Swan, Maurice Charles v Downes, Stephen Thomas [1978] FCA 31

Federal Court of Australia|1978-05-09|Before: Franki J

Trade Practices Prosecution - Acceptance of payment without intention to supply - Submission of no case to answer ~ Whether in trade or commerce among the states.

MAURICE CHARLES SWAN v. STEPHEN THOMAS DOWNES (Qld. Nos. G7-16 of 1977)

; THE FEDERAL COURT OF AUSTRALIA QUEENSLAND DISTRICT REGISTRY GENERAL DIVISION

REASONS FOR JUDGMENT: FRANKI J. DELIVERED: 9 May 1978.

Maurice Charles Swan, the informant, with the consent of the Minister, laid ten informations under s.79 of the Trade Practices Act 1974 ("the Act") against Stephen Thomas Downes, the defendant, alleging contraventions of s.58(a) of the Act. By consent all the informations were heard together.

Section 58 is in Division 1 of Part V of the Act and provides::-

"A corporation shall not, in trade or commerce, accept payment or other consideration for goods or services where at the time of the acceptance it intends -

(a) not to supply the goods or services; or (b) ... "

fhe offences charged were particularised by alleging that the defendant in contravention of s.58(a) of the Act in trade or commerce within Australia accepted payment for goods where at the time of the acceptance he intended not to supply the goods. The goods concerned were books or magazines and in each information the name of the particular publication was set out and also the name of the person alleged to have paid the money. Each information also alleged that the defendant accepted money at the particular place where the contract of sale wes made, These places were situated in either Victoria, South

The defendant carried on business at Southport in Queensland under the business names "Town and Country Readers Service & Co." and "East Coast Readers Service & Co.". The business was commenced about 1974 and it consisted of soliciting orders for books and magazines and then, in most cases, arranging with a business associate in the United Kingdom to place sppropriate orders with the publishers for the supply of the books or magazines to the person from whom an order had been

received cz to the person nominated to receive the books or

The defendant arranged with certain persons, whom he called"sub-agents", to visit possible customers and solicit orders in various parts of Australia. In general, at the time when an order was given to an agent, payment was made either

by cheque or in cash and each day the cheques and cash received

were handed to a "manager" in the particular state where the orders had been received. There was some evidence that the "manager", after paying expenses, deposited the cheques and the balance of the money into an account of East Coast Readers Service & Co. and transferred the orders to the office in Southport. However, in each transaction in respect of which an information was laid, payment was by cheque and the cheque was deposited by the defendant.

When an order was received at the Southport office it was entered onto an order form in quadruplicate, There was some evidence that the orders were received from the

"managers" by mail. There was an order form for edch book or magazine so that if, for example, five persons ordered a@ particular book, the names and addresses of those five persons would appear on the order forn.

The procedure which was initially adopted was to forward tvo copies of the order to an associate in the United Kingdom and up to a certain time it appears as though the orders were fulfilled. However, towards the end of 1976 it seems that the defendant's business ran into financial difficulties and in November 1976 the defendant issued instructions that no orders which the business had received were to be forwarded onto the associate in the United Kingdom. The effect of this was that money was received over a period of one yeer at least from persons vy way of payment for books or magazines but the orders were not getting past the office in Southpcert.

At the conclusion of the informant's case the defendant submitted that there was no case to answer. The basis of the submission was first that s.58(a) so far as it related to an

individual, was confined, so far as is relevant, to trade or commerce among the states but the relevant conduct was not such conduct and secondly that it had not been established that any payment was accepted with an intention not to supply the goods.

Section 58 is expressed to apply to a corporation put 8.6 provides: ;

"6.(1) Without prejudice to its effect apart fron this section, this Act also has effect as provided by this section.

(2) This Act, other than Part X, has, by force of this sub-section, the effect it would have if -

. (a) any references in this Act other than , in section 55 to trade or commerce were, , by express provision, confined to trade or commerce - -

(i) between Australia and places outside Australia; (41) among the States;

(h) subject to paragraphs (d), (e), (f) end (g), a reference in this Act to a corporation, except a reference in section 4, 48, 50 or 81 or sub-section 88(9), included a reference to a person not being a corporation.

