FEDERAL COURT OF AUSTRALIA

Australian Competition and Consumer Commission v Smash Enterprises Pty Ltd (No 2) [2011] FCA 376

THE COURT DECLARES THAT:

1.    On or around 29 October 2008, the First Respondent contravened s 65C of the Trade Practices Act 1974 (Cth) (the TPA) by supplying to the Second Respondent 2,112 bean bag covers in trade or commerce:

(a)    that were likely to be used, or were of a kind to be used, by a consumer; and

(b)    in respect of which there was a consumer safety standard prescribed by reg 11 of the Trade Practices (Consumer Product Safety Standards) Regulations 1979 (Cth) (the Regulations),

in circumstances where the bean bag covers supplied did not comply with the Regulations in that the bean bag covers did not have fixed securely to, or stamped on, them a warning label or notice as required by regs 11(4) and 11(5) of the Regulations in the prescribed form.

2.    On or around 16 January 2009, the First Respondent contravened s 65C of the TPA by supplying to the Third Respondent 11,024 bean bag covers in trade or commerce:

(a)    that were intended to be used, or were of a kind likely to be used, by a consumer; and

(b)    in respect of which there was a consumer safety standard prescribed by reg 11 of the Regulations,

in circumstances where the bean bag covers supplied did not comply with the Regulations in that the bean bag covers did not have fixed securely to, or stamped on, them a warning label or notice as required by regs 11(4) and 11(5) of the Regulations in the prescribed form.

3.    On or around 29 October 2008 until on or around 25 October 2010, the Second Respondent contravened s 65C of the TPA by supplying 1702 bean bag covers in trade or commerce:

(a)    that were intended to be used, or were of a kind likely to be used, by a consumer, and

(b)    in respect of which there was a consumer safety standard prescribed by reg 11 of the Regulations,

in circumstances where the bean bag covers supplied did not comply with the Regulations in that the bean bag covers did not have fixed securely to, or stamped on, them a warning label or notice as required by regs 11(4) and 11(5) of the Regulations in the prescribed form.

AND THE COURT ORDERS BY CONSENT THAT:

Injunctions

4.    The First Respondent be restrained, for a period of five years, whether by itself, its officers, servants, agents or howsoever otherwise, in trade or commerce in Australia from supplying bean bag covers which are intended to be used by, or of a kind likely to be used by, consumers that do not comply with the Regulations or such other prescribed safety standards as may from time to time be applicable at the time of the supply.

5.    The Second Respondent be restrained, for a period of five years, whether by itself, its officers, servants, agents or howsoever otherwise, in trade or commerce in Australia from supplying bean bag covers which are intended to be used by, or of a kind likely to be used by, consumers that do not comply with the Regulations or such other prescribed safety standard as may from time to time be applicable at the time of the supply.

Compliance Programs

6.    The First Respondent:

(a)    establish a compliance program in accordance with the program set out in Annexure A to these Orders:

(i)    for the employees or other persons involved in the First Respondent’s business, being a program designed to ensure their awareness of the responsibilities and obligations in relation to the conduct declared by the Court in this proceeding to be in contravention of s 65C of the TPA and any similar related conduct; and

(ii)    revising the internal operations of the First Respondent’s business which led to it engaging in the conduct declared by the Court in this proceeding to be in contravention of s 65C of the TPA;

(b)    maintain and administer, at its own expense, the compliance program set out in Annexure A for a period of three years; and

(c)    provide at its own expense, a copy of any documents to be provided to the Applicant pursuant to the compliance program set out in Annexure A.

7.    The Second Respondent:

(a)    maintain its existing compliance program in accordance with the program set out in Annexure B to these Orders:

(i)    for the employees of the Second Respondent’s business, being a program designed to ensure their awareness of the responsibilities and obligations in relation to the conduct declared by the Court in this proceeding to be in contravention of s 65C of the TPA and any similar related conduct; and

(ii)    revising the internal operations of the Second Respondent’s business which led to it engaging in the conduct declared by the Court in this proceeding to be in contravention of s 65C of the TPA;

(b)    maintain and administer, at its own expense, the compliance program set out in Annexure B for a period of three years; and

(c)    provide at its own expense, a copy of any documents to be provided to the Applicant pursuant to the compliance program set out in Annexure B.

Costs

8.    The First Respondent pay within thirty (30) days of the date of this Order the Applicant’s costs of the Application fixed in the amount of $7,500.

9.    The Second Respondent pay within thirty (30) days of the date of this Order the Applicant’s costs of the Application fixed in the amount of $10,000.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using Federal Law Search on the Court’s website.

