Trade Practices Commission v. Madad Pty Ltd (trading as Sealy of Australia) [1979] FCA 21

Federal Court of Australia|1979-03-15|Before: Keely J

' / / . ee \ . arf 7 MR PS LeCK HAR | CATCHWORDS ST

Trade Practices - practice - determining pecuniary penalty where admissions made ~ whether sworn evidence required - whether affidavits to be filed and served before hearing -

Trade Practices - resale price maintenance ~ manufacturer attempting to induce retailer not to sell goods below specified price - ignorance that conduct contrary to law -

pecuniary penalty - Trade Practices Act 1974 ss. 48, 76, 96.

Trade Practices Commission v. Madad Pty Ltd trading as Sealy of Australia

MADAD PTY LTD trading as SEALY OF AUSTRALIA Defendant

The defendant pay to the Commonwealth, in respect

of the contraventions of s.48 of the Trade Practices

(a) $7,000.00 in respect of the contravention alleged in paragraph 4 thereof;

(b) $7,000.00 in respect of the contravention alleged in paragraph 7 thereof;

judgment be entered for the Trade Practices Commission

on behalf of the Commonwealth of Australia for the sum of $21,000.00. 3. The defendant pay to the plaintiff the costs of and

incidental to these proceedings including all costs

IN THE FEDERAL COURT OF AUSTRALIA ) ) No. Gl of 1978

MADAD PTY LTD trading as SEALY OF AUSTRALIA Defendant

This is a claim by the plaintiff Trade Practices Commission for orders that the defendant pay to the Commonwealth pecuniary penalties in respect of certain alleged contraventions of s.48 of the Trade Practices Act 1974. The defendant, Madad Pty Ltd, was at all material times a company incorporated in the State of Queensland trading under the registered business name of Sealy of Australia. The defendant did not maintain dealerships or franchise agreements and sold to any retailer (subject to normal credit checks) a range of mattresses under the trade name of Sealy Posturepedic. The Court was not informed as to the numbers of retailers to whom sales were made by the defendant.

Mr Jerks for the plaintiff and Mr Fitzgerald Q.C. appeared

with Mr Cooper for the defendant. It was admitted by the defendant that "in or about the month of March 1977 at Brisbane the defendant attempted to induce" each of three retailers "not to sell at a price less than a price specified by the defendant (the price specified by the defendant being a price which represented 10% off the price recommended by the defendant) Sealy Posturepedic mattresses supplied to" each of the three retailers "by the defendant". The three retailers were: Sandman Slumber Centre Pty Ltd | B. W. Coles (Discount Furniture) Pty Ltd A-Mart International Pty Ltd. It was also admitted that the defendant was at all material times a supplier within the meaning of Part VIII of the Act of mattresses to each of the said three retailers. Having regard to the provisions of s.96(1) and (3)(b) of the Act, I find that the defendant engaged in the practice of resale price maintenance by its acts in respect of each of the three retailers and such acts in each case contravened s.48 of the Act which provides that "A corporation or other person shal} not engage in the practice of resale price maintenance". Before the hearing commenced a question arose as to the proper practice to follow, where admissions have been made, in placing material before the Court on the question of penalty. As the matter was referred to by both counsel at the

hearing it is perhaps desirable that I should express my view

and my reasons for it. A relatively short time before the

hearing my associate was informed by counsel for both parties that admissions as to certain allegations in the statement of claim would be made at the hearing by the defendant and that other allegations of contraventions would be withdrawn by the plaintiff. Counsel for both parties also informed my associate that they each intended to place before the Court material relevant to penalty simply by statements from the bar table.

No sworn evidence, either oral or on affidavit, was to be placed before the Court unless a statement by one counsel as

to the facts, made in the course of his address, was disputed by the opposing counsel. That proposed course of conduct was said to be in accordance with the practice of the Supreme Court of Queensland in considering matters of penalty in criminal proceedings. .

At my direction my associate informed counsel for both the plaintiff and defendant that the Ccurt as presently constituted required the factual material on the question of penalty to be by affidavit filed and served no later than 3.00 p.m. on the day before the hearing with a right in each party to cross-examine deponents and to file affidavits in reply.

