Ducret v Nissan Motor Co (Australia) Pty Ltd [1979] FCA 6; (1979) 38 FLR 126 (5 March 1979)

FEDERAL COURT OF AUSTRALIA

DUCRET v. NISSAN MOTOR Co. (AUSTRALIA) PTY. LTD. (1979) 38 FLR 126
Trade Practices

COURT

FEDERAL COURT OF AUSTRALIA
GENERAL DIVISION
Northrop J.(1)

CATCHWORDS

Trade Practices - Representation as to goods having accessories which they did not have - Fines - Matters to be taken into account when considering penalty - Trade Practices Act 1974 (Cth.), ss. 53, 79. The defendant used advertising material, including brochures, in relation to motor vehicles which it imported and distributed. Statements contained in the advertising material to the effect that the vehicles had accessories, namely, rear stabilizer bars, were untrue. The defendant was charged pursuant to s. 53 (c) of the Trade Practices Act 1974 and pleaded guilty.

Held: (1) In considering the question of penalty it is relevant to take into account the method of making the representation. However, because each information alleges a representation to an individual person the extent of the distribution of the brochures and the advertising material is not relevant.

(2) Lax or inefficient contact between departments of a corporation cannot amount to a defence to a breach of s. 53(c), nor can it mitigate the seriousness of the offence, as there is an absolute duty upon corporations not to make representation that goods have accessories they do not have.

HEARING

Melbourne, 1978, December 5, 6; 1979, March 5. 5:3:1979
INFORMATIONS.

The defendant was charged by information with eight offences pursuant to s. 53(c) of the Trade Practices Act 1974. The relevant facts appear from the judgment.

H. Nathan, for the informant.

C.W. Porter, for the defendant.
Cur. adv. vult.

Solicitors for the informant: Alan R. Neaves (Commonwealth Crown Solicitor).

Solicitors for the defendant: Weigall & Crowther.
R.W. DAVIS

DECISION

March 5.

The following judgment was delivered.
NORTHROP J. With the consent of the parties, eight separate informations

against the defendant were heard concurrently. The defendant, by its counsel, entered a plea of guilty to each information. Each information alleged a breach of s. 53(c) of the Trade Practices Act 1974, as amended, the relevant provisions of which read:

"A corporation shall not, in trade or commerce, . . . in
connexion with the promotion by any means of the supply . . . of
goods . . .

(c) represent that goods . . . have . . . accessories . . . they do not
have." (at p125)

2. Each information alleged that the goods being supplied were Datsun Patrol motor vehicles, the supply of which was being promoted by means of advertisements representing to named individuals that the vehicles had accessories, namely rear stabilizer bars, which they did not have. At the hearing the parties by consent presented a statement of agreed facts. In addition, exhibits were tendered and the defendant led evidence from an expert witness concerning the nature of stabilizer bars, their use and the effect of the absence of stabilizer bars at the rear of the vehicles. (at p127)

3. The defendant is a corporation within the meaning of s. 53 of the Trade Practices Act 1974 and is a wholly owned subsidiary of Nissan Motors Co. Ltd. of Japan. The defendant carries on business as an importer and distributor of, inter alia, fully assembled Datsun Patrol motor vehicles (Datsun Patrols). In the course of its business the defendant markets Datsun Patrols through a chain of distributors and dealers throughout Australia. Prior to 1st February, 1977, Datsun Patrols manufactured in Japan were fitted with stabilizer bars on both front and rear suspensions, but between 1st February, 1977, and 31st July, 1977, the rear stabilizer bars were not fitted to some models of Datsun Patrols. After 31st July, 1977, the rear stabilizer bars were fitted again during manufacture. Between 1st February, 1977, and the end of October 1977, 1,424 Datsun Patrols imported into Australia by the defendant did not have rear stabilizer bars fitted. Those vehicles were sold by the defendant to its distributors and dealers throughout Australia. During the twelve-month period April 1977 to March 1978, distributors and dealers sold 1,153 of these vehicles, the great bulk being sold in the months of July to November inclusive. During the same twelve months approximately 3,118 Datsun Patrols, including the 1,153 Datsun Patrols not fitted with the rear stabilizer bars, were sold by the distributors and dealers of the defendant. (at p127)

