Effective Diligence (Reliance on Certificates of Compliance).
When does reliance on a test certificate equate to due diligence? First published in the Justice of the Peace (1995) 159 JPN 572 and 587.
The due diligence defence
The question of what amounts to the exercise of all due diligence is one which has exercised the minds of many a court and has been the subject of numerous appeals.
Most offences against consumer protection and trading standards legislation are absolute ones. Although there is no requirement in these cases for the prosecution to prove any intent on the part of the accused, the strict liability of the offence is usually coupled with a statutory defence which, if made out, will entitle the accused to be acquitted. The exact wording of the statutory defence varies from statute to statute but at its heart can generally be found the burden on the accused to show inter alia that he has “exercised all due diligence” to avoid the commission of the offence. A due diligence defence can be found in
Section 24 of the Trade Descriptions Act 1968 (“the TDA”), s 21 of the Food Safety Act 1990 (“the FSA”) and s 39 of the Consumer Protection Act 1987 (“the CPA”). Under the TDA and the FSA the defence has to “prove” that it has taken “all reasonable precautions and exercised all due diligence” and these were the words used in the previous version of the CPA which currently refers to the defence having to “show” that it has taken all reasonable “steps” rather than “precautions”. There appears to be no authority for suggesting that there is any practical distinction to be drawn between the taking of “steps” or “precautions” or that there is any difference in the burden between having to “show” or to “prove”.
The standard of proof required to discharge a statutory defence was expounded by Humphreys J in the Court of Criminal Appeal in R v Carr-Braint [1943] 2 All ER 156, where he said, “in any case where, either by statute or at common law, some matter is presumed against an accused person ‘unless the contrary is proved’, the jury should be directed that it is for them to decide whether the contrary is proved; that the burden of proof required is less than that required at the hands of the prosecution in proving the case beyond a reasonable doubt: and that the burden may be discharged by evidence satisfying the jury of the probability of that which the accused is called upon to establish”.
Although the standard of proof is lower than that on the prosecution the burden on the defence is none the less an onerous one in terms of the content of what has to be proved. A number of authorities have stressed the need for the defence to show all due diligence on its part and that the reliance by the defence on a certificate or warranty as to compliance with the law will not necessarily suffice. The recent case of Balding v Lew Ways Ltd (1995) The Times March 9, emphasises that the taking of reasonable steps or precautions and the exercise of due diligence is not enough unless it has the capacity to avoid committing the offence i.e. the offence under the legislation concerned and not some lesser version thereof. For diligence to be effective as a defence all due diligence to avoid offending must be exercised.
Balding v Lew Ways Limited
Lew Ways Limited were the manufacturers of a “Tipper Trike” which was a toy designed for children between the ages of 18 months and 4 years. It was in essence a small tricycle of simple construction with a bucket, capable of tipping, mounted such that it could swivel about the rear axle. The forward most rim of the bucket had a protruding “U” shaped clip which enabled the bucket to be secured in the horizontal position by clipping round the bar supporting the saddle. When in the vertical position, however, the protruding clip presented a danger to children who might fall on it. The company was prosecuted following three incidents in which children were facially injured by falling on the clip. The prosecution was brought under s 12 of the CPA alleging failure to comply with the requirements of the Toys (Safety) Regulations 1989 (“The Regulations”). The justices heard, from the prosecution, that during the course of an interview with the company’s sales director he had produced to them a series of three test certificates to show that every two years the Trike had been submitted to a reputable testing house which established that it complied with the relevant British Standard for the safety of toys. No evidence was called by the defence. The justices dismissed the prosecutions having accepted submissions that under s 39 of the CPA the company had discharged the burden upon it “to show that he took all reasonable steps and exercised all due diligence to avoid committing the offence”. The prosecution appealed.
