Re Michael John Pretorius v Venture Stores (Retailers) Pty Ltd [1992] FCA 46; (1992) 14 Atpr 41-166 (14 February 1992)

FEDERAL COURT OF AUSTRALIA

Re: MICHAEL JOHN PRETORIUS
And: VENTURE STORES (RETAILERS) PTY LTD
Nos. G102, 103 and 105 of 1991
FED No. 58
Trade Practices
[1992] FCA 46; (1992) 14 ATPR 41-166

COURT

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
DIVISION
Northrop J.(1)

CATCHWORDS

Trade Practices - Product safety standard - sale of child toys and swimming aids in breach of that standard - failure to carry appropriate warning - factors to be taken into account in determining fine.

Trade Practices Act 1974 ss.65C(1)(a), 79(1)

HEARING

MELBOURNE
14:2:1992

Counsel for the Prosecutor: Mr G.M. Randall

Solicitor for the Prosecutor: Director of Public Prosecutions

Counsel for the Defendant: Mr A.R. Lewis

Solicitor for the Defendant: Price Brent

ORDER

The defendant be convicted of the offence charged.

The defendant pay the prosecutor's costs.

No. G102 of 1991

The defendant be convicted of the offence charged.

Pursuant to section 79 of the Trade Practices Act 1974 a fine in the sum of $7000.00 be paid to the Commonwealth by the defendant.

Judgment be entered for the prosecutor against the defendant in the sum of $7000.00.

The defendant pay the said sum of $7000.00 to the Registrar within

28 days of the date of this order.

The defendant pay the prosecutor's costs.

No. G105 of 1991

The defendant be convicted of the offence charged.

The defendant pay the prosecutor's costs.

NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules

DECISION

The defendant has pleaded guilty to three charges brought under s.79(1) of the Trade Practices Act 1974 ("the Act") of breaches of para.65C(1)(a) of the Act. The three charges were, by consent, heard together.

2. Paragraph 65C(1)(a) of the Act provides:

"65C. (1) A corporation shall not, in trade or commerce, supply
goods that are intended to be used, or are of a kind likely to be
used, by a consumer if the goods are of a kind:
(a) In respect of which there is a prescribed consumer product
safety standard and which do not comply with that standard;"

3. Under sub-section 79(1) of the Act, a corporation which contravenes para.65C(1)(a), which is within Part V of the Act, is guilty of an offence punishable on conviction by a fine not exceeding $100,000. Sub-section 79(2) contains provisions limiting the total amount of fines to be imposed where a person is convicted of two or more offences constituted by contraventions of the same provisions of Part V and being contraventions that appear to the Court to have been of the same nature or a substantially similar nature and to have occurred at or about the same time.

4. The defendant is a corporation with Australia-wide outlets for selling a wide range of goods by retail to the public. The essential nature of the offences committed by the defendant are set out in the charge made in matter V No. G 103 of 1991 namely:

"That between 26 October 1989 and 26 January 1990 at sundry places
in the States of Queensland, New South Wales, Victoria, Tasmania
and South Australia and in the Australian Capital Territory
Venture Stores (Retailers) Pty Ltd did commit an offence against
Section 79(1) of the Trade Practices Act 1974 constituted by
breach of Section 65C(1)(a) of the said Act in that it supplied to
persons unknown in trade or commerce goods of a kind likely to be
used by a consumer (namely approximately 1000 flotation armbands
and approximately 1680 animal head rings) in respect of which
there was a prescribed consumer product safety standard and which
did not comply therewith."

5. The other two charges relate to actual sales of an animal head ring at Parramatta and of three flotation armbands at Canberra.

6. The flotation armbands and animal head rings, obviously, are for use by children while playing or swimming in water. Equally obviously, they are not life saving equipment but could give a false sense of security both to children and to older persons in charge or control of children. They are made of plastic and required to be inflated. They are brightly coloured but flimsy in construction. They are childrens' flotation toys or swimming aids. Pursuant to powers conferred by s.65E of the Act, the Minister had signed and had published in the Government Gazette notices declaring mandatory safety standards in respect of childrens' flotation toys and swimming aids. At all material times the safety standard consisted of a requirement that the goods and their packaging carry a specified warning of at least six millimetres in height, in contrast with its background and be indelible, namely:

"WARNING
NOT A LIFESAVING DEVICE
USE ONLY UNDER ADULT
SUPERVISION"

7. In the present cases, the goods did not contain the warning prescribed. Each inflatable product was folded inside a sealed clear plastic bag in which was also a card depicting a coloured poster of the product and its description. The card carried the words:

"STURDY VINYL CONSTRUCTION. MADE IN TAIWAN.
CAUTION. NOT TO BE USED AS A LIFE PRESERVER."