(3) In addition to the effect that this Act, other than Part X, has as provided by sub-section (2), Division 1 of Part V has, by force of this sub- section, the effect it would have if -

(a) that Division (other than section 55) were, by express provision, confined in its operation to engaging in conduct to the extent to which the conduct involves the

use of postal, telegraphic or telephonic services or takes place in a radio or television broadcast;

Section 6(2)(a) operates on s.58(a) so that it is to be read as "A person, not being a corporation, shall not, in trade or commerce among the states, accept payment ... for goods ... where at the time of the acceptance he intends not

to supply the goods", (See generally Ex parte CLM Holding. Pty. Ltd, 13 A.L.R. 273 at pp.279-280).

The expression "trade or commerce among the states"

is that used in s.51(1) and s.92 of the Commonwealth of Australia

Constitution Act with the exception that s.92 adds the words

"and intercourse", Section 6(2)(a) of the Act refers to reading, so far as is relevant, s.58(a) as if the words "trade or commerce" were, by express provision, confined to trade or commerce «mong the states. Although I do not consider it critical in the subject case the section does approach the delineation of the trade or commerce involved by using the word "confined'', It is necessary to look to the authorities in relation to s.51(i) and s.92 for assistance in ascertaining the meaning of "trade or commerce

among the states", The matter can be examined in the light of what is the, trade or commerce in which the corporation was

engaged or alternatively in the light of whether a particular transaction in respect of which payment was made was in trade

I consider that the more appropriate construction of 8.58(a) is that it requires the matter to be tested by examining whether the acceptance of payment was in relation to a transaction which was one in trade or commerce among the states. A corporation is defined in s.4(1) as including a trading corporation formed within the limits of Australia and also a foreign corporation. Many sections in Part V limit the proscribed conduct in relation to a corporation to conduct "in trade or commerce" (for example, ss.52, 53, 53A(1),! 54 and 55A) but others (for example, ss.53A(2), 60, 63A, and those in Division 2 of Part V) do not specifically do so. Whilst it is difficult to appreciate the significance of this it does seem to indicate that some effect must be given to the words "in trade or commerce" and this lends some weight to the view which I have expressed that the relevant consideration is that

'I propose first of all t3 examine whether any of the payments were accepted in a transaction of trade or commerce

In W. & A. McArthur Ltd. v. State of Queensland (1920) 28 C.L.R. 530 the High Court considered what were thu essential features of an offer for sale or a sale in order that the transaction should be one of interstate trade. The relevant facts in that case were stated by Knox C.J., Isaacs and Starke JJ. in a joint judgment at p.540 as follows:

"The plaintiff is a Sydney company carrying on the business of softgoods warehousemen, holding its

stocks - which include calico, sheeting and sheets -

. plaintiff in the following ways: (1) 'they offer for sale goods of the descriptions sold by the plaintiff, to be delivered in Queensland; (2) they

' obtain offers to purchase goods af the descriptions sold by the plaintiff, and forward the offers to the plaintiff in Sydney, where they are accepted, anc the goods are in fact despatched to the purchasers in Queensland; (3) they make agreements to sell goods of that description to be delivered in Queensland; and (4) they make agreements to seli goods of that description, stipulating that the goods are to be despatched from the plaintiff's warehouse in Sydney and jelivered by plaintiff to purchasers in Queensland, All the several methods have been pursued since the Act was passed and the Gazette notification published, and at prices for Calico, sheeting and sheets higher than the price declared by the Commissioner; and, unless prevented, the plaintiff Company intends to continu its established course of business. In this action the Company claims to restrain the State of Queensland, the Minister administering the Act and the Commissioner of Prices from instituting threatened prosecutions against its travellers and "rom enforcing the provisions of the Act in r.spect of the various classes of transactions mentioned."

