FEDERAL COURT OF AUSTRALIA

Australian Competition and Consumer Commission v Chopra [2015] FCA 539

REASONS FOR JUDGMENT

INTRODUCTION

1    On 11 May 2015 I made orders disposing of this proceeding. These are my reasons for those orders.

2    In this proceeding the applicant, the Australian Competition and Consumer Commission (‘ACCC’), alleged that the respondent, Mr Chopra, engaged in conduct that contravened ss 18, 29(1)(m) and 36(4) of the Australian Consumer Law (‘ACL’), being Sch 2 of the Competition and Consumer Act 2010 (Cth) (‘CCA’).

3    The conduct in question occurred between 13 June 2012 and 28 November 2014 and involved the promotion and sale of electronic goods and related accessories to consumers by Mr Chopra through the website at www.electronicbazaar.com.au (‘EB Website’).

4    In particular, the ACCC allege that Mr Chopra contravened:

(a)    sections 18 and 29(1)(m) of the ACL by, in trade or commerce and in the period from at least 21 May 2014 to 28 November 2014, making false or misleading representations on the EB Website in relation to consumer rights and remedies (‘Representations’); and

(b)    section 36(4) of the ACL by, in trade or commerce, on four separate occasions in the period from 13 June 2012 to 21 July 2014, after accepting payments for goods, not supplying those goods within either the period specified by him or on his behalf at or before the time the payment was accepted, or within a reasonable period.

5    In support of its application for relief, the ACCC relied on affidavits of:

(a)    Kevin James John Love, solicitor for the applicant, affirmed on 30 April 2015;

(b)    Carmen Romeo, Acting Assistant Director of the ACCC, sworn on 24 April 2015; and

(c)    Sam Spirou, Investigator of the ACCC sworn on 30 April 2015.

THE RESPONDENT’S CONDUCT

6    Before detailing the conduct of Mr Chopra, I pause to note that under s 6(3)(a) of the CCA, the provisions (among others) of ss 18, 29 and 36 of the ACL have the effect that they would have if those provisions were, by express provision, confined in their operation to engaging in conduct to the extent to which the conduct involves the use of postal, telegraphic or telephonic services or takes place in a radio or television broadcast. In Australian Competition and Consumer Commission v Jutsen (No 3) (2011) 206 FCR 264, at [100], Nicholas J held that the expression “telegraphic…services” in s 6(3) of the CCA extends to conduct involving the use of the internet, as occurred in this proceeding.

7    Mr Chopra admitted the allegations made by the ACCC, the particulars of which may be relevantly summarised as follows.

Conduct in contravention of sections 18 and 29(1)(m) of the ACL

8    Mr Chopra has admitted to making each of the Representations on the EB Website, that each of the Representations was false or misleading, that in making each of the Representations, he was using the internet and engaging in trade or commerce, and that he has therefore engaged in conduct that was misleading or deceptive or likely to mislead or deceive, in contravention of s 18 of the ACL. He has also admitted to having made false or misleading representations concerning the existence, exclusion or effect of conditions, warranties, guarantees, rights or remedies, in connection with the supply or possible supply of goods or the promotion of the supply or use of goods, in contravention of s 29(1)(m) of the ACL.

9    The Representations, and the reasons they were false or misleading, are as follows:

(a)    in the period from at least 21 May 2014 to 24 August 2014:

(i)    Mr Chopra represented that consumers who purchased goods through the EB Website that were no longer under express warranty were not entitled to a refund, replacement or repair in relation to those goods (‘Express Warranty Only Representation’), when in fact under Div 1 of Pt 3-2 and Pt 5-4 of the ACL (collectively, ‘Consumer Guarantee Provisions’, which are referred to in more detail below), a consumer could be entitled to a refund, replacement or repair in relation to goods supplied through the EB Website in certain circumstances following the expiry of any express warranty in respect of those goods;

(ii)    Mr Chopra represented that consumers who purchased goods through the EB Website did not have any rights or guarantees under the ACL in respect of those goods, when in fact a consumer who purchased goods using the EB Website had rights and guarantees under the Consumer Guarantee Provisions in respect of those goods, which could not be excluded, restricted or modified by a term of a contract;

(b)    in the period from 25 August 2014 to 28 November 2014:

(i)    Mr Chopra represented that consumers who purchased goods through the EB Website were not entitled to a refund for those goods unless the goods were faulty upon arrival or out of stock, or where a replacement was unavailable, when in fact under the Consumer Guarantee Provisions, a consumer could be entitled to a refund in relation to goods supplied using the EB Website in certain circumstances where there was a fault with the goods that was not apparent at the time that the consumer received the goods, where the goods were in stock or a replacement product was available;

(ii)    Mr Chopra represented that consumers who purchased goods through the EB Website were not entitled to return the goods and receive a refund where the goods had been used, were not in original condition or were not in their original packaging, when in fact under the Consumer Guarantee Provisions, a consumer could be entitled to a refund in relation to goods supplied using the EB Website in certain circumstances where the goods had been used, were not in original condition or were not in their original packaging;

(iii)    Mr Chopra represented that consumers who purchased goods through the EB Website were not entitled to a refund outside of a specified time period, when in fact under the Consumer Guarantee Provisions, a consumer could be entitled to a refund in relation to goods supplied using the EB Website outside a specified time period in certain circumstances; and

