Effem Foods Ltd v Nicholls [2004] NSWCA 332 | Case summary

The claimant (the manufacturer) manufactured a chocolate-coated confectionary item sold under the name of Snickers bar (the bar). The opponent purchased one of these bars in a shop but when she attempted to eat it she bit into a concealed safety pin and was injured. She brought proceedings in the District Court against the manufacturer for breach of its obligations under ss 74D and 75AD of the Trade Practices Act 1974 to supply goods which were of merchantable quality and free from defects. The trial Judge overruled statutory defences under s 74D(2)(a)(i) and s 75AK(1)(a) that the defect occurred after the bar had left its control and did not exist when it was supplied by the manufacturer. The Judge found that the chances of a safety pin accidentally entering the product line, surviving and then passing the metal detector at the end were very remote but such a result was not impossible. He also found that the safety pin could have been deliberately inserted in the bar while it was in the retail shop. The Judge awarded the opponent damages and the manufacturer sought leave to appeal. It claimed that proof of the possibility of sabotage in the shop was enough to discharge its onus of proving the statutory defences. HELD: (1) Under the statutory defences the manufacturer had to establish on the civil onus that the defect occurred after the bar had left its control and did not exist when it was supplied by the manufacturer; (2) It had only proved that deliberate sabotage in the retailer's shop was a possibility; (3) Since any such act would be a criminal offence the presumption of innocence applied: Briginshaw v Briginshaw (1938) 60 CLR 336, 362-3 applied; (4) The manufacturer had not discharged the onus of proof. ORDERS

