON BLANC
MVMGP
1586
0.81
$0.700
0.0057
$1,110.20
1991 CHENIN BLANC
MVMGP
1242
0.64
$0.500
0.0032
$621.00
195550
100.00
1.1633
$227,480.30
The letters MVMGP in the second column refer to the Marketing Group and the letters TVWC to the company. According to the P4 Standards, a wine manufacturer who receives an order for 1991 Cabernet Sauvignon can lawfully fill the order with wine that is 80% Cabernet Sauvignon. The remaining 20% may be another wine or indeed two or more other wines of any variety. Such a wine is usually described as a "varietal" as distinct from a "blend". A "blend" is not held out as complying with the 80% rule, whereas a varietal is. A blended wine might be described as a "Dry Red" or a "Dry White". The P4 Standards require that at least 95% of the wine supplied be of the 1991 vintage.
If the above Sale Record is accurate, it reveals that the wine supplied to Orlando Wyndham was only 87.21% Cabernet Sauvignon and only 69.21% 1991 vintage. It also discloses that the 195,550 litres were a blend of eight different wines. The amounts in the "Total Cost" column are the amounts the Marketing Group had nominated as its sales prices or the company's internal costing of its own products. The price stipulated by Orlando Wyndham in its purchase order was $1.36 per litre. The sale price of $265,948 therefore exceeded "Total Cost" of $227,480.30 by $38,467.70.
Tank Files
The company also produced monthly stocktakes called Tank Files. There was a file for each tank, which recorded the volume of wine in the tank and a description of the wine. If two or more wines were placed together in the same tank, each was identified by variety and volume. Two codes, a "wine code" and a "sort code", were assigned to each wine. This was to ensure that upon ultimate sale of the wine, or of the blend of which the wine formed part, the relevant owner could be determined. The owner of each wine was identified by the use of acronyms.
Reliability of records
In the course of lengthy cross-examination of the prosecutor's principal witness, Michael Fragos, it became apparent that the Tank Files could not be relied upon at face value. For example, one Tank File for April 1992 describes a full tank containing twelve types of wine, the quantity of each type in the tank, and the owner of each type. The same Tank File for May 1992 also shows the tank to be full, but four of the components in that month were different from those in the April File. It was of course impossible for those wines to be removed from the blend of which they formed part.
The prosecution opened its case in reliance on the Sales Records, which on their face disclosed that the wines supplied by the company in fulfilment of particular orders did not comply with the P4 Standards or, in some cases, with the representations made in statutory declarations that the wine was 100% of a named variety and of a nominated vintage. Although the Tank Files were available to the prosecution, they had apparently not been compared with the Sales Records, and the case was opened with the prosecution unaware of the discrepancies between the two sets of documents. The defence on the other hand was aware of the deficiencies of the company's records. Upon discovering that it could not place total reliance on the Sales Records because they were based in part on inaccurate Tank Files, the prosecution realised it would have to make its case with evidence other than the company's records. This change of tack was the subject of complaint before us, and it will be necessary to return to it.
Prosecution witnesses
Mr Fragos
Mr Fragos was the principal witness for the prosecution and had been granted immunity from prosecution. He was appointed the company's winemaker in October 1991 when his
predecessor, Mr Bourchier, was dismissed. His evidence was to the effect that blending in respect of the 1990 and 1991 vintages was so extensive that up to 75% - 80% of the wine stocks were blends. The general effect of his evidence was that he knew the company was selling wine that did not accord with the description under which it was sold, that he was a knowing participant in such sales, and that he had given purchasers false declarations about the components of wines. He said his participation began under instructions from Mr Bourchier and continued after Mr Bourchier's dismissal, under the supervision and with the knowledge, of the appellants. Mr Fragos said that with the exception of the Orlando Wyndham wine (count 11 aganst the company) he played no part in the blending of wines from the 1990 or 1991 vintages.
In his evidence in chief Mr Fragos asserted that the Sales Records were accurate in recording the components of the wines sold to each purchaser. The trial judge concluded, however, as a result of the discrepancies in the records disclosed in the course of his cross-examination, that Mr Fragos' evidence in this respect could not be "unequivocally accepted". His Honour said he could not "with confidence, look at any Blend Profile in a Sale Record and have the required satisfaction beyond reasonable doubt that its contents truly and accurately reflect the components that were sold to an individual purchaser".
Mr Bourchier
Mr Bourchier denied knowledge of any malpractice, and sought to shift blame onto Mr Fragos. The trial judge was not impressed by Mr Bourchier, and on the two important areas where his evidence differed from that of Mr Fragos, his Honour preferred that of Mr Fragos. Thus he accepted Mr Fragos' evidence that until Mr Bourchier left the winery in October 1991 the latter was responsible for the company's computer records relating to wine stocks, and performed all blending of wines.
