CATCHWORDS
TRADE PRACTICES - prosecution - free mobile phones advertised over five day period in newspapers, on radio and on television in Sydney - limitation of 5000 phones to Sydney readers - condition that purchaser pay delivery fee, security deposit and enter phone service plan - whether false or misleading representation with respect to price of goods - meaning of "price" of goods - whether false or misleading representation concerning the existence or effect of conditions - expectation of some conditions - purchaser not given opportunity to examine actual conditions in advertisements - meaning of term "free" - offer of free goods with the intention of not providing them as offered - whether mens rea necessary - whether failure to establish requisite intention
WORDS AND PHRASES - "price"
Trade Practices Act 1974 (Cth): ss 53(e), 53(g), 54 and 79(1)(a) and (b)
Bahri Kural v The Queen (1987) 162 CLR 502
Beckwith v The Queen (1976) 135 CLR 569
Bergin v Stack (1953) 88 CLR 248
Chief of the General Staff v Stuart (1995) 58 FCR 299
Federal Trade Commission v Standard Education Society (1937) 302 US 112
Given v C V Holland (Holdings) Pty Ltd (1977) 29 FLR 212
He Kaw Teh v The Queen (1985) 157 CLR 523
In re Samuel Stores (1938) 27 FTC 882
Proudman v Dayman (1941) 67 CLR 536
Sherras v De Rutzen [1895] 1 QB 918
Tesco Supermarkets Ltd v Nattrass [1972] AC 153
Tillmanns Butcheries Pty Ltd v Australasian Meat Industry Employees' Union (1979) 42 FLR 331
Australian Competition and Consumer Commission v Nationwide News Pty Limited
(No. NG 709 of 1995)
Australian Competition and Consumer Commissioner v Smartcom Telecommunications Pty Limited
(No. NG 708 of 1995)
Judge: Heerey J
Date: 8 August 1996
Place: Hobart (heard in Sydney)
IN THE FEDERAL COURT OF AUSTRALIA)
)
NEW SOUTH WALES DISTRICT REGISTRY) No. NG 709 of 1995
)
GENERAL DIVISION )
B E T W E E N:
AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
Prosecutor
- and -
NATIONWIDE NEWS PTY LIMITED
Defendant
No. NG 708 of 1995
B E T W E E N:
AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
Prosecutor
- and -
SMARTCOM TELECOMMUNICATIONS PTY LIMITED
Defendant
JUDGE: Heerey J
DATE: 8 August 1996
PLACE: Hobart (heard in Sydney)
MINUTES OF ORDER
The Court orders that:
1. As to Nationwide News Pty Limited, the charges the subject of information numbers 8, 11, 14, 17, 20 and 23 are found proved. All other informations are dismissed.
2. As to Smartcom Telecommunications Pty Limited, all informations are dismissed.
3. Questions of penalty and costs are adjourned for hearing on a date to be fixed.
NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules
IN THE FEDERAL COURT OF AUSTRALIA)
)
NEW SOUTH WALES DISTRICT REGISTRY) No. NG 709 of 1995
)
GENERAL DIVISION )
B E T W E E N:
AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
Prosecutor
- and -
NATIONWIDE NEWS PTY LIMITED
Defendant
No. NG 708 of 1995
B E T W E E N:
AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
Prosecutor
- and -
SMARTCOM TELECOMMUNICATIONS PTY LIMITED
Defendant
JUDGE: Heerey J
DATE: 8 August 1996
PLACE: Hobart (heard in Sydney)
REASONS FOR JUDGMENT
The Australian Competition and Consumer Commission (the Commission) has brought charges against Nationwide News Pty Limited (Nationwide) under s 53(e) and (g) and s 54 of the Trade Practices Act 1974 (Cth) (the Act) and against Smartcom Telecommunications Pty Limited (Smartcom) alleging an aiding and abetting of the s 53(e) and s 54 contraventions by Nationwide.
Nationwide
is the publisher of two Sydney newspapers, the Daily Telegraph Mirror and the
Sunday Telegraph. In July and August
1994 those newspapers embarked on a promotion which involved the
offer of a "free" mobile phone.