8. The words were in lettering only about 2mm high. There was no warning on the products themselves.

9. The facts are not in dispute and can be stated in short form from a statement handed to the Court by counsel for the prosector:

"The facts do not appear to be in issue, but relate to the sale in
trade or commerce of flotation aids and toys. The products were
sold by Venture in various stores. They had been purchased from
Action Trend Pty Ltd, which in turn had imported them from Taiwan.
The articles and the packaging were not marked in accordance with
the product safety standard. The articles were withdrawn from
sale, and recall advertisements were placed. It is not suggested
that there was fraud or dishonesty. There was full co-operation
with the Officers of the Bureau of Consumer Affairs. However
there was a lack of system for ensuring compliance with product
safety standards."

10. The deficiencies in the warning signs on the goods and packaging were drawn to the attention of the defendant late in January 1990. Immediately the defendant took steps to rectify the matter. The goods were withdrawn from sale and warning notices were published.

11. The defendant had purchased the goods from Action Trend Pty Ltd. The goods were not checked by the defendant to ensure compliance with the safety requirements. The defendant assumed the importer would have checked to ensure the goods complied with the relevant standards. The procedures then applied by the defendant did not require trained staff to inspect the goods to ensure they met the relevant standards but expected suppliers to check them to ensure compliance. It is clear that the defendant, at that stage, had no system for ensuring compliance with product safety standards.

12. In mitigation of penalty, the defendant filed affidavits sworn by Neil Hugh Armistead, the Divisional Controller (Buying) of the defendant and Nicholas John Rimmer, a Toy and Sporting Goods Buyer for the defendant. Mr Rimmer was in Taiwan with representatives of Action Trend when the goods were ordered by that company. The facts in the affidavit are accepted. In summary, the defendant is a large retailer of goods throughout Australia dealing mainly in the sale of apparel with some soft homewares, housewares, children's toys and sporting goods. The goods in question were retailed through the toy departments of some 75 Venture stores. Until about June 1988 the defendant directly imported merchandise from overseas manufacturers and suppliers. During that time officers of the defendant checked that the goods imported complied with Australian standards. For various reasons, new procedures were introduced in 1988 whereby the defendant switched away from the importation of products towards purchasing from domestic sales agents. By doing this the defendant avoided the necessity to use its warehouse facility since the distribution of goods was made directly from the selling agents to the various Venture stores. As part of this change, the defendant commenced purchasing products from Action Trend Pty Ltd being a company in which a former Divisional Controller (Buying) of Venture was a senior officer. When purchasing goods from Action Trend, as well as other selling agents, the defendant relied on the seller, as was the practice in the trade, to ensure the goods satisfied Australian standards. This, however, does not release the defendant from the responsibility to satisfy itself of compliance. In late 1988 the defendant imported direct from suppliers in Taiwan, inflatable toys which satisfied the Australian safety standards. Later in that year it adopted the practice which led to the breach for which it is being prosecuted.

13. In February 1989 Mr Rimmer was in Taiwan with his Buying Controller and representatives from Action Trend. Mr Rimmer relied upon Action Trend to ensure the goods satisfied the safety standards. He did not check them himself. He did not ask to inspect the goods. He was not aware of the safety requirements. Because the goods were forwarded directly to individual stores in Australia, they were not checked in Australia. Since then the defendant has set up procedures to prevent occurrences of this kind happening again. In all cases, a sample of the product must be sighted by a buyer. In addition store managers are advised regularly of existing regulations and amendments to them. The defendant has not been convicted of any similar offence in relation to selling goods which do not satisfy safety requirements.

14. It appears that some 3984 flotation armbands were ordered of which some 1000 were sold. The remainder have been destroyed by the defendant. It appears that some 3984 animal head rings were ordered of which some 1680 were sold. The remainder have been destroyed by the defendant. There have been no complaints made by any purchaser. There is no suggestion that anyone has suffered any injury from the use of the toys. No one returned any of the goods after warnings had been published by the defendant. The purchasers of the goods, the subject of the charges in V No G 102 and V No G 105 of 1991, were officers of the department investigating the offences committed by the defendant. Further, the defendant has suffered a substantial loss from these enterprises even though some of that loss has been recouped from Action Trend Pty Ltd.

