Universal Telecasters (Qld) Ltd v Guthrie [1978] FCA 9; (1978) 32 FLR 360 (4 April 1978)

FEDERAL COURT OF AUSTRALIA

UNIVERSAL TELECASTERS (QLD) LTD. v. GUTHRIE (1978) 32 FLR 360
Trade Practices - Companies

COURT

FEDERAL COURT OF AUSTRALIA
GENERAL DIVISION
Bowen C.J.(1), Nimmo(2) and Franki(3) JJ.

CATCHWORDS

Trade Practices - Television broadcast of misleading statement - Elements of offence - Trading corporation - Whether "made" statement - Statement misleading as to "existence of price reduction" - Defences available - Corporation did not know and had no reason to suspect contravention - Knowledge of principal officer knowledge of corporation - Reliance on information supplied - Reasonable precautions to avoid contravention - Trade Practices Act 1974, ss. 53 (e), 58 (1), (2), (3), 84 (1), (2).

Companies - Knowledge of principal officer - Knowledge of company - Knowledge of superior servant not knowledge of company. The appellant appealed against its conviction for breach of s. 53 (e) of the Trade Practices Act 1974 (the Act). The appellant televised an advertisement prepared by Doyle Dane and Bernbach Pty. Ltd., advertising agents, on behalf of Metro Ford Pty. Ltd. The advertisement implied that sales tax cuts which had been introduced would only be available for a certain period. In fact, the sales tax cuts were to continue but at a reduced rate. Both Metro Ford Pty. Ltd. and Doyle Dane and Bernbach Pty. Ltd. had already been convicted in respect of the same advertisement. An appeal by Doyle Dane and Bernbach Pty. Ltd. was pending. When the advertisement was telecast, the general manager who was the chief executive of the appellant company, was absent and the company secretary was acting in his place. A complaint was made by a viewer to the sales manager of the company. An officer of the Trade Practices Commission in the course of his inquiries also spoke to the sales manager. As a result of the complaints and inquiries, the advertisement was subsequently withdrawn.

The five main contentions of the appellant were (i) the appellant did not make any statement but only published the statement of another; (ii) the advertisement was not misleading concerning the existence of a price reduction, but was rather a statement as to some future event; (iii) the appellant was treated as a principal offender and essential elements in the offence were not proved, e.g., that the appellant was a corporation within the meaning of the Act; (iv) s.83(3) of the Act provided a defence; (v) s. 85 (1) of the Act provided a defence.

Held: (1) By telecasting the advertisement the appellant had made the statement as alleged. The making and publishing of a statement in this case were contemporaneous and mutually inclusive.

(2) Per Bowen C.J. and Franki J. - The statement was misleading as to the duration of the price reduction and was a statement as to an existing fact.

Per Nimmo J. - It was the intention of the legislature to prohibit misleading statements concerning the existence of price reductions whether presently operating or in the future.

(3) Per curiam - The appellant was beyond reasonable doubt a trading corporation within the Act, carrying on the business of selling services to advertisers.

(4) Per Bowen C.J. and Franki J., Nimmo J. dissenting - The defence under s. 85 (3) was established in that the sales manager was not an officer of the appellant whose activities could be said to be those of the appellant.

Per Nimmo J. (dissenting) - On the evidence, the sales manager was an officer who could be said to represent the mind and will of the appellant. Accordingly the appellant could not establish the defence that it had no reason to suspect that its publication would amount to a contravention of the Act.

Tesco Supermarkets Ltd. v. Nattrass, (1972) AC 193, followed.

(5) Per curiam - The defence under s. 85 (1) was not made out. Although the appellant relied on the information supplied, it had not taken reasonable precautions and exercised due diligence to avoid the contravention. It was not sufficient to establish a proper system to guard against contravention without providing for proper supervision to ensure that the system worked.

(6) As to the operation of s. 84 of the Act, the section only dealt with the situation where it was necessary to establish the intention or the conduct of the body corporate and was of no assistance with respect to the knowledge of the body corporate or where the body corporate failed to act.

(7) On the question of onus of proof, the defence need only to be established on the balance of probabilities.

HEARING

Sydney, 1977, December 7, 8; 1978, April 4. 4:4:1978
APPEAL.

The material facts appear from the judgments of the court.

G. E. Fitzgerald Q.C. and R. Cooper, for the appellant.

D. K. Derrington Q.C. and J. O. Jerks, for the respondent.
Cur. adv. vult.

Solicitors for the appellant: Henderson & Lahey.

Solicitor for the respondent: A. R. Neaves (Commonwealth Crown Solicitor).

DECISION

April 4.

The following judgments were delivered.
BOWEN C.J. I have read the reasons for judgment prepared by Franki J. I

agree with his conclusions and, speaking generally, with his reasons. However, I feel I should express my own views on three aspects. (at p361)

2. The first concerns the question whether a television station which broadcasts an advertisement for one of its customers "makes" any statement which forms part of that advertisement. The word "make" is a word with a wide range of meanings. One meaning is "to cause to exist; to produce by action; bring about". Another is "to cause to be, render" (see Shorter Oxford Dictionary, 3rd ed. (1973), p. 1263). In one sense, when a television station broadcasts an individual saying something, it is the individual who makes the statement; the station broadcasts his statement. However, the meaning of the word "make" is such that it is wide enough to cover the broadcasting of the statement. It appears to be used in s. 53 (e) of the Trade Practices Act 1974 in a sense which extends to that. (at p362)

3. But it is argued that where it appears that the statement is put forth by or on behalf of another and not by or on behalf of the television station, the station does not "make" the statement. (at p362)

4. The argument was illustrated by supposing a case where the television station broadcast a statement by an individual along the following lines - "Today the Federal Treasurer said 'Sales tax on all motor vehicles will be reduced by twenty-five per cent as from 1st July next'". It was argued that the television station in this instance should be held to make the statement about the treasurer and his announcement but should not be held to make the statement regarding sales tax. Where there are express words such as those in the illustration or where there are express words of adoption or exclusion, this may, perhaps, be a proper line to draw. If so, then logically it would seem difficult to distinguish the case where, by necessary implication the statement was made for or on behalf of another. These will be matters for decision when an appropriate case arises. In the fields of consumer protection legislation and television broadcasting, it appears to me that any doctrine of necessary implication, if it is proper to import it at all, will have to be closely confined. (at p362)

5. No evidence was tendered as to what would be the reaction of particular viewers. Obviously one difficulty would be to lay down a rule for determining when such an implication should be made. Would the mere fact that it was an advertisement which, in the nature of things, featured the name of the advertiser be sufficient? The television medium is such that the impact is immediate and ephemeral. A viewer cannot go back over the broadcast. For him it is necessarily a matter of impression. If one sought to find a test by which one might determine whether the implication should or should not be made, should one test it by asking whether the judge would make that implication if he were the viewer or, leaving the judge on one side, whether an ordinary reasonable person viewing it would make that implication or whether some less sophisticated or less perceptive viewer would do so. None of these tests would appear to me to be satisfactory. The relevant provisions of the Trade Practices Act 1974 are directed to protecting all viewers including those who are particularly susceptible to the influence of persuasion by advertisement. The fact that a statement is clearly an advertisement for a particular advertiser would not seem to constitute a sufficient basis in the circumstances to justify a holding that the statement was not made by the television station. (at p362)

6. While the terms of the advertisement in the present case may fairly raise the inference that the statement in it is the statement of Metro Ford, there is insufficient material in it to raise the inference that it is not also the statement of Universal Telecasters. Even if it be proper to distinguish statements on the basis they are expressly or by necessary implication statements of the advertiser and not of the television station, the statement in this case is not seen to be such a statement. (at p363)

