FEDERAL COURT OF AUSTRALIA

Australian Competition and Consumer Commission v Dataline.Net.Au Pty Ltd [2007] FCAFC 146

TRADE PRACTICES – consideration of the principles guiding the imposition of a pecuniary penalty pursuant to s 76 of the Trade Practices Act 1974 (Cth) (TPA) in circumstances where the respondent company is in liquidation – consideration of evidence or inferences drawn from evidence of no reasonable prospect penalty might be paid – consideration of the principles guiding orders made pursuant to order 35A rule 3(2)(c) – consideration of the principles guiding the imposition of a pecuniary penalty generally – consideration of the utility of earlier determinations of pecuniary penalty in informing determinations of pecuniary penalty in subsequent cases

TRADE PRACTICES - consideration of the principle guiding the granting of injunctive relief pursuant to s 80 of the TPA concerning conduct directly or indirectly aiding and abetting conduct in contravention of ss 51AC, 52, 60 and 48 of the TPA – consideration of the principles and authorities guiding the making of an injunction order pursuant to s 80 of the TPA in respect of contraventions of the TPA – consideration of past conduct as an indication of future likelihood of contravening conduct – consideration of principles informing the grant of an injunction, generally – consideration of the relationship between the possible grant of an injunction in aid of an existing statutory prescription or proscription and the statutory sanctions attending non-compliance.

PRACTICE AND PROCEDURE - consideration of the principles guiding orders made pursuant to order 35A rule 3(2)(c)

Trade Practices Act 1974 (Cth), ss 51AC, 52, 60, 48, 76, 80

Federal Court Rules, Order 35A rule 3(2)

Australian Competition and Consumer Commission v Dataline.Net.Au Pty Ltd (2007) ATPR 42-138

Australian Competition and Consumer Commission v Dataline.net.au Pty Ltd [2005] FCA 153 (3 March 2005)

Australian Competition and Consumer Commission v Dataline.net.au Pty Ltd [2003] FCA 1027 (25 September 2003)

Australian Competition and Consumer Commission v The Vales Wine Company Pty Ltd (1996) ATPR 41-528

Australian Competition and Consumer Commission v SIP Australia Pty Ltd (2003) ATPR 41-937

Australian Competition and Consumer Commission v Australian Securities and Investments Commission (2000) 174 ALR 688

Commonwealth v Leahy Petroleum – Retail Pty Ltd (subject to deed of company arrangement) (2005) 55 ACSR 353

Ah Toy v Registrar of Companies (1985) 10 FCR 280

Trade Practices Commission v CSR Ltd (1991) ATPR 41-076

Australian Competition and Consumer Commission v NW Frozen Foods Pty Ltd (1996) ATPR 41-515

ACCC v Mayo International Pty Ltd [1998] FCA 1

ACCC v Mayo International Pty Ltd [1998] FCA 1008

ACCC v High Adventure Pty Ltd [2005] FCA 762

Rip Curl International Pty Ltd v Phone Lab Pty Ltd (No 2) [2004] FCA 1553

Australian Competition and Consumer Commission v High Adventure (2006) ATPR 42-091

Phonographic Performance Ltd v Maitra [1988] 2 All ER 638

Australian Competition and Consumer Commission v Dermalogica Pty Ltd (2005) 215 ALR 482

Minister for Industry, Tourism and Resources v Mobil Oil Australia Pty Ltd [2004] FCAFC 72; (2004) ATPR 41-993

Trade Practices Commission v Stihl Chain Saws (Aust) Pty Ltd (1978) ATPR 40‑091

Australian Competition and Consumer Commission v George Weston Foods Ltd (2000) ATPR 41‑763

NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (1996) 71 FCR 285

Schneider Electric (Australia) Pty Ltd v Australian Competition and Consumer Commission [2003] FCAFC 2

Australian Competition and Consumer Commission v CC (NSW) Pty Ltd (No. 8) (1999) 92 FCR 375

Australian Competition and Consumer Commission v Gullyside Pty Ltd [2005] FCA 1727; (2006) ATPR 42‑097

Australian Competition and Consumer Commission v McMahon Services Pty Ltd [2004] FCA 1425

Australian Competition and Consumer Commission v Leahy Petroleum (No. 2) [2005] FCA 254 [17]; (2005) 215 ALR 281

Australian Competition and Consumer Commission v Humax Pty Ltd [2005] FCA 706; (2005) ATPR 42‑072,

Australian Competition and Consumer Commission v High Adventure Pty Ltd [2005] FCA 762; (2005) ATPR 42‑073

Australian Competition and Consumer Commission v RM Hall Pty Ltd (SAD 182/2004

Australian Competition and Consumer Commission v Chaste Corporation Pty Ltd (In Liquidation) [2004] FCA 398

Australian Competition and Consumer Commission v Chaste Corporation Pty Ltd (In Liquidation) [2005] FCA 1212

Australian Competition and Consumer Commission v Colgate‑Palmolive Pty Ltd [2002] FCA 619 (2002) ATPR 41‑880

Australian Competition and Consumer Commission v Sundaze Australia Pty Ltd [1999] FCA 1642 (2000) ATPR 41‑736

Australian Competition and Consumer Commission v Mayo International Pty Ltd, LeCourt & Ors (No. 1) (1998) ATPR 41‑653

Australian Competition and Consumer Commission v Mayo International Pty Ltd & Ors (No. 3) (1998) ATPR 41‑655

Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd (1997) ATPR 41‑562

Australian Competition and Consumer Commission v Hugo Boss (Australia) Pty Ltd (1996) ATPR 41‑536

Australian Competition and Consumer Commission v Cambur Industries Pty Ltd (2006) ATPR 42‑127

Australian Competition and Consumer Commission v Digital Products Group Pty Ltd (2007) ATPR 42‑145

Australian Competition and Consumer Commission v Jurlique International Pty Ltd [2007] FCA 79

Australian Competition and Consumer Commission v Tooltechnic Systems (Aust) Pty Ltd [2007] FCA 432

Australian Competition and Consumer Commission v Westminster Retail Pty Ltd (2005) ATPR 42‑084

Australian Competition and Consumer Commission v 1Cellnet LLC [2005] 856

Macquarie Bank Ltd v Seagle (2005) 146 FCR 400

Scott v Beneficial Finance Corp Ltd (unreported, Federal Court, per Burchett J, NG 699 of 1993

Cardile v LED Builders Pty Ltd (1999) 198 CLR 380

Corporation of the City of Enfield v Development Assessment Commission (1999) 199 CLR 135

Truth About Motorways Pty Ltd v Macquarie Infrastructure Investment Management Ltd (2000) 200 CLR 591

Rural Press Ltd v Australian Competition and Consumer Commission (2003) 216 CLR 53

Australia Operations Pty Ltd v Trade Practices Commission (1992) 38 FCR 248

BMW Australia Ltd v Australian Competition and Consumer Commission (2004) 207 ALR 452

House v The King (1936) 55 CLR 499

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION v DATALINE.NET.AU PTY LTD (IN LIQUIDATION) ACN 075 400 529, AUSTRALIS INTERNET PTY LTD (IN LIQUIDATION) ACN 090 539 432 AND JOHN LYNDEN RUSSELL

QUD 458 OF 2006

MOORE, DOWSETT AND GREENWOOD JJ

7 September 2007

BRISBANE

THE COURT ORDERS THAT:

1.                  The Appeal is dismissed.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

REASONS FOR JUDGMENT

THE COURT

1                     This is an appeal by the Australian Competition and the Consumer Commission (“ACCC”) from a judgment of a single judge given on 3 November 2006: Australian Competition and Consumer Commission v Dataline.Net.Au Pty Ltd (2007) ATPR 42-138; [2006] FCA 1427.  The proceedings before the primary judge concerned alleged contraventions of the Trade Practices Act 1974 (Cth) (“TPA”) in the provision of internet-related services, principally by the present respondents.  Following default by the respondents, the primary judge made orders pursuant to O 35A r 3 of the Federal Court Rules.  This appeal by ACCC, in which the respondents have taken no role, concerns certain of those orders and the primary judge’s refusal to make other orders sought by ACCC.

Background

2                     The first respondent, Dataline.Net.Au Pty Ltd (“Dataline”) was a wholesale provider of internet services to virtual internet service providers (“VISPs”).  Such VISPs, in turn, sold services to customers (the “consumers”).  The second respondent, Australis Internet Pty Ltd (“Australis”), was a VISP.  Both Dataline and Australis were effectively controlled by Mr Russell, who is the third respondent.  The services supplied by Dataline included:

   

     

·               Wholesale internet provider services for resale by VISPs to consumers;

     

·               The right to use a certain online computer program (Pandora) in the administration of the business of reselling services to consumers; and

     

·               Technical support services to assist in the use of such services and Pandora.

   

 

3                     The proceedings before the primary judge primarily addressed the conduct of Dataline and Australis in connection with the VISPs, and the involvement of Mr Russell and other individuals in that conduct.  World Publishing Systems Pty Ltd (“World Publishing Systems”), of which Dataline was a wholly owned subsidiary, was also a respondent to the proceedings below, although it seems not to be of any present relevance.

4                     The statement of claim was fifty-two pages in length.  The alleged conduct was described in some detail by her Honour which is unnecessary for us to repeat here.  ACCC alleged that Dataline and Australis contravened the TPA in various ways and in numerous transactions.  The alleged contraventions included resale price maintenance, misleading and deceptive conduct, unconscionable conduct, undue harassment and coercion. 

5                     After repeated non-compliance by the respondents with orders for particular discovery, self-executing orders were made that the defence filed by the present respondents and two other respondents be struck out if they failed to comply with further orders for particular discovery.  They did not comply and the defence was struck out.  A series of hearings then took place concerning the appropriate orders to be made under O 35A r 3(2)(c) of the Federal Court Rules.

6                     The procedural background is set out at [2] to [5] of her Honour’s reasons.  Further detail also appears in two earlier judgments of her Honour in relation to issues of discovery: see Australian Competition and Consumer Commission v Dataline.net.au Pty Ltd [2005] FCA 153 (3 March 2005) and Australian Competition and Consumer Commission v Dataline.net.au Pty Ltd [2003] FCA 1027 (25 September 2003). 

7                     On 3 November 2006, her Honour made orders including declarations that the corporate respondents had contravened the TPA and that the individual respondents were knowingly concerned in certain of those contraventions.  In relation to Mr Russell, her Honour granted an injunction restraining him from identified resale price maintenance and imposed a pecuniary penalty of $5,000.

Orders made below

8                     The amended draft order proposed by ACCC was 21 pages in length.  Although the orders below covered a considerable number of the allegations made by ACCC, her Honour did not accept that all the orders sought were warranted.  In a number of instances, her Honour found the alleged conduct did not amount to contravention of the particular section of the TPA as pleaded, because the facts were insufficient or otherwise.  In some instances, her Honour found that the conduct alleged did not contravene the TPA at all. 

9                     In summary, the orders of 3 November 2006, as they relate to the present respondents, included declarations, an injunction against Mr Russell and the imposition on Mr Russell of a pecuniary penalty.  The declarations were to the following effect:

   

     

1.             Dataline engaged in four species of unconscionable conduct in contravention of s 51AC of the TPA, such conduct being a misuse of bargaining power.  The relevant conduct was summarised in the orders (orders 2, 3, 5 and 7);

     

2.             Dataline engaged in misleading and deceptive conduct in contravention of s 52 of the TPA by eight representations summarised in the order (order 9);

     

3.             Australis contravened s 52 of the TPA by four representations described in the order (order 13);

     

4.             World Publishing Systems contravened s 52 of the TPA by the representation described in the order (order 16);

     

5.             Mr Russell was knowingly concerned in the contraventions of Dataline, other than the contravention referred to in order 3, and the contraventions of Australis and World Publishing Systems (orders 4, 6, 8, 10, 14 and 17).

   

 

10                  Her Honour ordered that Mr Russell be restrained from engaging in resale price maintenance in connection with the supply of internet-related services.  Mr Russell was also ordered to pay a pecuniary penalty of $5,000 in respect of his involvement in the resale price maintenance of Dataline and Australis.  The present respondents were ordered to pay ACCC’s costs in a fixed amount.

