Trade Practices Act 1974 (Cth) ss 65C(1), 65E and 79(1)(a)

Solicitor for the Prosecution: Director of Public Prosecutions

For the Defendant Company: Mr S Hunter

Director and Secretary of

Nordic Lust Pty Ltd

1. A conviction be recorded against the defendant.

2. Further consideration of this matter be adjourned to a date to be

fixed.

3. Either party to be at liberty to apply on seven day's notice.

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

BRANSON J On 19 January 1996 Ms Peta Seddon, then being authorised in writing by the Australian Competition and Consumer Commission to do so, instituted a prosecution before this Court for an offence against the Trade Practices Act 1974 (Cth) ("the Act") by laying the following information before a Registrar of the Court:-

"NORDIC LUST PTY LTD A.C.N. No. 059 413 295 (herein referred to as the

defendant), the registered office being situate at C/- Unite Western,

Unit 4, 121 Grange Road, Allenby Gardens in the State of South

Australia;

On about the 18th day of July 1995 at Adelaide in the said State, the

defendant, being a Corporation within the meaning of the Trade

Practices Act 1974, did contravene Section 65C(1) of the said Act in

that it did in trade or commerce supply goods that were of a kind

likely to be used by a consumer and in respect of which there was a

prescribed consumer product safety standard but which did not comply

with that standard; contrary to Section 79(1)(a) of the Trade

Practices Act 1974.

Particulars:

The defendant sold an exercise bike to which the "Consumer Product

Safety Standard - Exercise Cycles" applied, namely a "York 2500 Home

Cycle". The said exercise bike failed to comply with the required

safety standard, in that

(a) the application of the prescribed probe in accordance with the

said safety standard in and around the guard protecting the flywheel

suffered shear likely to cause permanent injury if the probe were a

child's finger; and

(b) the application of the prescribed probe in accordance with the

said safety standard in and around the flywheel loading mechanism

suffered drawing-in likely to cause permanent injury if the probe were

a child's finger."

2. The defendant pleaded not guilty to the charge contained in the above information.

3. Section 79(1)(a) of the Act provides as follows:-

"A person who ... contravenes ... a provision of Part V other than

section 52, 65Q or 65R or subsection 65F(9) is guilty of an offence

punishable on conviction -

(f) . . .

(g) in the case of a person being a body corporate - by a fine not

exceeding $200,000".

4. Section 65C(1) of the Act, which is included in Part V of the Act, provides, so far as is here relevant, as follows:-

"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;

(b) . . .; or

(c) . . .".

5. Consumer product safety standards are prescribed pursuant to s65E of the Act. So far as is here relevant s65E provides as follows:-

"(1) The Minister may, by notice in writing published in the Gazette,

declare that, in respect of goods of a kind specified in the notice, a

particular standard, or a particular part of a standard, prepared or

approved by the Standards Association of Australia ..., or such a

standard or part of a standard with additions or variations specified

in the notice, is a consumer product safety standard for the purposes

of section 65C ...

(2) Where a notice is so published, the standard, or the part of the

standard, referred to in the notice, or the standard or part of a

standard so referred to with additions or variations specified in the

notice, as the case may be, shall be deemed to be a prescribed

consumer product safety standard for the purposes of section 65C ...".

6. A notice in writing was published in the Commonwealth of Australia Gazette No.GN41, of Wednesday 19 October 1994 in the following terms:-

"COMMONWEALTH OF AUSTRALIA

Trade Practices Act 1974

Consumer Protection Notice No. 3 of 1994

DECLARATION OF CONSUMER PRODUCT SAFETY STANDARD

EXERCISE CYCLES

I, JEANNETTE McHUGH, Minister for Consumer Affairs, pursuant to

section 65E(1) of the Trade Practices Act 1974, DECLARE that, in

respect of the goods of a kind specified in Division 1 of the Schedule

to this notice, the standard approved by the Standards Association of

Australia specified in Division 2 of the Schedule as varied by the

deletions specified in Division 3 of the Schedule, is a consumer

product safety standard for the purposes of section 65C of the Act

effective from the date specified in Division 4 of the Schedule.

SCHEDULE

Division 1: Particulars of Goods

Exercise cycles, being stationary devices designed to be used for

personal physical exercise by means of an activity simulating bicycle

riding.

Division 2: The Standard

Australian Standard 4092-1993, Exercise cycles - Safety requirements,

approved by the Standards Association of Australia on 26 August 1993

and published on 11 October 1993.

Division 3: Variation

The Standard specified in Division 2 is varied by deleting:

(i) Clauses 1.1, 1.2 and 1.3.1; and

(ii) Clause 4.1.

