Ransley, D.A. v. Coles Myer Ltd [1987] FCA 133

Tt URE CRDLUPAL COUE or SUYTRAL C7 TASMONT ULAR UT be RS Er : , Yoo 0h Boor bana SENCESL Dis tet ' BETWEEN : DAI ACLEN BRANSLeY Prosecutor and TOLES M?RR DIM ULE Defendant

QUURL: NORTHROP J. DATE: 27 MARCH L387

ELACE: HOGBAL'T

REASONS PUR TUWGMON'T

Coles Mrer Limited 13 3 well known compiny carrying

on business throughout Australia. Among many

activities, it conducts ratarl selling outlets at

other

large

shopping centres. Coles Myer Limited has pleaded quilty toa

charqe:-

"THAT on the twenty~seventh day of May L986 at

Eastliands Shopping Centre at Rasny Park in Tasmania (it) committed an otfence against Section 62(1)(b) of the Trade Practices Act 1974, by selling to one Bavid Allen kansley tablets containing wGlucomannan tn a bothin labelled 'Golden Life Natural Sprrulina Vitamin & Compound', thus supplying goods ct a kind Likely to be used by a consumer and in respect et which chere was in force a Notice under that section declarinad goods tn be unsafe goods."

Section 62 or the 'Trade Practices Act 35 within

Division | of Part '" ot that Act. That Part 1.5 headed

"Consumer Protection" and that Pivision 1s beaded "Untaur

Practices." The relevant parts of s.2 are as follows:~-

"ed. Cl) A cerporation shall mot, in trade or commerce, supply caoods thit... are of a kind lakely to be used. by 4 consumer it the qnods are of a kind -

(bh) an respect ot which there 1s in torce 3 notice under this section declaring the

goods to be unsate doodn.

see

(2D) Where 1t appears to the Minister that qoods of a particular kind will or may cause injury

to persons using the goods or to any other persons, he may, by notice under his hand published in the

Gazette, declare the qoods to be unsafe goods.

(2E) A notice under sub-section (2D) has etfect until the expiration of LB months after the date of publication of the notice in the Gazette unless it is revoked before the expiration or that period."

Under 5.4 of the Act. the word "supply" when used ain

sub-section 62(1l) wncludes supply by way of sale.

In the exercise or the powers conterred by

sub-section 62(2D), the Minister published in the Gazette aft 13 May 1985 a notice declaring goods to be unsafe qoods,

namely, goods being ""Glucomannan in tablet torm."

un 2/ May Loss, the prosecuter, Navid Allen Ranslev, being an otficer oat the V'rade Practices Commission, at the K Mart store of Coles Myer fimited at the FastLlands Shopping Centre, purchased twa plastic bottles from Coles Myer Limited. 'The label on each bottle contained the

following words:-

"GOLDEN LICE Natura l Glucomannan Spirulina & Vitamin Bo Compound

60 TABLES."

Fach bottle contained tablets which contained qalucomannan and thus the contents of each battle compriced a@lucomannan in tablet form. The two bottles were among a group of six bottles containing similar tablets. [ach bottle was priced at $3 heing a discounted price having been reduced

from a price of $10.9t. to a price of $7 and then to $3.

On these racts, 1t 1s clear that Coles Myer Limited

contravened sub-section 62(1)(b) of the Trade Practices Act.

Under sub-section 79(1)(b) of the Act. Coles Myer Limited is punishable on conviction to a fine not exceeding 650,000.) [kt 1s noted that aft the offence had been committed atter June

1986 it would have been puntshable on conviction to a tine

not exceeding $100,000.

ft 1s noted that 3.45 of the 'rade Practices Act

makes provisions tor detences to a prasecution of the type

brought in this care (ne ot the defences co available ts 1f the defendant establishes that if took reasonable precautions and exercised due diligence toa «avoid the contravention charged. In May L985, Unies Myer Limited hada detailed procedure laid down ina document called the "Product Recall Manual" to he tollowed where, as a matter ot urdqency. products being sold by Coles Myer timtted had to he taken off the market and not sold to the public. 'fhis procedure was

designed to prevent the sale of products which were

discovered to be dangerous to the health ct the public, such as contaminated food. In the present case, Colas Myer lsamited does not rely upon a daetence based upon s.85 of the Act and the application of the procedures prescribed by the Product. Recald Manual. 'the materia] batore the Court shows that following the coxperience qained from the present. case, thone procedures have been varied in an attempt to prevent a

Similar occurrence happening in the future.

