Australia: ACCC V Hercules Iron - Continuing To Supply Goods That Failed To Meet Australian Safety Standards

Australian Competition And Consumer Commission V Hercules Iron Pty Ltd [2008] FCA 1182

A supplier of beds has been fined for contempt after breaching court orders in continuing to supply beds that failed to meet safety standards.

The Australian Competition and Consumer Commission (ACCC) brought the initial proceedings against Hercules Iron Pty Ltd (Hercules) and its director (Mr Hatz) for breach of section 65C of the Trade Practices Act 1974 (Cth) in supplying bunk beds that did not satisfy Australian safety standards. Having been found in breach of the section, Hercules and Mr Hatz were ordered not to supply the non-compliant beds for three years. The ACCC argued that despite the orders, Hercules and Mr Hatz had continued to supply the non-compliant bunk beds, therefore acting in breach of the orders.

The Federal Court considered whether continuing to supply the beds, in breach of a court order, amounted to contempt and if so, the appropriate penalty for the conduct. Having decided that Hercules and Mr Hatz were both aware of and understood the orders made, the court considered whether the conduct was a "deliberate defiance" of those orders or whether it was "casual, accidental and unintentional".

In an affidavit presented to the court, Mr Hatz admitted that, contrary to the court order, some of the non-complying beds had been retained in the warehouse and that they had been accidentally mixed together with the new, complying beds. Once this was discovered, Mr Hatz claimed to have implemented the procedures necessary to ensure compliance with the court order.

The court considered that those steps ultimately implemented by Mr Hatz should have been taken when the court orders were made. The failure of Hercules and Mr Hatz to implement such steps was regarded as a deliberate defiance of the orders, constituting deliberate conduct amounting to civil contempt.

In deciding the appropriate penalty, the court had considerable scope to impose a penalty of fines or imprisonment and to then suspend such penalty on conditions or terms.

The court regarded the non-compliance as a violation that directly and substantially impacted on health and safety issues. For both specific and general deterrence, the court considered that the circumstances warranted something beyond a nominal penalty. Accordingly, Hercules and Mr Hatz were each fined $10,000 and were ordered to pay the ACCC's costs.

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