Mr Haden
Mr Haden was appointed acting general manager and a director of the company soon after Mr Bourchier's departure in October 1991. He resigned in February 1992. While Mr Haden was a director, Mr von Berg was Chairman of Directors. Mr Curtis was the only other director. Mr Haden became concerned about the company's wines and its records as a result of an incident that occurred on 6 February 1992. In connection with a proposed sale of three particular wines ("the Alko transaction") Mr Haden asked Mr Fragos for details of their Blend Profiles. These showed that none of the wines complied with the 95% vintage requirement, and two of them did not comply with the 80% variety requirement. According to Mr Haden, when he expressed concern to Mr Fragos, the latter said "these were arrangements that had been established in the era of Mr Bourchier". When he told Mr von Berg of his discovery, the latter told him not to worry about it. When he told Mr Curtis about it, the latter said it was too late to do anything about the wine offered in the Alko transaction, but that something should appear in the minutes and something should be said to Mr Fragos.
The trial judge was impressed by Mr Haden and accepted his evidence that he had told Mr von Berg and Mr Curtis of his discovery. He found that in February 1992 both men knew Mr Fragos had documents in his possession that supported his admission to Mr Haden that the company had been offering for sale wine that did not match its description.
Defence witnesses
Mr von Berg and Mr Curtis gave evidence. Both denied any knowledge of false representations and false sales, claiming that those matters were the province of either Mr Bourchier or Mr Fragos as the winemakers. When pressed as to discrepancies in various documents disclosing unusual Blend Profiles of which other evidence showed they must have
been aware, they said Mr Fragos had told them not to be worried about the documents as these had been compiled for "accounting purposes".
Trial judge's assessment of witnesses
The prosecution case depended on Mr Fragos. His Honour noted that Mr Fragos had initially denied any wrong doing, but later admitted to being knowingly involved in selling wine that he did not believe was true to description. He also noted that Mr Fragos was giving evidence with immunity from prosecution. Mr Fragos at first maintained the correctness of the company's records, but was forced to concede they were full of inaccuracies. Despite his dissatisfaction with some aspects of Mr Fragos' evidence, his Honour said this did not mean he was to be "summarily dismissed as a wholly unbelievable witness". There were areas where his evidence gained "some measure of support" from other evidence. His Honour said:
there are areas of Mr Fragos' evidence that I should accept. For example, I accept his evidence that there was a practice in the winery of offering wine for sale, and selling wine, that did not match its description. I accept that this practice was in operation under the control of Mr Bourchier when Mr Fragos joined the company and under the control of Mr Fragos after Mr Bourchier's dismissal.
The trial judge did not accept Mr von Berg's evidence that Mr Fragos had said the Sales Records were for "accounting purposes". He was of the opinion that the evidence was deliberately untrue. He thought Mr Curtis was evasive and overly defensive in giving his evidence. His Honour concluded his assessment of credit of the main witnesses as follows:
I am prepared to accept [Mr Fragos] as a witness of truth in respect of the section of his evidence where he explains that Mr von Berg and Mr Curtis told him to sell blended wines as varietals. I find that Mr von Berg and Mr Curtis well knew and understood about the existence of the blending activities of the company. As I have said, both men accepted that if, in truth, 80% or so of the
wines that were in storage were blends rather than varieties, it could be financially disastrous for the winery, and both accepted the approximate figures of $1.50 per litre for varietals and 50 or 60 cents for blends. Both men said in evidence that Mr Fragos had told them that the computer records (which, according to them, falsely detailed the wines in the tanks) had been compiled by Mr Bourchier, the man whom they did not trust and who had been dismissed the preceding October for reasons that included his alleged failure to keep appropriate records. In those circumstances I am confident that common practise and ordinary procedure would have demanded some form of investigation on the part of Mr von Berg and Mr Curtis if, contrary to the evidence of Mr Fragos, they were not party to the decision to sell blends as varietals.I cannot believe that two experienced businessmen would have behaved in the way in which Mr von Berg and Mr Curtis claimed to have behaved. Assisted by the integrity of Mr Haden, who gave no evidence of hearing any explanation about "accounting" activities, I find myself able to accept the evidence of Mr Fragos to the effect that both Mr von Berg and Mr Curtis knew about the winery's practise of blending wines. I reject the evidence of Mr von Berg and Mr Curtis. I find that each lied when they said in evidence that they were told by Mr Fragos that the Sales Records were merely accounting records.
Company counts
His Honour dealt with the eleven counts against the company in accordance with the principle that where the only evidence was a Sale Record, not supported by other evidence, he was unable to be satisfied beyond reasonable doubt that the offence had been made out. On this basis he dismissed all but four of the counts. In the events that have happened, only count 11 need be examined.
