CATCHWORDS
TRADE PRACTICES - prosecution - penalties and costs - convictions recorded - other counts dismissed - both prosecution and defence seeking orders for costs.
COSTS - see above
Latoudis v Casey (1990) 170 CLR 534
Cretazzo v Lombardi (1975) 13 SASR 4
Hughes v Western Australian Cricket Association (1986)
8 ATPR 40-748
Queensland Wire Industries Pty Ltd v Broken Hill Proprietary Co Ltd (1987) 17 FCR 211
Nos SG 126 of 1993 and SG 48 of 1994
AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
Prosecutor
- and -
THE VALES WINE COMPANY PTY LTD
MICHAEL GUNTHER BARON VON BERG and
CLAUDE VIRGILIO CURTIS
Defendants
O'Loughlin J
Adelaide
24 September 1996
IN THE FEDERAL COURT OF AUSTRALIA)
)
SOUTH AUSTRALIA DISTRICT REGISTRY) No SG 126 of 1993
)
GENERAL DIVISION )
B E T W E E N:
AUSTRALIAN COMPETITION AND
CONSUMER COMMISSION
Prosecutor
- and -
THE VALES WINE COMPANY PTY LTD
Defendant
MINUTES OF ORDER
CORAM: O'Loughlin J
PLACE: Adelaide
DATE: 24 September 1996
THE COURT ORDERS THAT:
1. A fine of $100,000.00 be imposed on the defendant in respect of the convictions recorded on counts 2, 3 and 6.
2. A fine of $65,000.00 be imposed on the defendant in respect of the conviction recorded on count 11.
3. The said fines be paid within 6 months of this date.
4. In default distress.
5. The defendant pay 35 per cent of the prosecutor's taxed costs.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA)
)
SOUTH AUSTRALIA DISTRICT REGISTRY) No SG 48 of 1994
)
GENERAL DIVISION )
B E T W E E N:
AUSTRALIAN COMPETITION AND
CONSUMER COMMISSION
Prosecutor
- and -
MICHAEL GUNTHER BARON VON BERG
and CLAUDE VIRGILIO CURTIS
Defendants
MINUTES OF ORDER
CORAM: O'Loughlin J
PLACE: Adelaide
DATE: 24 September 1996
THE COURT ORDERS THAT:
1. A fine of $10,000.00 be imposed by each defendant in respect of the convictions recorded on Count 10.
2. Each fine be paid within 6 months of this date.
3. In default of payment, 6 months imprisonment.
4. The defendants jointly and severally pay 10 per cent of the prosecutor's taxed costs.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA)
)
SOUTH AUSTRALIA DISTRICT REGISTRY) No SG 126 of 1993
) No SG 48 of 1994
GENERAL DIVISION )
B E T W E E N:
AUSTRALIAN COMPETITION AND
CONSUMER COMMISSION
Prosecutor
- and -
THE VALES WINE COMPANY PTY LTD,
MICHAEL GUNTHER BARON VON BERG
and CLAUDE VIRGILIO CURTIS
Defendants
REASONS FOR PENALTIES AND COSTS
Coram: O'Loughlin J
Place: Adelaide
Date: 24 September 1996
On 10 May 1996, I published my reasons for judgment in respect of certain charges that had been brought by the Trade Practices Commission as it was then called ("the Commission") for alleged offences under the provisions of s53 of the Trade Practices Act 1974 (Cth) ("the TPA"). The defendants were The Vales Wine Company Pty Ltd ("the company") and two of the company's directors, Michael Gunther Baron von Berg and Claude Virgilio Curtis. On the information that had been laid against the company, it was found guilty on 4 counts; 7 other counts were dismissed. Mr von Berg and Mr Curtis had been
charged, originally, on 10 counts, but before the matter came on for trial 6 of those counts were withdrawn. They were convicted on one count and the remaining three counts were dismissed.
It is now necessary to consider questions of penalties and costs. For those purposes I intend to rely on the contents of my reasons for judgment. Unless it is necessary, I will not repeat facts or information that can be found in those earlier reasons.
