NSW Food Authority v Fernbrew Pty Limited trading as D'Aquino Bond Wholesalers

Authorised Officer Ian Beer v D'Aquino & Ors [2006] NSWSC 821 CASES CITED : Kirkby v A. & M.I. Hanson Pty Limited (unreported, Hungerford J, 13 September 1994) Workcover Authority of New South Wales v Warrah Ridge Pastoral Co. Pty Limited (unreported, Bauer J, 23 September 1994) Page v Best & Less (Australia) Pty Limited (unreported, Peterson J, 3 November 1994)

PARTIES : New South Wales Food Authority (Authorised Officer Ian Beer) (Plaintiff) Fernbrew Pty Limited t/as D'Aquino Bond Wholesalers (Defendant)

COUNSEL : B.D Hodgkinson SC/M. Shume (Plaintiff) I. Temby QC/J. Atkin (Defendant)

SOLICITORS : Moray & Agnew (Plaintiff) Cheney & Wilson (Defendant)

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

14217/04 NEW SOUTH WALES FOOD AUTHORITY (AUTHORISED OFFICER IAN BEER) v FERNBREW PTY LIMITED t/as D'AQUINO BOND WHOLESALERS

14219/04 NEW SOUTH WALES FOOD AUTHORITY (AUTHORISED OFFICER IAN BEER) v FERNBREW PTY LIMITED t/as D'AQUINO BOND WHOLESALERS

JUDGMENT 1 HIS HONOUR: The defendant, Fernbrew Pty Limited, has pleaded guilty to two offences under the Food Act 2003. These proceedings have been brought by the prosecutor, Ian Beer as an authorised officer duly appointed pursuant to ss 114 and 115 of the statute. 2 The offences charged, and to which the defendant has pleaded guilty, constitute breaches of ss 18(3) and 21(2) of the Food Act. The maximum penalties provided for are set out in the relevant sections, the terms of which I now record: 3 Section 18 provides: "(1) A person must not, in the course of carrying on a food business, engage in conduct that is misleading or deceptive or is likely to mislead or deceive in relation to the advertising, packaging or labelling of food intended for sale or the sale of food. (2) A person must not, for the purpose of effecting or promoting the sale of any food in the course of carrying on a food business, cause the food to be advertised, packaged or labelled in a way that falsely describes the food. Note. Examples of food that is falsely described are contained in section 22. (3) A person must not, in the course of carrying on a food business, sell food that is packaged or labelled in a way that falsely describes the food. Note. Examples of food that is falsely described are contained in section 22. (4) Nothing in subsection (2) or (3) limits the generality of subsection (1). Maximum penalty: 500 penalty units in the case of an individual and 2,500 penalty units in the case of a corporation." 4 Section 21 provides: "(1) A person must comply with any requirement imposed on the person by a provision of the Food Standards Code in relation to the conduct of a food business or to food intended for sale or food for sale. (2) A person must not sell any food that does not comply with a requirement of the Food Standards Code that relates to the food. (3) A person must not sell or advertise for sale any food that is packaged or labelled in a manner that contravenes a provision of the Food Standards Code. (4) A person must not sell or advertise for sale any food in a manner that contravenes a provision of the Food Standards Code. (5) This section does not require compliance with a provision of the Food Standards Code in relation to the conduct of a food business that is primary food production unless a food safety scheme provides that the provision applies to the food business or to a class of food businesses that includes the food business concerned. Maximum penalty: 500 penalty units in the case of an individual and 2,500 penalty units in the case of a corporation." 5 The defendant was, at relevant times, the proprietor of a liquor wholesale business, trading as "D'Aquino Bond Wholesalers". It supplied liquor products to a retail outlet located at 129 Bathurst Road, Orange where there was also located a warehouse from which the defendant operated. 6 A statement of agreed facts was tendered by consent and I refer to it in recording the circumstances of the commission of the offences the subject of the summonses: "6. On 6 July 2004, the Prosecutor and Officer Biffin attended the liquor outlet for the purpose of carrying out an investigation as a result of a complaint received. Senior Constable Myers of Orange Police Station was also present.

Upon entering the liquor outlet Officer Thomson observed numerous bottles displayed for sale which contained various types of alcoholic drinks.

The premises were inspected and a warrant was executed.

Mr R. D'Aquino showed the Prosecutor and Officer Biffin his office where the bond and excise records were stored. The Prosecutor and Officer Biffin inspected the premises including the areas near the office, the label storage rooms, storage racking area and bottling line area and took photographs.

The Prosecutor and Officer Biffin then inspected the warehouse area operated by the defendant. The warehouse area is located on the ground floor of the building.

The Prosecutor and Officer Biffin examined stocks of palletised bottled spirits and other alcoholic beverages. The Prosecutor took a number of photographs during this inspection.

