Barton, E.A. v. Croner Trading Pty Ltd [1985] FCA 35

Federal Court of Australia|1985-02-19

Trade Practices -. consumer protection - sale of soft toys bearing false representations as to their history, standard and sponsorship ~ penalty. under s.79 Trade Practices Act,

1974 - relevant considerations in assessing penalty.

Trade Practices Act, 1974 ss.53 (a) and- (c);.79. _

EDWINA ALICE BARTON v. CRONER TRADING PTY. LIMITED Nos. G199 to G216 of 1983 oe

TRADE PRACTICES ACT 1974 Sections 79 and 53(a) and 53(c)

"Al ~The defendant '4s 'ordered. 'Eo: pay a. 1 fine "of. 8, 750. 00:

contraventions of the provisions of 5.53 (a) and (c)

respectively of the frade Practices Act, 1974 being the charges referred to in proceedings Nos. G199 to G216 of 1983 inclusive.

The defendant is ordered to pay a fine of $1,750.00 -

in respect of the contravention referred to in No. G199 of

"The defendant 'is ordered. to pay a 'fine of gl, 750. 00 :

in respect' of 'the! contravention referred to, "in No. G200 ca

in respect of the contravention, referred to: _in No: G201 of

5.- - The defendant is ordered to pay a fine of $1,750.00.

in respect- of the contravention reférred to in No. G202 of

The defendant is ordered to pay a fine of $1,750.00 in respect of the contravention referred to in No. G 203 of

in respect | Of "the: contravention referred to" in No. 6207 or

The defendant is ordered to pay a fine of $1,750.00

in respect of the contravention referred to in No. G204 of

_The defendant is ordered to pay a fine of $1,750.00 in respect of the contravention referred to in No. G205 of

The defendant is ordered to pay a | fine of. $1, 750. 00

in respect of the contravention referred to in No: 6206 or

ll. 'The defendant is ordered to pay a fine of $1,750.00 - in respect of the contravention referred to in No. G208 of _

The defendant is ordered to pay a fine of $1,750.00

in respect of the contravention referred to in No. G209 of

The defendant is ordered to pay a fine of $1,750.00

in respect of the contravention referred to in No. G210 of

ATS , The defendant is ordered, to pay. & fine of: £: $1750. 00.

14, The defendant is ordered to pay a fine of $1,750.00 in respect of the contravention referred to in No. G211 of

'The defendant is ordered to pay a fine of $1,750.00 in respect of the contravention referred to in No. G212 of

The defendant is ordered te pay a fine of $1, 750. 00 in respect of the contravention referred to" 'in No. '213 of

18...' The defendant is ordered to pay a fine of $1,750.00. in respect of the contravention referred to in No. G215 of

The defendant is ordered to pay a fine of $1,750.00 in respect of the contravention referred to in No. G216 of

Each of the said fines is to be paid to the District Registrar of this Court within 21 days of this day.

prosecutrix with respect to each of the said proceedings.

IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY

TRADE PRACTICES ACT .1974 Sections 79 and 53(a) and 53(c)

DATED: 19 February 1985. re rae a REASONS FOR JUDGMENT (ON PENALTY)

The prosecutrix, an officer of the Trade Practices Commission, has charged the defendant with 18 ~

contraventions of the Trade Practices Act, 1974 ("the Act").

The contraventions, which are punishable by s.79 of the Act, are said to offend s.53(a) and (c) of the Act. Those

"53. A corporation shall not, in trade or commerce, in connexion with the supply or possible supply of goods or services or in connexion with the promotion by any means

(a) falsely represent that goods are of a particular standard, quality, grade, composition, style or model or have had a particular history or particular previous use;

(c). represent. that goods or, services _.-

have. | sponsorship, . approval,. . ' performance. - ic characteristics,-
accessories, uses _ or benefits they...

do not have;" ee A Die et

The contraventions of the Act are said 'to. arise 'eu ae

of 'false representations 'made by 'the 'defendant in connection:

with the. supply or possible supply of certain toy koalas and."

toy kangaroos: "the prosecutrix alleges that a. number of -- false representations were made by the defendant as to the

history, sponsorship and standard of the toy products.

