Re John Graham Videon v Barry Burroughs Pty Ltd, Beneficial Leasing Pty Ltd and Beneficial Finance Corporation Ltd [1982] FCA 14; (1982) 57 FLR; 5 (16 February 1982)

FEDERAL COURT OF AUSTRALIA

Re: JOHN GRAHAM VIDEON
And: BARRY BURROUGHS PTY. LTD., BENEFICIAL LEASING PTY. LTD. AND BENEFICIAL
FINANCE CORPORATION LTD. [1982] FCA 14; (1982) 57 FLR 5
No. 5-6, 7-8, 8-10 of 1980
Trade Practices Act

COURT

IN THE FEDERAL COURT OF AUSTRALIA
SOUTH AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION
Fisher J.(1)

CATCHWORDS

Trade Practices Act - false and misleading statement concerning location of land - penalties - affect on the public of the misrepresentation - isolated incident - publicity attached to conviction - will of Parliament - deterrent effect - lack of fraudulent intent and dishonesty.

Trade Practices Act s.53A(1)(b) Federal Court Rules Order 49 rule 5

Trade Practices - False and misleading statement concerning location of land - Penalties - Effect of misrepresentation upon public - Isolated incident - Publicity attached to conviction - Deterrent effect necessary in penalty - Lack of fraudulent intent or dishonesty - Trade Practices Act 1974 (Cth), s. 53A (1) (b) - Federal Court Rules, O. 49, r. 5. The defendants had contravened s. 53A (1) (b) of the Trade Practices Act by publishing a brochure containing misleading statements concerning the location of land being sold by one defendant and in respect of which another defendant was acting as the estate agent.

The defendants were conscious of their obligations to ensure that the public was not misled; and the error in the brochure was inadvertent and not fraudulent or dishonest. No significant advantage accrued to the defendants, nor did the public suffer any significant loss due to their conduct. Neither defendant had any prior convictions.

Held: (1) The degree of culpability of each defendant was equivalent.

(2) The contraventions did not warrant substantial fines approaching the maximum fines for these contraventions.

(3) The penalties fixed should be sufficiently high to be a realistic punishment and have a deterrent quality, while not being so high as to be oppressive.

Dawson v. World Travel Headquarters Pty. Ltd. [1981] FCA 2; (1981), 53 FLR 455; Trade Practices Commission v. Stihl Chain Saws (Aust.) Pty. Ltd. (1978) ATPR 40-091, referred to.

(4) Because of the relative sizes of the two companies, a fine of $5,000 was appropriate for the vendor, and $2,000 for the agent.

HEARING

Adelaide, 1981, December 16; 1982, February 16. 16:2:1982
SENTENCING.

The defendants had been found guilty or had pleaded guilty to breaches of s. 53A (1) (b) of the Trade Practices Act.

E. P. Mullighan Q.C. and M. Blue, for the applicant.

J. Von Doussa Q.C. and R. Proud, for the first defendant.

E. F. Johnston Q.C. and D. Smith, for the second defendant.

Cur. adv. vult.

Solicitor for the applicant: Deputy Commonwealth Solicitor.

Solicitors for the first defendant: Finlayson & Co.

Solicitors for the second defendant: Wallman & Partners.

ORDER

1. The informations relating to Charges G6, G7, G8, and G10 in each instance of 1980 are all dismissed.

2. The defendant Beneficial Finance Pty. Ltd. is ordered to pay a fine of $5,000 in respect of the contravention referred to and charged in G9 of 1980.

3. The defendant Barry Burroughs Pty. Ltd. is ordered to pay a fine of $2,000 in respect of the contravention referred to and charged in G5 of 1980.

4. Each of the fines to be paid to the District Registrar of this Court within 21 days of this date.

DECISION

On 30 October 1981 I delivered reasons for my finding that the defendant Beneficial Finance Corporation Ltd ("Beneficial Finance") on 20 February 1979 contravened the provisions of s.53A(1)(b) of the Trade Practices Act ("the Act") in that it made a misleading statement concerning the location of land. In those reasons I indicated the grounds upon which I relied in finding that this defendant did not make on that day a misleading statement concerning facilities associated with the land. At the conclusion of these reasons I will enter orders convicting Beneficial Finance of the offence relating to the location of the land and will dismiss the charge concerning the facilities associated therewith.

The defendant Barry Burroughs Pty. Ltd. ("Barry Burroughs") indicated, after I found a case to answer, that it proposed to plead guilty to summons G5 of 1980 relating to the location of the land and that it had been agreed that summons G6 of 1980 would by consent be dismissed. Barry Burroughs formally pleaded guilty to the former charge on 16 December 1981 and on the same day the prosecutor consented to the dismissal of the latter charge. At the same time a number of affidavits filed on behalf of this defendant pursuant to Order 49 Rule 5 of the Rules of Court were tendered and two of the deponents were cross-examined by counsel for the prosecutor. Four affidavits were likewise tendered by the prosecution.