Division 4: Date of Effect

This consumer product safety standard takes effect from 1 June 1995.

Dated this fifth day of October 1994.

(signed)

JEANNETTE McHUGH

Minister for Consumer Affairs."

7. I raised with Mr Kourakis, prosecuting counsel, the basis of the authority of the Minister for Consumer Affairs, as opposed to the Attorney-General, to make the above declaration. Mr Kourakis referred first to s19A of the Acts Interpretation Act 1901 (Cth) ("the Acts Interpretation Act"). So far as is here relevant, s19A of the Acts Interpretation Act provides as follows:-

"(1) Where a provision of an Act refers to a Minister, using the

expression "the Minister" without specifying which Minister is

referred to, then, unless the contrary intention appears, the

expression means:

(a) (not here relevant);

(b) if paragraph (a) does not apply and, for the time being, 2 or more

Ministers administer the provision - any one of those Ministers; or

(c) (not here relevant).

. . . . . .

(4) For avoidance of doubt, it is declared that where:

(a) a provision of an Act is administered by 2 or more Ministers; and

(b) by virtue of this section, the provision requires or permits

anything to be done by or in relation to any one of those Ministers;

the provision shall not be taken to require or permit it to be done in

any particular case by or in relation to more than one of those

Ministers."

8. He then tendered, and I admitted into evidence, the following documents:-

(a) a notice of appointment dated 24 March 1993 appointing The

Hon Jeannette McHugh, M.P., "to hold the Office of MINISTER FOR

CONSUMER AFFAIRS and to administer THE ATTORNEY-GENERAL'S

and

(b) an administrative arrangements order dated 1 June 1994 published

in a special Gazette of 6 June 1994, the operative portion of which is

in the following terms:-

"I, WILLIAM GEORGE HAYDEN, Governor-General of the Commonwealth of

Australia, acting with the advice of the Federal Executive Council,

revoke all administrative arrangements previously ordered and order

that:

1. The matters dealt with by a Department of State include:

(a) the matters referred to in the Part of the Schedule relating to

that Department; and

(b) matters arising under the legislation administered by a Minister

of State administering the Department.

2. The legislation administered by a Minister of State administering a

Department is:

(a) subject to order 3, the legislation referred to in the Part of the

Schedule relating to that Department; and

(b) legislation passed before or after the date of this Order, that

relates to a matter dealt with by the Department, not being

legislation referred to in another Part of the Schedule.

3. (not here relevant)."

9. In the Part of the Schedule to the administrative arrangements order of 1 June 1994 relating to the Attorney-General's Department is a sub-heading "Legislation administered by the Minister". Under that sub-heading appears a long list of legislation which includes the following:-

"Trade Practices Act 1974, section 4B; parts IVA, V and VA; sections

79, 80A, 87A, 170 and the following sections so far as they relate to

parts IVA, V and VA: 4C, 5, 6, 28, 29, 75B, 79A, 80, 82, 83, 84, 85,

86, 86A, 86B, 87, 95, 163, 163A and 172."

10. Having regard to s19A of the Acts Interpretation Act and the above documents, I am satisfied that The Hon Jeannette McHugh was authorised as Minister for Consumer Affairs to administer the Attorney-General's Department, and in that capacity to administer Part V of the Trade Practices Act. She was therefore, in my view, as at 5 October 1994, to be regarded as "(t)he Minister" within the meaning of s65E of the Act.

11. To obtain a conviction in this matter, it is incumbent on the prosecution to prove beyond reasonable doubt each of the following elements of the charge:-

(1) that the defendant is a corporation;

(2) that the defendant supplied the exercise bike referred to in the

information "in trade or commerce";

(3) that the exercise bike was of a kind likely to be used by a

consumer;

(4) that there is a prescribed consumer product safety standard in

respect of the exercise bike; and

(5) that the exercise bike did not comply with that standard.

12. Section 85 of the Act provides a number of defences. It is not clear that any of them was sought to be invoked in this case. I refer to them in some detail below.

13. The prosecutor tendered, and I admitted into evidence, a certificate of registration of the company Nordic Lust Pty Ltd, Australian Company Number 059 413 295, given under the seal of the Australian Securities Commission on 7 May 1996 showing that the date of commencement of registration of the company was 17 March 1993. Such certificate amounts to proof of the first element of the charge as identified above (Corporations Law s1274).