The promotion was carried out in conjunction with Smartcom which had a
connection with Vodafone Pty Limited (Vodafone), the operator of a mobile
telephone network. The essential feature
of the promotion which has led to these prosecutions is the fact that a person
wishing to take up the offer was required to enter into an agreement (known as
Smartplan 130) with Smartcom under which he or she would have to pay
(a) a connection fee of $65;
(b) a delivery charge of $19.95;
(c) a "security deposit" of $260 said to be refundable after 15 months if certain conditions were met; and
(d) $130 per month in advance for a minimum of 15 months in respect of access to the Vodafone Mobile Digital Network, which would include the first $120 worth of calls per month.
The Newspaper Advertisements
On page 7 of the Daily Telegraph Mirror Late Final edition for Thursday 28 July 1994 there appeared an advertisement 4 x 21 cm in vertical format containing a photograph of a mobile phone and the words "Free mobile phone for every reader Don't miss Monday's Telegraph Mirror".
On page 7 of the Daily Telegraph Mirror Metro edition for Friday 29 July there appeared an advertisement in identical terms except that it was 4 x 16 cm.
On page 7 of the Daily Telegraph Mirror Late Final edition for Friday 29 July there appeared an advertisement in identical terms and size to the Metro edition of the same day except that after the words "for every reader" there appeared the words "*Conditions apply".
On page 157 of the Sunday Telegraph for Sunday 31 July there appeared a large advertisement taking up about three-quarters of the page with a photograph of a young woman holding a mobile phone and the words
Don't miss your Telegraph Mirror tomorrow
FREE* mobile phone from Smartcom Telecommunications Vodafone Mobile Digital.
*Conditions apply
For Telegraph Mirror readers.
On the front page of the Daily Telegraph Mirror Metro edition for Monday 1 August there appeared an advertisement 14 x 4cm in horizontal format immediately below the masthead. It consisted of a photograph of a young woman with a mobile phone and the words
*FREE Mobile phone for Sydney Telegraph Mirror readers.
*Conditions apply. From Smartcom Communications Vodafone mobile digital.
Details Page 16.
The word "*FREE" appeared in white lettering about 8 mm high against a red star with gold border shading. The words "Mobile phone" were in blue on a white background. The words "conditions apply" were in red and the remaining words in black. All were on a blue background, with the exception of "Details Page 16" which were in black on a white background.
On page 16 of the same issue there appeared a photograph of the same young woman together with a young man, both holding a mobile phone. Under a heading "Get mobile with our phone offer" there was the following text:
Sydney readers of the Daily Telegraph Mirror can own their own digital mobile phone - FREE
We have teamed with Smartcom Telecommunications and Vodafone to offer an Ericsson GH 198 digital mobile phone and accessories with a recommended retail price of over $1000.
The phone will operate on the Vodafone Mobile Digital network.
The limited offer is subject to taking up a 15 months subscription to Smartplan 130 and is open to Sydney readers over 18 years of age with existing credit cards and credit approval.
The Smartplan 130 costs a minimum of $130 a month and includes $120 worth of free calls each month.
Additional charges are listed in the Terms and Conditions in the Public Notices section of the Teleclassifieds each day this week and next week.
The phone offer is likely to appeal especially to existing mobile phone users who depend on them for business reasons.
Tradesmen, removalists, couriers, drivers and sales people who make a high volume of mobile phone calls to run their operations are the kinds of people the offer could benefit most.
In Sydney, the Vodafone mobile digital network is available in the suburbs listed on this page.
To get your phone, all you need is five differently numbered tokens from the Daily Telegraph Mirror.
A token appears each day from Monday.
Cut the tokens out and attach them to the application coupon which will be published in the Daily Telegraph Mirror today and Tuesday.
The Daily Telegraph Mirror cannot accept responsibility for readers entering into a legally binding agreement and recommends you seek independent legal advice if unsure of the terms.
*Five thousand phones only are available, so be early.
All the foregoing was in the same size type as the general editorial content of the newspaper.
There
then appeared under the heading "Calling all suburbs while
on the move" the words "The Sydney suburbs covered by the Vodafone
mobile digital network" and a list of Sydney suburbs. Alongside this was a token with the words
"The Daily Telegraph Mirror", the number "1", a picture of
a mobile phone and the word "Token".
