Federal Court of Australia|1977-09-21|Before: John J

Guthrie v Doyle Dane and Bernbach Pty Ltd [1977] FCA 13; (1977) 30 FLR 116 (21 September 1977)

GUTHRIE v. DOYLE DANE AND BERNBACH PTY. LTD. (1977) 30 FLR 116

Trade Practices - Misleading advertising as to price reductions - Mens rea - Defence - Reliance on information supplied - Reasonable precaution and due diligence to avoid contravention - Trade Practices Act 1974, ss. 53 (e), 85 - Crimes Act 1914-1973, s. 5. (e) of the provides: "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 of the supply or use of goods or services: . . . (e) make false or misleading statements concerning the existence of, or amounts of, price reductions".

The defendant company was charged pursuant to s. 53 (e) of the Act that it did in contravention of that section in trade or commerce in connexion with the promotion by advertising of the supply of goods, such goods being Ford Falcon motor cars, make a misleading statement concerning the existence of price reductions.

Section 85 (1) of the Act provides, inter alia, that in relation to a contravention of a provision of Pt V it is a defence if the defendant establishes that the contravention in respect of which the proceeding was instituted was due to reliance on information supplied by another person and that reasonable precautions were taken and due diligence exercised to avoid the contravention. The defendant in reliance upon the defence in s. 85 (1) served the requisite notice pursuant to s. 85 (2) identifying the person from whom the information was received as Metro Ford Pty. Ltd. Metro Ford Pty. Ltd. had appointed the defendant company as their advertising agents.

The alleged misleading statement was made in an advertisement published and screened over television station TVQ Channel O at Brisbane. The relevant words in the advertisement were: "Dr. Jim's lovely tax cuts are guaranteed to only April 30, so if you haven't been out to Metro Ford by then you could be a dead set April Fool. Metro Ford offer immediate delivery of automatic Falcon 500 sedans that save you $335. If you don't take delivery by April 30 you're up for an extra 335 bucks in tax".

It was submitted that the defendant company was entitled to rely upon information given to it by its client and on the fact that the client was a responsible and well-managed organization and further that the advertisement was subject to approval by the client.

Held: (1) The words in the advertisement related to existing price reductions and not to future price increases.

(2) The statement was misleading and was not an accurate statement of the situation that existed. The situation that existed, based on press statements of 28th January and 31st January, was that after 30th April sales tax would be gradually re-imposed.

(3) In order to succeed in establishing the defence under s. 85 (1) (b) of the Act the onus, albeit a civil onus, is on the defendant company. The practice in the advertising industry was not relevant unless it amounted to a precaution or indicated the exercise of diligence within the meaning of the subsection. On the facts the defendant company did not take the precautions or exercise the diligence necessary to establish the requisite defence.

Sherratt v. Geralds The American Jewellers Ltd. (1970), 114 Sol Jo 147, and Naish v. Gore, (1971) 3 A11 ER 737, approved.

(4) There was no evidence of specific attention being given to avoiding contravention of s. 53 (e) of the Act. The procedure of referring the advertisement back to the client was for the purpose of satisfying the client that his instruction had in fact been carried out.

(5) It was clear that where an offence is one of strict liability the application of s. 5 of the Crimes Act 1914-1973 does not have the effect of introducing an element of mens rea or an additional ingredient.

Kurucz v. Mayne, (1966) SASR 82; Lenzi v. Miller, (1965) SASR 1; Reg. v. Glennan (1970), 91 WN (NSW) 609, referred to.

D. K. Derrington Q.C. and J. O. Jenks, for the informant.

A. Fitzgerald Q.C. and R. E. Cooper, for the defendant.

Cur. adv. vult.

Solicitor for the informant: A. R. Neaves (Commonwealth Crown Solicitor).

Solicitors for the respondent: Henderson & Lahey.

(Reported by Ada Moshinsky, Barrister-at-Law.)

The following judgment was delivered.

ST. JOHN J. The defendant company is charged pursuant to s. 53 (e) of the

Trade Practices Act 1974 (the Act) in that, it did, in contravention of that section, in trade or commerce, in connection with the promotion by advertising of the supply of goods, to wit Ford Falcon motor cars, make a misleading statement concerning the existence of price reductions. It is alleged that the misleading statements were made in an advertisement published and screened over television station TVQ Channel O at Brisbane in the state of Queensland. Consent to bring the proceedings was given by the Attorney-General on 8th April, 1976. (at p117)

2. By consent the transcript of certain of the evidence in proceedings B. No. 224 of 1976 between the same informant and Metro Ford Pty. Ltd. has been tendered. Certain additional documentary evidence has been tendered and the defendant company has called one further witness. (at p117)