At pp.559-560 in the same joint judgment, it was said:

"We then have to consider whether any of the four methods of transacting business above detailed are outside the operation of the Act, because they are of an inter-State character. The first and third of these methods do not necessarily involve any éct done outside Queensland or any transaction of an inter-State character. The goods offered for sale or agreed to be sold are not stated to be either by express stipulation or necessary implication supplied from New South Wales, or anywhere outside Queensland. A contract cf sale if effected or the delivery of goods agreed to be sold might, at the option of the vendor, for all that appears, be consummated entirely within thre State of Queensland. If so, it is impossible to say these transactions are of an inter-State character. A situation having considerable resemblance to this arises in provisions found in England and other parts of the Empire for service of writs out of the jurisdiction where breaches of contract take place within the jurisdiction. In Comber v. Leyland (1898) A.C., 524 a defendant abroad contracted to sell goods sent to him and remit the proceeds to England by bills, and

wl cecilia inte sae lenin is se etenien ee ool me a ee tes nm mth niente

he sold the goods and kept the proceeds. It was held that since his contract could all be performed abroad, no writ could be issued in England for service abroad. The first and third methods, as alleged, are consistent with either domestic or inter-State character. If the vendor elects to supply the goods from New South Wales, the actual

' movement of the goods from State to State would, of.course, be inter-State trade and commerce; and would be protected accordingly. But the 'offer for Sale' and the 'tagreement for sale' would not be changed in character, ani they are all we are concerned with as to the two methods mentioned. As to the second method, the traveller in Queensland does an act by which he aids or abets or becomes knowingly concerned in tie making of a contract in New South Wales which, if done in Queensland, would be an offence under sec.12. By the terms of sec.29(7 he is deemed to have committed the offence itself, end is punishable accordingly. Now, the thing done outside Queensland which is imputed to the traverlc. namely, a contract made according to the second meth. is similar to the first and third methods; that is, it is a contract for goods which neither by the expressed terms of the contract nor by its implication are necessarily deliverable from any State but Queensland, and, therefore, is not shown to be an inter-State transaction. The offence, consequently, as far as appears is one relating to purely domestic trade. The fourth method, according to the criterion of inter-State trade, commerce and intercourse above stated, is distinctly an inter-State transaction.

For the reasons stated, the plaintiff fails as to the first three methods and succeeds as to the fcurth."

"The meaning of the expression 'trade and commerce among the States! must be the same,.in sec.51(I.) and sec.92, and in both must embrace all that is

ordinarily comprised within the term 'trade and commerce' when taking place 'among the States.' "

Although other aspects of McArthur's Case are no longer good law the approach adopted by the members of the Court from whose judgment I have quoted has been referred to

on @ number of occasions, and always without dissent.

Examples of such references are Wrage v. State of New South

Wales (1953) 88 C.L.R. 353 by Taylor J. at pp.394-398. Dixon C.J. and McTiernan, Williams, Fullagar and Kitto JJ. agreed with the judgment of Taylor J. See also Williams v. Metropolitan and

Export Abattoirs Board (1953) 89 C.L.R. 66 at pp.74-76; Chapman v. Suttie (1963) 110 C.L.R. 321 at pp.337-338 and p.341;

and Mikasa (N.S.W.) Pty. Limited v. Festival Stores (1972) 127 C.L.R. 617 at p.639.

I am therefore of opinion that a transaction involving the making of a contract and the acceptance of payment for goods, both taking place within one state, is not one of trade or commerce among the states, if tested with reference to the particular transaction, unless it falls within the fourth method of trade set out in McArthur's Case, that is the agreement to sell, or the sale, in respect of which the payment is accepted must by an express term or by necessary implication stipulate that the goods are to be despatched from one state for delivery

v. The Commonwealth (1936) 55 C.L.R. 1 at p.60 that:

"One is that though trade and commerce mean the sare

thing in sec.92 as in sec.51(i.), they do not cover the same area, because sec.92 is limited to a narrower context by the word 'free'; the critical test of the scope of sec.92 is to ascertain what is meant by 'free'; their Lordships have sufficiently stated, and will not repeat, their opinion on that point."