The appeal
The case stated asked the Divisional Court two questions:
i) Whether the justices were correct in finding that the Respondent had made out a defence under s 39 CPA by relying on a certificate showing the toy’s compliance with the relevant British Standard when the British Standard did not relate to all matters covered by [the Regulations] applicable to the toy and the toy had not been examined for compliance with [the Regulations].
ii) Whether it was open to the justices to find that the Respondent had made out a defence under s 39 CPA when no evidence was given by it or called on its behalf.
i) Reliance on test certificates
It was common ground at the appeal that the offence had been proved subject to s 39 and that there were material differences between the Regulations and the British Standard. Pill LJ observed that the Regulations required that “accessible edges, protrusions, cords and fastenings on toys must be so designed and constructed that the risks of physical injury from contact with them are reduced as far as possible”. He also noted that the forward to the British Standard states, in heavy type, that “compliance with a British Standard does not of itself confer immunity from legal obligations”. The forward draws attention to the Regulations as replacing the previous ones and taking effect as from 1 January 1990.
Pill LJ referred to Amos v Melcon (Frozen Foods) Limited (1985) 149 JP 712 where it was held, under s 24 of the Trade Descriptions Act, that what amounts to all reasonable precautions and all due diligence will vary according to the circumstances. He noted the observation of Neill L J, at page 718, that “the onus of proof is therefore placed quite firmly on the defendant”. Pill LJ held that the company must show that they took all reasonable steps and exercised all due diligence in relation to the Regulations. He said: “The standard to be applied is that laid down by Regulations made under the authority of Parliament. In my judgment it is not taking such steps or exercising such diligence to show that you have complied with some other standard, however reputable the organisation which has proclaimed that standard.” Pill LJ continued that “the company were not entitled to assume that British Standards complied with the requirements laid down by Parliament ... [counsel for the respondent’s] strictures about living in the real world do not in my judgment allow the company to establish a defence under section 39 when they did not ask the tester they instructed to consider whether their product complied with the law of the land”.
Keene J agreed, he said it could only be right that a s 39 defence was made out simply because of compliance with the British Standard “if there was also evidence to show that the respondent company had taken some steps to ascertain that compliance with BS 5665 would imply compliance with [the Regulations] or at least that the company had been advised that it would. It is not simply to be assumed that compliance with a British Standard will automatically mean that the law as to safety requirements is being complied with, nor can that properly be inferred without some further evidence. After all, British Standards are not themselves legal regulations”. Keene J added that “the statutory defence of all due diligence refers to diligence to avoid committing the offence ... the relevant certificates, unlike an earlier one, did not refer to the Safety Regulations and there was no evidence that the analyst had been asked to certify that this toy met the terms of the statutory Regulations”.
The retailers of the Trike were not prosecuted as they had relied on a warranty given to them by Lew Ways that the Trike complied “in every respect with the provisions of all existing and future legislation of either United Kingdom or European Community origin and all regulations ... made thereunder”. Pill LJ considered that the warranty added weight to his judgment as a “company which gives a warranty relating to the law of the land can be expected to show due diligence in their own compliance with it”.
Riley v Webb
It will not always be the case that retailers will escape prosecution because they relied on a warranty from their supplier. In Riley v Webb and Others (1987) 151 JP 372, the respondents asserted that they had exercised all due diligence by imposing a contractual term on their suppliers that the goods they supplied to them would conform “with all the requirements imposed by any statute or statutory regulations or orders”. Macpherson J, having stressed that “each case must be considered on its own facts”, said that the respondents could not rely on such “a general blanket condition ... nothing was done by them to see that they had at least a measure of assurance from their suppliers that the [relevant] regulations had been complied with”. Watkins J added that it is “a minimum requirement, if sampling has not been undertaken, for the establishment of the defence ... that the sellers of the goods receive from the suppliers a positive assurance that they conform to the specific regulations which govern the sale of them. Nothing short of that will suffice to satisfy the burden of proof for this defence which is upon the basis of the balance of probabilities”. The obtaining of such an assurance was a “minimum requirement” and it does not follow that the acquisition thereof will always amount to the taking of all reasonable steps or the exercise of all due diligence, particularly if there was any reason to doubt the accuracy of the assurance.