(iv)    Mr Chopra represented that consumers who purchased goods using the EB Website would be entering into an agreement for supply with a company called “Unreal Technologies Private Limited” or “Unreal Technology Private Limited” and therefore the consumer’s rights or remedies would exist against that company as the supplier, when in fact, at least during the period from 25 August 2014 to 28 November 2014:

(1)    there was no company named “Unreal Technologies Private Limited” or “Unreal Technology Private Limited”;

(2)    consumers who purchased goods using the EB Website were not entering into an agreement with a company as the supplier;

(3)    consumers who purchased goods using the EB Website were entering into an agreement with Mr Chopra as the supplier; and

(4)    consumers who purchased goods using the EB Website had rights and remedies under the ACL, including under the Consumer Guarantee Provisions, which existed against Mr Chopra as the supplier and which did not exist against a company named “Unreal Technologies Private Limited” or “Unreal Technology Private Limited”, or any other company, as the supplier.

10    Under the Consumer Guarantee Provisions, a consumer who acquired goods from Mr Chopra through the EB Website had the following statutory guarantees under the ACL:

(a)    the guarantee as to title (s 51);

(b)    the guarantee as to undisturbed possession (s 52);

(c)    the guarantee as to undisclosed securities (s 53);

(d)    the guarantee as to acceptable quality (s 54);

(e)    the guarantee as to fitness for any disclosed purpose (s 55);

(f)    the guarantee relating to the supply of goods by description (s 56);

(g)    the guarantee relating to the supply of goods by sample or demonstration model (s 57);

(h)    the guarantee as to repairs and spare parts (s 58); and

(i)    (except in relation to the Express Warranty Only Representation referred to above) the guarantee as to express warranties (s 59).

11    Upon a failure by Mr Chopra to comply with one or more of those statutory guarantees, the relevant consumer would be entitled to a refund, replacement or repair of the goods supplied by Mr Chopra: ss 259(2)(a) and 261 of the ACL.

Conduct in contravention of section 36 of the ACL

12    Since 1 January 2011, s 36(4) of the ACL has provided:

36 Wrongly accepting payment

…

(4)    A person who, in trade or commerce, accepts payment or other consideration for goods or services must supply all the goods or services:

(a)    within the period specified by or on behalf of the person at or before the time the payment or other consideration was accepted; or

(b)    if no period is specified at or before that time - within a reasonable time.

13    Section 36(4) has not previously been the subject of judicial consideration. While other subsections of s 36 appear to be modelled on s 58 of the Trade Practices Act 1974 (Cth) (‘TPA’), the TPA did not contain any provision that is the equivalent to s 36(4).

14    The Explanatory Memorandum to the Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010 (Cth) notes that the requirement contained in s 36(4) is drawn from the requirement in s 19 of the Fair Trading Act 1999 (Vic), and is intended to prevent traders from subjecting people to unnecessarily long delays in receiving goods or services for which they have paid.

15    Mr Chopra has admitted to contravening s 36(4) of the ACL, in his dealings with four consumers during the period from 13 June 2012 to 21 July 2014.

16    In particular, Mr Chopra has admitted that, in trade or commerce, he accepted payment of a total of $4176.44 in the course of four transactions with different consumers between 13 June 2012 and 21 July 2014, and did not supply the products the subject of those transactions to those consumers within a reasonable time or, in the case of three of the four consumers, within a time that he, or someone on his behalf, specified at or before the time at which payment was accepted.

RELIEF SOUGHT

17    The ACCC and Mr Chopra sought by consent the orders set out in the minutes of proposed order signed by the parties on 11 March 2015 (‘Proposed Consent Orders’), namely declarations (pursuant to s 21 of the Federal Court of Australia Act 1976 (Cth) (‘Federal Court Act’)), injunctions pursuant to s 232 of the ACL, and a non-punitive order pursuant to s 246 of the ACL requiring Mr Chopra to undertake training on the responsibilities and obligations under ss 18, 29 and 36 of the ACL.

18    In addition, the ACCC sought court orders that Mr Chopra pay a pecuniary penalty pursuant to s 224 of the ACL, and that he pay the ACCC’s costs of this proceeding, pursuant to s 43(1) of the Federal Court Act.

19    I will briefly address the essential issues relating to each of these orders sought.

Declarations

20    The Court has a wide discretionary power to make declarations. In this proceeding:

(a)    The proposed declarations relate to conduct that contravenes the ACL and the matters in issue have been identified and particularised by the parties with precision: see Australian Competition and Consumer Commission v MSY Technology Pty Ltd (2012) 201 FCR 378 (‘MSY Technology’) at [35].

(b)    It is in the public interest for the ACCC to seek to have the declarations made and for the declarations to be made. There is a significant legal controversy in this proceeding, which is being resolved. The ACCC is the public regulator under the CCA and has a genuine interest in seeking the declaratory relief. In addition, as noted above, there has been no previous judicial consideration of s 36(4) of the ACL.

(c)    Mr Chopra is a proper contradictor because he is a person who contravened the ACL and is the subject of the declarations. He has a genuine interest in opposing the declaratory relief. The Court has power to make declarations notwithstanding Mr Chopra’s agreement to the making of the proposed declarations: see MSY Technology at [32]; Australian Competition and Consumer Commission v Sampson [2011] FCA 1165 at [13]–[18].

