Samuels v Readers' Digest Association Pty Ltd

Samuels v Readers' Digest Association Pty Ltd - [1969] HCA 6 - HCA 1969 case summary — Zoe

[16]

The facts produced in support of this charge were that a witness, who as well as his wife, was a current subscriber to "The Readers' Digest", a magazine which is published monthly in Australia, received by post an envelope addressed to him and his wife. Clearly the envelope and its contents emanated from the defendant in Sydney. The envelope and portion of the papers it contained informed the addressees that they had already won a prize without any effort on their part or any participation in any contest and that by merely returning to the defendant in Sydney one of the sheets of paper which was contained in the envelope and which was called a certificate, with a small square of cardboard bearing a number suitably placed on the certificate, they would be eligible to win, in addition to the prize they had already won, again without effort or participation in any contest, a prize in what was called "The Readers' Digest $16,999 Lucky Number Contest". The square of cardboard bearing a number to which I have already referred was called "Readers' Digest Lucky Number Token" and was held in a small slot on the left hand end of the certificate. Thus by merely removing the token from one slot, and placing it in another and mailing the certificate to the defendant in Sydney the addressee could win a further prize. The papers in the envelope did not disclose the nature of the prize already won, and contained no information as to how prize winners in the Lucky Number Contest were to be determined but did contain information as to the nature of the principal prizes in the Lucky Number Contest. According to the literature in the envelope this gratuitous prize-giving was entered upon as a means of drawing attention to the "magnificent 10 record album" which was the subject of the offer contained in a further part of the enclosed material. This part contained an offer of a free ten-day trial of the records in the album and an offer to sell the album at what was claimed to be a "low price", some $22.51 less than the price of the records themselves, presumably if purchased separately in a retail store. It did not appear that the album itself could be bought otherwise than from the defendant. To obtain delivery of the album on trial the addressees were required to remove the lucky number token from its slot and place it in another slot upon the certificate marked "Yes Please" and which bore the legend "Yes send me my prize and mail me one set of "120 Greatest Hit Songs from Broadway" for 10 days free play". If the addressees did not want the album of records, the token could be placed in a different slot on the same sheet, marked "No Thank You" and bearing the legend "No, I do not wish to hear these records but please send me the prize I must win". If the Certificate were returned with the token in the slot marked "No", the addressee would be entitled to participate, as I have already mentioned, in the Lucky Number Contest as well as receive the prize already won. It was also said in this part of the literature that if the addressees placed the token in the "Yes" slot and mailed it as directed, and subsequently won a major prize in the Lucky Number Contest, a special $50 bonus prize would be paid. If the addressees obtained the album on trial, they could return it within ten days of its receipt without obligation but if they retained it they would be obliged to pay the stipulated price, which could be discharged by a deposit and instalments as specified in the papers in the envelope.

[60]

There is nothing fraudulent or deceptive in the inducement by material and non-monetary advantage either in the manner of its making or in the nature of things offered. Nor is there anything, either in itself or in its circumstances, which could possibly be classed as unfair trading of an order which could be brought by analogy within the scope of fraud or deceit. The section, for example, would make it criminal to make an offer of a baker's dozen for the price of twelve if the delivery of the thirteenth was made contingent on acceptance of the offer to buy twelve. To outlaw fraudulent or deceitful practices is but to secure freedom of trade and commerce as that freedom is understood in organized and civilized societies. To prevent cornering, restriction of competition in a society based on free competition in trade, or monopolization, particularly where disproportionate strength or advantage is the source of the power or ability to corner, restrict or monopolize, again to my mind is compatible with freedom of trade in such a society and laws providing means of such prevention can be regarded as regulatory in nature, and dependent on the length of their reach and the nature of their provisions, may well be regarded as compatible with the guaranteed freedom. But the offer of a material inducement such as in the present case has no similarity whatever to a deceitful, fraudulent, restrictive or monopolistic practice even if the ability to make it springs from great economic strength or a powerful position in a particular field of trade. The manner of trading it represents is common in Australia, exhibiting a great variety of forms with a wide variety of goods or material benefits being offered as inducement to buy goods or order or accept services. We were told that several States have like legislation to that in question here: but that fact, in my opinion, carries no weight whatever in the resolution of the question posed in this case. If all the States adopt the same restrictive measures in relation to some area of trade and commerce, it merely means that overall the harm done to national trade is the greater.

