Citation: Consumer Affairs v Reject Shop; Department of Fair Trading v Reject Shop [1999] NSWSC 62
Court: Supreme Court of New South Wales (Common Law Division)
Date: 16 February 1999
Judge(s): Grove J
Background
The defendant was a retail company operating a chain of discount stores across New South Wales. Two summonses were brought against it by the Commissioner for Consumer Affairs and the Director General of the Department of Fair Trading, together covering eleven offences under the Fair Trading Act 1987 alleged to have occurred between September and December 1994.
The offences fell into two broad categories. Some concerned products that failed mandatory safety standards, including children's toys that presented inhalation or ingestion hazards or failed projectile tests. Others concerned products that were the subject of active banning orders under the Act, including exercise equipment, children's Santa bags lacking required air holes, and elastic luggage straps without mandatory warning labels.
The defendant pleaded guilty to all eleven charges. The matter proceeded on an agreed statement of facts, with contested argument limited to sentencing considerations and the conclusions to be drawn from the circumstances of each offence.
Legal Issues
- What penalties were appropriate for eleven contraventions of the Fair Trading Act 1987, each carrying a maximum fine of $100,000 for a corporation?
- What weight should be given to mitigating factors, including guilty pleas, absence of prior convictions, the defendant's cooperation, and voluntary recall efforts?
- Were costs payable by the defendant, and if so, in what amount?
Decision
Grove J sentenced the defendant on all eleven counts, imposing individual fines that varied according to the seriousness of each offence. The court assessed culpability by reference to the nature of each product, the risk posed, and whether the defendant had received prior warnings before continuing to sell the item. Products likely to endanger young children, particularly the Santa bags and projectile-launching toy jets, attracted relatively higher fines.
The court accepted that the defendant had no prior convictions under the Act and that the conduct was confined to a discrete period. It also accepted the evidence of a director in mitigation as truthful, noting genuine efforts by the company to implement recalls and respond to regulatory alerts. Some offences were treated as less serious where the defendant could point to inter-state differences in applicable bans or where stock had found its way onto shelves due to inadequate internal supervision rather than deliberate flouting.
However, the court rejected the view that cooperation and voluntary recalls should substantially reduce penalties for those offences where more fundamental failures were evident. The court noted, for instance, that the presence of the Super Jetfighter at the newly opened Top Ryde store, while explained by unfortunate timing, still constituted an offence. Similarly, selling Santa bags without the required perforations was treated as serious given the obvious vulnerability of the likely end users.
On costs, the court ordered the defendant to pay the prosecutor's assessed costs in full, in addition to the fines imposed.
Orders Made
- Offence 1: Fined $4,000
- Offence 2: Fined $4,000
- Offence 3: Fined $2,000
- Offence 4: Fined $2,000
- Offence 5: Fined $2,000
- Offence 6: Fined $4,000
- Offence 7: Fined $2,000
- Offence 8: Fined $4,000
- Offence 9: Fined $4,000
- Offence 10: Fined $2,000
- Offence 11: Fined $2,000
- Total fines: $30,000
- Prosecutor's costs ordered to be paid: $89,772
- Both amounts enforceable under the Fines Act 1996
Key Takeaways
- Under the Fair Trading Act 1987, a corporation faced a maximum fine of $100,000 per offence; however, Grove J imposed fines well below that ceiling where genuine mitigating factors were established, resulting in a total of $30,000 across eleven offences.
- Guilty pleas, an absence of prior convictions, voluntary recalls, and cooperation with investigators were all treated as relevant mitigating factors, though they did not operate uniformly to reduce penalties across all counts.
- Where products posed risks to young children, such as toys with inhalation hazards or bags without required air holes, the court regarded this as an aggravating consideration that weighed against a lower penalty.
- Costs of $89,772 were ordered against the defendant in addition to fines, illustrating that the financial consequences of regulatory prosecutions can substantially exceed the penalties themselves.
- A defendant's unfamiliarity with NSW-specific banning orders was treated with limited sympathy: the court noted that electing to trade in a new state carries an obligation to understand and comply with the laws of that jurisdiction.
Legislation and Cases Referenced
Legislation:
- Fair Trading Act 1987 (NSW), including s 31 (banning orders)
- Trade Practices Act 1974 (Cth)
- Fines Act 1996 (NSW)
Cases cited: None cited in the provided text.