Zaravinos, O. v Dairy Farmers Co-Operative

CATCHWORDS

Trade Practices - preliminary question

of law

- whether the Court has

jurisdiction to hear the proceedings

- whether the provisions

of the Pure

Food Act 1908

(N.S.W.) answer the description of

a prescribed consumer

safety standard within the meaning of para. 62(1)

(a)

of the Trade

Practices Act 1974 - whether the applicants answer the description of "a person who suffers loss or damage by conduct of another person that was

done in contravention of"

S . 82 of the Trade Practices Act

- costs.

Trade Practices Act 1974:

ss . 6 2 , 74B. 74D. 74G and 82.

Pure Food Act 1908 (N.S.W.):

s s .

10, 13(1).

GEORGE ZARAVINOS

V. DAIRY FARMERS CO-OPERATIVE

LIMITED

DAIRY FARMERS CO-OPERATIVE

LIMITED (Cross Claimant)

PURE-PAK AUSTRALIA PTY. LIMITED Cross Respondent (Second Cross Claimant)

DAIRY FARMERS CO-OPERATIVE LIMITED Second Cross Respondent

1983

G277

OURIANA ZARAVINOS	V. DAIRY FARMERS CO-OPERATIVE	& PTIRE PAK AUSTRALIA PTY.
LIMITED G278 of 1983
LOCKHART J. SYDNEY
14 MARCH 1985

IN THE FEDERAL COURT OF AUSTRALIA	)
1

NEW SOUTH WLES DISTRICT REGISTRY )

No. G277 of 1983

)

DIVISION	GENERAL	)
GEORGE ZARAVINOS

Applicant

DAIRY FARMERS CO-OPERATIVE LIMITED

Respondent

DAIRY FARMERS CO-OPERATIVE LIMITED

Cross Claimant

PURE PAK AUSTRALIA PTY. LIMITED

Cross Respondent

(Second Cross Claimant)

DAIRY FARMERS CO-OPERATIVE LIMITED

Second Cross Respondent

IN THE FEDERAL COURT OF AUSTRALIA	1
)

NEW SOUTH WALES DISTRICT REGISTRY	)	No. G270 of 1983
)
GENERAL DIVISION	)

BETWEEN:

OURIANA ZARAVINOS

Applicant

AND :

DAIRY FARMERS CO-OPERATIVE

LIMITED

First Respondent

AND:	PURE PAK AUSTRALIA	PTY.
LIMITED

Second Respondent

MINUTES OF ORDER

JUDGE MAKING ORDEF?:	LOCKH-ART J.
DATE OF ORDER:	14 MARCH 1985
WHERE MADE:	SYDNEX
THE COURT ORDERS that:-

1. The proceedings G277 and G278 of 1983 be dismissed.

There be no order as

the

costs of any

party to

these

proceedings.

Note: Settlement and entry of orders is dealt with in Order

36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA

1 1

NEW SOUTH WALES DISTRICT REGISTRY

)	No. G277 of 1983

)

DIVISION

GENERAL

)

GEORGE ZARAVINOS

Applicant

DAIRY	FAkMERS	CO-OPWTIVE
LIMITED

Respondent

DAIRY

FARMERS

CO-OPERATIVE

LIMITD

Cross Claimant

PTJRE PAK AUSTRALIA PTY. LIMITED

Cross Respondent

(Second Cross

Claimant)

DAIRY

FARMERS

CO-OPERATIVE

LIMITED

Second Cross Respondent

IN THE FEDERAL COURT OF AUSTRALIA

)

NEW SOUTH WALES DISTRICT REGISTRY

)	No. G278 of 1983

)

DIVISION

GENERAL

)

OURIANA

ZARAVINOS

Applicant

AND: DAIRY

FARMERS

CO-OPERATIVE

LIMITED

First Respondent

AND:	PURE PAK AUSTRALIA PTY. LIMITED

Second Respondent

14 March 1985

2 .

REASONS FOR JUDGMENT

LOCKHART J.

When the hearing

these two matters began yesterday,

counsel for the first respondent, Dairy Farmers Co-operative Limited

("Dairy Farmers")

contended that the Court had no jurisdiction to hear

them. It was agreed that I should hear the argument on that question as a preliminary question

f law.

There are two proceedings in this Court, G 277 of 1983 and

G270 of 1983; the former is brought by George Zaravinos and the latter

by Ouriana Zaravinos, his wife. By consent, the two proceedings are

to be heard together.

Mr. and Mrs. Zaravinos allege in their respective statements

of claim that on

or about 29 July

1981 Mr. Zaravinos purchased a

carton of milk on behalf

himself and Mrs. Zaravinos from a

delicatessen in Rose Bay; that the carton was manufactured by the

second respondent, Pure-Pak Australia Pty. Limited ("Pure-Pak"), and

delivered by it to Dairy Farmers who filled it with milk before it was

delivered to the delicatessen.