21    Further, as was submitted by the ACCC, having regard to the reasoning in Australian Competition and Consumer Commission v Construction, Forestry, Mining and Energy Union [2006] FCA 1730 (at [9]), the declarations sought are appropriate because they serve to:

(a)    record the Court’s disapproval of the contravening conduct;

(b)    vindicate the ACCC’s claim that Mr Chopra contravened the ACL;

(c)    assist the ACCC in carrying out the duties conferred on it by the CCA in the future;

(d)    assist in clarifying the law; and

(e)    act as a deterrent to other persons and corporations from contravening the ACL.

22    The proposed declarations contained sufficient detail as to how and why the conduct complained of contravenes the ACL: see BMW Australia Ltd v Australian Competition and Consumer Commission (2004) 207 ALR 452 at [35].

23    It is appropriate for the Court to order the declaratory relief on the basis of the admissions made by Mr Chopra. It is not necessary for the parties to tender further evidence in support of the declarations: See Australian Competition and Consumer Commission v Dataline.Net.Au Pty Ltd (2006) 236 ALR 665 at 680–681, [57]–[59] per Kiefel J, endorsed by the Full Court in Australian Competition and Consumer Commission v Dataline.Net.Au Pty Ltd (2007) 161 FCR 513 at [92]; Hadgkiss v Aldin (No 2) [2007] FCA 2069 at [21]–[22] per Gilmour J; and Secretary, Department of Health & Ageing v Pagasa Australia Pty Ltd [2008] FCA 1545 at [75]–[78].

Injunctions

24    Both parties agree to injunctions restraining Mr Chopra from engaging in conduct, on terms which are set out in the Proposed Consent Orders. The ACCC submitted that it is appropriate for the Court to order those injunctions.

25    Section 232(1)(a) of the ACL relevantly empowers the court to grant an injunction, in such terms as it considers appropriate, if the court is satisfied that a person has engaged, or is proposing to engage, in conduct that constitutes, or would constitute, a contravention of a provision of Ch 2 (which includes s 18) or Ch 3 (which includes ss 29 and 36) of the ACL.

26    Pursuant to s 232(4)(a) of the ACL, the Court may grant an injunction whether or not it appears to the Court that there is a likelihood of the conduct being repeated or continued.

27    The terms of s 232 are relevantly identical to those in s 80 of the TPA: see Australian Competition and Consumer Commission v SMS Global Pty Ltd [2011] FCA 855 (‘SMS Global’) at [59] per Murphy J. The authorities on s 80 of the TPA therefore provide some guidance on the construction of s 232 of the ACL: Australian Competition and Consumer Commission v Willesee Healthcare Pty Ltd [2011] FCA 301 at [38].

28    In discussing s 80 of the TPA, Lockhart J, with whom French J (as he then was) agreed, said in ICI Australia Operations v Trade Practices Commission (1992) 38 FCR 248 at 256 (applied in Foster v Australian Competition and Consumer Commission (2006) 149 FCR 135):

In my opinion, subss (4) and (5) are designed to ensure that once the condition precedent to the exercise of injunctive relief has been satisfied (ie contraventions or proposed contraventions of Pt IV or V of the Act), the court should be given the widest possible injunctive powers, devoid of traditional constraints, though the power must be exercised judicially and sensibly.

29    Justice French (as he then was) noted in OD Transport Pty Ltd v Western Australian Government Railways Commission (1987) 13 FCR 500 at 508 (which was applied in Foster v Australian Competition and Consumer Commission (2006) 149 FCR 135) that the court’s discretion in formulating the terms in which an injunction may be granted under s 80 of the TPA “is as wide as the phrase ‘as the court determines appropriate’”.

30    The court’s power is, however, subject to at least three limitations (see Australian Competition and Consumer Commission v Z-Tek Computer Pty Ltd (1997) 78 FCR 197 at 203–4 and SMS Global at [59]):

(a)    the relief should be designed to prevent a repetition of the contravening conduct;

(b)    there must be a sufficient nexus or relationship between the contravention and the injunction; and

(c)    the injunction must relate to the case or controversy.

31    The injunctive relief sought in this proceeding is within the Court’s power and is appropriate because the relief:

(a)    is designed to prevent Mr Chopra from:

(i)    making false or misleading representations similar to those that are the subject of the proceeding; and

(ii)    accepting payments for goods from consumers in circumstances where he has specified a time frame for the supply of those goods and is unable to comply with that time frame;

(b)    is expressed in terms that are closely tied to the terms in which Mr Chopra has admitted his contraventions of the ACL; and

(c)    arises in the circumstances of this proceeding, which has been appropriately issued in this Court.

Training

32    The Court is empowered by s 246 of the ACL to make the non-punitive consent order sought, and in my view it is appropriate to do so.

Pecuniary penalties — applicable principles

Section 224 of the ACL

33    Pursuant to s 224(1)(a)(ii) of the ACL, if the court is satisfied that a person has contravened a provision of Pt 3-1 of the ACL (which includes ss 29 and 36), the court may order the person to pay, in respect of each relevant act or omission by the person, such pecuniary penalty as the court determines to be appropriate.