At an early stage of the proceedings, the defendant indicated that it wished to submit that the informations, or at any rate, some of them, were statute-barred by reason of the provisions of s.21 of the Crimes Act, 1914. Other defences raising points of law were foreshadowed. In due course, the parties) agreed, in the main, upon the facts

necessary to refer toa Full Court by a special case a

number of questions of law, including the defendant's limitation defence. Since the parties were unable to agree on one aspect | of the facts, a trial of that issue was held and I made certain findings in that connection in reasons

By special case dated 22 June 1984, three questions of law were stated for the opinion of the Full Court. oOn 19 July 1984, for the reasons | At then gave, the . Full Court (Bowen; C.J., Beaumont and 'Wilcox, ga. ) answered each of 'the questions adversely to. the defendant. "There being no other defences on the issue of the ability of the defendant to : be convicted, the Full Court remitted the matter: for "the: - entry: of formal: "convictions" "and: for 'consideration | OE penalties. Since the reasons for judgment delivered by the Full Court describe fully the background to the prosecution. and the details of the charges laid, I will not repeat that

The history of the matter commences in March 1982 when a representative of Woolworths Limited approached Mr. Gil Lockhart, the defendant's national sales manager and informed him that Woolworths was doing an "Australian made promotion" and was looking for toys to be included in the sale. In response to the question whether the defendant held any stock that was "Australian made", Mr. Lockhart

indicated that the defendant had a "Matilda" kangaroo and a

koala. Woolworths then ordered a total of 5,412 kangaroos and 5,220 koalas at a wholesale price of $3.32 each. With sales tax at the rate of 17 1/2% added, the. total value of the order was $41,475.43. In April or May 1982, the defendant sent samples of the toys to Woolworths. The kangaroo and the koala so forwarded were photographed by an advertising agent retained by Woolworths for the purpose of an advertising campaign for a sale fixed to commence on 12

July 1982 in 110 Woolworths stores throughout Australia. .

Towards the middle of 1982, "brochures were placed ~

in- the letterboxes- _of residents in the areas surrounding

Woolworths' stores. The brochures: advertised woolworths' we "Aussie Made gale" against - the background of "the "ational _ flag. © In the brochure, Woolworths, _Which described itself.

as "an all Australian company run by Australians 'for __

Australians", offered a - 'number. 'Of "articles. for sale. Included in the brochure was a photograph of a number of toys. . Under 'the general heading "Woolworths Aussie Made Sale", the "Matilda kangaroo or koala" were included in the photograph and were advertised at $5.99 each. The defendant's products were referred to in these terms:

""CRONER TOYS TOYS CHILDREN LOVE DOWN UNDER FUN FRIENDS ..."

In the first instance, the defendant proposed to fulfill the order from Woolworths by importing partly

fabricated toys, being skin forms, from Samho Trading Co. of Seoul, Korea ("Samho"). A purchase order on Samho bearing date 6 April 1982 ordering the skins was prepared. As ordered, the skins were said to be "semi-stuffed" so that,

if this order had been met, it would have been necessary to carry out a factory operation in Australia to complete the stuffing and stitching of the goods hbefore delivery to Woolworths. The purchase order on Samho specified shipment in full "before 2 'May. 1982. Since shipment was by sea, it'

would | take about' one month before the semi-stuffed skins

; would | arrive in Australia and a further - month would: be

The unfortunate course of events which then ensued was sought to be explained by the defendant's managing director, Mr. John V. Hunter, in his affidavit sworn 19

"17. However, the purchase order was not sent off at a proper time in order to meet