Carrick v Taunton Vale Meat
On rare occasions the reliance on a certificate will be sufficient to demonstrate “all due diligence”. In Carrick District Council v Taunton Vale Meat Traders Ltd (1994) 158 JP 347, the respondents had consigned beef which was unfit for sale. The respondents had relied upon the certificate of the local authority meat inspector that the particular consignment of beef was fit. There was no reason for the respondents to have doubted the reliability of the meat inspector who, on this occasion, had made an error of judgment. Smith J said: “If, in the particular circumstances of a case, the court considers that it was reasonable for a defendant to place reliance upon a certificate of examination provided by another, I can see no reason, as a matter of law, why the court should not be free to permit such reliance and declare itself satisfied, if it sees fit, that the defence of due diligence has been made out. It may be that such cases will be rare. Indeed, it should not be thought that this case will amount to authority for the proposition that all that any slaughterer need do to comply with his duties under the Food Safety Act 1990 is to rely on the meat inspector’s certificate. I say only that if the court considers that in the particular case it is reasonable for the defendant to rely on the inspector’s certificate, it must be free to come to that conclusion”.
Taylor v Lawrence Fraser
One of the most often cited cases on the reliance on certificates or assurances to show due diligence is Taylor v Lawrence Fraser (Bristol) Ltd (1977) 121 Sol Jo 157; [1978] CLR 43. In that case a toy, which turned out to have too high a lead content, was imported from France on condition that it complied with the contemporary version of the Toys (Safety) Regulations. The importers only purchased the toy having been given an assurance that it complied with the regulations but they carried out no sampling or checking of their own. The importers employed only 50 people and contended that it would have been impracticable for them to sample each of their 3,000 types of goods in stock. Lord Widgery CJ said: “I draw particular attention to the practice apparently of these respondents of relying on assurances of some kind from their suppliers to satisfy the Regulations in force. Although every case depends on its own facts, I should think there are very few cases of this kind where reliance on certificates by itself is to be treated as sufficient when there is a possibility of professional sampling, and that possibility has been deliberately rejected by the policy of the company”.
Taylor v Lawrence Fraser was cited by the appellants in Carrick DC v Taunton Vale Meat Traders Ltd (above) but, having read only the report which appears at [1978] CLR 43, Smith J formed the view that Lord Widgery CJ’s remarks (that there were very few cases of this kind where reliance on a certificate by itself was sufficient) were obiter. She came to that conclusion because the brief report she read says that “the company had no guarantee on which it could rely in relation to that particular toy”. Smith J appears to have read those words as meaning “there was no guarantee in respect of this consignment of toys”. What the report is saying, however, is not that there was no guarantee but that there was no guarantee on which the company “could rely”. In other words there was a guarantee (the court gave the company the benefit of the doubt that there was) but it was not an effective one. This interpretation of the report is plain if one looks at the report of the case at (1977) 121 Sol Jo 157 where it notes that “the defendants could not rely on any guarantee or assurance, in respect of that particular toy as the regulations had been altered in 1974 and no attempt had been made, subsequently, to ascertain that the old stock complied with the altered regulations”. The facts are also clear from their citation in Hicks v Sullam Ltd (below) where the court had the benefit of a transcript of the judgment in Taylor v Lawrence Fraser. Lord Widgery CJ had said that “even if one gives the benefit of the doubt [to the respondents that they had carried out their normal enquiries as to compliance] it seems to me that their attempt to comply with this Act was wholly inadequate”. The second line of defence relied upon in Taylor v Lawrence Fraser was that the Trading Standards Department was opposite the company’s premises and they had been invited to take samples from time to time, which had been done. In relation to this Peter Pain J said, “they can hardly be heard to say that, simply because they have fair and proper relations with the enforcing authority, they can therefore in some way shuffle off on to the enforcing authority their responsibility for taking precautions”.
