Trade Practices Act 1974, para. 53(ea), subsections 79(1), 85(1), (1A) and (2).

Solicitors for the Prosecutor: Australian Government Solicitor

Solicitors for the Defendant: Andros Chrysiliou of Collaroy,

1. Each information be dismissed.

2. Each party have liberty to apply in relation to costs

provided any such application is notified to the Registrar or

to the Associate to Sheppard J. on or before 31 January 1990.

NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

The defendant has been charged with 21 charges of contravening the Trade Practices Act 1974 ("the Act"). Each of the charges alleges a breach of para. 53(eb) of the Act. The relevant provisions of the paragraph are that a corporation shall not, in trade or commerce, in connection with the supply of goods, make a false representation concerning the place of origin of goods. The goods in question were all described as plush toy koala bears. In each case the alleged false representation concerning the place of origin of the bears was that they were made in Australia. The particulars of the charge in matter No. G759 of 1987 are as follows:-

"(a) The said goods were three model 875 and

three model 876 plush toy koalas to

which were affixed labels bearing the

words 'Made in Australia by C.A. Toys

Sydney'.

(b) Between about the 23rd day of October

1986 and about the 15th day of December

1986 the said goods were observed at

JBM Toy Distributors warehouse, Unit

17, 16 Macquarie Place, Boronia,

Melbourne, in the State of Victoria."

2. The only variations of substance which there are in the subsequent charges is in the number of koala bears, their model numbers and the places at which the koala bears were observed.

3. It is common ground that the defendant did, at the relevant times, distribute plush toy koala bears and that each of the bears carried a label which contained words to the effect that the bear was made in Australia. The principal issues in the case are whether that statement was false and, if so, whether the contraventions in respect of which the proceedings have been instituted were "due to reasonable reliance on information supplied by another person;" see para. 85(1)(b) of the Act. In relation to some of the charges there is a question whether it was the defendant which represented that the bears were made in Australia.

4. Mr. C.A. Bidder is the Managing Director of the defendant. He gave detailed evidence of the way in which the bears were manufactured. I accept this evidence. Mr. Bidder is the principal designer of soft toys made by the defendant. He has been designing toys since 1977. He said that in 1981 he conceived the idea of designing a realistic soft toy koala. This led him to design what he has described as the "lay back" koala which is the subject of the proceedings. He said that he believed that there was not then, nor has there been since, any comparable soft toy koala product marketed anywhere in the world. He said that the concept of the design was to capture the appearance of the koala in a relaxed and restful pose. The design process took four years.

5. In his affidavit Mr. Bidder has very fully described the method by which he went about the design. He embarked on a program of study to understand and become familiar with the koala bear, its eating habits, its environment, its cultural and territorial way of life and its predators. I do not go into the detail of what follows. Exhibited to Mr. Bidder's affidavit are a large number of publications which he studied and a number of the observations he made. Of the design process Mr. Bidder said:-

"In developing my design I had noticed that

the koala's head was similar to an egg shape,

so I used this egg shape as my starting point

realising it would require a lot of attention

to its filling in order to give the realistic

appearance of cheeks and jaws. I positioned

the nose on the apex of the egg shape. This

nose was basically a flat, oval shape and

needed special attention when filling and

finishing to ensure it had the correct

profile essential to the koala's expression.

In designing the mouth I wanted the koala to

have a friendly expression which I used a

thin 8mm apricot coloured fabric to achieve.

I then used a white 15mm piece of fabric for

the chin. Realising that the correct

expression I wanted could only be achieved by

very careful attention to the filling and

finishing of the koala to ensure a correct

profile, I then used a horizontal line

touching the top of the nose and passing

through the centre of the eyes as a guide for

the positioning of the eyes. In positioning

the eyes along this horizontal line I noticed

that they needed to be positioned 1/3 of the

distance between the edge of the koala's nose

and ears.

I also used the same principle in aligning

the tip of the koala's ears and head along a

horizontal line. In executing this I found

that the koala's nose became too flat in

appearance and the koala's side profile did

not emphasise its mouth and nose to achieve

the koala characteristic features which I

believed to be essential. Therefore I

developed a special stitching technique.

This stitching technique involves the

stitching of the toy koala (in specific

points on the toy's face) after it is filled.

It is critical that the stitching be carried

out correctly as if it is not tight enough

the toy's facial features will not be

properly emphasised and it will lack the true

character of a koala. If the stitching is

too tight the toy's facial features will be

distorted. In designing the koala's eyes I

encountered a major problem as I was not

satisfied with the glass or plastic eyes

available. It was only after some

considerable time and investigations that I

noticed an oval shaped 'nose' which I decided

to use as an eye."

6. Mr. Bidder went on to describe the way in which the legs and side profiles of the koala were designed and also of his concern for the correct "feel" of the toy. In relation to this matter he said:-

"In developing the necessary feel of the

koala I experienced the difficulty

encountered in past attempts by traders

(including the defendant) to produce a toy

koala with realism, namely that the toy was

too rigid and therefore lacking in what I

considered to be an important part of the

toy's characteristic, its cuddly feeling.

This encouraged me to pursue the reclining

koala position as a basis for my design. I

saw a further advantage in designing the

koala in a reclining position as it allowed

me to properly portray some of the koala's

character by specialised use of the filling

process. The reclining position did cause

some problems in that it was difficult to

properly display the koala. To overcome this

problem, I found by experimentation that if

the finished koala's arms were placed behind

its back with the hands turned outwards and

the palms stretched in a continuation of the

hand then sufficient support was provided to

hold the koala in the correct position. This

meant that the attention to filling and

finishing the koala was critical to the

character I wanted to portray. This often

also required carefully hand stitching the

armpit to the toy's body to maintain the

correct position."

7. Mr. Bidder said that he was unable to obtain suitable fabric for the manufacture of the koala in Australia. He made inquiries of various fabric mills overseas and eventually decided upon a grey and white high pile fabric mixed together with a shorter brown pile length fibre. Mr. Bidder also had to find suitable material with which to fill the koalas. In this case he was successful in finding suitable material in Australia. The material decided upon was a plastic foam. It needed to be of very high grade because of the resilience which it must have. He needed to monitor the supplies of foam to ensure that the grade and crumb size met the appropriate standards.

8. Between January and March 1985 a prototype was developed at the defendant's premises at Brookvale, a Sydney suburb. Patterns were made for use in the cutting and assembly of the fabric from which the koalas were to be manufactured. On 21 March 1985 Mr. Bidder applied to register the design of the bear under the Designs Act 1906. It was registered on 1 August 1986.

9. In April 1985 Mr. Bidder went to Korea. He requested a fabric mill to make a sample fabric swatch using a number of colour and shading changes which he specified. He took the prototype and patterns to a factory known as "Kyung Nam Industrial Co." which worked on a cottage industry basis and had no designers or pattern makers. Mr. Bidder worked out an arrangement with Kyung Nam to supply regular orders for the koalas. The factory agreed to manufacture the koalas exclusively for the defendant under the defendant's guidance and strictly in accordance with its instructions and standards.

10. Mr. Bidder returned to Australia in May 1985. About eight weeks later he received a pre-production sample of the koala from Korea. He gave Kyung Nam some instructions about modifications and as to filling and finishing touches which he required. Thereafter koalas were made in Korea until 1986.

11. From about 1986 only casings (in the evidence sometimes referred to - but not by Mr. Bidder - as skins) for the koalas were made in Korea. The balance of the work required to turn the casings into a finished product was carried out at the defendant's factory at Brookvale. The casings were made up of a number of pieces sewn together. The material used was not manufactured in Australia. The pieces were cut and sewn to Mr. Bidder's design. Casings for some models of the bear arrived in Australia inside out and had to be hand turned at Brookvale; others were turned in Korea. It should be clear that the casing is the most important component of the bear. When turned it becomes the outer surface and is what is seen of the product when finished. It comprises, of course, the facial features, the ears, the legs and the body of the bear.

12. Mr. Bidder described the process of completing the manufacture of the bears after the casings arrived in Australia. Prior to casings which were inside out being turned, they were blown down by high pressure air to remove dust and fluff. They were then turned by hand and a high pressure air jet was applied to the inside of the casings to rejuvenate the fabric. Casings for models CA875 and CA876 bears were not received inside out, but required the same application of a high pressure air jet to the inside of the casings to rejuvenate the fabric. They also required the application of a strong jet of air to the outside of the casings in order to remove loose fibres and fluff. Once these steps had been completed, the casings were partly closed by carefully turning back the fabric which curved inside the casings and stitching the casings until an opening of about 5 centimetres remained. This was the aperture through which they were filled.