14. The prosecutor further tendered, and I admitted into evidence, a certificate signed by the Commissioner for Corporate Affairs (S.A.) of the registration of the business name "City Pro-Sport and Fitness" which certifies that such business name was registered under the Business Names Act 1963 (S.A.) on 22 January 1992 (Business Names Act 1966 (S.A.) s32(1)). The certificate is, in my view, to be understood as implying that the registration remained current from that date to the date of the certificate, namely 7 May 1996. A "business names extract" from the Office of Consumer and Business Affairs, Attorney-General's Department (S.A.) received in evidence, shows that from 1 July 1993 the company Nordic Lust Pty Ltd carried on business under the business name "City Pro-Sport and Fitness". This was not contested by the defendant.

15. Mark William Norman Feather ("Mr Feather"), a project officer with the Australian Competition and Consumer Commission, gave evidence that in July 1995 he was an officer of the Trade Practices Commission based in Adelaide. He stated that at that time he was asked to take part in an investigation which involved his attending at a shop called "City Pro-Sport and Fitness" at 131 Currie Street, Adelaide. His evidence was that he went to the City Pro-Sport and Fitness shop and spoke to an assistant, who it is conceded was Rebecca Elizabeth Christine O'Sullivan ("Miss O'Sullivan"), about the purchase of an exercise bike. After inspecting certain exercise bikes shown to him on the floor of the shop, Mr Feather gave to Miss O'Sullivan the description of a bike which he told her that he had seen in the shop a few days before. In fact Mr Feather had not seen such a bike in the shop previously: the description that he gave to Miss O'Sullivan was a description given to him by one of his colleagues from the Trade Practices Commission who had earlier visited the City Pro-Sport and Fitness shop and seen a model of exercise bike which he suspected did not comply with the published consumer product safety standard for exercise cycles.

16. After Mr Feather gave her the description of the bike, Miss O'Sullivan took him to the rear of the store and showed him three bikes, two large and one small, which did not have price tags on them. Mr Feather expressed interest in one of the larger bikes and, after some discussion as to its price, Mr Feather offered to purchase the bike. He gave Miss O'Sullivan the price which she asked for the bike in cash and received a receipt for the bike which was received into evidence along with the exercise bike. I accept Mr Feather's evidence as to his purchase of the exercise bike from the City Pro-Sport and Fitness shop.

17. Miss O'Sullivan gave evidence on behalf of the defendant by whom she continues to be employed as a sales assistant at the City Pro-Sport and Fitness shop. She confirmed much of the evidence of Mr Feather although there was some discrepancy between them on matters of detail. None of the discrepancies is, in my view, material to the issues which I am required to determine.

18. Miss O'Sullivan gave evidence that she said to Mr Feather words to the effect:-

"We're waiting on information from the Trade Practices Act (sic) as to

whether we can or can't sell the bike. ... I think it's to do with

safety, see, like at the back there you can pop your fingers in."

19. She stated that she queried Mr Feather as to whether he had any small children and received his assurance that he was by himself and had no small children. Mr Feather did not give evidence of the above exchange. However, it was not clearly put to Miss O'Sullivan that an exchange such as that of which she gave evidence did not occur, and I accept that an exchange of that sort did occur. In answer to a question put to her on behalf of the defendant, Miss O'Sullivan said of her actions in selling the bike to Mr Feather:-

"... I guess looking back at it I wasn't aware of the legal

consequences of it. I just saw it as, he wanted it. I'd explained

the safety aspect, I'd explained that we were working on this

information and because I wasn't sure, you know, we're still waiting

on this information ... So I just said okay, sort of thing, and he

took it."

20. In cross-examination it was put to Miss O'Sullivan that she did not see herself as disobeying any instruction of her employer in selling the bike as her manager, Mr Hunter, had not told her much more than:-

"I don't know whether we can sell it or not; we're waiting for

information."

"That was about as much as Steve (Mr Hunter) knew."

22. I understood Miss O'Sullivan by giving that answer to have acknowledged the accuracy of the proposition put to her by the cross-examiner.

23. On the basis of the above evidence I am satisfied beyond reasonable doubt that the defendant supplied the exercise bike to Mr Feather in trade and commerce. I am further satisfied, indeed it was not contested, that the exercise bike is, and was at the relevant time, of a kind likely to be used by a consumer.

24. As mentioned earlier, a declaration of a consumer product safety standard ("the standard") in respect of exercise cycles was published in the Gazette of 19 October 1994. Its terms are set out above. For the reasons already set out, I am satisfied that such standard is a "prescribed consumer product safety standard" within the meaning of s65C(1) of the Act. I am further satisfied that the standard has application in respect of the exercise bike sold to Mr Feather.

25. The relevant section of the standard is in the following terms:-

"SECTION 2 GUARDING OF MOVING PARTS.