4. The defendant promoted the supply of Datsun Patrols by means of brochures and by means of advertisements placed in magazines directed to members of the public interested in motor vehicles capable of operating on rough terrain. An earlier brochure supplied by the defendant described the suspension of the Datsun Patrol as follows: "Suspension front and rear: longitudinal semi-elliptic leaf springs, torsion bar type stabilizers". (at p127)

5. In January 1977 the defendant commenced preparing information to be incorporated in a new brochure promoting Datsun Patrols. The mechanical information was provided by the sales and marketing department of the defendant to an advertising agent, and on or about 18th May, 1977, an order was placed by that agent for the printing of some 10,000 copies of the brochure. The printing was done on 6th and 7th July, 1977, and the completed brochures were delivered to the parts department of the defendant on 11th July, 1977. (at p128)

6. The brochure is on glossy paper and contains a number of attractive photographs, seven of which depict a Datsun Patrol operating in rough outback conditions and one of which depicts the Datsun Patrol operating on a country highway. Words associated with the photographs use the descriptions "Dawn Patrol", "Mountain Patrol", "River Patrol" and "Highway Patrol". The brochure describes a Datsun Patrol and the purposes for which it can be used, as the following extracts from the brochure illustrate: "In whatever form you want it - as a workhorse around your farm, as a dual purpose vehicle for both off road and highway travelling, as an effective way to reach that secluded beach or for carting your gear to the remote corners of a forest, there's a Datsun Patrol that can handle it. And when the terrain gets out of shape there's no need to worry about the Patrol. Its ladder-type chassis and all-welded box-type side members are built tough for that really rough treatment. Its six cylinder engine offers the best torque on the market giving you the power as well as the strength. Even on the highways, the Datsun Patrol is at home. With leaf springs and stabilizer bars on both front and rear suspensions, you can cruise in comfort all day. Load it up, knock it about, the Datsun Patrol has the guts to come back for more." (at p128)

7. Along with the specifications set out in the brochure is the following: "Suspension front and rear: longitudinal semi-elliptic leaf springs, torsion bar type stabilizers front and rear." (at p128)

8. On an unspecified date in June 1977, the defendant first became aware that some models of the Datsun Patrols were being imported into Australia without rear stabilizer bars being fitted. The service department of the defendant discovered the absence of the rear stabilizer bars and immediately issued and distributed a service bulletin dated 21st June, 1977, to inform the distributors, dealers and other departments of the defendant of the omission of the bars. The bulletin therefore was distributed to the sales and marketing department of the defendant, but despite the fact that it had authorized the printing of the brochures and despite the fact that the brochures had not then been printed, that department took no steps to make the necessary corrections to the statements contained in the brochures. The service bulletin was headed: "Nissan Patrol Rear Stabilizer", and contained the following information: "We advise that as a running change the rear stabilizer was deleted from G60, 94ZG60 and 62ZG60 versions of Nissan Patrol from February 1977 production. The stabilizer remained as standard fitment on 60 model. However, it has been decided to reintroduce the stabilizer for all Patrol models and this is expected to become effective August 1977 production. It should be noted that claims cannot be accepted in respect of those vehicles for which the stabilizer was not standard equipment." On 12th July, 1977, the parts department of the defendant, which by then must have had delivered to it a copy of the service bulletin dated 21st June, 1977, commenced distribution of the brochure. The brochure was supplied by the defendant to its distributors and dealers throughout Australia at a cost of ten cents each brochure and was made available by the distributors and dealers to the public without charge. (at p129)

