Universal Telecasters (QLD) Ltd v Guthrie

(1978) 32 FLR 360

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(Judgment by: Franki J)

Between: Universal Telecasters (QLD) Ltd
And: Guthrie

Court:

Judges: Bowen CJ
Nimmo J

Franki J

Subject References:
Trade Practices
Companies

Hearing date: 7 December 1977, 8 December 1977
Judgment date: 4 April 1978

Sydney

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Judgment by:
Franki J

1. The appellant, Universal Telecasters (Qld.) Ltd., appeals from a conviction and fine imposed by a single judge of this Court. The appellant was charged with a breach of s. 53 (e), of the Trade Practices Act 1974 ("the Act"). (at p375)

2. Section 53 (e) provides: "A corporation shall not, in trade or commerce, in connection with the supply or possible supply of goods or services or in connection with the promotion by any means of the supply or use of goods or services - . . . (e) make false or misleading statements concerning the existence of, or amounts of, price reductions." (at p375)

3. The offence charged was that on or about 15th April, 1975, in contravention of s. 53 (e) of the Act, in trade or commerce, in connection with the promotion by advertising of the supply of goods, to wit, Falcon motor cars, the appellant made misleading statements concerning the existence of price reductions. It was alleged that the misleading statements were made in and by an advertisement published and screened by the appellant and that the statements were misleading in that they contained the words and sentences, "Dr. Jim's lovely tax cuts are guaranteed till only April 30, so if you haven't been out to Metro Ford by then you could be a dead set April Fool. Metro Ford offer immediate delivery of automatic Falcon 500 sedans that save you $335. If you don't take delivery by April 30, you're up for an extra 335 bucks in tax. "It was further alleged that the statements were misleading in that the words and sentences meant and implied that the existence of a reduction in price for such vehicles on account of sales tax cuts would not continue after 30th April, 1975, so that a purchaser would then have to pay an additional $335 in sales tax on such a vehicle, whereas the true position was that a reduction in price on account of sales tax cuts was to continue (though at a reduced amount) after 30th April, 1975, so that a purchaser would not have to pay $335 additional sales tax but a lesser sum. (at p376)

4. The advertisement the subject of the prosecution was an advertisement of Metro Ford Pty. Ltd. and it had been prepared for that company by Doyle Dane and Bernbach Pty. Ltd., advertising agents. The appellant had no part in the preparation of the advertisement other than to permit it to be made in its studios for which it received a fee. Metro Ford Pty. Ltd. and Doyle Dane and Bernbach Pty. Ltd. have already been convicted in respect of the same advertisement although an appeal by Doyle Dane and Bernbach Pty. Ltd. is awaiting hearing in this Court. (at p376)

5. The chief executive of the appellant, who was directly responsible to the board of directors, was the general manager of the station, Mr. Archer. Mr. Lusk, the company secretary was the next most senior executive and he acted in Mr. Archer's place when Mr. Archer was away. Mr. Garry was the sales manager and Mr. Yardley the sales service manager. (at p376)

6. The advertisement was telecast on 15th April, 1975, at a time when Mr. Archer was overseas and Mr. Lusk was acting in his place. A Mr. Paterson, a full-time university student who had recently left the hire purchase industry, saw the advertisement, apparently during the first week in April, and telephoned the station at about 7.30 p.m. at night. He asked to speak to either the programme director or the person in charge at the time, but he was told that no one was available to talk to him, although he said he wished to complain about what he considered to be a misleading advertisement. The suggestion was made to him that he should telephone the station manager or the station sales manager the next day. Mr. Paterson did ring at about 9 a.m. the next day and later that morning spoke to Mr. Garry, the sales manager at the time, and said he considered that the advertisement was misleading because sales tax would not increase by $335 in May. Mr. Garry had in fact resigned on 4th April, 1975, although he did not leave until May 1975. Mr. Garry told Mr. Paterson that the advertisement would be reviewed. Subsequently, on 15th April, 1975, Mr. Paterson again saw the advertisement and again rang the appellant at night and asked to speak to someone in charge, but the person who answered the phone identified himself as a technician and suggested that Mr. Paterson should ring the next day. Mr. Paterson however decided to ring the Trade Practices Commission.