S.76(1) in empowering the Court to make the orders sought in the present case requires that any pecuniary penalty

"as the Court determines to be appropriate having regard to all relevant matters including the nature

or damage suffered as a result of the act or omission, the circumstances in which the act or omission took place and whether the person has previously been found by the Court in proceedings under this Part

In my view the statutory direction that the Court have regard

to the matters specified makes it desirable that each party

which wishes the Court to take into account in determining a penalty any matter of fact should establish that fact by sworn evidence - unless some reason is advanced which satisfies the Court that particular facts, which have been expressly agreed upon by the parties, should be accepted by the Court. I do not consider that it is satisfactory that counsel for either party should have to decide whilst opposing counsel is addressing the Court whether to object to assertions in that address as to the facts. A properly informed decision as to whether those assertions are accurate might well require counsel to have discussions with officers of the plaintiff or the defendant (as the case may be) or with officers of one or more companies affected by the alleged contraventions.

Accordingly, I consider it preferable that evidence of

the facts which either party proposes to rely on should be Placed on affidavit and filed and served upon the opposing party in sufficient time to enable it to check the accuracy of the statements in it. It may be necessary for it to seek

detailed instructions as to the facts asserted in order to

enable cross-examination of a deponent or for the preparation

of affidavits in reply. Parenthetically, I might add that in the present proceedings, because of the late stage at which the Court learnt of the course proposed by the parties, the time fixed was much shorter than is desirable. The obtaining of sufficiently detailed instructions may well take a considerable time as it may require the plaintiff, for example, to discuss with persons affected by the alleged contraventions (such as the three retailers in the present proceedings) the contents of any affidavits filed on behalf of a defendant. , | Other matters which appear to me to reinforce the need for sworn evidence may be briefly summarised as follows: (a) Having regard to the object of the Act, the

determination of an appropriate penalty is a matter

'of considerable importance to the public. As Smithers J.

said in Trade Practices Commission v. Stihl Chain Saws (Aust.) Pty Ltd (1978) A.T.P.R. 40-091 at 17,896: "So far as resale price maintenance is concerned the object of the Act is to create conditions in which the public will benefit from traders' competing with each other in respect of prices unfettered by price restraints imposed by suppliers of goods upon retailers." (b) \ Full and accurate material as to all matters relevant to penalty is important because of the wide range of the penalty prescribed - "... not exceeding $250,000

The Queensland practice referred to was as to criminal proceedings and both counsel agreed that this present matter is not a criminal proceeding (s.78(a)).

However, even in criminal proceedings the Court in considering the appropriate penalty normally has before it the sworn evidence given at the trial or, if there has been a plea of guilty, the sworn evidence

contained in the depositions taken at the committal proceedings. The sworn evidence would normally deal

in some detail with matters similar to those specified in s.76(1) e.g. "the nature and extent of the act", "the circumstances in which the act ... took place"

and the "loss or damage suffered as a result of the act", By way of contrast the course proposed by the parties in this matter would have left the Court to determine penalties without any sworn evidence at all - unless some assertion of fact by one side was expressly put in issue by the other side.

In any event, even as to criminal proceedings where the Court normally already has sworn evidence before it, in R.v.McIntosh and others (1923) St. R. Qd 278 at 282-3, the Queensland Court of Criminal Appeal, specially constituted by five Judges (McCawley C.J., Shand, Lukin, Blair and Douglas JJ.) said:

"... We think it desirable to emphasize that the circumstances relevant to punishment should be

counsel and counsel for the accused, and that

fuller details than it has been customary to furnish should be afforded, particularly in ; regard to first offenders." 1 It was submitted by Mr Fitzgerald Q.C. that it is a matter for the parties what matters are put before the Court in relation to penalty. In my opinion in order to be able to determine an appropriate penalty under s.76 of the Act the Court should have the benefit of sworn evidence as to all material in the plaintiff's possession which is relevant to penalty. In this connection I adopt with respect, as being equally applicable to the function of this Court in determining a penalty under s.76, the following words of the Queensland Court of Criminal Appeal in R. v. McIntosh and others (supra): ""We ... emphasize that the circumstances relevant

to punishment should be fully placed before the trial Judge by Crown counsel...

The grave responsibility cast upon the Judge cannot

are not placed at his disposal." Perhaps I should add that in the present case Mr Derrington Q.C., on behalf of the Trade Practices Commission, stated quite specifically that "the arrangements we have made with our friends are not in any way directed towards keeping information from the Court".

As I said at the hearing there is no duty upon counsel

for a defendant to place any evidence before the Court. It must

always be a matter for him to determine what evidence if any he

places before the Court in respect of his submissions on the question of penalty. He may choose to rely upon his address alone and it will be given appropriate consideration even though it is not evidence.