13. The casings were filled with a high grade foam utilising special machinery. The machinery was operated by a skilled operator as correct filling was essential to the toy's characteristics. The machinery utilised a mixture of foam and compressed air. The filling process had to be done slowly so as to obtain correct distribution and softness. The head had to be filled more tightly, as it had to be finally shaped by handwork at the hand stitching stage of the process. If it was not packed tightly enough the face would tend to pull in. Notwithstanding this, the head had to have a degree of softness to complement the general softness of the entire toy. The hands, legs and feet were filled so as to achieve an even fill but with a soft feel. The backside and neck were filled so as to achieve an even fill but again with a soft feel. However, the neck had to be sufficiently rigid to support the head. The body was filled so as to achieve an evenness of fill and a soft feel.

14. Once the filling process was complete, each koala was manually checked to ensure consistency and correct filling. Very often filling had to be removed from the stomach of the bears to ensure that their soft character was maintained. The sewer had then to pull back the fabric ends which curved inward inside the opening in the back of the bears and then vigorously to brush away all foam residue before carefully stitching the hole. It was important to stitch no more than 1.5 centimetres from the edge of the fabric so that the koala's shape was not reduced. At the same time care had to be taken to ensure that the seam was not visible. The back seam was then brushed to untangle and free the fabric pile caught in the seam as well as to remove any fine particles of foam.

15. There followed further hand moulding and stitching to ensure the correct facial features and characteristics were achieved. It was essential correctly to shape and form the nose accurately stitching from the top of the left side of the nose to the corresponding right side ensuring the correct tension was applied to the stitch. The same process was repeated for the lower part of the nose. This stitching was essential to ensure that the correct shape of the nose, mouth and chin were achieved so as to reveal the koala's expressive character.

16. The koalas were then checked and manipulated with a sharp instrument to manoeuvre particles of filling and to stretch the fabric at various points to ensure the correct shape and character was displayed and enhanced. Further checking and adjustment for the koalas' sitting position was then carried out to ensure that the bears were correctly supported by their arms. If necessary, hand stitching just under the armpits was used to pull the arms closer to the koalas' chests thus providing more support.

17. The koalas were finally hand checked again to ensure their correct shape, profile and feel. All parts of the seams were then hand brushed to remove fabric pile caught in the seams and to ensure that the seams were not visible. Checks were made for any holes or faults. Loose threads were cut and removed. There were other finishing details referred to in the evidence but I do not need to refer to them in detail.

18. The models in question here were numbered CA873, 874, 875, 876 and 878. All but the last of these was similar in appearance. The difference between them was in their size. Model 878 was fundamentally a model 873 bear which is about 40 centimetres in height. But it was got up, to use the defendant's expression, as a "surfie" koala. It was made with more rigidity than the normal model 873 bear. It was dressed in a wetsuit, wore an eye shade and carried a surfboard under its arm. The wet suit, eye shade and surfboard were manufactured in Australia from Australian materials and the assembly of the model was carried out in the defendant's factory at Brookvale. Informations number G776 and G777 of 1987 charge offences in relation to model 878 or "surfie" koalas.

19. The first question is whether it is correct to say that the koalas in question were made in Australia. In short the evidence establishes that the koalas were designed in Australia and were manufactured from casings made in Korea. The finishing process which I have described was a necessary step in the manufacture and, despite the evidence of a former employee at the defendant's factory, Ms. Mace, and submissions to the contrary by counsel for the prosecutor, was an intricate process which required a substantial degree of care and skill. Nevertheless, the essential component of the bears was the casings. They comprised the outer skin and thus the visible parts of the bears. The pieces which made up the casings were cut to Mr. Bidder's design, but in Korea, and the cutting and stitching processes were carried out there. Although these tasks were largely repetitive, it seems to me that they, like the finishing processes in Australia, must have involved a degree of care and skill. I am assisted in reaching this conclusion by Mr. Bidder's own evidence of problems he had in attempting to have the pieces sewn together in Australia.

20. Obviously, a question of fact and degree is involved and one must come to a conclusion on the basis of a consideraton of the entirety of the steps necessary to manufacture the koalas beginning at the design stage and going through to the finishing processes which take place at Brookvale. I must bear in mind that this is a criminal prosecution and that the criminal standard of proof, that is, proof beyond reasonable doubt, applies.

21. I have reached the conclusion that the bears were not correctly described as having been made in Australia. I think that the appropriate description would rather be, "Designed and finished in Australia using casings (or skins) made in Korea". In reaching my conclusion I have had regard to the decisions of Jenkinson J. in Korczynski v. Wes Lofts (Aust.) Pty. Limited 10 FCR 348 and Gummow J. in Netcomm (Australia) Pty. Limited v. Dataplex Pty. Limited (1988) 81 ALR 101. Whilst I have found those decisions helpful, I think they must be looked at in the context of their own facts. The same course has to be followed here.

22. It seems to me that there were three essential steps in the process of manufacture that is in question. In saying this, I agree with submissions made by counsel for the prosecutor that it is not appropriate to include the designing of the koala bears as a step in their manufacture. Many articles are designed in one country, but made in another. The first essential step was the cutting and sewing of the material to form the casing, the second, the filling of the casing, and the third, the further sewing and checking procedures. It is true that, of these, only the first was carried out in Korea, but in my opinion that was the step which transformed the material which was used into the essential shape and appearance of a koala bear. It is equally true that each of the three steps was an essential element in the production process. Without any one of them, no koala bear would have been produced. So it might be just as wrong to say that the bears were made in Korea. Only a statement such as I have formulated above correctly describes the position. As Jenkinson J. pointed out in the Wes Lofts case, a statement such as "Made in Australia" is an historical statement. The expression suggests at least substantial manufacture in Australia. In my opinion the fact that the casings were cut and sewn in Korea prevents the statement from being one which can be correctly applied to the articles in question here.

23. I have given consideration to the question whether any different conclusion should be reached in relation to the "surfie" koala. It is true, as counsel for the defendant has submitted, that there is a much more substantial Australian element in these bears. But fundamentally the article was a koala bear to which the wetsuit, eye shade and surfboard had been attached. In those circumstances I am satisfied that the article, looked at as a whole, was not made in Australia.

24. Before I come to deal with the defence under s. 85 of the Act upon which the defendant relies, I should deal with informations No. G761 of 1987 and Nos. G766-768 of 1987 which raise separate considerations. Counsel for the prosecutor sought leave to amend the informations in both matters G760 and G761 of 1987. I allowed the amendment to the information in matter G760 of 1987, but refused it in matter G761 of 1987. The amendment which was sought in matter No. G761 of 1987 was to the particulars appended to the charge. As originally framed, the particulars were as follows:-

"(a) The said goods were 848 model 873 and

452 model 874 plush toy koalas to

which were affixed labels bearing the

words 'Made in Australia for Kangaroo

Gifts Australia Wide Souvenirs'.

(b) The said representation was made

between about the 7th day of November

1986 and about the 24th day of

December 1986 was made (sic) at

Kangaroo Gifts warehouse, 204

Gladestone Street, South Melbourne in

the State of Victoria."

25. It was sought to substitute for these paragraphs the following:-

"(a) The said goods were 72 model 874 plush

toy koalas to which were affixed

labels bearing the words 'Made in

Australia'.

(b) The said representations were made on

or about 5 December 1986 at Kangaroo

Gifts Warehouse, 204 Gladstone Street,

South Melbourne, Victoria."

26. Originally information No. G760 of 1987 referred to the goods there in question as being 72 model 873 and 210 model 874 plush toy koalas. The amendment, which was made without opposition from the defendant, alleged that the goods were an unspecified quantity of model 873 and an unspecified quantity of model 874 plush toy koalas.

27. Notwithstanding that information G760 alleged display of the bears on 9 November 1986 at a warehouse operated by Hollstrom Distributors Pty. Limited and information G761 of 1987 alleged display on 7 November 1986 at the Kangaroo Gifts Warehouse, I think that there is substance in the submission of counsel for the defendant that there is a danger that the two informations cover, at least in part, the same articles. In other words the articles referred to in G761 of 1987 may well be some of the articles referred to in information G760 of 1987. In those circumstances I think that information No. G761 of 1987 should be dismissed. I should add that that course was not strongly opposed by counsel for the prosecutor.

28. Informations G766-768 of 1987 raise a more complex problem. The charges relate to koalas supplied to Kangaroo Gifts which is a business conducted by a company, H.S.K. Administrators Pty. Limited. The Managing Director of H.S.K. Administrators Pty. Limited is Mr. H. Korn. His wife described herself as Co-Manager. Both Mr. and Mrs. Korn gave evidence as did Mrs. Joyner who said that she was assistant to the Korns.

29. There is a conflict of evidence between Mr. and Mrs. Korn on the one hand and Mr. Bidder and members of his staff, Mrs. C. Hall and Mr. R.M. Pyle.