Garrett v Boots
Having referred to the remarks of Lord Widgery CJ in Taylor v Lawrence Fraser, Lord Lane CJ in Garrett v Boots the Chemists Limited (1979) 88 ITSA MR 238 said: “‘All reasonable precautions’ are strong words”. It was not enough that Boots had assurances from their importers that the goods supplied to them would comply with the specific regulations in question. Lord Lane CJ said “every case will vary in its facts; what might be reasonable for a large retailer might not be reasonable for the village shop. But here dealing with a concern the size of Boots, it seems to me that one of the obvious precautions to be taken was a random sample, whether statistically controlled or not. One does not know whether the random sample would have in fact produced detection of the errant pencils. It might have, it might not have. But to say that it was not a precaution which should reasonably have been taken does not seem to me to accord with good sense”. In agreeing Comyn J said, “they certainly did not do sufficient to come within that very important, wide and comprehensive provision of taking all precautions”.
Sherratt v Gerald’s
In the much cited case of Sherratt v Gerald’s The American Jewellers Limited (1970) 68 LGR 256, the respondents were the supplier of watches which they described as “waterproof”. A purchaser found this to be false when he put his watch in a bowl of water and it filled with water and stopped within an hour. The company relied on the facts that the watches were supplied to them as “waterproof” and that they had not had any previous problems. Lord Parker CJ said: “That they took no precautions at all is clear; they relied solely on their previous dealings with the wholesalers. It seems to me that if they are to succeed here, they must show on a balance of probabilities that although no precautions were taken, there were no reasonable precautions that could be taken ... the elementary precaution which would have prevented this offence from being committed was to dip the watch in a bowl of water as the purchaser did”.
L.B. of Sutton v Perry Sanger
A trader without relevant experience may find that the only way to escape liability is by obtaining a warranty from an expert. In London Borough of Sutton v Perry Sanger & Co. Ltd (1971) 135 JP Jo 239, the respondents had sold a cross-breed dog as a “Sheltie”. The justices acquitted them of supplying the dog with a false trade description applied to it in that, as they were not experts, the respondents were entitled to rely on the information (which included an unsigned pedigree certificate) given to them by the person from whom they had acquired the dog. On appeal before the Divisional Court, headed by Lord Parker CJ, it was held that the steps necessary by the respondents to establish that they had taken all reasonable precautions and exercised all due diligence under s 24 TDA were “greater” by reason of the fact that they were dealers and not experts. No precautions or diligence had been shown.
Hicks v Sullam
In Hicks v Sullam Limited (1983) 147 JP 493 the respondents had sold to British Home Stores electric light bulbs falsely described as “safe”. Sullam had imported the bulbs from Taiwan relying on the assurances of their Hong Kong agents as to their quality. Sullam could not make out a statutory defence. Dunn LJ noted that, “Sullam had no system of random sampling ... They did not instruct independent electrical engineers in this country to examine the lamps and to report upon them ... there is no finding that Sullam ever asked [their Hong Kong agents] why they felt able to give the assurances they did about these goods which had been manufactured in Taiwan”. Prior to the case being heard Sullam did carry out sampling thus indicating that it was a step they could have taken previously.
Gale v Dixon
In Gale v Dixon Stores Group Limited (1993) 111 ITSA MR 20, Kennedy LJ referred to the fact that Dixons had changed their system after the offence. “They introduced a precaution, and that precaution was, as it seems to me, a reasonable precaution. That precaution, had it operated in February 1990, was a precaution which would have in fact avoided the commission of the offence which took place ... It was a precaution introduced, at any rate inter alia, in order to avoid the commission of such an offence. In those circumstances I for myself find it impossible to say that in February 1990 these employers were taking and had taken all reasonable precautions and exercised all due diligence to avoid the commission of the offence which occurred”.
Rotherham v Raysun
Rotherham Metropolitan B C v Raysun (UK) Ltd (1988) The Times April 27, was yet another appeal case in which reliance on the actions of agents was held to be insufficient. Woolf LJ pointed out that the respondents “relied on a system where, if the analysis was adverse, they would be informed, but if it was favourable, they would not be informed ... the respondent company merely assumed that because they had not heard of any adverse analysis, that in fact the analyses were taking place in Hong Kong and were proving favourable ... This case boils down to this. The respondent company were relying upon their agents to do what should be done in Hong Kong to provide precautions. In addition, they were carrying out a sparse sampling exercise in this country. Apart from that, they were really taking no action in order to fulfil the statutory obligations which are placed upon them”.