However it seems that I should apply the tests set out in McArthur's Case to questions arising in relation to the words "trade or commerce among the states" which are imported into

C.L.R. 460 the question of whether a transaction was interstate trade was considered and the High Court pointed out that s.92 of the Constitution does not protect acts which may or may not lead to transactions of interstate trade and, at best, can only be preparatory to transactions which may or may not prove to have an interstate character. The appellants were convicted under s.15(3) of The Primary Produners' Organisation and Marketing Acts 1926-1946 of receiving a declared commodity

Street, Brisbane, as wholesale fru:.t and produce merchants.

By a telephone conversation H.C. Butt, a resident of New South Wales and a partner of J.E. Long & Co. of Jennings on the New South Wales side of the Queensland border, instructed the firm's agent, Profke, at Lowood, Queensland, to buy potatoes

on behalf of the firm from local growers in Queensland.

Profke accordingly bought sixty-one bags of potatoes, which were paid for by J.E. Long & Co.'s cheque and consigned by

rail by Profke in the name of J.E. Long & Co. to Roma Street railway station, Brisbane. On 17 May 1950, the day the potatoes arrived at Roma Street, Butt by telephone instructed the appellants to take delivery of the consignment and sell the potatoes on commission. The appellants took delivery of the consignment 'and sold the potatoes. They sent J.E. Long & Co. the account sales accompanied by a cheque for the proceeds of

-WmW- At p.479 the Court, in a joint judgment, said:

"It will be seen that there is no inter-State element in the whole transaction except that Butt'ts instructions to Profke and to the appellants! firm appear to have been communicated or transmitted from Jennings. Possibly the cheque paid to the growers for the potatoes also came from Jennings. The account sales and the cheque for the proceeds were doubtless delivered to the box in the post office at Wallangarra and, if taken across the border, were so taken by J.E. Long & Co. themselves.

The receiving of the potatoes, which is made the basis of the charge against the appellants under' s.15(3) is the receiving of the commodity into their possession in Brisbane by taking delivery of the sixty-one bags of potatoes at the Roma Street railway sheds and placing them on their stand at the markets whence they were sold. Obviously no inter-State trade was involved in the sale and Gelivery of the potatoes to Profke on behalf of J.E. Long & Co., the consignment to Brisbane, th? receipt of the potatoes by the appellants and their subsequent sale and delivery of the potatoes by the appellants acting for J.E. Long & Co. The fact that J.E. Long & Co. were in Jennings across the border does not alter the intra-State nature of the transaction in which they were concerned. The communications of J.E. Long & Co. with Profke and the appeliants' firm may in themselves have amounted to inter-State intercourse, but that does not make the transaction entered into as the result of those communications inter-State trade. It is accordingly clear that, considered as a whole, the completed transaction of which the receipt by the appellants of the potatces forms a part does not fall within the protection of s.92,"

I do not think that the nature of the defendant's business rather than the particula" transaction is the relevant

A, somewhat similar issue arose in Hospital Provident

Fund Pty. Ltd. v. The State of Victoria (1953) 87 C.L.R. 1. The question there was whether certain Victorian legislation

requiring registration by the applicant under the Benefit

Associations Act 1951 (Vic.) offended against s.92 of the Constitution. It was held by a majority of the Court that the Act did not contravene s.92 and the majority held that the business carried on by the plaintiff was not itself interstate commerce. At pp.38-39 Fullagar J. said:

"Yor it is very clear that a person may carry on business in every State of the Commonwealth and yet never engage in an act of inter-State commerce. Bach of the plaintiff companies appears to carry on business in more than one State, but that, of itself, means nothing that is relevant for the purposes of s.92. The fact that directors of one company reside in different States and meet sometimes in the one and sometimes in the other can in no way affect the nature of the business carried on by that company. The facts that' the company in one State makes contracts with persons in other States and receives 'contributions! from persons in other States, that it makes payments from its office in one State to persons in other States, that its servants and agents travel from one State to another on the company's affairs, that documents and communications are transmitted from one State to another - these things, severally or in combination, do nov mean that the business in which the company is engaged or any part of that business possesses the character of inter- State commerce."