The statements of claim further allege

that on the same day,

29 July 1981, Mrs. Zaravinos drank milk from

the

carton and that the

milk contained the hind-quarters of a rat; that

the milk

was not

therefore

reasonably

fit

for

human consumption

and

was

not

merchantable quality.

The statements of claim also allege that Mrs. Zaravinos, as a

result of drinking the milk herself and seeing both the remains of the

rat in the residue of the milk being poured out

of the carton and the

apparent

effect

those

events

upon

her

child, suffered

gastroenteritis, hair loss, severe emotional reaction and nervous

shock. She claims damages.	Mr. Zaravinos claims consequential loss
of consortium.

The claims of

Mr.

and Mrs. Zaravinos are founded upon

(a)

alleged breaches by Dairy Farmers of ss. 6 2 , 74B, 74D and 74G of the

Trade Fractices Act 1974;

(b) alleged breaches by Dairy Farmers of

S . 10 and

S . 13(1) of the Pure Food Act 1908 (N.S.W.) and (c) common

law claims of alleged negliq2ncc on

the part of each respondent.

Dairy Farmers and Pure-Pak deny all relevant allegations in the statements of claim. It is plain

and, indeed, common ground that

the claims brought under the Trade Practices Act cannot, as

matter of

law, be sustained there

is no remaining federal element

present in the claims; and

that this Court, in those circumstances,

has no jurisdiction. It is to this question that

I now turn.

Section 62 of the Trade Practices Act provides, as far as is

relevant:

4 .

"s.62(1) A corporation shall

not, in trade

commerce, supply goods that are intended

to be used or are of a kind likely to be

used, by a consumer if the goods are	of a
kind -

(a) in

respect

which

there

prescribed consumer product safety

standard and which	do not comply
with that standard.

The section also provides:

" s . 6 2 ( 2 )

The regulations may,

in respect of goods

of a particular

kind,

prescribe

consumer

product

safety

standard

consisting of such requirements as to

(a) performance,

composition;

contents

design,

construction,

finish

packaging of the goods; and

(b) the

form

and content of markings

warnings or instructions	t
accompany the goods,

as are reasonably necessary to prevent

reduce risk of injury to persons using

the goods or to any other persons."

Failure to observe the prohibition imposed by sub-section

62(1) constitutes

a contravention of the Trade Practices Act and is

offence punishable on conviction pursuant to

S. 79 of that Act. It is

common ground that no relevant regulations have been prescribed under

sub-S. 6 2 ( 2 ) .

It is also common ground that no provisions of S. 62 other

than those to which I

have just referred are relevant.

I have not

been referred by counsel to any decided cases which relevantly concern

S . 6 2 , nor have my

own researches revealed any.

The particulars of the alleged breach of

S. 62 are stated by

Mr.

and Mrs.

Zaravinos in their respective statements of clalm.as

follows

"Breach by the first respondent

S . 62

of the

Trade Practices Act (Commonwealth) 1974 - 1981 in

that the First Respondent supplied a carton of milk

that was intended

to be used or was of a kind

likely to be used by a consumer yet the carton of

milk did not comply with a prescribed consumer

product safety standard namely ss. 10 and 13(1) of

the Pure Food

Act (N.S.W.)."

Sections 10 and 13(1) of the Pure

Food

Act provide as

follows

"s.10 No

person shall sell any article

of food

which is adulterated or

falsely described,

which

contains any matter foreign to the

nature of the food or which is packed or

enclosed for sale in any manner contrary to

any

provision

this

Act

the

Regulations.

13(1) Where any person sells

a food which is a

mixture, the ingredients shall

pure and

in an undeteriorated and sound condition and

shall comply with the prescribed standards

and such person shall deliver the mixture to

the purchaser in

a package on

or attached to

which shall be a statement or label, legibly and uniformly written stating that the food

mixture

and

the

names

the

ingredients

and

the proportions

the

ingredients when

so prescribed provided that

shall not be necessary

so to attach a

statement or label in the case of

(a)

an article of food generally known to users as a compounded article mixed

with

any

matter

or ingredient

not

injurious to health, and not intended

fraudulently

increase

its

bulk,

weight, or measure, or to conceal its

inferior quality; or

...

(c)

a mixture exempted from this section by

the regulations, which exemption may be

applied to classes of articles.”

Counsel for

Mr. and Mrs. Zaravinos contended that those

provisions of the Pure Food Act answer the description of

a prescribed

consumer product safety standard within the meaning of para. 62(l)(a)

of the

Trade Practices Act.

It is not necessary for me to decide

whether

goods

encompassed

sub-s.