On 9th April, 1975, a Mr. Wise, an officer of the Trade Practices Commission received a telephone call from a Mr. Meldrum concerning the advertisement and as a result of this on 9th April, 1975, Mr. Wise rang the appellant and asked to speak to whoever was responsible for answering inquiries about advertisements shown on the channel. This call was transferred to Mr. Garry. Mr. Wise told Mr. Garry that he had received a complaint about the subject advertisement but said that he did not know what was wrong with it. It was arranged that Mr. Garry would send Mr. Wise a copy of the advertisement by post. On 16th April, 1975, Mr. Wise made an appointment to see Mr. Garry on 21st April, 1975, and after that meeting the advertisement was not telecast again. (at p377)

7. The five main points relied upon by the appellant were that:

(1)

the appellant did not make any statement but only published a statement of another;

(2)

the advertisement was not misleading concerning the existence of a price reduction but was rather a statement as to some future event;

(3)

the appellant was treated as a principal offender and essential elements in the offence were not proved, for example, that the appellant was a corporation within the meaning of the Act;

(4)

s. 85 (3) of the Act provided a defence;

(5)

s. 85 (1) of the Act provided a defence. (at p377)

8. Whether the appellant made a statement. (at p377)

9. I proceed to consider whether it was established that the appellant made a false or misleading statement. Although the phrase "make false or misleading statements" rather suggests that there may very well be a difference between making a statement and publishing the statement of somebody else, I have come to the conclusion that, in general, where a television station telecasts an advertisement that contains certain spoken words, it is proper to hold that the television station has made a statement. Section 85 (3) of the Act also points in the same direction. I consider that by telecasting the advertisement the appellant made the statement as alleged. Similar legislation elsewhere often contains some provision either excluding a television station or newspaper from its operation or providing a defence in one way or another, often somewhat comparable with the defence provided by s. 85 (3) of the Act. Illustrations of such legislation are - Consumer Protection Act, 1969 (N.S.W.), s. 32; Combines Investigation Act 1970 (Canada), s. 33C; Uniform Deceptive Trade Practices Act 1964 and 1966 (Rev.), ss. 2 (11) and 4, adopted by certain States in the United States of America (see Uniform Laws Annotated, vol. 7, 1970, p. 325, West Publishing Co.). (at p377)

10. Whether the advertisement was misleading concerning the existence of a price reduction. (at p377)

11. I next consider the submission that the advertisement was not misleading concerning the existence of a price reduction but was rather a statement as to some future event. The offence charged is that the appellant made "misleading statements concerning the existence of price reductions" and the particulars given were that the statement was misleading because the price would not increase by $335 after 30th April, 1975. The appellant admitted that the sales tax reduction which had been $335 would be two and a half per cent less after 30th April, 1975. Bearing in mind the definition in s. 4 that price includes a charge of any description, I am satisfied that the word "price" in s. 53 (e) in relation to the subject appeal covers an amount included in respect of sales tax. No attack was made on the way the charge was framed and particularized in the information and I note reg. 78K of the Conciliation and Arbitration Regulations. I consider that the charge can be best described as an allegation that the statement concerning price reductions was misleading because it was misleading as to the duration for which the then current price reduction of $335 would exist. I do not consider that the statement was a promise as to future conduct or a prediction or statement as to the future but rather a statement of an existing fact that the then price reduction of $335 due to sales tax cuts had a limited life and would cease at 30th April, 1975. I consider that it was a false statement as to an existing fact. I regard this as consistent with the views I expressed in Thompson v. Mastertouch T.V. Service Pty. Ltd. (No. 1) (1977) 29 FLR 270 . (at p378)