In the present case, pursuant to 0.49 r.5 of the Rules of Court, the prosecutor and the defendant have filed detailed affidavit material to assist the Court to determine the appropriate penalty to be iumposed on Coles Myer Limited. Glucomannan 15 a type of starch or carbohydrate having a very large molecule which readily absorbs liquids and expands quickly. When swallowed, the qlucomannan absorbs the Liquids in the stomach, expands and creates a feeling of a full

stomach without havinad eaten tood. it 1s used as an aid to

slimming. The Minister had been qiven expert advice that glucomannan, in tablet form, was a dangerous substance 'since there was a possibility ot 1t¢ expanding in the oesophagus of a person betore 1t had time fo reach the stomach. lt this eccurred, a dangerous condition would result requiring urgent surgical treatment. 'There was no evidence as to whether this had ever occurred or not. (t was accepted that alucomannan tabtets had been on sale tor at Lloast two years berore May 1986. There was no evidence or what publicity, at any, eccurred at the time the Minister declared qhuacomannan in

tablet torm to be unsate goods.

The main attadavit filed bv the defendant was sworn by Keith Irvine. the secretary ot Coles Myer Limited. [n May

1985, the detendant held about 3,000 bottles of glucomannan

tablets either in stock or on display shelves. At that time it operated some 1,055 stores in Australia and some 200 of those stocked qatucomannan tablets. The defendant did not know of the deciaration published 1n the Gazette of 13 Mav 1985 but 1% must he presumed to have knowledge of it. The leqal otticer whose duties include reviewing Government

Gazettes, did not realise that the defendant sold qlucomannan in tablet trorm. lf the defendant had known ot the

declaration the procedures prescribed in the Product Recall Manual would bave been implemented. Jn all probabilitv, this

would have prevented the oftence occurring,

The defendant first became aware ot ditizcuities with respect: to a@lucemannan tablets on about J4 or 16 May

1985 when Graham Hurton, who wan then the Group Centroller of the supermarket and tood services division at the derendant s head atfice in Melbourne, received a phone call from a person whose name he cannot recall. As a result of that phone call, Burton rang Gordon James then the Sales Manager ot the companies selling "Golden Life" and "Natures Way" brands of vitamin products. These two companies were part of the Nicholas Kiwi group ot companies, a well known and reputable group. James told Burton that the companies had recalled "Golden tife" glucomman tablets and that the recall had been ordered by the Federal Heaith Authority. Burton was not told

of the declaration in the Gazette.

in agnorance of the declaration. Burton did not activate the recall procedures but instituted procedures tor the withdrawal trom sale of qlucomannan tablets and their return to the suppliers. The memorandum instituting those procedures was dated (6 May 1985 and was directed to all States. 'The instruction was headed ""Glucomannan Tablets" and

contained the following instructtons:-

"Whilst some states' Health Department are disagreeing with the Federal Body, we are to return

all stocks. all brands, of these weight control items to the various suppliers.

This applies to tablets only and is due to the fact that because they absorb moisture so quickly that there 1s a chance that they may stick an the throat or somebody.

This risk factor does not apply to capsules ar powders and these are not to be returned.

Range to be Returned

Golden Gite Great shape Tablets

Golden Lite Glucomannan Spirulina and f6

Natures Way Clucomannan 500

Should your state be stocking any other Glucomannan Tablets these are to be included in the instruction

to stores.

Please instruct stores to remove the above ttems trom sale and in the case of Metropolitan areas return to vour G.0.C. by the 7th June otherwise claims may not be allowed.

With regard to country stores please obtain the quantity of stock on hand so that we can negotiate with the supplier on the method of returning. Please contact your local representative tor the Golden Lite/Natures Way (Nicholas) items and they will arrange to pick up from your G.D.C. when

stocks are available and we suggest no later than 28th June."