[64]

It may have been thought at the time special leave was granted that this Court's decision in Crafter's Case [1] necessarily fell for review in this. But it became apparent during the argument of the matter that this was not really so. Indeed, the complainant's counsel did not really rely upon that case, except as a terminal argument, all else failing and then but faintly. And upon a close examination of that case the manifold differences between its circumstances and those of this became apparent. Here the trader is offering his own goods both as the principal matter of the proposed transaction and as the subject matter of his inducement. There it was a trading stamp company dealing only in stamps and not at all in goods, except in so far as goods were involved in the redemption of the trading stamps. We are here concerned with a substantially different aspect of the South Australian statute, namely, that which seeks to prevent all traders from offering inducements other than cash discounts to promote their trade and does so by throwing a very wide net; for example, the delivery of a packet of a household commodity would appear to be forbidden under criminal penalty if on the packet there is an offer to the purchaser of a free cookery book. It was not considered necessary by the Court in Crafter's Case [1] to consider this operation of the Act. I do not find it necessary therefore to express any concluded view on the propriety of the precise decision in Home Benefits Pty. Ltd. v. Crafter [1] in relation to its own facts and to that part of the statute on which the offence in that case was said to rest. Suffice it to say that I would be unable to accept any of the very divergent reasons then given for that decision. These were propounded at an earlier time before such decisions as the Bank Case [2] and Hughes and Vale Pty. Ltd. v. New South Wales [No. 2] [3] . Certainly I would not feel bound to follow and apply it if its decision were material to the resolution of this case. There is little room for stare decisis in this field: I have expressed elsewhere, however, my opinion as to the occasions on which earlier decisions should be departed from: Spratt v. Hermes [4] .

[77]

Among the contents of the envelope was a card which was marked as divisible into two parts. One part, which letterpress on it called the stud, had a detachable portion describing itself as "Readers' Digest Lucky Number Token". The other part, referred to in the case as the reservation card, bore on its face the names and address of Mr. and Mrs. Davis, and had two pairs of slots, one pair marked Yes and the other No, in either of which the lucky number token, when detached from the stub, could be inserted. Letterpress indicated that if the reservation card were returned to the defendant with the token inserted in the Yes slots it would be a request to the defendant to send Mr. and Mrs. Davis a "mystery prize" and to mail them one set of gramophone records for ten days' free play; but that if it were returned with the token inserted in the No slots it would indicate that Mr. and Mrs. Davis did not wish to hear the records but were requesting that the mystery prize be sent to them. Another document, headed "You have already won a prize", explained that the records, ten in number, were records of "the 120 greatest hit songs from Broadway", and that the recipients, if they should take the set for the ten days' free trial, might either return them within the ten days and owe nothing, or buy them at a stated price (which was represented as substantially below their normal retail price) and pay for them by instalments over a period of five months. If the recipients should send in the token in either pair of slots they would be eligible for one of a number of "major" prizes, and if they should win such a prize after saying Yes to the offer they would qualify for a special bonus prize of $50. Still another document in the envelope informed the recipients that if they should within ten days mail the card asking for the ten records and should keep the set after the ten days' trial, the defendant would send them another record, called "Broadway Show Stoppers", free of charge.

[78]

The first count of the complaint, as explained by particulars that were given, charged that the defendant at Glenunga, in connexion with the advertising of the ten records, delivered to Mr. and Mrs. Davis, with an advertisement (of the records) consisting of the document headed "You have already won a prize", a trading stamp, being either the lucky number token or the reservation card with the token attached, "in so far" (the particulars said) "as it concerns the free record Broadway Show Stoppers". (I omit superfluous alternative allegations which the evidence does not support and the complainant would have been well advised to leave out.) A contention that the Act on its true construction applies only to acts done not only in South Australia but by persons who are in South Australia at the time of doing them may be put aside as obviously untenable; but a second contention, that neither the token nor the reservation card with the token attached was a "trading stamp", requires consideration. The expression "trading stamp" is defined by s. 4. Although the definition is expressed as inclusive it is in truth exclusive since "trading stamp", unexplained, is a meaningless expression. The definition is lengthy, and there is no need, as I regard the matter, to do more than point out that it cannot apply to anything which does not authorize or entitle "the holder thereof or person producing the same" (or any number or combination of the same) to receive, or purport to promise that "such person" will or may receive, money or goods. An essential feature of a "trading stamp" is therefore missing if the only authorization or entitlement or purported promise is given to particular persons as personae designatae and upon their performing other conditions than simply being the holders or the persons producing a coupon or the like. The token and the card in the present case were addressed to Mr. and Mrs. Davis by name, and the promise that was held out to them of receiving a free record was conditional upon their purchasing the set of ten records, and not upon their holding or producing the token or the reservation card with the token attached to it. In my opinion the charge in the first count fails for this reason.