9. In the month of October 1977, through the same advertising agent, the defendant caused an advertisement for Datsun Patrols to be inserted in each of three magazines namely "Off Road", "Treads" and "Overlander". Each of these magazines appears to be directed to that section of the public interested in operating motor vehicles off made roads and in rough terrain. The magazines contain articles and photographs depicting the pleasures of those types of activities and contain advertisements by which various motor vehicles are depicted as being the most suitable for those types of activities. In each case the advertisement inserted by the defendant consisted of a full page with an attractive photograph of two Datsun Patrols in an idyllic off road setting. At the top of the page in large lettering were the words "Gutsy DATSUN PATROL" while in two of the magazines the description of the Datsun Patrol included the following: "Next, consider some of the other gutsy features of the Patrol like the steel frame. And the stabilizer bars back and front." In the third magazine the equivalent description was as follows: "Next, consider some of the other gutsy features of the Patrol like the steel ladderbox frame which is 1" thick and all welded. And the stabilizer bars, back and front." The advertisements appeared in: (1) The December 1977-January 1978 issue of "Off Road" and some 33,400 copies went on sale in newsagents and bookstores throughout Australia on and after 23rd December, 1977; (2) The January 1978 issue of "Treads" and some 29,580 copies went on sale in newsagents and bookstores throughout Australia on and after 20th January, 1978; (3) The December 1977-January 1978 issue of "Overlander" and some 33,000 copies went on sale in newsagents and bookstores throughout Australia in and after the month of January 1978. (at p129)

10. The informant did not rely upon the display of the brochures and the advertisements in the magazines as constituting the representation within the meaning of s. 53(c) of the Trade Practices Act 1974. Each information before the court alleges a particular representation to a named person. It is necessary, therefore, to make reference to the material before the court relating to each information.

V. No. G 44 of 1978. (at p129)

11. On or about 14th September, 1977, Christopher Kinrade, accompanied by his father, went to the premises of a Datsun dealer at Ferntree Gully, Victoria, and was given a copy of the brochure. He saw the statements contained therein relating to the existence of stabilizer bars. Subsequently the father purchased a Datsun Patrol from another Datsun dealer. On inspection, Christopher Kinrade discovered there was no stabilizer bar fitted to the rear of the purchased vehicle. He then went to a third Datsun dealer and there inspected a number of other Datsun Patrols, none of which had rear stabilizer bars fitted. He took no further action.

V. No. G 45 of 1978. (at p130)

12. On or about 23rd September, 1977, Alfred James went to the premises of a Datsun dealer at Alice Springs, Northern Territory, and was given a copy of the brochure. He saw the statements contained therein relating to the existence of stabilizer bars. A few days later he purchased a Datsun Patrol from that dealer. On driving the vehicle over rough terrain he noticed it was difficult to handle and that the rear tended to jump and sway. He then discovered that the vehicle was not fitted with a rear stabilizer bar. He complained to the dealer and was told nothing could be done about it. In January 1978 the dealer again refused to fit a stabilizer bar on the ground that a Nissan service bulletin stated that claims for a rear stabilizer bar would not be allowed. Finally, in April 1978 the dealer fitted a rear stabilizer bar at no cost to Mr. James.

V. No. G 49 of 1978. (at p130)

13. On or about 16th January, 1978, Mr. James was in Adelaide. He purchased a copy of the December 1977-January 1978 issue of "Off Road" and saw therein the advertisement for Datsun Patrols. On 17th January, 1978, he made a complaint to the Trade Practices Commission in Adelaide and left a copy of the advertisement with the commission.

V. No. G 46 of 1978. (at p130)

14. On or about 7th October, 1977, Peter Wentt attended the premises of a Datsun dealer at Frankston, Victoria, and was given a copy of the brochure. He saw the statements therein relating to the existence of stabilizer bars. By comparison, a brochure for Toyota four-wheel drive vehicles disclosed that the Toyota vehicles did not have stabilizer bars. This was a feature which influenced him in purchasing a Datsun Patrol later that month. He discovered that a rear stabilizer bar was not fitted to his Datsun Patrol but took no further action.

V. No. G 47 of 1978. (at p130)

15. In January 1978 Edward Morgan purchased a copy of the December 1977-January 1978 issue of the "Overlander" and saw the advertisement relating to Datsun Patrols.

V. No. G 48 of 1978. (at p131)

16. In early January 1977 Edward Morgan went to a Datsun dealer at Springvale, Victoria, and was given a copy of the brochure. He saw the statements contained therein relating to the existence of stabilizer bars. Later that month he purchased a Datsun Patrol from another Datsun dealer. At the time of the purchase he noticed that the rear stabilizer bar was missing and complained to the salesman, and was told that he should see the services manager. Subsequently he was informed that the rear stabilizer bar was no longer standard equipment but on advice from the dealer, telephoned the defendant and spoke to a person who claimed to be from the public relations section of the defendant. This person said that Nissan in Japan had deleted the bar from production and that the vehicle was not meant to be equipped with a rear stabilizer bar and that there was nothing that could be done about it.