7. It may be suggested that this interpretation places a heavy burden upon television stations. However, it is no doubt because of this burden that the defences in s. 85 are provided. Thus a television station may, by way of defence, show that it is its business to publish or arrange for publication of an advertisement, that it received the advertisement for publication in the ordinary course of business and that it did not know and had no reason to suspect that its publication would amount to a contravention of the Act (s. 85 (3)). (at p363)

8. Counsel for Universal Telecasters sought to obtain some support for his argument upon the interpretation of "make" in s. 53 (e) by reference to the use of the word "publish" in s. 85 (3). I do not consider that the use of the word "publish" in s. 85 (3) requires s. 53 (e) to be construed in the manner suggested. It may be noted that s. 85 (3) provides a defence which is available in respect of the offences provided for in other paragraphs of s. 53, besides s. 53 (e). (at p363)

9. The second aspect concerns the defence under s. 85 (1) that Universal Telecasters "took reasonable precautions and used due diligence". While these are plain English words, which have to be applied as they stand, it appears to me that two responsibilities which Universal Telecasters would have to show it had discharged, in order to establish this defence, would be that it had discharged, in order to establish this defence, would be that it had laid down a proper system to provide against contravention of the Act and that it had provided adequate supervision to ensure the system was properly carried out. Universal Telecasters did institute a system and did provide for supervision. The mere fact that its system and supervision has proved inadequate to prevent error, does not necessarily establish that its system is defective. Even the best systems may break down due to human error. It is necessary to make a judgment about the system and the provision for supervision. (at p363)

10. The system of having advertisements checked by Mr. Yardley before transmission appears to have been basically a sound one, although it would have been stronger if it had not placed so much weight upon his mere personal knowledge and reaction to the advertisements which he viewed. However, I would not be prepared to hold that the system was defective in not requiring an advertisement, such as that in the present case, to be checked with the relevant government department or in not requiring the advertisement to be verified by the advertiser. The failure to provide a better system of dealing with telephone complaints made at the time, in the evening, when the advertisement was to be broadcast, raises a more difficult question. It is, in my opinion, not enough for Universal Telecasters to show that it had a careful system of vetting advertisements before it put them to air. In the case of advertisements which are to be broadcast during the evening period on more than one day, I think a proper system should include some procedure whereby a complaint made during this period that an advertisement is misleading or otherwise contravenes the Trade Practices Act will be referred promptly to an appropriate officer. No system had been established which made adequate provision for this. In this respect I think the company failed to make out the defence under s. 85 (1) (b). (at p364)

11. The third aspect concerns the defence under s. 85 (3), that it was the business of Universal Telecasters to publish or arrange for publication of advertisements and that it received the advertisement for publication in the ordinary course of business and did not know and had no reason to suspect that its publication would amount to a contravention. (at p364)

12. There is no doubt that the business of Universal Telecasters fell within the section and that it received the advertisement for publication in the ordinary course of business. The question is whether Universal Telecasters established that it did not know and had no reason to suspect that publication of the advertisement would amount to a contravention. (at p364)

13. It appears to me that after Mr. Paterson's warning to Mr. Garry, the sales manager of Universal Telecasters, Mr. Garry had reason to suspect that publication of the advertisement would amount to a contravention. Did Universal Telecasters have reason to suspect? (at p364)

14. The question whether a corporation has knowledge or reason to suspect something is a difficult one. A defence such as this is designed to excuse a corporation which has published a misleading advertisement if, in doing so, it was not blameworthy. It seems clear enough that if an employee, for example a lift driver or a telephonist, had knowledge or reason to suspect something, it would be wrong to attribute this to the corporation. On the other hand, if an employee in an executive position had knowledge or reason to suspect something, it might be thought that it would be fair to hold the corporation responsible. If the matter were to be approached in this way, the problem would be where to draw the line. (at p364)

15. In dealing with a related problem under the Trade Description Act 1968 (U.K.), the House of Lords in Tesco Supermarkets Ltd. v. Nattrass [1971] UKHL 1; (1972) AC 153 adopted a different approach. Their Lordships applied the "organic" theory (see Gower, The Principles of Modern Company Law, 3rd ed. (1969), Ch. 8). The view was taken that what natural persons were to be treated in law as being the corporation were to be found by identifying those natural persons who, by the memorandum and articles of association or as a result of action taken by the directors or by the corporation in general meeting pursuant to its articles, were entrusted with the exercise of the powers of the corporation (Tesco's case per Lord Diplock (1972) AC, at pp 199-200 ; cf. per Lord Reid (1972) AC, at pp 170-171 and Lord Dilhorne (1972) AC, at p 187 ). In that case, the principle was applied in determining whether the company had taken "all reasonable precautions" and exercised "all due diligence". It would seem that the principle would apply equally in determining whether, under our corresponding legislation, a corporation had knowledge of or reason to suspect somethin (see generally Halsbury's Laws of England, 4th ed., vol. 7, p. 451, par. 757). (at p365)

16. In the present case, if this be the principle to be applied, Mr. Garry would fall outside the persons who are to be treated as the corporation in the case of Universal Telecasters. (at p365)

17. However, it is argued that in Australia, s. 84 of the Trade Practices Act has altered the position as it was discussed in Tesco's case. Section 84 provides that where it is necessary to establish the intention of the corporation, it is sufficient to show that a servant or agent had the particular intention (s. 84 (1)). It further provides that any conduct engaged in on behalf of the corporation by a director, agent or servant shall be deemed to have been engaged in also by the corporation (s. 84 (2)). It would seem that s. 84 does alter the position as it was discussed in Tesco's case in two respects, first, so far as the intention of a corporation is concerned and, secondly, so far as conduct engaged in on behalf of a corporation is concerned. It does not touch the question of knowledge or reason to suspect, nor does it touch the situation where consideration has to be given not to some act on behalf of the corporation but to failure to act. In other words, in the areas which we have to consider in relation to Mr. Garry's knowledge and reason to suspect that the advertisement would amount to a contravention, s. 84 has no application. We are left then with the application of the principle discussed in Tesco's case [1971] UKHL 1; (1972) AC 153 . Applying this principle, it appears that Mr. Garry falls outside the class of persons who are to be regarded as the corporation and that, in the circumstances, Universal Telecasters has made out its defence under s. 85 (3). (at p365)

18. I agree with orders proposed by Franki J. (at p365)

DECISION

NIMMO J. This is an appeal from an order made by a single judge of this Court on 12th October, 1977, by which the appellant company was convicted of contravening s. 53 (e) of the Trade Practices Act 1974 and fined $2,000 and ordered to pay the respondent's costs. Section 53 (e) reads as follows: "A corporation shall not, in trade or commerce, in connexion with the supply or possible supply of goods or services or in connexion with the promotion by any means of the supply or use of goods or services - make false or misleading statements concerning the existence of or amounts of, price reductions; . . . " The charge which led to the conviction was that on or about 15th April, 1975, in Brisbane in the State of Queensland the appellant, "a corporation as defined in the Trade Practices Act 1974 did in contravention of s. 53 (e), in trade or commerce, in connection with the promotion by advertising of the supply of goods, to wit Falcon motor cars, make misleading statements concerning the existence of price reductions, the said misleading statements being made in and by an advertisement published and screened by the Television Station TVQ Channel O in Brisbane in the State of Queensland, the said statements being misleading in that the said statements contained the words and sentences, 'Dr. Jim's lovely tax cuts are guaranteed till only April 30, so if you haven't been out to Metro Ford by then you could be a dead set April Fool. Metro Ford offer immediate delivery of automatic Falcon 500 sedans that save you $335. If you don't take delivery by April 30 you're up for an extra 335 bucks in tax', which made the statements misleading in that the said words and sentences meant and implied that the existence of a reduction in price for such vehicles on account of sales tax cuts would not continue after 30th April, 1975, so that a purchaser would then have to pay an additional $335 in sales tax on such a vehicle whereas the true position was that a reduction in price on account of sales tax cuts was to continue (though at a reduced amount) after 30th April, 1975, so that a purchaser would not have to pay $335 additional sales tax but a lesser sum". (at p366)