Subsequently on 21 December 1981 submissions were made as to the appropriate fine to be imposed in respect of the contravention by Beneficial Finance. Much evidence on this matter was given at trial and I made in my initial reasons certain findings relative to the conduct of this defendant. In addition the prosecutor tendered an affidavit and it was agreed I could take into account the affidavits filed and tendered by Barry Burroughs. I will deal in the first instance with the matter of the appropriate fine to be imposed on the defendant Beneficial Finance.

In my earlier reasons I commented upon the fact that all of the executive officers of Beneficial Finance who had had any involvement with the subdivision were called and I found that they were conscientious and reliable. Apart from the lapse which occurred in relation to the brochure there was no ground for criticism of their performance of their duties. Nor did I find that by reason of carelessness or otherwise they failed to pick up the misleading statement prior to the intervention of the Trade Practices Commission. In somewhat similar manner to that disclosed in Dawson v World Travel Headquarters Pty. Ltd. reported both at (1980) A.T.P.R. 40-187 and (1981) A.T.P.R. 40-193 the defendant was aware of its obligation to ensure that neither it nor those acting on its behalf misled the public. To this end it also established a system whereby it comtemplated checking brochures and advertisements prepared by others on its behalf. As I found in my earlier reasons its default was a failure to supervise and police this system in that it failed to ensure that all the procedures were followed. It failed to ensure that it examined and approved the draft brochure, which was ultimately printed and presented to the public containing the misleading statement. There was however nothing deliberate, fraudulent or dishonest in its conduct and it is hard to see that it stood greatly to gain or that the public has suffered much loss by virtue of this conduct.

In assessing the seriousness of this defendant's contravention and the quantum of an appropriate fine I take into account without repeating the matters which I considered relevant in Dawson v World Travel Headquarters (1981) A.T.P.R. at p.42,631-3. In particular I take account of the effect upon a company of the standing of Beneficial Finance of the conviction and attendant publicity, particularly as it is dependant upon the raising of funds from the public. It is also relevant that the contravention is the consequence of an isolated incident and not an established pattern of culpable conduct.

It is proper that I also record the fact that when the fault which produced the contravention occurred, at the latest early in 1977, s.53A had not been enacted

I again emphasize, as I did in Dawson v World Travel Headquarters Pty. Ltd. supra at page 42,632 that as Smithers J. said in Trade Practices Commission v Stihl Chain Saws (Aust) Pty. Ltd. (1978) A.T.P.R. 40-091 at p.17,896 penalties "should reflect the will of Parliament that the commercial standards laid down in the Act must be observed but not be so high as to be oppressive". They must also be sufficiently high to have a deterrent quality. I expressly draw attention to these two factors in the present matter where two companies have contravened the act in circumstances which revealed a like level of culpability I do not see the infringement by Beneficial Finance as being markedly different to or more serious than that of Barry Burroughs. However because of the relative size of the two companies, to impose a fine appropriate to Barry Burroughs would not be a realistic punishment or deterrent to Beneficial Finance. Likewise to impose a fine appropriate to Beneficial Finance could be oppressive to Barry Burroughs. I consider it proper to have these matters in mind notwithstanding the fact that I do not consider the contraventions warrant substantial fines in any way approaching the maximum of $50,000.

In all the circumstances I consider a fine of $5,000 is appropriate in the case of Beneficial Finance.

The defendant Barry Burroughs indicated a plea of guilty after I found a case to answer and prior to Beneficial Finance presenting evidence by way of defence. I attach little weight to this factor, its advantage to this defendant will lie in some lessening of the considerable cost to it of these proceedings.

As a consequence of the additional evidence tendered in mitigation I am prepared to find that Barry Burroughs was not the prime mover in having the misleading words included in the brochure. It appears that its Managing Director was prepared to go along with the suggestion of the co-agent who had had prior and intimate association with the land. I am not persuaded on the evidence to find that this defendant checked this representation with the District Council of Munno Para.

I reiterate without repeating the matters which I stated as proper to be taken into account in arriving at an appropriate penalty in the case of Beneficial Finance. As I have said, it seems that the degree of culpability of each defendant is reasonably equivalent. Equally the contravention by Barry Burroughs was brought about by carelessness or negligence, without dishonesty or fraudulent intent. As with Beneficial Finance, Barry Burroughs has no previous convictions in this or any other area.

In the present case this defendant failed to exercise sufficient care in the preparation of a brochure which it was aware would be distributed to the public. It had been clearly and positively alerted by Beneficial Finance to the necessity to ensure that advertising material contained no misleading statements yet, notwithstanding this warning, no serious attempt was made to check the accuracy of the brochure. Again fortuitously no member of the public has to date suffered significant loss as a consequence of the misleading statement.

In the circumstances I considered that it is appropriate to impose a fine of $2,000 on the defendant Barry Burroughs.
The Court Orders that:

1. The informations relating to Charges G6, G7, G8 and G10 in each instance of 1980 are all dismissed.

2. The defendant Beneficial Finance Pty. Ltd. is ordered to pay a fine of $5,000 in respect of the contravention referred to and charged in G9 of 1980.

3. The defendant Barry Burroughs Pty. Ltd. is ordered to pay a fine of $2,000 in respect of the contravention referred to and charged in G5 of 1980.

4. Each of the fines to be paid to the District Registrar of this Court within 21 days of this date.