On the dates of these offences, the maximum penalty provided by sub-s79(1) of the TPA for a contravention of s53 was, in the case of a body corporate, a fine not exceeding $100,00.00. That has since been increased to $200,000.00 thereby adding emphasis, should that be needed, to the fact that the legislature regards such offending seriously. At the relevant time, the maximum penalty provided by sub-s79(1) of the TPA for an offence by a person, not being a body corporate, who aids, abets, counsels or procures another to contravene s53 of the Act was a fine not exceeding $20,000.00. That has since been increased to $40,000.00.
I accept the submission of counsel for the prosecution that offences such as these ordinarily ought to attract substantial penalties in the higher range of available fines. As I explained in my judgment the evidence from members of the wine industry made it clear that the offending could not be detected by the human senses or by technology. In matters of blends and components, one is wholly dependent upon the integrity of the winemaker.
Penalties - The Company
The conduct of the company is to be assessed, in the main, through the evidence of Mr Fragos. Messrs von Berg and Curtis denied any involvement in any wrong doing as did Mr Bourchier and I was satisfied that Mr Haden had no knowledge of what had occurred. For the purpose of assessing penalty against the company, it matters not whether the wrong doing originated with Mr Bourchier. Indeed it is not even necessary to examine the involvement of Messrs von Berg and Curtis. It is sufficient to rely on the evidence of Mr Fragos subject to one important caveat: I found that his evidence (in the form of his reliance on the Sales Records) was not reliable and could not support convictions where it had been alleged that a particular wine did not meet the P4 standards. Whilst I did not consider it necessary for the prosecution to prove the exact composition of a wine, it was necessary for it to prove beyond reasonable doubt that a P4 standard had been breached. I intend, therefore, to assess the penalties against the company by having regard to my findings that on 4 occasions the company falsely held out that a particular wine was 100% of a nominated variety.
The company is now in liquidation and I have been informed that there would be no hope of any penalties or costs being recovered. This state of affairs should not, however, dissuade a court from assessing appropriate penalties. Even though they may not be recovered, they will serve as a warning throughout the wine industry and elsewhere of the attitude of the Court to offences of this nature.
Sub-section 79(2) addresses the question where a person (which expression includes a body corporate: par79(1)(g)) is convicted of two or more offences constituted by, or relating to, contraventions of the same provision of Part V. In those circumstances, if it appears to the Court that the contraventions were of the same nature or a substantially similar nature and that they occurred at or about the same time, the Court shall not impose fines that, in the aggregate, exceed the maximum fine that would be applicable in respect of one offence by that body corporate. My findings with respect to the conduct of the company leave me in no doubt that the four offences were of the same nature. But did they, or any of them, occur at or about the same time? The offences represented by counts 2 and 3 were both committed in September 1991 and the offence reflected by count 6 occurred in early November of the same year. But count 11 related to the sale of 196,530 litres of wine (falsely described as 1991 McLaren Vale Cabernet Sauvignon) to Orlando Wyndham in July and August 1992.
Although I did not have the benefit of counsel's submissions on this subject, the matter is of some importance as I consider that the nature of the company's offending was very serious. It warrants recognition of that fact by the imposition of heavy penalties. If however, as I think, the first three counts are sufficiently close in point of time to bring down the protection of sub-s79(2), care must be taken to fashion the size of the penalties accordingly. In my assessment of the facts of this prosecution and the application of the provisions of sub-s79(2), the Court should treat the first three convictions in a group as being the same or substantially similar and as having occurred at or about the same time. But count 11, occurring as it did eight or nine months later, did not occur at or about the same time and must be separately assessed.
In assessing the penalties that the company must pay, I accept the submission of the prosecution that deterrence is a very important matter. Indeed it is a paramount consideration. The wine industry is dependent upon the integrity of winemakers and manufacturers. Conduct of the kind engaged in by the company has the potential to cause serious damage to the nation's Wine industry. I adopt the following extract from the written submissions of the prosecution:-
"Because
the company was a supplier of bulk wine to other wineries, who intended to
blend other wine with the wine supplied, the falsity of any misrepresentation
of variety and vintage would almost inevitably infect all further dealings with
wine containing any of the wine supplied.