34    The ACL does not empower the court to impose a pecuniary penalty for a contravention of s 18 of the ACL.

35    The maximum penalty in respect of a contravention of a provision of Pt 3-1 of the ACL by a natural person is $220,000: s 224(3) of the ACL.

36    A person is not liable to more than one pecuniary penalty in respect of the same conduct: s 224(4) of ACL.

37    In determining the appropriate pecuniary penalty, s 224(2) of the ACL requires the court to have regard to all relevant matters, including:

(a)    the nature and extent of the act or omission and of any loss or damage suffered as a result of the act or omission;

(b)    the circumstances in which the act or omission took place; and

(c)    whether the person has previously been found by a court in proceedings under Ch 4 or Pt 5-2 of the ACL to have engaged in any similar conduct.

Additional considerations

38    Section 224 of the ACL is in substantially identical terms to s 76E of the TPA. The Court has confirmed that, with some exceptions, the principles relevant to the imposition of a civil penalty under the former s 76 of the TPA (relating to restrictive trade practices) apply to s 76E of the TPA: Australian Competition and Consumer Commission v MSY Technology Pty Ltd (No 2) (2011) 279 ALR 609 at 624 per Perram J (his Honour’s reasoning in this regard was not disturbed by the Full Court on appeal in MSY Technology). Accordingly, given the similarities between s 224(2) of the ACL and s 76E(2) of the TPA, the guiding principles developed for s 76 of the TPA are also of relevance to the power contained in s 224 of the ACL: Australian Competition and Consumer Commission v Pepe’s Ducks Ltd [2013] FCA 570 (‘Pepe’s Ducks’) at [16] per Bromberg J.

39    In NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (1996) 71 FCR 285 at 292, Burchett and Kiefel JJ referred to a checklist of matters that judges have regarded as useful in the assessment of an appropriate pecuniary penalty under s 76 of the TPA. In considering the imposition of a penalty under s 76E of the TPA, Perram J in Australian Competition and Consumer Commission v Singtel Optus Pty Ltd (No 4) (2011) 282 ALR 246 at [11] set out an updated checklist of relevant considerations, which was referred to without demur on appeal. That checklist has been considered by this Court in ordering pecuniary penalties under s 224 of the ACL: see, eg, Pepe’s Ducks at [17], and Australian Competition and Consumer Commission v Coles Supermarkets Australia Pty Ltd [2015] FCA 330 (‘Coles Supermarkets’) at [8].

40    The guiding considerations identified by Perram J were:

(a)    the size of the contravening company;

(b)    the deliberateness of the contravention and the period over which it extended;

(c)    whether the contravention arose out of the conduct of senior management of the contravener or at some lower level;

(d)    whether the contravener has a corporate culture conducive to compliance with the ACL, as evidenced by educational programs and disciplinary or other corrective measures in response to an acknowledged contravention;

(e)    whether the contravener has shown a disposition to cooperate with the authorities responsible for the enforcement of the ACL in relation to the contravention;

(f)    whether the contravener has engaged in similar conduct in the past;

(g)    the financial position of the contravener; and

(h)    whether the contravening was systematic, deliberate or covert.

41    Also of relevance may be whether any loss or damage was caused by the conduct of the contravener, including whether the ACCC demonstrates that consumers have suffered any loss, and the extent of such loss.

Purpose of deterrence

42    In the context of the legislation I am considering, it is still true that the principal object of a pecuniary penalty is deterrence, both the need to deter repetition of the contravening conduct by the contravener (specific deterrence) and to deter others who might otherwise be inclined to engage in similar contraventions (general deterrence).

43    The recent Full Court decision in Director, Fair Work Building Industry Inspectorate v Construction, Forestry, Mining and Energy Union [2015] FCAFC 59 (‘CFMEU’) stressed that the relevant legislation will provide the most reliable guide for identifying the purpose of the penalty to be imposed: see CFMEU at [65–6] and [75].

44    I proceed on the basis that the pecuniary penalty in this proceeding should be imposed for the principal purpose of specific and general deterrence. Other purposes for imposing a penalty in the context of the ACL include an element of punishment.

45    There is a need to impose penalties of sufficient weight to deter businesses from weighing up the risks of a penalty being ordered as a strategic business cost.

46    In Singtel Optus Pty Ltd v Australian Competition and Consumer Commission (2012) 287 ALR 249 at [62], the Full Court stated in the context of the setting of a penalty under s 76E of the TPA:

There may be room for debate as to the proper place of deterrence in the punishment of some kinds of offences, such as crimes of passion; but in relation to offences of calculation by a corporation where the only punishment is a fine, the punishment must be fixed with a view to ensuring that the penalty is not such as to be regarded by that offender or others as an acceptable cost of doing business.

47    In TPG Internet (at [65]), the High Court said:

General and specific deterrence must play a primary role in assessing the appropriate penalty in cases of calculated contravention of legislation where commercial profit is the driver of the contravening conduct.

48    In Coles Supermarkets at [95] and [100], Allsop CJ said:

[95] …It is important that sellers in the market recognise that consumers are entitled to reliable, truthful and accurate information. Confidence in such is a matter of importance for the Australian community and economy. It is an important factor in market efficiency. General and specific deterrence are important in order to encourage the maintenance of a fair, reliable and efficient market. Consumers play a vital part in that market. They buy the goods and services that commercial entities proffer.