At the bottom of the page was a coupon. It had the words
Digital Mobile Phone for the Daily Telegraph Mirror readers - *FREE Conditions apply. Sydney readers* of the Daily Telegraph Mirror can get a digital mobile phone with one battery and a rapid desktop charger worth over $1,100 ... FREE. The Daily Telegraph Mirror has teamed up with VODAFONE and SMARTCOM TELECOMMUNICATIONS to bring you this exclusive offer. Complete this application form and attach your five differently numbered tokens appearing in The Daily Telegraph Mirror this week. Then send it to:
SmartCom, P O Box 174, Seaford, Victoria 3198.
Your free telephone will be delivered to you within 28 days of your application being approved and accepted by Smartcom. Make sure you read the full terms and conditions appearing in the Teleclassifieds each day as the Daily Telegraph Mirror cannot accept responsibility for readers entering into a legally binding agreement and recommend you seek independent legal advice if you are unsure of the terms. Vodafone, Mobile Digital, Smartcom Telecommunications, The Daily Telegraph Mirror.
The coupon contained space for an applicant to include name and address etc and also the following:
Tariff Refundable Delivery Cost of Digital Please debit my
required Security Fee Phone credit card for the
Deposit amount shown below
Smartplan 130 $260 $19.95 FREE $279.95
There was provision for placing name and other details of a credit card account and also the following:
I have read and understand the terms and conditions in Teleclassifieds. I hereby subscribe to Smartplan 130 and authorise you to debit my credit card with security deposit and delivery fee of $279.95 and a one-off connection fee of $65, then $130 monthly plus call costs in excess of $120 monthly for the duration of the contract.
Under the heading Public
Notices there appeared on page 65 in the
classified advertisements section a notice headed "FREE MOBILE DIGITAL
PHONE FOR SYDNEY READERS TERMS AND CONDITIONS OF OFFER". In summary, this notice stated that readers
must be connected to the Vodafone Mobile Digital Network via Smartcom for a
minimum of twelve months subject to 90 day termination after 12 months, that
monthly accounts must be paid by credit or charge card mandate only, that the
offer was subject to status (presumably credit status), product availability,
network geographic coverage and the unconditional acceptance of the Smartcom
Network Services Agreement, terms and conditions of which would be
"included with your free phone".
A security deposit of $260 for the Smartplan 130 had to be paid on
application by credit or charge card only.
This deposit was refundable in full after the minimum contractual period
subject to "satisfactory payment history". A minimum fee of $130 per month for the
contract period and an initial $65 one-off connection fee would be
charged. Monthly access fees were to be
charged monthly in advance and additional calls monthly in arrears. Smartcom reserved the right to amend the
tariff due to network tariff charges and change the model of the telephone
supplied without notification. The offer
was subject to a delivery charge of $19.95 to be paid on application by credit
or charge card with up to 28 days allowed for delivery. The offer was open to any reader aged 18 and
over, was valid until 1 October 1994 and was restricted to the first 5,000
qualifying respondents. There then
followed the terms of an acknowledgment under the Privacy Act which in effect was a consent to Smartcom providing
information to a credit agency.
In the Daily Telegraph Mirror of Tuesday 2 August there appeared an advertisement on the front page in the same terms as Monday's issue. On page 16 there was a different photograph but apart from the heading "Get mobile with our great phone offer" the text was substantially the same as in Monday's issue. On page 28 under the heading "Ring up a free mobile" there was text substantially the same as that which appeared in the Public Notice section of the Monday issue and also a coupon in the same terms.
Television Advertisements
On 31 July Nationwide caused to be broadcast television advertisements on Sydney channels in the following terms:
VIDEO AUDIO
OPEN ON SHOT OF PAPER WITH SFX: MOBILE PHONE RINGS.
MOBILE PHONE BESIDE IT. PHONE
IS RINGING AND WE SEE A HAND VO: "In tomorrow's Daily Telegraph
ENTER FRAME AND PRESS A BUTTON Mirror
TO ANSWER. SFX: BEEP (as phone is answered)
CUT TO SHOT OF PHONE AS WE PHONE VOICE: Free mobile phone HEAR THE VOICE DOWN THE LINE for Telegraph Mirror readers.
