Re Barry John Doolan v Magnamail Pty Limited [1982] FCA 25 (12 March 1982)

FEDERAL COURT OF AUSTRALIA

Re: BARRY JOHN DOOLAN
And: MAGNAMAIL PTY. LIMITED
No. G 44 of 1981
No. G 45 of 1981
No. G 46 of 1981
No. G 47 of 1981
No. G 48 of 1981
No. G 49 of 1981
No. G 50 of 1981
No. G 51 of 1981
No. G 70 of 1981
No. G 138 of 1981
Trade Practices

COURT

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Morling J.

CATCHWORDS

Trade Practices - false representations under s.53(a) of Trade Practices Act 1974 (Cth) - defendant offers goods for sale by mail order catalogue - representation that cuckoo clock "carved" - representation that radio is a "mini stereo" set - representation that device repels mosquitoes - representations false - cheap articles - gravity of offences

Trade Practices Act 1974 (Cth) ss. 53(a), 79.

HEARING

SYDNEY
12:3:1982

ORDER

1. The charges referred to in proceedings numbers G44, G46, G47, G49, G50, G51 and G70 in each case of 1981 are dismissed.

2. The defendant is convicted of committing three contraventions of s.53(a) of the Trade Practices Act 1974, being the charges referred to in proceedings numbers G45, G48 and G138 in each case of 1981.

3. The defendant is ordered to pay a fine of $750.00 in respect of the contravention referred to in No. G45 of 1981.

4. The defendant is ordered to pay a fine of $2000.00 in respect of the contravention referred to in G48 of 1981.

5. The defendant is ordered to pay a fine of $2750.00 in respect of the contravention in G138 of 1981.

6. The fines are to be paid to the District Registrar of this Court within 21 days of this day.

7. The defendant is to pay the prosecutor his costs with respect to proceedings numbers G45, G48 and G138 in each case of 1981, the same to be taxed if not agreed.

DECISION

Magnamail Pty. Limited has been charged with the commission of a number of offences against s. 79 of the Trade Practices Act. The bases of the charges are alleged contraventions of s.53(a) of that Act. The prosecutor has not proceeded with most of the charges and it is agreed that they should be dismissed. However it has pressed with three of the charges and to these the defendant has pleaded guilty. These are the charges referred to in proceedings No. G 45 of 1981, G 48 of 1981 and G 138 of 1981. The substance of the contraventions is as follows:
G 45 of 1981

It is alleged that between 29 October 1980 and 24 November 1980 the defendant falsly represented in a mail order catalogue published by it that a "Rustic Cuckoo Clock from the Black Forest" was carved when in fact it was not carved.

G 48 of 1981

The allegation in this matter is that in the same mail order catalogue a radio advertised as a "mini stereo set" was claimed to be capable of stereo amplification, when in fact it was not so capable.

G 138 of 1981

The allegation in this matter is that in the same mail order catalogue as a "Hi-Frequency Electronic Repeller" was claimed to be capable of driving mosquitoes away by sonic vibration, whereas in fact the product did not have any relevant repellent effect.

All these allegations were admitted by the defendant through its counsel.

The defendant carries on a substantial business in the sale of goods through the post. From time to time it publishes catalogues of goods which may be purchased from it by the sending of orders through the mail. These catalogues are widely distributed, some 202,000 of the October 1980 edition being put into circulation by the defendant. The goods sold are, for the most part, cheap products which would be of attraction only to the most unsophisticated buyer. The type and prices of the goods may be gleaned from its October 1980 catalogue which included the following products - automatic pencil sharpener $6.90; insulated pitcher $4.90; siren alarm torch $5.90; 22 piece coffee set $35.90; pocket saw $3.60; owl barometer $6.90; power crusher (to build a "power packed body") $14.90; a variety of cosmetics said to be efficacious for such disparate purposes as concealing ugly veins, ensuring "more glamorous eyes in the morning" and to "improve your breasts naturally"; beer glasses claimed to be "fabulous conversation pieces" (2 for $7.90) and an organ, said to be "an absolute must for the Christmas Season" which is "decorated with chubby little angels on top of the organ and a golden star in the middle" which possible purchasers are told "will delight your ears" for the modest price of $12.60.

The literary style of the advertisements for the three products which are the subject of the charges can best be described as florid. This may be seen from the text of the advertisement for the cuckoo clock. Beside a fairly crude and multi-coloured drawing of a cuckoo clock, which looks anything but carved, the following text appears:

"CARVED RUSTIC CUCKOO CLOCK FROM THE BLACK FOREST Hang one of these genuine cuckoo clocks from the fabled Schwartzwald of Western Germany on any wall and watch the storybook enchantment unfold. A little bird calls out every quarter hour. Traditional cabinet delights young and old. Works of art, carved by old world artisans.

Easy to wind. 38 cms from crest to pendulum. Multi-coloured. A182 BLACK FOREST CUCKOO CLOCK $23.80"

The catalogue contains an order form and goods are purchased on the basis that the defendant agrees to refund the purchase price for any article with which the purchaser indicates he is dissatisfied within ten days of purchase. There is evidence, which I accept, that the defendant readily honours this term of sale.

The managing director of the defendant company gave evidence explaing how the offences occurred. So far as the cuckoo clock was concerned, he said that it was described as being carved because it had been so described in a catalogue sent to him from Germany by the manufacturers. With respect to the radio set, he said it had been supplied to him in a box in which it was described as a "stereo amplifier" AM radio. He said that at the time the radio was advertised for sale he believed that "stereo" meant "sound coming from different directions" and that as the radio was supplied with two separate speakers which could be placed apart, he believed it was correctly described in the catalogue. As to the repeller, he said he did not independently verify that it had the qualities claimed for it, but he was aware that similar products were on the market. He also said that he had tested the repeller in his own home on one occasion and that it seemed to drive away mosquitoes.