17 SEPTEMBER 2004 EFFEM FOODS LTD v PAMELA NICHOLLS Judgment 1 HANDLEY JA: This application for leave to appeal arises from an encounter between a Snickers bar, a safety pin and the opponent on 21 March 2002. A Snickers bar is a confectionary item which is separately wrapped. It consists of chocolate which covers a mixture of caramel, nougat and peanuts. The bar in question was the larger 60g version which had been purchased by the opponent from a newsagency in a nearby suburb a few days earlier. 2 Shortly before the evening meal on the day in question the opponent decided to eat one of these bars, and having selected this one from a kitchen cupboard she tore the wrapping across the top and down one side. She then pushed the bar partly out of what remained of the wrapping and bit off a substantial portion. As she began to chew the bar she felt a hard object at the back of her tongue which caused momentary pain that led her to spit what was in her mouth onto a nearby coffee table. She went to the bathroom, washed out her mouth, and became aware of the taste of blood. She rejoined her husband and discovered that the material she had spat out included an open safety pin with a badly bent pin. 3 Since the opponent's tongue had been penetrated she was given a tetanus injection which unfortunately produced an allergic reaction. Subsequently she was tested for the presence of the HIV and Hepatitis B and C viruses. She developed an obsessive condition which manifested itself in poor appetite and disturbed sleep. 4 The opponent brought an action in the District Court against the claimant as the manufacturer for breach of ss 74D and 75AD of the Trade Practices Act 1974. The trial Judge (Phegan DCJ) held that the plaintiff had proved a prima facie breach of s 74D(1) because the bar was not of merchantable quality, and a prima facie breach of s75AD because the defendant, in trade and commerce, had supplied defective goods manufactured by it which had injured the plaintiff. 5 The case on liability turned on statutory defences. The defence to the claim under s 74D(1) was that in sub-s (2)(a)(i), and the defence to the claim under s 75AD was that in s 75AK(1)(a). The Judge rejected both and entered judgment for the plaintiff for $54,765.89. 6 The claimant sought leave to appeal because the judgment was for less than the appealable amount under s 127(2)(c) of the District Court Act. It did not challenge the Judge's findings of primary fact or, his assessment of damages. 7 The parties were fully heard and the Court is in a position to finally dispose of the case if leave to appeal is granted. 8 Section 74D(2)(a)(i) provides: "Subsection (1) does not apply: (a) if the goods are not of merchantable quality by reason of: (i) an act or default of any person (not being the corporation or a servant or agent of the corporation); or (ii) … occurring after the goods have left the control of the corporation." 9 Section 75AK provides, in relation to the claim under s 75AD that: (1) … it is a defence if it is established that: (a) the defect in the action goods that is alleged to have caused the loss did not exist at the supply time" 10 The expression "action goods" is defined is s 75AA as meaning the goods whose supply and defect is alleged in the action and "supply time" is relevantly defined in s 75AK(2) as the time when the goods were supplied by the manufacturer. 11 The claimant had both the legal and the evidentiary burden of proof of these defences. The Judge accepted the evidence of both the plaintiff and her husband, and also the evidence of Mr Schulze, the food safety manager at the Ballarat factory where Snickers bars are manufactured. Photographs of the untouched section of this bar, still in its wrapper, the bent safety pin and the other material were taken within a few days of the accident. Markings on the wrapper visible in a photograph enabled Mr Schulze to identify the date and approximate time when the particular bar was manufactured. 12 He gave detailed evidence about the processes involved in the manufacture of Snickers bars, and the controls in place at the time to prevent the entry of foreign material into the factory, or into the ingredients during the manufacturing process, and to detect its presence before the product left the factory. 13 The Judge observed that Mr Schulze had not suggested that it was impossible for a safety pin to get into the factory or into any of the ingredients during the manufacturing process. He then found that: "the chances of a bar containing a safety pin in the condition in which it was found … surviving the … metal detector were very remote. However it cannot be said, and indeed Mr Schulze did not say it, that such an outcome was impossible". 14 Mr Schulze also addressed the chance that a Snickers bar could be tampered with after it left the factory. The wrapping could be opened and the bar removed. A safety pin could be pushed into the bar which could then be returned to the wrapping and the package resealed. This could be done without evident damage to the wrapping but the chocolate coating would be disturbed. A demonstration in Court was not attempted. 15 The Judge commented that that was as far as the defendant's evidence went. It had not shown that the wrapper or the chocolate coating of this particular bar had been disturbed. He concluded: "… the possibility of the scenario described by Mr Schulze actually happening in this particular instance is very remote and remains entirely a matter of speculation rather than any positive evidence." 16 He said later: "… there is nothing in the evidence to suggest, for example, that the defect … is more likely to have arisen post-manufacture then prior to the end of the manufacturing process. If anything, in my view, the evidence would point to quite the opposite conclusion. When one lines up the possibilities, remote as they may have been, of this object getting into the chocolate bar during the process of manufacture with the possibilities … of the object finding its way into the chocolate bar after it left the manufacturer … the possibility of it happening at a later stage was even more remote than of it happening at an earlier stage." 17 The defence under s 74D(2)(a)(i) required the defendant to prove, on the civil onus on the balance of probabilities, that the safety pin was present in the Snickers bar "by reason of an act or default" of a stranger "occurring after the goods had left the control of the corporation". The defence under s 74AK(1)(a) required it to establish that "the defect … did not exist" when the goods were delivered by the manufacturer into the supply chain. 