Issues in the appeal

11                  Only ACCC was represented at the hearing of the appeal.  No appearances were entered for the respondents and they have not taken any role in the appeal.  ACCC has identified four issues:

   

     

1.      Whether pecuniary penalties under s 76 of the TPA ought to be imposed on Dataline and Australis.

     

2.      If so, the amount of the pecuniary penalties that ought to be imposed on Dataline and Australis.

     

3.      The amount of the pecuniary penalty imposed under s 76 of the TPA on Mr Russell.

     

4.      Whether an injunction ought to be granted against Mr Russell in relation to his contraventions of ss 51AC and 52 of the TPA.

   

 

12                  It is convenient to discuss the approach of the primary judge when discussing each of these issues.

Issue 1:  Pecuniary penalties against a company in liquidation

13                  In the proceedings below, ACCC sought orders that Dataline and Australis each pay penalties in the sum of $250,000 pursuant to s 76 of the TPA.  Both companies were then in liquidation.  In her reasons for judgment the primary judge noted the factors which the Court was required to consider when determining an appropriate pecuniary penalty, having regard to the terms of s 76(1) of the TPA, the further factors identified in the authorities and the additional factors which ACCC submitted were relevant.  In considering the position of Dataline and Australis, her Honour said that she “would have been inclined” to order payment by each company in the sum of $25,000.  Her Honour said (at [117]):

… I accept that a penalty is not a debt provable in liquidation and would not have an adverse effect on creditors.  It seems to me however that a penalty is meaningless where a company is being wound up.  The only purpose it could have is that of deterrence and that is provided by my finding of what orders would have been made were the companies likely to have continued in existence.  (Emphasis added)

14                  On this issue of whether a penalty should be imposed on a company in liquidation, her Honour had said earlier at [113]:

With respect to the further factors identified by Heerey J in Australian Competition and Consumer Commission v NW Frozen Foods Pty Ltd (1996) ATPR 41–515 at 42, 444 – 42, 445, the fact that the respondent corporations are both in liquidation should be taken into account.  It is not suggested however that the imposition of a penalty would have an adverse effect upon creditors.  The factors also require the deterrent effect of the penalties are taken into account.

15                  In issue is whether there was any appealable error in relation to the decision not to impose a pecuniary penalty on the companies.

16                  In this appeal, senior counsel for ACCC did not submit that the fact that a company was in liquidation was an irrelevant consideration in determining whether to impose a penalty.  He accepted it was a relevant matter.  He submitted that the error of the primary judge was that her Honour refused to impose a penalty because the companies were in liquidation.  The submission was made that as a matter of general principle, the Court ought not refuse to impose a penalty because a company is in liquidation.  It was submitted that the established approach was that the imposition of a pecuniary penalty, even on a company in liquidation, marks the Court’s disapproval of the conduct and serves as a warning to others.  The approach was said to be illustrated by O’Loughlin J in Australian Competition and Consumer Commission v The Vales Wine Company Pty Ltd (1996) ATPR 41-528 at 42,776:

The company is now in liquidation and I have been informed that there would be no hope of any penalties or costs being recovered.  This state of affairs should not, however, dissuade a court from assessing appropriate penalties.  Even though they may not be recovered, they will serve as a warning throughout the wine industry and elsewhere of the attitude of the Court to offences of this nature.

17                  That approach, it was submitted, had been followed in a number of cases including by Goldberg J in Australian Competition and Consumer Commission v SIP Australia Pty Ltd (2003) ATPR 41-937.  ACCC was not aware of any other judgment that had put in issue this reasoning or approach. 

18                  In our opinion, when one reads the primary judge’s reasons for judgment as a whole, it is tolerably clear that her Honour did not decline to impose a penalty simply and only because the company was in liquidation.  It may be accepted that some of her Honour’s observations at [17] might be understood to indicate such an approach.  However it is clear, from her reasons as a whole and particularly from [113], that her Honour understood it to be one of a number of considerations only.

19                  There will be situations where notwithstanding that a company is in liquidation, it is appropriate, for one or a range of factors, to impose a penalty.  However, significantly in this case, senior counsel for the appellant was unable to point to any fact or circumstance which would warrant the step of imposing a penalty on a party reasonably expecting that it would never be paid.  There was no evidence from which the Court might infer that a third party or even a related company might meet the obligation of the company as happened in Australian Competition and Consumer Commission v Australian Securities and Investments Commission (2000) 174 ALR 688.  Similarly there was no evidence from which the court might infer that at the completion of the liquidation there might be funds available to meet, in whole or in part, the penalty as happened in Commonwealth v Leahy Petroleum – Retail Pty Ltd (subject to deed of company arrangement) (2005) 55 ACSR 353; [2005] FCA 1422. 

20                  It seems to us that if matters such as those discussed in the preceding paragraph are to be relied on by a regulatory authority in support of the imposition of a penalty on a company in liquidation, some evidence, even if slight, should be led to enable the Court to draw the inference.  Additionally, a court may impose a penalty on a company in liquidation if, to do so, would clearly and unambiguously signify to, for example, companies or traders in a discrete industry that a penalty of a particular magnitude was appropriate (and was of a magnitude which might be imposed in the future) if others in the industry sector engaged in the same or similar conduct.  This was exemplified in the judgment of O’Loughlin J in The Vales Wine Company Pty Ltd decision. 

21                  No general principle can be stated about whether or not a penalty should be imposed on a company in liquidation.  Whether a penalty is imposed would depend on all the circumstances including the fact that the company was in liquidation and special facts, if any, surrounding the liquidation.  We agree that the bare fact that a company is in liquidation is not, of itself, an immutable reason for not imposing a penalty. Nonetheless the fact that the company is in liquidation could be a factor militating against the imposition of a penalty.  However there will be cases where other factors make it clearly desirable to impose a penalty on a company even though it is in liquidation.  However this is not such a case and the appellant has not made good this ground of appeal.  Given that her Honour’s discretion did not miscarry, it is unnecessary for us to consider what penalty should be imposed.  This was accepted by counsel for ACCC.  While her Honour did express a view in her reasons about the appropriate amount, this appeal is against her Honour’s orders and not her reasons: see Ah Toy v Registrar of Companies (1985) 10 FCR 280.

Issue 2:  What penalty should have been imposed on Dataline and Australis?

22                  This issue is moot for the reasons given at the conclusion of the preceding paragraph.

Issue 3:  Pecuniary penalty imposed on Mr Russell

23                  The issue is whether there was any appealable error in relation to the imposition of the pecuniary penalty of $5,000 on Mr Russell for his involvement in the practice of resale price maintenance of Dataline in contravention of s 48 of the TPA.  ACCC had sought an order for a pecuniary penalty in the sum of $100,000. 

24                  ACCC’s allegations concerning resale price maintenance are summarised by her Honour at [27].  It was alleged that between November 1999 and June 2000, Dataline offered to sell services to VISPs on plans, on six occasions, on the basis of a retail price which Dataline specified.  One occasion was specified when Dataline offered the plans for sale on the express condition that VISPs not resell them to consumers for less than a specified retail price.  This took place in the form of a communication dated 4 December 1999 from Mr Russell to VISPs.  The VISPs were alleged to have acted in accordance with the requirements.  Australis and Mr Russell, along with one other non-corporate respondent, were said to have been aware of, or complicit in, the conduct.  Her Honour also referred to the evidence relating to Mr Russell’s involvement in the practice of resale price maintenance, in considering the injunctions sought against Mr Russell for resale price maintenance: see [94].  That evidence was given by Mr Litchfield, a Dataline employee, and concerned discussions which had taken place at a series of meetings about the price at which VISPs would be required to sell plans to consumers.  When asked by Mr Litchfield, Mr Russell had made it clear that he intended to require VISPs to sell at a specified price irrespective of whether they were entitled to make such demands.  Her Honour noted that although the evidence suggested a wider practice of resale price maintenance, it was only possible to take the evidence as establishing the case pleaded. 

25                  As noted earlier, in considering the pecuniary penalty, her Honour considered the statutory factors, the factors identified in the authorities and the additional factors identified by ACCC.  The factors which the Court is required to consider pursuant to s 76(1) of the TPA are:

   

     

(a)        the nature and extent of the respondent’s acts;

     

(b)       any loss or damage suffered as a result of those acts;

     

(c)        the circumstances in which the acts took place;

     

(d)       whether the respondents have previously been found to have been engaged in similar conduct by the Court in proceedings under Pt VI of the TPA.

   

 

26                  In relation to the above factors, her Honour said (at [111]):

The act here in question is limited to one occasion and the context was the provision of internet-related services to retail Consumers.  There is no evidence as to what effect this had upon Consumers.  There is no evidence of prices in the market for the Services at the time.  There is no evidence to suggest the respondents have previously engaged in similar conduct.

27                  Her Honour noted ACCC’s submission that although there was only one act of resale price maintenance, its operation had been extensive.  It had pointed to statements made by respondents including Mr Russell indicating the large number of VISPs and the number of customers of VISPs and of Australis.  Her Honour also referred to a document handed up by ACCC summarising the penalties imposed in other cases and found that none of the decisions provided support for the level of penalty sought by ACCC “in a case involving one contravention, albeit having a significant sphere of operation” (at [117]).

28                  Her Honour considered the factors identified by French J in Trade Practices Commission v CSR Ltd (1991) ATPR 41-076 at 51,152-51,153 and Heerey J in Australian Competition and Consumer Commission v NW Frozen Foods Pty Ltd (1996) ATPR 41-515 at 42,444-42,445.  Her Honour said at [112]-[113]:

The additional factors referred to by French J in Trade Practices Commission v CSR Ltd (1991) ATPR 41 – 076 at 51,152 – 51,153 concern the contravening corporation and have regard to its power in the market and its corporate culture.  There is little that can be said about these factors on the bare facts of this case.  There is nothing to suggest that Dataline or Australis had any significant power in the market.  It may be inferred that the contravention was deliberate.  It arose out of the conduct of the person controlling the company.  There is no suggestion that the corporate respondents had a corporate culture conducive to compliance.  The history of these proceedings would suggest they did not have a disposition to cooperate with the authorities. 

With respect to the further factors identified by Heerey J in Australian Competition and Consumer Commission v NW Frozen Foods Pty Ltd (1996) ATPR 41–515 at 42, 444 – 42, 445, the fact that the respondent corporations are both in liquidation should be taken into account.  It is not suggested however that the imposition of a penalty would have an adverse effect upon creditors.  The factors also require the deterrent effect of the penalties are taken into account.

29                  Her Honour considered the three further factors which had been identified by ACCC as relevant to the determination of penalty.  Those factors were that the respondents’ practice of resale price maintenance more readily facilitated the unconscionable conduct in which they engaged, that the respondents also engaged in unreasonable harassment or coercion in connection with the acts of resale price maintenance, and that they failed to properly perform their obligations of discovery.  Her Honour did not accept that any of these factors should properly be taken into account.

30                  Her Honour concluded (at [118]):

So far as concerns Mr Russell, the penalty appropriate for his participation could in my view be no more than $10,000.   He has no assets to speak of and I infer that his parlous financial position has been substantially brought about by the costs of these proceedings.  Given his circumstances I propose to make an order that he pay a penalty of $5,000.

31                  ACCC submitted that the primary judge erred in four ways.  The first was that the penalty imposed was manifestly inadequate and significantly less than the penalty imposed on other individuals in resale price maintenance cases in which mitigating factors were present.  In this case, there had been no mitigating factors.  For example, there was no cooperation by Mr Russell.  ACCC’s submissions to the primary judge included a schedule of cases and penalties imposed for resale price maintenance.  It identified the penalties imposed in eight cases on a total of fifteen individuals and provided a brief summary of the facts of each case.  Accepting that previous cases are of limited assistance, ACCC submitted that the schedule nevertheless demonstrated the manifest inadequacy of the penalties imposed and also showed that the penalty sought by ACCC was not significantly more than penalties imposed in other cases.  It may be noted that a penalty of less than $5,000 was imposed on an individual in two of those cases, which was $2,000 in each case.  Those cases were Australian Competition and Consumer Commission v Mayo International Pty Ltd [1998] FCA 1008 and Australian Competition and Consumer Commission v High Adventure Pty Ltd [2005] FCA 762; (2005) ATPR 42‑073. 

32                  Secondly, ACCC submitted that her Honour had erred in finding that Mr Russell was in a “parlous financial position”.  Mr Russell had never submitted that his financial position was parlous.  The evidence about his financial position had been limited and unsubstantiated, and no bank statements or supporting financial documents were provided.