SUPER: "5000 FREE MOBILE SFX: BEEP (to end call)
PHONES FOR SYDNEY READERS"
CONDITIONS APPLY SFX: Phone rings again.
FROM: SMARTCOM (LOGO)
SFX: BEEP
CUT TO SHOT OF PAPER WITH VO: But you must get tomorrow's PHONE BESIDE IT Daily Telegraph Mirror for details.
CUT TO SHOT OF PHONE AS WE PHONE VOICE: A mobile phone HEAR THE VOICE DOWN THE LINE: free for readers
SUPER: "5000 FREE MOBILE
PHONES FOR SYDNEY READERS"
CONDITIONS APPLY
FROM SMARTCOM (LOGO)
HAND ENTERS SHOT AND PRESSES SFX: BEEP
BUTTON
SFX: Phone rings again.
CUT TO SHOT OF PRIME TIME VO: Also new tomorrow, Prime Time the ultimate TV Guide to the very best viewing all week
CUTS TO SHOT OF QUEENSLAND And there are 20 Queensland holidays
HOLIDAY to win. Don't forget.
SUPER: 20 QUEENSLAND (LOGO)
GOVERNMENT TRAVEL CENTRE
HOLIDAYS
CUT TO SHOT OF PHONE AS WE SFX: BEEP
HEAR THE VOICE DOWN THE LINE:
PHONE VOICE: A free mobile phone
SUPER: "5000 FREE MOBILE for readers
PHONES FOR SYDNEY READERS:
CONDITIONS APPLY
FROM SMARTCOM (LOGO)
CUTS TO SHOT OF PAPER AND VO: Only in tomorrow's Daily PHONE. Telegraph Mirror
SUPER: TOMORROW. SFX: BEEP
["SFX" means sound effects,
"VO" means voice over]
Radio Advertisements
Nationwide caused to be broadcast radio advertisements over a number of Sydney radio stations on Monday 1 August in the following terms:
Voice 1: In today's Daily Telegraph Mirror.
Voice 2: Free. Mobile phone for Telegraph Mirror readers.
Voice 1: But you must get today's Daily Telegraph Mirror for details and conditions.
Voice 2: A mobile phone free for readers.
Voice 1: Also new today, Prime Time. The ultimate TV guide to the very best viewing all week. And there are twenty Queensland holidays to win. Don't forget ...
Voice 2: A free mobile phone for readers.
Voice 1: Only in today's Daily Telegraph Mirror.
Statutory Provisions
Section 53 of the Act provides:
A corporation shall not, in trade or commerce, in connexion with the supply or possible supply of goods or services or in connexion with the promotion by any means of the supply or use of goods or services -
...
(e) make a false or misleading representation with respect to the price of goods or services;
...
(g) make a false or misleading representation concerning the existence, exclusion or effect of any condition, warranty, guarantee, right or remedy.
Section 54 provides:
A corporation shall not, in trade or commerce, in connexion with the supply or possible supply of goods or services or in connexion with the promotion by any means of the supply or use of goods or services, offer gifts, prizes or other free items with the intention of not providing them, or of not providing them as offered.
By s 79(1)(a) and (b) of the Act a person who contravenes or aids, abets, counsels or procures a person to contravene a provision of Part V other than s 52, 65Q or 65R or ss 65F(9) is guilty of an offence punishable on conviction, in the case of a person being a body corporate, by fine not exceeding $200,000. Sections 53 and 54 are in Part V.
The Informations against Nationwide
There were six newspaper
advertisements, one radio and one television advertisement. In respect of each advertisement there are
informations alleging contravention of s 53(e), s 53(g) and s 54, a total of 24
informations in all. Although there is
some variation between the form of the differing advertisements, the issues
which arise in this case can be most conveniently dealt
with by considering the informations in groups according to the particular statutory provision concerned.