30. Mr. Korn and Mr. Bidder were well known to each other because of numerous business transactions which they had had prior to the present problem arising. Kangaroo Gifts distributes soft toys of various kinds to stores and to souvenir shops. In 1986 one of its substantial customers was K-Mart. In the first half of 1986 Kangaroo Gifts had acquired koala bears from the defendant. These had been fully manufactured in Korea and are not in question in this case. In the second half of 1986 Mr. Korn saw Mr. Bidder at a trade fair in Melbourne. Mrs. Hall was present. There was a discussion in which Mr. Korn asked Mr. Bidder whether he could make plush toy koalas in Australia so that they could be labelled "Made in Australia". Mr. Bidder explained the difficulties which he had, up to that time, encountered in attempting to perform the entire manufacturing process here, but said, according to his evidence, that he thought that he would be able to supply koala bears made in Australia later in the year.

31. There is a conflict between the two witnesses about what Mr. Bidder told Mr. Korn of his intended manufacturing process. It was Mr. Korn's evidence that he was led to believe that the cutting and sewing would be done in Australia. Mr. Bidder, on the other hand, asserted that he had told Mr. Korn that it was proposed to have the casings made in Korea and filled and finished in Australia.

32. Mr. Korn wished to be able to market the bears, not under the defendant's label, but under a label which would say "Made in Australia for Kangaroo Gifts ..." Mr. Korn asked Mr. Bidder to have labels depicting these words printed. Mr. Bidder agreed to do this. The original intention was that the labels would be attached to the bears by the defendant at Brookvale. As things turned out, a quantity of the bears was sent to Kangaroo Gifts unlabelled and Kangaroo Gifts affixed the labels to them. Mrs. Joyner had charge of this operation. Her evidence, which I accept, was that not all the bears required labelling but that about three-quarters of them did. The labels were sent in bulk by the defendant to Kangaroo Gifts for this purpose.

33. It was in these circumstances that counsel for the defendant submitted that the representation as to the place of manufacture of the bears was not made by the defendant but by Kangaroo Gifts. If Mr. Korn believed that the bears were entirely manufactured in Australia - that is, if he believed that the casings were made here from pieces of material cut and sewn here - I think the submission would be without foundation because there could be no basis whatever for suggesting that Kangaroo Gifts or Mr. Korn was implicated in any wrongful conduct. In those circumstances Kangaroo Gifts would properly be regarded as having been no more than the innocent agent of the defendant in placing the labels on the bears with the consequence that the representation would be a representation made by or on behalf of the defendant; cf. Barton v. Croner Trading Pty. Limited (1984) 54 ALR 541 at p 553. It therefore becomes critical to determine whether Mr. Korn's evidence or Mr. Bidder's evidence about what Mr. Korn was told of the way in which the bears were manufactured was correct.

34. As mentioned, Mr. Bidder's evidence was corroborated by Mrs. Hall's evidence. Mrs. Hall described herself as a commission agent and said that she had been at all relevant times the Victorian agent for the defendant. Her evidence was in terms closely similar to that of Mr. Bidder.

35. The evidence in this case was given by affidavit. Affidavits serve a most useful purpose in many cases, but, in my opinion, there is a problem about their use in cases which involve disputed questions of what was said in critical conversations. This case highlights that problem. It does so because it complicates the task of assessing which version of the conversation I should accept.

36. The reason that there is a problem in relation to the evidence of the three witnesses, Mr. Korn, Mr. Bidder and Mrs. Hall, on this matter, lies in the fact that Mrs. Hall, in her affidavit, has used language which is closely similar to that used by Mr. Bidder. Counsel for the prosecutor cross-examined Mrs. Hall about this matter suggesting to her that there was such similarity between the versions of the conversation given by Mr. Bidder and herself that the only conclusion was that they must have collaborated with one another. Mrs. Hall vehemently resisted this suggestion and maintained her version of the conversation.

37. The affidavits were not, of course, prepared by the witnesses but by the respective solicitors as one would expect. The defendant's solicitor was not called, but one is only too familiar with procedures which are undertaken in solicitors' offices for the preparation of affidavits. A statement is taken, either orally or in writing, and upon the basis of this statement, the affidavit is prepared. Very often the solicitor's own language or way of expressing himself or herself intrudes into the exercise, albeit subconsciously. The procedure ensures that the Court is denied the opportunity of hearing and seeing the witness give evidence in chief. That exercise itself often provides the most valuable guidance in the exercise of assessing the reliability of a witness' evidence, not overlooking the fact that the witness will have given a statement, will have read, immediately before going into the witness box, a copy of that statement and will have been seen in conference by counsel and solicitor.

38. I am denied that valuable assistance in this case. I am not prepared to take the simple view pressed on me by counsel for the prosecutor that the very similarity of the language used in the two affidavits ought lead me to reject Mr. Bidder's and Mrs. Hall's evidence. What counsel has put is an important consideration which I have weighed in the balance but I must also take into account the way in which affidavits come into existence, and I could not, with any degree of confidence, reject the evidence on the basis on which counsel for the prosecutor relies.

39. To be weighed in the balance also is my own assessment of the witnesses as I observed them cross-examined. I have already indicated my acceptance of Mr. Bidder's evidence in relation to the way in which the bears were manufactured. Mr. Bidder made a favourable impression upon me. I did not find any of his answers evasive or in conflict in any material way. He was cross-examined at length about a number of matters and, I think, stood up well to the exercise. I have an equally favourable impression of Mrs. Hall.

40. All that is not to say that I found myself substantially unimpressed by Mr. Korn's evidence. I think, however, that there are indications in his evidence that he was confused about some matters. I find, for instance, that the earliest date when he could have expected delivery of bears which were to be described as Australian made was September, and not July 1986 as he said. I think the documents in the case and the evidence of Mr. Baron bear this out. All I am prepared to say about Mr. Korn's evidence is that, either he knew precisely the way in which Mr. Bidder intended to produce the bears and when the Trade Practices Commission investigation began was reluctant to concede to its officers that he knew what the true position was, or that he was confused about the matter and misunderstood what Mr. Bidder told him.

41. I should mention here that there is some support for Mr. Korn's evidence in the evidence of Ms. E.A. Barton. She was the officer from the Trade Practices Commission who investigated the matter. When I come to consider her evidence, it will emerge that she said that, in a telephone conversation she had with Mr. Bidder on 28 January 1987, she was led to believe that the casings were sewn (although not cut) in Australia and not in Korea. This case has so many aspects that I have felt constrained to deal with it in a series of compartments, but I should make it clear that in weighing Mr. Korn's evidence I have taken into account Ms. Barton's evidence just as I have taken his evidence into account when weighing hers. I shall say more of this in due course.

42. In relation to the matter now under consideration, I find that the majority of the bears which are the subject of informations Nos. G766-768 of 1987 were intended by both the defendant and Mr. Korn on behalf of Kangaroo Gifts to be labelled as having been made in Australia and that Mr. Korn, whatever may have been his understanding, had been told by Mr. Bidder of how it was proposed to manufacture the bears.

43. The next question is what is the legal significance of that finding?

44. Each of the informations, including informations in matters Nos. G766-768 of 1987, charges a contravention of para. 53(eb) of the Act. Each of the informations is laid pursuant to s. 79 of the Act which provides that a person who, inter alia, contravenes a provision of Part V of the Act other than the provisions of certain sections which are not here relevant, is guilty of an offence punishable on conviction by fines specified in the section. In addition to providing for the punishment of persons who contravene provisions of Part V of the Act, s. 79 also provides for the punishment of persons who, inter alia, aid, abet, counsel or procure a person to contravene a provision of the Part, who are in any way, directly or indirectly knowingly concerned in, or party to, the contravention of such a provision, or who conspire with others to contravene such a provision. Whatever Mr. Korn may have understood about the defendant's manufacturing and finishing processes, the defendant, through Mr. Bidder, was well aware of them and well aware of the fact that it was intended that the bears supplied to Kangaroo Gifts would be labelled, whether by the defendant itself or by Kangaroo Gifts, as having been made in Australia. Other bears which had undergone the same manufacturing process and which were the subject of other charges, were labelled similarly in the defendant's factory. The defendant procured the printing of the Kangaroo Gift labels and sent the labels to Kangaroo Gifts knowing and intending that they would be affixed to bears manufactured in the way that has been described.

45. In the submission of counsel for the defendant, the most that could be said of the defendant's conduct in this regard was that it aided, abetted, counselled or procured Kangaroo Gifts itself to contravene para. 53(eb) of the Act. The defendant was not charged with that offence and accordingly, so it was submitted, the charges relating to the bears supplied to Kangaroo Gifts should be dismissed.