2. The appellant conducts the television station TVQ Channel O at Brisbane. On 15th April, 1975, it transmitted through its television facilities the advertisement about Falcon motor cars with the text as quoted in the charge. This advertisement referred to sales tax reductions on motor vehicles which had been announced by the treasurer, Dr. Jim Cairns, on 28th January, 1975. The tax reductions were operating on 15th April, 1975, although it was not until 18th April, 1975, that they received legal sanction by retrospective legislation. Prior to the reductions coming into effect on 29th January, 1975, sales tax was payable on new passenger motor cars at the rate of twenty-seven and a half per cent. In anticipation of the legislation, following the treasurer's announcement, sales tax in respect of those vehicles from 29th January to the end of April 1975 was to be at the rate of fifteen per cent and thereafter at an additional rate of two and a half per cent for each succeeding month until it was restored to twenty-seven and a half per cent after the end of August 1975. (at p366)

3. At the hearing of the charge evidence was given that one Mr. A. B. Paterson on viewing a telecast of the advertisement early in April 1975 rang the station at about 7.30 p.m. and had a conversation with a person, who, when informed that Mr. Paterson wished to complain about what he considered a misleading advertisement, advised Mr. Paterson to ring either the station manager or station sales manager the following day. This he did soon after 9 a.m. and was advised that the sales manager was unavailable. He rang again at 10.30 a.m. and was put through to a person who "introduced himself as Terry Garry, sales manager". Mr. Paterson informed Mr. Garry that he considered the advertisement was misleading inasmuch as sales tax would not increase by $335 on the Falcon in May. Mr. Garry then questioned Mr. Paterson as to his knowledge of whether or not sales tax would increase, and, if so, by what amount and Mr. Paterson answered, "that on the basis that I had until recently been employed by a finance company and I was aware of the proposals in relation to sales tax increases in May". Mr. Garry then said that "he had had a look at the ad. or they had had a look at the ad." and intimated that the advertisement had been reviewed but in the light of Mr. Paterson's conversation with him, "they would again review the advertisement and take whatever action they saw fit". (at p367)

4. On 9th April, 1975, Mr. A. A. Wise of the Trade Practices Commission, as a result of a telephone call from a Mr. Meldrum about the advertisement, rang Channel O, asked the telephonist to connect him to whoever was responsible for answering inquiries on advertisements shown on that channel. He was connected to Mr. Garry. Mr. Wise identified himself and his place of employment and informed Mr. Garry that a complaint on the Metro Ford advertisement had been received. Mr. Garry, after stating that he was the sales manager of the appellant, asked what was wrong with the advertisement. Mr. Wise replied, "I do not know, that is why I would like to obtain the transcript of the advertisement if I could". Mr. Garry then said, "I cannot see anything blatantly wrong with the advertisement. I will send you a copy in the mail". At that time Mr. Wise was not aware of the text of the advertisement. On 15th April, 1975, Mr. Wise checked the text of an advertisement televised by Channel O at 7.45 p.m. on that date and found the wording to be exactly the same as the wording of the text of the advertisement he had received from Mr. Garry. In the evening of the same day, Mr. Paterson again viewed the advertisement televised by Channel O. He again rang the station and asked to speak to someone in authority. The person he spoke to identified himself as a technician. He suggested that Mr. Paterson ring the following morning, when he could then speak to the manager, the sales manager or perhaps Fonda Metassa, the speaker of the text of the advertisement, if he so desired. Mr. Paterson did not again contact Channel O but rang the Trade Practices Commission on 16th April, 1975. On that day Mr. Wise rang and arranged a meeting with Mr. Garry for 21st April, 1975. Up to that stage Mr. Wise had not notified Mr. Garry or anybody else at Channel O that the Trade Practices Commission considered the advertisement to be a contravention of the Act. (at p367)

5. On 21st April, 1975, Mr. Wise called on Mr. Garry at the Channel O studios and advised him that the Trade Practices Commission had an objection to the advertisement. Mr. Garry thereupon said the advertisement "would be withdrawn at once", and it was. (at p367)

6. At the hearing before this Court, senior counsel for the appellant sought to have the order of 12th October, 1977, set aside on the following five grounds: firstly, that the appellant did not make the statements contained in the advertisement; secondly, that the advertisement was not misleading concerning the existence of a price reduction; thirdly, the respondent, having treated the appellant as a principal offender, had not proved essential elements of the charge such as that the appellant is a corporation within the meaning of the statute, which, if it made the statements, made them in its trade or commerce; fourthly, s. 85 (3) of the Act affords a defence, assuming that the offence were otherwise established, to a person in the position of the appellant if it published the advertisement in the ordinary course of its business and did not know and had no reason to suspect its publication would amount to a contravention, and the appellant was such a person; fifthly, s. 85 (1) of the Act affords an alternative defence: "which is in substance that the offence, if it occurred, occurred despite reasonable precautions and due diligence on the part of the appellant". (at p368)

7. The first ground on which it is contended that the order should be set aside is based on the undisputed fact that the advertisement was prepared by an advertising agency, Doyle Dane and Bernbach Pty. Ltd., on the instructions of the advertiser, Metro Ford Pty. Ltd. and then sent to the appellant to be telecast. In those circumstances, it is argued, it was the advertising agency that made the statements and all that the appellant did was provide the means by which they were published. This argument suggests that the mere preparation by the advertising agency constitutes the making of the statements. In the context of Pt V of the Act, I consider that the making of statements involves more than that and requires their dissemination by one means or another to potential consumers. In the present case the text of the advertisement was disseminated to potential consumers by the appellant in its telecast which made no reference to the advertising agency. In my view the making and publishing of the statements in this case were contemporaneous and mutually inclusive. Such a state of affairs appears to me to have been contemplated by the legislature for s. 85 (3) provides a defence to a person whose business is to publish or arrange for the publication of advertisements and who received an advertisement for publication in the ordinary course of business but did not know and had no reason to suspect that its publication would amount to a contravention of Pt V of the Act. It follows that, in my view, this ground for setting aside the order must be rejected. (at p368)

8. The second ground raised by counsel is that the advertisement was not misleading "concerning the existence of price reductions" because, he argued, the words, "If you don't take delivery by April 30 you're up for an extra 335 bucks in tax" related not to the then existing price reductions but to the cessation of those reductions at a future date. I consider this argument is misconceived because it seeks to limit the application of the words "the existence of price reductions" to present price reductions. There is nothing in the context in which the words are used to warrant such a restrictive interpretation. In my view the intention of the legislature is to prohibit a corporation from making misleading statements concerning the existence of price reductions regardless of whether they are presently operating or are to operate at some future date. (at p369)