18 Mr Hoeben SC, for the claimant, submitted that the first defence was made out if the system of manufacture was such that the possibility of the pin getting through undetected was extremely remote, and there was evidence that the bar could subsequently have been interfered with. The defence in his submission, was not restricted to proof of actual interference. A circumstantial case could also be sufficient. He submitted that proof of those matters would also establish the other defence. 19 In my judgment these submissions are not supported by the statutory text. Section 74D(2)(a)(i) relevantly requires proof that the defect arose from the act of a stranger after the goods left the control of the manufacturer. Section 75AK(1)(a) requires proof that the defect did not exist at that time. At least in this case I can see no practical difference in the scope of these defences. The first requires proof that the defect occurred after supply, the second proof that it did not exist at the time of supply. The defences are simply two sides of the same coin. 20 The Judge found that the pin was in this bar when it was opened by the plaintiff. This finding, which has not been challenged, must be treated as a certainty: Malec v J C Hutton Pty Ltd (1990) 169 CLR 638, 640, 643. The Court has to evaluate these defences in the light of the fact, treated as a certainty, that the pin was in the bar when the plaintiff attempted consumption. The parties advanced two hypotheses to explain how the pin got there. The first was accidental entry during the manufacturing process which escaped detection. The other was deliberate interference during the supply chain. 21 The Court can safely infer that these bars are supplied by the manufacturer in sealed cartons which are not normally opened until they reach the retailer. Any interference with the sealed carton before it reached the retailer would be apparent on a normal inspection. Mr Hoeben did not suggest that interference with this bar occurred between dispatch of the carton from the factory and its arrival at the retailer. 22 Items in small shops such as Snickers bars which are desirable, portable and larcenable are normally kept on shelves behind the cashier's counter out of reach of members of the public. The possibility of malevolent interference by a member of the public after the bar reached the retailer can be ignored. 23 There remains the possibility of malevolent interference by an employee of the retailer. During a quiet period, when the boss was away, an employee in charge of the cash register could have undertaken the exercise described by Mr Schulze. However there is no apparent motivation for an isolated act of this kind calculated to injure an unknown member of the public on a completely random basis. Such an act was not likely to damage the employer's business. 24 There was no evidence that this manufacturer was the target of deliberate sabotage at this time. There was no evidence of threats or blackmail or of product recalls. On the evidence the presence of the pin in this bar was the result of an isolated occurrence either in the factory or in the shop. There was also no evidence that the retailer had a disgruntled employee who might have been motivated to commit such an act. 25 The Court is faced with a choice between an isolated event in the factory due to the inadvertence or negligence of an employee and a deliberate but isolated act of sabotage by an employee in the retailer's shop. There is also a third choice namely a decision that the onus of proof on the defendant has not been discharged. See The Popi M [1985] 1 WLR 948 HL, 955-6. 26 The court in evaluating the competing hypotheses applies the ordinary presumption against criminality in civil cases. An employee of the retailer who deliberately sabotaged this Snickers bar by inserting a safety pin, open or closed, would appear to be guilty of an offence under s 41 of the Crimes Act 1900 of causing to be administered to any person a destructive or noxious thing with intent to injure that person. The act of sabotage may also be criminalised under other sections. 27 In Briginshaw v Briginshaw (1938) 60 CLR 336, 362-3 Dixon J said: "The seriousness of an allegation made, the inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding are considerations which must affect the answer to the question whether the issue has been proved to the reasonable satisfaction of the tribunal … When, in a civil proceeding, a question arises whether a crime has been committed, the standard of persuasion is … the same as upon other civil issues … But … weight is given to the presumption of innocence and exactness of proof is expected." 28 On the evidence the sabotage of this product on the premises of the retailer was no more than a bare possibility and in my judgment proof of this and nothing more was not sufficient to discharge the onus of proof on the manufacturer, bearing in mind the weight to be given to the presumption of innocence. 29 The Court was informed that there is no direct authority on the scope of these defences but we were referred to cases where passing reference was made to them. See Cavalier Marketing (Australia) Pty Ltd v Rasell (1990) 96 ALR 375, 400; Stegenga v J Corp Pty Ltd (1999) ATPR 41-695; Cheong v Wong (2001) 34 MVR 359, 369-70; and Medtel v Courtney (2003) 198 ALR 630. These references do not assist either party. 30 Mr Hoeben, while acknowledging that the liability of a manufacturer under these provisions was strict, submitted, correctly, that it was not absolute. He asked, rhetorically, what more could a manufacturer be expected to do to discharge the onus under these provisions than was done in this case. His point is valid, so far as it goes, but the manufacturer has to establish these defences on the balance of probabilities and speculation and proof of mere possibilities are not enough. This does not mean that a manufacturer's liability is absolute. There is scope for these defences where an examination of the product after the accident establishes that it has been deliberately tampered with. Examples that come to mind include the sabotage of car tyres or brake fluid lines or the presence of poison in a glass of soft drink. A manufacturer is not required to lead direct evidence to support these defences and a case based on circumstantial evidence is capable of discharging the onus. In the present case the defendant's evidence did not rise above the level of a speculative possibility. The trial Judge was correct in finding that the defences had not been established. This Court has been greatly assisted by the Judge's clear and careful judgment. The following orders should be made:

Effem Foods Ltd v Nicholls

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Judgment (15 paragraphs)

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