46. If it were correct to say that the correct characterisation of the defendant's conduct was that of an aider or an abettor, I think there would be substance in the submission. The provisions of s. 5 of the Crimes Act 1914 which, in ordinary circumstances, deem a person who aids, abets, counsels or procures the commission of an offence against any law of the Commonwealth to have committed the offence, do not apply because of the special provisions of s.79. In Giorgianni v. The Queen [1985] HCA 29; (1985) 156 CLR 473 Gibbs C.J. said (p. 477):-

"In these circumstances two questions of

principle arise for our decision. The first

is whether a person who has aided, abetted,

counselled or procured another person to

drive in a manner dangerous to the public

may, if death or grievous bodily harm has

been occasioned, be properly convicted of an

offence against s. 52A of the Crimes Act

(1900 (N.S.W.)). That question must in my

opinion be answered in the affirmative. It

is true that the application of provisions

such as those of s. 351 of the Crimes Act

(the New South Wales equivalent of s. 5) 'may

be excluded by the nature of the substantive

offence or the general tenor or policy of the

provisions by which it is created': Mallan v.

Lee [1949] HCA 48; (1949) 80 CLR 198, at p. 216. There

is, however, nothing in the nature of the

offence created by s. 52A, or in the

provisions of that section, which reveals any

intention to exclude the ordinary rules

governing the liability of a secondary party,

as a person who has aided, abetted,

counselled or procured the commission of a

crime is now called."

47. I think this case is distinguishable from Giorgianni's case because the provisions of s. 79 are such as to indicate that the legislature intended the provisions of s. 5 of the Crimes Act to be displaced by its provisions which provide a comprehensive code for the prosecution of persons who are alleged to have committed, or to have been involved in, breaches of the provisions of Part V of the Act.

48. My difficulty with the submission made by counsel for the defendant arises, however, because of the premise upon which the submission is based, namely, that the defendant, in relation to the Kangaroo Gift charges, was an aider and abettor and not a principal, in other words, not a person who, within the meaning of s. 79 of the Act, contravened a provision of Part V.

49. I do not decide in this case - it would be quite inappropriate for me to reach a conclusion about the matter - whether Mr. Korn or his company committed any breach of the Act. What I am concerned with is the question whether the defendant contravened such a provision. In my opinion, the evidence to which I have referred establishes, subject to the defence under s. 85 of the Act upon which the defendant relies, that it did contravene the Act. It sent bears not made in Australia to Kangaroo Gifts along with labels indicating that they were made in Australia intending that Kangaroo Gifts should attach those labels to the bears with the consequence that the defendant thereby represented to members of the public that bears not made in Australia were so made. For these reasons I do not regard the offences charged in informations Nos. G766-768 of 1987 as being in any different situation from those charged in the other informations. It follows that the prosecutor has established the elements of the offence in all cases except No. G761 of 1987 which should be dismissed.

50. The remaining question is whether the defendant has made out the defence provided for in para. 85(1)(b) of the Act. The paragraph is as follows:-

"85.(1) Subject to sub-section (2), in a

prosecution under this Part in relation to a

contravention of a provision of Part V, it is

a defence if the defendant establishes-

..........................................

(b) that the contravention in respect of

which the proceeding was instituted

was due to reasonable reliance on

information supplied by another

person; or

........................................."

51. With para. 85(1)(b) need to be considered subsections 85(1A) and (2) which are as follows:-

"85.(1A) In paragraphs (1)(b) and (c),

'another person' does not include a person

who was-

(a) a servant or agent of the defendant;

or

(b) in the case of a defendant being a

body corporate, a director, servant

or agent of the defendant,

at the time when the contravention occurred.

(2) If a defence provided by sub-section

(1) involves an allegation that a

contravention was due to reliance on

information supplied by another person or to

the act or default of another person, the

defendant is not, without leave of the Court,

entitled to rely on that defence unless he

has, not later than 7 days before the day on

which the hearing of the proceeding

commences, served on the person by whom the

proceeding was instituted a notice in writing

giving such information that would identify

or assist in the identification of the other

person as was then in his possession."

52. Counsel were agreed that it was for the defendant to establish, upon a balance of probabilities, that:-

(a) relevant information was supplied; (b) the defendant relied on it; and (c) such reliance was reasonable.

53. I agree that this is the way in which the matter should be approached.

54. Ms. Barton gave evidence that on 28 January 1987 Mr. Bidder rang her and said to her that he understood that Grace Bros. had informed him that she had been making inquiries about model CA874 koalas which were labelled "Made in Australia". Ms. Barton confirmed that she had been making inquiries and said that she had seen apparently identical koalas which were labelled "Made in Korea". She said that it had been her intention to raise the matter with the defendant when she had more information. Ms. Barton said that Mr. Bidder told her that, in or about August or September 1986, the defendant started to try to make the model 874 koala in Australia. Previously it had been importing bears from Korea. According to Ms. Barton he said that "we" tried to copy and duplicate the Korean made version. Mr. Bidder added,

"We only made a small quantity as a trial.

We weren't very successful. Sewing the

fabric is difficult."

55. Ms. Barton asked what was involved in making the bears in Australia. According to her evidence, Mr. Bidder said:-

"We arranged with our Korean supplier to

bring the fabric in from overseas pre-cut

into pieces. We then stitch them up here at

our Brookvale premises using Korean-made

sewing machines. There is also a lot of hand

stitching involved. They are difficult to

make because of the hand stitching involved,

for instance the face has to be hand stitched

from the outside. The Australian content is

about 60%, minimum, of the cost of the toy.

The fabric pieces are cut using the same die

that is used to produce the Korean-made

version."

56. Ms. Barton asked how many koalas had been produced by this process and was informed, so she said, that only 400 of the model 874 koalas had been made. She asked about other models and was told about the "surfie" koala which was said to have an Australian content of about 95 per cent. Mr. Bidder said that the defendant was gearing up for full local production and not just a trial run. The trial run of the model 874 bears was to make sure that the defendant could carry out the process.

57. Ms. Barton asked if the fabric pieces imported from Korea for the model 874 bears were individual pieces or were pre-sewn into groups of pieces. She said that Mr. Bidder replied:-

"No, they are individual unsewn pieces.

There are about 20 separate pieces such as:

left arm; right arm; nose piece; eye

surround; ear; felt claws etc. These pieces

all come from Korea in plastic bags - a bag

of nose pieces, a bag of eye surrounds and so

on."

58. Later Ms. Barton asked Mr. Bidder whether he had ever imported model 874 koalas "in skin" form, that is, with all the pieces sewn together but unfilled. According to Ms. Barton Mr. Bidder said:-

"No, we have never brought it in in 'skin'

form as the fabric's pile flattens badly and

the toy needs hand finishing to restore it.

We couldn't duplicate the face and body shape

easily with the ones we were sewing here

because of the sewing machine work and have

found that they need careful hand filling to

ensure the right appearance when finished."

59. After some further conversation, Mr. Bidder said to Ms. Barton, "You are welcome to come to the factory and see the set up." Ms. Barton said that it would be most helpful to have Mr. Bidder show her precisely how the koala was made.

60. There was some further conversation in which Ms. Barton said that she would probably be approaching Mr. Bidder in the next week or two to seek a meeting at his Brookvale premises to discuss the matter further.

61. Ms. Barton annexed to her affidavit her notes of the conversation. The notes are detailed and were made, so Ms. Barton said, contemporaneously. Her affidavit is in accordance with them.

62. If this evidence were accepted at its face value, it would destroy the defendant's case based on s. 85 of the Act. This is because it would, in my opinion, strongly suggest that the defendant had not relied upon representations made by other persons as to what would, and what would not, entitle it to label the product as having been made in Australia. The evidence is therefore quite critical.

63. Mr. Bidder gave evidence of the conversation which he agreed had taken place over the telephone on 28 January 1987. According to Mr. Bidder, he said:-

"We have been importing these koalas fully

finished from Korea and found this to be a

very popular item and received a number of

enquiries from overseas. Because of its high

quality and ability to command a high retail

price, I thought this would be a good item to

make in Australia. I was also contacted by a

very large American retailer (Neiman Marcus)

early last year who indicated they would buy

big quantities of this item if it was made in

Australia. So I planned a trial production

of a small quantity to see if we could

achieve the same skill and quality which was

achieved in the Korean made koala."

64. Ms. Barton asked about the quantity which was being made. According to Mr. Bidder, he said:-

"Only a small quantity as a trial as we

wanted to make sure we can match the Korean

quality before we commit ourselves too

heavily. We weren't very successful at first

as there is an art to correctly filling and

hand sewing these koalas. It's very

difficult to get the correct expression. We

have to carefully stitch the face to give the

koala its expression."

65. Mr. Bidder confirmed that the koalas' faces were stitched from the outside. He estimated that they had a minimum of 60 per cent Australian content.

66. In relation to the "surfie" koala, Mr. Bidder said:-

"CA-878 which is a surfie koala. This had

about 90% or 95% Australian content. This

has been our main production. We use real

wetsuit made by a local wetsuit manufacturer,

even the surfboard is authentic. At present

the fabric pieces are pre-cut and sewn in

Korea, but from March I plan to do the

wetsuit ourselves and around May the

surfboards; by June we should even start

cutting the fabric ourselves."