9. The third ground relied on by counsel is that the respondent failed to prove an essential element in the offence charged, namely, that the appellant is a "trading corporation" formed within the limits of Australia (see par. (b) of the definition of "corporation" in s. 4 of the Act). He admitted that the appellant is a corporation formed within the limits of Australia but argued that it is not a "trading corporation". The expression "trading corporation" is defined in s. 4 to mean "a trading corporation within the meaning of paragraph 51 (xx) of the Constitution" but for present purposes that definition does not assist. No single test for determining whether or not a particular corporation is a "trading corporation" is to be found in the judgments delivered in the case of The Queen v. Trade Practices Tribunal; Ex parte St. George County Council [1974] HCA 7; (1974) 130 CLR 533 which was cited by counsel for the appellant. Some of the judges in that case considered that the description "trading corporation" refers to the activities of the corporation at the relevant time, others to the purpose for which the corporation was formed. In the present case the activities of the appellant on 15th April, 1975, were those of a corporation operating a commercial television station for profit. Its principal and almost exclusive activity, was selling its services to advertisers. Although the memorandum of association of the appellant was not tendered in evidence it may be inferred from its activities that it was formed for the purpose of performing them. The appellant televised the advertisement, the subject of the offence charged, in the ordinary course of the business activities it was conducting and for which it had been incorporated. In such circumstances I consider that the evidence establishes beyond reasonable doubt that the appellant was at the relevant time a "trading corporation" within the meaning of the Act. (at p369)

10. The fourth ground for setting aside the order under appeal is based on s. 85 (3) of the Act which reads: "In a proceeding under this Part in relation to the contravention of a provision of Part V committed by the publication of an advertisement, it is a defence if the defendant establishes that he is a person whose business it is to publish or arrange for the publication of advertisements and that he received the advertisement for publication in the ordinary course of business and did not know and had no reason to suspect that its publication would amount to a contravention of a provision of that Part." Before the subsection affords a defence to the appellant it must establish that on the balance of probabilities it did not know and had no reason to suspect that the publication of the advertisement would amount to a contravention of Pt V of the Act. Since a company has no mind of its own the question immediately arises - Whose lack of knowledge and whose lack of reason to suspect is relevant? In Tesco Supermarkets Ltd. v. Nattrass Lord Reid said: "I must start by considering the nature of the personality which by a fiction the law attributes to a corporation. A living person has a mind which can have knowledge or intention or be negligent and he has hands to carry out his intentions. A corporation has none of these: it must act through living persons, though not always one or the same person. Then the person who acts is not speaking or acting for the company. He is acting as the company and his mind which directs his acts is the mind of the company. There is no question of the company being vicariously liable. He is not acting as a servant, representative, agent or delegate. He is an embodiment of the company or, one could say, he hears and speaks through the persona of the company, within his appropriate sphere, and his mind is the mind of the company. If it is a guilty mind then that guilt is the guilt of the company. It must be a question of law whether, once the facts have been ascertained, a person in doing particular things is to be regarded as the company or merely as the company's servant or agent" (1972) AC, at p 170 . (at p370)

11. His Lordship went on to say:

Reference is frequently made to the judgment of Denning L.J. in H. L. Bolton (Engineering) Co. Ltd. v. T. J. Graham & Sons Ltd.

(1957) 1 QB 159, at p 172
. He said: 'A company may in many ways be likened to a human
body. It has a brain and nerve centre which controls what it does.
It also has hands which hold the tools and act in accordance with
directions from the centre. Some of the people in the company are
mere servants and agents who are nothing more than hands to do
the work and cannot be said to represent the mind or will. Others
are directors and managers who represent the directing mind and
will of the company, and control what it does. The state of mind of
these managers is the state of mind of the company and is treated
by the law as such.'

"In that case the directors of the company only met once a year:
they left the management of the business to others, and it was the
intention of those managers which was imputed to the company. I
think that was right. There have been attempts to apply Lord
Denning's words to all servants of a company whose work is brain
work, or who exercise some managerial discretion under the
direction of superior officers of the company. I do not think that
Lord Denning intended to refer to them. He only referred to those
who 'represent the directing mind and will of the company, and
control what it does'.

directors, the managing director and perhaps other superior
officers of a company carry out the functions of management and
speak and act as the company. Their subordinates do not. They
carry out orders from above and it can make no difference that
they are given some measure of discretion. But the board of
directors may delegate some part of their functions of
management giving to their delegate full discretion to act
independently of instructions from them. I see no difficulty in
holding that they have thereby put such a delegate in their place
so that within the scope of the delegation he can act as the
company"
(1972) AC, at p 171
. (at p371)

12. The officers of the appellant who, I think, on the evidence could be said to represent the mind and will of the appellant are the general manager (Mr. R. G. Archer), the secretary (Mr. G. E. Lusk) and the sales manager (Mr. Garry). At all material times Mr. Archer had complete responsibility for implementing the policy of the appellant as determined by its board of directors as dictated to them, if necessary, by the appellant's parent company. In no way did the directors of the appellant or the directors of its parent company interfere with the management and operations of the television station. Mr. Lusk stood in for Mr. Archer when he was absent and exercised the same powers and performed the same duties as the general manager normally did. Mr. Garry was sales manager whose principal task was to obtain revenue for the company from advertising. According to Mr. Archer he was a departmental head with whom he dealt directly. He was an executive who attended meetings of the executive. His duties included the obtaining of advertisements and the receiving of complaints in relation to them. Mr. Archer stated that if there was a complaint to the station, for example, a telephone call or a letter, it would be promptly referred to Mr. Garry if it related to advertising matter. In this case it was Mr. Garry who received the telephone calls from Mr. Paterson and Mr. Wise and it was Mr. Garry who interviewed Mr. Wise on the two occasions he visited the studio. According to Mr. Archer Mr. Garry was expected to exercise "some subjective judgment" regarding any such complaints but had no discretion to deal with them if they were matters involving litigation or anything that would jeopardize the station's licence; such matters were to be referred to him or Mr. Lusk. According to Mr. Lusk, Mr. Garry's responsibility as sales manager did not change in Mr. Archer's absence when Mr. Lusk then considered himself to be Mr. Garry's boss "for general responsibility of the station" but not in "sales matters". According to Mr. Yardley, who had the responsibility for the vetting of advertisers' commercials which had not been examined by the Federation of Australian Commercial Stations, it was Mr. Garry's prerogative as sales manager to withdraw any commercial in the event of a problem. Mr. Garry in fact exercised that prerogative on 21st April, 1975, in respect of the advertisement the subject of the charge after first previewing it with Mr. Yardley. (at p372)

13. From this evidence concerning Mr. Garry's status, duties and responsibilities it seems clear to me that the task of receiving complaints in relation to advertising matter had been delegated to him. The fact that he was obliged to refer some complaints he received to Mr. Archer or Mr. Lusk instead of handling them himself does not, in my opinion, affect in any way his responsibility to receive them. It follows, in my view, that receipt by him of a complaint must be regarded as receipt by the company of that complaint and its subject matter. His knowledge of or reason to suspect a contravention of Pt V must therefore be that of the company. If it were otherwise, how could a member of the public like Mr. Paterson who made his complaint to the person designated by the company to receive it and to whom he was directed to make it communicate to the company that it had telecast a misleading advertisement? (at p372)