V. No. G 50 of 1978. (at p131)

17. On 8th February, 1978, the informant, an officer of the Trade Practices Commission, at Footscray, Victoria, purchased a copy of the January 1978 issue of "Treads" and saw therein the advertisement for Datsun Patrols.

V. No. G 51 of 1978. (at p131)

18. On or about 16th March, 1978, Kevin McLean at Fawkner, Victoria, visited the premises of a Datsun dealer and was given a copy of the brochure. He saw the statements contained therein relating to the existence of stabilizer bars. Later that month he purchased a Datsun Patrol. He discovered that the vehicle had no rear stabilizer bar but took no further action. On or about 24th May, 1978, the Datsun dealer wrote to him stating that it would fit a rear stabilizer bar on his vehicle at no cost to him. (at p131)

19. It is necessary to complete the summary of the material presented to the court and having general application. The manufacturing company did not notify the defendant of its intention to cease fitting, during manufacture, the rear stabilizer bar to certain models of Datsun Patrols. When it discovered the absence of rear stabilizer bars, the defendant requested, successfully, the manufacturing company to fit the bars to all models, but of necessity some delay occurred, see service bulletin dated 21st June, 1977. In any event the lead time involved resulted in some Datsun Patrols which had not been fitted with rear stabilizer bars being imported until October 1977 while Datsun Patrols not fitted with rear stabilizers remained in stock in Australia until april 1978. (at p131)

20. The defendant contends that, save as to the material related by Mr. Morgan and in relation to which the defendant had made inquiries of its officers but has no knowledge, the defendant did not until so informed by the informant on or about 12th April, 1978, have any knowledge of any complaint by any purchaser of a Datsun Patrol concerning the absence of a rear stabilizer bar. This may have resulted from the statement contained in the service bulletin of 21st June, 1977. Following an interview with the informant, the defendant issued a technical service bulletin dated 13th April, 1978, to its distributors in which it was stated that rear stabilizer bars would be fitted on owner complaint under warranty provisions. By a sales bulletin dated 23rd May, 1978, the defendant notified all its Victorian dealers to inspect all of their stocks of Datsun Patrols and to fit rear stabilizer bars to any which had no rear stabilizer bars fitted and not to sell any Datsun Patrol which was not fitted with such a bar. From 23rd June, 1978, the defendant commenced to inform all its purchasers of affected vehicles that it would fit rear stabilizer bars at no cost to the purchaser if the vehicle was returned to the distributor or dealer. (at p132)

21. On the evidence given by Mr. Marsden, the production evaluation manager of the defendant, the court finds that the Nissan Patrol is a vehicle designed on the basis that eighty per cent of its use is for off highway purposes and twenty per cent for highway purposes and accordingly its suspension is designed to cope with rough road factors. The purpose of the rear stabilizer bar is to assist in resolving the problem of controlling centrifugal force employed through cornering, particularly on rough surfaces, and to assist in keeping the vehicle on a level basis when being driven on uneven ground. On a normal highway the absence of a rear stabilizer bar does not affect adversely the safety or road handling ability of a Datsun Patrol but under off highway conditions, particularly if the vehicle is heavily laden and is being driven over deeply rutted tracks, there could be a greater tendency of body roll in the absence of such a bar. Even in the light of these findings, although the safety of the vehicle is not adversely affected, it is apparent that the defendant considered the existence of rear stabilizer bars as an important selling point. The emphasis in the brochure and the advertisements that a Datsun Patrol is eminently suited for off highway work and is fitted with stabilizer bars front and rear supports that view. Likewise the fact that the defendant, on discovering the absence of the stabilizer bars on some models, took immediate steps to ensure that in future all models of Datsun Patrols would be fitted with rear stabilizer bars during manufacture, shows that the defendant considered the existence of the rear stabilizer bars to be an important selling point. (at p132)

