Australia: Hefty fines for businesses in New South Wales that fail food safety standards

Two recent decisions of the New South Wales (NSW) Local Court reveal the serious consequences for businesses that fall foul of the Food Act 2003 (NSW) (the Act).

The first involved the prosecution of a noodle manufacturer for unhygienic practices, resulting in fines totalling $113,000. The second involved the prosecution of a food wholesaler for mislabelling food products, resulting in fines totalling $30,000.

The decisions are the latest in a string of successful prosecutions by the Food Authority and should serve as a reminder to businesses of the importance of complying with food safety obligations.

Making food safety your number one priority

A business, which manufactures popular food products (including noodles), was selling its products wholesale to restaurants and grocery stores across Australia.

In January 2016 the Compliance Investigation Unit of the NSW Food Authority began its "Fresh Noodle Manufacturers Project", designed to improve standards in the fresh noodle industry.

Between February and April 2016 the Food Authority visited the business on three occasions for the purpose of carrying out inspections as part of the Project. A number of poor hygiene and maintenance practices were identified, including dirt, food waste and mould on the floor, roof, and machinery; rodent droppings in cold storage and spice grinding areas; a broken hand washing basin; and flies on the wall in the food processing area.

After each inspection the business was issued with an improvement notice ordering it to take certain steps to address the problems identified during the inspections. The business had some prior history with the Food Authority, with a number of improvement and penalty notices issued to it between 2010 and 2012.

In light of this, the Food Authority initiated proceedings against the business in the Local Court. The business pleaded guilty to the charges but asked the Court to take into consideration what it proposed were "mitigating factors" in determining the applicable fine. These included that:

  • the business was small and family-owned
  • the breaches were not that serious
  • the business had been experiencing financial and production pressures
  • receiving the maximum penalty could lead to closure of the business (and loss of employment for its seven employees), and
  • the offences were not committed for financial gain.

Notwithstanding these arguments, the Court imposed fines for each offence, totalling $113,000 (which included a discount for the early plea) and ordered that the business pay costs associated with the proceedings.

Don't rely on supplier labelling

A Sydney-based business importing and wholesaling food products found itself on the wrong side of the law after a child was hospitalised by one of its products.

The child, who was allergic to peanuts, tree nuts and cow's milk, suffered an anaphylactic reaction after consuming a drink product that had been mislabelled as "dairy free".

The NSW Food Authority investigated the incident after being notified. It collected medical evidence, tested samples and requested that the business recall the mislabelled product. The business was slow in effecting the recall, and this weighed against it when the matter eventually arrived before the Court.

It was prosecuted by the Food Authority for:

  • labelling the product as dairy free when it did in fact contain dairy
  • not declaring the presence of a milk substance, and
  • not complying with the recall plan.

The business was convicted and fined $30,000 for the breaches. It was also ordered to pay more than $25,000 in costs.

In handing down the convictions and fines, the Court was critical of the business' reliance on the supplier of the product. It noted that overseas companies are often not subject to the same level of regulatory stringency that applies in Australia and found that the business had relied too heavily on the supplier's labelling and failed to check whether the beverage contained any milk products.

Other decisions of which to be aware

Some other safety prosecutions of which to be aware are:

  • On 28 June 2017 a Sydney chicken producer trading as Bill's Chicken was convicted and fined a total of $34,000 and ordered to pay $6,196 in professional costs after pleading guilty to twelve charges relating to failures in hygiene, maintenance and Food Safety Program monitoring. Inspectors from the Food Authority commenced proceedings after observing a number of dangerous health practices, including rusted equipment used to transport chicken meat intended for sale and unclean premises and utensils.
  • On 28 April 2016 a now closed-down Wollongong bakery named Betta Maid was convicted and fined $63,000 and ordered to pay $20,000 in professional costs for selling unsafe food and breaching hygiene standards. The charges were brought following a Food Authority investigation into a salmonella outbreak in ten aged care facilities across Australia, which led to two fatalities. The bakery's director was also convicted and fined in a separate proceeding.

The legislation and the Regulator

The Act aims to ensure that food for sale in NSW is safe and suitable for human consumption. It also requires businesses to comply with the requirements of the Food Standards Code, which sets out standards for food additives, food safety, and labelling.

Together with NSW Health, the Food Authority monitors food safety across the State to make sure all food produced and sold in NSW meets the minimum requirements. Its functions include:

  • monitoring food safety schemes under the Food Regulation 2015
  • licensing food businesses
  • investigating food-related complaints
  • coordinating recalls of food products, and
  • prosecuting businesses for offences under the Act.

Inspectors of the Food Authority have the power to enter and inspect food premises and take photos or audio recordings, among a range of other powers.

If inspectors find that the required food standards are not being met, they have the power to issue:

  • An improvement notice: Setting out the defects observed by the inspector, what action the business must take to comply and the date by which to complete the required action.
  • A prohibition order: Preventing the business from producing food or using particular equipment until they comply.

Each defect identified in the inspection is an offence under the Act and the majority attract an on-the-spot fine. If an offence is taken to court, a business can be liable to pay up to $275,000 per offence (although the Local Court can only fine a business a maximum of $10,000 per offence).

Also, some years ago the Government passed laws allowing the Food Authority to publish details of successful prosecutions on its website. The Authority makes good use of its power, publishing a "name and shame" register, which lists businesses that have breached or are alleged to have breached food safety laws.

Lessons for businesses

There are obligations under the Food Act in respect of licences, supervision and food safety standards. When running a business that involves serving or producing food, it is important to understand what exactly is expected of a business under the Act. The consequences of falling foul of food safety laws can be lasting financial and reputational damage. For example, businesses that are ordered to close under a prohibition order take on average three days to re-open, leading to loss of trade and diminishing the business's reputation.

Summary

The cases outlined above show the Food Authority will pursue breaches of the Act in court if that is what it takes to make sure businesses comply. This has resulted in a spate of cases where businesses have been slapped with convictions and fines, attracting media attention.

Businesses should get on the front foot when it comes to food safety obligations. In this regard, it is noted that other jurisdictions also have similar provisions. We recommend businesses become familiar with the obligations of running a food business as they apply in the states in which they operate.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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