33                  The evidence of Mr Russell’s financial position was in the form of an unwitnessed facsimile copy of an affidavit signed by Mr Russell on 27 October 2005, attached to an affidavit of Mr Russell’s solicitor, Mr Zeke Bentley.  Mr Russell’s affidavit signed 27 October 2005 identified his assets and their value, which totalled $17,000.  He said that he did not own any real property and that he did not hold shares “in any companies with substance”.

34                  Mr Bentley’s affidavit was sworn on 28 October 2005.  Mr Bentley deposed that he had that day received a telephone call from Mr Russell in which Mr Russell said he had been unable to locate a proper witness and that he had signed the affidavit on the understanding that it was on a sworn basis and that he held the requisite belief.  Mr Russell had also read through the affidavit and told Mr Bentley that the only issue in doubt was whether he owned shares in any shelf companies that he had forgotten about.  Mr Russell believed that he did not hold any shares of any value.  He would make an original and properly executed affidavit as soon as he was able.  In an affidavit sworn 16 November 2005, Mr Russell confirmed in effect that the telephone conversation as summarised in Mr Bentley’s affidavit was correct.

35                  A further affidavit sworn by Mr Russell on 21 November 2005 was also filed.  He deposed, inter alia, that he did not hold any shares in the company for which he then worked, Veridas Communications Pty Ltd, nor did he hold any personal credit cards.  His taxable income was $48,000 gross per annum and he had $3,000 to $4,000 in savings.

36                  ACCC submitted that even if the financial evidence was accepted, it did not support the finding that Mr Russell’s financial position was “parlous”.  Before the primary judge, Mr Russell had submitted that an appropriate penalty would be in the order of $5,000 to $10,000, but no more than $20,000.  ACCC submitted that this suggested Mr Russell had the capacity to pay $20,000.  Mr Russell had evidently also been able to afford Queen’s Counsel, junior counsel and solicitors for the hearing.

37                  The third error alleged by ACCC was her Honour’s inference that Mr Russell’s position was “substantially brought about by the costs” of the proceedings.  ACCC submitted that Mr Russell had never deposed to this fact; nor had his counsel made any submissions to the primary judge to this effect.  There was simply no evidence to support the inference.  At most, it was submitted, there was a statement in a written submission prepared by Mr Russell in November 2004 to the effect that the proceedings had put him out of business and “run [him] out of money”.  ACCC submitted that there was no evidence as to the truth of either of these assertions. 

38                  Fourthly, ACCC submitted that her Honour erred in halving the penalty imposed on Mr Russell.  It submitted that the proposed course of halving the penalty due to Mr Russell’s financial position had never been put to the parties.  The usual course taken by courts faced with a respondent of modest means was to make an order that penalties be paid in instalments.  However, Mr Russell’s counsel had made no submissions that he should pay any pecuniary penalty in instalments.  ACCC submitted that if that submission had been made, the amount of the penalty may have had to be altered because payment by instalments “detracts from the force of a penalty and the purpose of its imposition”: see Rip Curl International Pty Ltd v Phone Lab Pty Ltd (No 2) [2004] FCA 1553 at [5] per Hely J.  ACCC referred also to Australian Competition and Consumer Commission v High Adventure (2006) ATPR 42-091 at 44,564, at [11] in which Heerey, Finkelstein and Allsop JJ held that even the possibility of a respondent’s insolvency must not prevent the Court “from doing its duty for otherwise the important object of general deterrence will be undermined”.

39                  As to the first ground, ACCC contends that the pecuniary penalty imposed upon Mr Russell is manifestly inadequate having regard to the broad framework of comparative determinations which as a matter of applied principle ought at least, in part, inform the exercise of the discretion in the present case notwithstanding the conceded limited utility, ultimately, of a direct comparison of previous decisions. 

40                  As a preliminary matter however, ACCC also contends that the primary judge did not properly take account of the established “factors” influencing the exercise of the discretion or accord proper weight to the contended “extensive and continuing” resale price maintenance of Dataline brought about by the conduct of Mr Russell as Dataline’s guiding mind, in determining the penalty to be imposed upon Mr Russell. 

41                  The primary judge approached the determination of final relief by initially making these observations in identifying the relevant factual foundation. 

Order 35A r 3(2)(c) principles

42                  Order 35A, r 3(2)(c) predicated upon an event of default (O 35A, r 2(2)) contemplates that judgment may be given against a respondent for relief to which the applicant appears entitled “on the statement of claim” and the Court is satisfied it has “power to grant”.  In determining the relief, O 35A permits regard to be had to the “face of the statement of claim”; no evidence need be adduced to prove the factual contentions; allegations of fact in the statement of claim are deemed admitted [45]; and although such admissions are generally taken as made only for the purpose of the relief sought by the statement of claim, O 35A consistent with O 35 contemplates judgment for relief not necessarily claimed in the pleading but nevertheless open on the facts deemed admitted [47].  The terms of the rule suggest that recourse is not appropriate to affidavit evidence of additional facts to those alleged in the statement of claim [48].  Although ACCC contended that affidavit evidence of facts not customarily alleged in the statement of claim might be adduced [48] on a hearing as to relief and the observations of Lord Woolf MR in Phonographic Performance Ltd v Maitra [1988] 2 All ER 638 at 644 suggest that as to discretionary relief evidence of relevant facts going to the exercise of the discretion should be properly before the Court, evidence which would alter the pleaded case should not be admitted [50].  The fourth respondent accepted that further affidavit material might be accepted by the Court in relation to the relief sought [50].  Regard ought not to be had to evidence of facts which could have been but were not pleaded concerning the conduct of the respondents.  Regard ought not to be had to evidence of a further purpose of Mr Russell in connection with Dataline’s conduct of resale price maintenance to undercut prices charged by VISPs to customers so as to attract those customers to Australis [51].  Evidence as to the present circumstances of Mr Russell is relevant and admissible in the determination of a pecuniary penalty [51].  Mr Russell continues to work in the same type of business as that conducted by Dataline and Australis [90]. 

43                  Her Honour noted that although the evidence of Mr Litchfield is to the effect that in a series of meetings held whilst employed by Dataline there was discussion of the price at which VISPs were to be required to resell network plans to their customers and that on one occasion Mr Russell said he had no interest in whether or not he was entitled to determine the resupply price and intended to deal in such a way with the VISPs, the evidence suggested a practice of resale price maintenance which extended beyond the one occasion pleaded [94].  Use can only properly be made of the affidavit evidence to the extent that it confirms the case pleaded [94]. 

The pleaded conduct

44                  The pleaded case as to the conduct is this. 

45                  From November 1999, Dataline offered to sell and sold particular internet services to VISPs on the terms of various Dataline plans (eight Dataline plans particularised) and specified various resupply prices at which the plans were to be sold (eight resupply prices particularised) [para 88, references are to the statement of claim].  That conduct occurred by Russell and Litchfield sending emails “to all VISPs … including emails dated 25 November 1999, 4 December 1999, 14 December 1999, 11 August 2000 and 7 June 2000” [para 88(ii)].  The services on the terms of the particularised Dataline plans were supplied on the express condition that VISPs did not resupply those plans to consumers for a price less than the particularised specified resupply price.  The imposition of the express condition occurred by Mr Russell sending electronic mail to “all of the VISPs” on 4 December 1999[para 89].  Dataline made contracts with eight VISPs [para 20]. 

46                  The resupply conduct was aided by Dataline incorporating features in the Pandora software program which prevented a VISP from entering billing details to its customers within a Dataline plan at any price lower than or other than that fixed by Dataline as the retail price of the plan [para 90]. 

47                  In December 1999, Mr Russell in a telephone conversation with Robert Hammersley of Ace Connect made a threat that Dataline would cease supplying services if Ace Connect did not resupply services to consumers on the terms of the Dataline plans.  A similar threat was made by Mr Russell to Jeanette Clifford of Oz Web in August 2000 [para 90, para 56(c)].  In late 1999, Mr Russell made a threat to Mr Gary Meadows and in February 2000 a threat to Mr Bill Main of Mainlink that Dataline would cease the supply of services if Meadows and Main did not resupply services pursuant to Dataline plans in the manner and at the price specified by Dataline [para 90, para 56(f)]. 

48                  VISPs resupplied Dataline services at prices not less than the specified price [para 91].  That conduct was induced by Mr Russell and Mr Litchfield on behalf of Dataline [paras 92, 93].  The purpose of Mr Russell and Mr Litchfield in specifying Dataline plans, resupply prices, despatching emails and making telephone calls as contended was substantially for the purpose or with the intention of inducing VISPs not to sell the Dataline plans for prices less than the specified price.  Mr Russell and Mr Litchfield either did or directed others to engage in the conduct [para 95] and to the extent of others, they knew others were engaging in the conduct [para 95].  The effect of the conduct was that Dataline made it known to VISPs that it would not supply plans (services) unless they agreed not to sell those plans at prices less than the specified price [para 94]. 

49                  Mr Russell is taken to have admitted these facts. 

50                  The primary judge observed that the act of resale price maintenance the subject of the pecuniary penalty assessment is limited to “one occasion” in the context of the resupply of internet related services to retail customers (at [111]).  ACCC contends that although, consistent with Australian Competition and Consumer Commission v Dermalogica Pty Ltd (2005) 215 ALR 482 at p 493 [57], per Goldberg J, there was only one act of resale price maintenance for the purposes of s 76(3) of the TPA, the conduct was nevertheless extensive and continuing and was “akin to the implementation of a general policy”, that is, systematic. 

51                  The reference to the conduct of Mr Russell sending emails to “all VISPs” on the nominated dates as pleaded is amplified by an affidavit Mr Russell swore on 26 January 2002 in an interlocutory application in which he gave evidence that Dataline provided wholesale internet services to 26 independent internet service provider (“ISP”) businesses (VISPs for the purposes of the statement of claim) which served approximately 5,000 customers.  The structure involved Dataline supplying VISPs with a monthly rental of a “port” and the provision of particular data so as to enable VISPs to provide “dial up services” to their retail customers.  Mr Russell says that most independent VISPs supply services to 10 customers from each “port” facility (for example a VISP with 200 customers would rent 20 ports per month from Dataline).  In the same affidavit, Mr Russell said that Australis provided retail internet services to approximately 3,500 customers in the same way that independent VISPs provided retail internet services to their customers. 

52                  Mr Litchfield swore an affidavit on 15 July 2005 (filed on 26 August 2005) in which he said that he was employed by Dataline from October 1998 to February 2002; to early 1999 his primary duties were to assist in technical support service to customers and to develop and maintain software applications including the Pandora program; as part of his duties in relation to Pandora and under the direction of Mr Russell, Mr Litchfield in late 1999 implemented features in Pandora that enabled independent ISP operators to retail network plans to customers; those features included a requirement to use Pandora and a condition that the price upon which a network plan was to be resupplied was fixed in the Pandora software; and that in mid 2000, Mr Russell directed Mr Litchfield to implement a feature in Pandora which enabled an independent ISP to vary the resupply price without constraint. 

53                  The balance of Mr Litchfield’s affidavit deals with practices adopted by Australis and Mr Russell to attract customers from independent ISPs supplied by Dataline, to Australis.  These were the matters excluded from consideration by her Honour in relation to any aspect of the relief as they went beyond any matters pleaded. 

54                  Mr Neale Banks swore an affidavit on 27 July 2005 (filed 26 August 2005).  Mr Banks says he was employed by Dataline for two separate periods between 1998 to 2001; in the second period in late 1999 Mr Banks, as part of his duties, discussed with Mr Russell the development of Dataline internet access plans (network plans) for supply of internet services to VISPs for resupply to their customers.  Mr Banks discussed with Mr Russell the features of particular plans to be offered, the cost of a plan to a VISP and the price Dataline required a VISP to charge VISP’s customers.  Mr Banks says he questioned Mr Russell as to whether “we can really do this” and Mr Russell said, “It doesn’t bother me.  I’m not interested.  It’s fine, I can do what I like.  This is what we’re going to tell them they have to charge”. 