During this inspection the Prosecutor and Officer Biffin found cartons of Old McTavish Scotch Whisky ('the Whisky') stored on a pallet in the warehouse. The labels stated 'Old McTavish Scotch Whisky' in black print.

The Prosecutor selected 3 bottles of the Whisky for a sample from a box in the warehouse area. The Prosecutor tendered a $20.00 note for the sale of the sample to Mr R. D'Aquino. Mr R D'Aquino would not accept the money and said, 'We'll deal with it later' . Later the Prosecutor paid Mr R. D'Aquino for the Whisky sample ('Whisky sample').

24 cartons (each containing 12 bottles) plus 6 further bottles of the Whisky were placed under seizure by Officer Biffin. The sample referred to above had been taken from this batch of the whisky.

On 7 July 2004, the Prosecutor submitted the sample of Whisky to the ICPMR Division of Analytical Laboratories for analysis. At a later date the Prosecutor received a Certificate of Analysis for Sample 3062. Sample 3062 was found to contain only 38.6% ethanol." 7 The liquor purchased by the Prosecutor as Scotch Whisky did not measure up to the alcohol strength by volume required for Scotch Whisky. The agreed facts conveniently record what was required: "16. The alcohol in alcoholic drinks is ethyl alcohol ('ethanol'). It is produced by the fermentation of sugar by yeast and is obtained by distillation.

17. Standard 2.7.5 entitled 'Spirits' ('the Standard') of the Food Standards Code ('FSC') protects geographic indications which represent a given quality, reputation or other characteristic of a spirit which is essentially attributable to its geographic origin. This protection implements Article 23 of the World Trade Organisation Agreement on Trade and Related Aspects of Intellectual Property Rights.

(2) A spirit lawfully exported under a geographical indication, but bottled other than in the territory, locality or region indicated by the geographic indication must not be sold under that geographical indication - (a) unless the concentration of alcohol by volume in the spirit is at a level permitted under the laws for that geographical indication of the territory, locality or region indicated by that geographical indication;

19. For spirits described as 'Scotch Whisky' the applicable laws are those of Scotland. Pursuant to s 3 of the Scotch Whisky Order 1990 which is a statutory instrument made pursuant to the Scotch Whisky Act , 1988 (Scotland) 'Scotch Whisky" must have a minimum of 40 per cent by volume alcoholic strength by volume.