Mr Derrington Q.C. sought a ruling as to whether a party's right to cross-examine the deponent on an affidavit filed by the other side as to penalty is dependent upon the giving of a notice that it requires the deponent to attend for cross-examination at the hearing. In my view even where a notice to attend for cross-examination has not been given it is desirable that the deponents be available both for cross-examination by the opposing party and for the purpose of answering any questions from the Court directed towards removing any ambiguities in the affidavit and clarifying matters dealt with in it.

Each party filed and served one affidavit but called no oral evidence at the hearing and neither party sought to cross- examine. As to the nature of the acts constituting the contraventions in respect of the three retailers Mr Fitzgerald QC. on behalf of the defendant accepted the statements in the affidavit of Dawn Margaret McKay including the following:

(1) Mr Dyer, the managing director of the defendant and

Mr O'Shea, its general manager, spoke to Mr Weller,

O'Shea: I am very concerned with the way Sealy is being marketed in regard to price. Not

necessarily by your company or yourself but we want to get Sealy back up to a

level where everybody can get a good profit margin. Do you agree with this?

O'Shea: Would you be prepared to stick to a recommended retail price?

Weller: What do you mean? So much off recommended retail price?

Weller: Only if others agree to it, but I cannot see them doing it.

O'Shea: We will get all the others in to ask them and it will benefit you all as it will mean more profit to you all.

Weller: What sort of margin could you make it? O'Shea: What about 10% below recommended retail?

Weller: Well if the others agree. Okay, but I cannot see it.

O'Shea: You are not to give pillows and blankets away however to get the sale. (This has been my usual practice to get sales)."

Later in March 1977 lists of prices were handed to Mr Weller by Mr O'Shea, who said:

"5. everybody has agreed to a price as from next Monday at 10% below our normal recommended retail price.

Will you stick by it? Give it a go. You may lose sales initially, but in the long run it

B. W. Coles (Discount Furniture) Pty Ltd in the course

"O'Shea:... We wish you to make a reasonable mark up on your Posturepedic range ... There is

Vann: Does this apply to everybody or just to the discounters?

O'Shea: No, every store selling Posturepedics has that list.

Vann: How are you going to know if everybody is sticking to this rule?

acting as customers and also ringing up. That will be the policing of it." (3) Messrs Dyer and O'Shea also had a conversation with

Mr Van Lieshout, a director of A-Mart International Pty

Ltd, and sent him a list of prices in an attempt to induce

that company not to sell at a price less than the price

specified by the defendant Sealy Posturepedic mattresses supplied to the company by the defendant.

The affidavit filed by the defendant, sworn by its managing director Mr Dyer, stated that the defendant is a family company which is effectively controlled by Mr Dyer who personally supervises the day to day running of the defendant company and the implementation of policy. Certain matters were dealt with in the affidavit rather briefly and without elaboration. However, as the affidavit was not challenged in any way by counsel for the plaintiff I accept all the statements of fact in it as they are not inherently improbable but, in the absence of further explanation by the deponent, I am not prepared to accept the statements of opinion contained in paragraph 7 of Mr Dyer's affidavit as being necessarily correct.

defendant does not underestimate the seriousness of the

contraventions ... which is reflected by the penalty which

the legislature has fixed as the maximum", there is no minimum

penalty prescribed by the Act and in the circumstances of this

case the penalty should be at the lower end of the scale.

In supporting the latter submission he relied upon various

(1) the contraventions are limited to acts consisting of attempts and there is no evidence of loss or damage suffered as a result of the conduct;

(2) the evidence shows that the conduct was not persisted in after it became known to the defendant that its conduct was in contravention of the Act, and it has taken steps to ensure that it does not breach the Act in the future. An undertaking has been given by Mr Dyer on behalf of the defendant that there will be no further breaches of the Act and it no longer maintains any recommended retail price list and does

. not publish any price card for the use of its customers;

(3) the defendant has never been convicted of any offence. I also note that there is no evidence that the defendant "has previously been found by the Court in proceedings under this Part to have engaged in any similar conduct" (s.76(1));

I accept without qualification each of the foregoing matters

and have taken them into account in determining penalties.

Mr Fitzgerald also submitted that the defendant was a minor company in a relatively minor industry. On the evidence I am not able to accept that submission in its terms although I accept that, as Mr Derrington conceded, it is plainly not one of Queensland's largest manufacturing companies. Mr Dyer's affidavit shows that the defendant is and has been since its incorporation in 1956 a mattress manufacturer and that its business -

America" but no other evidence was led as to the size of the defendant's operations or the size of the industry. Mr Fitzgerald submitted that the number of mattresses sold by the defendant or by the three retailers and the total number of retailers to whom the defendant sold Sealy mattresses were all irrelevant.