55                  The evidence of Mr Russell amplifying the content of the pleaded conduct is not inconsistent with the statement of claim; does not alter the pleaded case and provides contextual evidence relevant to the relief.  Accordingly, between 25 November 1999 and 7 June 2000, Mr Russell, as the guiding mind of Dataline, caused Dataline to contravene s 48 of the TPA by despatching the pleaded emails imposing the resupply condition upon 26 VISPs servicing 5,000 internet customers.  Her Honour noted that the contravention was deliberate; it arose out of the conduct of the person controlling the company, Mr Russell; there was no culture of compliance with the TPA within Dataline or on the part of Mr Russell; and the history of the proceedings demonstrated a disposition on the part of Mr Russell not to cooperate with ACCC [112]. 

56                  There is one further aspect of the resale price maintenance conduct that requires comment.  ACCC contended before the primary judge and on appeal that the imposition of terms upon VISPs made effective through the Pandora software preventing a VISP resupplying services at less than the specified resupply price, enabled Australis by reason of Mr Russell’s conduct of causing Australis to offer internet services directly to customers of VISPs at prices less than the prescribed resupply price, to divert custom from VISPs to Australis.  Although a pecuniary penalty is not to be imposed or assessed in respect of Mr Russell’s engagement in the conduct of diverting custom from VISPs to Australis, ACCC says, in effect, that s 76(1) requires the Court in determining the appropriate pecuniary penalty in respect of the s 48 conduct to have “regard to all relevant matters” and those matters include the consequential extent to which Mr Russell’s participation in Dataline’s s 48 conduct aided, facilitated or caused the infliction of damage upon VISPs by holding VISPs to a resupply price while Australis, at the direction of Mr Russell, offered those customers a more favourable price. 

57                  ACCC has not pleaded as an element of the resale price maintenance conduct, facts (which might have been pleaded) and thus deemed admitted, demonstrating any relationship between pricing conduct by Australis determined by Mr Russell and the resale price maintenance conduct.  Accordingly, we agree that the primary judge correctly disregarded any contended correlation between the s 48 conduct and pricing behaviour of Australis on the footing that those matters alter the pleaded case and are not the subject of deemed admissions. 

General principles to be applied in determining a pecuniary penalty

58                  It is clear from the reasons of the primary judge that her Honour had regard to the factors prescribed by s 76 of the TPA and those considerations identified in the authorities (see Trade Practices Commission v CSR Ltd (supra) per French J and Australian Competition and Consumer Commission v N W Frozen Foods Pty Ltd (supra) per Heerey J) which have been consistently applied in determining a pecuniary penalty although the identified factors are not exhaustive. 

59                  The primary judge had regard to the detailed submissions of ACCC recognising that although the submissions of ACCC represent the observations of a specialist regulator, they are not determinative (Minister for Industry, Tourism and Resources v Mobil Oil Australia Pty Ltd [2004] FCAFC 72; (2004) ATPR 41-993 per Branson, Sackville and Gyles JJ at 48, 626; Dermalogica at p 494 at [61]. 

60                  The primary objective of imposing a pecuniary penalty upon Mr Russell is deterrence with a view to putting a “price on contravention that is sufficiently high to deter repetition by the contravener and by others who might be tempted to contravene the Act” (Trade Practices Commission v CSR Ltd (supra) per French J at 52, 152; see also: Trade Practices Commission v Stihl Chain Saws (Aust) Pty Ltd (1978) ATPR 40‑091 per Smithers J at p 17, 896; Australian Competition and Consumer Commission v George Weston Foods Ltd (2000) ATPR 41‑763 per Goldberg J, 40, 986; NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (1996) 71 FCR 285 per Burchett and Kiefel JJ at pp 294‑295; Schneider Electric (Australia) Pty Ltd v Australian Competition and Consumer Commission [2003] FCAFC 2; (2003) 127 FCR 170 per Sackville J at 172 at [3]; and Dermalogica (supra) per Goldberg J at 495 at [64]).  Accordingly, a pecuniary penalty ought to be imposed upon Mr Russell sufficient to deter him from engaging in further contraventions of the TPA (specific deterrence) and to deter members of the public from engaging in similar conduct (general deterrence) by demonstrating to the public that a contravention of s 48 is a serious matter and that the burden or consequences of a contravention of the provision outweighs the cost of adopting a culture of compliance with the legislation (NW Frozen Foods v Australian Competition and Consumer Commission (supra) at 294 per Burchett and Kiefel JJ).  Any penalty ought not to be disproportionate so as to be oppressive (Trade Practices Commission v Stihl Chain Saws (Aust) Pty Ltd (supra), 17, 896).  The character of the contravention must be the central determinant of the penalty taking into account any ameliorating circumstances (Schneider Electric (Australia) Pty Ltd v Australian Competition and Consumer Commission (supra) per Sackville J at [6]).  Although contraventions of s 48 of the TPA involve contraventions of a per se prohibition, an analysis of the character of the offence as a “central determinant” of penalty necessarily involves contrasting such a contravention with other classes of contravention such as “major cases of price fixing by companies with considerable market power in industries of wide significance to society” (Dermalogica (supra) per Goldberg J at [71]) and contraventions which strike at the “very heart of the objectives of the TPA” involving “collusive tendering arrangements” with the “consequent destruction of a competitive market” (Schneider Electric (Australia) Pty Ltd v Australian Competition and Consumer Commission (supra) per Sackville J at [6]). 

61                  In determining a pecuniary penalty the Court will have regard to the nature, character, content and extent of the contravening conduct; whether the conduct was deliberate and undertaken by Mr Russell in disregard of the prohibition imposed by the legislation; the scale (size, resources, and market power) of the corporation engaging in the conduct through the actions of Mr Russell; the seniority of and role discharged by Mr Russell in relation to the conduct of the corporation; the commercial consequences of the conduct upon all participants affected by the conduct; the contextual events within which the conduct occurred (such as the nature of the industry and the methodology adopted to give effect to the conduct); whether the contravention is truly isolated or aberrant notwithstanding a demonstrated culture of compliance (if one exists) on the part of the corporation or a demonstrated culture of compliance on the part of the senior manager engaged in the conduct giving rise to the contravention; whether Mr Russell has cooperated with ACCC in seeking to address the conduct in the face of examples of contravening conduct identified and put by ACCC to Mr Russell; and whether Mr Russell has previously been found by the Court to have contravened a provision of Part IV of the TPA. 

62                  ACCC contends (see [16], [31], [32] and [94]) that because a contravention of s 48 of the TPA involves a per se prohibition, the Court ought to proceed on the footing that a serious effect upon competition has occurred.  The very designation of the conduct as a per se prohibition is said to reflect an expression of the Parliament that resale price maintenance conduct poses a real threat, like price fixing conduct, “to the central nervous system of the economy” (Australian Competition and Consumer Commission v CC (NSW) Pty Ltd (No. 8) (1999) 92 FCR 375 per Lindgren J at [182]).  In Australian Competition and Consumer Commission v Gullyside Pty Ltd [2005] FCA 1727; (2006) ATPR 42‑097 at 44, 754 at [23], Kiefel J observed in respect of a per se prohibition that “… whilst any known effect may be of considerable importance to the question of penalty, an inability to quantify it is not a factor which operates in favour of contraveners.  This inability will often be present”.  In Australian Competition and Consumer Commission v McMahon Services Pty Ltd [2004] FCA 1425 at [16], Selway J observed in relation to a price fixing contravention that evidence of an “actual market outcome is not necessarily an important issue in determining the appropriate penalty except perhaps as a matter of aggravation” because the law itself assumes that the purpose or alternatively the effect of the conduct is to substantially lessen competition.  Selway J noted that having regard to that assumption, it cannot be a factor in mitigation of a pecuniary penalty that no such market effect occurred.  However, in determining an appropriate pecuniary penalty the character of the contravention as a contravention of a per se prohibition does not mean that evidence of the effect of the conduct upon particular parties or the public more generally or evidence of the circumstances of the corporation, its turnover, resources, scale, market share and other evidence of market circumstances, is not relevant and important.  The pecuniary penalty must be determined by the Court as appropriate having regard to “all relevant matters including the nature and extent of the act or omission and of any loss or damage suffered as a result of the act or omission, the circumstances in which the act or omission took place and whether the person has previously been found by the Court in proceedings under this Part … to have engaged in any similar conduct” (s 76(1)); see also Australian Competition and Consumer Commission v Leahy Petroleum (No. 2) [2005] FCA 254 at [17]; (2005) 215 ALR 281 per Merkel J. 

63                  ACCC contends that the appropriate penalty to be imposed upon Mr Russell is a penalty of $100,000.00.

Specific examples of previous pecuniary penalty determinations relied upon by ACCC

64                  ACCC has referred the Court to a wide range of previous determinations which are said to provide an informed framework for determining an appropriate penalty of approximately $100,000.00.  The Court has considered ACCC’s submissions on penalty relied upon before the primary judge and these authorities, Australian Competition and Consumer Commission v Humax Pty Ltd [2005] FCA 706; (2005) ATPR 42‑072, per Merkel J; Australian Competition and Consumer Commission v High Adventure Pty Ltd [2005] FCA 762; (2005) ATPR 42‑073, per Gray J; Australian Competition and Consumer Commission v RM Hall Pty Ltd (SAD182/2004, 29 March 2005, an order of Mansfield J unsupported by published reasons); Australian Competition and Consumer Commission v Dermalogica Pty Ltd (supra), per Goldberg J; Australian Competition and Consumer Commission v Chaste Corporation Pty Ltd (In Liquidation) [2004] FCA 398, per Spender J; Australian Competition and Consumer Commission v Chaste Corporation Pty Ltd (In Liquidation) [2005] FCA 1212 per Lander J; Australian Competition and Consumer Commission v Colgate‑Palmolive Pty Ltd [2002] FCA 619 (2002) ATPR 41‑880 per Weinberg J; Australian Competition and Consumer Commission v Sundaze Australia Pty Ltd [1999] FCA 1642 (2000) ATPR 41‑736 per Spender J; Australian Competition and Consumer Commission v Mayo International Pty Ltd, LeCourt & Ors (No. 1) (1998) ATPR 41‑653 per Kiefel J; Australian Competition and Consumer Commission v Mayo International Pty Ltd & Ors (No. 3) (1998) ATPR 41‑655 per Kiefel J; Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd (1997) ATPR 41‑562 per Goldberg J; and Australian Competition and Consumer Commission v Hugo Boss (Australia) Pty Ltd (1996) ATPR 41‑536 per Lockhart J. 

65                  The Court has also considered the further authorities referred to in ACCC’s submissions on the appeal, namely, Australian Competition and Consumer Commission v Cambur Industries Pty Ltd (2006) ATPR 42‑127 per Besanko J; Australian Competition and Consumer Commission v Digital Products Group Pty Ltd (2007) ATPR 42‑145 per Tracey J; Australian Competition and Consumer Commission v Jurlique International Pty Ltd [2007] FCA 79 per Spender J; and Australian Competition and Consumer Commission v Tooltechnic Systems (Aust) Pty Ltd [2007] FCA 432 per Kiefel J. 

66                  In addition, the Court was referred to a schedule of previous determinations incorporating all of these cases and a further case, Australian Competition and Consumer Commission v Westminster Retail Pty Ltd (2005) ATPR 42‑084 per Mansfield J. 

Utility of previous examples of pecuniary penalty

67                  Having considered all of these authorities, the Court is confirmed in the view that there is little to be gained in undertaking in these reasons a detailed comparative analysis of the conduct of each corporation in the identified cases, the extent to which particular officers of those corporations engaged in the contravening conduct or the scale and dimension of the conduct.  The constellation of circumstances, essential character of the conduct and the factors to be weighed by the Court are inevitably sufficiently different in each case that previous determinations ultimately provide little utility in precisely informing the appropriate pecuniary penalty to be imposed in any particular contravention.

68                  However, an assessment of previous determinations in relation to resale price maintenance conduct may provide a high level broad range within which an appropriate pecuniary penalty may be imposed having regard to the character and content of the contravention and other considerations reflecting some elements broadly consistent with the evidence in the particular case.  The determinations in Hugo Boss, Australian Safeway Stores, Colgate‑Palmolive, Jurlique International and Dermalogica concern conduct on the part of substantial national corporations with related overseas shareholders or parents.  The resale price maintenance conduct in each case was significant, in some cases Australia‑wide, enduring and attracted substantial penalties.  These cases do not represent a useful analogue informing the exercise of the discretion in relation to Mr Russell.  Nor does the determination in Sundaze provide assistance as the respondent engaged in conduct over an extended period of time and agreed a pecuniary penalty of $500,000.00. 