62(1) are

only

those

particular kind which may be prescribed from time to time by the

regulations made under the Trade Practices Act,

or whether such goods

could also encompass those,

any, in respect of which certain other

Commonwealth statutes prescribed consumer product safety standards. However, it is not suggested that there are any other relevant Commonwealth statutes save the Trade Practices Act.

I reject the argument that the Pure Food Act

(N.S.W.) could

prescribe consumer product safety standards for the purposes of sub-s.

62(1) of the

Trade Practices Act. It cannot have been within the

contemplation of the Commonwealth Parliament when enacting

S. 62 that

the failure by

a corporation in trade or

commerce to observe the

requirements of the law of

a State or Territory of the Commonwealth in

respect of consumer product safety standards shall, without more,

constitute

breach

Commonwealth

law. The contrary

view

necessarily

involves

acceptance

the

proposition

that-

the

Commonwealth

Parliament

intended

create

offences

against

Commonwealth law for breaches of State law which may vary from tlme to time and from State to State without any national element, and in

respect of State prescribed safety standards which	are beyond the
reach of Commonwealth control.

Properly construed, on no view of the matter can sub-S. 62(1)

encompass State

law.

In my opinion, insofar as the case of

Mr. and

Mrs. Zaravinos is based on sections

10 and 13(1) of the

Pure Foods

Act

(N.S.W.) as a source of the relevant standards for the purposes of	S .
62, it cannot succeed.

I turn to ss. 74B,

74D and 74G

of the Trade Practice Act.

Those three sections appear in Division 2A of Part

V of the

Trade

Practices Act. That division is a revolutionary code of products liability: see Greqq and Tzovaras, "The Liabilitv of Manufacturers

and Importers Under the Trade Practices (Amendment) Act

1978", (1979)

Fed.L.Rev.

398; and Ahmed, "Products Liability in Australia",

(1979) 6 U. Tasm.L.Rev.

189.

The rationale behind Division

2A is that liability for

defects in goods should be borne by the manufacturer rather than the

retailer

because

modern

methods

packaging,

labelling,

distribution and promotion of goods. Division 2A does not apply where

there is a contract between the manufacturer and

a consumer. It

applies where the manufacturer supplies goods to another person,

usually a distributor or retailer, who acquires the goods for the

purposes of re-supply. The Division applies to the supply of goods

which are

a kind ordinarily acquired for personal, domestic

household use or consumption (para. 74A(2)(a))

- that is, consumer

goods. There is

an extended definition of "manufacturer" to include,

for example,

corporation that is not the actual manufacturer of

goods which imports them into Australia provided that at the time of

importation

the

real

manufacturer

has

no place

business

Australia:

sub-S.

7 4 A ( 4 ) .

The

Division

therefore

capable

operating in respect of two different corporations

the actual

manufacturer and the notional one.

the goods supplied by the

manufacturer are not reasonably fit for

a particular purpose expressly

or impliedly made known to the manufacturer, then the manufacturer is

liable to the consumer for loss

or damage suffered by him:

sub-S.

74B(1).

No liability attaches where the consumer did not rely

on the

skill or

judgment of the manufacturer; para. 74B(2)(b). If goods are

supplied to

a consumer by description by

a person who acquires the

goods for resupply from the manufacturer and the goods

not

correspond with that description, the manufacturer is liable for any

loss or

damage suffered by the consumer

as a

result: sub-s. 7 4 C ( 1 ) .

But the description must have been applied to the goods by

behalf of the manufacturer or

with his consent, express or implied,

€or

a liability to arise on the part of the manufacturer:

sub-S.

74C(3).

The Act

does

not

define

the

xpression

"supply

description" beyond stating that self-selection by the consumer does

not prevent the supply being by description: sub-s.

7 4 C ( 5 ) .

If the goods supplied to a consumer are not of merchantable

quality and the consumer

or any person who derives title to the goods

through or under the consumer suffers loss or damage as a result, the

manufacturer is liable to compensate that person for the loss:	sub-S.
74D(1).

Where goods are supplied to

a consumer by reference to

sample and the bulk does not correspond with the sample in quality

the qoods have a defect, rendering them unmerchantable, that is not

apparent on reasonable examination of the sample, the manufacturer is

liable to the consumer for loss

or damage thereby suffered: sub-S.

74E(1). There is no liability, however, if the sample

is not supplied

by the manufacturer

or if the supply by sample is made without his

concurrence, express or implied: sub-S.

74E(2).

In the case of these

various statutory warranties

the manufacturer is not liable if the

relevant problem arises through the act or

default of another person

by reason of

a cause independent of his control.

A manufacturer is liable for loss

or damage to a consumer if

he acts unreasonably in failing to ensure that repair facilities

spare parts are reasonably available to the consumer who acquired the

goods and who later finds that they need repair;

sub-S.

74F(1).

manufacturer can contract out of his liability under this provision in

certain circumstances;

sub-S.