20. On 17 November 2004 the Officers collected the 24½ cartons of the Whisky that had previously been placed under seizure by Officer Biffin on 6 July 2004. 21. The whisky was not scotch whisky as labelled." 8 The definition of "food" for the purposes of the Food Act is very broad, including: "any substance or thing of a kind used, or represented as being for use, for human consumption (whether it is live, raw, prepared or partly prepared)…": s 5(1)(a) of the Act. 9 "Food business" is also given a broad definition by s 6 of the Food Act which provides: "In this Act, food business means a business, enterprise or activity that involves: (a) the handling of food intended for sale, or (b) the sale of food, regardless of whether the business, enterprise or activity concerned is of a commercial, charitable or community nature or whether it involves the handling or sale of food on one occasion only." 10 The liquor the subject of the transaction inviting consideration of s 18(3) was within the statutory definition of food and the defendant's business was a food business as defined by s 6. The sale offended s 18(3) because the whisky was labelled falsely in that it was labelled as "Old McTavish Scotch Whisky", and the content was not Scotch Whisky. 11 Turning to the offence against s 21(2), the whisky sold to the inspector did not comply with a requirement imposed under the Food Standards Code, namely that mentioned above, being Standard 2.7.5 to be considered in conjunction with cl 4(2)(a) as set out above. The whisky sold did not have a minimum alcohol strength of forty percent. The analysis conducted produced this report, according to the certificate in evidence: "Ethanol at 20C (ml/100mL): 38.6". In short then, what was sold to the inspector did not meet the requirements as to alcohol content of Scotch Whisky. 12 In short then, the defendant offended by selling liquor falsely labelled as Scotch Whisky and by selling liquor as Scotch Whisky which did not meet the minimum requirements for such a product. 13 Mr Temby of Queen's Counsel submitted on behalf of the defendant that the defendant has recognised the serious nature of its obligations under the Food Act by its conduct since the seizure of the whisky. As at 4 July 2004 the defendant was using a method for measuring the alcohol content of its whisky which method was rudimentary. At that time a hydrometer was employed. However, since then more sophisticated measures have been adopted. The defendant leased a gas chromatograph. The costs associated with this amounted to $44,000 (Exhibit 1). Then, in January 2006, the defendant acquired two alcolyzers, one for use in conjunction with its spirits activities and the other for use in conjunction with its vineyard. The total cost of that measure was $55,000. So it is, Mr Temby submitted, that the defendant has spent approximately $100,000 in obtaining equipment by reference to which more accurate measurement of alcohol content of its liquor can be ascertained. 14 The defendant was incorporated on 20 November 1991. It has no prior convictions either under the Food Act 2003 or the earlier Food Act of 1989. Mr Temby informed the Court, without challenge, that the directors of the defendant have no convictions either. 15 Mr Temby submitted, consistently with well settled principle, that it was appropriate for me to make allowance for the guilty pleas when determining what penalties should be imposed. These summonses were filed on 21 December 2004 and on 13 October 2006 these matters were set down for trial for 21 May 2007, with an estimate of five days. That estimate included both these summonses and four other summonses which I was asked on 24 May 2007 to dismiss, with no order as to costs. Mr Temby did not contend that the defendant pleaded guilty at the earliest opportunity but a willingness to so plead was apparently conveyed to the prosecutor some time after proceedings before Bell J were determined last year: see Authorised Officer Ian Beer v D'Aquino & Ors [2006] NSWSC 821. In the proceedings before Bell J there was a challenge to the court's jurisdiction. That challenge was unsuccessful and it was approximately two months after that decision was given that the hearing dates for these summonses were allocated on the basis that the matters were to be defended. 16 It cannot be said that the defendant pleaded guilty at the earliest opportunity but it is appropriate that the Court should make due allowance for the utilitarian benefit of the pleas advanced. Instead of an estimated five days of hearing, the hearing was reduced to approximately 1½ hours, and the need for prosecution witnesses to be called was eliminated. 17 Mr Temby submitted that it would be appropriate to reduce the penalties otherwise to be imposed by twenty percent. I consider that the appropriate discount, having regard to the history of these matters, is that there be a discount of fifteen percent. 18 In the statement of facts recorded, I referred to the seizure of 24½ cartons of the whisky. That liquor has not yet been destroyed but Mr Hodgkinson of Senior Counsel informed the Court that destruction was the intended fate for the liquor seized. Mr Temby informed the Court that the defendant was not opposed to the destruction of the liquor. That, it seems to me, is reflective of a responsible attitude by the defendant. 19 Each of the offences to which the defendant has pleaded guilty is in a category for which the statute has set a maximum penalty in the case of a corporation of $275,000. Mr Hodgkinson does not contend that either of these offences should attract the maximum penalty or anything like it. 20 I was informed that this is the first such prosecution in this Court. Proceedings are ordinarily taken at Local Court level and that court can impose a penalty up to $10,000 only. 21 I was informed by counsel that they jointly considered that the appropriate aggregate penalty for the two offences was in the range of $10,000 to $30,000. In suggesting that range, counsel made it clear that it was acknowledged that it was for me to determine what penalty was appropriate, and the range was being advanced only for the purposes of consideration. 22 Section 127 of the Food Act makes provision for a number of presumptions. One of these is that: "Food that is part of a batch, lot or consignment of food of the same class or description is representative of all of the food in that batch, lot or consignment": s 127(c). A further presumption is contained in s 127(d): "Each part of a sample of food provided for the purpose of analysis under this Act is of uniform composition with every part of that sample." 23 The presumption here is that the sample tested was representative of the cartons of whisky seized. 24 Customers purchasing bottled whisky ordinarily have no opportunity of testing the product before purchase and are dependent upon the description of the product according to the label. A person purchasing a bottle of the defendant's whisky described as Scotch Whisky would be entitled to think that he was truly purchasing Scotch Whisky, as, indeed, the figure portrayed on the label in its Scottish attire also suggested. 