The wineries purchasing the bulk wine chose the variety,
vintage and quantities of the wines to be blended in reliance upon the accuracy
of the representations made. Those
wineries would then make their own representations as to the composition of the
new wine product in connection with its supply to others. Major, well known and respected wine
companies like Andrew Garrett Wines, Angoves and Orlando Wyndham would then,
quite unwittingly, be led by the offences of the defendant company into making
false representations of their own. The
degree to which those representations departed from the truth is likely to be
further extended from that of the original false representation. The effect is to compound the false
representations of the defendant company."
In my opinion, one fine of $100,000.00 should be imposed on the company in respect of the convictions of the first three counts and a fine of $65,000.00 should be imposed on the last of the counts. I will fix a period of 6 months for payment, in default, distress.
Penalties - Messrs von Berg and Curtis
I was satisfied that both men were untruthful when giving their evidence. My assessment of their situation is relatively simple; they found out that the company had large stocks of wine that could only be sold as "dry white" or "dry red". This could have meant financial disaster to the company as the prices for such blends would have been almost a $1 per litre less than the prices for varietals. Contrary to their denials, I was satisfied that on one occasion, on the sale of 195,550 litres of wine to Orlando Wyndham, Mr von Berg and Mr Curtis involved themselves sufficiently in the misrepresentations to bring down a finding of criminality. However, they are not to be punished for the general conduct of the winery, nor are evidentiary findings, such as "blending was rife", to be held against them. For the purpose of determining whether the prosecution had established guilt with respect to the Orlando Wyndham transaction, their earlier knowledge of Mr Haden's concern was an important evidentiary aid but, their guilt and their punishment must be limited to that one transaction.
Both Mr von Berg and Mr Curtis were men of good character prior to the commission of this offence and they are entitled to credit for that fact. Both have impressive histories of educational achievement, hard work and community involvement. Mr von Berg was decorated in Vietnam for valour. I also recognise to their advantage, that their offending came about as a result of circumstances that were created by others. They did not originate the criminal conduct - they inherited it. However I have made adverse findings about them and their conduct in my earlier judgment and those adverse findings must be brought into the balance when considering penalties.
I do not intend to differentiate between the two men. It is my assessment that Mr von Berg was probably the more dominant of the two personalities but I fall short of calling him the leader and Mr Curtis the follower. I consider that the same penalty should be imposed on both men.
What I have already said on the subject of deterrence must also apply to Messrs von Berg and Curtis. I also hold it against them that their conduct was deliberate. I found that each of them well knew and understood that he was participating in a fraud. In my opinion, and contrary to the submissions of counsel for the defence, personal deterrence as well as general deterrence is an important factor in this case. In the interests of each defendant I accept that there was no evidence that their conduct was motivated by direct personal gain and I accept that the adverse publicity generated by their conviction would have had a very serious effect on their commercial and personal reputations. In addition they must have already suffered financially as a result of the prosecution. Balancing those factors against the adverse findings that I have made, I impose a penalty of $10,000.00 on each of them. They may have 6 months to pay and in default of payment 6 months imprisonment.
Costs
The charges against the company were heard at the same time as the charges against Mr von Berg and Mr Curtis. There were a total of eleven charges against the company, but Mr von Berg and Mr Curtis faced trial only in respect of aiding and abetting in the commission of four of those eleven charges. It seems to me, therefore, that in a consideration of the various costs issues, the first matter to be borne in mind is that a section of the trial was devoted exclusively to the affairs of the company and neither Mr von Berg nor Mr Curtis should be ordered to meet those costs.
The prosecution seeks an order that all defendants pay 75% of the prosecution costs, claiming that only a small portion of time was taken up pursuing the dismissed charges and the charges that related to the company only. I do not accept that assessment. My assessment of the time taken in the trial is governed, to a substantial degree, by the fact that the prosecution made a fundamental error when it relied on the Sales Records but failed to check back against the Tank Files. If the prosecution had performed a random check of one or two Sales Records against the Tank Files, it would have found for itself that the records of the company were wholly unreliable. The defence was able to perform that task - there is no excuse for the prosecution's failure. If this had been done there is the likelihood that the prosecution case would have been recast so that the matter proceeded only on those counts where convictions were recorded.