69                  The determinations in Mayo International (No. 3), Humax, High Adventure and Westminster Retail may provide some high level guidance. 

70                  The determination in Mayo International (No. 3) concerned resale price maintenance conduct undertaken over three years involving 14 contraventions designed to prevent franchisees discounting the resale price of hair care products below the recommended retail price.  The conduct was thus enduring and serious; became company policy; bordered on “intimidatory” conduct; gave rise to no noticeable impact on any relevant market; and the corporate respondent was profitable but not a large company.  The corporate respondent incurred a penalty of $46,500.00 and the guiding mind of the conduct, Mr LeCourt, incurred a pecuniary penalty of $3,000.00 for each of three specific contraventions and $1,000.00 for each of 11 other specific contraventions. 

71                  In Humax, the respondent’s general manager on two days attempted to induce three retailers of Humax digital set top boxes not to resupply those boxes below a nominated price.  The admitted conduct was the subject of an agreed statement of facts and joint submissions on penalty and resulted in a pecuniary penalty imposed upon the general manager of $7,500.00 discounted from $10,000.00.  Humax incurred a penalty of $150,000.00. 

72                  In High Adventure, the sole director and guiding mind, Mr Scott of the respondent corporation, refused to supply a particular brand of imported paragliders to a retailer unless the retailer agreed not to sell the product below a specified price.  The respondent corporation and Mr Scott admitted the contraventions, filed financial information revealing meagre resources and were unrepresented at the hearing.  The trial judge concluded that the penalties proposed by ACCC would “ruin” the respondents and Mr Scott’s family.  The Court imposed a pecuniary penalty of $3,000.00 upon High Adventure and $2,000.00 on Mr Scott.  The Full Court subsequently set aside the penalty imposed upon the corporation both as to the foundation for particular factual findings and as to the penalty.  The penalty imposed upon Mr Scott was undisturbed. 

73                  In Westminster Retail, the respondent’s “clearly significant” but “relatively small” business supplied speciality giftware, toiletries, baby wear and similar items to franchisees and sought to impose a resupply price in franchise agreements.  The respondent corporation and its two directors cooperated with ACCC significantly; agreed the facts and made separate submissions from ACCC on penalty.  The Court imposed a penalty upon each director of $18,000.00 and a penalty upon the corporation of $100,000.00. 

74                  In Cambur Industries, the corporation’s sales and marketing manager engaged in eight acts of resale price maintenance over 16 months involving one retailer of electrical and home ware products supplied by the corporation and four acts of resale price maintenance over 18 months concerning a second retailer.  The respondent corporation and sales manager admitted the contraventions, adopted a compliance program and expressed remorse at the conduct.  The Court imposed a pecuniary penalty of $280,000.00 on the corporation and a penalty of $32,000.00 on the sales manager. 

75                  In Digital Products Group, the managing director of the corporation and the national sales manager admitted 20 contraventions of s 48 of the TPA (11 by the managing director and nine by the national sales manager) over 20 months in seeking to induce retailers not to resupply Digital set top boxes at a price less than the recommended retail price.  The parties filed joint submissions as to penalty; the corporation was a small growing family company; the conduct of the individuals was not aggressive or overbearing and the pecuniary penalties imposed by the Court were, managing director - $42,000.00; national sales manager - $17,500.00; corporation - $238,000.00. 

Conclusions as to the first contended error of the primary judge

76                  In relation to Mr Russell, the conduct involved the supply of internet services comprising eight Dataline plans on terms that VISPs would not resupply internet services at prices less than the particularised resupply price.  The conduct was effected by a number of emails between 25 November 1999 and 7 June 2000 and particularly the imposition of the condition as to resupply by an email on 4 December 1999 to all VISPs.  There are no pleaded and thus no admitted facts nor evidence as to the effect of the conduct upon VISPs nor upon the economic behaviour of customers or consumers of the services supplied by VISPs.  There is no evidence of the impact upon prices in the market for the acquisition of internet services by customers of VISPs nor the extent of Dataline’s engagement in the market for the provision of internet services or its market share (other than 26 VISPs supplying approximately 5,000 customers).  There is no evidence of the effect of the conduct in the market for the acquisition of wholesale internet services by VISPs.  There is no evidence of the size of Dataline or Australis although when the matter came before the primary judge both corporations were in liquidation.  The resale price maintenance conduct although serious and implemented over a period of seven months represents one class of conduct.  There is no evidence that the conduct was anything other than reasonably contained.  It is clear that the conduct was deliberate; undertaken by Mr Russell as the guiding mind of the company; no culture of compliance with the TPA operated within Dataline; Mr Russell seemed unconstrained by the resale price maintenance prohibition contained in the legislation and failed to cooperate with ACCC in addressing the conduct. 

77                  Having regard to all these factors informed by the considerations reflected in the authorities, the range of an appropriate pecuniary penalty in respect of Mr Russell’s conduct is $5,000.00 to $20,000.00.  The pecuniary penalty determined by the primary judge is not manifestly inadequate although we recognise that the pecuniary penalty determined by the primary judge is set at the low end of the range.  That range of penalty also recognises that the character of the contravention is not of the kind contemplated by Sackville J in Schneider Electric (supra) or Goldberg J in Dermalogica (supra). 

The contended second error

78                  The second error contended for by ACCC is that the primary judge erred in finding that Mr Russell was in a “parlous financial position”.  The evidence in relation to Mr Russell’s financial position is set out at [32] to [36] of these reasons.  Having regard to the evidence of Mr Russell’s ill health reflected in his affidavit sworn 17 November 2005 (filed on 6 December 2005) and the annexures to that affidavit; the facts asserted in Mr Russell’s affidavit of 27 October 2005 identifying total assets of $17,000.00 and no interest in any real property or shares; nor ownership of any shares in the company for which he worked at the time of swearing his affidavit on 21 November 2005 (Veridas Communications Pty Ltd); a taxable income of $48,000.00 per annum gross; and savings of between $3,000.00 and $4,000.00, the findings of the primary judge that Mr Russell is in a position characterised by economic uncertainty or precariousness (that is, “parlous”) was plainly open.  In addition, Mr Russell was at that time confronting the real likelihood of an order to pay the costs of and incidental to ACCC’s proceedings which necessarily contributed to Mr Russell’s economic or financial uncertainty.  By O 21 of the orders made by the primary judge on 3 November 2006 the fourth respondent was ordered to pay ACCC’s costs of the proceedings fixed in a sum which appears to be $5,214.10 although the order is unclear. 

The contended third error

79                  The third error contended for by ACCC is that the primary judge improperly drew an inference that Mr Russell’s position at the time of the hearing of the application for final relief was “substantially brought about by the costs of these proceedings” [118].  ACCC says that there was no evidence to support such a finding and nor was any submission made by Mr Russell or his counsel to that effect.  ACCC conceded that Mr Russell in November 2004 contended that the proceedings had put him out of business and had caused him to “run out of money” although ACCC contended that there was no evidence as to the truth of such a claim.  Having regard to the gross income and assets of Mr Russell identified in the affidavit material (notwithstanding the failure to provide supporting documentation such as bank statements or other financial documents), her Honour’s case management of the proceedings and her Honour’s appreciation of the costs and expenses associated with responding to proceedings of this character and the various interlocutory applications, it was open to her Honour to infer that the uncertainty in Mr Russell’s financial position was substantially brought about by the costs incurred by Mr Russell of and incidental to the proceedings.  Such an inference drawn by the primary judge does not suggest that the regulator did anything other than properly investigate and prosecute a contravention by Dataline of the TPA or investigate and prosecute Mr Russell in respect of his engagement in that contravention.  The inference drawn by the primary judge is simply one of recognising that the costs of the proceeding have contributed (in a way of substance) to the financial uncertainty Mr Russell now confronts.  That inference was open to the primary judge. 

The contended fourth error

80                  The fourth error contended for by ACCC is that her Honour erred by reducing a proposed pecuniary penalty of $10,000.00 to $5,000.00 having regard to “his circumstances” [118] which is a reference to Mr Russell’s parlous financial position and the contribution to that circumstance by reason of his responding to the proceedings.  The primary judge took the view that the appropriate pecuniary penalty could be no more than $10,000.00.  The reference to Mr Russell’s parlous financial position and the contribution of the proceedings to his economic uncertainty informed the primary judge’s exercise of the discretion to reduce the pecuniary penalty to $5,000.00 essentially, on a natural reading of the reasons for judgment, on the footing that Mr Russell had suffered a real financial consequence arising out of the conduct which had the effect, in part, of imposing a meaningful financial penalty upon him and thus the objective of “specific deterrence” of Mr Russell’s future participation in such conduct would be achieved by reducing a potential penalty pursuant to s 76(1) of $10,000.00 to $5,000.00. 

81                  The objective of general deterrence is achieved by the public, aided by informed opinion, assessing the contextual circumstances and all of the relevant circumstances influencing the determination of the pecuniary penalty reflected in the reasons of the Court. 

82                  ACCC says that the exercise of the discretion miscarried because the appropriate course to be taken under s 76(1) is to impose the appropriate penalty upon the contravener and to the extent of any demonstrated financial hardship, time might be extended for the payment of the pecuniary penalty by instalments.  However, the considerations informing the exercise of the discretion were open to the primary judge.  The exercise of the discretion required the primary judge to determine an appropriate pecuniary penalty having regard to all relevant matters.  The matters taken into account by her Honour are plainly relevant and informed her Honour’s discretion as to the appropriate pecuniary penalty in all the circumstances.  There is no demonstrated error. 

Issue 4:  Injunctions against Mr Russell

83                  By its application ACCC sought declarations, injunctions and other relief against Mr Russell upon the basis that he had aided, abetted, counselled or procured, or been knowingly concerned in, or party to, various contraventions of the TPA by Dataline, Australis and World Publishing Systems Pty Ltd.

Orders at first instance and orders sought on appeal

84                  The primary judge declared that Mr Russell was knowingly concerned in various contraventions by Dataline and Australis.  Her Honour also ordered that Mr Russell “be restrained from requiring or encouraging retail providers of internet-related services not to sell the services to consumers at a price less than the price specified by any business with which he is connected”.  ACCC had sought much more extensive injunctive relief.  The injunctive relief sought against Mr Russell appears in para 17 (at AB 106) as follows:

Pursuant to section 80 of the Trade Practices Act 1974 (Cth), Russell be restrained, by himself, his servants or agents, or otherwise howsoever, in connection with the Dataline Business or Australis Business, or any similar business, from in any way, directly or indirectly, aiding, abetting, counselling, or procuring or being knowingly concerned in or party to any corporation engaging in any of the following conduct:

   

     

(a)       conduct of the same or similar kind to any described in paragraph 1 that is, in all the circumstances, unconscionable in contravention of section 51AC of the Trade Practices Act 1974 (Cth);

     

(b)       making representations of the same or similar kind to any described in paragraph 2 where those representations are false, misleading, incorrect, or inaccurate, and also if they relate to future matters, where the maker does not have any reasonable grounds for making them;

     

(c)        conduct of the same or similar kind to any described in paragraph 3;

     

(d)       acts of the same or similar kind to any described in paragraph 4.

   

 

85                  The conduct “described in paragraph 1” was allegedly unconscionable conduct by Dataline, contrary to s 51AC of the TPA.  The conduct “described in paragraph 2” was allegedly misleading or deceptive conduct by Dataline, contrary to s 52.  The conduct “described in paragraph 3” was allegedly undue harassment or coercion by Dataline, contrary to s 60.  The conduct “described in paragraph 4” was allegedly resale price maintenance by Dataline, contrary to s 48.