22. Under s. 79 of the Trade Practices Act 1974 the defendant is liable to a fine not exceeding $50,000 on each information. For the moment the effect of s. 79(2) of the Act is put to one side. As said earlier each information alleges a representation to a specified person and it is necessary to look at each information separately but at the same time consideration must be given to the facts common to all informations. In Eva v. Mazda Motor (Sales) Pty. Ltd. (1977) 2 TPC 37 and in Eva v. Southern Motors Box Hill Pty. Ltd. (1977) 30 FLR 213 Smithers J. considered matters relevant in considering penalties to be imposed for breaches of s. 79 of the Act. In the former of those cases the informations related to advertisements generally while in the second of those cases the offences related to representations to specified persons. In particular in the present case, the extent of the distribution of the brochures and the advertisements is not relevant in considering the penalty to be imposed. (at p133)

23. In the present cases, the method of making the representation is relevant, particularly in the brochure and the specifications contained in the brochure. At the same time each information alleges a representation to a specified person. Accordingly in considering penalties the fact that the brochures and the advertisements had wide circulation is not relevant. Notwithstanding this, the offences are most serious. The statement of a substantial selling point is false. The defendant discovered the falsity before the brochures were printed but did nothing to correct the statements appearing in the brochure and did nothing to give a warning to persons reading the brochure. Although it took steps to ensure that in the future the bars would be fitted, it directed its distributors and dealers that claims by the public relating to the absence of rear stabilizer bars would not be met under warranty and accordingly they would not be installed at the expense of the defendant. It continued the deception contained in the brochure. Subsequently it included the false statements in the advertisements. Only after investigations by the Trade Practices Commission did the defendant take any steps to rectify the position and to fit stabilizer bars to Datsun Patrols apart from during manufacture. In two cases the persons to whom the representations were made, upon complaint after purchasing a Datsun, were told nothing could be done to rectify the position in one case by the dealer and in the other by the dealer and the defendant. The persons who purchased the magazines containing the advertisements knew before the time of purchase that all Datsun Patrols did not have rear stabilizer bars fitted. To that extent the fine to be imposed in those cases is of a lesser amount. (at p133)

24. Lax or inefficient management control between departments of a corporation cannot amount to a defence of a breach of s. 53(c) of the Trade Practices Act, nor can it mitigate against the seriousness of the offences committed. The section imposes upon a corporation an absolute duty to not to make representations that goods have accessories they do not have. In the present case the defendant knew of the absence of the rear stabilizer bars before the brochures were printed and months before the advertisements were inserted in the magazines. The breaches of the provisions of the Act were compounded by the direction given to the distributors and dealers of the defendant that claims would not be accepted in respect of those vehicles for which the stabilizer bars were not standard equipment. All this occurred long before any of the representations were made. It is clear that in the absence of action taken by the Trade Practices Commission, the defendant would have maintained that position. The object of the Act is to protect the public from actions of this kind. It is appropriate that a more severe fine should be imposed in those informations where the person to whom the representation was made was not able to obtain redress initially. In one case, the person to whom the representation was made compared that representation with a representation concerning another type of vehicle and the representation that stabilizer bars were fitted on Datsun Patrols whilst not on the other vehicle influenced his thinking in a decision to purchase a Datsun Patrol. (at p134)

25. Having regard to all the facts and circumstances already set out including the fact that the defendant has now fitted stabilizer bars to the vehicles previously sold, I would impose the following fines: V. No. G 44 of 1978 - $3000; V. No. G 45 of 1978 - $5000; V. No. G 46 of 1978 - $4000; V. No. G 47 of 1978 - $2000; V. No. G 48 of 1978 - $5000; V. No. G 49 of 1978 - $2000; V. No. G 50 of 1978 - $2000; V. No. G 51 of 1978 - $3000. (at p134)

26. The aggregate of the fines proposed to be imposed on the defendant does not exceed the maximum fine that would be applicable in respect of one offence by the defendant and accordingly there is no need to consider what application, if any, s. 79(2) of the Trade Practices Act has to the facts of the present case. (at p134)

27. Accordingly convictions are entered and fines imposed as indicated and in each case the defendant is ordered to pay the informant's costs. (at p134)

ORDER

Order accordingly.