On the other hand, it cannot be overlooked that the defendants have been found "Guilty" of very serious offences. It could not be suggested that if the prosecution had better prepared itself, Mr von Berg and Mr Curtis would have pleaded "Guilty". They had denied any wrongdoing and all knowledge of any wrongdoing. In those circumstances it would be somewhat incongruous to see such guilty parties enjoy an award of costs against a successful prosecution. I therefore reject the primary submission of the defence that as it was substantially successful it should have the greater part of its costs. Latoudis v Casey (1990) 170 CLR 534 is authority for the proposition that in ordinary circumstances an order for costs should be made in favour of a defendant against whom a prosecution has failed. But that is not the case here; the prosecution did not fail - it was partially successful. It failed in its attempts to prove breaches of the P4 standards but it was successful in proving those charges where the relevant defendants were involved in sales of wine that were held out as 100% varietals.
Apportionment of costs is a matter of the exercise of the discretion of the trial judge: sub-s43(2) of the Federal Court of Australia Act 1976 (Cth). As to the exercise of that discretion, I adopt what Bray CJ said in Cretazzo v Lombardi (1975) 13 SASR 4 at 11:-
"I think the guiding principle still stands as it left the House of Lords in the famous case of Donald Campbell & Co v Pollack [1927] AC 732, that the general discretion is absolute and unfettered, except that it must be exercised judicially, not arbitrarily or capriciously, and that it cannot be exercised on grounds unconnected with the litigation."
Section 43 of the Federal Court of Australia Act has equal application to civil and criminal matters. In sub-s(1) it is provided that, subject to special provisions with respect to a representative proceeding:-
"...the Court or a Judge has jurisdiction to award costs in all proceedings before the Court ... other than proceedings in respect of which any other Act provides that costs shall not be awarded."
No such other Act applies to this case.
There were aspects about the case for the prosecution and the manner in which it was presented that reflect adversely on the prosecution. In particular, as a result of inadequate investigations, the prosecution proceeded upon the premise (which the defence proved to be false) that the Court would be entitled to rely on the contents of the Sales Records. I do not see why any of the defendants should be visited with costs because of the time taken during the trial to establish the unreliability of those records. Aligned to that is the time taken with the evidence of Mr Fragos. He was the witness for the prosecution who had asserted that those records were reliable. The defendants should not be required to pay all costs associated with his evidence. Although it might be said that the prosecution was not to know that he would be unsatisfactory in aspects of his evidence, he was the witness for the prosecution. I do not see why the defence should pay for his shortcomings.
The prosecution conceded that it should pay the costs incurred by Messrs von Berg and Curtis with respect to the six withdrawn charges. However, it submitted that only costs "solely incurred" by the defence in relation to the withdrawn counts should be payable. The prosecution claimed that those costs that were incurred in relation to counts 1-6 that would have been incurred in any event, as part of the general preparation for trial, should be dealt with separately. In my opinion this submission must be correct.
However, the withdrawn charges are only one aspect of a much larger issue of costs; they are to be assessed in the knowledge that they are part of the costs relating to the charges against the company and the other charges against Messrs von Berg and Curtis. In the peculiar circumstances of this case I am of the opinion that it would be inappropriate to make a series of costs orders. It would be preferable to consider the competing submissions and to make a global order after giving due weight to all relevant factors.
My first task is to apportion costs between the company on the one hand and Messrs von Berg and Curtis on the other. As to
that, I intend to proceed upon the premise that the primary offender was the company. That fact was recognised by the prosecution because it chose, originally, to institute proceedings against the company only. The decision to charge Messrs von Berg and Curtis as aiders and abettors in respect of 10 of the 11 charges came at a later stage and ultimately six of the counts against them were withdrawn. Looking at the trial in its entirety, its duration was increased by the presence of the charges against Messrs von Berg and Curtis only to the extent of leading evidence as to their knowledge in respect of 4 counts. Without more, that would suggest that the company would be responsible for the bulk of the costs as between it and the two directors. On the other hand, the company did not appear in answer to the charges. If the matter had proceeded against the company ex parte it is reasonable to assume that the trial would have only lasted a few days. It was the justifiable cross-examination of counsel for Messrs von Berg and Curtis that was a substantial reason for the length of the trial. In determining the outcome of the costs issue, I intend to give recognition to the fact that neither the company nor Messrs von Berg and Curtis should have to bear the costs of the time taken in cross-examination of Mr Fragos to show that there could be no reliance on the Sales Records.