86                  In its notice of appeal ACCC asks this Court to restrain Mr Russell from:

(a)       preventing or dissuading his customers, or customers of businesses with which he is concerned, from obtaining independent advice with respect to the terms of contracts for the supply of Internet-related services where those terms have the potential for adverse consequences for the customer;

(b)       threatening to cease the supply of Internet-related services to customers if the customer does not enter into a further agreement with him, or a business with which he is concerned;

(c)        wrongfully ceasing the supply of services to customers and then offering to acquire its contracts with its customers;

(d)       representing to his customers, or to customers of businesses with which he is concerned, that:

(i)         he, or the business, will provide on-going training in the use of its services and software and provide skilled technical support at all times when he, or the business, do not have any intention to do so;

(ii)        complaints about the efficiency or quality of Internet-related services are caused by matters beyond his, or the business’s, control, or do not exist at all, when the complaints are well founded;

(iii)       he, or the business, is entitled to make charges with respect to a customer’s use of Internet-related services when the customer has ceased to access the services and there is no contractual right to continue to make charges;

(iv)       customers have accessed a greater amount of data than they in fact have accessed;

(v)        he, or the business, is entitled to make charges against their credit card accounts when there is no authority to do so and no contractual basis for doing so;

(vi)       customers can purchase, or are purchasing, unlimited access to Internet-related services when he, or the business, has limited the ability of customers to access those services;

(vii)      he, or the business, will pay commission if the customer enters into a partnership agreement when he, or the business, has no intention of doing so;

(e)        representing to the public that he, or a business with which he is concerned, has the approval of the Australian Competition and Consumer Commission for the terms and conditions of his, or the business’s, contracts for the supply of Internet-related services when that is not the case.

Background

87                  As we noted at the commencement of these reasons, ACCC alleged that Dataline and Australis contravened the TPA in various ways and in numerous transactions.  The alleged contraventions included resale price maintenance, misleading and deceptive conduct, unconscionable conduct, undue harassment and coercion.  The specific claims against Mr Russell appear at para 154 of the statement of claim.  In effect it is alleged that he was “involved” in various contraventions by Dataline and/or Australis.  Pursuant to s 75 B of the TPA references in Part VI to “a person involved in a contravention” are to a person who aids, abets, counsels or procures, induces, is knowingly concerned in, or a party to, or who conspires to effect, a contravention.  For present purposes it will generally be convenient to refer to all such conduct as “involvement” in any contravention.

88                  The relevant conduct in which Mr Russell is said to have been involved is summarized in the following table.  In making these allegations against Mr Russell (at para 154 of the statement of claim) the pleader refers to paras 138-152 of the statement of claim.  These paragraphs raise specific allegations against Dataline or Australis, with further references to the paragraphs at which relevant facts are pleaded.  In column 1 of the table we identify the paragraphs (138-152) in which misconduct is alleged against Dataline or Australis.  In column 2 we identify the paragraphs at which the relevant factual allegations appear.  In column 3 we identify whether those allegations involved Dataline, Australis or both.  In column 4, we identify the relevant section or sections of the TPA and briefly describe the alleged contraventions.  The allegation against Mr Russell is that he aided, abetted, counselled, procured and/or was knowingly concerned in the alleged contraventions.  There is also a “free-standing” allegation that he was “involved” in such contraventions, but it is difficult to see that this adds anything to the case.

89                  The reader who patiently tracks ACCC’s claims against Mr Russell through the paragraphs identified in column 1 and those in column 2 will find that he or she has not yet identified the nature of many of the claims.  There are further cross-references to paragraphs and references to people (possibly complainants) and transactions which seem quite unrelated to one another.  It would be easy to conclude that in this pleading, the “impenetrable forest of detail” inevitably prevents the other parties, the Court and the public from identifying what is said to be the “timber" of the case.  See Scott v Beneficial Finance Corp Ltd (unreported, Federal Court, per Burchett J, NG 699 of 1993).  Such impenetrability is not uncommon in proceedings brought to enforce provisions of the TPA.  It seems to be the product of the Act itself and ACCC’s policies concerning its enforcement. 

Factual resolution

90                  We have previously referred to the fact that her Honour disposed of the matter pursuant to O 35A r 3.  There is no appeal against her Honour’s decision to proceed in that way, and so it is not necessary that we consider, in detail, the true meaning of O 35A. However, in connection with the claims to injunctive relief, we make two brief observations.  Firstly, we doubt whether an applicant would be entitled to rely upon pleaded inferences from facts where those inferences are not reasonably available.  Secondly, by virtue of the provisions of O 35A r 3(2)(c)(ii) the Court must be satisfied that it has power to grant particular relief.  Such entitlement must generally be determined by reference to the facts as pleaded.  It is not necessary for us to consider whether additional evidence may be led going beyond the facts pleaded in the statement of claim.  It must also be kept in mind that declaratory and injunctive relief is discretionary.

Declarations

91                  Her Honour made declarations against various respondents, including Mr Russell.  Each of those declarations was preceded by the words “Upon the admissions which the [relevant respondents] are taken to have made, consequent upon their non-compliance with orders of the Court, it is declared that:  … .”  As we understand it this preface was intended to disclose that the declarations had been made upon deemed admissions pursuant to O 35A and not upon judicial findings after a trial.  The declarations made against Mr Russell were that he was knowingly concerned in various breaches of the TPA by Dataline and Australis.  There was also a declaration that he was knowingly concerned in a contravention by World Publishing Systems, but that matter is not presently relevant.  The availability or otherwise of declaratory and injunctive relief depended upon there having been appropriate findings of fact.  However it did not automatically follow from such findings that declarations should be made.  Grant of that remedy required the exercise of a judicial discretion.  Similarly, the findings of fact did not automatically lead to the grant of injunctive relief.  Nor did the making of declarations necessarily do so. 

92                  The inclusion in the declarations of the prefaces was, in our view, entirely appropriate.  We do not understand ACCC to suggest to the contrary.  Her Honour, in the exercise of her discretion, apparently considered that those who became aware of the declarations should understand the basis upon which they were made.  The approach is similar to that of identifying consent orders as such. 

Injunctions

93                  The primary judge considered the question of injunctive relief at [86]-[95] of her reasons.  Her Honour noted that neither Dataline nor Australis continued in business and that injunctions were not sought against them or against World Publishing Systems. She observed that Mr Russell continued to be involved in the supply of Internet-related services through another company, Veridas Communications Pty Ltd.  He had no interest in that company.  Apart from the relief identified in the draft order, ACCC sought mandatory injunctions against Mr Russell, compelling him to:

·                    attend a Trade Practices compliance programme;

·                    establish a domain name for the purpose of complying with an adverse publicity order; and

·                    take all reasonable steps to discontinue certain District Court actions commenced by Dataline and Australis.

Her Honour declined to make such orders.  Those aspects of the decision are not subject to appeal.

The notice of appeal

94                  ACCC asserts that the primary judge erred:

   

     

·                    in finding that it was not possible to formulate an injunction which “encapsulated the particular type of conduct to be enjoined”; and

     

·                    in finding that, because any injunctions would be based on facts deemed to be admitted, such relief was inappropriate.

   

 

95                  In oral and written submissions on appeal ACCC relied upon only the second assertion although the first was not expressly abandoned.  We have set out above the injunctive relief which ACCC now seeks. 

Some authorities

96                  The High Court and this Court have, on a number of occasions, considered the nature of injunctive relief pursuant to s 80 of the TPA.  It may be of assistance to set out some relevant extracts from the judgments.  ACCC frequently claims injunctive relief such as that presently sought.  The problems inherent in such relief are regularly identified but, in our experience, rarely resolved.  Such resolution should commence with a consideration of the authorities.  In Cardile v LED Builders Pty Ltd (1999) 198 CLR 380, the majority (Gaudron, McHugh, Gummow and Callinan JJ) said at [28]-[29]:

28.       The term “injunction” is used in numerous statutes to identify a particular species of order, the making of which the law in question provides as part of a new regulatory or other regime, which may be supported by penal provisions.  Notable examples in statutes presently in force nationally are found in s 80 of the Trade Practices Act … .  These provisions empower courts to give a remedy in many cases where none would have been available in a court of equity in the exercise of its jurisdiction, whether to protect the legal (including statutory) or equitable rights of the plaintiff, the administration of a trust for charitable purposes, or the observance of public law at the suit of the Attorney-General, with or without a relator, or at the suit of a person with a sufficient interest.

29.       In these situations the term “injunction” takes its content from the provisions of the particular statute in question … .

97                  In Corporation of The City of Enfield v Development Assessment Commission (1999) 199 CLR 135 at [23], the majority (Gleenson CJ, Gummow, Kirby and Hayne JJ) said, concerning a South Australian statute which authorized any person to apply to restrain the breach of a planning act:

That section does not purport to displace or limit the jurisdiction of the Supreme Court, nor does it do so by implication … .  However, in administrative law, as elsewhere, the grant of injunctive and declaratory relief is attended by discretionary considerations.  As Menzies J put it … “(t)he wide discretion of the Court is an adequate safeguard against abuse of a salutary procedure”.

98                  In considering the validity of s 80, Gummow J said, in Truth About Motorways Pty Ltd v Macquarie Infrastructure Investment Management Ltd (2000) 200 CLR 591 at [79]-[80]:

79.       S 52 thus is an exercise by the Parliament of its powers to create new norms of conduct and require their observance by specified sections of the community.  The legislature may also, in exercise of its powers, adapt remedies known at general law or modify them or create new remedies.  It may do so not only to prevent or to compensate for injury done by violation of the new federal norm of conduct …, but to enforce or induce compliance with the federal law … . 

80.       Pt VI [of the TPA] (which contains s 80) and Part XII (which contains s 163A) make provisions which affect the attainment of one or more of those ends.  In many cases, the remedy sought under s 80 for a prohibitory injunction would have the character of enforcing present compliance or inducing future compliance with the norm of conduct imposed by s 52, and a declaration would provide consequential relief.  In the present case, the mandatory injunction sought would be apt to counter-balance the injury for the public interest allegedly sustained by the publication of the Statement.

99                  In Rural Press Ltd v Australian Competition and Consumer Commission (2003) 216 CLR 53 at [89]-[95], Gummow, Hayne and Heydon JJ discussed declarations and injunctions made pursuant to the TPA, Gleeson CJ and Callinan J apparently concurring in such discussion.  Their Honours observed that the trial judge had made declarations of contravention by corporations of ss 45 and 46 of the TPA and of knowing involvement in such contraventions by natural person.  Although no complaint had been made concerning the orders, their Honours said at [89]-[90]:

89.       … The declarations spoke merely of “an arrangement” having a purpose and effect, without giving any content to that expression and without indicating the gist of the findings of the primary judge identifying the arrangement. 

90.       These declarations provide a bad precedent and were of a kind which the trial judge should not have agreed to make even if urged to do so by the parties.  Close attention to the form of proposed declarations, particularly those “by consent” should be paid by primary judges.

100               At [91] their Honours observed that certain injunctions against breaches of ss 45 and 46 “appear to go beyond the Act impermissibly …”.  Their Honours did not elaborate upon that view.  However footnote 98 refers to the decision of this Court in ICI Australia Operations Pty Ltd v Trade Practices Commission (1992) 38 FCR 248 at 267.  Gummow J there observed: 

Section 80(1) confers upon the court the power to grant an injunction where it is satisfied that a person has engaged or is proposing to engage in conduct that constitutes or would constitute conduct of the description in paras (a)-(f).  The power of the court to grant an injunction is controlled by the words “in such terms as the Court determines to be appropriate”.

Thus, the terms of the injunction will not be “appropriate” if, on its face, it operates upon a range of conduct some of which does, but some of which does not, have the relationship required by s 80 with contravention of the Act.  The injunction should not prohibit conduct falling outside the boundaries drawn by s 80 … .  The same limitation applies to mandatory injunctive relief.  It is, in my view, no support for the grant of an injunction which, from the outset, has an operation outside the boundaries of s 80, to say that it is open for the party enjoined to apply under s 80(3) to vary the injunction so as to bring its operation wholly within proper limits.  The party in question should not be placed under any such obligation in the first place.

The succeeding sub-sections, in particular subss (4) and (5), take subs (1) further by indicating that the power may be exercised whether or not there are present certain circumstances which I have described as ordinarily considered essential by courts of equity exercising their inherent or traditional jurisdiction.  But that is not to say that the matters referred to in s 80(4) and (5) are irrelevant to the consideration by the court of the question of whether an injunction is to be granted, and if so, to the determination of the appropriate terms of such an injunction.

101               In Rural Press at [93], their Honours set out orders proposed in the course of the hearing of the appeal.  The comment at [95] concerning the “tail-piece to para 3(a)” should be considered in drafting orders of this kind.   