The trial judge accepted that there were inadequacies in the relevant Sale Record (Ex MF107). Mr Fragos gave evidence, which his Honour accepted, that he had a particular memory of the wine in question because it had proved difficult to sell. Mr von Berg and Mr Curtis had instructed him to contact various wineries to seek expressions of interest. Mr Fragos carried out some blending tests in which Mr Curtis was directly involved, and
produced a second blend. Samples were dispatched to potential customers. Mr Curtis asked Mr Fragos whether small volumes of other wines could be added to the second blend. Mr Fragos said they could. After Orlando Wyndham's order came in, a third blend was prepared in accordance with Mr Curtis' suggestion, again with his knowledge, and was dispatched to Orlando Wyndham.
As dispatched the wine contained 20,000 litres of 1992 Cabernet Sauvignon owned by a company called Vinovation ("the Vinovation wine"). His Honour accepted Mr Fragos' evidence that Orlando Wyndham had required him to provide a statutory declaration that the wine was 100% 1991 McLaren Vale Cabernet Sauvignon. He expressed to Mr von Berg his unease about providing this declaration, and Mr von Berg told him to include in the declaration that some other varieties were present in the blend. He prepared a statutory declaration in Mr von Berg's presence stating that the wine was 93% Cabernet Sauvignon, 5% Merlot and 2% Cabernet Franc, and that it was 100% McLaren Vale 1991. He was then telephoned by someone from Orlando Wyndham who said the declaration did not satisfy the purchaser's requirements. It had to state that the wine was 100% 1991 Cabernet Sauvignon. Mr Fragos discussed the matter with Mr von Berg who told him to send the declaration that Orlando Wyndham required, which he did.
On the basis of this evidence, aided by a "selective use" of Ex MF107, his Honour was satisfied beyond reasonable doubt that the wine that was supplied was not 100% 1991 Cabernet Sauvignon, and that count 11 had been sustained.
Aiding and abetting - von Berg
The trial judge was satisfied on the basis of Mr Fragos' evidence summarized under the preceding heading that Mr von Berg knew about the two statutory declarations and was
therefore actively involved in the company, through Mr Fragos, falsely representing to Orlando Wyndham that the wine was 100% 1991 Cabernet Sauvignon. That knowledge, together with proof of the essential ingredients of the principal offence, was sufficient to warrant a finding that Mr von Berg was guilty as charged.
Aiding and abetting - Curtis
The trial judge found that Mr Curtis knew that Orlando Wyndham had ordered 1991 Cabernet Sauvignon and that Mr Fragos was intending to add the Vinovation wine once a firm order had been received. He was also personally involved in the compilation of the second and third blends. He knew the Vinovation wine was included in the wine dispatched to Orlando Wyndham as a 1991 Cabernet Sauvignon. He thus knew that the 95% rule had been broken. His Honour was satisfied beyond reasonable doubt that Mr Curtis was guilty as charged.
Grounds of appeal
Particulars
In their grounds of appeal the appellants contend that the trial judge erred in finding they were not prejudiced by the "inconsistency in the particulars relating to Count 10". This suggests a complaint internal to count 10, which we have set out under the heading "Charges". Although paragraph (a) of the Particulars is rather strangely constructed, in that sub-par (ii) seems to be unnecessary, there is no inconsistency between sub-pars (i) and (ii). Rather, sub-par (ii) alleges more than is required to justify a conviction. Paragraph (a) should simply have alleged that the company falsely represented that the wine was 100% Cabernet Sauvignon when in fact it was less than 100% Cabernet Sauvignon. However, the addition of sub-par (ii) could cause no prejudice or unfairness to the appellants. Obviously a wine that is less than 95% 1991 vintage is less than 100% 1991 vintage.
In the course of argument it appeared that the real complaint may not have been that stated in the grounds of appeal. Rather, it seems that the appellants' complaint is that the Particulars in relation to the company differ from those relating to them. The former alleges that the 100% 1991 Cabernet Sauvignon representation was false in that the wine did not contain at least 95% of the 1991 vintage. The latter alleges that the representation was false in that the wine contained less than 100% Cabernet Sauvignon and less than the 95% requirement. The appellants accepted that the divergence is of relevance only if they could show they were prejudiced by it in the conduct of the case. No prejudice has been shown. The appellants knew what the case against them was: that the company's representation that the wine was 100% 1991 Cabernet Sauvignon was not true, and that they were involved in that falsehood. The draftsman's failure to ensure that the two sets of Particulars were in accord should not be permitted to derail the prosecution when it has had no adverse effect on the conduct of the appellants' case. Further, the defence did not complain about the disconformity until final written submissions. The fact that no earlier complaint was made suggests that the defence did not apprehend that its conduct of the defence was adversely affected.