ANNEXURE A

ANNEXURE B

REASONS FOR JUDGMENT

1    On 17 December 2010, the Australian Competition and Consumer Commission (the ACCC) commenced proceedings in Fast Track alleging contraventions of s 65C(1)(a) of the Trade Practices Act 1974 (Cth) (TPA) by Smash Enterprises Pty Ltd (ACN 091 134 708) (Smash Enterprises), Spotlight Pty Ltd (ACN 005 180 861) (Spotlight) and Fantastic Furniture Pty Ltd (ACN 003 688 855) (Fantastic Furniture). Each was alleged to have supplied bean bag covers intended to be used or were of a kind likely to be used by a consumer in respect of which there was a prescribed consumer product safety standard and which did not comply with that standard.

2    The ACCC and each of the respondents has settled the proceedings. These reasons for decision concern Smash Enterprises and Spotlight.

Smash Enterprises

3    Smash Enterprises admitted the following facts pleaded by the ACCC in its Fast Track Statement.

1.    Smash Enterprises is in the business of supplying a range of products to retailers in Australia including bean bag covers. Those retailers include Spotlight and Fantastic Furniture.

2.    In particular, on or around 29 October 2008, Smash Enterprises supplied to Spotlight a total of 2,112 bean bag covers as follows:

3.    Smash Enterprises invoiced Spotlight for payment for the supply of the bean bag covers by invoice numbered 92604, dated 6 October 2008 in the amount of US $14,361.60.

4.    On or around 16 January 2009, Smash Enterprises supplied to Fantastic Furniture a total of 11,024 bean bag covers as follows.

5.    Smash Enterprises invoiced Fantastic Furniture for payment for the supply of the bean bag covers by invoice numbered 97614, dated 4 February 2009 in the amount of US $105,488.60.

6.    Smash Enterprises made the supplies to Spotlight and Fantastic Furniture in trade or commerce.

7.    Each bean bag cover supplied by Smash Enterprises to Spotlight and Fantastic Furniture the subject of the admissions in sub-paragraphs 2 and 4 above (defined collectively as the Smash Covers) was, at all material times, intended to be used by consumers, or of a kind likely to be used by consumers, particularly by the class of children and young children.

8.    For the purposes of s 65C(1)(a), reg 11 of the Trade Practices (Consumer Product Safety Standards) Regulations 1979 (Cth) prescribes the consumer product safety standard applying to bean bags, bean bag covers and packages containing bean bag filling (the Regulations).

9.    Each of the Smash Covers is a bean bag cover as defined in reg 11(1) of the Regulations.

10.    Each of the Smash Covers did not comply with the Regulations in that each bean bag cover did not have fixed securely to, or stamped on, it a label or notice as required by reg 11(4) of the Regulations in the following form (the Warning Label):

WARNING: Small Lightweight Beads Present a Severe Danger to Children if Swallowed or Inhaled.

11.    Each of the Smash Covers did not comply with reg 11(5)(a) and 11(5)(b) of the Regulations, which prescribe the required size and style of the Warning Label, and reg 11(5)(c) which requires the Warning Label to be conspicuously displayed.

4    As against Smash Enterprises, the ACCC seeks a declaration that Smash Enterprises contravened s 65C of the TPA by supplying the bean bag covers in circumstances where the bean bag covers did not comply with the Regulations. Secondly, the ACCC seeks an injunction that Smash Enterprises be restrained for a period of five years from supplying bean bag covers which do not comply with the Regulations or such other safety standards. Thirdly, the ACCC seeks an order that Smash Enterprises establish a compliance program for employees designed to ensure that the employees are aware of the responsibilities and obligations in relation to the contravening conduct and revising internal operations which led to that conduct. Smash Enterprises consents to the Court granting the relief sought by the ACCC. The parties have submitted consent orders for the Court to consider.

5    In my view, it is appropriate for there to be declarations in accordance with paragraphs 1 and 2 of the minute of proposed orders. As a general principle, a Court does not make declarations on matters relating to public rights by consent or on admissions, unless it is satisfied by evidence: see Australian Competition and Consumer Commission v Smash Enterprises [2011] FCA 375 at [12], Australian Securities & Investment Commission v Rich (No 2) (2004) 50 ACSR 500 at [10]; Williams v Powell [1894] WN (Eng) 141; Gramophone Co Ltd v Magazine Holder Co (1911) 28 RPC 221 at 225–227; Termijtelen v Van Arkel [1974] 1 NSWLR 525; Wallersteiner v Moir [1974] 3 All ER 217; Metzger v Department of Health and Social Security [1977] 3 All ER 444 at 451; BMI Ltd v Federated Clerks Union of Australia (NSW) Branch (1983) 51 ALR 401; Young P W, Declaratory Orders (2nd ed, 1984) [601]. In the present case, that is not an issue. Smash Enterprises admitted the essential facts in its Fast Track Response: see [3] above.