Group I - s 53(e) - Price
A contravention of this section is alleged by informations numbered 1, 4, 7, 10, 13, 16, 19 and 22. In each case the representation was said to be misleading (as distinct from false) with respect to the price of goods, to wit mobile phones. The advertisements concerned and the corresponding informations are as follows:
Information No. Publication
1 DTM 28 July
4 DTM 29 July Metro Edition
7 DTM 29 July Late Final Edition
10 ST 31 July
13 Television advertisement 31 July
16 Radio advertisement 1 August
19 DTM 1 August (Front page)
22 DTM 2 August (Front page)
In the advertisement the subject of information no. 7 and all subsequent informations the advertisement contained the words "Conditions apply" or some other reference to conditions.
The particulars in each
information state that the words in the advertisement "were likely to be
understood by readers as a representation that a mobile phone would be supplied
to every reader without charge or payment" and that Nationwide was aware
that mobile phones would only be supplied to a maximum of 5000 readers who, in
each case, entered into a Smartplan 130 agreement with Smartcom pursuant to
which the reader would become liable to pay the connection fee, delivery
charge, security deposit and
monthly payments already mentioned.
It was not disputed that Nationwide made, in trade or commerce, in connection with the supply or possible supply of goods, namely the Daily Telegraph Mirror newspaper, a representation with respect to goods, namely the mobile phones the subject of the offer.
However, in my opinion the representation was not misleading (nor false) in relation to the price of those goods. The word "price" in s 53(e), at least in relation to goods, is to be understood in its ordinary legal and contractual sense as found in sale of goods legislation in the States and Territories. Taking the New South Wales Act as an example, s 6(1) of the Sale of Goods Act 1923 No. 1 (NSW) provides:
A contract of sale of goods is a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a money consideration called the price.
This may be a technical legal meaning but it is also a meaning well understood in general parlance. Thus the first meaning given by the Macquarie Dictionary for the noun "price" is:
The sum or amount of money or its equivalent for which anything is bought, sold or offered for sale.
Other more extended meanings are given, and in particular the fourth:
That which must be given, done, or undergone in order to obtain a thing: to gain a victory at a heavy price.
It might be argued that this meaning applied to the payments that subscribers to the offer were required to make under the Smartplan 130 agreement and for delivery and connection. Those payments might be said to be things which had to be done in order to obtain a phone.
In Beckwith v The Queen (1976) 135 CLR 569 at 576 Gibbs J said (citations omitted):
The rule formerly accepted, that statutes creating offences are to be strictly construed, has lost much of its importance in modern times. In determining the meaning of a penal statute the ordinary rules of construction must be applied, but if the language of the statute remains ambiguous or doubtful the ambiguity or doubt may be resolved in favour of the subject by refusing to extend the category of criminal offences.
The word "price" in
s 53(e) may be said to be ambiguous in that it is capable of bearing more than
one meaning. Section 53 creates a large
number of offences - probably at least 100 by the time various alternative
formulations are counted - which can be committed by corporations in trade or
commerce in connexion with the supply or promotion of goods or services. Since Parliament, in striking contrast to the
broad terms of s 52, has chosen numerous very specific forms of commercial
conduct to be stigmatised as criminally unlawful, I think it is reasonable to
conclude that language creating such offences is to be taken as precisely
directed. The meaning of
"price" in the sense used in the sale of goods legislation may be a
narrow meaning, but is in no way a strained or unnatural meaning. It is consistent with the regime of detailed
regulation created by s 53. And if any
doubt remains, the rule of construction applicable to penal
statutes can be called in aid.
On the evidence, a person who took up the offer in the promotion would acquire an unencumbered title to a mobile phone and would not pay, or be liable to pay, any amount of money for such acquisition. There was no price which such a person would have to pay for the transfer of the property in the telephone to him or herself. Therefore acquisition of title to the telephone was "free". The money such a person had to pay was for the various services, namely connection to the Vodafone network, delivery of the phone and an amount of $130 per month for the service provided by the network. The "security deposit" of $260 was not related to possession or ownership of the phone itself, but was a fund to which Vodafone could look for payment of its charges. Neither Vodafone nor Smartcom (still less Nationwide) would obtain any right of recourse against the phone itself.
There was no suggestion that the transaction into which a subscriber would enter was a sham, either in whole or in part. The monies paid for the various services referred to were in truth payment for those services. It was no part of the prosecution case that they were a disguised form of payment for acquiring title to the telephone.