[83]

In Home Benefits Pty. Ltd. v. Crafter [1] a coupon company was charged under s. 5a (2) (b) of the Act with having encouraged a person to dispatch in South Australia to it in New South Wales, in exchange for articles such as butter-knives, to be sent to him by the defendant from New South Wales at prices lower than their value, a specific number of labels, each forming a part of a package in which tea of a particular brand was sold by another company. The coupon company contended that unless s. 92 provided a good defence to the charge the Act impaired the freedom of inter-State trade in respect of its own trade in the articles it offered to exchange for labels, or alternatively in respect of the tea merchant's trade in tea. Lord Atkin's judgment in James v. Cowan [2] and Lord Wright's judgment in James v. The Commonwealth [3] had been delivered, but much had yet to be explained, both by the Privy Council and by this Court, as to the nature of the freedom which s. 92 should be understood as intending to confer. The judgment in James v. The Commonwealth [3] recognized that laws there described as "regulatory" of trade were not inconsistent with the freedom of trade, but what had yet to be made clear was that the reason for this is, not that there is some implied proviso to s. 92 preserving "regulatory" laws notwithstanding an interference with freedom, but that "regulatory", if properly used in this connexion, refers to a kind of law which operates upon inter-State trading or commercial activity and yet cannot fairly be said, as a matter of common sense, to impede, restrict or burden it: see the observations of Fullagar J. in Hughes and Vale Pty. Ltd. v. New South Wales [No. 2] [1] , approved by Dixon C.J. in Greutner v. Everard [2] . But it was not apparent upon the face of either of the Privy Council judgments, and indeed it did not become received doctrine until the Banking Case (The Commonwealth v. Bank of New South Wales [3] ), that s. 92 confers freedom from such restrictions and burdens only as are imposed upon inter-State trade by the direct operation of laws or of executive acts as distinguished from being merely the consequences or indirect results of such laws or acts. Even after the Banking Case the test for distinguishing between direct operation and consequential result had yet to be fully worked out. Dixon J. had suggested a formula by his proposition in O. Gilpin Ltd. v. Commissioner for Road Transport and Tramways (N.S.W.) [4] that

[85]

The answer which Latham C.J. and Starke, Evatt and McTiernan JJ. gave to the defendant's argument upon s. 92 was, in substance, that the operation of the legislation in the particular case was to prohibit a supposedly objectionable method of trading in tea, as distinguished both from the trade in tea and from the dealings of the coupon company with the purchaser of tea, and that a law merely forbidding a particular method of trading was a "regulation" of trade, in the sense which James v. The Commonwealth [5] had held to be consistent with the freedom conferred by s. 92. Starke J. alone referred expressly to the proposition advanced by Dixon J. in O. Gilpin Ltd. v. The Commissioner for Road Transport and Tramways (N.S.W.) [6] , and he did so in order to say that he thought it could not be adopted in view of the Privy Council decisions and the decisions of the High Court in a group of cases beginning with R. v. Vizzard; Ex parte Hill [1] . The High Court decisions to which Starke J. referred have since been overruled by the Privy Council in Hughes and Vale Pty. Ltd. v. New South Wales [No. 1] [2] , and there was in truth nothing inconsistent with Dixon J.'s proposition in James v. Cowan [3] or in James v. The Commonwealth [4] . Dixon J. himself, while not reiterating his proposition in terms in Home Benefits Pty. Ltd. v. Crafter [5] , dealt with the s. 92 point in that case in a manner which did not depart from it. Like the other members of the Court, he considered that the transaction between the purchaser of tea and the coupon company was not an independent commercial dealing or part of an independent trade or trafficking in goods, and therefore was outside the protection of s. 92; but of course the inter-State sale and distribution of tea were within the protection, and his Honour's reason for holding that the legislation was compatible with that freedom was that its operation was upon "a secondary consequence or incident in the sale or distribution", upon "an accessory transaction to principal transactions which otherwise are left entirely free".