In Hughes v Western Australian Cricket Association (1986) 8 ATPR 40-748 at 48 136 Toohey J said:-
1. "Ordinarily, costs follow the event and a successful litigant receives his costs in the absence of special circumstances justifying some other order. Ritter v. Godfrey (1920) 2 K.B. 47.
2. Where a litigant has succeeded only upon a portion of his claim, the circumstances may make it reasonable that he bear the expense of litigating that portion upon which he has failed. Forster v. Farquhar (1893) 1 Q.B. 564.
3. A successful party who has failed on certain issues may not only be deprived of the costs of those issues but may be ordered as well to pay the other party's costs of them. In this sense, "issue" does not mean a precise issue in the technical pleading sense but any disputed question of fact or of law. Cretazzo v. Lombardi (1975) 13 S.A.S.R. 4 at p. 12.
There is no difficulty in stating the principles; their application to the facts of a particular case is not always easy. Also it is necessary to keep in mind the caveat by Jacobs J. in Cretazzo v. Lombardi at p 16. His Honour sounded what he described as "a note of cautious disapproval" of applications to apportion costs according to the success or failure of one party or the other on the various issues of fact or law which arise in the course of a trial. His Honour commented:-
"But trials occur daily in which the party, who in the end is wholly or substantially successful, nevertheless fails along the way on particular issues of fact or law. The ultimate ends of justice may not be served if a party is dissuaded by the risk of costs from canvassing all issues, however doubtful, which might be material to the decision of the case. There are, of course, many factors affecting the exercise of the discretion as to costs in each case, including in particular, the severability of the issues, and no two cases are alike. I wish merely to lend no encouragement to any suggestion that a party against whom the judgment goes ought nevertheless to anticipate a favourable exercise of the judicial discretion as to costs in respect of issues upon which he may have succeeded, based merely on his success in those particular issues."
The observations of Toohey J were approved by a Full Court of this Court in Queensland Wire Industries Pty Ltd v Broken Hill Proprietary Co Ltd (1987) 17 FCR 211 at 222. In referring to the judgment of his Honour, the Full Court said that it "summarises the well-known guidelines within which the discretion as to the costs is exercised".
It is true that
the prosecution succeeded in four only of the counts against the company and
failed in seven. With respect to Messrs
von Berg and Curtis it succeeded on one only out of four. But I do not consider that an arithmetical
approach is the correct approach. In my
opinion the correct approach is to commence with the observation that the
prosecution set out to prove and ultimately did prove that the company was
selling wine that was not true to description and that on one occasion Messrs
von Berg and Curtis aided or abetted or counselled or procured the company to
commit an offence. However, along the
way the trial was protracted because of a fundamental flaw in a substantial
part of the prosecution's case, that is, its
inappropriate reliance on the Sales Record.
In view of the fact that I have found that the prosecution should have
known of the faults in the Sales Records and would have known of those faults
if it had properly investigated the matter, it should suffer the consequences
by not enjoying orders for its full costs.
In my opinion there should be an order that the company pay 35% of the prosecutions costs. There should, in addition, be a separate order that Messrs von Berg and Curtis jointly and severally pay an amount equal to 10% of the prosecution's costs. Those costs are to be taxed in default of agreement.
I certify that this and the preceding pages are a true copy of the Reasons for Judgment of the Honourable Justice O'Loughlin
Associate:
Dated:
Counsel for the Prosecution : Mr B R Martin QC
and Mr D J Chapman
Solicitor for the Prosecution : Director of
Public Prosecutions
Counsel for the Defendants : Mr K V Borick
Mr von Berg and Mr Curtis and Mr D L Hopton
Solicitors for the Defendants : von Doussas
Mr von Berg and Mr Curtis
There was no appearance for
the company
Dates of Hearing : 25 July 1996
26 August 1996