Woolworths' requirements. As the purchase order was dated 6 April 1982, it was sent

off so. late it was unlikely that Woolworths' date could be met. At a later stage it emerged that Samho could not meet the shipping date 2 May 1982 as specified.

tt is not suggested that Woolworths» were aware "of.

the defendant' s actions until the Trade. Practices Commission ;

manager, endeavoured to explain the deception which occurred

After several telexes passed between Croner Trading and Samho in the course of endeavours to accelerate delivery by Samho;- an order was given by telex to Samho altering the requirement to fully stuffed koalas and kangaroos. The fully -stuffed- kangaroos were imported by sea. Toy koalas stock which had not been obtained in connection. with this particular order but had been imported from Samho in Korea was used to meet Woolworths order. In some cases labels

partly removed from the toys; I have not been able to establish whether this was done in all cases. With respect to the kangaroos, these . were: filled with

kangaroos when . imported. did. not. bear:.".. - labels referring to their being. made. in

"5, In the course of April 1982 I realized that it was likely that there would be a failure to meet the delivery times which would be specified in Woolworths' expected order, and I took steps to alter the orders which had been given to Samho to orders for fully stuffed koalas" and kangaroos. I made arrangements for these to be equipped with labels after arrival

in Melbourne. Before making these arrangements I discussed what could be done to meet Woolworths' requirements with

the warehouse manager, Mr Ron Ariderson, but I did not discuss the difficulty or what I proposed to have done with Mr Hunter the Managing Director, or with any director of the Company, or any other

I acknowledge that it was wrong to take the course I did andI wish to express to this Honourable Court my regret for having done so. I did so because I feared that if Woolworths' delivery dates . were, not met, Woolworths might impose-. penalties on. Croner Trading such as. ~ withholding future orders, or insisting on'

payment of claims based .on losses fron. disrupting its marketing programme. or" Woolworths might refuse to take delivery. | . altogether leaving Croner Trading with, the . difficulty: of disposing of the goods." be

Mr. James R. Anderson, the - defendant' Ss. 5 warehouse manager, in his affidavit sworn 24 October 1984, 'offered the

"I can recollect placing labels on some koalas and kangaroos in approximately April or May of 1982. I only have a vague recollection of this and cannot say who instructed me to do this work. I cannot remember the number involved. My recollection is that my instructions did not come from Mr. Hunter."

In consequence of the defendant's actions, the kangaroo- and the koala were, for the reasons given in answering the special | case, projected by the defendant into _ the course of trade 'accompanied by anumber of false representations as' to their history, standard and sponsorship. Although the goods were made in the Republic of Korea and imported, fully made, _ into this country and although there was not: in force at any material time any "Inflammability Act" or any State or | Commonwealth ~ legislation or regulation dealing with. the flammability of

the - toys, to each koala supplied: there "was affixed the

following: : oe . cms, - Petes (a) - A swing tag reading "made in Australia"; - (b) A swing tag reading "Advance Australia" and bearing

a representation of the flag of the Commonwealth, being an

(b) A swing tag reading. "Advance Australia" and bearing

a representation of the fiag of the Commonwealth, being an"

Australian Safety Regulations, including | the 'Inflammability Act"; and ,

(oy A 'swing ©. tag. reading ""this~" item exceeds. all -

In a series of interviews with officers of the Trade Practices Commission conducted before the institution of these proceedings, representatives of the defendant gave a false and misleading impression of the events being investigated. When interviewed on 26 October 1982, Mr. James C. Lockhart, the manager of the defendant's division known as "Playmate Toys (N.S.W.)", alleged that in the case of the koala, the defendant purchased the skin only from

"The skin was made in Korea and imported by. Croner... We. filled the bear here. . The." . eyes etc. were on the skin' when' we .. imported it. The filling is . of:crushed.--...

mnuts-. and flock... We-. use. macadamia nuts" -.. now, we used to. buy apricot. shells; the -. flock we buy from whoever has it. We also ~ buy-° material - trimmings and' wool. _ trimmings." ot : weet