It is conceivable that the
conduct of Nationwide was misleading and deceptive or likely to mislead or
deceive within the meaning of s 52 in that the person attracted by the offer of
a "free" mobile phone could not obtain that benefit without paying a
significant amount of money and incurring a liability for substantially
more. But as counsel for Nationwide
correctly stressed, Parliament has drawn a careful distinction between
s 52 and the offence-creating sections in Part V such as s 53 and
s 54. Section 52 has an extremely
wide ambit. Contravention of it will
confer a right to damages by a person suffering loss or damage (s 82(1)). Contravention may be restrained by
injunction, including injunction at the suit of the Commission (s 80), and a
wide variety of other orders made (s 87).
But no criminal liability is imposed.
Group II - s 53(g) - Existence of Conditions
In this group are informations 2 and 5 which concern the advertisements in the Daily Telegraph Mirror of Thursday 28 July and Friday 29 July Metro edition. It is said there was a false representation concerning the existence of any conditions because the words "Free mobile for every reader Don't miss Monday's Telegraph Mirror" constituted a representation that there were no conditions upon the supply of the goods whereas there was in truth conditions, namely limitation to 5,000 readers, entry into the Smartplan 130 agreement and payment of the various charges already referred to.
I am not satisfied beyond reasonable doubt that the advertise- ments would convey the meaning that there were no conditions. Three consumer witnesses called by the Commission readily conceded, as common sense would indicate, that a promotion of this kind must be subject to some conditions, however benevolent.
Further, and importantly, the words "Don't miss Monday's Telegraph Mirror" could only convey the meaning that somebody wishing to take up the offer would find in that issue of the paper some detail as to how the offer would work. It is clear that the offer could not be taken up before the Monday. The essence of the charge in this group of informations is not that the nature of conditions were misrepresented but that the advertisements falsely stated that there were no conditions at all. I do not think this case is made out.
Group III - s 53(g) - Effect of Conditions
The informations in this group allege a misleading (as distinct from false) representation as to the effect of conditions. The advertisements were:
Information No. Publication
8 DTM 29 July Final edition
11 STM 31 July
14 Television advertisement 31 July
17 Radio advertisement 1 August
20 DTM 1 August (front page)
23 DTM 2 August (front page)
The advertisements the subjects of these informations are the ones in which the words "*conditions apply" or equivalent were added. In the particulars to these informations it is said (with some variations not presently relevant) that the advertisement would be
likely to be understood by readers as a representation that a mobile phone would be supplied without charge or payment to every reader of the Daily Telegraph Mirror who complied with conditions other than conditions relating to charges or payments.
In my opinion these charges
are made out. I do not base that
conclusion on any finding that the words "conditions apply" (with or
without asterisk) were obscured by presentation in small print. With the possible exception of the television
advertisement, those words were obvious enough.
But with all these advertisements the reader, viewer or listener would
not have the opportunity to examine the actual terms and conditions. This is so even with the Daily Telegraph
Mirror issues on the Monday and the Tuesday because it can be safely inferred
that many, if not most, buyers of the newspaper would look at the prominent
coloured advertisement on the front page before buying the paper but would not,
prior to purchase, look at pages 16 and 65 -let alone digest the contents of
what there appeared.
These charges are not concerned with any representations as to price in the sense already discussed in relation to the Group I informations. The heavy emphasis on the phones being "free" would convey the impression that, whatever the conditions were, they would not be inconsistent with that basic promise or, as the particulars state, would not be conditions relating to charges or payments. But in truth the conditions meant that a person would have to part with a substantial sum of money (albeit not as a "price") before he or she could get a phone. The true effect of the conditions were thus misrepresented.
The potency of misrepresentation as to merchandise being "free" was recognised in the decision of the United States Supreme Court in Federal Trade Commission v Standard Education Society (1937) 302 US 112. The selling practices of an encyclopaedia publisher included a representation that a subscriber who paid $69.50 for a loose leaf supplement would receive a set of encyclopaedias "free". In delivering the unanimous judgment of the Court Justice Hugo Black said (at 115):
The fact that a false statement may be obviously false to those who are trained and experienced does not change its character, nor take away its power to deceive others less experienced. There is no duty resting upon a citizen to suspect the honesty of those with whom he transacts business. Laws are made to protect the trusting as well as the suspicious. The best element of business has long since decided that honesty should govern competitive enterprises, and that the rule of caveat emptor should not be relied upon to reward fraud and deception.