3. The advertisement in question was made for Metro Ford Pty. Ltd. and was recorded on video tape. A person, known as a presenter, spoke the words set out hereafter in a didactic and declamatory manner and specially emphasized the word "only" where it appears before "April 30". At various stages throughout the advertisement certain printed words and sums of money in figures appeared on the screen and various motor cars were pictured on the screen, the Ford Falcon 500 appearing after the words "April Fool" where first used. For the purposes of the prosecution the relevant words in the advertisement were: "Dr. Jim's lovely tax cuts are guaranteed till only April 30, so if you haven't been out to Metro Ford by then you could be a deadset April Fool. Metro Ford offer immediate delivery of automatic Falcon 500 sedans that save you $335. If you don't take delivery by April 30 you're up for an extra 335 bucks in tax". The reference to "Dr. Jim's lovely tax cuts" was a reference to a reduction in the percentage of sales tax payable on motor vehicles announced by the Commonwealth Treasurer, Dr. J. F. Cairns, by way of a press release on thirty-first January, 1975. Those reductions included a reduction from twenty-seven and one-half per cent to fifteen per cent on private passenger vehicles for a period from 29th January to 30th April, 1975, and after that date a monthly increase of two and one-half per cent bringing the sales tax back to a percentage of twenty-seven and one-half per cent on 1st September, 1975. Subsequently legislation was enacted in order to effect such reductions in sales tax. (at p118)

4. The relationship between the defendant company and Metro Ford Pty. Ltd. commenced in or about October 1974. On 22nd October, 1974, Metro Ford Pty. Ltd. wrote to the defendant company confirming the appointment of that company as advertising agents for Metro Ford Pty. Ltd. In the initial conversation preceding appointment Mr. Morris, the managing director of Metro Ford Pty. Ltd., used words to the effect that it would be necessary in the performance of the agency contract that he had to finally approve every advertisement before publication of it. No written contract was entered into between Metro Ford Pty. Ltd. and the defendant company. Metro Ford Pty. Ltd. were given, on each occasion that an advertisement was prepared, the opportunity of approving or disapproving its contents and in particular that company was given the opportunity of approving or disapproving the advertisement in question. However, a script of the particular advertisement was altered from that approved by Mr. Packard of Metro Ford Pty. Ltd. without his authority. Mr. Slade, who was in charge of the making of the advertisement by the defendant company, and who described himself as a retail creative director of the defendant company made alterations. The most significant change effected by Mr. Slade was to change the words "you could be up for" to "you're up for". Mr. Slade stated that this and other changes were made in order to compress the advertisement within the desired time schedule. (at p118)

5. It has been argued for the defendant company that the words in the advertisement, firstly do not relate to price reductions and secondly, are not misleading. It is submitted that the advertisement relates to future price increases and not to reductions at all. In my view this argument is without substance. The advertisement is to the effect that there is a price reduction in existence and that it will exist only until 30th April. In my view it is clearly a statement concerning the existence of price reductions within the meaning of the relevant section. "Price" is defined in s. 4 of the Act as including a charge of any description. The imposition of sales tax is, of course, a matter of law and expert evidence was tendered to the effect that sales tax was levied on the last wholesale transaction in respect to the goods in question. It is clear that sales tax is a component in the retail price of the vehicles being advertised and I am satisfied that the advertisement concerned a reduction in price. The use of the words "that save you $335" to a prospective purchaser clearly relates to price and would be so understood by that prospective purchaser. As to the sentence, "Dr. Jim's lovely tax cuts are guaranteed till only April 30", it was submitted that it is an accurate statement of the situation and that argument is based upon a press statement of the treasurer dated 28th January, 1975. It is contended that the question of sales tax after 30th April is left in a situation of doubt because of the content of this statement. In my view the statement deals with broad questions relating to unemployment and the motor industry generally and does not detract from the press statement of 31st January wherein the precise tax reductions up till 30th April and the gradual re-imposition of the full rates is set out. In any event the sentence has to be read in its context and if the prospective purchaser were left in any doubt after listening to that sentence that doubt would be dispelled by two following sentences: "Metro Ford offer immediate delivery of automatic Falcon 500 sedans that save you $335. If you don't take delivery by April 30 you're up for an extra 335 bucks in tax". Counsel for the defendant company has submitted that the application of s. 5 of the Crimes Act 1914-1973 has the effect of producing a further ingredient in the offence under s. 53 (e) of the Act, that further ingredient being knowledge in the defendant company that the statement was misleading. (at p119)

6. In Kurucz v. Mayne (1966) SASR 82 the appellant was charged and convicted of having aided and abetted, counselled and procured the commission of an offence, namely, the offence of having driven a motor vehicle whilst so much under the influence of intoxicating liquor as to be incapable of exercising effective control of the vehicle. For the appellant it was contended that it was necessary for the prosecution to prove that at the time of the commission of the offence the appellant knew that the person who drove was so much under the influence as to be incapable of exercising effective control. This contention was rejected. Walters A.J. held that a provision similar to s. 5 of the Crimes Act (namely s. 53 of the Justices Act, 1921-1960 (S.A.)) was purely declamatory of the common law and did not create any new offence, relying upon Lenzi v. Miller (1965) SASR 1 . Similar conclusions were reached by the New South Wales Court of Criminal Appeal in Reg. v. Glennan (1970) 91 WN (NSW) 609 . It appears clear that where an offence is one of strict liability the application of s. 5 of the Crimes Act does not have the effect of introducing an element of mens rea or an additional ingredient. (at p120)

