Re Lesley Patricia Reardon v Aquajet Holdings (SA) Pty Limited and James Patrick Nolan SA [1983] FCA 15 (10 February 1983)

FEDERAL COURT OF AUSTRALIA

Re: LESLEY PATRICIA REARDON
And: AQUAJET HOLDINGS (S.A.) PTY. LIMITED AND JAMES PATRICK NOLAN
SA No. G54-60 of 1981 and G5-7 of 1982
Trade Practices

COURT

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

CATCHWORDS

Trade Practices - Prosecution - fines imposed on Company and a director - deliberate misrepresentations - seriousness of conduct - need for deterrent - apportionment of costs - imprisonment of director in default of payment of fines.

Federal Court Rules 0.49 r.5

TRADE PRACTICES ACT 1974 s.59(2), 79(1)

CRIMES ACT 1914 s.18A

JUSTICES ACT (S.A.) 1921 s.81

HEARING

ADELAIDE
10:2:1983

ORDER

1. The defendant Aquajet Holdings (S.A.) Pty. Limited is convicted of committing the contraventions of s.59(2) of the Trade Practices Act 1974 more particularly referred to in the seven charges G54 to G60 in each instance of 1981 inclusive.

2. The defendant Aquajet Holdings (S.A.) Pty. Limited is ordered to pay a fine of $20,000 in respect of each of the contraventions referred to respectively in charges G54 and G56 and a fine of $1,000 in respect of each of the other five charges.

3. The defendant James Patrick Nolan is convicted of committing each of the contraventions of s.59(2) of the Trade Practices Act 1974 more particularly referred to in the three charges G5 to G7 of 1982 inclusive.

4. The defendant James Patrick Nolan is ordered to pay a fine of $5,000 in respect of the contravention referred to in charge G5 of 1982 and a fine of $500 in respect of each of the charges G6 and G7 of 1982.

5. The fines to be paid by the defendants to the District Registrar of this Court within 21 days of this date.

6. The defendant Aquajet Holdings (S.A.) Pty. Limited to pay to the prosecutrix nine tenths of her costs in relation to the informations and charges and the defendant James Patrick Nolan to pay to the prosecutrix one tenth of her said costs, the same to be taxed if not agreed.

7. The prosecutrix to be at liberty to apply on seven days' notice for orders against the defendant James Patrick Nolan for imprisonment in default of payment of fines.

DECISION

I indicated in my reasons for judgment delivered on 13 December 1982 that I proposed convicting each of the defendants ("Aquajet" and "Mr. Nolan") of the contraventions alleged against it or him. On 20 December 1982 the matters were again heard for the purpose of taking submissions on the questions of fines and costs. Aquajet was not represented, its counsel having earlier indicated that the company was in liquidation and he was instructed not to make submissions on these topics. Mr. Nolan attended in person and made submissions.

An Affidavit of the prosecutrix was filed pursuant to 0.49 r.5 of the Rules of Court and tendered at the hearing. Mr. Nolan did not tender an affidavit but during his submissions he said that "on three occasions I asked the Commission if they wished me to change the type of advertising I was doing, or in fact stop altogether, and each time they said, no". As he particularly asked me to take this statement into account I required him to give further evidence on the allegations. They had not been the subject of cross-examination of any of the witnesses for the prosecution, nor had they been put forward in this form by Mr. Nolan in his evidence.

In this fresh evidence Mr. Nolan identified only one occasion which was relevant to the charges. He said that at the interview with the prosecutrix and Mr. Henderson in December 1980 on numerous occasions he asked whether or not he should change the form of the advertising which was at that time appearing. He said that on each occasion he was told " . . . no, basically something to the effect they did not see any problems". He said that he asked the same question when the interviewers were leaving his office, namely whether or not he should change the advertising or in fact stop altogether, and to which he received the same answer "we cannot see any problems". Mr. Nolan said he relied on those statements in permitting the advertisements to continue to be inserted.

In answer to this evidence Mr. Henderson, who was an officer of the Trade Practices Commission senior to the prosecutrix, gave evidence of the interview. He said that on a number of occasions Mr. Nolan asserted that his advertisements were not misleading and asked for confirmation of this from the interviewers. Mr. Henderson said that he replied that it was not for him as an officer of the Commission to speak for it on these matters and in particular to say whether the advertisements were misleading or not.

I accept the evidence of Mr. Henderson of what happened at the interview and in particular his denial that he or Miss Reardon made any statements as alleged by Mr. Nolan. Not only would Mr. Henderson have exceeded his authority and contravened the Commission's policy in these matters but he could not possibly know at that time the background circumstances against which the statements in the advertisements had to be critically considered and assessed. I reject this evidence of Mr. Nolan as to these statements.

As I have indicated in my earlier reasons for judgment I consider these offences to be very serious and the conduct of the defendants both deliberate and dishonest and designed expressly to promote sales of floor cleaning machines. In assessing the appropriate penalties I must have regard to all relevant circumstances to which I drew attention in Dawson v World Travel Pty. Ltd. (1981) 3 A.T.P.R. 42,311.