15. The principles to be applied in determining the amount of penalty to be imposed are well known and have been discussed in many authorities. It is not relevant to refer to them here. I do not find it helpful to refer to the amount of penalty imposed in other cases. No two cases are identical and in my opinion it is not helpful to refer to the penalty imposed by a Court on the particular facts of one case. In the present case, the substantial offence is that contained in matter V No 103 of 1991 - the general offence. The other two charges, in reality, merge into that general offence. In all the circumstances one penalty should be imposed in that matter, a conviction without penalty should be recorded in the other two and the defendant should pay the prosecutor's cost in each of these matters.

16. In the course of submissions reference was made to S.16A of the Crimes Act 1914. That section was inserted into the Crimes Act by s.6 of the Crimes Legislation Amendment Act (No 2) 1989 being, strangely Act No 4 of 1990, and came into operation on 17 July 1990. Section 16A applies with respect to a federal offence and by definition contained in s.16, each of the offences to which the defendant has pleaded guilty, is a federal offence. Sub-sections (1) and (2) of s.16A are set out:

(1) In determining the sentence to be passed, or the order to be
made, in respect of any person for a federal offence, a court must
impose a sentence or make an order that is of a severity
appropriate in all the circumstances of the offence.
(2) In addition to any other matters, the court must take into
account such of the following matters as are relevant and known to
the court:
"(a) the nature and circumstances of the offence;
(b) other offences (if any) that are required or permitted to be
taken into account;
(c) if the offence forms part of a course of conduct consisting
of a series of criminal acts of the same or a similar
character - that course of conduct;
(d) the personal circumstances of any victim of the offence;
(e) any injury, loss or damage resulting from the offence;
(f) the degree to which the person has shown contrition for the
offence;
(i) by taking action to make reparation for any injury,
loss or damage resulting from the offence; or
(ii) in any other manner;
(g) if the person has pleaded guilty to the charge in respect of
the offence - that fact;
(h) the degree to which the person has co-operated with law
enforcement agencies in the investigation of the offence or
of other offences;
(j) the deterrent effect that any sentence or order under
consideration may have on the person;
(k) the need to ensure that the person is adequately punished
for the offence;
(m) the character, antecedents, age, means and physical or
mental condition of the person;
(n) the prospect of rehabilitation of the person;
(p) the probable effect that any sentence or order under
consideration would have on any of the person's family or
dependants."

17. There is nothing really novel about these provisions. They have been described as a check list of matters to be taken into account.

18. Although para (2)(j) refers to the deterrent effect the order may have on the person, the section makes no reference to general deterrence on other persons, but it has been held that general deterrence should be taken into account, in appropriate cases, in determining the order to be made; see Director of Public Prosecutions (Commth.) v Said Khodor El Kartani (1990) 21 NSWLR 370 per Kirby P, Campbell and Newman JJ at 377-8. In the present case each counsel submitted that general deterrence was a matter to be taken into account in determining the order to be made.

19. In submissions in mitigation, counsel for the defendant made 11 points which can be stated shortly, namely: 1. the breach was not deliberate and involved no fraud or dishonesty, 2. the offences related to labelling and not to any inherent danger in the goods themselves, 3. no complaint from the public, the original warning came from Action Trend following which action was taken by the defendant; 4. remedial action taken immediately; 5. public notices giving warning to purchasers; 6. an unprofitable exercise; 7. co-operative attitude with officers investigating the offence; 8. introduction of systems to prevent similar offences in the future; 9. a plea of guilty; 10. no previous relevant conviction; and 11. a good corporate citizen, a responsible employer of a large number of employees, a good reputation as a retailer but facing financial difficulties at this time.

20. At the same time it must be remembered that the maximum penalty is $100,000 having been increased from $50,000 in 1986. But it is noted that the range of offences for which a penalty can be imposed is wide and the seriousness of the nature of offences can vary enormously. In this case, the width of the offence is wide, but no damage or injury has been suffered and the offence thus comes within the less serious range. The goods themselves do not have the appearance of being life saving equipment. But further, the general deterrent effect is of importance to ensure that corporations do comply with safety requirements.

21. The Court takes all these factors into account. The defendant is a large retailer that should have ensured it took all reasonable steps that the goods it sold to the public complied with the safety requirements. It did not do so. It cannot rely upon its importer. The offence occurred because an inadequate system of checking goods existed within the Venture store structure to ensure compliance. No danger or suffering resulted. The defendant is contrite and has taken steps to prevent similar offences happening in the future. In all the circumstances a penalty of $7000.00 should be imposed in matter V No. G 103 of 1991.

22. With respect to each information, the defendant is convicted and is ordered to pay the costs of the prosector. In matters V No G. 102 and V No G. 104 no penalty is imposed. In matter V No G. 103 of 1991 the defendant is ordered to pay $7000.00.