2. Section 62 of the Trade Practices Act is within Division 1 of Part V of that Act. That Part is headed "Consumer Protection" and that Division is headed "Unfair Practices." The relevant parts of s.62 are as follows:-

"62. (1) A corporation shall not, in trade or

commerce, supply goods that . . . are of a kind

likely to be used, by a consumer if the goods are

of a kind -

. . .

(b) in respect of which there is in force a

notice under this section declaring the

goods to be unsafe goods.

. . .

(2D) Where it appears to the Minister that

goods of a particular kind will or may cause injury

to persons using the goods or to any other persons,

he may, by place under his hand published in the

Gazette, declare the goods to be unsafe goods.

(2E) A notice under sub-section (2D) has

effect until the expiration of 18 months after the

date of publication of the notice in the Gazette

unless it is revoked before the expiration of that

period."

Under s.4 of the Act, the word "supply" when used in sub-section 62(1) includes supply by way of sale.

3. In the exercise of the powers conferred by sub-section 62(2D), the Minister published in the Gazette of 13 May 1985 a notice declaring goods to be unsafe goods, namely, goods being Glucomannan in tablet form."

4. On 27 May 1986, the prosecutor, David Allen Ransley, being an officer of the Trade Practices Commission, at the K Mart store of Coles Myer Limited at the Eastlands Shopping Centre, purchased two plastic bottles from Coles Myer Limited. The label on each bottle contained the following words:-

"GOLDEN LIFE

Natural

Glucomannan Spirulina

and Vitamin B6

Compound

60 TABLETS."

5. Each bottle contained tablets which contained glucomannan and thus the contents of each bottle comprised glucomannan in tablet form. The two bottles were among a group of six bottles containing similar tablets. Each bottle was priced at $3 being a discounted price having been reduced from a price of $10.91, to a price of $7 and then to $3.

6. On these facts, it is clear that Coles Myer Limited contravened sub-section 62(1)(b) of the Trade Practices Act. Under sub-section 79(1)(b) of the Act, Coles Myer Limited is punishable on conviction to a fine not exceeding $50,000. It is noted that if the offence had been committed after June 1986 it would have been punishable on conviction to a fine not exceeding $100,000.

7. It is noted that s.85 of the Trade Practices Act makes provisions for defences to a prosecution of the type brought in this case. One of the defences so available is if the defendant establishes that it took reasonable precautions and exercised due diligence to avoid the contravention charged. In May 1985, Coles Myer Limited had a detailed procedure laid down in a document called the "Product: Recall Manual" to be followed where, as a matter of urgency, products being sold by Coles Myer Limited had to be taken off the market and not sold to the public. This procedure was designed to prevent the sale of products which were discovered to be dangerous to the health of the public, such as contaminated food. In the present case, Coles Myer Limited does not rely upon a defence based upon s.85 of the Act and the application of the procedures prescribed by the Product Recall Manual. The material before the Court shows that following the experience gained from the present case, those procedures have been varied in an attempt to prevent a similar occurrence happening in the future.

8. In the present case, pursuant to O.49 r.5 of the Rules of Court, the prosecutor and the defendant have filed detailed affidavit material to assist the Court to determine the appropriate penalty to be imposed on Coles Myer Limited. Glucomannan is a type of starch or carbohydrate having a very large molecule which readily absorbs liquids and expands quickly. When swallowed, the glucomannan absorbs the liquids in the stomach, expands and creates a feeling of a full stomach without having eaten food. It is used as an aid to slimming. The Minister had been given expert advice that glucomannan, in tablet form, was a dangerous substance since there was a possibility of it expanding in the oesophagus of a person before it had time to reach the stomach. It this occurred, a dangerous condition would result requiring urgent surgical treatment. There was no evidence as to whether this had ever occurred or not. It was accepted that glucomannan tablets had been on sale for at least two years before May 1985. There was no evidence of what publicity, if any, occurred at the time the Minister declared glucomannan in tablet form to be unsafe goods.

9. The main affidavit filed by the defendant was sworn by Keith Irvine, the secretary of Coles Myer Limited. In May 1985, the defendant held about 3,000 bottles of glucomannan tablets either in stock or on display shelves. At that time it operated some 1,055 stores in Australia and some 200 of those stocked glucomannan tablets. The defendant did not know of the declaration published in the Gazette of 13 May 1985 but it must be presumed to have knowledge of it. The legal officer whose duties include reviewing Government Gazettes, did not realise that the defendant sold glucomannan in tablet form. If the defendant had known of the declaration the procedures prescribed in the Product Recall Manual would have been implemented. In all probability, this would have prevented the offence occurring.