The practice of promising free books where no free books were intended to be given, and the practice of deceiving unwary purchasers into the false belief that loose leaf supplements alone sell for $69.50, when in reality both books and supplement regularly sell for $69.50, are practices contrary to decent business standards. To fail to prohibit such evil practices would be to elevate deception in business and to give to it the standing and dignity of truth. It was clearly the practice of respondents through their agents, in accordance with a well matured plan, to mislead customers into the belief that they were given an encyclopedia, and that they paid only for the loose leaf supplement.
As was noted by the Federal Trade Commission in In re Samuel Stores (1938) 27 FTC 882, "free goods" offers are
recognized as powerful psychological magnets to draw trade and undoubtedly the merchant expects to benefit thereby, either through an immediate direct profit on some other article which must be purchased or indirectly through increased good will and future patronage.
Group IV - s 54 - Not Providing as Offered
This group consists of informations 3, 6, 9, 12, 15, 18, 21 and 24, which cover each advertisement. These informations allege that Nationwide in connexion with the promotion of the supply of goods , to wit newspapers, offered free items, namely mobile phones, with the intention of not providing them as offered.
Particulars to these informations state that the advertisement "Free mobile phone for every reader Don't miss Monday's Telegraph Mirror" (and variations) "constituted an offer to provide a mobile phone to every reader of the Daily Telegraph Mirror without conditions". It was said that Nationwide at all material times intended that mobile phones
(a) would only be provided to a maximum of 5,000 readers of the Daily Telegraph Mirror; and
(b) subject to the further condition that in each case the reader entered into a Smartplan 130 agreement with Smartcom pursuant to which the reader would become liable to pay the amounts mentioned.
Counsel for Nationwide contended that mens rea ("an evil intention, or a knowledge of the wrongfulness of the act": Sherras v De Rutzen [1895] 1 QB 918 at 921) was an essential ingredient of the offence created by s 54.
The general principles applicable to the question whether the presumption of mens rea has been excluded are to be found in He Kaw Teh v The Queen (1985) 157 CLR 523, Bahri Kural v The Queen (1987) 162 CLR 502 and Chief of the General Staff v Stuart (1995) 58 FCR 299.
At an early stage in the
administration of the Act it was held by Franki J in Given v C V Holland (Holdings) Pty Ltd (1977) 29 FLR 212 that mens rea was not
a necessary ingredient for an offence under s 53(a) (falsely representing
quality). His Honour
relied in particular on the decision of the House of Lords in Tesco Supermarkets Ltd v Nattrass [1972]
AC 153 and the presence in the Act of s 84(2), which makes corporations liable
for the acts of servants, without limitation to any particular grade of
servant, and s 85, which provide defences of reasonable mistake and reliance on
others.
In my respectful opinion s 54 cannot be rationally distinguished in this regard from s 53.
However one of the elements of the offence created by s 54 is the intention on the part of the defendant of not providing the gifts, prizes or other free items in question, or not providing them as offered. These words "necessarily import a mental element": He Kaw Teh at 539 per Gibbs CJ. What has to be proved is the actual intention of the defendant, just as "purpose" in s 45D means "the operative subjective purpose of those engaging in the relevant conduct": Tillmanns Butcheries Pty Ltd v Australasian Meat Industry Employees' Union (1979) 42 FLR 331 at 348 per Deane J.
In He Kaw Teh and Stuart
there is discussion of the "half-way house" (157 CLR at 591 per
Dawson J) between mens rea on the one hand and strict liability on the other, namely
where the defendant acts "under an honest and reasonable belief as to the
existence of facts, which, if true, would have made his act innocent" (157
CLR at 533 per Gibbs CJ). This is
usually referred to as the Proudman v
Dayman defence: see (1941) 67 CLR
536 at 541 per Dixon J, although whether it is strictly a defence at all or instead
an issue which, once raised, must be negatived by the prosecution, is not yet
authoritatively decided.