67. Ms. Barton then asked Mr. Bidder whether the fabric pieces the defendant had imported from Korea were individual pieces or were pre-sewn into groups of pieces. According to Mr. Bidder, he said, "No, there are about only 20 pieces which we have already made up from unsewn pieces." By that he meant only 20 koalas.

68. Mr. Bidder confirmed the conversation about a proposed visit by Ms. Barton to the premises. There was other conversation but it is unnecessary to refer to the detail of it.

69. It is to be observed that the essential difference between the evidence of Ms. Barton and Mr. Bidder is in what was conveyed to her about the state of the pieces imported from Korea. Mr. Bidder's account of the conversation is of his having told Ms. Barton of the way in which the bears were in fact manufactured, that is, except for a small quantity, the casings were sewn in Korea from pieces of material cut in Korea, and filled and otherwise completed in Australia. The reference to sewing in Mr. Bidder's account of the conversation is based upon the sewing of the faces of the bears which, it is common ground, was done in Australia.

70. Ms. Barton, on the other hand, was given the impression that the pieces were imported separately and sewn here. I need to decide now whether I accept her evidence about the conversation or that of Mr. Bidder.

71. I have reached the conclusion that a most important factor which provides guidance as to the evidence which I should accept is the common ground between the two witnesses that Mr. Bidder offered and, at that stage, Ms. Barton accepted, a suggestion that she visit the factory and observe the manufacturing process for herself. The manufacturing process was at that time as I have found it to be. A cursory inspection by Ms. Barton would have shown her the reality and would have established that any statement made by Mr. Bidder that the sewing took place at Brookvale was false. I have earlier had occasion to refer to my assessment of Mr. Bidder as a witness. He is certainly not a fool. In my opinion, he is a business man of some shrewdness. I suppose this case raises the question whether Mr. Bidder, if not a fool, is a knave. A knave who is not foolish would not have been so reckless as to offer an inspection of a manufacturing process if that inspection would have quickly demonstrated that statements made by him about significant aspects of the process were false.

72. But there are other important factors to be weighed which tend the other way. Firstly, there is the contemporary note of the conversation which Ms. Barton made. Her evidence is consistent with it, as one would expect it to be. Her note contains a degree of detail which Ms. Barton could not have imagined. It gives an accurate account of the manufacturing process except insofar as it suggests that the pieces making up the casings were sewn here. Mr. Bidder's recollection of the conversation, on the other hand, is not nearly so precise and some of his own statements, according to the account of the conversation he gave, are vague and ambiguous.

73. A further factor is that Mr. Korn's evidence, if it were accepted, would be in accordance with that of Ms. Barton in that each of them has deposed to having been told that the sewing of the pieces was done in Australia rather than Korea. I have earlier reached the conclusion that I should reject Mr. Korn's evidence on this matter. In doing so, I did, as I have mentioned, have regard to the consistency which there is between Mr. Korn's evidence and that of Ms. Barton, but I preferred Mr. Bidder's version of the conversation, supported as it was by the evidence of Mrs. Hall.

74. In reaching a conclusion, I must, of course, weigh the impression I have of each of the witnesses, having observed them in the witness box. I rarely regard demeanour as the most reliable guide to the veracity or reliability of a witness. I much prefer more objective considerations such as contemporary documents, and the essential probabilities of the situation which is in question. I say at once that Mr. Bidder's evidence did make a favourable impression upon me but, in saying that, I would also say that nothing about the way in which Ms. Barton gave her evidence suggested to me that she was doing otherwise than endeavouring to give the best of her recollection about the events of which she spoke. In these circumstances I am driven back to the significance of the suggested visit to the factory which it is common ground was expected to take place. The evidence about it persuades me that I should accept Mr. Bidder's evidence and reject Ms. Barton's evidence insofar as there is any conflict between the two. I make it clear that I do not find Ms. Barton to have been dishonest; it is just that I regard Mr. Bidder's evidence as the more reliable. I am reinforced in that conclusion by the fact that, when Mr. Bidder was formally interviewed by Ms. Barton on 31 March 1987, he made no attempt to deceive her in relation to the manufacturing process. He told her straight out that the casings were made in Korea and imported into Australia.

75. In this regard, I should mention that, as I develop the account of the evidence that relates to the section 85 defence, it will become apparent that Mr. Bidder acted for many years on the basis that he could lawfully label goods as made in Australia if more than 50 per cent of the cost of manufacture were incurred here. It seems highly unlikely to me that Mr. Bidder would have bothered to mislead Ms. Barton about the manufacturing process. At all times he firmly believed that he was entitled to label goods as having been made in Australia if more than 50 per cent of the manufacturing costs were incurred in this country. That was the criterion on which he relied.

76. A further consideration is this. The telephone conversation which took place on 28 January 1987 was the first contact between the two. Although Ms. Barton was investigating the matter at that time, the call from Mr. Bidder was totally unexpected. She was not then at all familiar with his manufacturing process and this was the reason for her questions about it. In those circumstances the chances that there would be a misunderstanding about some aspects of the process were by no means small. I think this is the explanation for the conflict.

77. In reaching my conclusion, I have had regard to a further matter which counsel for the prosecutor submitted should weigh with me in determining which of the two witnesses I should accept. It arises from evidence given by Ms. Barton of a telephone call made to her by Mr. Symons, the then solicitor for the defendant. The telephone conversation occurred on 20 February 1987, over three weeks after Mr. Bidder's telephone conversation with Ms. Barton. Ms. Barton said that she said to Mr. Symons,

"Whilst I do not know the full facts yet ...

I have been concerned from the outset that

the C.A. koalas may have been imported in

skin form. Mr. Bidder has told me on the

phone that this is not the case and I am

looking forward to having him demonstrate his

production to me."

78. It is true, as counsel for the defendant submitted, that Ms. Barton's statement to Mr. Symons of what Mr. Bidder said to her is hearsay, but it serves to show Ms. Barton's then state of mind. She remained under the impression that Mr. Bidder had told her that the casings were sewn in Australia. Whilst this tends to demonstrate that there is an internal consistency in her evidence, the fact remains that what she said was immediately followed by a reference to the proposed visit to the factory. All the considerations to which I have earlier referred continue to apply. The visit would have shown her straight away that the casings were not sewn in Australia.

79. My conclusions on the evidence of the two witnesses of their initial contact being as they are, I turn to Mr. Bidder's evidence of the basis of his belief that he was entitled to label goods as made in Australia if more than 50 per cent of the cost of the goods was incurred here. Mr. Bidder said that he first commenced to explore the possibility of Australian manufacture in 1978. He began to consider exporting products to Europe and the United States of America and "started to look at the extent of Australian manufacture required for me to sell 'Australian made' product". He deposed to having had discussions with the Department of Trade in 1978 and said that he rang the Department's office in Sydney. According to his evidence, the following conversation took place:

"Myself: 'What do I have to do here

to be able to label my

products as Australian

made?'

Department of 'As long as you have more

Trade: than 50% Australian content

by way of materials, labour,

packaging, overhead costs

and your mark up, you can

then call your products

'Australian made.'

Myself: 'What do you mean by mark

up?'

Department of 'Mark up covers all your

Trade: other overheads as well as

your profit margin. For

example, even selling

commissions, you may have to

pay, would be included.'"

80. Mr. Bidder said that in 1979 he had a number of discussions with the Department of Trade in Sydney in which statements were made to him about the fact that he had only to build up his local costs to over 50 per cent to start selling as Australian made and that he should attend the 1980 New York Trade Fair (perhaps, more correctly, Toy Fair) where he could exhibit toys as Australian made if the local content was over 50 per cent of the total cost. He deposed to further conversations with Mr. Richard Fletcher of the Department of Trade who confirmed the advice he had previously been given.

81. He visited the New York Toy Fair in 1980. He met a Mr. Glasheen and a Mr. Levett. Mr. Levett was from the Australian Trade Commission in New York. Mr. Levett asked Mr. Bidder whether he had made any decision about Australian production. Mr. Bidder said that he was proposing to manufacture partially in Australia and would meet the "over 50% requirement in labelling toys Australian made", as his costs, including overheads, would clear the 50 per cent figure. Mr. Levett said that this was good because there was a great advantage in being able to label articles as being made in Australia.

82. The defendant took part in the 1981 New York Trade Fair. Mr. Bidder again saw Mr. Levett who said to him that he should continue with his project for finishing the animals in Australia so that he could sell them as Australian made. After the 1981 New York Trade Fair, he went to San Francisco and met Mr. Phillip Heald, an officer of the Australian Trade Commission in San Francisco. He said that his conversation with Mr. Heald included the following:-

"Mr. Heald: 'You realise that if you

export to the U.S. you have to

have the country of origin on

your label.'

Myself: 'By country of origin you mean

the same as I have to label in

Australia.