10. The defendant first became aware of difficulties with respect to glucomannan tablets on about 15 or 16 May 1985 when Graham Burton, who was then the Group Controller of the supermarket and food services division at the defendant's head office in Melbourne, received a phone call from a person whose name he cannot recall. As a result of that phone call, Burton rang Gordon James then the Sales Manager of the companies selling "Golden Life" and "Natures Way" brands of vitamin products. These two companies were part of the Nicholas Kiwi group of companies, a well known and reputable group. James told Burton that the companies had recalled "Golden Life" glucomannan tablets and that the recall had been ordered by the Federal Health Authority. Burton was not told of the declaration in the Gazette.

11. In ignorance of the declaration, Burton did not activate the recall procedures but instituted procedures for the withdrawal from sale of glucomannan tablets and their return to the suppliers. The memorandum instituting those procedures was dated 16 May 1985 and was directed to all States. The instruction was headed "Glucomannan Tablets" and contained the following instructions:-

"Whilst some states' Health Department are

disagreeing with the Federal Body, we are to return

all stocks, all brands, of these weight control

items to the various suppliers.

This applies to tablets only and is due to the fact

that because they absorb moisture so quickly that

there is a chance that they may stick in the throat

of somebody.

This risk factor does not apply to capsules or

powders and these are not to be returned.

Range to be Returned

Golden Life Great Shape Tablets

Golden Life Glucomannan Spirulina and B6

Natures Way Glucomannan 500

Should your state be stocking any other Glucomannan

Tablets these are to be included in the instruction

to stores.

Please instruct stores to remove the above items

from sale and in the case of Metropolitan areas

return to your G.D.C. by the 7th June otherwise

claims may not be allowed.

With regard to country stores please obtain the

quantity of stock on hand so that we can negotiate

with the supplier on the method of returning.

Please contact your local representative for the

Golden Life/Natures Way (Nicholas) items and they

will arrange to pick up from your G.D.C. when

stocks are available and we suggest no later than

28th June."

12. In Tasmania, this instruction was directed to Dean Kane, then the defendant's buyer of grocery and non food products in the Tasmanian supermarket division.

13. In May and June 1985, Mark Anderson was the Department Manager of the toiletries/cosmetic department at the defendant's K Mart store in the Eastlands Shopping Centre at Rosny Park. That department sold vitamin tablets. In June 1985, Anderson was instructed by Graham Mazey, the then Area Manager at that store, to remove glucomannan tablets from the display shelves until further notice. Anderson was shown a written instruction to do that. He and Susan Cooper, a sales assistant in that department, searched the display shelves and found six bottles of Golden Life glucomannan tablets. These six bottles were removed from the shelves, wrapped in a piece of white paper on which had been written words to the effect that the six bottles were not to be removed from the stock room until further notice, and all were secured by being placed within a rubber band. These were then placed on the top shelf of the fixtures in the stock room. The shelf was some six feet above the floor and the bottles were placed there to avoid them becoming mixed with other bottles and being returned to the display shelves. Anderson noticed the bottles on that shelf on several occasions over the next few months. In January 1986, Anderson became the Area Manager of the Eastlands K Mart store. He does not know how the six bottles were returned to the display shelves.

14. On the evidence before the Court, the procedures adopted at the Eastlands K Mart store with respect to these six bottles created a dangerous situation. This arose from a lack or knowledge of the evidence of the declaration and the non implementation of the procedures specified in the Product Recall Manual. Further, there was a failure on the part of the appropriate officers of the defendant to take adequate precautions to prevent those bottles from being returned to the display shelves.

15. It appears that before the memorandum of 16 May 1985 was forwarded. Burton rang Neville Langley, the defendant's Tasmanian State Manager directing him to contact store managers to direct them to remove glucomannan tablets from the display shelves. That procedure had some of the characteristics of the procedure laid down in the Product Recall Manual where, as a matter of urgency, products are to be removed from sale. Langley implemented this procedure and the store managers, including the manager at the K Mart store at Eastlands, were so directed. They were told to hold the tablets in the stock room until further notice and that a memorandum would be sent out confirming the recall. Anderson carried out those directions. I am satisfied that at this time no adequate follow up instructions were given as to what should be done with the glucomannan tablets after they had been removed from the display shelves.

16. There then developed a long history of a tidying up nature in which officers of the Trade Practices Commission found glucomannan tablets first at some Coles Myer Limited stores in Tasmania, second at a Coles Myer Limited store at Newtown and thirdly at a Coles Myer Limited store at Melville, Western Australia. On each occasion, on being notified, senior management took urgent and comprehensive action to ensure that further sales did not occur.