7. The defendant company relies upon s. 85 of the Act. The defendant company gave the requisite notice pursuant to s. 85 (2) of the Act alleging that the defendant company reasonably relied on information supplied to it by Mr. Morris, the managing director of Metro Ford Pty. Ltd., in relation to the prices of vehicles offered for sale and the incidence of sales tax and any mis-statement as to the incidence of sales tax was due to the act or default of the said Mr. Morris in the supply of information concerning the incidence of sales tax. In order to succeed in such a defence it is necessary under s. 85 (1) (b) for the defendant company to prove that it took reasonable precautions and exercised due diligence to avoid the contravention. It is to be noted that the onus, albeit a civil onus, is on the defendant company. The only evidence specifically directed to this issue would appear to be the evidence of Mr. Dennis a director and general manager of the defendant company from December 1974 onwards. (at p120)

8. Mr. Dennis said that in his experience the practice of advertising agencies was to rely upon information given to the agency by the client and that the client was charged with responsibility of giving such information. If particular facts were to be used in an advertisement those facts would be obtained from the client. In his experience where the client was a responsible or well-managed organization reliance on information supplied by it would be made. So far as the particular company, Metro Ford Pty. Ltd., was concerned he said this: "We had put together a number of campaigns, the information had always been reliable and the management of Metro Ford in our view was quite excellent". He went on to repeat that it was common practice in the industry for the advertising agent to rely on factual information where the client was regarded as a responsible body. (at p120)

9. The first observation I wish to make is that practice in the advertising industry is not relevant unless it amounts to a precaution or indicates the exercise of diligence within the meaning of the subsection. I see nothing in Mr. Dennis' evidence which indicates that the defendant company took any precautions or exercised any diligence; in fact, if anything it indicates a lack of diligence. (at p120)

10. Similar words to those contained in s. 85 (1) (d) are contained in the English Trade Descriptions Act, s. 24. (at p120)

11. In Sherratt v. Geralds The American Jewellers Ltd. (1970) 114 Sol Jo 147 the defendants were charged with supplying a wrist watch described as waterproof. The purchaser tested the watch for water-proofness and found it lacking and the defendants contended that the watch had been bought from a reputable wholesaler with whom they had dealt for some time and with whom they had had no previous trouble; that no precautions had been taken but they had relied on the reputation and experience of the wholesalers. The Divisional Court of the Queen's Bench Division consisting of Lord Parker C.J., Ashworth and Talbot JJ. held that clearly there had been no precautions and to succeed they would have had to show that if no precautions had been taken there were none reasonable to be taken. Sherratt's case was followed in Naish v. Gore (1971) 3 All ER 737, at p741 by Lord Widgery C.J. where his Lordship said this: "The effect of that authority, as I see it, is to emphasize that the onus is on the defendant. It is for the defendant to prove that he took all reasonable precautions, and if he has taken none, that means he must prove that none could reasonably have been taken". In addition to there having been no precautions taken there is also no evidence of the exercising of any diligence. The incidence of sales tax and the treasurer's intentions in relation to it are matters of public knowledge available to those who took the trouble to inquire. No reasonable explanation could be advanced as to why in circumstances such as in the instant case the defendant company could not have made its own inquiries as to the incidence of sales tax and the duration of any sales tax cuts. There is no evidence of specific attention being given to avoiding contravention of s. 53 (e) of the Act. I have been asked to draw inferences in the defendant company's favour from certain records. These inferences do not clearly arise and therefore I gain no assistance from these documents. There being no defence established pursuant to s. 85, I convict the defendant. In doing so, I apply the criminal onus. (at p121)

12. The breach occurred within months of the Act coming into force. The defendant company was careless of its obligations rather than reckless. The advertisement related to the purchase of a substantial item, a motor car. To the submission that being misled did not mean a loss to the purchaser it can be replied that the purchaser may have been induced to buy when he might not otherwise have done or may have been induced to buy the Ford vehicle in preference to another make. I impose a penalty of $2,000 and order the defendant to pay the informant's costs of the proceedings. (at p121)

Guthrie v Doyle Dane and Bernbach Pty Ltd [1977] FCA 13;

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Judgment (29 paragraphs)

Guthrie v Doyle Dane and Bernbach Pty Ltd [1977] FCA 13; (1977) 30 FLR 116 (21 September 1977)

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Legislation Cited (8)

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