14. Mr. Archer and Mr. Lusk gave evidence which leaves no doubt in my mind that on and prior to 15th April, 1975, they did not know and had no reason to suspect that the advertisement that was telecast on that date would amount to a contravention of Pt V. They did not know and had no reason to suspect a contravention of Pt V because it was Mr. Garry's responsibility to receive in the first place all complaints in relation to advertising and for reasons not disclosed in the evidence he did not inform them before 15th April of his conversations with Mr. Paterson and Mr. Wise. Mr. Garry was not called to give evidence at the hearing of the charge and in the absence of any other evidence that would establish that he did not know and had no reason to suspect that publication of the advertisement would amount to a contravention of Pt V the company, in my opinion, has failed to discharge the onus of proof imposed upon it by the subsection. In any case, had Mr. Garry been called I think, in view of the evidence given by Mr. Paterson and Mr. Wise, he would have experienced real difficulty in satisfying the trial judge that he had no reason to suspect that publication of the advertisement would amount to a contravention. Both men spoke to him well in advance of 15th April, 1975. Mr. Paterson not only told him that he considered the advertisement was misleading but also informed him of his qualifications to express such an opinion. Mr. Garry must have been impressed for he undertook to have the advertisement reviewed in the light of Mr. Paterson's complaint. Not long after his conversation with Mr. Paterson, Mr. Wise, after informing him that he was an officer of the Trade Practices Commission, stated that he had received a complaint about the advertisement and requested a copy of the text of it. On that occasion Mr. Garry stated that he saw nothing blatantly (the emphasis is mine) wrong with the advertisement. I consider that what was conveyed to Mr. Garry in the two conversations provided reason enough for him to suspect that further telecasting of the advertisement would amount to a contravention of a provision of Pt V of the Act, the contents of which had been drawn to his attention as shown later in this judgment. Notwithstanding his knowledge of two complaints about the advertisement it appears that he took no measures to investigate them before 21st April, 1975, when the advertisement was withdrawn. (at p373)

15. The fifth and final ground argued on behalf of the appellant is that it is entitled to rely on the defence provided by s. 85 (1) of the Act. Section 85 (1) reads:

"Subject to sub-section (2), in a prosecution under this Part in
relation to a contravention of a provision of Part V, it is a defence
if the defendant establishes -

(a) that the contravention in respect of which the proceeding was
instituted was due to a mistake, to reliance on information
supplied by another person, to the act or default of another person,
to an accident or to some other cause beyond his control; and

(b) that he took reasonable precautions and exercised due
diligence to avoid the contravention." (at p373)

16. In so far as par. (a) of the subsection is concerned, the learned trial judge was satisfied that the appellant had established on the civil onus the necessary facts to sustain the defence the subsection affords. His finding in this connection was not questioned on this appeal. Paragraph (b) of the subsection imposed on the appellant the same onus of establishing that it took reasonable precautions, and that it exercised due diligence to avoid the contravention. (at p373)

17. Shortly after the Act came into force a system of vetting television advertisements was introduced by the appellant in order to avoid contraventions of the Act. The instrument which set the system in train was a memorandum dated 23rd October, 1974, issued by Mr. Archer. It read:

"MEMO TO: Messrs. A. Linning, K. Yardley, D. Nolan and J.
McCormack
c.c. Messrs. G. Lusk, R. Pennell, J. Stevenson, T.
Garry and D. Jull
FROM: General Manager
SUBJECT: TRADE PRACTICES ACT (at p373)

18. With the Trade Practices legislation effective from 1st October, it is imperative that we protect the station to the best of our ability from any violation of this Act, particularly in respect to the consumer protection provisions. (at p374)

19. This simply means that all commercials to be transmitted by the station must be vetted before they are telecast. (at p374)

20. The people responsible for this vetting will be Ken Yardley in respect to advertiser's commercials and Alec Linning for station promos. Alec Linning will also watch all advertiser's commercials that are produced by the station. (at p374)

21. We will accept any material that has F.A.C.T.S. approval without further vetting by Ken Yardley. (at p374)

22. The Film Department will be responsible for advising Ken Yardley on a daily basis of any film or VTR material which is received and does not have F.A.C.T.S. approval. The Film Department will introduce a system on their cards to show the material has been checked. (at p374)

23. The Film Department and Traffic Department will liaise to advise Ken Yardley of any material that is late and is likely to arrive after hours - either week nights or week-ends. With his past knowledge of the client, Mr. Yardley can decide if these 'late' advertisements can go to air. (at p374)

24. The Traffic Department will be responsible for advising Ken Yardley of the arrival of new advertising material other than film or videotape. (at p374)

25. Mr. Yardley and Mr. Linning have a booklet summarizing the Trade Practices Act. Mr. Lusk and I are in possession of the full Act. (at p374)

26. If there is any doubt about the legality of a commercial the person responsible for the initial vetting should report to Mr. Lusk or myself. If there remains doubt we will seek legal advice or some other outside opinions. (at p374)

27. This practice is to take effect immediately." (at p374)

28. Before Mr. Yardley received his copy of the memorandum Mr. Archer discussed its contents with him and explained to him what was expected of him. He also went through the Act with him and to the best of his ability pointed out the loopholes and the problems that the station might face and outlined what Mr. Yardley's task was in relation to them. At or about that time Mr. Yardley was given the booklet referred to in the memorandum which provided in layman's language an adequate summary of the provisions of Pts IV and V of the Act. Later he was given a copy of the Act. (at p374)

29. The memorandum relates to vetting before advertisements are telecast but provides no procedure for dealing with complaints received after they have been telecast. Mr. Archer stated that complaints between 9 a.m. and 5 p.m. were channelled to the appropriate executive but there was no system for logging them. He further stated that any calls made outside those hours were to be logged by the technicians on duty if they thought they were complaints. Since the prime time for television viewing is outside normal office hours one would have expected the appellant to have foreseen the probability of telephone complaints particularly in the evening. To have made no more positive provision than to require technicians to log what they considered to be complaints, in my view, amounts to a deficiency in the system and a failure to take reasonable precautions to avoid contraventions of Pt V. I consider provision should have been made whereby such complaints could be referred to someone in authority to enable prompt investigation. In the instant case Mr. Paterson rang the station on the night of 9th April, 1975, and specifically stated that he wished to complain about what he considered to be a misleading advertisement, but neither that call nor his call on 15th April, 1975, was logged. (at p375)

30. Mr. Archer, to whom full power to manage and operate the station had been delegated by the directors of the appellant, delegated to Mr. Garry, an executive of the company, full power to receive complaints about advertising matter, including complaints that telecast advertisements were in contravention of the Act, between 9 a.m. and 5 p.m., but made no similar delegation in relation to complaints made to the station outside those hours and during the prime viewing time. For this reason, I find that the appellant has not discharged the onus imposed upon it by s. 85 (1) (b) and is therefore not entitled to rely on the defence the subsection affords. (at p375)

31. The appellant having failed on all five grounds, I would dismiss this appeal with costs. (at p375)

FRANKI J. The appellant, Universal Telecasters (Qld.) Ltd., appeals from a conviction and fine imposed by a single judge of this Court. The appellant was charged with a breach of s. 53 (e), of the Trade Practices Act 1974 ("the Act"). (at p375)

2. Section 53 (e) provides: "A corporation shall not, in trade or commerce, in connection with the supply or possible supply of goods or services or in connection with the promotion by any means of the supply or use of goods or services - . . . (e) make false or misleading statements concerning the existence of, or amounts of, price reductions." (at p375)

3. The offence charged was that on or about 15th April, 1975, in contravention of s. 53 (e) of the Act, in trade or commerce, in connection with the promotion by advertising of the supply of goods, to wit, Falcon motor cars, the appellant made misleading statements concerning the existence of price reductions. It was alleged that the misleading statements were made in and by an advertisement published and screened by the appellant and that the statements were misleading in that they contained the words and sentences, "Dr. Jim's lovely tax cuts are guaranteed till only April 30, so if you haven't been out to Metro Ford by then you could be a dead set April Fool. Metro Ford offer immediate delivery of automatic Falcon 500 sedans that save you $335. If you don't take delivery by April 30, you're up for an extra 335 bucks in tax. "It was further alleged that the statements were misleading in that the words and sentences meant and implied that the existence of a reduction in price for such vehicles on account of sales tax cuts would not continue after 30th April, 1975, so that a purchaser would then have to pay an additional $335 in sales tax on such a vehicle, whereas the true position was that a reduction in price on account of sales tax cuts was to continue (though at a reduced amount) after 30th April, 1975, so that a purchaser would not have to pay $335 additional sales tax but a lesser sum. (at p376)