12. Whether all essential elements in the offence had been proved. (at p378)

13. The appellant next submitted that it had been treated as a principal offender but the prosecution had not established that it was a corporation within the meaning of the Act. It was submitted in this regard that the relevant question was whether the appellant was a trading corporation formed within the limits of Australia. It was admitted that the appellant is, and at all material times was, a company incorporated in Queensland and conducted the television station TVQ Channel O. It is clear that the appellant derived its revenue from telecasting advertisements. I consider that no relevant help is to be found in the judgment of the High Court in The Queen v. Trade Practices Tribunal; Ex parte St. George County Council (1974) 130 CLR 533 . That case concerned the position of a county council established under the Local Government Act, 1919 (N.S.W.) for "local government purposes" and not the position of a public company incorporated under the Companies Act, 1961 (N.S.W.). Applying the appropriate standard of proof in criminal cases I consider that on the evidence the appellant derived its revenue from telecasting advertisements and was a trading corporation within the meaning of those words in the Act. (at p378)

14. Whether the defence under s. 85 (3) was established. (at p378)

15. I pass now to consider the defence provided by s. 85 (3). (at p378)

16. Section 85 (3) reads:

"(3)

In a proceeding under this Part in relation to a contravention of a provision of Part V committed by the publication of an advertisement, it is a defence if the defendant establishes that he is a person whose business it is to publish or arrange for the publication of advertisements and that he 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 of a provision of that Part." (at p379)

17. I consider that the defence provided by this section, which need only be established on the balance of probabilities, is available whether or not a defendant is able to show that he took reasonable precautions and exercised due diligence to avoid any relevant contravention. What is necessary under this defence is not a setting up and policing of a system, but in relation to a particular advertisement that he did not know and had no reason to suspect that its publication would amount to a contravention of a provision of Pt V. Nowhere in the Act is it said that the knowledge of any servant is the knowledge of a company or that a company shall be deemed to suspect something if any servant of the company suspects it. In my opinion the persons relevant for consideration in deciding whether a company "did not know and had no reason to suspect" are those who are to be treated as the company itself. The basic test is whether the employee is one who, by the memorandum and articles of association or as a result of action taken by the directors or by the corporation in general meetings pursuant to its articles, has been entrusted with the exercise of the powers of the corporation - (See Tesco Supermarkets Ltd. v. Nattrass (1972) AC, at pp 171, 174-175, 187, 199-200 ). In the case before us, I am satisfied that the board of directors, Mr. Archer and at least during Mr. Archer's absence, Mr. Lusk came within this category. In my opinion, with regard to the matter under consideration Mr. Garry should not be regarded as the company. (at p379)

18. Mr. Garry had his attention drawn to the advertisement twice and I consider that he should be held to have had reason to suspect that the publication of the advertisement would amount to a contravention of the Act but the question is not whether he had reason to suspect but whether the company had reason to suspect. Mr. Garry had not been delegated a general power to deal with all complaints. For example where any complaint concerning any possible breach of the broadcasting legislation was involved, or a complaint involved anything to do with trade practices, his instructions were to refer the matter to Mr. Archer or Mr. Lusk. (at p379)

19. Mr. Garry does not fall within the word "defendant" in s. 85 (3) although he was a "superior servant" of the appellant (see Tesco's case (1972) AC, at pp 185, 190, 198 ). Although he had reason to suspect that the publication of the advertisement would amount to a contravention of Pt V of the Act the fact that he had reason to suspect did not mean the appellant had reason to suspect. In my opinion, Mr. Garry was not the company for the purposes of s. 85 (3) and I consider that the defence under s. 85 (3) has been made out. (at p380)

20. Whether the defence under s. 85 (1) was established. (at p380)

21. Section 85 (1) and (2) at the relevant time read:

"(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-

(a)

that the contravention in respect of which the proceeding was instituted was due to a mistake, to reliance on information supplied by another person, to the act or default of another person, to an accident or to some other cause beyond his control; and

(b)

that he took reasonable precautions and exercised due diligence to avoid the contravention.