Hurley v Martinez & Co Ltd
Perhaps the most notable case in which reliance on the information of others did succeed is Hurley v Martinez & Co Ltd (1990) 154 JP 821 where imported wine was erroneously labelled as “alc 8% vol” instead of 7%. Rather curiously, the appellants were seeking to allege that the justices, who had accepted the due diligence defence, were perverse in so doing notwithstanding that their own witness had apparently conceded that the risk of the offence being committed was not sufficiently large to demand that a quite small local dealer should carry out very expensive sampling to eliminate the risk altogether.
In the more recent case of Hereford and Worcester County Council v T&S Stores Plc (1995) 93 LGR 98, counsel for the appellants destroyed any chance of success on an appeal, which was dependant upon establishing that the conclusion of the justices was perverse, when he conceded that the justices conclusion only “got close to being perverse”. The Divisional Court, not surprisingly, decided that the taking of all reasonable precautions did not mean the taking of all precautions whether reasonable or not.
Returning to the Hurley case, Mustill LJ distinguished the cases of Sullam and Raysun. He said, “here by contrast, the production and sampling of the wine was subject to a tight regime enforceable under European community law, of which independent verification formed an integral part. Any blameworthy act or omission which might take place in the country of origin would expose the producers at least to the risk of sanctions in that country”. Mustill LJ continued: “No such system is ever foolproof, but the regime of the English Act and the Regulations is not itself designed to be foolproof since the presence of s 24 [of the TDA] ensures that in some cases a misdescribed product may slip through the net and yet still leave the supplier exempt from criminal responsibility. The known thoroughness in law and practice of the verification regimes at an earlier stage in the chain of supply must to my mind, as a matter of common sense, have an important bearing, although not in every case a decisive bearing, on the scale of the additional verification, if any, demanded at the stage of small scale local distribution ... I am not in any way creating a charter for retailers, whether on a large scale or otherwise, to sit back and do nothing in every case, leaving it to others to take care that the goods are what they purport to be. The earliest cases ... show very clearly that this is not so. In the present case I say no more than that the decision of the justices was within the range of rational decisions on the facts”.
ii) The need for defence evidence on oath
As both judges in Lew Ways allowed the prosecutor’s appeal on the first question of law they decided that it was not necessary to answer the second one. Pill LJ did, however, say obiter dicta that he would “not exclude the possibility that there could be circumstances in which the defence under s 39 is made out upon the basis of evidence called by the prosecution”. Clearly such situations would be exceedingly rare given that if the prosecution had evidence that all due diligence had been taken then there is unlikely to have been a prosecution in the first place. In R v Director of Public Prosecutions and Another, ex parte C (1995) 159 JP 227, Kennedy LJ said that the prosecutor “erred in that he failed in accordance with paragraph 4 of the Code [for Crown Prosecutors] to ‘have regard to any lines of defence which are plainly open to ... the accused’”. The Code for Crown Prosecutors was made pursuant to s 10 of the Prosecution of Offences Act 1985 specifically to guide the Crown Prosecution Service. It must, however, be right that other prosecuting authorities have regard to it. Some statutory codes such as that on “legal matters” made under s 40 of the FSA specifically require the prosecutor to consider a number of factors before deciding to prosecute. These factors may include “the likelihood of the defendant being able to establish a due diligence defence” and “any explanation offered by the affected company”. This code also draws the prosecutor’s attention to the Code for Crown Prosecutors.
