Universal Telecasters (QLD) Ltd v Guthrie
(1978) 32 FLR 360(Judgment by: Bowen CJ)
Between: Universal Telecasters (QLD) Ltd
And: Guthrie
Judges:
Bowen CJNimmo J
Franki J
Subject References:
Trade Practices
Companies
Judgment date: 4 April 1978
Sydney
Judgment by:
Bowen CJ
1. I have read the reasons for judgment prepared by Franki J. I agree with his conclusions and, speaking generally, with his reasons. However, I feel I should express my own views on three aspects. (at p361)
2. The first concerns the question whether a television station which broadcasts an advertisement for one of its customers "makes" any statement which forms part of that advertisement. The word "make" is a word with a wide range of meanings. One meaning is "to cause to exist; to produce by action; bring about". Another is "to cause to be, render" (see Shorter Oxford Dictionary, 3rd ed. (1973), p. 1263). In one sense, when a television station broadcasts an individual saying something, it is the individual who makes the statement; the station broadcasts his statement. However, the meaning of the word "make" is such that it is wide enough to cover the broadcasting of the statement. It appears to be used in s. 53 (e) of the Trade Practices Act 1974 in a sense which extends to that. (at p362)
3. But it is argued that where it appears that the statement is put forth by or on behalf of another and not by or on behalf of the television station, the station does not "make" the statement. (at p362)
4. The argument was illustrated by supposing a case where the television station broadcast a statement by an individual along the following lines-
"Today the Federal Treasurer said 'Sales tax on all motor vehicles will be reduced by twenty-five per cent as from 1st July next'".
It was argued that the television station in this instance should be held to make the statement about the treasurer and his announcement but should not be held to make the statement regarding sales tax. Where there are express words such as those in the illustration or where there are express words of adoption or exclusion, this may, perhaps, be a proper line to draw. If so, then logically it would seem difficult to distinguish the case where, by necessary implication the statement was made for or on behalf of another. These will be matters for decision when an appropriate case arises. In the fields of consumer protection legislation and television broadcasting, it appears to me that any doctrine of necessary implication, if it is proper to import it at all, will have to be closely confined. (at p362)
5. No evidence was tendered as to what would be the reaction of particular viewers. Obviously one difficulty would be to lay down a rule for determining when such an implication should be made. Would the mere fact that it was an advertisement which, in the nature of things, featured the name of the advertiser be sufficient? The television medium is such that the impact is immediate and ephemeral. A viewer cannot go back over the broadcast. For him it is necessarily a matter of impression. If one sought to find a test by which one might determine whether the implication should or should not be made, should one test it by asking whether the judge would make that implication if he were the viewer or, leaving the judge on one side, whether an ordinary reasonable person viewing it would make that implication or whether some less sophisticated or less perceptive viewer would do so. None of these tests would appear to me to be satisfactory. The relevant provisions of the Trade Practices Act 1974 are directed to protecting all viewers including those who are particularly susceptible to the influence of persuasion by advertisement. The fact that a statement is clearly an advertisement for a particular advertiser would not seem to constitute a sufficient basis in the circumstances to justify a holding that the statement was not made by the television station. (at p362)
6. While the terms of the advertisement in the present case may fairly raise the inference that the statement in it is the statement of Metro Ford, there is insufficient material in it to raise the inference that it is not also the statement of Universal Telecasters. Even if it be proper to distinguish statements on the basis they are expressly or by necessary implication statements of the advertiser and not of the television station, the statement in this case is not seen to be such a statement. (at p363)
7. It may be suggested that this interpretation places a heavy burden upon television stations. However, it is no doubt because of this burden that the defences in s. 85 are provided. Thus a television station may, by way of defence, show that it is its business to publish or arrange for publication of an advertisement, that it received the advertisement for publication in the ordinary course of business and that it did not know and had no reason to suspect that its publication would amount to a contravention of the Act (s. 85(3)). (at p363)
8. Counsel for Universal Telecasters sought to obtain some support for his argument upon the interpretation of "make" in s. 53 (e) by reference to the use of the word "publish" in s. 85 (3). I do not consider that the use of the word "publish" in s. 85 (3) requires s. 53 (e) to be construed in the manner suggested. It may be noted that s. 85 (3) provides a defence which is available in respect of the offences provided for in other paragraphs of s. 53, besides s. 53 (e). (at p363)
9. The second aspect concerns the defence under s. 85 (1) that Universal Telecasters "took reasonable precautions and used due diligence". While these are plain English words, which have to be applied as they stand, it appears to me that two responsibilities which Universal Telecasters would have to show it had discharged, in order to establish this defence, would be that it had discharged, in order to establish this defence, would be that it had laid down a proper system to provide against contravention of the Act and that it had provided adequate supervision to ensure the system was properly carried out. Universal Telecasters did institute a system and did provide for supervision. The mere fact that its system and supervision has proved inadequate to prevent error, does not necessarily establish that its system is defective. Even the best systems may break down due to human error. It is necessary to make a judgment about the system and the provision for supervision. (at p363)