6    In those circumstances, it is appropriate for the Court to grant the declarations sought by consent. They are an appropriate vehicle to record the Courts disapproval of the conduct. They may deter other corporations from contravening the TPA and, in the absence of them, the contravening conduct would not otherwise be clearly identified. Finally, there is public benefit in the contravening conduct being clearly identified.

Injunction

7    In my view, the injunction sought by consent under s 232 of the Australian Consumer Law is within the power and is appropriate: see Smash Enterprises [2011] FCA 375 at [15]. The terms of the injunctions are limited by reference to the conduct in contravention of the Act in which Smash Enterprises has engaged and is designed to prevent a repetition of that conduct: cf Foster v Australian Competition and Consumer Commission (2006) 149 FCR 135.

Other orders

8    The other orders are within power and otherwise appropriate: Australian Consumer & Competition Commission v Target Australia Pty Ltd [2001] ATPR 41-840 at [24] and Australian Consumer & Competition Commission v Econovite Pty Ltd [2003] ATPR 41-959 at [12].

Spotlight

9    Spotlight admitted the following contentions and facts pleaded by the ACCC in its Fast Track Statement:

1.    Spotlight had contravened s 65C(1)(a) of the TPA in that in trade or commerce it supplied to consumers, through Spotlight Stores bean bag covers which were intended to be used or were of a kind likely to be used by consumers but which did not comply with the applicable prescribed consumer product safety standard;

2.    on or around 29 October 2008, Smash Enterprises supplied to Spotlight a total of 2,112 bean bag covers as follows:

3.    Smash Enterprises invoiced Spotlight for payment for the supply of the bean bag covers by invoice numbered 92604, dated 6 October 2008 in the amount of US $14,361.60;

4.    from on or around 29 October 2008 until on or around 25 October 2010, Spotlight supplied in trade or commerce by way of sale a total of 1,702 bean bag covers directly to consumers through Spotlight Stores;

5.    Each bean bag cover supplied by Smash Enterprises to Spotlight the subject of the admissions in sub-paragraphs 2 and 4 above (defined collectively as the Spotlight Covers) was, at all material times, intended to be used by consumers, or of a kind likely to be used by consumers, particularly by the class of children and young children;

6.    For the purposes of s 65C(1)(a), reg 11 of the Regulations prescribes the consumer product safety standard applying to bean bags, bean bag covers and packages containing bean bag filling;

7.    Each of the Spotlight Covers is a bean bag cover as defined in reg 11(1) of the Regulations;

8.    Each of the Spotlight Covers did not comply with the Regulations in that each bean bag cover did not have fixed securely to, or stamped on, it the Warning Label; and

9.    Each of the Spotlight Covers did not comply with reg 11(5)(a) and 11(5)(b) of the Regulations, which prescribe the required size and style of the Warning Label, and reg 11(5)(c) which requires the Warning Label to be conspicuously displayed.

10    As against Spotlight, the ACCC seeks a declaration that Spotlight contravened s 65C of the TPA by supplying the bean bag covers in circumstances where the bean bag covers did not comply with the Regulations. Secondly, the ACCC seeks an injunction that Spotlight be restrained for a period of five years from supplying bean bag covers which do not comply with the Regulations or such other safety standards. Thirdly, the ACCC seeks an order that Spotlight maintain its existing compliance in accordance with an identified program to ensure that the employees are aware of the responsibilities and obligations in relation to the contravening conduct and to revise internal operations which led to that conduct. Spotlight consents to the Court granting the relief sought by the ACCC. The parties have submitted consent orders for the Court to consider.

11    In my view, it is appropriate for there to be declarations in accordance with the minute of proposed orders. As noted earlier (see [5] above), as a general principle, a Court does not make declarations on matters relating to public rights by consent or on admissions, unless it is satisfied by evidence. However, in the present case, that is not an issue. Spotlight admitted the essential facts in its Fast Track Response: see [9] above. Again, in the circumstances of this case, there is a further reason for granting the declarations. In the absence of them, the contravening conduct would not otherwise be clearly identified and there is at least some public benefit in that contravening conduct being clearly identified.

Injunction

12    In my view, the injunction sought by consent under s 232 of the Australian Consumer Law is within power and appropriate. The terms of the injunctions are limited by reference to the conduct in contravention of the Act in which Spotlight has engaged and is designed to prevent a repetition of that conduct: cf Foster.

Other orders

13    The other orders are within power and otherwise appropriate: see [8] above.

Associate:

Dated:    14 April 2011