"(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." (at p380)

22. The trial judge held that he was satisfied that the defendant company had established, on the civil onus, the facts necessary to satisfy s. 85 (1) (a) but he was not satisfied that the requirements of s. 85 (1) (b) had been established. His Honour did not indicate what was the basis for his finding that the facts necessary to satisfy s. 85 (1) (a) had been established. The defendant had had no part in the preparation of the advertisement other than to allow it to be made in its studios. In so far as the telecasting of the advertisement constituted the making of a false or misleading statement within the terms of s. 53 (e), the only part that the defendant had in this contravention was the telecasting of an advertisement in the preparation of which it had played no part. The real substance of the contravention was, I consider, the reliance on information supplied by another person or persons or the act or default of another person. It seemed common ground in the proceedings before the trial judge that sufficient notice had been given under s. 85 (2) by the notice which the defendant had given to the Commonwealth Crown Solicitor wherein it identified various other persons in accordance with s. 85 (2) as including: (1) Metro Ford Pty. Ltd. of 150 Leichhardt St., Brisbane and its officers and employees; (2) Doyle Dane and Bernbach Pty. Ltd. of 18th Floor, Bank of New South Wales Building, 260 Queen Street, Brisbane and its officers and employees. (at p381)

23. Since the case proceeded before the trial judge in the way it did, I consider that whether or not this notice was adequate to satisfy s. 85 (2), this Court should proceed upon the basis that the notice was adequate or alternatively, that the trial judge by acting as he did, gave leave to rely on the defence provided in s. 85 (1). (at p381)

24. It is also necessary to consider s. 84. Section 84 (1) and (2) reads:

"(1)

Where, in a proceeding under this Part in respect of any conduct engaged in by a body corporate, being conduct in relation to which a provision of Part V applies, it is necessary to establish the intention of the body corporate, it is sufficient to show that a servant or agent of the body corporate by whom the conduct was engaged in had that intention. (at p381)

25.

"(2)

Any conduct engaged in on behalf of a body corporate by a director, agent or servant of the body corporate or by any other person at the direction or with the consent or agreement (whether express or implied) of a director, agent or servant of the body corporate shall be deemed, for the purposes of this Act, to have been engaged in also by the body corporate." (at p381)

26. Section 84 (1) deals only with a situation where it is necessary to establish the intention of a body corporate and, in my opinion, is not relevant to a consideration of the defence under s. 85 (1). Section 84 (2) applies to conduct engaged in on behalf of a body corporate by a director, agent or servant but it does not make the failure of an agent or servant of the company the failure of the body corporate. In my view the provisions of s. 84 (2) do not have any relevance in the subject case to a defence under s. 85 (1) in deciding whether "he" took reasonable precautions and exercised due diligence to avoid the contravention. (at p381)

27. The learned trial judge decided that the defendant had not taken reasonable precautions because he held that amongst other precautions to be taken there should have been instructions to check the accuracy of any statement the ultimate source of which was a government department by inquiry of the relevant department. Additionally his Honour found that there should have been a precaution that, in the event of any complaint being made to the effect that the contents of an advertisement were misleading, that complaint should be immediately referred to the person or persons whose duty it was to take precautions to avoid contravention of the Act. His Honour also held that what he referred to as the "obvious precaution" of insisting upon advertisers verifying the factual content of their advertisements should have been taken. His Honour also found that due diligence was not exercised in relation to the investigation of Mr. Paterson's complaint. (at p381)

28. A section similar to s. 85 (1) was considered by the House of Lords in Tesco Supermarkets Ltd. v. Nattrass [1972] AC 153 . The section there under consideration was s. 24 of the Trade Descriptions Act 1968 (U.K.). So far as is relevant, this section provided:

"In any proceedings for an offence under this Act it shall, . . . be a defence for the person charged to prove-

(a)

that the commission of the offence was due to . . . reliance on information supplied to him or to the act or default of another person . . . and

(b)

that he took all reasonable precautions and exercised all due diligence to avoid the commission of such an offence by himself or any person under his control." (at p382)

29. The statements made in relation to who was "another person" by members of the House of Lords in that case are not directly applicable to the Australian Act because of the provisions of s. 84 (2) of the Act, but in my opinion, what is said about s. 24 (1) (b) of the Trade Descriptions Act is directly applicable to s. 85 (1) (b) of the Act. The only relevant difference is that the English Act refers to "all reasonable precautions" and "all due diligence" whereas the Australian Act omits the word "all" in both places and so provides a somewhat lesser standard of "reasonable precautions" and "due diligence". (at p382)