4. The advertisement the subject of the prosecution was an advertisement of Metro Ford Pty. Ltd. and it had been prepared for that company by Doyle Dane and Bernbach Pty. Ltd., advertising agents. The appellant had no part in the preparation of the advertisement other than to permit it to be made in its studios for which it received a fee. Metro Ford Pty. Ltd. and Doyle Dane and Bernbach Pty. Ltd. have already been convicted in respect of the same advertisement although an appeal by Doyle Dane and Bernbach Pty. Ltd. is awaiting hearing in this Court. (at p376)

5. The chief executive of the appellant, who was directly responsible to the board of directors, was the general manager of the station, Mr. Archer. Mr. Lusk, the company secretary was the next most senior executive and he acted in Mr. Archer's place when Mr. Archer was away. Mr. Garry was the sales manager and Mr. Yardley the sales service manager. (at p376)

6. The advertisement was telecast on 15th April, 1975, at a time when Mr. Archer was overseas and Mr. Lusk was acting in his place. A Mr. Paterson, a full-time university student who had recently left the hire purchase industry, saw the advertisement, apparently during the first week in April, and telephoned the station at about 7.30 p.m. at night. He asked to speak to either the programme director or the person in charge at the time, but he was told that no one was available to talk to him, although he said he wished to complain about what he considered to be a misleading advertisement. The suggestion was made to him that he should telephone the station manager or the station sales manager the next day. Mr. Paterson did ring at about 9 a.m. the next day and later that morning spoke to Mr. Garry, the sales manager at the time, and said he considered that the advertisement was misleading because sales tax would not increase by $335 in May. Mr. Garry had in fact resigned on 4th April, 1975, although he did not leave until May 1975. Mr. Garry told Mr. Paterson that the advertisement would be reviewed. Subsequently, on 15th April, 1975, Mr. Paterson again saw the advertisement and again rang the appellant at night and asked to speak to someone in charge, but the person who answered the phone identified himself as a technician and suggested that Mr. Paterson should ring the next day. Mr. Paterson however decided to ring the Trade Practices Commission. On 9th April, 1975, a Mr. Wise, an officer of the Trade Practices Commission received a telephone call from a Mr. Meldrum concerning the advertisement and as a result of this on 9th April, 1975, Mr. Wise rang the appellant and asked to speak to whoever was responsible for answering inquiries about advertisements shown on the channel. This call was transferred to Mr. Garry. Mr. Wise told Mr. Garry that he had received a complaint about the subject advertisement but said that he did not know what was wrong with it. It was arranged that Mr. Garry would send Mr. Wise a copy of the advertisement by post. On 16th April, 1975, Mr. Wise made an appointment to see Mr. Garry on 21st April, 1975, and after that meeting the advertisement was not telecast again. (at p377)

7. The five main points relied upon by the appellant were that: (1) the appellant did not make any statement but only published a statement of another; (2) the advertisement was not misleading concerning the existence of a price reduction but was rather a statement as to some future event; (3) the appellant was treated as a principal offender and essential elements in the offence were not proved, for example, that the appellant was a corporation within the meaning of the Act; (4) s. 85 (3) of the Act provided a defence; (5) s. 85 (1) of the Act provided a defence. (at p377)

8. Whether the appellant made a statement. (at p377)

9. I proceed to consider whether it was established that the appellant made a false or misleading statement. Although the phrase "make false or misleading statements" rather suggests that there may very well be a difference between making a statement and publishing the statement of somebody else, I have come to the conclusion that, in general, where a television station telecasts an advertisement that contains certain spoken words, it is proper to hold that the television station has made a statement. Section 85 (3) of the Act also points in the same direction. I consider that by telecasting the advertisement the appellant made the statement as alleged. Similar legislation elsewhere often contains some provision either excluding a television station or newspaper from its operation or providing a defence in one way or another, often somewhat comparable with the defence provided by s. 85 (3) of the Act. Illustrations of such legislation are - Consumer Protection Act, 1969 (N.S.W.), s. 32; Combines Investigation Act 1970 (Canada), s. 33C; Uniform Deceptive Trade Practices Act 1964 and 1966 (Rev.), ss. 2 (11) and 4, adopted by certain States in the United States of America (see Uniform Laws Annotated, vol. 7, 1970, p. 325, West Publishing Co.). (at p377)

10. Whether the advertisement was misleading concerning the existence of a price reduction. (at p377)

11. I next consider the submission that the advertisement was not misleading concerning the existence of a price reduction but was rather a statement as to some future event. The offence charged is that the appellant made "misleading statements concerning the existence of price reductions" and the particulars given were that the statement was misleading because the price would not increase by $335 after 30th April, 1975. The appellant admitted that the sales tax reduction which had been $335 would be two and a half per cent less after 30th April, 1975. Bearing in mind the definition in s. 4 that price includes a charge of any description, I am satisfied that the word "price" in s. 53 (e) in relation to the subject appeal covers an amount included in respect of sales tax. No attack was made on the way the charge was framed and particularized in the information and I note reg. 78K of the Conciliation and Arbitration Regulations. I consider that the charge can be best described as an allegation that the statement concerning price reductions was misleading because it was misleading as to the duration for which the then current price reduction of $335 would exist. I do not consider that the statement was a promise as to future conduct or a prediction or statement as to the future but rather a statement of an existing fact that the then price reduction of $335 due to sales tax cuts had a limited life and would cease at 30th April, 1975. I consider that it was a false statement as to an existing fact. I regard this as consistent with the views I expressed in Thompson v. Mastertouch T.V. Service Pty. Ltd. (No. 1) (1977) 29 FLR 270 . (at p378)

12. Whether all essential elements in the offence had been proved. (at p378)

13. The appellant next submitted that it had been treated as a principal offender but the prosecution had not established that it was a corporation within the meaning of the Act. It was submitted in this regard that the relevant question was whether the appellant was a trading corporation formed within the limits of Australia. It was admitted that the appellant is, and at all material times was, a company incorporated in Queensland and conducted the television station TVQ Channel O. It is clear that the appellant derived its revenue from telecasting advertisements. I consider that no relevant help is to be found in the judgment of the High Court in The Queen v. Trade Practices Tribunal; Ex parte St. George County Council [1974] HCA 7; (1974) 130 CLR 533 . That case concerned the position of a county council established under the Local Government Act, 1919 (N.S.W.) for "local government purposes" and not the position of a public company incorporated under the Companies Act, 1961 (N.S.W.). Applying the appropriate standard of proof in criminal cases I consider that on the evidence the appellant derived its revenue from telecasting advertisements and was a trading corporation within the meaning of those words in the Act. (at p378)

14. Whether the defence under s. 85 (3) was established. (at p378)

15. I pass now to consider the defence provided by s. 85 (3). (at p378)

16. Section 85 (3) reads: "(3) In a proceeding under this Part in relation to a contravention of a provision of Part V committed by the publication of an advertisement, it is a defence if the defendant establishes that he is a person whose business it is to publish or arrange for the publication of advertisements and that he received the advertisement for publication in the ordinary course of business and did not know and had no reason to suspect that its publication would amount to a contravention of a provision of that Part." (at p379)