17. Altogether, the defendant did a thorough job and cleared the large number of bottles from the large number of stores. The occasions of the breaches at Tasmania. Newtown and Melville were due to human error and after explanations supplied by the defendant, the Trade Practices Commission decided not to prosecute with respect to those breaches. In the correspondence relating to those matters, the Commission drew attention to the fact that what had occurred tended to show that the defendant was not acting with due diligence within the meaning of s.85 of the Trade Practices Act. As I have said, the lack of knowledge of the defendant of the existence of the declaration under sub-section 62(2D) of the Trade Practices Act had led it into adopting procedures which were not as strict as they could otherwise have been. By August 1985, following the incident at the Newtown store, the defendant did know of that declaration, a copy of the Gazette having been provided to it by the Commission under cover of a letter dated 8 August 1985. Thereafter the defendant with great concern and activity, activated many procedures in an attempt to prevent glucomannan tablets being sold at any of its stores. It is not necessary to detail those procedures and attempts. It is sufficient to say that the six bottles of glucomannan tablets placed on the high shelf in the stock room at the defendant's K Mart store at Eastlands constituted a hidden trap awaiting to be sprung by an unsuspecting employee of the defendant. The existence of those bottles were forgotten or overlooked by the responsible officers of the defendant employed at that K Mart store.

18. From time to time, the presence of those bottles was noticed by employees carrying out stocktaking activities. As late as March 1986, Scott Cane, then a trainee manager working part of the time at the K Mart store at Eastlands, saw on the top shelf in the stock room something wrapped in white paper secured by a rubber band. He did not examine it. He left it there.

19. Between August 1985 and February 1987, Peter Wilde was the Manager at the K Mart store at Eastlands. Before 27 May 1986, he did not know that there were any glucomannan tablets at that store. In November 1985, he issued instructions that vitamins which were nearing their expiry date should be marked down progressively and sold. The six bottles of glucomannan appear to have an expiry date of April 1986. In April he decided to close down the vitamin section entirely and to sell all stocks of vitamins. He does not know how the six bottles of glucomannan tablets came to be removed from the stock room to the display shelves. He made enquiries of the employees who were involved in the April clearance of vitamins but none of them remembers placing any of those six bottles on the display shelves. After Ransley purchased the two bottles, he gave one to Wilde. Wilde then searched the display shelves and removed the other four. On instructions from his superior officer, he destroyed the five bottles.

20. Miss Cooper who had assisted in the removal of the bottles from the display shelves in May or June 1985 continued to see them in the stock room during stock control exercises. At the time of the vitamin clearance, she removed all the vitamin tablets from the lower shelves of the stock room but did not move the glucomannan tablets. She was involved in the marking down of the prices on the vitamin products but did not see the bottles of glucomannan tablets except on the top shelf of the stock room while doing that. She did not put the reduced prices on the glucomannan tablet bottles.

21. No explanation has been given as to how the offending bottles came to be on the display shelves in May 1986. In the circumstances, it would be idle to speculate what happened. I am satisfied that in all probability, it was done by an employee employed on the shop floor at the K Mart store.

22. On all the material before me I am satisfied that the defendant is not guilty of any moral turpitude. It has not engaged in any dishonest activity. It did not exercise due diligence to ensure that all the declared goods were removed from possible sale from all of its stores. When its attention was drawn to the fact it had not succeeded, it initiated extensive and detailed procedures to prevent future breaches of s.62 of the Trade Practices Act. The fact that it failed resulted, in my opinion, from a failure of personnel at the store level.

23. The maximum penalty prescribed by s.74 of the Trade Practices Act is designed to cover the whole range of offences created by breaches of the provisions of Part V of the Act. Many of those offences may result from the moral turpitude and dishonesty of the offending person where that person has engaged in conduct for his own benefit at the expense of innocent persons. Nothing like that has occurred here. In attempting to prevent the sale of the glucomannan tablets, the defendant failed to exercise due diligence and so could not rely upon a defence based on s.85 of the Act. Nevertheless, in many respects it was in the position of an innocent person. When the declaration order was made, without knowledge of that order, the defendant expended time and resources to remove the tablets. That was a mammoth task. It did not succeed completely. Thereafter, it expended further time and resources to rectify the position. It failed because of human error at a junior level of responsibility.

24. Counsel for the defendant submitted that the Court should exercise its discretion under s.19B of the Crimes Act 1914, and refrain from entering a conviction against the defendant having regard to the extent to which the offence is of a trivial nature or to the extent to which the offence was committed under extenuating circumstances. In my opinion, neither of those matters apply here. The offence is not trivial and the facts of this prosecution do not constitute extenuating circumstances.

25. A conviction should be recorded but having regard to all the circumstances of this case a nominal penalty only should be imposed which I determine at $500.

27. In addition, it is ordered that the defendant pay the prosecutor's costs of the prosecution.