[90]

The logical force of this formulation, perhaps nowhere better illustrated than by the Vacuum Oil Case [1] , has been accepted and given effect to by the Court in Grannall v. Marrickville Margarine Pty. Ltd. [2] ; Beal v. Marrickville Margarine Pty. Ltd. [3] , and a number of other cases. The Margarine Cases were cases of manufacture, but the principle for which they are authorities is missed if they are thought of as having been decided as they were because of some consideration applying exclusively to manufacture. The ratio decidendi had to do, not with anything peculiar to manufacture, but with the distinction between laws which impose by their own force restrictions or burdens upon the very things which s. 92 protects, namely inter-State trade, commerce and intercourse themselves, and laws which impose restrictions or burdens upon things antecedent or preparatory or collateral to inter-State trade, commerce or intercourse and affect such trade, commerce and intercourse as a matter only of economic or practical consequence. The application of that ratio decidendi to cases other than cases of manufacture is not an extension or development of the law as laid down in the Margarine Cases and the long line of cases from which they extract the essence. It is not open to be condemned as resulting rather from a pursuit of logic than upon the actual provisions of the Constitution. The purpose of the test which Dixon J. propounded is the exact opposite. It is to bring thought on the subject back to the very terms of the Constitution, and to insist that since s. 92 decrees freedom for nothing but trade, commerce and intercourse among the States no considerations of logic or supposed reasonableness should be allowed to extend the freedom beyond that concept to facts, events or things which, though incidental or ancillary or conducive to or necessarily consequential upon some activity of trade, commerce or intercourse [1] neither form part and parcel of it nor give it the quality of inter-Stateness. It seems to me that when such a precisely-worded statement of principle has been worked out by strenuous thought over a long period of years, and has been made the basis of the Court's decisions in a succession of cases on the ground of its exactness in defining a complicated concept which the Constitution expresses with economy of language, the national interest is well served by a continuing acknowledgment that to that extent certainty as to the meaning of the Constitution has been achieved.

[113]

In most questions concerning the consistency with s. 92 of laws which in some way affect the conduct of any description of transaction or activity occurring in the course of inter-State trade commerce or intercourse there is nothing better calculated to open the way to a true solution than to distinguish between on the one hand the features of the transaction or activity in virtue of which it falls within the category of trade commerce and intercourse among the States and on the other hand those features which are not essential to the conception even if in some form or other they are found invariably to occur in such a transaction or activity. Much the same line of reasoning was applied in Mansell v. Beck [4] , where in the judgment of Dixon C.J. and Webb J. it was said: The fact that the "transaction" beginning with the acceptance of the money and ending with the delivery of the ticket may possess an inter-State character does not take the defendant far enough for a reason arising from the operation of s. 92 as it has now come to be applied. The reason is that it still remains to consider whether the provision impugned, notwithstanding that in this particular case its effect is to penalize the acceptance of money with which the transaction begins, is in truth a law impairing the freedom which is constitutionally assured by s. 92. To give a law that character it is not enough that there are or may be transactions of inter-State trade, commerce or intercourse that are adversely affected by the operation of the law. That may be a consequence of a law which is not concerned with any fact, matter or thing forming part of inter-State trade, commerce or intercourse but takes for its operation events or circumstances or conduct which of their own nature do not fall within that conception and do not constitute or necessarily include any essential element or attribute of trade, commerce and intercourse among the States. A law which imposes restrictions or burdens upon some description of act matter or thing not of its own nature forming part of inter-State trade, commerce or intercourse and does so because of some characteristic which is independent of any element entering into that conception is very unlikely to be found to destroy impair or detract from the freedom secured by s. 92. It may conceivably do so if upon examination of the facts and scrutiny of its intended operation it appears that in spite of the prima facie absence of any but an accidental interference with inter-State trade, commerce and intercourse the law is but a circuitous means of burdening, restricting or impeding operations of a kind which s. 92 protects. But no such vice can be imputed to the enactment under discussion and the qualification which the possibility demands may be ignored in considering the true relation of the prohibition contained in s. 21 of inter-State trade. The basis of the prohibition is the existence of a lottery. If the legislation had taken this basal conception and independently of the place where or whence the lottery was conducted had prohibited the selling of tickets and the acceptance of money for the purchase of tickets there would be little difficulty in regarding the case as one in which a law taking no aspect of trade, commerce or intercourse among the States and no attribute of that conception as the criterion of its operation, produced an incidental effect upon given transactions of inter-State trade, commerce or intercourse. In the same case Fullagar J. quoted the passage from the Hughes and Vale Case [1] and then went on to quote from the judgment of Dixon J. in Gilpin's Case [2] : given an act or transaction which falls within the conception of trade, commerce, or intercourse among the States and a restriction or burden operating upon that act or transaction, it appears to me that it must be an infringement upon the absolute freedom guaranteed by s. 92 unless the restriction or burden is imposed in virtue of or in reference to none of the essential qualities which are connoted by the description "trade, commerce, and intercourse among the States". 1. (1955) 93 C.L.R., at p. 162. 2. (1956) 95 C.L.R. 550, at pp. 564, 565. 3. (1955) 93 C.L.R., at p. 162. 4. (1935) 52 C.L.R., at p. 206.

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