In Tasmania, this instruction was directed to Dean

Kane, then the defendant's buyer of grocery and non food

products in the Tasmanian supermarket divis3zon.

fn May and dune 1985, Mark Anderson was the

Department Manager of the toltetries/cosmetic department at the detendant's K Mart store in the Fastlands Shopping Centre at Rosny Park. That department sold vitamin tablets. In June 1985. Anderson was instructed by Graham Mazey, the then Area Manager at that store, to remove qtucomannan 9 tablets from the display shelves unti! turther notice. Anderson was shown a written instruction to do that. He and Susan Cooper, a sales assistant in that department. searched the display

shelves and found s1x bottles of Golden [Life qlucomannan

tablets. 'These six bottles were removed trom the shelves. wrapped in a piece ot white paper on which had been written words to the ettrect that the six bottles were nat to be removed trom the stock room unti! further notice. ind all were secured by being placed within a rubber band. These were then placed on the top shelt of the fixtures in the stock room. 'The shelt was some six feet above the tloor and the bottles were placed there tq avo1d them becoming mixed with other bottles and being returned to the display shelves. Anderson noticed the bottles on that shelf on several gccasions Over the next few months. In January 196, Anderson became the Area Manager or the Eastlands K Mart store. He does not know how the six bottles were returned ta

the display shelves.

On tbe evidence before the Court. the procedures adopted at the Eastlands K Mart store with respect to these

six bottles created a dangerous situation. 'This arose trom a

lack ot knowledae ot the evidence at the declaration and the non implementation of the procedures specified in the Product Recall Manual. Further, there was a tatlure on the part of the appropriate otticers of the detendant to take adequate precautions to prevent those bottles from being returned to

the display shelves.

-y -

It uppears that hetore the memorandum at Lh May 1985 was torwarded. Burton rang Nevitie fangley, the defendant's Tasmanian State Manager directing him to) enntact store managers to direct them to remove glucomannan tablets from the display shelves. That procedure had same af the characteristics of the procedure laid down in the Product Recall Manual where, as a matter ot urgency, products are to be removed trom sale. Langley implemented this procedure and the store managers. uneluding the manager at the K Mart store at kastlands, were so directed. Shey ware told to hold the tablets un the stock room unt1!) further notice and that a memorandum would he sent aut contirming the recall, Anderson carried out those directions, C am satistied that at this time no adequate tollow up instructions were given as to what should be done witb the qlucomannan tablets atter they had

been removed from the display shelves.

There then developed a Lona history ot a tidying up nature in which otticers ot the Trade Fractices Commission found glucomannan tablets first at some Coles Myer Limited stores in Tasmania, second at a Coles Myer Limited store at Newtown and thirdly at a Coles Myer Limited store at Melvitite, Western Australia, Un each ocerasion. on heing notified, sanior management took urgent and comprehensive

action to ensure that further sales did not occur.

- lu -

Altogether, the defendant did aiotherough job and

cleared the large number ot bottles from the larqae number of stores. The occasions ot the breaches at Tasmania, Newtown and Melville were due to human error and after explanations— supplied by the defendant, the Trade Practices Commission decided not to prosecute with respect to those breaches. In the correspondence relating to those matters, the Commission drew attention to the tact that what had occurred tended to show that the detendant was not acting with due diligence within the meaning ot 5.85 ot the Trade Practacen_Act. As have said, the lack ot knowledge of the defendant ot the existence ot the declaration under sub-section 64(4D) of the Trade Practices Act had fed 1t into adopting procedures which were not as strict as they could otherwise have been. By August 1985, following the incident at the Newtown store, the defendant did know ot that declaration, a copy ot the Gazette having been provided to 1t by the Commission under cover of a letter dated § August 1985. Thereafter, the defendant with great concern and activity, activated many procedures in an attempt to prevent glucomannan tablets being sold at any of its stores. [t is not necessary to detail those procedures and attempts. It. is sufficient to sav that the six bottles of alucomannan tablets placed on the high shelf in the stock room al, the defendant's K Mart store at FBastlands constituted abpidden trap awacting to be sprunq by an unsuspecting employee ot the detendant. 'the eristence ot those botttes

were torgotten or overlooked by the responsible ofticers ot

the defendant employed at that K Mart store.