…

[100] …General deterrence can be achieved by demonstrating to others who might engage in similar conduct that the Court will seek to ensure that any penalty imposed in these cases will be adequate to ensure that conduct that is liable to mislead or deceive consumers will not be profitable: that penalties are not just a cost of doing business.

49    It is necessary for the penalty to be of a sufficient magnitude to achieve specific deterrence, in that the penalty must be sufficiently high to deter Mr Chopra from repeating the contravening conduct. The fact that Mr Chopra has consented to the proposed injunctions does not detract from the need for a pecuniary penalty to reflect specific deterrence.

Determining the penalty figure

50    In Barbaro v The Queen; Zirilli v The Queen (2014) 305 ALR 323 (‘Barbaro’), a majority of the High Court (comprised of French CJ, Hayne, Kiefel and Bell JJ), held that criminal prosecutors should not make submissions to a sentencing judge as to the “available range” of sentences. Their Honours held that such a submission was no more than a statement of opinion which could not properly be taken into account by a sentencing judge.

51    The principles enunciated in Barbaro on the practice in this Court in relation to submissions in civil penalty matters were considered by the Full Court of this Court exercising the original jurisdiction of the Court in CFMEU. The Full Court applied those principles to the civil penalty proceeding before it. The ACCC put submissions before me on the basis that the approach adopted by the Full Court in CFMEU should be applied in this proceeding. Mr Chopra was not represented and did not oppose this course of action. Assuming the reasoning in CFMEU applies to the statutory context of this proceeding (which is different from the Building and Construction Industry Improvement Act 2005 (Cth)), I make these general observations.

52    The legal representatives for both the regulator and the respondent have a responsibility to assist the court to avoid appealable error. This involves ensuring that a penalty is not manifestly excessive or manifestly inadequate. This can be appropriately achieved by the making of submissions based upon the applicable legal principles, any relevant previous decisions, and the evidence before the court. The opportunity to do so will often arise in the course of discussion between the Bench and the legal representatives in any particular proceeding as to the appropriateness of a particular penalty. I do not see the Full Court in CFMEU as seeking to stifle any necessary discussion in this regard between the Bench and the legal representatives of the parties before the court. The submissions of the legal representatives, as in any proceeding, should not and would not normally involve any “opinion” of the legal representative, the regulator, or any party.

53    In the context of considering previous decisions, a debate as to the similarities and differences between such decisions and the conduct of the contravener before the court may occur. Consistency in the imposition of penalties under the ACL is obviously desirable. If sufficient detail is given to the court as to the previous decisions (see the comments in CFMEU at [253]), the legal representatives are entitled to submit, based upon the relevant aspects of the previous decisions and the circumstances of the contravener’s conduct, the range demonstrated by the relevant cases. The legal representatives should submit to the court any pecuniary penalty which would be manifestly excessive or manifestly inadequate. The process of determining the appropriate penalty by the court then takes place. The court must consider the appropriate penalty in view of all the relevant factors against the circumstances of the particular case, taking into account all the submissions put before the court.

54    The actual imposition of a penalty involves the exercise of judicial power, and as the Full Court said in CFMEU at [218] “pecuniary penalties are clearly penal in nature. They mark the community’s displeasure concerning breaches of its laws”. In any exercise of judicial power, a court must be careful in the way it undertakes its role so as not to adversely affect public perceptions of the exercise of the judicial function. However, any appropriately informed and fair minded lay observer would be well familiar with the role of a legal representative in making submissions to the Court, as not being the mere mouthpiece of a client. A legal representative in all civil proceedings is there to assist the court by making submissions within the confines of his or her ethical obligations to the client and the court.

55    In Markarian v The Queen (2005) 228 CLR 357 (‘Markarian’), the High Court said that this process of arriving at an appropriate sentence for a criminal offence involves an intuitive or instinctive synthesis of all the relevant factors. That process is also by analogy applicable to the assessment of pecuniary penalties under s 224 of the ACL. Justice Gilmour in Australian Competition and Consumer Commission v Marksun Australia Pty Ltd [2011] FCA 695 at [91] conveniently summarised the principles outlined in Markarian as follows:

(a)    the Court’s assessment of the appropriate penalty is a discretionary judgment based on all relevant factors

(b)    ‘…careful attention to maximum penalties will almost always be required, first because the legislature has legislated for them; secondly, because they invite comparison between the worst possible case and the case before the court at the time; and thirdly, because in that regard they do provide, taken and balanced with all of the other relevant factors, a yardstick’;

(c)    it will rarely be appropriate for a Court to start with the maximum penalty and proceed by making a proportional deduction from that maximum;

(d)    the Court should not adopt a mathematical approach of increments or decrements from a predetermined range, or assign specific numerical or proportionate value to the various relevant factors;

(e)    it is not appropriate to determine an ‘objective’ sentence and then adjust it by some mathematical value given to one or more factors such as a plea of guilty or assistance to authorities;

(f)    the Court ‘may not add and subtract item by item from some apparently subliminally derived figure’ to determine the penalty to be imposed; and

(g)    since the law strongly favours transparency, accessible reasoning is necessary in the interests of all, and, while there may be occasions where some indulgence in an arithmetical process will better serve the end, it does not apply where there are numerous and complex considerations that must be weighed.