Mr. Lockhart proffered a similar explanation in the case of the kangaroo. He was also asked about the removal of the labels stating "Made in Korea" and their substitution with the Playmate "Made in Australia" swing tag. He said that Mr. Hunter gave him an instruction, orally, to cut off

the sewn-in labels and to attach the Playmate "made in

A further interview with representatives of the defendant was conducted by officers of the Commission on 16

March 1983. Messrs. Hunter and Bontorno were present. On

that occasion, Mr. Hunter was referred to the swing tag "Proudly Made in Australia by Playmate Toys (N.S.W.)". In

response toa request to explain this claim, Mr. Hunter

"The incorrect label was used, the stock label was used, it was rush job, very rushed. It was done without proper care."

"It is all new material, but certainly non - Australian made material. The stuffing is - Australian. It's a stock label. We think.- there is ambiguity in Trade Practices regarding made in Australia. labelled (sic)." Se .. : ee

"Mr. Hunter was also questioned about the "Australian Safety Regulations" and "The Inflammability Act". He said:

"There is a regulation regarding flash flame tests, pull tests on the eye. There is Australian Standard which our manufacturers are aware of as well as everyone in the industry."

When asked about the "Inflammability Act, Mr. Hunter said:

When asked whether it was a Federal or State Act,

"I'm not 'qualified to answer that, there is a regulation concerning flammability."

Mr. Hunter was also questioned about the testing of

the toys to the various Regulations and the Act referred to

"Jim Lockhart is qualified to answer that. I believe yes. I'm sure these would pass . the Standards. ". a De ee SOR:

. 'The removal of the labels was ~ further explored by

"62. Seo, eo I said: 'I understand that these sewn-in labels. of the KOALA were removed by MR JIM LOCKHART in Sydney on the instructions of MR JOHN HUNTER, MANAGING DIRECTOR of CRONER TRADING PrY LTD. Is that correct?'

He said: That's a long time ago. The fact of the matter is, we didn't want two labels appearing on the products.

I. said: 'Why was the. sewn-in label, indicating "MADE IN KOREA" removed?'

He said: I'll use the answer to 62 and transfer it down here, I think that is the answer, I certainly am not aware of it. I don't live in Sydney.

I said: 'Is it the common practice of CRONER TRADING PTY LID to remove the woven-fabric, sewn~in labels of imported unfilled toys when they are to be filled in Australia?'

(Mr. Hunter was shown Mr. Lockhart's record of interview.)

indicates the words "he said".: This of course is the answer MR LOCKHART gave to

_ would appreciate your' advice that what MR LOCKHART said in this record of interview is true and correct. as far as CRONER. - TRADING PTY LTD is concerned. Is there

'anything in there. with which you ~ disagree?' -- . a He said: Some' things come to mind, for instance, I didn't instruct him to remove the. tags, nothing to do with - the shipping." 7 Doe

A second interview with Mr. Lockhart was conducted by the Commission on 17 March 1983. The purpose of this interview was to explore the inconsistencies between the accounts of Mr. Lockhart and Mr. Hunter of certain relevant

events, in particular, the relabelling of the koalas and

. kangaroos. On that point, the record of interview proceeds

"ASA: (Mr. Lockhart) There was a discussion between myself and Mr Hunter, and I thought that more than

50% was done here value-wise and I made the decision to do that.

When we spoke previously you said the decision was not yours. The two of you discussed it on the phone, you discussed the Australian content?

Probably I would have said 'would it be. alright todo that' and he as the boss. said, 'yes go ahead.'