Mr. Heald: 'Yes. If you meet the 50%

test Australia is the country

of origin.'

Myself: 'I am planning to bring the

casings for my larger toys

into Australia and do the

filling and finishing locally.

However, the smaller ones will

only be checked and packaged

in Australia.

Mr. Heald: 'If all your local production

costs including materials,

labour and overheads are over

50% then there is no problem

in labelling the larger ones

as made in Australia. You

have problems with the smaller

ones as they are imported.'"

83. In February 1982 the defendant was one of a group of Australian toy manufacturers which participated in the Nuremburg Toy Fair in West Germany. Mr. Bidder said that an officer of the Australian Trade Commission, Mr. Cronin, had a discussion with a number of members of the group. The conversation included the following:-

"Mr. Cronin: 'I am from the Australian

Trade Commission and I have

come down to see how you

are all going. Are these

Australian animals made in

Australia?'

Myself: 'That is our intention. We

are planning to carry out

some local production.

Although the toys will also

have some overseas content,

our local costs all up will

be over 50%.'"

84. Mr. Bidder said that his experience up to 1982 led him to believe that, if the defendant were to succeed in its marketing of Australian made toys, it would need a special and unique range of high quality articles. He concluded that he would need to improve the defendant's designs, quality and finish. He said that he realized that he would have to spend a great deal of time, likely to be several years, developing the "right" range of products. In 1985 he began to receive a number of inquiries from overseas buyers looking for Australian animal products. This led him to finalize preparations for the manufacture in Australia of the lay-back koala. In the middle of July 1986 he contacted Austrade (which was formerly the Department of Trade) and had a conversation with an officer whose name he could not recall. He said that the conversation was to the following effect:-

"Myself: 'It's Chris Bidder of C.A. Toys

speaking. We have had a number

of dealings with Austrade over

the years. I understand that

previous advice you gave me

that where a product is

partially made overseas and

partially made in Australia you

can label it as made in

Australia if more than 50% of

the costs of manufacture

including materials, labour,

overhead and mark up are

Australian. I am planning to

start manufacturing and want to

check if this is still the

position.'

Austrade: 'Yes, that is correct.

Provided that more than 50% of

your production costs in

material, labour and overhead

including mark up is Australian

then the product is Australian

made.'"

85. I need now to turn to some further evidence. Mr. Heald is an American citizen and lives in San Francisco. Between January 1980 and June 1987 he was employed by the Australian Trade Commission in San Francisco as a marketing officer. His duties included advising Australian business enterprises in respect of actual and/or potential exports of manufactured goods from Australia to the United States. In the course of his duties he met with representatives of many Australian businesses and gave advice and assistance on the export of Australian products to the United States. He said that it was common for inquiries to be made as to the necessary criteria to enable Australian exporters to label their products as having been made in Australia. Mr. Heald said that it was his practice to tell the inquirers the following:-

"a. Products imported into the United

States of America for sale in that

country had to be labelled with their

country of origin in accordance with

U.S.A. regulations.

b. Products wholly manufactured in

Australia should be labelled 'Made in

Australia'.

c. Products partly manufactured in

Australia could be labelled 'Made in

Australia' provided more than fifty

percent of the total production costs

of the product comprising the costs

of materials, labour and overhead

were incurred in Australia."

86. Mr. Heald also said that, based on instructions given to him and fellow marketing officers in his presence by senior officers, it was the Commission's policy to advise Australian business representatives that products could be labelled "Made in Australia" if more than 50 per cent of the total production costs of the product comprising the costs of materials, labour and overheads were incurred in Australia.

87. Mr. Heald remembered meeting Mr. Bidder in San Francisco on a number of occasions and having several discussions with him. He said that he became aware that the defendant made a range of soft toys. The subject of the discussions usually concerned market development opportunities in America. Mr. Heald said that he had no recollection of telling Mr. Bidder about the criteria for the labelling of products as Australian made but believed that during one or more of his discussions he would have advised him in substance of the matters set out in paras. a, b and c above.

88. Mr. Heald's evidence was given on affidavit. The affidavit was sworn on 14 February 1989 in San Francisco before a notary public, Mr. T.A. Gallagher, whose name and address appear on the affidavit. The affidavit was filed on 3 March 1989.

89. Mr. Heald was called by the defendant and was required by the prosecutor to attend for cross-examination. He said that he had ceased to be employed by the Australian Trade Commission and was now a management consultant. He was asked questions which occupied a little over a page of the transcript. The cross-examination established that he is an American citizen, that he was born in America and that he had never visited Australia before. He was asked some perfunctory questions about the date of his conversations with Mr. Bidder. He was asked whether he knew a Mr. Glasheen, to whose evidence I shall refer, and he said that the general subject of his conversation with Mr. Bidder was about Mr. Bidder's desire to export toys to the United States. He agreed that the advice he gave was in the context of that subject matter.

90. I digress to observe, as I did at the conclusion of Mr. Heald's evidence, that Mr. Heald was brought from San Francisco for five minutes in the witness box. I agree that there are cases in which five minutes cross-examination can be devastating. This was not such an occasion. There was no challenge to the general purport of Mr. Heald's evidence. When I chided counsel for the prosecutor about the wasteful exercise which had been engaged in, I was told that the Trade Practices Commission had reservations whether Mr. Heald existed. Notwithstanding that the affidavit did not reach the Commission until early in March 1989, I would have thought that some simple inquiry made in San Francisco, if not of Austrade, then of the notary public, Mr. Gallagher, would have establilshed the truth of the matter. I do not know what the cost of bringing Mr. Heald to Australia was, but it must have been substantial. I have no hesitation in saying that his trip was unnecessary and involved substantial waste of money.

91. These considerations aside, I have decided that I should accept Mr. Heald's evidence. It serves substantially to corroborate the evidence given by Mr. Bidder.

92. After her initial telephone contact with Mr. Bidder, Ms. Barton interviewed him formally on two occasions, the second interview being held at his request. During the first interview on 31 March 1987, Mr. Bidder was asked about his discussions with officers of the Department of Trade. He was asked by Ms. Barton whether he had spoken to the Department recently and he said that he had spoken to officers in July 1986 and then again during the week before the interview. He was asked to whom he spoke and said that he had spoken to a Mr. Danilo and a Mr. Ian Suliman (sic). Mr. Pyle who was also present said that it was Mr. Solomon and that he and Mr. Bidder had seen him the previous Friday. Ms. Barton commented that she thought that it was surprising that Austrade would say what was attributed to it and added, "We will talk to Austrade".

93. Mr. Danilo was called in the prosecutor's case. Mr. Danilo said that he was a Trade Department officer with the Australian Trade Commission, otherwise Austrade, in Sydney. He had been employed by Austrade, which was previously the Department of Trade, since 1982. He said that he had no recollection or record of ever having spoken to Mr. Bidder, Mr. Pyle or any other representative of the defendant. He explained the nature of his duties and the nature of the inquiries he usually received in relation to the export of Australian goods. He said that his duties did not include giving advice about the labelling of goods either for the Australian market or any overseas markets. He said that, if he did receive inquiries about labelling for the Australian market, his practice was to refer the inquirer to other agencies "such as the licensor of the 'Advance Australia' logo or Trade Practices Commission." In the course of his cross-examination Mr. Danilo said that he was aware that it was not uncommon for the Department of Trade to promote Australian made weeks and events for various parts of the United States. However, he was not aware of the New York Trade Fair (or Toy Fair) and he did not know a Mr. Levett of the Australian Trade Commission office in New York; nor did he know Mr. Heald. He agreed that he spoke to a great many people who made inquiries and that he often had to spell his name for them, the relevance of this being that Mr. Bidder correctly spelt his name when informing Ms. Barton of it.

94. More importantly, he said that one of the criteria used to determine whether an export incentive should be granted was the degree of local content compared with overseas content of a product. He said that this would have been a matter on which, in March 1987, he would have given advice to members of the public over the telephone. Later he gave the following evidence:-

"But if it were the case that someone said to

you well, look, over 50 per cent of our total

production costs for this product is spent

right here in Australia, even though we have

some imported content as to the balance, that

product may or may not qualify depending on

the circumstances? ---Subject to

manufacturing in Australia or assembly in

Australia with the grant?

Yes? ---Yes."

95. However, he also said that neither Austrade nor himself would deal with labelling. He agreed that in March of 1987 it was possible that someone rang him and asked him questions about soft toys which were to be sold either in Australia or overseas.

96. Mr. Solomon is no longer employed in the Department of Trade but, so Mr. Danilo said, employed in a different government department in Victoria. There was nothing in the evidence to suggest that he was not available to give evidence. In those circumstances the question arises whether I should not infer that any evidence he might have given would not have assisted the Prosecutor's case, he being a government employee and thus, it might be said, a person more available to the prosecutor than to the defendant. Having reflected on the matter, I do not think I should take this view. It seems to me that the safer course is to approach the matter on the basis that he was not called as a witness and that speculation as to what he might have said about the terms of the conversation he apparently had with Mr. Bidder or Mr. Pyle is not of assistance in resolving the present problem.