30. In Tesco's case the defendant was a body corporate owning supermarket stores and it sought to raise a defence which involved establishing that it had taken all reasonable precautions and exercised all due diligence to avoid the commission of the offence charged, which was broadly, that the defendant in offering to supply goods, gave an indication by means of a notice that the goods were offered at a price less than that at which they were in fact being offered. It was found that the manager of the store and a shop assistant had failed adequately to perform the tasks which had been assigned to them by the defendant company but that nevertheless the defendant company had satisfied the requirements of s. 24 (1) (b), which involved the duty of setting up an efficient system for the avoidance of offences under the Act and a proper operation of the system. It was pointed out that s. 24 (1) (b) required diligence from the employer personally and not anyone else. Lord Reid said (1972) AC, at pp 172, 174 that as a matter of construction there was no reason for reading into the section in place of the word "he" the words "he and all persons to whom he has delegated responsibility". See also Lord Morris of Borth-y-Gest, Viscount Dilhorne and Lord Diplock (1972) AC, at pp 179, 185-186, 197-200, 203 . I quote the following passage from Lord Diplock's speech:

"The fallacy lies in the next step of the argument. Where Parliament in creating an offence of 'strict liability' has also provided that it shall be a defence if the person upon whom the duty is imposed proves that he exercised all due diligence to avoid a breach of the duty, the clear intention of Parliament is to mitigate the injustice, which may be involved in an offence of strict liability, of subjecting to punishment a careful and conscientious person who is in no way morally to blame. To exercise due diligence to prevent something being done is to take all reasonable steps to prevent it. It may be a reasonable step for an employer to instruct a superior servant to supervise the activities of inferior servants whose physical acts may in the absence of supervision result in that being done which it is sought to prevent. This is not to delegate the employer's duty to exercise all due diligence; it is to perform it. To treat the duty of an employer to exercise due diligence as unperformed unless due diligence was also exercised by all his servants to whom he had reasonably given all proper instructions and upon whom he could reasonably rely to carry them out, would be to render the defence of due diligence nugatory and so thwart the clear intention of Parliament in providing it" (1972) AC, at p 203 . See also Halsbury's Laws of England, 4th ed., vol. 7, par. 757. (at p383)

31. A Queen's Bench Divisional Court also considered s. 24 (1) (b) of the Trade Descriptions Act 1968 in Nattrass v. Timpson Shops Ltd. (1973) Crim LR 197 and held that following Tesco's case, the two basic responsibilities which it was said had to be established to satisfy the requirements of the section were the installation of a proper system to provide against the commission of such offences and the provision of adequate supervision to see that the system was properly carried out. (at p383)

32. Sherratt v. Geralds the American Jewellers Ltd. (1970) 114 SJ 147 was decided before Tesco's case and I doubt whether the two cases are entirely consistent since Sherratt's case seems to be directed not so much to the institution of any system but rather to an isolated act. In any event in Sherratt's case no precautions had been taken by the defendant. (at p383)

33. I consider that in the case of a company seeking to come within s. 85 (1) (b) it is necessary to establish whether the employee in question had the status and authority which in law made his act in the matter under consideration, the act of the company so that the employee was to be treated as the company itself. I am now directing this comment only to s. 85 (1) (b) because so far as the commission of an act is concerned, s. 84 (2) deems the conduct of a director, agent or servant of the body corporate to be also the conduct of the body corporate. (at p383)

34. I pass now to consider what relevant steps the appellant took. It will be recalled that Mr. Archer was the general manager of the station and the top executive, Mr. Lusk was the company secretary and acted as the chief executive if Mr. Archer was away. Mr. Garry was the sales manager and Mr. Yardley was the sales service manager. The Trade Practices Act 1974 came into operation on 1st October, 1974, and in October 1974 the appellant took some steps designed to prevent the station committing any breach of the Act. Mr. Archer sent a memorandum dated 23rd October, 1974, to a number of people including Mr. Yardley, Mr. Lusk and Mr. Garry. The memorandum set out that all commercial advertisements to be transmitted must be vetted before they were telecast and placed the responsibility for vetting upon Mr. Yardley, except where the advertisement had the approval of the Federation of Australian Commercial Television stations (F.A.C.T.S.) There were also instructions that the film department had to advise Mr. Yardley when film was received which did not have F.A.C.T.S. approval and that the film department was to introduce a system on their cards to show that the material had been checked.