You're' quite certain you did discuss it was him? - ote ; oS

Towards the end of the interview, the interviewer explained that the inconsistency which remained was in respect of the identification of the person who made the decision to relabel the koalas and kangaroos. Mr. Lockhart was given a copy of the record of the interview of 26 October 1982 and was asked to indicate any amendments to

that record which he thought necessary. Mr. Lockhart did not alter his account of the relabelling.

which hac been thrown up by the varicus versicns of what hac

nappened, a second interview with Mr. Hunter was conducted

by the Commission on 14 June 1983. Specifically. an officer of the Commission sought at this interview clarification by Mr. Hunter of his answers to questions numbers 62 and 63 of

the interview of 16 March 1983 (see above) as follows:

'Mr Hunter. when the question numbered 62 was put to you we were discussing the circumstances surrounding the removal of the sewn-in labels which stated that the toys were of Korean origin. So now I will ask you that question again, and ask you

to clarify the answer you gave at the interview on 16 March 1983, and I quote:

"T understand that these sewn-in labels of the Koala were removed by Mr Jim Lockhart in Sydney on the instructions of Mr John Hunter, Managing Director of Croner Trading Pty. Ltd. Is that correct?" end quote.' (I gave Mr. Hunter a photocopy of a typed version.)

'IT have no recollection of instructing Mr. Lockhart to remove the labels.'

'Thanks, Mr. Hunter. Now I will repeat the question numbered (63) sixty three at the interview mentioned earlier.

"Why was the sewn-in label, indicating 'Made in Korea' removed?".'

'Well, I don't know why. dust would say it would be unattractive. Don't know why. Believe it could make the toy unattractive. That's good enough.'"

The oral evidence of Messrs. Hunter, Bontorno and Anderson given on the hearing sought to confirm the account of the relabelling decision contained in their affidavits, that is to say, that the immediate decision to remove the labels "Made in Korea" and replace them with the Playmate "made in Australia" swing. tag was taken by Mr. Anderson. For his part, Mr. Hunter maintained. in his oral evidence that at the time of the interview of himself and . Mr. :

Bontorno by. the Commission, viz. 16 March 1983, che was. not

" aware that the order to Samho | ain 1 Korea had been changed. fron Lo

"semi- stuffed" toys to finished 'toys. Consequently, in his

cross-examination, he attempted to justify his condoning of the use of the "standard" Playmate "made in Australia" label by asserting that. he believed "that the toys would be

to be to the effect that they were made in Australia?---if we were stuffing and finishing and sewing them, we would have used the standard label, the Croner Trading Sydney label.

"What was your understanding of the labels with which these toys were to be equipped?---The wording, you mean?

Yes?---I think that we would have had to have put made in Australia, finish the

That was in respect of toys which you then knew were going to be wholly manufactured in Korea?---The final process of manufacture was still done in Australia. We also imported a medallion that we put on, . .

'So, you are talking' about fitting a medallion on to- _ the. finished - » boyy are. _ Yours- - Yese.- z

In your opinion that would not qualify. these toys for the description, made in Australia, would it?---Not as it turned out, no, oo

_ Even before anything was raised by the Trade Practices Commission, you could not have held the opinion these toys were made in Australia, could you?---I inquired and I could not find out from anyone what qualified an item being made in Australia, what part of the process had to be done in Australia. -

But you really could' not have thought, by putting a medal ona toy imported from Korea, that would transform it into a

product made in Australia, could you?---Not really."

While Mr. Bontorno acknowledged in his affidavit that he made arrangements for the toys to be equipped with

the "standard" Playmate swing tag on their arrival, in his

oral evidence he denied that he also made the arrangements to have the "Made in Korea" labels removed. He even denied

any knowledge at the relevant time of that being done.

Mr. Anderson, the warehouse manager, was prepared, in his oral evidence, to accept responsibility for the immediate decision to remove the "Made in Korea" labels. He said that the instruction to replace the "Made in Korea" labels had accompanied the toys as received from the

defendant. He claimed that he had thought nothing of this

"The sewn in label that you were instructed to replace on these toys had words to the effect, 'Made in Korea' on it; is-that - right?---Yes, I would say that would be correct.