(Citations omitted)

56    I mention one other aspect of sentencing relevant to this proceeding. In relation to the “totality principle”, the Court in Trade Practices Commission v TNT Australia Pty Ltd (1995) ATPR 41-375 at 40,169 held that the total penalty for each offence ought not to exceed what is proper for the entire contravening conduct involved. This approach was endorsed by Goldberg J in Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd (1997) 145 ALR 36 at 53 where his Honour said:

The totality principle is designed to ensure that overall an appropriate sentence or penalty is appropriate and that the sum of the penalties imposed for several contraventions does not result in the total of the penalties exceeding what is proper having regard to the totality of the contravening conduct involved. But that does not mean that a court should commence by determining an overall penalty and then dividing it among the various contraventions. Rather the totality principle involves a final overall consideration of the sum of the penalties determined.

(Citations omitted)

57    The Full Court in CFMEU made certain comments on the totality principle (and “course of conduct” approach) which I do not need to specifically address for the purposes of this proceeding: see CFMEU at [40–6].

CONSIDERATION

58    For present purposes, the above considerations in determining the appropriate pecuniary penalties can be relevantly distilled into the following list of considerations:

(a)    the nature, extent and duration of conduct, and the circumstances in which it took place;

(b)    whether the contravener engaged in prior similar conduct and has previously been found by a Court in proceedings under Ch 4 or Pt 5-2 of the ACL to have engaged in any similar conduct;

(c)    the size and financial position of the contravener;

(d)    the deliberateness of the contravening conduct;

(e)    the participation of senior management;

(f)    the culture in respect of compliance with the ACL;

(g)    disposition to cooperate;

(h)    the amount of profits gained and loss suffered; and

(i)    other general sentencing principles referred to above, such as deterrence, punishment and totality.

59    Each of these will be explored in turn.

The nature, extent and duration of conduct, and circumstances in which it took place

60    Mr Chopra made the Representations, which were false or misleading in contravention of s 29(1)(m) of the ACL. The Representations were made on the EB Website, which was accessible to the general public. The Representations purported to exclude or limit the availability of consumer entitlements under the ACL, including entitlements to refunds, repairs and replacements. The conduct in contravention of s 29(1)(m) of the ACL occurred for at least six months.

61    As mentioned above, Mr Chopra has admitted to contravening s 36(4) of the ACL on four occasions over the period from 13 June 2012 to 21 July 2014, in his dealings with four consumers from four different States and Territories.

Whether the contravener engaged in prior similar conduct and was previously found to have contravened the ACL

62    Mr Chopra has not previously been found by a court to have contravened the ACL or the TPA.

The size and financial position of the contravener

63    Mr Chopra operates the Electronic Bazaar business as a sole trader. He has provided the ACCC with information regarding his personal and business financial position.

64    Mr Chopra informed the ACCC that he has assets totalling $40,000, comprising a $20,000 term deposit and a vehicle valued at $20,000; that he has no real estate assets; and that he has liabilities of approximately $45,000 in credit card debts.

65    Mr Chopra also provided information and documents to the ACCC that show that the business conducted by him through the EB Website consistently generated substantial revenue from 29 June 2012 to 30 September 2014 (ranging between $47,503.37 and $338,758.06 per month, with an average of $119,863.99 per month); and continued to generate revenue from 1 October 2014 to 31 December 2014, albeit to a diminished extent (ranging between $15,858.25 and $33,479.45 per month, with an average of $27,087.28 per month).

66    Mr Chopra gave oral evidence at trial about his financial circumstances and the position of his business. I accept his evidence that his business has incurred significant losses for a number of years, that the EB Website is no longer operational and that his business is no longer viable. I also accept that he currently has a tax debt of approximately $260,000.

67    However, the information and oral evidence provided by Mr Chopra, particularly with regard to the revenue of his ongoing business, does not demonstrate that Mr Chopra does not have capacity to pay a pecuniary penalty and costs.

68    In any event, while incapacity to pay any pecuniary penalty is a relevant consideration, the Court must ultimately ensure that the penalty provides sufficient general deterrence: Australian Competition and Consumer Commission v Leahy Petroleum Pty Ltd (No 3) (2005) 215 ALR 301 at [87], [99] and [100].

The deliberateness of the contravening conduct

69    Mr Chopra’s conduct in contravention of s 29(1)(m) of the ACL was deliberate and involved disregard for his obligations under the ACL.

70    On 20 September 2010, the ACCC sent Mr Chopra a letter in which concerns were raised about false and misleading representations about consumers’ rights and refunds on the EB Website.

71    In relation to any Representations made on or after 16 July 2014, Mr Chopra was aware, at the time the Representations were made, of the relevant provisions of the ACL.

72    In its letter of 16 July 2014, the ACCC advised Mr Chopra that it, and its counterpart state and territory fair trading agencies, had received a significant number of complaints relating to the availability and supply of products by Electronics Bazaar. It also advised Mr Chopra that many complainants had experienced lengthy delays following payment of the purchase price before receiving their goods. The letter contained detailed information about the Consumer Guarantee Provisions and s 29(1)(m) of the ACL.