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From time to time. the prasence ot those bottles was noticed by employees carrying aut crocktalcing activitias. As late as March LY8e. Sentt Cane, then i trainee manaqer working port of the time at Fhe K Mirt store ah Kastlandsc,. saw on the top shelr in the stock room something wrapped in white paper secured by a rubber band. He did not examine it.

He Lett ut there,

Between August LyaS and February LY&7. Peter Wilde was the Manager at the K Mart store at Easttands. Betore ?2/ May L946, he did not know that there wore any qlucomannan tablets at that store. In November 1985, he issued instructions that. vitamins which were nearing their expiry date should be marked down progressively and sold. The si3x bottles ot qlucomannan appear to have an expiry date ot April 1986. In Apri! he decided to close down the vitamin section antirely and to sell all stocks oat vitamins. He does not know how the 51% bottles ot ajucomannan tablets came to he removed trom the stock room to the display shelves. He made enquiries ot the employees who wrre involved in the April clearance of vitamins but none of them remembers placing any or those six bottles on the display shelves. After kansLlev purchased the two bottles. he qave one to Wriide ffilde then searched the display shelves and removed the other four. un

instructions trom his superior otticer. he destroved the tive

bottles.

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Miss Cooper who had assisted in the removal ot the bottles from the display shelves wn May or June 1985

continued to see them in the stock room durtna stock control exercises, At the time of the vitamin clearance, she remaved all the vitamin tablets trom the lower shelves of the stock room but did not move the qlucomannan tablets. she was involved in the marking down of the prices on the vitamin products buf did not see the botties ot alucomannan tablets except on the top shelt ot the stock room while doing that.

She did not put the reduced prices on the glucomannan tablet

bottles.

No explanation has heen qiven as ta how the offending bottles came to be an the display shelves in May 1986. In the circumstances, it would be idle to speculate what happened. [fam satisfied that in all probability, it

was done by an employee employed on the shop floor at the K

Mart store.

On all the materral before me. [f am satistied that the detendant is not guilty of any moral turpitude. {t has not engaged in any dishonest activity. If did not. ewercise due diligence to ensure that all the declared qoods were removed trom possible sale from all ot its stores. When w1ts attention was drawn to the fact it had not succeeded, it initiated extensive and detailed procedures to prevent tuture breaches ot 3.6% ot the 'Trade Practices Act. The fact that it failed resulted, in my opinion, from a failure of

personnel at the store Level.

the maximum penalty preseribed dy 6.79 at the Trade Practices Aci as denianed to cover the whole ranae of ortences created by breaches ot the provistons of Part V oft the Act. Many of those offences may result from the moral turpitude and dishonesty of the ottending person where that person has engaged in conduct for his own benefit at the expense of innocent persons. Nothing Like that has occurred here. L{n attempting to prevent the sale of the qLucomannan tablets. the defendant tailed to exercise due diligence and so could not. rely upon a detence based on 5.85 of the Act. Neverthetess, in many respects it was in the position of an innocent, person. When the declaration order was made, without knowledae ot that order. the detendant crpended time and resources to remove the tabtets, That was a mammoth task. tT did not succeed completely. Thereatter, it expended further time and resources to rectity the position.

fit failed because of human error at a junior Level of

responsibility.

Counsel for the defendant submitted that the Court should exercise its discretion under s.L9B of the Crimes Act 1914, and refrain from entering a conviction against the defendant having regard to the extent to which the oftence is of a trivial nature or to the extent to which the otfLence was committed under extenuaLing circumstances. {In my opinion, neither of those matters apply here. The otfence 1s not trivial and the facts of this prosecution do not constitute

extenuating circumstances.

A conviction should 6e recorded but having reqard

to all the circumstances ot this case a nominal penalty only

should be imposed which J determine at $4500,

The Court. orders accordinaly.

In addition, 1t 1s ordered that the detendant pay

the prosecutor's costs of the prosecution,

I certify that this and the thirteen (13) preceding pages are a true copy of the Reasons for Judgment herein of the Honourable Mr. Justice R.M. Northrop.

Associate

27 Mare