2.1 GENERAL The guarding arrangements on exercise cycles shall be

designed primarily to protect young children from injury when in the

vicinity of a cycle which is either in use by another person, or

stored in a location accessible to young children.

2.2 FLYWHEEL, DRIVE TRAIN AND LOADING MECHANISM

Guards shall be provided to protect dangerous parts at all locations

which constitute shear, crushing or drawing-in hazards, giving

particular attention to the following:

(a) The flywheel.

(b) The drive train.

(c) The flywheel loading mechanism."

26. The standard goes on to identify points of potential hazards and to specify a method of testing for compliance with the standard.

27. An engineer, Matthew Stephen English ("Mr English"), operations manager for Civil Test at the University of Adelaide, gave evidence of having tested the exercise bike sold to Mr Feather for compliance with the standard, utilising the methods of testing set out in the standard. His report of his tests and the results thereof was admitted in evidence. Having regard to the contents of that report and the oral evidence of Mr English I am satisfied beyond reasonable doubt that the exercise cycle sold to Mr Feather does not meet the requirements of clause 2.2 of the standard in that:-

(a) the guard surrounding the flywheel, on the side opposite the

drive-train mechanism, does not provide adequate protection against

shear hazard; and

(b) the flywheel loading mechanism constitutes a drawing-in hazard.

28. Ronald Lawrence Somers ("Dr Somers"), an injury epidemiologist employed by the South Australian Health Commission, gave evidence, which I accept without hesitation. The general effect of his evidence was that exercise bikes which do not comply with the standard constitute a significant danger to young children when used or stored where they may have access to them.

29. I am satisfied beyond reasonable doubt as to each of the elements of the charge in this matter.

30. Section 85 of the Act, so far as is here relevant, provides as follows:-

"(1) Subject to sub-section (2), in a prosecution under this part in

relation to a contravention of a provision of Part V, it is a defence

if the defendant establishes -

(a) that the contravention in respect of which the proceeding was

instituted was due to reasonable mistake;

(b) that the contravention in respect of which the proceeding was

instituted was due to reasonable reliance on information supplied by

another person; or

(c) that -

(i) the contravention in respect of which the proceeding was

instituted was due to the act or default of another person, to an

accident or to some other cause beyond the defendant's control; and

(ii) the defendant took reasonable precautions and exercised due

diligence to avoid the contravention.

(1A) In paragraph (1)(b) and (c) "another person" does not include a

person who was -

(a) a servant or agent of the defendant; or

(b) in the case of a defendant being a body corporate, a director,

servant or agent of the defendant,

at the time when the contravention occurred."

31. It is not clear that the defendant in this case sought to call in aid any of the above defences. Nonetheless, I shall consider their respective availability on the evidence before me.

32. Mr Hunter, the managing director of the defendant, gave evidence of his uncertainty at the relevant time as to whether or not exercise bikes of the type sold to Mr Feather could lawfully be sold. I am not satisfied on the balance of probabilities that, at the time of the sale of the exercise cycle, Mr Hunter, whose state of mind is relevantly that of the defendant, held a reasonable, albeit mistaken view, that the sale of the bike was lawful. In my view Mr Hunter was alert to the possibility that any sale of the cycle would be unlawful. Mr Hunter accepted by his evidence that an officer of the Trade Practices Commission had advised him that bikes such as that sold to Mr Feather may not satisfy the standard and further suggested that such bikes should be removed from the showroom floor. Miss O'Sullivan's evidence referred to above as to the nature of the instruction given to her by Mr Hunter as to the sale of such bikes confirms the absence of any firm belief by Mr Hunter in the lawfulness of any sales of such bikes.

33. Although Mr Hunter gave evidence of certain conversations between him and other persons, including an employee of the supplier of the bike in question, such evidence was insufficient, in my view, to establish on the balance of probabilities, reasonable reliance by the defendant on information supplied by another. Moreover, as mentioned above, Mr Hunter had been placed on notice by an officer of the Trade Practices Commission of the requirement for exercise bikes to comply with the standard. I refer again to Miss O'Sullivan's evidence as to her reasons for selling the bike to Mr Feather.

34. The third ground of defence set out in s85(1) of the Act plainly has no application in the present case.

35. Being satisfied as to each of the elements of the charge against the defendant beyond reasonable doubt, and being further satisfied that none of the statutory defences is available to the defendant, I am satisfied that a conviction should be recorded.

36. The matter will be adjourned to a date to be fixed when submissions on penalty and on any consequential matters will be heard. Either party is at liberty to apply on seven day's notice.