No case to answer
The appellants submitted that the trial judge wrongly found there was a case to answer in relation to count 10. In Doney v The Queen (1990) 171 CLR 207 at 214-215 the High Court said:
if there is evidence (even if tenuous or inherently weak or vague) which can be taken into account by the jury in its deliberations and that evidence is capable of supporting a verdict of guilty, the matter must be left to the jury for its decision. Or, to put the matter in more usual terms, a verdict of not guilty may be directed only if there is a defect in the evidence such that, taken at its highest, it will not sustain a verdict of guilty.
The trial judge was entitled to take the view that Mr Fragos' evidence, taken at its highest for the prosecution, and supported by other evidence including that relating to the Vinovation wine, was sufficient to pass the no case test.
Fragos' evidence
It was contended that because Mr Fragos had been shown to be "totally unreliable", the trial judge erred in placing any reliance on his evidence. This overstates the position. His Honour accepted parts of Mr Fragos' evidence, particularly where he was supported by other evidence. His Honour had the advantage of seeing and hearing the witnesses, and his findings on matters of credit can be interfered with only if it is clear that he failed to use or misused that advantage, or acted on evidence which was inconsistent with facts incontrovertibly established by the evidence or which was glaringly improbable: Devries v Australian National Railways Commission (1993) 177 CLR 472 at 479. It was submitted that as this was an appeal from a conviction by a judge, the ordinary appellate restraints did not apply. We entirely reject the submission. In Reg v Byrnes and Hopwood (unreported, 2 May 1996) the South Australian Court of Criminal Appeal applied the ordinary rules on an appeal from a judge alone. The following passage from that case applies to his Honour's treatment of Mr Fragos' evidence:
It is, at once, apparent that aspects of credibility and demeanour of the principal witness did, indeed, loom large in the findings made and conclusions arrived at by the learned trial judge, as well as the inferences which he was disposed to draw. It follows that, conformably with what fell from the High Court in Devries v Australian National Railways Commission, any findings made by him, which stemmed wholly or in part from such considerations, must stand, save to the extent that it can be demonstrated that he manifestly failed to use, or palpably misused, his advantage in seeing and hearing the relevant witnesses, or acted on evidence which was inconsistent with facts uncontrovertibly established by the evidence, or which was glaringly improbable.
No attempt was made by counsel for the appellants to convince us that the case fell within any of the exceptional circumstances referred to in that passage.
Company's records
It was contended that the trial judge erred in placing any reliance on the company's records because they had been shown to be "totally unreliable". This again overstates the position. His Honour declined to act on the records where they were not supported by other evidence. In relation to count 10 there was other evidence, and in those circumstances his Honour "selectively relied" on Ex MF107. The other evidence was Mr Fragos' about the Vinovation wine, and his Honour gave convincing reasons for his acceptance of that evidence. We refer in this connection to what we have said under the heading Company counts.
Proof of composition of wine
The submission here was that the trial judge erred in holding that the prosecution did not have to prove the actual composition of the Orlando Wyndham wine. There is no substance in this submission. Section 53(a) requires the prosecution to prove false a representation that goods are of a particular composition - in the present case that the representation that the wine was 100% 1991 Cabernet Sauvignon was false. That can be shown by evidence that the actual composition was less than 100% 1991 Cabernet Sauvignon. There is nothing in s 53(a), in its application to a case such as the present, which suggests that in order to establish a contravention a complainant or prosecutor must go further and establish the actual composition of the wine.
Knowledge of falsity
The trial judge held that knowledge of the falsity of the representation was not an element of the offence. It is said that he was wrong. That he was not wrong is shown by Given v CV
Holland (Holdings) Pty Ltd (1977) 29 FLR 212 and Darwin Bakery Pty Ltd v Sully (1981) 51 FLR 90 where it was held that the word "falsely" in s 53(a) does not mean "intentionally untrue". But in any event his Honour found that Mr Fragos knew of the falsity of the representation he was making on behalf of the company.
So far as the appellants are concerned, knowledge or intent is required before a person may be convicted of being an accessory to a crime which itself may not require any such knowledge or intent. See Giorgianni v The Queen (1985) 156 CLR 473, to which his Honour referred. He found that Mr von Berg knew Mr Fragos' representation was false. He knew the wine was not 100% 1991 Cabernet Sauvignon. He found that Mr Curtis knew the wine was not at least 95% 1991 vintage.