10. The system of having advertisements checked by Mr. Yardley before transmission appears to have been basically a sound one, although it would have been stronger if it had not placed so much weight upon his mere personal knowledge and reaction to the advertisements which he viewed. However, I would not be prepared to hold that the system was defective in not requiring an advertisement, such as that in the present case, to be checked with the relevant government department or in not requiring the advertisement to be verified by the advertiser. The failure to provide a better system of dealing with telephone complaints made at the time, in the evening, when the advertisement was to be broadcast, raises a more difficult question. It is, in my opinion, not enough for Universal Telecasters to show that it had a careful system of vetting advertisements before it put them to air. In the case of advertisements which are to be broadcast during the evening period on more than one day, I think a proper system should include some procedure whereby a complaint made during this period that an advertisement is misleading or otherwise contravenes the Trade Practices Act will be referred promptly to an appropriate officer. No system had been established which made adequate provision for this. In this respect I think the company failed to make out the defence under s. 85 (1) (b). (at p364)
11. The third aspect concerns the defence under s. 85 (3), that it was the business of Universal Telecasters to publish or arrange for publication of advertisements and that it received the advertisement for publication in the ordinary course of business and did not know and had no reason to suspect that its publication would amount to a contravention. (at p364)
12. There is no doubt that the business of Universal Telecasters fell within the section and that it received the advertisement for publication in the ordinary course of business. The question is whether Universal Telecasters established that it did not know and had no reason to suspect that publication of the advertisement would amount to a contravention. (at p364)
13. It appears to me that after Mr. Paterson's warning to Mr. Garry, the sales manager of Universal Telecasters, Mr. Garry had reason to suspect that publication of the advertisement would amount to a contravention. Did Universal Telecasters have reason to suspect? (at p364)
14. The question whether a corporation has knowledge or reason to suspect something is a difficult one. A defence such as this is designed to excuse a corporation which has published a misleading advertisement if, in doing so, it was not blameworthy. It seems clear enough that if an employee, for example a lift driver or a telephonist, had knowledge or reason to suspect something, it would be wrong to attribute this to the corporation. On the other hand, if an employee in an executive position had knowledge or reason to suspect something, it might be thought that it would be fair to hold the corporation responsible. If the matter were to be approached in this way, the problem would be where to draw the line. (at p364)
15. In dealing with a related problem under the Trade Description Act 1968 (U.K.), the House of Lords in Tesco Supermarkets Ltd. v. Nattrass [1972] AC 153 adopted a different approach. Their Lordships applied the "organic" theory (see Gower, The Principles of Modern Company Law, 3rd ed. (1969), Ch. 8). The view was taken that what natural persons were to be treated in law as being the corporation were to be found by identifying those natural persons who, by the memorandum and articles of association or as a result of action taken by the directors or by the corporation in general meeting pursuant to its articles, were entrusted with the exercise of the powers of the corporation (Tesco's case per Lord Diplock (1972) AC, at pp 199-200 ; cf. per Lord Reid (1972) AC, at pp 170-171 and Lord Dilhorne (1972) AC, at p 187 ). In that case, the principle was applied in determining whether the company had taken "all reasonable precautions" and exercised "all due diligence". It would seem that the principle would apply equally in determining whether, under our corresponding legislation, a corporation had knowledge of or reason to suspect somethin (see generally Halsbury's Laws of England, 4th ed., vol. 7, p. 451, par. 757). (at p365)
16. In the present case, if this be the principle to be applied, Mr. Garry would fall outside the persons who are to be treated as the corporation in the case of Universal Telecasters. (at p365)
17. However, it is argued that in Australia, s. 84 of the Trade Practices Act has altered the position as it was discussed in Tesco's case. Section 84 provides that where it is necessary to establish the intention of the corporation, it is sufficient to show that a servant or agent had the particular intention (s. 84 (1)). It further provides that any conduct engaged in on behalf of the corporation by a director, agent or servant shall be deemed to have been engaged in also by the corporation (s. 84 (2)). It would seem that s. 84 does alter the position as it was discussed in Tesco's case in two respects, first, so far as the intention of a corporation is concerned and, secondly, so far as conduct engaged in on behalf of a corporation is concerned. It does not touch the question of knowledge or reason to suspect, nor does it touch the situation where consideration has to be given not to some act on behalf of the corporation but to failure to act. In other words, in the areas which we have to consider in relation to Mr. Garry's knowledge and reason to suspect that the advertisement would amount to a contravention, s. 84 has no application. We are left then with the application of the principle discussed in Tesco's case [1972] AC 153 . Applying this principle, it appears that Mr. Garry falls outside the class of persons who are to be regarded as the corporation and that, in the circumstances, Universal Telecasters has made out its defence under s. 85 (3). (at p365)
18. I agree with orders proposed by Franki J. (at p365)