The untrue statements as to likely earnings were made deliberately for the purpose of attracting the attention of prospective purchasers of machines. They departed to a most substantial and vital extent from the earnings in fact at the time being enjoyed by sub-contractors. A substantial number of consumers were prejudiced by the advertisements and induced into buying machines which they were to a greater or less extent unable to turn to profitable use. The consequence of the advertising was to produce for Aquajet gross proceeds of sale totalling more than $170,000 and net profit in excess of $50,000. The advertisements continued after Aquajet and Mr. Nolan became aware that the advertisements were under critical consideration by the Trade Practices Commission. They also continued notwithstanding the fact that Mr. Nolan knew that there was little if any work available for sub-contractors and as a consequence should have been aware that it was impossible for persons owning the machines to earn the represented figures or even a small part thereof. The advertisements continued to be inserted after Aquajet employees drew to Mr. Nolan's attention the inaccuracies in the advertisements and he made no effort to correct or adjust the information to coincide with the realities. Mr. Nolan and Aquajet in fact displayed a disregard for the interests of sub-contractors which can only be classed as selfish and callous. No factor which could explain or mitigate the seriousness of the conduct of either party has been put before me except the contention which I above rejected and Mr. Nolan's statement as to his financial circumstances in consequence of the liquidation of Aquajet.

I see this as a matter in which substantial penalties should be imposed because of the circumstances set out above and as a deterrent. There was however no suggestion that either Aquajet or Mr. Nolan had any previous convictions under this or any other legislation.

My attention was drawn to the provisions of s.79(1) of the Act which does in certain circumstances impose a ceiling on the aggregate of the fines. I am relieved of the necessity of considering in detail the impact of those provisions in this matter. Counsel for the prosecutrix acknowledged but without conceding that there was much to be said for assessing the offences arising out of the advertisements of 31 December 1980 and 22 January 1981 as being contraventions of the same nature and to have occurred at about the same time. It is equally open to assess in a like fashion the five similar advertisements inserted between 3 February and 24 March 1981 and this I propose to do.

It follows that in respect of Aquajet the maximum aggregate penalties that I can impose are $50,000 in respect of the first two offences and $50,000 in respect of the remaining five offences. I do however see the subsequent offences in each instance as being manifestations of the same fault, namely the poster insertion of a deliberately misleading advertisement. In the circumstances I consider that a penalty of $20,000 should be imposed on Aquajet in respect of charge G54 of 1981 and $20,000 in respect of charge G56 of 1981. The sum of $1,000 is an appropriate fine in respect of each of the five subsequent offences.

In respect of Mr. Nolan the result of the above assessment is that the maximum aggregate penalties can not exceed $10,000. I consider that a fine of $5,000 should be imposed in respect of the first charge, namely G5 of 1982 and a fine of $500 in respect of each of the two subsequent charges G6 and G7. These fines are to be paid by Aquajet and Mr. Nolan respectively to the District Registrar of this Court within 21 days

On the question of costs Aquajet must pay the costs of the proceedings against it. In respect of each of the proceedings against him Mr. Nolan must pay the costs of these proceedings so far as they relate to work done on behalf of the prosecutrix additionally to that done in the proceedings against Aquajet. But for the contentions by Mr. Nolan in respect of the validity of service on him of his three charges this additional work would have been relatively small in amount and difficult to separate out. In my opinion justice will be done if Mr. Nolan is required to pay one tenth of the total costs of the prosecutrix of the proceedings, the same to be taxed if not agreed.

Counsel for the prosecutrix asked that in respect of Mr. Nolan I should impose the penalty of imprisonment in default of payment of his fines. He relied upon the provisions of s.18A of the Crimes Act 1914 and s.81 of the Justices Act (S.A.) 1921 and the two decisions of Smithers J. in Wilde v Menville Pty. Ltd. and Others (1981) A.T.P.R. 42,646 and Ducret v Colourshot Pty. Ltd. and Another (1981) A.T.P.R. 42,667, (1981) 35 A.L.R. 503. He also informed me that a motion for special leave to appeal against the orders of Smithers J. and the Full Federal Court in the latter matter is to be heard by the High Court on 13 February 1983. I think it appropriate in the circumstances if I grant the prosecutrix leave subsequently to apply for orders of imprisonment against Mr. Nolan if his fines are not paid.

The orders of the Court are as follows:
1. The defendant Aquajet Holdings (S.A.) Pty. Limited is convicted of committing the contraventions of s.59(2) of the Trade Practices Act 1974 more particularly referred to in the seven charges G54 to G60 in each instance of 1981 inclusive.
2. The defendant Aquajet Holdings (S.A.) Pty. Limited is ordered to pay a fine of $20,000 in respect of each of the contraventions referred to respectively in charges G54 and G56 and a fine of $1,000 in respect of each of the other five charges.
3. The defendant James Patrick Nolan is convicted of committing each of the contraventions of s.59(2) of the Trade Practices Act 1974 more particularly referred to in the three charges G5 to G7 of 1982 inclusive.
4. The defendant James Patrick Nolan is ordered to pay a fine of $5,000 in respect of the contravention referred to in charge G5 of 1982 and a fine of $500 in respect of each of the charges G6 and G7 of 1982.
5. The fines to be paid by the defendants to the District Registrar of this Court within 21 days of this date.
6. The defendant Aquajet Holdings (S.A.) Pty. Limited to pay to the prosecutrix nine tenths of her costs in relation to the informations and charges and the defendant James Patrick Nolan to pay to the prosecutrix one tenth of her said costs, the same to be taxed if not agreed.
7. The prosecutrix to be at liberty to apply on seven days' notice for orders against the defendant James Patrick Nolan for imprisonment in default of payment of his fines.