P4 Standards
The appellants contended that the trial judge erred in finding that the wine sold to Orlando Wyndham did not comply with the P4 standards. As has been said, this wine and aspects of its sale were unusual. This was the only wine Mr Fragos made in the 1992 vintage. It had proved difficult to sell. Mr Fragos was instructed to try to move it. He made a second blend and at Mr Curtis' request a third blend. There was Orlando Wyndham's request for a statutory declaration, and its dissatisfaction with the declaration provided, and the preparation, at Mr von Berg's request, of the second declaration. Those features of the transaction clearly distinguish the Orlando Wyndham transaction from a number of others in respect of which the trial judge was not prepared to act on the Sales Records alone. Here the relevant Sale Record was supported by clear evidence from Mr Fragos that the 20,000 litres of Vinovation wine, which he had reason to remember, was included in the wine that was sent to Orlando Wyndham. Once it was accepted that the Vinovation wine went into the mix, a finding that the wine did not comply with the P4 Standards was inevitable.
Curtis' knowledge that the wine failed to comply with standards
Mr Curtis acknowledged that he knew Mr Fragos intended to use the Vinovation wine in the Orlando Wyndham blend. But he said he had warned Mr Fragos that the Vinovation wine could not exceed 5% of the blend. His Honour did not believe that Mr Curtis gave the warning. He accepted Mr Fragos' evidence that Mr Curtis was actively involved in the preparation of the second and third blends, and the wine that was to be used, and found that Mr Curtis knew the Vinovation wine was included. No matter what other wines made up the blend, it could not satisfy the P4 Standards because the Vinovation wine accounted for about 10 per cent of the blend. His Honour was entitled to prefer these aspects of Mr Fragos' evidence to Mr Curtis'. His Honour had the advantage of seeing and hearing the witnesses. His preference for Mr Fragos' account was based on that advantage. It is an advantage we do not have. Conformably with settled principles confining an appellate court's ability to interfere with findings as to credit, we cannot interfere with his Honour's acceptance of Mr Fragos' evidence in this respect.
Had the company sold a blend as a varietal?
It is contended that the trial judge erred in finding that the appellants engaged in a course of conduct which involved offering blends for sale as varietals when there was no evidence that the company sold a blend as a varietal. We do not understand this ground of appeal. The finding that is attacked is that the appellants engaged in a course of conduct in offering blends for sale as varietals. The ground of attack is that this finding cannot be sustained because there is no finding that the company had sold a blend as a varietal. Even if there were no evidence that the company sold blends as varietals, it would not affect the finding under attack. If what is meant by the ground is that there is no evidence that the company offered blends for sale as varietals, then there is such evidence. His Honour accepted Mr
Fragos' evidence that the appellants instructed him to continue the practice of offering blends for sale as varietals.
von Berg's instruction
There was a conflict between Mr Fragos and Mr von Berg as to whether the latter instructed the former to provide the second statutory declaration to Orlando Wyndham. Mr Fragos said he was given the instruction. Mr von Berg denied that he gave it. His Honour believed Mr Fragos and disbelieved Mr von Berg. His Honour saw the witnesses and was in a position to do what we cannot possibly do, namely make an informed assessment, taking into account their demeanour in the witness box, as to who was telling the truth. We refer to what we have said under the heading Fragos' evidence.
Curtis' awareness of von Berg's instruction
The contention here is that the trial judge erred in finding that Mr Curtis was aware of Mr von Berg's instruction to Mr Fragos to represent the wine as a 1991 Cabernet Sauvignon. His Honour's actual finding was expressed as follows:
I am prepared to ... accept Mr Fragos' evidence that they instructed him to continue the practise of offering blends for sale as varietals. That finding can be described as a general finding as to the course of conduct in which both men engaged. By adding to that their respective involvements in the Orlando Wyndham transaction (Mr Curtis in the blending exercises and Mr von Berg with respect to the Statutory Declarations and Ex D47) I am satisfied beyond reasonable doubt that each of them is guilty of the offence as charged. Each of them knew that Mr Fragos had followed his instructions in falsely representing the wine to Orlando Wyndham as a 1991 Cabernet Sauvignon; each of them knew that the company, through the agency of Mr Fragos ... had ... falsely represented that the wine was of a particular composition.
In using the words "knew that Mr Fragos had followed his instructions", we do not think his Honour intended to say that Mr Curtis knew of Mr von Berg's instruction to Mr Fragos. Only a few pages earlier his Honour had said there was "no evidence that would suggest that [Mr Curtis] had any knowledge of or that he had any part to play in the giving of either of the two Statutory Declarations". Reading the whole of the relevant part of his Honour's reasons, it is clear that what he meant when he said that Mr Curtis "knew that Mr Fragos had followed his instructions in falsely representing the wine to Orlando Wyndham as a 1991 Cabernet Sauvignon", was not that Mr Curtis knew of Mr von Berg's instruction to Mr Fragos, but that Mr Curtis knew that Mr Fragos had falsely represented the wine to Orlando Wyndham as a 1991 Cabernet Sauvignon, which was in fact in accordance with the instruction. Once his Honour accepted Mr Fragos' evidence in preference to Mr von Berg's, as he was entitled to do, the conclusion was plainly open, if not inevitable, that Mr Curtis was involved in the making of the false representation. We refer to what we have said under the heading "Curtis' knowledge that the wine failed to comply with standards".