In Lew Ways Pill LJ noted that “the relevant British Standard ... was not produced before the Justices. It may be that the prosecution were intending to put the documents to any defence witness, the burden being upon the defence to establish the defence relied on”. By failing to call any direct evidence the company had denied the prosecution the opportunity of challenging its defence. The price for this, however, was that it could not establish all the ingredients of its defence i.e. not merely that there were certificates showing compliance with the British Standard but also why (if this were so) it was reasonable for them to rely on the certificates as evidence of compliance with the regulations.
As the court in Lew Ways did not answer the second question it is useful to consider two other decisions which combined with the dicta of Pill LJ give a good indication as to what the answer might have been.
Hicks v Grewal
In Hicks v Grewal (1984) Tr.L 92, justices had found a s 24 defence made out under the TDA on the sole evidence of an unsworn statement made by the defendant. Stephen Brown LJ accepted the submissions of the appellant that “since the respondent did not give evidence there was no proof within the meaning of s 24 which could entitle the justices to dismiss the case upon the basis of an unsworn statement”.
R v Hook
In R v Hook (1994) 158 JP 1129 the question arose as to the weight to be attached to self-serving statements made at interview. Stuart Smith LJ said: “It is plain that defence counsel was doing what is sometimes done in criminal cases, of advancing the proposition ... that because a defendant has given an account to the police in interview, there is no point in him giving evidence on oath. That of course is quite wrong because evidence on oath tested in cross-examination carries much greater weight as a rule ... than evidence which is in the form of a self-serving statement made to the police, made in the police station and not tested in that way”.
It would appear therefore that:
i) the onus is firmly on the defence to make out a statutory defence (Melcon / Lew Ways),
ii) this cannot be done by no evidence or (solely) by unsworn evidence (Grewal),
iii) it could possibly be done in reliance on the prosecution’s own evidence (Lew Ways) but,
iv) evidence of a self-serving statement made at interview will have limited weight (Hook).
Statements made at interview, although unsworn, will unlike the statement in Grewal, have been made after caution and will therefore carry at least some weight. In Hook, however, it should be born in mind that the self-serving statements were put forward as the defence in circumstances where it was for the prosecution to prove the offence. In cases where a self-serving statement is put forward as evidence to prove a statutory defence, and hence where the burden of proof is on the defence, it would seem highly unlikely that such statements could ever succeed (alone) in discharging the burden on the defence.
The prosecution evidence proving a defence
It is surmised here that the sort of prosecution evidence which Pill LJ had in mind as possibly sufficing to make out a statutory defence would be where, for example on the facts of Lew Ways, the certificates produced at interview were verified as genuine by the prosecution and showed compliance, not merely with the British Standard, but with the Regulations themselves. Even that, however, would not necessarily be enough. Having the goods in question tested for compliance with the relevant legislation may well be a very reasonable step to take to prevent the commission of the offence and it will be a good example of due diligence but it will not, always, amount to the taking of all reasonable steps or the exercise of all due diligence. In Whirlpool (UK) Limited and Magnet Limited v Gloucester County Council (1995) 159 JP 123, Whirlpool (UK) Limited sought to make out a statutory defence under s 39 CPA by showing reliance upon test certificates showing compliance with the relevant safety standard in relation to cooker hoods. Had the company made enquiries, however, they would have known from the information available within the industry that there was a potential problem with the combination of the electrical hoods positioned over gas appliances. The High Court therefore found that the justices were “fully justified” in convicting Whirlpool.
Returning to the example of Lew Ways, had the company there sought to rely upon certificates showing compliance with the Regulations, when they were aware from complaints that the toy had caused injury to children and hence did not in fact comply with the Regulations, then reliance on the certificates alone could not establish a defence. In that scenario evidence would be required from the defence as to why the toy had not been withdrawn from the market, at least pending an investigation into the complaints. It may be that there were other steps which could and should have been taken. As the toy was of simple construction with an obvious protrusion and as it was designed for use by very small children it may have been reasonable for it to have been examined by a paediatrician or other person with an expertise in the behaviour of small children.
All in all, even if Pill LJ’s dicta is followed, a defendant will none the less take on an almost impossible task in seeking to prove a defence without calling any evidence in support thereof.
VICTOR SMITH