17. I consider that the defence provided by this section, which need only be established on the balance of probabilities, is available whether or not a defendant is able to show that he took reasonable precautions and exercised due diligence to avoid any relevant contravention. What is necessary under this defence is not a setting up and policing of a system, but in relation to a particular advertisement that he did not know and had no reason to suspect that its publication would amount to a contravention of a provision of Pt V. Nowhere in the Act is it said that the knowledge of any servant is the knowledge of a company or that a company shall be deemed to suspect something if any servant of the company suspects it. In my opinion the persons relevant for consideration in deciding whether a company "did not know and had no reason to suspect" are those who are to be treated as the company itself. The basic test is whether the employee is one who, by the memorandum and articles of association or as a result of action taken by the directors or by the corporation in general meetings pursuant to its articles, has been entrusted with the exercise of the powers of the corporation - (See Tesco Supermarkets Ltd. v. Nattrass (1972) AC, at pp 171, 174-175, 187, 199-200 ). In the case before us, I am satisfied that the board of directors, Mr. Archer and at least during Mr. Archer's absence, Mr. Lusk came within this category. In my opinion, with regard to the matter under consideration Mr. Garry should not be regarded as the company. (at p379)

18. Mr. Garry had his attention drawn to the advertisement twice and I consider that he should be held to have had reason to suspect that the publication of the advertisement would amount to a contravention of the Act but the question is not whether he had reason to suspect but whether the company had reason to suspect. Mr. Garry had not been delegated a general power to deal with all complaints. For example where any complaint concerning any possible breach of the broadcasting legislation was involved, or a complaint involved anything to do with trade practices, his instructions were to refer the matter to Mr. Archer or Mr. Lusk. (at p379)

19. Mr. Garry does not fall within the word "defendant" in s. 85 (3) although he was a "superior servant" of the appellant (see Tesco's case (1972) AC, at pp 185, 190, 198 ). Although he had reason to suspect that the publication of the advertisement would amount to a contravention of Pt V of the Act the fact that he had reason to suspect did not mean the appellant had reason to suspect. In my opinion, Mr. Garry was not the company for the purposes of s. 85 (3) and I consider that the defence under s. 85 (3) has been made out. (at p380)

20. Whether the defence under s. 85 (1) was established. (at p380)

21. Section 85 (1) and (2) at the relevant time read:

"(1) Subject to sub-section (2), in a prosecution under this Part in
relation to a contravention of a provision of Part V, it is a defence
if the defendant establishes -

(a) that the contravention in respect of which the proceeding was
instituted was due to a mistake, to reliance on information
supplied by another person, to the act or default of another person,
to an accident or to some other cause beyond his control; and

(b) that he took reasonable precautions and exercised due
diligence to avoid the contravention.

"(2) If a defence provided by sub-section (1) involves an
allegation that a contravention was due to reliance on information
supplied by another person or to the act or default of another
person, the defendant is not, without leave of the Court, entitled to
rely on that defence unless he has, not later than 7 days before the
day on which the hearing of the proceeding commences, served on
the person by whom the proceeding was instituted a notice in
writing giving such information that would identify or assist in
the identification of the other person as was then in his
possession." (at p380)

22. The trial judge held that he was satisfied that the defendant company had established, on the civil onus, the facts necessary to satisfy s. 85 (1) (a) but he was not satisfied that the requirements of s. 85 (1) (b) had been established. His Honour did not indicate what was the basis for his finding that the facts necessary to satisfy s. 85 (1) (a) had been established. The defendant had had no part in the preparation of the advertisement other than to allow it to be made in its studios. In so far as the telecasting of the advertisement constituted the making of a false or misleading statement within the terms of s. 53 (e), the only part that the defendant had in this contravention was the telecasting of an advertisement in the preparation of which it had played no part. The real substance of the contravention was, I consider, the reliance on information supplied by another person or persons or the act or default of another person. It seemed common ground in the proceedings before the trial judge that sufficient notice had been given under s. 85 (2) by the notice which the defendant had given to the Commonwealth Crown Solicitor wherein it identified various other persons in accordance with s. 85 (2) as including: (1) Metro Ford Pty. Ltd. of 150 Leichhardt St., Brisbane and its officers and employees; (2) Doyle Dane and Bernbach Pty. Ltd. of 18th Floor, Bank of New South Wales Building, 260 Queen Street, Brisbane and its officers and employees. (at p381)

23. Since the case proceeded before the trial judge in the way it did, I consider that whether or not this notice was adequate to satisfy s. 85 (2), this Court should proceed upon the basis that the notice was adequate or alternatively, that the trial judge by acting as he did, gave leave to rely on the defence provided in s. 85 (1). (at p381)

24. It is also necessary to consider s. 84. Section 84 (1) and (2) reads: "(1) Where, in a proceeding under this Part in respect of any conduct engaged in by a body corporate, being conduct in relation to which a provision of Part V applies, it is necessary to establish the intention of the body corporate, it is sufficient to show that a servant or agent of the body corporate by whom the conduct was engaged in had that intention. (at p381)

25. "(2) Any conduct engaged in on behalf of a body corporate by a director, agent or servant of the body corporate or by any other person at the direction or with the consent or agreement (whether express or implied) of a director, agent or servant of the body corporate shall be deemed, for the purposes of this Act, to have been engaged in also by the body corporate." (at p381)

26. Section 84 (1) deals only with a situation where it is necessary to establish the intention of a body corporate and, in my opinion, is not relevant to a consideration of the defence under s. 85 (1). Section 84 (2) applies to conduct engaged in on behalf of a body corporate by a director, agent or servant but it does not make the failure of an agent or servant of the company the failure of the body corporate. In my view the provisions of s. 84 (2) do not have any relevance in the subject case to a defence under s. 85 (1) in deciding whether "he" took reasonable precautions and exercised due diligence to avoid the contravention. (at p381)

27. The learned trial judge decided that the defendant had not taken reasonable precautions because he held that amongst other precautions to be taken there should have been instructions to check the accuracy of any statement the ultimate source of which was a government department by inquiry of the relevant department. Additionally his Honour found that there should have been a precaution that, in the event of any complaint being made to the effect that the contents of an advertisement were misleading, that complaint should be immediately referred to the person or persons whose duty it was to take precautions to avoid contravention of the Act. His Honour also held that what he referred to as the "obvious precaution" of insisting upon advertisers verifying the factual content of their advertisements should have been taken. His Honour also found that due diligence was not exercised in relation to the investigation of Mr. Paterson's complaint. (at p381)

28. A section similar to s. 85 (1) was considered by the House of Lords in Tesco Supermarkets Ltd. v. Nattrass [1971] UKHL 1; (1972) AC 153 . The section there under consideration was s. 24 of the Trade Descriptions Act 1968 (U.K.). So far as is relevant, this section provided: "In any proceedings for an offence under this Act it shall, . . . be a defence for the person charged to prove - (a) that the commission of the offence was due to . . . reliance on information supplied to him or to the act or default of another person . . . and (b) that he took all reasonable precautions and exercised all due diligence to avoid the commission of such an offence by himself or any person under his control." (at p382)

29. The statements made in relation to who was "another person" by members of the House of Lords in that case are not directly applicable to the Australian Act because of the provisions of s. 84 (2) of the Act, but in my opinion, what is said about s. 24 (1) (b) of the Trade Descriptions Act is directly applicable to s. 85 (1) (b) of the Act. The only relevant difference is that the English Act refers to "all reasonable precautions" and "all due diligence" whereas the Australian Act omits the word "all" in both places and so provides a somewhat lesser standard of "reasonable precautions" and "due diligence". (at p382)