Orlando's knowledge
It will be recalled that when Orlando Wyndham received the first statutory declaration showing small quantities of two other wines, it required a fresh declaration removing any reference to them. It must have known that the second declaration would be false. His Honour rejected the appellants' submission that the purchaser's ignorance of the falsity of the representation contained in the declaration was an essential part of the prosecution case. In statutory and common law contexts where inducement forms part of a misrepresentation type offence or cause of action, the representee's knowledge that the representation is false will preclude a finding that he was induced by it to enter into a transaction or take a particular course. But inducement is not an element of s 53(a). A contravention occurs if a person makes a representation that is false. That is what the company, through Mr Fragos, did.
Haden's evidence
This is a complaint that the trial judge admitted Mr Haden's evidence about what Mr Fragos told him on 6 February 1992 about the Alko transaction. It was said that this was propensity evidence which was admitted contrary to the provisions of the Evidence Act 1995. The evidence was not admitted as similar fact or propensity evidence, and the relevant provisions of the Act were not mentioned at the trial. Mr Haden's evidence was led to show Mr von Berg's and Mr Curtis' state of knowledge at the time, and not to show their bad character. In any event, the evidence was received without objection.
Failure to call witnesses
The Crown has an obligation to call all available material witnesses. In Whitehorn v The Queen (1983) 152 CLR 657 at 674 Dawson J said:
there is good guidance in the cases for what constitutes a material witness. All available witnesses should be called whose evidence is necessary to unfold the narrative and give a complete account of the events upon which the prosecution is based. In general, these witnesses will include the eye-witnesses of any events which go to prove the elements of the crime charged and will include witnesses notwithstanding that they give accounts inconsistent with the Crown case.
Counsel for the appellants submitted to us (as they had at trial) that by not calling successive Chairmen of the Marketing Group, the Group's accountant, the company's accountant, its bookkeeper, members of its office staff and cellarhands, the prosecution failed to discharge its duty. We have not been persuaded by anything that was said by counsel that the evidence of any of these persons was necessary to unfold the narrative or to give a complete account of the events upon which the prosecution was based. The trial judge put the matter more broadly by asking whether the failure to call them caused any prejudice to the defence or constituted any unfairness to the accused. He answered the question in the negative and gave his reasons. We have found his reasons persuasive and agree with them. In particular, we share his view that the company's accountant, bookkeeper, office staff and cellarhands, who might have been able to throw light on the accuracy of its records, were not wrongly withheld by the prosecution. If their evidence would have been to the effect that the company's records were unreliable, it was not needed. Cf Whitehorn at 664 per Deane J and 674 per Dawson J. If their evidence would have supported the accuracy of the records, it would not have assisted the defence. Nothing was put to us by counsel that suggested that representatives of the Marketing Group could have given "necessary" evidence in the Whitehorn sense or evidence that would have assisted the defence.
In a written supplementary submission, counsel for the appellants contended that the evidence of one of the representatives of the Marketing Group would have supported the explanation given by Mr von Berg and Mr Curtis that the Sales Records were only for "accounting purposes". We agree with the trial judge's conclusion that evidence led to support this explanation would not have been admissible as it went only to credit. That this is so, and that the evidence in any event would not have assisted the defence, may be demonstrated by considering the implications of that explanation. If the Sales Records were as grossly inaccurate as the defence asserted, to allow them to be used as the basis for accounting for sales to the owners of the wine, would be to account to the owners on a basis known to be false. As the trial judge observed: "Why would any business house, when selling wine on behalf of those owners account to anyone other than those owners for wine other than the wine that comprised the product sold? That question was never answered". On the evidence of Mr von Berg and Mr Curtis, when they learned that the Sales Records were inaccurate,
they took no steps to have them corrected. To allow inaccurate records to be used as the basis for accounting to the wine owners did nothing for the credit of Mr von Berg or Mr Curtis. Independent evidence that the Sales Records had indeed been used as the basis for accounting to the owners, including the Marketing Group, would not have assisted the defence case, and would have said nothing about the content of the wine actually sold to Orlando Wyndham. If the independent evidence were to the effect that the Sales Records were not the basis on which the company accounted to the Marketing Group, that evidence would have served only to discredit the "accounting purpose" explanation without saying anything about the content of the wine actually sold.