I accept the submission for the defendant that the conduct had been engaged in in the belief that such conduct would be in the interests of all concerned in the industry including the financial interests of the defendant.

Mr Fitzgerald also submitted that there was really only one contravention, not three, because these were obviously

associated matters, I accept and take into account the fact

that the contraventions arose out of the one course of conduct.

It would not be proper to consider each of the three contraventions against a maximum penalty of $250,000. However, it is not correct in my view to treat the acts as constituting only one contravention because the evidence establishes that the acts constituting the contravention were taken not merely in respect of one retailer but in respect of each of the three retailers (cf. s.79(2) and also Smithers J. in Hartnell v. Sharp Corporation (1975) A.T.P.R. 40-003 at 17,112 relating to offences - not to contraventions of Part IV of the Act).

Mr Dyer stated in his affidavit that he and his manager "attended two seminars ... to familiarize ourselves with the" Trade Practices Act 1974 but that "Despite this at the time the discussions took place with the retailers named in the statement of claim Madad was not aware that such conduct contravened a provision of the Trade Practices Act", The affidavit did not state what was the belicf at the material time of Mr Dyer or of Mr O'Shea as to the relevant law and did not state whether the defendant obtained or gave any consideration to the desirability of obtaining legal advice as to the proposed conduct. As I have said earlier Mr Dyer was not cross-examined at all by counsel for the plaintiff and I accept this statement at its face value. I take it into account as establishing

that the defendant's conduct did not constitute a conscious

defiance of the will of Parliament as expressed in the Act

but in my view ignorance of the law cannot operate to reduce

a penalty which the Court considers to be appropriate by

1971 - although until the 1974 Act came into effect an

authorisation of such conduct could be granted. Since the

1974 Act commenced, resale price maintenance has been

prohibited by the Act in all circumstances and cannot be

authorised. Accepting the defendant's lack of awareness that as a matter of law its conduct contravened the Act, it is nonetheless clear that as a matter of fact the defendant deliberately entered upon a course of conduct which was contrary to Parliament's intention "that traders operate in competitive conditions and that the public has the benefits which flow therefrom" (per Smithers J. in Trade Practices

Commission v. Stihl Chain Saws (Aust.) Pty Ltd (supra at

p. 17,896)). That course of conduct by the defendant

(a) \ an attempt was made to ensure that each of the three retailers should not sell below a minimum price specified by the defendant - plainly with the intenLlion of preventing the public from obtaining from any of the three retailers Sealy Posturepedic

specified by the defendant. The evidence of the conversations includes a statement to one of the retailers "You are not to give pillows and blankets away however to get the sale" (as had been the retailer's "usual practice to get sales") and a statement to another retailer "There is the list. Don't go under those prices"; the acts constituting the contraventions were carried out personally by both the managing director and the general manager of the defendant as to two of the retailers and by the general manager as to the other retailer ~- a situation likely to indicate to the three retailers that the defendant attached considerable importance to the minimum price which it had specified to the retailers; a system was organised by the defendant to "police" the specified price by checking on the prices being asked by the three retailers in their stores both by -

the defendant's conduct was partly in the interests of its own financial position and partly "to get Sealy back up to a level where everybody can get a good profit margin". No evidence was placed before the

or the profit margin for the three retailers, apart

In my view these contraventions were not minor breaches and it is not suggested that they arose from any accident, or any failure of employees to properly understand instructions. Having regard to all the circumstances, including all of the matters raised by Mr Fitzgerald Q.C. on behalf of the defendant, and the importance of deterring similar contraventions of the Act, I have determined in respect of each of the three contraventions that the appropriate pecuniary penalty is $7,000. In determining the amount of the penalty I have taken into account that there are to be three penalties and in my view the sum of $21,000 represents the appropriate total penalty to be paid by the defendant in respect of the three contraventions.

Although the affidavit evidence as to the contravention in respect of A-Mart International Pty Ltd did not set out the conversation in any detail (as was done in respect of the other retailers) there was nothing in the evidence to suggest - nor was it suggested at the hearing - that any one contravention

was different in any significant way from the others. On the

evidence both the managing director and the general manager had the conversation with the director of A-Mart International Pty Ltd and the list of prices was sent to him. In the circumstances I have decided that the same penalty should be imposed in respect of each of the three contraventions.

: The defendant is also ordered to pay to the plaintiff the costs of and incidental to these proceedings including

I certify that this and the SsicXhay preceding pages are a true copy of the Re.3ens for Judgmeni hereia of bis Honour

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Judgment (123 paragraphs)