73    Despite being specifically informed of the complaints and the relevant provisions of the ACL, Mr Chopra continued to make multiple representations that misinformed consumers about their entitlements under the ACL, with the potential for him to benefit from any reliance by consumers on those representations.

74    Mr Chopra also made certain Representations following the commencement of this proceeding on 28 November 2014 and following the subsequent provision of a signed undertaking to the ACCC’s solicitors that he would cease making such representations. He also made Representations following an interlocutory hearing in relation to interim interlocutory relief on 16 December 2014, at which Mr Chopra gave an enforceable undertaking to the Court.

75    Mr Chopra’s contravening conduct under s 36(4) of the ACL was also deliberate.

The participation of senior management

76    As noted above, Mr Chopra runs the Electronic Bazaar business as a sole trader. Mr Chopra has admitted that he was responsible for the content of the EB Website and for the business conducted through that website. He was responsible for the management and day to day operations of the business, and in particular, operated the online store on the EB Website, communicated with consumers via email, received incoming phone calls and email correspondence to the business, and had the ability to add to or remove content from the EB Website.

The culture in respect of compliance with the ACL

77    At the time of the contravening conduct, Mr Chopra’s business did not have a culture of compliance with the ACL.

78    The ACCC offered to provide Mr Chopra with publications that contained information in relation to the ACL, but he declined to receive them. Mr Chopra continued to contravene s 29(1)(m) of the ACL after the ACCC had explained its concerns to him and made that offer.

Disposition to cooperate

79    Prior to the commencement of this proceeding, Mr Chopra did not cooperate with the ACCC in relation to the contraventions. In particular, as noted above, despite the ACCC’s letter of 16 July 2014, Mr Chopra did not stop the contravening conduct, nor did he provide a response to the ACCC’s concerns or meaningfully engage with the ACCC in relation to the contravening conduct.

80    For some time following the commencement of the proceeding, Mr Chopra remained uncooperative. He failed to comply with a series of orders of the Court for the filing of his Fast Track Response, resulting in a default judgment application being made by the ACCC.

81    The extent of Mr Chopra’s cooperation is limited to the making of admissions in his Fast Track Response and his agreement to the Proposed Consent Orders.

82    The fact that Mr Chopra has admitted liability in relation to the contraventions of the ACL, is a mitigating factor. A contested trial would have consumed a larger amount of the Court’s time and resources, and those of the ACCC.

The amount of profits gained and loss suffered

83    The ACCC was unable to ascertain the number of consumers who relied upon the Representations. It was therefore unable to quantify the amount of profit gained by Mr Chopra, or the loss (if any) caused to consumers or competitors, by the contraventions of s 29(1)(m) of the ACL.

84    However, the ACCC noted that Mr Chopra engaged in conduct in contravention of s 29(1)(m) for a period of at least six months, by publishing the Representations to the general public on the EB Website. Further, in Mr Chopra’s Fast Track Response, Mr Chopra stated that his business has had approximately 10,000 customers since it commenced trading. I will assume that some loss was caused to some consumers.

85    In respect of the contraventions of s 36(4) of the ACL, Mr Chopra paid refunds or partial refunds to each of the affected consumers. It is a mitigating factor in relation to the contraventions of s 36(4) that there was minimal or no quantifiable profit gained by Mr Chopra or minimal loss (if any) suffered by those consumers.

Other sentencing principles

86    Each instance in which Mr Chopra made a Representation in breach of s 29(1)(m) or failed to supply a good following acceptance of payment in breach of s 36(4) constitutes a separate act in contravention of those provisions.

87    It is appropriate to treat the acts of Mr Chopra that gave rise to the contraventions of s 29(1)(m) as one course of conduct comprising the making of the Representations, because these contraventions arose from the same or similar facts. This is a relevant consideration in considering the total pecuniary penalty.

88    However, it is appropriate to treat the four instances of failure to supply a good within a specified or reasonable time following acceptance of payment in breach of s 36(4) as four separate contraventions, rather than a single course of conduct, because those contraventions occurred as discrete incidents and relate to four different consumers.

89    In light of the recent decision of the Full Court in CFMEU, the ACCC has provided submissions detailing pecuniary penalties imposed in previous potentially analogous decisions. This included details of pecuniary penalties imposed:

(a)    in other cases for contraventions of s 29(1)(m);

(b)    under the ACL in cases involving sole traders or small proprietary companies (but where no contravention of s 29(1)(m) was alleged); and

(c)    for contraventions of three other provisions that have some similarities to s 36(4) (because no pecuniary penalty has previously been imposed for a contravention of s 36(4) of the ACL), namely s 58(b) of the TPA, s 75AZL(3) of the TPA and s 19 of the Fair Trading Act 1999 (Vic).

90    Those submissions were useful, in that they provided details of the relevant statutory provisions, the maximum penalties, the nature of the conduct of the contravener, and the relevant factors taken into account by the court.

91    Counsel for the ACCC referred to (amongst other decisions) Australian Competition and Consumer Commission v Artorios Ink Co Pty Ltd (No 2) [2013] FCA 1292 (‘Artorios’), in which the contraveners had engaged in deceptive conduct in attempts to establish contractual relationships with small business customers, including by representing that they had placed orders for certain products, when that was not the case.