97. I should next refer to the evidence of Mr. Glasheen who was called in the defendant's case. Between 1979 and 1987 he was a director of a company, Tetratoys (Aust.) Pty. Limited, which manufactured a range of wooden toys. In 1979 he was invited by the Department of Trade to exhibit the Tetratoys product range at the 1980 New York Trade (or Toy) Fair. Tetratoys were exhibited at the fair and Mr. Glasheen attended it. Mr. Glasheen said that Mr. Levett of the Australian Trade Commission in New York provided assistance in respect of the arrangements necessary for the exhibition of the toys. Mr. Glasheen recalled meeting Mr. Bidder at the fair and said that he recalled Mr. Bidder having discussions about Australian made toys with Mr. Levett who was in regular attendance at the fair. Mr. Glasheen attended the 1981 fair and again saw Mr. Bidder and Mr. Levett whom he described as a "helpful and enthusiastic representative of the Department of Trade".

98. Mr. Glasheen recounted a conversation in which he had participated with Mr. Bidder and an officer from the Australian Trade Commission at the 1981 fair. Mr. Glasheen said that on one occasion he had said to Mr. Bidder that Australian animals should be the drawcard for attracting customers to the Australian toy displays. Mr. Bidder said, "Well, I intend to start Australian manufacture of the larger toy animals by bringing casings into Australia and filling and finishing them locally. This will mean my local costs and overheads will be more than 50 per cent so I can label as Australian made". The officer from the Trade Commission said that he agreed that Mr. Bidder should proceed with his plans and added, "There is an advantage to us all".

99. Mr. Glasheen also said that he went to San Francisco in 1981 and had discussions there with Mr. Heald. Mr. Glasheen and Mr. Bidder were present in San Francisco at the same time and on one occasion saw Mr. Heald together. Mr. Glasheen said that during this conversation Mr. Heald told Mr. Bidder that "Made in Australia" was appropriate for the larger koala if it were filled and finished locally and the Australian costs were greater than 50 per cent.

100. In 1982 Mr. P.A. Fish was a director of Pafco Pty. Limited which was a toy manufacturer carrying on business in Chatswood, a Sydney suburb. In February 1982 he attended the Nuremburg Toy Fair in Germany where Pafco was exhibiting toys. Mr. Bidder was present. Mr. Fish said that an official from the Australian Embassy came to the fair to see whether he could do anything for the Australian exhibitors. Mr. Bidder had on exhibition some of his soft toys and the official asked whether they were "really made in Australia". A conversation followed, the detail of which Mr. Fish did not remember, but he heard the official say, "That's O.K. as long as they are of 50 per cent Australian content." Mr. Fish was not cross-examined, it being submitted that his evidence was not relevant.

101. One puzzling feature of Mr. Fish's evidence is his recollection of the official asking whether Mr. Bidder's soft toys were really made in Australia. So far as the evidence discloses, Mr. Bidder, upon his own case, was not making soft toys in Australia in 1982. It does not therefore seem that Mr. Fish's recollection could be accurate in that regard, but the critical part of the affidavit is consistent with similar statements which are to be found in Mr. Bidder's evidence and in the evidence of Mr. Glasheen and Mr. Heald.

102. The second of the interviews conducted by Ms. Barton of Mr. Bidder took place on 1 May 1987. In the course of that interview there was produced to Ms. Barton a copy of an extract from Hansard, the Proceedings of the Senate for 19 March 1987 (p. 1044). The copy recorded that on 5 December 1986 a question had been asked on notice of the Minister for Industry, Technology and Commerce. Amongst other things the Minister said:-

"The government's 'Australian Made' campaign

provides for the certification of goods as

'Australian Made' according to rules drawn up

by the government and advanced by the Advance

Australian Foundation."

"Those rules provide that the 'Australian

Made' certification mark, the distinctive

green and gold logo, will only be applied to

goods where at least 75% of the total factory

cost of manufacturing those goods has been

incurred in Australia. Special consideration

will be given where the materials or

components used in manufacturing are not

available in Australia and there are public

benefit considerations which should be taken

into account provided that 50% of the total

costs of manufacturing are incurred in

Australia."

104. The Minister went on to refer to guidelines issued by the Trade Practices Commission with regard to what constituted misleading or deceptive labelling of the origin of goods under the Trade Practices Act, but what he then said is not of relevance to this aspect of the case.

105. Mr. Philip Baron was called in the prosecutor's case. He is the Managing Director of Australian Souvenirs and Marketing Pty. Limited which carries on business in Melbourne. For many years he has purchased a variety of toys from the defendant. In more recent times these have included koalas. The purpose for which Mr. Baron was called was to establish that his company had distributed toys to various retail outlets at which they were displayed with "Made in Australia" labels attached to them. One of the exhibits to Mr. Baron's affidavit is a statement which, because of the way in which reference to it in the affidavit is made, it would appear Mr. Baron insisted on including in his affidavit. In the statement, Mr. Baron referred to a visit to the defendant's premises early in July 1986. Mr. Baron said to Mr. Bidder, "Why are you now labelling the koala with a label stating that it is made in Australia?" Mr. Bidder said words to the effect that he was legally entitled to do so on the basis of his costs. He said that he had been advised that he could label goods as made in Australia provided the local Australian costs were "of a certain percentage of imported costs" which was said to be the case with the model koala which Mr. Baron saw.

106. In the course of his oral evidence Mr. Baron said that he thought that his visit to the defendant's premises had occurred in late August or early September 1986 rather than July 1986.

107. Mr. Pyle is the Financial Controller of the defendant. He has held that position since October 1985. In September 1986 he had a conversation with Mr. Bidder in which he, like Mr. Baron, raised the question whether the koalas then being made could properly be described as being made in Australia. Mr. Bidder said that there was no doubt that an Australian made label could be used. He added,

"I've checked it out and received advice that

we are fully entitled to do so."

108. Counsel for the prosecutor submitted that neither Mr. Baron's evidence, nor that of Mr. Pyle was admissible or, if admitted, could be used to support the defendant's case. This was because each of the statements was hearsay. Neither established that Mr. Bidder was in fact told by anyone that he could label goods Australian made if more than 50 per cent of the cost of manufacture was incurred in Australia. I think there is force in this submission. A proper consideration of it would involve the analysis of the recent decision of the High Court in Walton v. The Queen [1989] HCA 9; (1989) 84 ALR 59. On balance I tend to the view that the evidence is admissible and does provide support for the defendant's case on two bases. Firstly, I think it goes to Mr. Bidder's state of mind, which, relevantly, is the mind of the defendant. The defendant's state of mind is in question because of its need to establish reliance on information which it received. Secondly, I think that, in any event, there are suggestions in Ms. Barton's questions of Mr. Bidder at the interviews and in the general conduct of the prosecutor's case, of recent invention. If, however, I be wrong in this conclusion, the omission of the evidence from account would not be of any consequence for the outcome of the case. The strength of the defendant's case is to be measured by reference to the more important, and plainly admissible, evidence given by Mr. Bidder, Mr. Heald, Mr. Glasheen and Mr. Fish.

109. Called in the defendant's case was Mr. D.A. Wiggins who is an accountant. The purpose of his being called was to establish that the amount incurred for manufacturing costs in Australia was well over 50 per cent of the total manufacturing costs. He said that in the case of the "surfie" koala, it was 78.8 per cent and, in the case of all the others except the model 875 bears, in excess of 60 per cent. The percentage for the model 875 bears was 58.7 per cent. This evidence was not the subject of any challenge except as to its relevance and I accept it.

110. The evidence of Mr. Bidder, Mr. Glasheen, Mr. Fish and Mr. Heald establishes to my satisfaction that in the years 1979 to 1982 Mr. Bidder was told on a number of occasions by representatives of the Australian Trade Commission or Austrade that he was entitled to label goods Australian made if more than 50 per cent of the total cost of producing the goods was incurred in Australia. He was told this in the context of a proposal to export goods as Australian made but I am satisfied that Mr. Bidder did not distinguish in his own mind between the position which might exist for exported goods and that which existed for goods which were to be sold in Australia itself. It follows that I am satisfied that the statements made to him about this matter constituted "information" supplied by other persons within the meaning of para. 85(1)(b) of the Act.

111. The next question is whether or not Mr. Bidder relied on that information in labelling the koalas as he did. The whole purport of his evidence is that he did. If I had accepted Ms. Barton's account of her initial conversation with Mr. Bidder on 28 January 1987, I would have had a different view, but I have not accepted that account. It was submitted to me that I could not be satisfied that information given to Mr. Bidder in the years 1978 to 1982 continued to play a part in his decision making in 1986, some four years later. But that omits from account the evidence given by Mr. Bidder of how the koalas were developed and also of his realization in 1982 that he still had some way to go before he could hope successfully to export Australian made articles to other countries. I have set this evidence out at length earlier in these reasons. Mr. Bidder's evidence shows that delay in marketing the bears occurred because of his desire to make sure that they would be a high quality product which would resemble as closely as possible a real koala bear.