Commonwealth Act
Part VIA of the Australian Wine and Brandy Corporation Act 1980 (Cth) is headed "Label Integrity Program". The Part was inserted into the Act in 1989. Its object is described as being to help to ensure "the truth, and the reputation for truthfulness, of statements made on wine labels, or made for commercial purposes in other ways, about the vintage, variety or region of origin of wine manufactured in Australia". Section 39F provides:
A wine manufacturer who receives wine goods for processing at the manufacturer's winery must make and keep a record in writing of their receipt showing:
(a)the date of their receipt; and
(b)their quantity; and
(c)their vintage, variety and region of origin; and
(d)the identity of their supplier
Penalty: $15,000.
Section 39X(1) provides:
For the purposes of this Division, when there is uncertainty about the variety of wine goods, a record showing their variety is a record showing whichever variety the wine manufacturer making the record considers on reasonable grounds most likely to be their variety.
The trial judge rejected a submission that s 39X provided a defence to the charges. He said that at the time the offences were allegedly committed the appellants were not experiencing "uncertainty about the variety of wine goods" that were being offered for sale. The appellants' case was that they believed, upon information given to them by Mr Fragos, that the wine accorded with the description given to it, namely that it was 100% 1991 Cabernet Sauvignon. We see no error in his Honour's treatment of s 39X.
His Honour was criticised for not referring to s 39D(2) which, counsel said, was "of particular significance". Section 39D provides:
(1)For the purposes of this Part, a blend is sold with a label claim if a label claim is made in relation to the wine when or before it is sold.
(2)For the purposes of this Part, where a blend is sold with a label claim, the claim not only relates to the blend but also relates to a wine used in the blend unless:
(a)the claim is one that the blend, or wine used in the blend, has a particular characteristic; and
(b)the first-mentioned wine does not have, but another wine used in the blend does have, that characteristic.
The expression "label claim" is defined in relation to wine goods as
a claim about their vintage, variety or region of origin made on a wine label, in a commercial document or in an advertisement, and includes a claim so made about the vintage, variety or region of origin of wine goods from which they were manufactured.
All that was said about s 39D(2) on the appeal was that counsel had difficulty understanding its meaning, and the Court's assistance in this respect would be welcome. It is not necessary to attempt an exposition of the meaning of the provision for the purposes of the present case, for on no view could it have assisted the appellants.
Unsafe and unsatisfactory
In addition to repeating the specific grievances with which we have already dealt, the appellants' counsel submitted that the defence had been ambushed at the trial by the way in which the prosecution ultimately presented its case. As we have said, the prosecution initially thought the Sales Records would make its case. But they were discredited. The prosecution then sought to save the day, at least as to count 11, with Mr Fragos' Vinovation evidence, the general nature of which we have described under the heading Company counts. In the course of re-examination the prosecutor asked Mr Fragos whether the Orlando Wyndham wine complied with the P4 Standards. The question was disallowed, but the prosecutor was granted leave to "re-open" to ask the question. Mr Fragos' answer was that the wine did not comply. Therein, it was said, lay the ambush which made the conviction unsafe and unsatisfactory.
The ambush contention is without substance. The Vinovation wine was part of the prosecution's evidence in chief. It was cross-examined upon. It was re-examined upon, and the extra question in chief asked and answered. That there was no ambush is confirmed by the events that followed Mr Fragos' answer. Defence counsel asked for and was granted a ten minute adjournment in order to decide whether he wished to cross-examine on the subject of the extra question. Upon resuming, he announced that he did not wish to cross-examine on that subject. Mr Fragos was re-called some days later, and was cross-examined, but not on the Vinovation material. In those circumstances it is impossible to describe the events
that happened as an ambush, or to accept that counsel was disadvantaged in the conduct of the case by the extra question in chief. After that question had been answered, Mr Fragos' re-examination continued. He was asked whether the Vinovation wine had been included in the Orlando Wyndham blend. The question was not objected to, and he said it had been included. Having regard to the quantity of the Vinovation wine, that evidence alone showed that the Orlando Wyndham wine did not comply with the P4 Standards.
In determining whether a verdict is unsafe or unsatisfactory an appellate court must undertake an independent examination of the relevant evidence to determine whether it was open to the jury to be satisfied beyond reasonable doubt as to the guilt of the accused. That function is not discharged merely by a consideration of whether there was sufficient evidence to sustain a conviction, for a verdict may be unsafe or unsatisfactory notwithstanding that there was evidence sufficient to entitle a reasonable jury to convict. The court must as well assess the quality of the evidence. See Morris v The Queen (1987) 163 CLR 454 and M v The Queen (1994) 181 CLR 487 at 492-493. We have assumed, without deciding, that what was said in these cases is applicable to a trial by judge alone.