102               In the ICI case, Lockhart J also discussed the grant of injunctive relief pursuant to s 80 of the TPA.  At 255 et seq,  his Honour said:

Section 80 is essentially a public interest provision.  Conduct of the kind proscribed by both Pts IV and V may be detrimental to the public interest because many persons can be affected and considerable loss or damage may be sustained by them.  The public nature of the injunctive powers conferred upon the court by s 80 is exemplified also by the provision in subs (1) as to the persons who may seek an injunction.  This right is conferred upon the Minister, the Commission or “any other person” (subject to one exception in the case of an injunction in respect of s 50 conduct).  The traditional rules which enable a person who seeks to restrain the contravention of a statute by obtaining a fiat from the Attorney-General do not apply to s 80 because no proprietary right or interest need be established to confer status upon the applicant to seek the injunction; but the court’s powers do not extend to answering hypothetical questions.  …

Paragraphs (c) to (f) of s 80(1) now contain provisions rendering a wide class of persons liable to be restrained by the court’s injunction who, although not principals, participate in a contravention by a respondent of the provisions of Pt IV or V of the Act … .  Parties bound by injunctions and persons who knowingly counsel, procure or induce breaches of injunctions are themselves directly responsible for those breaches and are answerable for contempt … but only principals are proper respondents to a claim for injunctive relief under ordinary equitable principles.

…

The public interest character of s 80 is also exemplified by the provision in s 80(6) that where the Minister or the Commissioner seeks an interim injunction the court shall not require any undertaking as to damages. 

Section 80(4) and (5) of the Act were present in the Act upon its enactment in 1974, though not in the same form as they became in 1983 … .

Section 80(4) and (5) are novel because they empower the court to grant injunctive relief notwithstanding that the defendant has not previously engaged in the prohibited conduct or does not intend to engage in it again or to continue to engage in it or there is no imminent danger of substantial damage.  Yet these are the traditional requirements for equitable injunctive relief. 

These subsections substantially depart from the traditional basis for the grant of injunctions in Chancery.  …  There is no doubt that subss (4) and (5) depart from the general law in permitting injunctions to be granted in the circumstances therein mentioned; but in my opinion they do not suggest legislative nihilism. 

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 Pts 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. 

Notwithstanding the provisions of subss (4) and (5), which permit an injunction to be granted whether or not there appears to be a likelihood of future contravention, the likelihood of future contravention by the defendant is regarded in the judgments of the court as a relevant factor … .

Injunctions are traditionally employed to restrain repetition of conduct.  A statutory provision that enables an injunction to be granted to prevent the commission of conduct that has never been done before and is not likely to be done again is a statutory enlargement of traditional equitable principles.  But this is because traditional doctrine surrounding the grant of injunctive relief was developed primarily for the protection of private proprietary rights.  Public interest injunctions are different.  Parts IV and V of the Act involve matters of high public policy.  Parts IV and V relate to practices and conduct that legislatures throughout the world in different forms and to different degrees, have decided are contrary to the public interest … .  These are legislative enactments of matters vital to the presence of free competition and enterprise and a just society.  This does not mean that the traditional equitable doctrines are irrelevant.  For example, it must be relevant to consider questions of repetition of conduct or whether it has ever occurred before or whether imminent substantial damage is likely:  but the absence of any one or more of these elements is not fatal to the grant of an injunction under s 80.  That is the effect of subss (4) and (5) (subs (4) in relation to the prevention of conduct and subs (5) in relation to a mandatory injunction).  Their presence is not an indication of a new statutory house, rather an old house with some modern extensions.

103               His Honour then rejected the proposition that pursuant to s 80, once contravention was demonstrated, an injunction should be granted unless the Court, in its discretion, considered that it should be refused.  At 258 his Honour observed:

To require, rather than permit, the court to grant an injunction once the prohibited conduct has been proved could deny the court its capacity to formulate the appropriate remedy to suit the needs of the case and could be productive of injustice.  The evident intent of s 80 is to place the weapon of an injunction in the discretionary armoury of the court together with the award of damages and wide ranging orders of the kind specified in s 87.

104               As to the form of any injunction, his Honour observed at 259:

Plainly injunctions should be granted in clear and unambiguous terms which leave no room for the persons to whom they are directed to wonder whether or not their future conduct falls within the scope or boundaries of the injunction.  Contempt proceedings are not appropriate for the determination of questions of construction of the injunction or the aptness of the language in which they are framed … .

Decisions under the Act have applied these principles and the judgments refer to the dangers of orders being cast in broad terms which “train the heavy guns of the law upon the respondent” … without giving him adequate guidance.

As Toohey J observed in Maclean v Shell Chemical (Australia) Pty Ltd (1984) 2 FCR 593 at 599:

“Any injunction granted should be in such terms that is reasonably capable of being obeyed … [The order sought] would create uncertainty and place the respondent in a position where it would not know with any precision what was required of it.  It follows that, faced with an application to enforce such an injunction, the court would be in an equally difficult position.”

…

In [Commodore Business Machines Pty Ltd v Trade Practices Commission (1990) 92 ALR 563] a Full Court of this Court said (at 574):

‘The injunction sought in the application was in the following terms:  “An injunction restraining [Commodore] from engaging in the practice of resale price maintenance in respect of the supply of Amiga computers (as defined in the statement of claim) supplied by [Commodore].”

An injunction in that form might be suggested by the relief granted by the Commonwealth Industrial Court in Festival Stores v Mikasa (NSW) Pty Ltd (1971) 18 FLR 260.  On appeal, Mikasa (NSW) Pty Ltd v Festival Stores (1972) 127 CLR 617 at 631-632, Barwick CJ rejected an attack on the propriety of an order which enjoined a wholesaler ‘from engaging in the practice of resale price maintenance in respect of tableware marketed … under the trade name “Mikasa” ’.

Nevertheless, such an injunction as that sought by the Commission in this case would have been open to the objection that it was of an undesirable width because, in respect of the supply of Amiga computers, it did no more than reproduce, but this time with the risk of sanctions for contempt, that which the Act in terms forbade by s 48.  Any practice of awarding injunctions in such a form is to be discouraged.  Such injunctions conflict with the general precept, applicable to the exercise of power under s 80 of the Act as much as to the framing of injunctions in aid of legal and equitable rights, that a final injunction should bear upon the case alleged and proved against the defendant, and should indicate that conduct which is enjoined or commanded to be performed, so that the defendant knows what is expected of him as a matter of fact.  Further, where the injunction is in the form of an interlocutory order, it is undesirable to frame the injunction in such a way as to leave the issues in the case open for determination on a contempt proceeding, rather than at a final hearing … .’ 

105               Lockhart J concluded at 261:

Nevertheless, in my opinion, the reasoning of Barwick CJ in Mikasa … applies to the Act in its present form, so that in an appropriate case the Court may grant an injunction to restrain the respondent from engaging in the practice of resale price maintenance notwithstanding that only some of the acts which are included in paragraphs of subs (3) of s 96 of the Act are found to have been committed.  A case where the respondent has committed earlier serious contraventions of the resale price maintenance provisions of the Act may be an appropriate case where an injunction in this general form may be granted.

…

But the members of the court in Commodore emphasised (at 574-575) that each case must be examined on its own facts to determine the aptness of a particular form of injunction, that care must be taken to ensure that injunctions are carefully drafted, but that they should be not so precisely expressed as to “encourage evasion of the spirit but not the letter” of the injunction. 

It is legitimate in some cases to grant an injunction against a respondent preventing him from engaging in conduct in the manner alleged in the statement of claim “or any similar manner” or some expression such as “to the like effect” or an injunction to prevent the respondent from using certain words of its business name “without clearly distinguishing” such business from another business.  The desirability of injunctions in these forms depends on the circumstances of the case and the extent to which the judgment has resolved … .

106               His Honour also observed at 262:

… [I]njunctions should in my opinion be self-contained so far as possible; that is to understand their terms it should be necessary to refer to the one document in which the injunction is expressed rather than requiring the respondent to look at both the form of the order and, as in this case, the further amended statement of claim.  This is particularly important in the case of a large corporation such as the appellant and the group of companies of which it is a member.  It is not only parties who are answerable for contempt of orders of courts.   As mentioned earlier, persons who counsel, procure or induce parties to breach injunctions are directly responsible for those breaches.  Hence, it is desirable that the terms of the injunctions be readily available to all persons who may be affected by them.

107               Finally, we refer to the decision in BMW Australia Ltd v Australian Competition and Consumer Commission (2004) 207 ALR 452, especially [35] et seq.  At [36] their Honours observed:

In our view, his Honour should also have considered whether an injunction was appropriate as a matter of discretion.  If so, his Honour should have considered carefully the terms of the injunction.  By s 80(1) of the Trade Practices Act, the court is given a wide discretion as to the terms of an injunction.  Section 80(4)(a) removes the normal rule that an injunction is only to be granted to restrain threatened or impending conduct, in the case of a restraining injunction.  Section 80(5) removes the same rule in the case of a mandatory injunction.  In such cases, it is clear that the terms of any injunction based only on past conduct should be limited to restraining a repetition of precisely that conduct.  The case of an injunction based on an intention to commit further conduct is different.  There, the terms can be cast more widely, in order to catch conduct of any kind threatened or intended.

108               We do not fully understand the distinction as to the permissible width of an injunction “based only on past conduct” as opposed to that of an injunction “based on an intention to commit further conduct”.  In each case, as we understand it, the purpose of the injunction will be to prevent, or at least to reduce the likelihood of, future infringement.  Past misconduct will be relevant to the likelihood of future misconduct, to the extent that it demonstrates a “propensity” or “inclination” to infringe the relevant legislation.  In many cases past conduct will give an indication of future intention.  In the absence of past misconduct, a court may nevertheless infer an intention to offend in the future, such inference being based on other evidence.  In many, perhaps most cases, the possibility of future misconduct will be the underlying rationale for injunctive relief.  In all cases the width of the relief will reflect the state of the evidence, including reasonable inferences which may be drawn from it.  That is not to overlook the power to grant injunctive relief in the absence of any threatened future misconduct.  Prevention of future misconduct may be the most common reason for granting injunctive relief, but there may be other reasons.  The likely severity of the consequences of an improbable future breach may be an example.  However, in all cases, the injunctive relief must relate to the TPA.  See ICI at 267 and Rural Press at [91].

109               At [39] in the BMW case the Court observed:

A relevant factor to consider in determining whether to grant an injunction pursuant to s 80 of the Trade Practices Act is whether the existing sanctions for the conduct to be the subject of the injunction, found in the Trade Practices Act itself, require to be supplemented by the availability of the range of sanctions applicable to contempt of court.  The purpose of granting an injunction to restrain conduct already prohibited by legislation can only be to add to whatever consequences the legislation attaches to that conduct the additional consequences of a possible finding of contempt of court by failure to comply with an injunction.  In each case, it is a question whether the conduct concerned warrants the application of those more stringent consequences.

110               We are inclined to think that in general, a court order requiring a person to conduct themselves in a particular way when a statute requires that conduct in any event, will add little to the statutory prescription or proscription and the statutory sanctions attending non-compliance.  We accept that such an order may add the possibility of imprisonment for contempt where the relevant contravention would not otherwise lead to that consequence.  However, if Parliament has not provided for imprisonment in connection with a contravention, it may not be appropriate for a court to enjoin such conduct simply in order to create the possibility of imprisonment.  While Parliament has provided for an injunction as a possible remedy, it may be doubted that it intended that an injunction would be a remedy granted in the ordinary course in the face of the statutory sanctions Parliament has itself provided.  Moreover, a Court has an interest in maintaining the efficacy of injunctive relief which requires that orders be respected.  They will only be respected if they consistently serve a useful purpose and if breaches are discovered and punished.  It may also be doubted that a court order requiring conduct which a statute otherwise requires will be seen to have some greater or different significance to the statutory requirement.

111               Many contraventions simply will not justify injunctive relief.  We doubt whether unintentional misconduct in contravention of s 52 would lead to such relief.  An isolated intentional breach may also not warrant it.  Conduct which occurred many years before the enforcement proceedings may not do so, especially if the offender has not recently infringed the law, or is no longer in a position where contravention is likely.  These are obvious cases, but they raise questions as to the relevant factors in considering whether to grant such relief.  The discretion is at large.  It is for the relevant applicant to demonstrate that the injunction will serve a purpose.  That purpose may involve the protection of the public interest or private rights. 