The Playmate label which you were to put. on the toys had words to the effect of, 'Made in Australia' on it?---It could have had, yes. ;

Did it not strike you as unusual that you were being asked to take off a label saying 'Made in Korea' and replace it with one saying, 'Made in Australia'?---I never thought anything of it.

Was this something that had happened before?---No. It was just on the order, so we did according to the order.

Was the receipt of this order from Croner Trading the first information you had

about what was to be done?---Yes, as far as I can remember, yes."

It is obvious that the defendant's lack of candour in its dealings with the Trade Practices Commission reflects poorly upon it. "Further, whatever actual knowledge Mr. Hunter had of the contraventions at the time they occurred, it is clear that those concerned to make the management decisions in question on behalf of the defendant must have known that their conduct was calculated to mislead and deceive the Australian public. Although the prosecutrix called evidence from only one member of the public to say that she was in fact misled, it is reasonable to assume that her reaction was fairly typical: one would naturally expect Australian consumers to be influenced to purchase 4 product by representations that the product was made in Australia and that it satisfied local safety tests for flammability.

Two further matters should be mentioned, both adverse to the defendant. Although the judgment of the Full Court was given on 19 July 1984, it was not until 30 September 1984, after further prompting by the Trade Practices Commission, that the defendant ceased the supply of its products in the offending form. It is hardly necessary to say that this step, belated as it was, should

have been taken much earlier. Also, the defendant has asked

the Court to take into account on penalty a number of other contraventions described by an agreed statement of facts as

"3. Amongst other toys distributed by Croner are the following soft plush toys:

'Willie Koala, Weight Lifter' 'Big Red The Boxing Kangaroo' Puggle'

The toys Willie Koala, Willie Koala Weight Lifter, Big Red The Boxing Kangaroo, Puggle, and Kangaroo with Joey bear a label which states:

The 'Footy Mascot' toy bears a label stating either:

'This item meets or exceeds all Australian Safety Regulations including Flammability Act' -. - . .

'This item exceeds all Australian Safety Regulations including the Inflammability Act'. |

On 23 July 1984 the prosecutor herein observed on display ina Coles store a number of Willie Koala toys bearing the label referred to in paragraph 4. The prosecutor purchased one such toy.

On 20 August 1984 the prosecutor herein observed on display in a Coles store a number of Big Red the Boxing Kangaroo toys, bearing the label referred to in Paragraph 4 above. The prosecutor purchased one such toy."

that the Court take into account the circumstances, first, that notwithstanding its hope to make a profit, it suffered

a small loss on the deal with Woolworths; and, secondly,

that it is a company of reasonably limited resources. I propose to take both matters into consideration in

It is not possible to regard the contraventions charged otherwise than as serious breaches of the law committed under circumstances which cast no credit upon the defendant. Further, the defendant's attempt to cover up what had happened and its failure to act appropriately when the Trade Practices Commission intervened are additional

I propose to impose a total fine of $31,500.00 as appropriate in the circumstances, having regard to the whole of the defendant's conduct. I propose to apportion the total fine between the 18 charges by fixing a fine of

$1,750.00 in respect of each contravention. I make the following orders:

The defendant is convicted of 'committing

contraventions of the provisions of s.53 (a) and (c)

respectively of the Trade Practices Act, 1974 being the

charges referred to in proceedings Nos. G199 to G216 of 1983

The defendant is ordered to pay a fine of $1,750.00 in respect of the contravention referred to in No. G199 of

The defendant is ordered to pay a fine of $1,750.00

in respect of the contravention referred to in No. G200 of

4, The defendant is ordered to pay a fine of $1,750.00 in respect of the contravention referred to in No. G20] of

The defendant is ordered to pay a fine of $1,750.00

in respect of the contravention referred to in No. G202 of

The defendant is ordered to pay a fine of $1,750.00

in respect of the contravention referred to in No. G 203 of

At a glance

Court

Decision date

Catchwords

Source

Catchwords

Judgment (222 paragraphs)

Cited By (2)