The memorandum referred to a booklet summarizing the Trade Practices Act and to Mr. Archer having a copy of the full Act and contained instructions that, in the event of any doubt about the legality of a commercial, the person responsible for the initial vetting should report the doubt to Mr. Lusk or Mr. Archer who would seek legal advice if necessary. Mr. Yardley was given a copy of a booklet produced by an advertising agent which contained a summary of the Trade Practices Act in layman's terms. Mr. Archer also had discussions with Mr. Yardley concerning what he was to do in relation to the "vetting" and how he was to carry out the task which was explained to him. Mr. Archer also answered queries from Mr. Yardley about some advertisements and Mr. Archer asked Mr. Yardley on occasions whether a particular advertisement had been checked or not. Upon the receipt of an advertisement from an advertising agent the video tape was transferred to a video tape cartridge which was used for the actual transmission. Mr. Yardley in evidence swore that he played the particular video tape before it was telecast and marked it as correct for transmission. Mr. Archer's signature appears on a label on the video tape box containing the relevant advertisement with a notation "O.K. - T.P.C." which indicated that the advertisement had been checked and was considered "O.K." by him so far as concerned the Trade Practices Commission. (at p384)

35. Mr. Yardley was not an executive. He did not attend executive meetings, but he was a senior employee. He had been employed by the company since 1965 and had been sales service manager since 1967. Mr. Archer gave evidence that Mr. Yardley was a very reliable person who paid great attention to detail and who had a lot of practical experience in the advertising industry. (at p384)

36. The trial judge did not say that he regarded any of the defendant's witnesses as unreliable or untruthful. (at p384)

37. I am satisfied that a proper system had been instituted for "vetting" advertisements before they were telecast and that the system was adequately supervised. (at p384)

38. In the case before us I consider that the taking of reasonable precautions did not require that an advertisement be checked with a government department or verified by the advertiser. (at p384)

39. It seems reasonable that some system was required for dealing with complaints made during the hours of transmission about advertisements alleged to be false or misleading. I pass to consider whether any adequate system had been introduced for dealing with such complaints. The evidence of Mr. Archer showed that Mr. Garry had a limited responsibility to deal with complaints. The complaints about the subject advertisement ultimately reached him. Mr. Garry was a senior employee who had been employed by the appellant for ten years. The appellant maintained a system of logging complaints made outside office hours, although the particular complaints made by Mr. Paterson were not recorded. Apparently no system existed of logging complaints made during office hours but all complaints made during those hours of which there is any evidence reached Mr. Garry. However Mr. Garry is not to be treated as the appellant in relation to dealing with all complaints because the instructions he had were to refer certain types of complaints to Mr. Archer or Mr. Lusk. Those to be referred included any concerning a possible breach of the broadcasting legislation or anything concerning trade practices. The system, such as it was, that had been instituted with regard to complaints broke down. One significant feature of the breakdown was the failure by Mr. Garry to refer the matter to Mr. Lusk. (at p385)

40. Although the system required that complaints made outside office hours be recorded there was no evidence that any rules had been formulated and conveyed to those employees likely to be involved concerning the use to be made of these records. In my opinion no adequate system was shown to exist for dealing with complaints and, in addition, there was no evidence before the learned trial judge of any adequate supervision of the procedure which did exist for dealing with complaints. I consider that the defence provided by s. 85 (1) has not been established. (at p385)

41. However, because of my opinion that the defence under s. 85 (3) has been established, the orders I propose are:

(1)

appeal upheld;

(2)

conviction quashed;

(3)

respondent to pay the costs of the appellant both of the appeal and before the trial judge. (at p385)

ORDER

Order accordingly.