25 The defendant had a responsibility to comply with the relevant provisions of the Food Act and that responsibility has to be treated very seriously. So, too, do the defendant's breaches of the Food Act which bring it before the Court. I must be mindful of the need to deter the defendant and others who might be tempted to offend from committing offences like these in the future. 26 Whilst the offences committed are discrete offences, I have regard to the principle of totality in determining the penalties to be imposed. 27 Having reflected upon the matters raised by Mr Temby by way of mitigation and upon the submissions of counsel generally, I have concluded that it is appropriate to impose a penalty of $15,000 for each of the offences the subject of the defendant's pleas. 28 The defendant seeks a period of two months within which to pay the fines. Pursuant to s 7(1) of the Fines Act 1996, the fines imposed are payable within twenty-eight days after imposition. The defendant may, nevertheless, make application to a registrar for further time to pay the fines, and Mr Hodgkinson has no objection to the defendant being allowed two months altogether within which to pay. Doubtless, the prosecutor's attitude will be taken into account by the registrar in the event of an application being made pursuant to s 10 of the Fines Act. 29 The defendant must pay the prosecutor's costs of these proceedings. Those costs have been agreed upon in the sum of $80,000 inclusive of GST, and the order for costs which I will shortly make will be for the payment of that amount. 30 The prosecutor has made application pursuant to s 122 of the Fines Act. The section provides, relevantly: "(1) This section applies where: (a) the Act imposing or authorising the imposition of a fine or other penalty does not make any provisions for its application when recovered, and (b) the prosecutor is not a police officer. (2) The court before which proceedings are taken to recover any such fine or other penalty may direct that such portion of it (not exceeding one-half) is to be paid to the prosecutor." 31 Neither s 122(1)(a) nor s 122(1)(b) presents a bar to the present application. Hence, I am asked to make an order under s 122(2) directing that one-half of the fines imposed be paid to the prosecutor. 32 Mr Hodgkinson has read the affidavit of Christine Tumney sworn 24 May 2007 in support of this application. Ms Tumney is the Manager of Enforcement for the New South Wales Food Authority. She, in that affidavit, has outlined the activities of the Authority: "5. The role of the Authority includes: 5.1 Conducting food safety programs; 5.2 Licensing and recording notification of food businesses in New South Wales; 5.3 Auditing and inspecting food operations and where necessary penalising non-compliance; and 5.4 Informing and educating consumers on food labelling, food handling and hygiene. 6. The Authority is part industry and part government funded, however the enforcement unit is entirely funded by government. 7. Any Moiety of fines received by the Authority, which relate to prosecutions are placed into the Authority's revenue and then distributed between enforcement activities and education programs." 33 Section 117A of the Food Act provides for the establishment of a special Food Authority fund: "(1) There is to be established in the Special Deposits Account a Food Authority Fund (the Fund ) into which is to be paid: (a) all money advanced to the Food Authority by the Treasurer or appropriated by Parliament for the purposes of the Food Authority, and (b) all money directed or authorised to be paid into the Fund by or under this or any other Act, and (c) the proceeds of the investment of money in the Fund, and (d) all money received by the Food Authority under this Act from any other source. (2) The Fund is to be applied for the purpose of enabling the Food Authority to exercise its functions under this Act. (3) All expenditure incurred by the Food Authority under this Act is to be paid from the Fund. (4) A separate account is to be maintained in the Fund in relation to each levy under section 117C imposed in respect of a particular industry or sector of industry." 34 Mr Hodgkinson referred to several decisions in the Industrial Court of New South Wales in each of which a moiety to the Workcover Authority was ordered following prosecutions under the Occupational Health and Safety Act: see Kirkby v A. & M.I. Hanson Pty Limited (Hungerford J, 13 September 1994); Workcover Authority of New South Wales v Warrah Ridge Pastoral Co. Pty Limited (Bauer J, 23 September 1994); and Page v Best & Less (Australia) Pty Limited (Peterson J, 3 November 1994). 35 In Warrah Ridge, Bauer J conducted a review of the relevant legislation leading up to the Fines and Penalties Act 1901 which was in force at the time of the decision in Warrah Ridge. Like s 122, s 5 of the earlier statute permitted of the making of a direction that portion of the fine not exceeding a moiety should be paid to the informer or prosecutor. Bauer J concluded that a moiety of fines levied under the Occupational Health and Safety Act "would in the usual case be accorded to the prosecutor unless good reason be otherwise shown, either as to cause or amount." 36 Similar considerations apply to prosecutions under the Food Act, and it seems to me, having regard to the provisions of s 122 of the Fines Act, and having regard to the content of Ms Tumney's affidavit, that it is appropriate that I accede to Mr Hodgkinson's application.

Formal orders 37 1. For the breach of s 18(3) of the Food Act 2003, the defendant is convicted and I impose a penalty of $15,000 .

For the breach of s 21(2) of the Food Act 2003, the defendant is convicted and I impose a further penalty of $15,000.

Those penalties are payable within twenty-eight days from today subject to any application the defendant may be advised to make pursuant to s 10 of the Fines Act , and I note that the prosecutor would have no objection to an extension of time provided the penalties are paid within two months from today.

I order that the defendant pay the prosecutor's costs of these proceedings, which are agreed upon in the sum of $80,000 inclusive of GST.

I note that the prosecutor would have no objection to time being extended for payment of these costs provided they are paid within two months from today.

In the event of default of payment within that period, the prosecutor is to be entitled to interest on any part of the agreed amount of $80,000 outstanding pursuant to s 100 of the Uniform Civil Procedure Act until the agreed amount is paid in full by the defendant.

Pursuant to s 122(2) of the Fines Act , I direct that one-half of the fines imposed are to be paid to the prosecutor. **********

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