Class 1 Information No. G7 of 1977. In this case the order was placed in Melbourne and payment was made by a cheque

drawn on a bank account in a Melbourne branch of a bank and

the cheque was deposited by the defendant at the St.Kilda Road branch of the Bank of New South Wales to the credit of

the account of East Coast Readers Service & Co. at that branch.

Informations Nos. G8, G11, G14 and G16 of 1977. In each of these cases an order was placed in South Australia and paymez.t was made by a cheque drawn on a bank account in a South Aus. ralian branch of a bank. Each cheque was then Geposited by the defendant at the Glenelg branch in South Australia of the Bank of New South Wales to the credit of the account of East Coast Readers Service & Co. at the St.Kilda Road branch of the Bank of New South Wales. There was evidence from an officer of the Bank of New South Wales that the amounts comprised in these cheques were transferred through the bank's internal system from the Glenelg branch in South Australia to the St.Kilda Road branch in Melbourne.

Class 3 Informations Nos. G9, G10 and G12 of 1977. In each

case the order was placed in Perth, West Australia, and payment made by a cheque drawn on a bank account in a West Australian branch of a bank. In each case the cheque was deposited by the defendant at a Perth branch of the Bank of New South Wales to the credit of the account of East Coast Readers Service & Co. at a Perth branch of the Bank of New South Wales.

Informations Nos. G13 and G15 of 1977. In each case the order was placed in Melbourne and payment was made by a cheque drawn on a bank account in a Victorian branch of a bank. The. cheques were deposited by the defendant at a South Australian branch of the Bank of New South Wales to the credit of the account of East Coast Readers Service & Co. at the St.Kilda Road branch of the Bank of New South Wales. Apparently the amounts comprised ia these cheques were transferred through the bank's internal system from the South

| Australian branch to the St.Kilda Road branch in Melbourne.

There was no evidence in respect of any information that payment was received on the basis that the contract of sale in respect of which the payment was accepted, by express term or necessary implication, required that the goods were to be despatched from one state for delivery in another state. In each case it was open to the defendant to supply the goods

from the state in which the order was placed if he so wished.

In my opinion in no case can the acceptance of payment be said to be in respect of trade or commerce confined

to trade or commerce among the states. I do not consider that

this finding is incompatible with the judgment in Wells v.

John R. Lewis (International) Pty. Ltd. (1975) 25 F.L.R. 194.

It is necessary to deal shortly with s.58(a) read 'in the light of s.6(3).

Very little was put by either party on this aspect. The informant argued that if cheques and orders crossed state borders in the post the transaction involved the use of postal services and so was proscribed by the combined effect of s.58(1)

In my opinion s.6(3), so far as it is relevant, only extends t) engaging in conduct to the extent to which that conduct iivolves the use of postal services. The conduct proscribed by s.58(a) read apart from s.6(2) is that of accepting payment in trade or commerce whether interstate, intrastate, or otherwise. All payments in the conduct charged were received directly by an agent of the defendant and did

I am satisfied that the submissions of the defendant on the first ground should be upheld but I feel it appropriate to make the comment that, on the material at present before me, the defendant's conduct in the transactions the subject of these informations does not appear to reflect any credit on

The submissions of the defendant on the second ground do not necessarily arise in view cf my finding on the first ground. I consider that if the submissions by the defendart on the first ground had been unsuccessful the relevant intent not to supply the goods could have been found against the defendant (see generally May v. O'Sullivan (1955) 92 C.L.R. 654

with regard to a submission of no case to answer). I do not

intend to deal further with the submissionson the second ground

because, in addition to being unnecessary, they would involve

an examination of the evidence inappropriate in the circumstances.

I find that there is no case to answer with respect

to each information and therefore I dismiss each of the informations.

I cerizfr thet thi3 ad tte fifteen preceding rages avo a true cony of the i Reasons for Judgment herein of his Honour ! Mr. Justice fraak.

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Judgment (104 paragraphs)

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