30. In Tesco's case the defendant was a body corporate owning supermarket stores and it sought to raise a defence which involved establishing that it had taken all reasonable precautions and exercised all due diligence to avoid the commission of the offence charged, which was broadly, that the defendant in offering to supply goods, gave an indication by means of a notice that the goods were offered at a price less than that at which they were in fact being offered. It was found that the manager of the store and a shop assistant had failed adequately to perform the tasks which had been assigned to them by the defendant company but that nevertheless the defendant company had satisfied the requirements of s. 24 (1) (b), which involved the duty of setting up an efficient system for the avoidance of offences under the Act and a proper operation of the system. It was pointed out that s. 24 (1) (b) required diligence from the employer personally and not anyone else. Lord Reid said (1972) AC, at pp 172, 174 that as a matter of construction there was no reason for reading into the section in place of the word "he" the words "he and all persons to whom he has delegated responsibility". See also Lord Morris of Borth-y-Gest, Viscount Dilhorne and Lord Diplock (1972) AC, at pp 179, 185-186, 197-200, 203 . I quote the following passage from Lord Diplock's speech: "The fallacy lies in the next step of the argument. Where Parliament in creating an offence of 'strict liability' has also provided that it shall be a defence if the person upon whom the duty is imposed proves that he exercised all due diligence to avoid a breach of the duty, the clear intention of Parliament is to mitigate the injustice, which may be involved in an offence of strict liability, of subjecting to punishment a careful and conscientious person who is in no way morally to blame. To exercise due diligence to prevent something being done is to take all reasonable steps to prevent it. It may be a reasonable step for an employer to instruct a superior servant to supervise the activities of inferior servants whose physical acts may in the absence of supervision result in that being done which it is sought to prevent. This is not to delegate the employer's duty to exercise all due diligence; it is to perform it. To treat the duty of an employer to exercise due diligence as unperformed unless due diligence was also exercised by all his servants to whom he had reasonably given all proper instructions and upon whom he could reasonably rely to carry them out, would be to render the defence of due diligence nugatory and so thwart the clear intention of Parliament in providing it" (1972) AC, at p 203 . See also Halsbury's Laws of England, 4th ed., vol. 7, par. 757. (at p383)

31. A Queen's Bench Divisional Court also considered s. 24 (1) (b) of the Trade Descriptions Act 1968 in Nattrass v. Timpson Shops Ltd. (1973) Crim LR 197 and held that following Tesco's case, the two basic responsibilities which it was said had to be established to satisfy the requirements of the section were the installation of a proper system to provide against the commission of such offences and the provision of adequate supervision to see that the system was properly carried out. (at p383)

32. Sherratt v. Geralds the American Jewellers Ltd. (1970) 114 SJ 147 was decided before Tesco's case and I doubt whether the two cases are entirely consistent since Sherratt's case seems to be directed not so much to the institution of any system but rather to an isolated act. In any event in Sherratt's case no precautions had been taken by the defendant. (at p383)

33. I consider that in the case of a company seeking to come within s. 85 (1) (b) it is necessary to establish whether the employee in question had the status and authority which in law made his act in the matter under consideration, the act of the company so that the employee was to be treated as the company itself. I am now directing this comment only to s. 85 (1) (b) because so far as the commission of an act is concerned, s. 84 (2) deems the conduct of a director, agent or servant of the body corporate to be also the conduct of the body corporate. (at p383)

34. I pass now to consider what relevant steps the appellant took. It will be recalled that Mr. Archer was the general manager of the station and the top executive, Mr. Lusk was the company secretary and acted as the chief executive if Mr. Archer was away. Mr. Garry was the sales manager and Mr. Yardley was the sales service manager. The Trade Practices Act 1974 came into operation on 1st October, 1974, and in October 1974 the appellant took some steps designed to prevent the station committing any breach of the Act. Mr. Archer sent a memorandum dated 23rd October, 1974, to a number of people including Mr. Yardley, Mr. Lusk and Mr. Garry. The memorandum set out that all commercial advertisements to be transmitted must be vetted before they were telecast and placed the responsibility for vetting upon Mr. Yardley, except where the advertisement had the approval of the Federation of Australian Commercial Television stations (F.A.C.T.S.) There were also instructions that the film department had to advise Mr. Yardley when film was received which did not have F.A.C.T.S. approval and that the film department was to introduce a system on their cards to show that the material had been checked. The memorandum referred to a booklet summarizing the Trade Practices Act and to Mr. Archer having a copy of the full Act and contained instructions that, in the event of any doubt about the legality of a commercial, the person responsible for the initial vetting should report the doubt to Mr. Lusk or Mr. Archer who would seek legal advice if necessary. Mr. Yardley was given a copy of a booklet produced by an advertising agent which contained a summary of the Trade Practices Act in layman's terms. Mr. Archer also had discussions with Mr. Yardley concerning what he was to do in relation to the "vetting" and how he was to carry out the task which was explained to him. Mr. Archer also answered queries from Mr. Yardley about some advertisements and Mr. Archer asked Mr. Yardley on occasions whether a particular advertisement had been checked or not. Upon the receipt of an advertisement from an advertising agent the video tape was transferred to a video tape cartridge which was used for the actual transmission. Mr. Yardley in evidence swore that he played the particular video tape before it was telecast and marked it as correct for transmission. Mr. Archer's signature appears on a label on the video tape box containing the relevant advertisement with a notation "O.K. - T.P.C." which indicated that the advertisement had been checked and was considered "O.K." by him so far as concerned the Trade Practices Commission. (at p384)

35. Mr. Yardley was not an executive. He did not attend executive meetings, but he was a senior employee. He had been employed by the company since 1965 and had been sales service manager since 1967. Mr. Archer gave evidence that Mr. Yardley was a very reliable person who paid great attention to detail and who had a lot of practical experience in the advertising industry. (at p384)

36. The trial judge did not say that he regarded any of the defendant's witnesses as unreliable or untruthful. (at p384)

37. I am satisfied that a proper system had been instituted for "vetting" advertisements before they were telecast and that the system was adequately supervised. (at p384)

38. In the case before us I consider that the taking of reasonable precautions did not require that an advertisement be checked with a government department or verified by the advertiser. (at p384)

39. It seems reasonable that some system was required for dealing with complaints made during the hours of transmission about advertisements alleged to be false or misleading. I pass to consider whether any adequate system had been introduced for dealing with such complaints. The evidence of Mr. Archer showed that Mr. Garry had a limited responsibility to deal with complaints. The complaints about the subject advertisement ultimately reached him. Mr. Garry was a senior employee who had been employed by the appellant for ten years. The appellant maintained a system of logging complaints made outside office hours, although the particular complaints made by Mr. Paterson were not recorded. Apparently no system existed of logging complaints made during office hours but all complaints made during those hours of which there is any evidence reached Mr. Garry. However Mr. Garry is not to be treated as the appellant in relation to dealing with all complaints because the instructions he had were to refer certain types of complaints to Mr. Archer or Mr. Lusk. Those to be referred included any concerning a possible breach of the broadcasting legislation or anything concerning trade practices. The system, such as it was, that had been instituted with regard to complaints broke down. One significant feature of the breakdown was the failure by Mr. Garry to refer the matter to Mr. Lusk. (at p385)

40. Although the system required that complaints made outside office hours be recorded there was no evidence that any rules had been formulated and conveyed to those employees likely to be involved concerning the use to be made of these records. In my opinion no adequate system was shown to exist for dealing with complaints and, in addition, there was no evidence before the learned trial judge of any adequate supervision of the procedure which did exist for dealing with complaints. I consider that the defence provided by s. 85 (1) has not been established. (at p385)

41. However, because of my opinion that the defence under s. 85 (3) has been established, the orders I propose are: (1) appeal upheld; (2) conviction quashed; (3) respondent to pay the costs of the appellant both of the appeal and before the trial judge. (at p385)

ORDER

Order accordingly.