112. There were criticisms of Mr. Bidder's reaction to the Trade Practices Commission's request for an interview and suggestions were made that he had deferred attending an interview for as long as possible, that he had not been co-operative and that some of his answers to questions had lacked frankness and were inaccurate in some respects. These matters were put in order to persuade me that the defendant's case based on statements to the effect that it could label articles as made in Australia if more than 50 per cent of the manufacturing cost were incurred here, were fabricated or conveniently called to mind as a means of overcoming the problem which faced it.

113. I find it difficult to draw the conclusion that there was any reluctance in Mr. Bidder's preparedness to attend an interview with the Trade Practices Commission. This is because of his suggestion, when Ms. Barton first made contact with him, that she come to the factory. There is no issue about this matter and I do not understand how anyone could be more co-operative about a problem of this kind than to offer an investigator such as Ms. Barton an opportunity of coming to the factory to see for herself what the process involved.

114. I think that any signs of a lack of frankness or willingness to co-operate which may emerge from a detailed consideration of the records of interview must be considered in the light of the Commission's own approach to the problem soon after the telephone conversation of 28 January 1987. On 6 February 1987 Ms. Barton wrote to Mr. Bidder informing him of the relevant provisions of the Act and of the consequences of a successful prosecution, namely, a penalty, in the case of a corporation, of up to $100,000 "per offence". I do not suggest that there was anything inappropriate in the Commission's warning Mr. Bidder as it did. It was no doubt fair and just that it should do so, but a company, such as his, would immediately have been alerted to the fact that it had a problem and, to use an expression, that "the gloves were off". Ms. Barton's eventual decision not to visit the factory would have confirmed this reaction.

115. It was in these circumstances that Mr. Bidder retained a solicitor and only agreed to an interview upon the basis that his solicitor should be present.

116. The first of the interviews took place on 31 March 1987. There is some dispute between the parties as to what was said and Ms. Barton has annexed to her affidavit her own version and a corrected version sent to her by the defendant's solicitor. There is little conflict between the two versions and it is quite unnecessary to resolve it. Indeed, counsel for the Commission was content to base his submissions about the interview on Mr. Bidder's version rather than that of Ms. Barton.

117. When it became clear that the koalas were manufactured as they were, that is, by the defendant filling casings which had been imported from Korea, Ms. Barton administered a caution to Mr. Bidder in which she told him that he was not obliged to say anything unless he wished to do so and that anything he did say would be recorded and might be used in evidence. There was then a discussion about why the warning had been given and a discussion between Mr. Bidder and his solicitor. The interview then continued. It did so, of course, in an atmosphere in which Mr. Bidder then knew that there was a real chance that his company would be prosecuted and that the maximum penalty, if the defendant were convicted, would be the number of offences for which the defendant was charged times $100,000.

118. It is clear on the evidence that Mr. Bidder made a serious mistake about whether there was one or more than one consignment of casings used in the manufacture of the bears. He was adamant that there was only one and he was clearly wrong about this, but apart from that matter, I do not find in the records of interview anything which tells particularly one way or the other about the critical matters that need to be decided.

119. There was then criticism of Mr. Bidder because the defence under s. 85 was notified to the prosecutor only one week before the hearing was to commence. It is difficult to criticise the defendant for this state of affairs when that is the obligation which the Act itself imposes upon a person who intends to rely on a defence under the section; see subsec. 85(2) earlier quoted. By that time the defendant knew that it had been charged with 21 offences under the Act and that its potential maximum liability for fines was $2.1 million. Even if the view were taken by its advisers that the case would not be likely to attract anything like the maximum penalties which could be imposed, their advice would have to have been that the defendant's potential liability was considerable.

120. I wish to emphasise that I make no criticism of the Commission's conduct in relation to these matters. It appears to me to have acted quite properly. My only reason for mentioning them arises from submissions made by counsel for the prosecutor that Mr. Bidder's conduct in some way left something to be desired. In my view his conduct was quite understandable in the light of the problems which confronted him. That is the only point I wish to make.

121. So I come back to the question whether I am satisfied that Mr. Bidder, in causing the defendant to label the koalas as it did, relied on the information which he had received on its behalf. Having considered the evidence and weighed up the probabilities I am satisfied that it did. The evidence of Mr. Pyle and Mr. Baron earlier referred to assists that conclusion, but it is a conclusion which I would reach whether that evidence were relevant to the question of reliance or not.

122. That leaves the question whether the defendant's reliance on the information was reasonable. The essence of the submission of counsel for the Commission that it was not, lay in the fact that the Department of Trade, the Australian Trade Commission and Austrade were not relevant authorities to give advice or guidance on the question whether articles should, or should not be, labelled as made in Australia. The offices of the Trade Practices Commission or State consumer affairs agencies were the appropriate bodies to consult for this purpose. Objectively speaking this is of course true. But to many people one department of Government speaking in a matter of this kind speaks for all departments. Mr. Bidder did not obtain any legal advice about the position until after prosecution was threatened. He had been told by a number of officials from the Department of Trade or its agencies that he was entitled to label the bears as having been made in Australia if more than 50 per cent of the manufacturing cost was incurred here. He worked with that goal in mind, oblivious of the fact that there might be other government departments or agencies which would have a different approach. It would not have occurred to him that there might be one rule which applied in the case of goods exported from Australia and another for goods intended for local distribution. It would not have occurred to him either that advice given him by various trade officials might simply have been wrong. I have earlier rejected a submission that I should infer that Mr. Solomon's evidence would not have assisted the prosecutor's case, but I do make the point that if advice of the kind which Mr. Bidder said he received was not being generally given in Trade Commission or Austrade offices at the relevant time, a witness could have been called in the prosecutor's case to establish this. No such witness was called.

123. In approaching the question whether a defence under s. 85 has been made out, I have obtained assistance from the judgment of Gummow J. in Adams v. Eta Foods Limited (1987) 78 ALR 611. His Honour was concerned with a prosecution based on contraventions of para. 53(a) of the Act. The defendant relied, inter alia, upon the provisions of para. 85(1)(b) thereof. His Honour drew attention to the fact that s. 85 had been amended in 1977. Having referred to the original and present forms of subsec. 85(1), Gummow J. said (p. 618):-

"I conclude that the mischief to which the

recast s. 85(1) was directed is to be

understood as follows. In its original form,

the provision was taken to incorporate and to

extend the principle that an honest and

reasonable mistake of fact will be a ground

of exculpation where actual knowledge is not

required as an element of an offence.

Nevertheless, the perception was that the

provision operated unduly harshly and that

amelioration in favour of defendants was

appropriate. This was sought to be achieved

by division of the sub-section so as to spell

out three heads of defence. Whether the

terms of the recast sub-section meet the

mischief I have described is a question for

the court upon the construction of the words

used: Re Bolton; Ex Parte Beane (1987) (162

CLR 514) [1987] HCA 12; 70 ALR 225; 61 ALJR 190 at

191, 197-8 (CLR at 578, 532)."

"The taking of reasonable precautions and

exercise of due diligence to avoid the

contravention in question no longer is

attached as a specific component in each

defence provided for by s. 85(1). It is now

attached as an element in the defence

provided for in para. (c). It is not

attached to paras. (a) and (b). They have

their own elements. In particular, both

mistake in para. (a) and reliance on

information in (b) must be reasonable. No

doubt reasonableness is an objective matter,

having regard, however, to the circumstances

of the case: cf He Kaw Teh v. R. (1985) 157

CLR 523 at 575; [1985] HCA 43; 60 ALR 449.

But in my view it is not necessarily fatal to

a defence of reasonable mistake within the

meaning of para. (a) that the defendant

cannot show that he took reasonable

precautions and exercised due diligence to

avoid the contravention. The question, more

directly, is whether the contravention was

due to reasonable mistake. Likewise, a

defendant may be able to show that, within

the meaning of para. (b), the contravention

was due to reasonable reliance on information

supplied by another person, even though the

defendant cannot also show that he took

reasonable precautions and exercised due

diligence to avoid the contravention."

125. His Honour went on to discuss para. 85(1)(c) of the Act which is not in question here.

126. In the result I have reached the conclusion that the defendant's reliance upon the various statements made by officers of the Department of Trade was reasonable in the circumstances. It follows that the defence under para. 85(1)(b) has been made out with the consequence that each of the informations should be dismissed.

127. The order I make is that each information be dismissed. There will be liberty to apply in relation to costs provided any application in that behalf is notified to the Registrar or to my Associate on or before 31 January 1990.