I am unimpressed with the defendant's efforts to ensure that it did not claim for its goods qualities which they did not possess. Any inspection of the cuckoo clock would have revealed that it was not carved. The fact that the radio was an AM set should, of itself, have indicated to the defendant that it was not capable of stereo amplification. Whilst it may not have been as easy to ascertain the capacity of the repeller to repel mosquitoes, it was the defendant's obligation to make enquiries in that regard before it described it in its catalogue, as it did, as an "amazing new electronic marvel (which) emits high frequency sonic vibrations at wave-lengths that repel plaguing blood-thirsty mosquitoes."

It is true that the purchaser of any item in the catalogue would or should have been aware that he was not purchasing a high quality article. The articles to which I have referred above would have been saleable only at the bottom end of the retail market and purchasers could not have expected to get very much for their money, in most instances. But that was no excuse for false advertising. Indeed, the circumstance that purchasers for these kinds of products may well have been unsophisticated and lacking in discrimination was itself a reason why advertisements in the catalogue should have been accurate. Further, the fact that purchasers had no opportunity to inspect the goods prior to purchase cast an additional responsibility upon the defendant to give a fair description of the goods offered for sale in the catalogue.

The perils attendant upon false advertising should have been brought home to the defendant by proceedings that were brought against it in 1977 in respect of earlier offences against s.79. See Thompson v. Magnamail Pty. Limited (No 1) (1977) ATPR 40-032 and Thompson v. Magnamail Pty. Limited (No 2) (1977) ATPR 40-033. It is true that the defendant has altered its advertising since the commission of the offences with which it is presently charged, but that does not excuse the contraventions of the Act. It is also true that the defendant refunds the full purchase price of any article to any dissatisfied customer. The evidence suggests that the proportion of customers dissatisfied with their purchases of cuckoo clocks, insect repellers and mini-stereo sets was, if anything, less than in the case of other articles advertised in the defendant's catalogue. On the other hand, I think there may well have been many dissatisfied purchasers who, having regard to the small amount of money involved, did not bother to return goods through the post and claim refunds.

Of the three offences, the offence in respect of the cuckoo clock is far the least serious. Any reader of the advertisement in respect of the clock would have obtained a reasonably accurate impression of its true quality and character from the illustration of it. It is true that it was described as being "carved", but no viewer of the illustration could have believed that it was carved otherwise than to a minimal extent and with a degree of crudity. It is important to bear in mind when considering the gravity of this offence that the prosecutor did not make any other complaint about the clock as advertised. In substance, I think that purchasers of the cuckoo clocks obtained substantially what they were offered in the advertisement and what they expected to receive. That is not to say that it was not wrong to describe the clocks as being carved. But I do not think that the misdescription prejudiced purchasers, except to a minimal degree.

The offence in respect of the insect repeller is much more deserving of censure. It is true that it might not have been possible for the defendant itself to verify that it was effective to repel mosquitoes, but it could have taken steps to obtain such verification from a third party. On the evidence before me, purchasers of this product (the price of which was $9.90) obtained very little for their money. The defendant admitted the repeller did not, in fact, have any repellent effect on mosquitoes. I am prepared to accept that when the catalogue was published and circulated the defendant believed the repeller was effective for its stated purpose. If I thought otherwise, the penalty imposed for this offence would have been much more severe.

As to the mini-stereo sets, purchasers of them did not obtain radios capable of stereo amplification. It would have been very easy for the defendant to have ascertained that the radio was falsely described as a "mini-stereo set". Although I had initially thought that this was the most serious of the three offences, upon reflection I have come to the view that it is somewhat less serious than that in respect of the insect repeller because purchasers of the sets did obtain something for their money, i.e. an AM radio with two speakers. Having regard to the modest price of these sets ($14.50) purchasers could hardly have expected to obtain very much for their money. Moreover, although described as mini-stereo sets, the advertisement also referred to them as AM radios, which, in fact, they were.

It is not possible to determine from the evidence how many of the clocks, repellers and radios were sold as a result of the publication of the advertisements which are the subject of the charges. However, over a three year period some 1,200 clocks were sold, over a two year period some 400 radios were sold, and some 2,800 insect repellers were sold over a period of five years.

Matters affecting the determination of penalty have been considered in a number of cases. It is sufficient to refer to the decision of Smithers J. in Eva v. Mazda Motors (Sales) Pty. Limited (1977) ATPR 40-020, Hartnell v. Sharp Corporation of Australia Pty. Limited (1977) ATPR) 40-003 per Smithers J. and to the decision of Lockhart J. in Doolan v. Waltons Limited (4 December 1981). Matters which must be taken into account include the degree that the statements made in the advertisements depart from the truth, the extent to which they have been disseminated, the determinative effect of any penalty and the importance of the untrue statements. In all the circumstances, I think it is appropriate to impose penalties of $750.00 in respect of the offence relating to the advertisement of the cuckoo clock, $2000 in respect of the offence relating to the mini-stereo sets and $2750 in respect of the offence relating to the insect repeller.

Accordingly I impose penalties as follows:

In matter No. G 45 of 1981 - $750.00
In matter No. G 48 of 1981 - $2000.00
In matter No. G 138 of 1981 - $2750.00

In each case the defendant is to pay the prosecutor's costs. The fines are to be paid to the District Registrar of this Court within twenty-one days of this day. All the other charges are, by consent, dismissed.