74F(2) and ( 3 ) .

10.

A manufacturer is liable

to compensate

a consumer for loss or

damage suffered by him if the manufacturer fails to comply with an

express warranty given by him in relation to the goods;

sub-S. 74G(1).

person who supplies goods direct to

a consumer has

a right of

indemnity from the manufacturer

in certain circumstances; S. 74H.

Further, any term

of a contract that purports to exclude, restrict

modify the liability

the manufacturer

or other person under

Division 2A is void: sub-S. 74K(1). A term of a contract shall not be

taken to exclude, restrict

or modify the application of that Division

unless it does so expressly	or is inconsistent with its provisions:
sub-S. 74K(2).

Counsel for

Mr. and Mrs. Zaravinos contended that each of

his

clients answered the description within

S. 82 of "a person who suffers

loss or darnage

conduct

another

person

that

was done in

contravention of" ss . 74B, 74D

or 74G of the Trade Practices Act.

The question arises whether

ss . 74B, 74D

or 74G are concerned

with conduct that may contravene the Trade Practices Act.	I now turn
to this question.

Divislon 1 of Part V

of the Trade Practices Act is concerned

with unfair practices in trade

or commerce. The Division contains,

first a general prohibition against misleading or deceptive conduct in trade or commerce, S . 5 2 ; and second, a large number of more specific

prohibited practices; for example,

ss .

53, 53A, 53B, 54 and 55.

breach of any of the specifically prohibited practices may attract

11 ..

fine of up to

$50,000 in the case of a corporation and $10,000 in the

case of

individual; S .

79. Other relief may be

granted, for

example, by way of injunction

- S. 80

- and damages may be awarded

where a

person suffers loss

and damage by conduct of another person

that was done

in contravention of a provision of Part IV

or V: S . 82.

Section 74B

creates a right in a consumer to recover loss or damage

from the manufacturer

of goods which are not reasonably fit

for a

particular purpose made known to the manufacturer, but, contrary for

example to

S . 5 2 , the section does not prohibit conduct of any kind by

anybody. Hence, there is

no conduct prohibited by that section which

may constitute a contravention. It follows

that no claim can be

brought under S. 82. Similar considerations apply with respect to ss. 74D and 74G. My conclusion is supported by the judgments of Brennan

J., when he was

a member of this

Court, in Arturi

v. ZUPPS Motors Ptv.

Limited (1980-1981) 33

A.L.R. 243, and Rogers J. of the Supreme Court

New South Wales in Zalai

Col Crawford (Retail) Ptv. Limited

(1980) 32

A.L.R. 187.

In the result, none of the federal claims made by

Mr. and

Mrs. Zaravinos are soundly based in law. As the other claims asserted by them against Dairy Farmers and Pure-Pak are based on non-federal

elements, this Court has

no jurisdiction to hear the proceedings

which

must, therefore, be dismissed. There remains the question of costs.

The proceedings

were

commenced

this

Court

after

proceedings had been commenced in the Supreme Court

of New South Wales

by Mrs.

Zaravinos.

I have been informed that no similar prvcec.+lirlgs

12.

have yet been instituted by

Mr. Zaravinos. The proceedings instituted

in the Supreme Court by

Mrs.

Zaravinos were

ad~ourned generally

pending the determination of the proceedings in this Court.

Notwithstanding directions hearings conducted in this Court from time to time, when any question of want of jurisdiction could have been raised by the respondents, the first occasion on which this

question was raised was in informal discusslon between counsel on

Monday of this week. Nor was

any

jurisdictional challenge raised or

foreshadowed

the

d fence.

Pure-Pak

was

joined

as a

cross-respondent by Dairy Farmers early in the proceedings.

As late

as last week, however, leave was sought by

Mr. and Mrs. Zaravinos, and

granted, for them

to join Pure Pak as a respondent to the proceedings.

No federal claim has been propounded against Pure-Pak by any other party.

I have heard full argument on the question

of costs.

The

applicants must, of course, prima facie, bear the responsibility for

instituting proceedings in this Court which has no jurisdiction to

hear them, but the other considerations to which

I have referred must

also be taken into account on this question of costs. In my opinlon

the appropriate order for costs is that no order be made	for the costs
of any party to the proceedings.

It is regrettable that these proceedings should be disposed

of solely on

a jurisdictional point. The Court feels sympathy

for Mr.

and

Mrs.

Zaravinos in their predicament, whatever the soundness of

their claim may be upon the merits.

13.

The order

of the Court i s that proceedings

G277 and G278 of

1983 be dismissed and that there be no order as to the costs of any

party.

I certlfy that thls and the

precedlng pages are a true copy of the

Reasons for Jx'grnent hereln of has Honour

Mr Justlce Lockhart ,

I ,

[1985] FCA 150

14 Mar 1985