In Stuart the Full Court held that in respect of the offence of losing service property under s 44 of the Defence Force Discipline Act 1982 (Cth) mens rea was displaced with respect to some ingredients but not others. The same conclusion applied to the Proudman v Dayman defence.
In the circumstances of the present case, I do not see any room for the application of the Proudman v Dayman defence. In particular, what is the "offer" of gifts etc is to be objectively ascertained. It is not a matter turning on the subjective belief of Nationwide or Mr Colin Allan (the Editor of the Daily Telegraph Mirror) as to what the offer meant. In any case, the position of Mr Allan brings to mind the point made by Fullagar J in Bergin v Stack (1953) 88 CLR 248 at 261:
The limits of the rule [in Proudman v Dayman] are well illustrated by Green v Sergeant (1951) VLR 500 at 504 where Martin J, with reference to the particular facts of the case, said: "His ignorance of the nature of the area in which he was engaged does not necessarily mean that he had an honest belief in a state of facts which, if they existed, would make his action innocent. There is no doubt he knew he was shooting duck at Werribee and he never bothered to enquire whether he was on prohibited land or not. He really had no belief on the subject.
But in my view these charges fail because the requisite intention has not been established.
The "offer" here was an offer of mobile phones on terms to be disclosed in the Daily Telegraph Mirror of Monday 1 August. There was no suggestion in the advertisements that anybody could take up the offer before that date, or without regard to whatever details were to appear in the paper published on that date. Commercially of course the whole point of the promotion in the earlier advertisements was to excite the attention of people who might be induced to buy Monday's paper. Nobody was going to get any phones in the meantime.
Nationwide never had an intention of not providing mobile phones "as offered" - that is to say on and from Monday 1 August on terms to be revealed in the Daily Telegraph Mirror of that date. In fact Nationwide did provide mobile phones in accordance with the offer. This proved not to be an onerous obligation - only 108 phones were applied for.
The limitation of the offer to 5000 phones was decided on by Mr Allan. A member of his staff told him that enquiries of the Daily Express in Scotland which had run a similar promotion indicated a likely level of demand which would make 5000 phones "more than enough". Mr Allan's own experience with promotions confirmed this view.
The offer would not convey the literal meaning that there were immediately available in some warehouse 1.3 million mobile phones, that being the readership of the Daily Telegraph Mirror. Obviously enough "every reader" meant every reader who applied for a phone. Nationwide in fact had the intention of providing a phone for every such reader. Nationwide believed on reasonable grounds that such intention could be carried out - as in fact it was. But in any case the offer "as offered" was on the terms which would appear in the Daily Telegraph Mirror of 1 August, which included a term that the offer was restricted to the first 5000 qualifying respondents.
Smartcom
There are four informations against Smartcom. Each alleges an aiding, abetting, counselling or procuring of contraventions by Naitonwide contrary to s 79(1)(b) of the Act. The respective contraventions of Nationwide alleged to have been aided, abetted, counselled or procured are as follows:
Information No. Nationwide Publication
Contravention
1 Misleading representation DTM 1 August
with respect to price (s 53)e)) (front page)
2 Offer with intention not DTM 1 August
to provide as offered (s 54) (front page)
3 Misleading representation DTM 2 August
with respect to price (s 53(e))(front page)
4 Offer with intent not to DTM 2 August
provide as offered (s 54) (front page)
I have found that there were no such contraventions by Nationwide. Accordingly the informations against Smartcom will be dismissed.
Orders
As to Nationwide, the charges the subject of informations in Group III, that is nos 8, 11, 14, 17, 20 and 23 I find proved. All other informations are dismissed.
As to Smartcom, all informations are dismissed.
Question of penalty and costs will be adjourned for hearing on a date to be fixed.
I certify that this and the preceding twenty-two (22) pages are a true copy of the reasons for judgment of his Honour Justice Heerey.
Dated:
Associate
Appearances
Counsel for the applicant: Mr P W Neil
Solicitor for the applicant: Director of Public
Prosecutions
Counsel for the respondent: Mr G Downes QC with Mr S
Wheelhouse
Solicitor for the respondent: Gallagher De Reszke
Dates of hearing: 22, 23, 24 and 25 July 1996