The prosecution case depended on Mr Fragos' evidence. There was a serious question as to its quality. He was giving evidence with immunity from prosecution. He initially maintained the accuracy of the Sales Records, but was then forced to accept that they were inaccurate in many respects. The trial judge was satisfied that Mr Fragos' evidence about the Vinovation wine was truthful, and that there were many matters which would have caused the Orlando Wyndham transaction to be retained in his memory. There was independent evidence to support aspects of Mr Fragos' evidence to which the trial judge made reference, and the conviction was not based solely on his oral evidence. On our own examination of
the evidence we do not think that the conviction of the company on count 11, or the conviction of the appellants on count 10, was unsafe or unsatisfactory.
Appeal on sentence
The maximum penalty for aiding and abetting was $40,000. The appellants were each fined $10,000. An appellate court does not interfere with a sentence merely because it is of the view that it is insufficient or excessive. It interferes only if it is shown that the judge acted on a wrong principle or misunderstood or wrongly assessed some salient feature of the evidence. See Reg v Tait (1979) 24 ALR 473 at 476.
In his remarks on sentence the trial judge pointed out that the evidence from members of the wine industry was that there is no human or technical means of assessing a wine to determine its vintage, variety or region of origin, and that in matters of blends and components one is wholly dependent on the integrity of the winemaker.
His Honour found that the appellants' conduct was deliberate; each knew he was participating in a fraud. His Honour took into account in favour of the appellants that they had hitherto been men of good character, that they had impressive histories of educational achievement, hard work and community involvement, and that Mr von Berg had been decorated in Vietnam for valour. He accepted that there was no evidence that their conduct was motivated by direct personal gain, that the adverse publicity generated by their convictions would have had a very serious effect on their commercial and personal reputations, and that they must have suffered financially as a result of the prosecution.
In our view neither the fines imposed nor his Honour's observations in passing sentence disclose any wrong principle or misunderstanding. The mitigating factors to which he
referred explain why fines of only one quarter of the maximum were imposed on each appellant for what is a very serious offence, having the capacity seriously to undermine confidence in the Australian wine industry.
Appeal on costs
The trial judge ordered that the company pay 35%, and the appellants jointly and severally pay 10%, of the prosecution's costs. It does not appear from the material before us that his Honour had before him an estimate of those costs. His Honour said there was no reason why the defendants should have to pay costs referable to the time taken to establish the unreliability of the company's records or that taken with Mr Fragos in controverting his initial assertion that the records were reliable. He referred to the well-known guidelines within which the discretion as to costs is exercised (see for example Hughes v Western Australian Cricket Association (1986) 8 ATPR 40-748 and Queensland Wire Industries Pty Ltd v Broken Hill Proprietary Co Ltd (1987) 17 FCR 211 at 222), and said:
It is true that the prosecution succeeded in four only of the counts against the company and failed in seven. With respect to Messrs von Berg and Curtis it succeeded on only one out of four. But I do not consider that an arithmetical approach is the correct approach. In my opinion the correct approach is to commence with the observation that the prosecution set out to prove and ultimately did prove that the company was selling wine that was not true to description and that on one occasion Messrs von Berg and Curtis aided or abetted or counselled or procured the company to commit an offence. However, along the way the trial was protracted because of a fundamental flaw in a substantial part of the prosecution's case, that is, its inappropriate reliance on the Sales Record. In view of the fact that I have found that the prosecution should have known of the faults in the Sales Records and would have known of those facts if it had properly investigated the matter, it should suffer the consequences by not enjoying orders for its full costs.
It is only in a rare case that an appellate court will interfere with the exercise of a judge's discretion as to costs. In any event, we see no error in the approach adopted by his Honour in the passage we have set out, or in his order based on that approach that the appellants pay 10% of the prosecution's costs. It would, we think, have been preferable for his Honour to have sought an estimate of the prosecution's costs so as to have been able to appreciate the impact of his order. But counsel for the appellants made no attempt to put before us an estimate, so as to enable us to appreciate that impact. In those circumstances we do not propose to interfere with the order made.
Conclusion
The appeal should be dismissed with costs.
I certify that this and the preceding twenty-seven pages are a true copy of the reasons for judgment of the Court
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Associate
19 December 1996
Counsel for the Appellants: K V Borick and D L Hopton
Solicitors for the Appellants: von Doussas
Counsel for the Respondent: M S Weinberg QC and D J Chapman
Solicitor for the Respondent: Director of Public Prosecutions
Date of Hearing: 12 - 13 November 1996
Place of Hearing: Adelaide
Date of Judgment: 19 December 1996
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