92    In that case, Mortimer J (at [21]) inferred:

a deliberate and calculated plan constructed to misrepresent to small businesses (through calls to unsuspecting employees or shop managers) some kind of existing supply relationship, then to take advantage of the misrepresentation to supply goods and then demand payment….

93    However, Mortimer J noted (at [93]) that:

[t]he proven loss and damage is at such a modest level that I do not consider it should attract a heavier penalty than might otherwise be imposed if no loss or damage were proven on similar facts.

94    Like the respondents in Artorios, Mr Chopra was operating a relatively small but fully-functioning small business, which was large enough to employ staff (see [94]) and his “conduct was spread across Australia, and continued over a substantial period of time”: see [96].

95    In considering the appropriate penalty in Artorios, her Honour (at [100–1]) noted the important need for deterrence, especially in light of the deliberate nature of the conduct, as has occurred in this proceeding.

The penalties imposed in this proceeding should be sufficiently high to deter the second and third respondents from harbouring any ideas it is worth repeating this kind of conduct. The penalties should also be high enough to demonstrate a real financial impact on any other suppliers of goods who might consider engaging in such a scheme.

These factors, especially the calculated and deliberate nature of the conduct, the planning and preparation for it disclosed by the evidence, and the targeting of low-level employees and small businesses with a common and necessary product, could have led me to conclude that penalties higher than those proposed in the joint submissions should be imposed….

96    However, her Honour considered that a lower penalty was appropriate after taking into account the following mitigating factors (at [102–5]):

[102]    I take into account the cooperation of the respondents, their ultimate agreement to the facts necessary to found liability and the consequent saving of the public resources of both the regulator and the Court. These matters have led me to consider a lower figure than otherwise might have been the case.

[103]    The second and third respondents have lost the business they established. They have also undertaken not to be directors of, or be involved in the management of, any corporation for five years. These two matters produce significant and adverse changes to their personal circumstances and I take those into account in determining the appropriateness of the sum of $50,000 as a penalty for each of them.

…

[105]    Both the second and third respondents attended the penalty hearing before the Court. I am prepared to infer that their experiences in being subjected to these proceedings, and to public admissions and findings of wrongdoing, and their naming in proceedings such as this, has been difficult and somewhat shameful for them. Those effects should also be taken into account in the determination of penalty.

(Emphasis added)

97    Justice Mortimer further held (at [106]) that absence of prior contraventions also justified a lower penalty:

Neither of the respondents has been found previously to have engaged in similar conduct under Ch 4 or Pt 5.2 of the ACL. This fact weighs in favour of a significant but not heavy penalty. I consider the sum of $50,000 to fit that description, given the maximum penalty is $220,000.

(Emphasis added)

98    As noted above, the maximum penalty in respect of a contravention of a provision of Pt 3-1 of the ACL by a natural person is $220,000.

99    The ACCC submitted that some of the mitigating factors in Artorios may not be present in this proceeding. In relation to cooperation, Counsel for the ACCC referred to unsuccessful attempts between the parties, pursuant to court orders, to attempt to agree a set of facts for the purposes of today’s hearing. However, Counsel accepted that Mr Chopra’s admission to the allegations, and the subsequent need for this Court to limit its consideration to penalty, warrants some discount.

100    Further, in my view, the mitigating factors considered by Mortimer J in paragraphs [103] and [105–6] are applicable here, save for the fact that Mr Chopra did not provide an undertaking. As I mentioned, I accept that Mr Chopra’s business is no longer viable and that he is in the process of closing it down. Finally, I am prepared to make a similar inference to that of Mortimer J, that Mr Chopra’s experience in this proceeding has been difficult and shameful for him.

101    I make detailed mention of the decision and approach of Mortimer J, and the differences and similarities to this proceeding, to demonstrate that with appropriate discernment as to detail, previous decisions can be of some guidance.

102    However, one point is important to stress. Previous decisions (no matter how analogous) do not limit the range of penalty which may be appropriate, nor do they restrict the approach to be taken by the court in imposing the appropriate penalty in any particular later decision. As Barker J said in Comcare v Tanspacific Industries Pty Ltd [2015] FCA 500 at [268–9]:

In taking all relevant factors into account, the Court may also have regard to what penalties have been provided in apparently like cases. This is emphasised in the recent Full Court decision of [CFMEU]. I, with respect, agree with the comments made by the Full Court to that effect, given that consistency in the imposition of penalties under the OHS Act is also a desired outcome of the operation of the legislative regime.

At the same time it is understood that there is no ‘tariff’ to be applied for particular types of contraventions. If that were so then the Court would be failing properly to conduct the intuitive synthesis exercise required of it. It would be a slave to precedent rather than to principle in assessing the appropriate penalty.

CONCLUSION

103    In light of the foregoing reasons, I made the orders for declarations, injunctions and training as detailed in the Proposed Consent Orders. In relation to the pecuniary penalties, I ordered that Mr Chopra pay $60,000 in respect of his contraventions of s 29(1)(m) of the ACL (being the same conduct), and $10,000 in respect of each of the four contraventions of s 36(4) of the ACL (being the same conduct), totalling $100,000.

Associate:

Dated:    29 May 2015