112               Any purpose will only be served if the injunction is expressed in terms which can be understood by those to whom it is directed, others who might also be involved in contraventions, and members of the public to whose notice it may come.  An injunction must enforce a legal duty to act or to refrain from acting, or protect a right.  For the purposes of s 80 such duty or right must be derived from the TPA.  If an injunction is to serve any purpose, it must be enforceable.  That requires a degree of clarity in its terms.  There must also be a probability that any breach will be detected and result in the imposition of sanctions.  Where the complainant and the contravening party are competently represented, the tension between their respective interests will usually lead to precise identification of the conduct to be restrained or compelled.  Where the contravening party is not represented, that may not occur and there may be a tendency to extend the injunctive relief.  An applicant such as ACCC should resist that tendency.  The court must consider carefully the terms of any proposed injunction.  Where the case proceeds pursuant to O 35A, similar comments apply.

113               Where an injunction is made in ordinary civil litigation the court normally relies upon the moving party to identify breaches and to move for appropriate remedies.  In those cases there is no cause for the court to fear that its orders will be ignored, an event which, if frequently occurring, might undermine the effectiveness of injunctive relief, whether granted pursuant to s 80 or the general law.  When ACCC seeks injunctive relief, it should consider how it will enforce it.  Intended enforcement methods may be relevant in determining the forms of order to be made.

114               The experience of the law is that unlawful or illegal conduct does not lead to an injunction against repetition of such conduct being sought or granted.  A range of other remedies exist in the civil and criminal law which are treated as adequate and appropriate sanctions for such conduct.  Normally, it is only where there is a real risk of further misconduct that injunctive relief is contemplated.  It is, we think, no answer to this experience to say that subss (4) and (5) provide that absence of any threat of further contravention is no longer a bar to the grant of such relief.  An injunction should not be seen as a necessary vindication of the applicant’s conduct in bringing the proceedings.  Other relief may better serve that purpose.  Nor should an injunction be sought primarily for public relations purposes, however worthy such purposes may be.

Discretionary relief

115               Clearly, her Honour’s decision to decline to grant injunctive relief was discretionary.  In those circumstances the considerations identified in House v The King (1936) 55 CLR 499 apply.  At 504-5 the Court (Dixon, Evatt and McTiernan JJ) emphasised that the discretion must be exercised according to settled principle:

But the judgment complained of, namely, sentence to a term of imprisonment, depends upon the exercise of a judicial discretion by the court imposing it.  The manner in which an appeal against an exercise of discretion should be determined is governed by established principles.  It is not enough that the judges composing the appellate court consider that, if they had been in the position of the primary judge, they would have taken a different course.  It must appear that some error has been made in exercising the discretion.  If the judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed and the appellate court may exercise its own discretion in substitution for his if it has the materials for doing so.  It may not appear how the primary judge has reached the result embodied in his order, but, if upon the facts it is unreasonable or plainly unjust, the appellate court may infer that in some way there has been a failure properly to exercise the discretion which the law reposes in the court at first instance.  In such a case, although the nature of the error may not be discoverable, the exercise of the discretion is reviewed on the ground that a substantial wrong has in fact occurred.

116               We have previously set out the injunctive relief sought at first instance.  Her Honour pointed out the difficulties in seeking to regulate Mr Russell’s conduct “in connection with the Dataline business or Australis business, or any similar business …”.  Dataline and Australis were, by that time, no longer in business.  To identify proscribed conduct by reference to whether it occurred in the course of a similar business to those carried on by such companies would offer a very uncertain basis for any decision as to whether proposed conduct was, or was not, prohibited by the injunction.  Her Honour also identified the difficulty inherent in identifying conduct which was “similar”to that described in paras 1, 2, 3 and 4 of the draft order.  The difficulty is highlighted by a consideration of those paragraphs.  

117               In para 1 ACCC proposed a declaration identifying conduct by Dataline as being “in all the circumstances unconscionable in contravention of section 51AC”.  However the “circumstances” are not identified.  The list of alleged misconduct extends over six pages and 26 sub-paragraphs.  Many of the individual actions might not, themselves, be unlawful.  Thus, for example, subpara 1(a) concerns an allegation that Dataline acted unconscionably in refusing to consider amendments proposed by VISPs in respect of contracts with Dataline.  Refusing to consider amending a contract, by itself, would not usually be unlawful.  Similarly, subpara 1(b) concerns an allegation that Dataline acted unconscionably by “preventing and dissuading VISPs from receiving independent expert and professional advice with respect to the VISP contracts.”  One wonders how Dataline could have done this but, in any event, there is nothing innately unlawful about such conduct.  Similar comments apply to many, if not most, of the other aspects of conduct identified in para 1.  Such conduct may have been unlawful in the circumstances in which it allegedly occurred, but absent those circumstances, it may have been lawful.  In that event, Mr Russell should not have been restrained from involvement in such conduct.  

118               A further compelling argument for declining to restrain Mr Russell’s involvement in such conduct was simply the range of conduct involved, even without the inclusion of “similar” conduct.  The most likely effect of such a wide-ranging injunction would have been to deter Mr Russell from working in the industry at all, lest he unintentionally offend against one or other of the prohibitions.  Some may say that, in light of his previous conduct, that outcome would yield a public benefit.  However injunctive relief is designed to enforce legal rights or prevent unlawful conduct.  It should not be used to discourage lawful conduct.  Similar comments apply to paras 2 (misleading or deceptive conduct) and 3 (undue harassment or coercion).  Paragraph 4 concerns resale price maintenance, in connection with which matter her Honour granted injunctive relief.  It is not necessary to consider it further.

119               There is a further difficulty with the injunctive relief sought at first instance.  Although corporate conduct in contravention of the TPA may be identified by reference to paras 1, 2 and 3 of the draft order, there is no identification of the conduct by Mr Russell which is said to have constituted his involvement in those contraventions.  As we have said, it is his conduct which is to be enjoined.  Although there are, in the statement of claim, some specific allegations concerning his conduct, no indication was given as to the aspects in respect of which injunctions were sought.

Her Honour’s treatment of deemed admissions

120               Concerning the deemed admissions, her Honour said at [93]:

I do not think injunctions in the terms sought would be appropriate.  There is another reason why they should not be granted, even if they were redrawn.  The purpose of an injunction, where it involves conduct already prohibited by statute, is to add the possibility of a finding of contempt by a failure to comply with the injunction, as the Court observed in BMW v ACCC (at para 39).  That is clearly the purpose of these injunctions.  They are however to be based upon facts which are deemed to be admitted and not found.  The explanatory preface, which I have proposed with respect to the declarations to be made, cannot work in connection with an injunction.  Declarations are a statement as to what has occurred.  Injunctions would require Mr Russell to take action or not to engage in particular conduct.  It would not be sensible for the Court to say that it was acting upon deemed admissions but nevertheless was prepared to require a person to do something or to regulate their conduct in some way.

121               ACCC impliedly submitted that the primary judge declined further injunctive relief solely because of her concerns about deemed admissions.  We do not accept that submission.  Her concern about that matter merely accentuated the effect of numerous other problems, particularly the identification of the conduct to be restrained and the likelihood (or unlikelihood) of continuing misconduct.  Once again we point out that any injunction against Mr Russell had to address his conduct.  There seems to have been no attempt, either in the draft order or, we infer, in submissions made to her Honour, to identify such conduct, as opposed to the conduct by corporations in which conduct he might be involved.  The only specific attempt to identify such involvement for the purposes of s 75B was in para 154 of the statement of claim where it was pleaded that:

In the premises of paragraphs 5, 9, 95, 117 and 135 Russell:

   

(a)       aided, abetted, counselled or procured Dataline and/or Australis (as applicable) to contravene the Act as referred to in paragraphs 138-152;

   

 (b)      further and/or alternatively, was knowingly concerned in, or a party to, the contraventions referred to in paragraphs 138-152; and

   

 (c)       further and/or alternatively, was involved in the contraventions referred to in paragraphs 138-152 within the meaning of section 75B of the Act.

 

122               Paragraph 5 pleaded relevantly that Mr Russell was, at all material times, a director, manager and secretary of Dataline, the manager, sole director and secretary of World Publishing Systems, a company which was not a party to the proceedings, a director and manager of World Publishing Systems and a director and manager of Australis.  It was also pleaded that the directors of Australis were accustomed to act in accordance with his instructions or wishes.  Paragraph 9 alleges that WPS owned World Publishing Systems, which in turn owned Dataline, and that WPS also owned Australis.  Although these facts were relevant to Mr Russell’s involvement in any contraventions, they did not necessarily establish it. 

123               Paragraph 95 related only to the claim that he was involved in resale price maintenance.  It is not presently relevant.  In para 117 it was pleaded that:

Each of the representations pleaded in paragraphs 98-115, which were made by or on behalf of either Dataline or Australis:

(a)       had content which was known, or authored, by Russell;

 (b)      were made with the knowledge and complicity of Russell; and/or

 (c)       were made by, or at the direction of, Russell.

124               The statement of claim contained a number of specific allegations against Mr Russell.  They may also have gone to prove involvement in contraventions pursuant to s 75A.  As with the allegations in para 117, many of those allegations were pleaded in the alternative.  We are unpersuaded that the deemed admission of the whole of the statement of claim necessarily implied that all such alternative pleadings were admitted, at least for the purpose of considering whether to grant discretionary relief.  Although a deemed admission of pleaded alternatives may be sufficient to establish a cause of action which is dependent upon proof of any one of a series of alternatives, it would be at least relevant to the grant of injunctive relief that the alleged misconduct was identified only in such an equivocal way.  There would be no apparent basis for restraining the conduct contained in one alternative form rather than the conduct identified in the others.  To restrain all alternatively pleaded conduct might significantly widen the reach of the injunction.  This would be a particular problem in the present case, given the other generalizations and ambiguities to which we have referred. 

125               Paragraph 135 pleaded:

The conduct described in paragraphs 28-87, which was made by or on behalf of Dataline, Australis, or World Publishing Systems (as the case may be):

(a)       was made with the knowledge and/or complicity of Russell; and/or

 (b)      was made by, or at the direction of, Russell.

126               Again there is the difficulty of pleading in the alternative.  Paragraphs 28-87 made multiple allegations of misconduct against the various corporations and some allegations concerning Mr Russell’s involvement.  However again, ACCC seems to have made no attempt to identify the conduct which should be the subject of injunctive relief.  It may be argued that to restrain “involvement” in identified contraventions would be permissible and sufficient.  At least in the circumstances of this case, we do not accept that proposition.  For reasons which we have given, such an order would have effectively prevented Mr Russell from working in the industry, simply because of the risk that apparently lawful conduct might, in particular circumstances, be proscribed.  It is no answer to say that had Mr Russell not defaulted in the conduct of the action, ACCC may have been in a better position to identify appropriate relief.  Many of these problems would have arisen in any event, even after a lengthy and expensive trial. 

127               The primary judge declined injunctive relief (save as to resale price maintenance) for a number of reasons.  They included the fact that Dataline and Australis were no longer trading, although her Honour recognized that Mr Russell was still working in the industry.  The question of utility was also relevant.  The difficulty of drafting appropriate injunctions which would fairly identify the proscribed conduct was part of her consideration of that issue, particularly having regard to the diffuse nature of the alleged misconduct.  The lack of clarity concerning Mr Russell’s conduct, resulting partly from the fact that the case was to be determined on the basis of deemed admissions, was also a factor.  A further difficulty arising from that fact was the likelihood or otherwise of further misconduct.  When so understood, her Honour’s reasons for refusing further injunctive relief are clear and free of error. 

Some further comments

128               That parties and causes of action may be joined in one action does not mean that they necessarily should be so joined.  Nor does the fact that many arguable contraventions have been identified in a particular series of transactions necessarily dictate that they all be the subject of legal proceedings.  It is, of course, for ACCC to make policy decisions as to the way in which it enforces the TPA.  However, having regard to such experience of litigation as we have, we suggest that a less ambitious approach, with greater attention to detail, may be a more successful enforcement technique.

129               We should make one other point.  The injunctive relief sought in the notice of appeal would restrain Mr Russell from doing many things, whether in connection with the business of a corporation or on his own behalf.  If he were trading on his own behalf, much of that conduct would not be contrary to the TPA, at least on the basis upon which this case was conducted.  It may be that such conduct would be prohibited by State law.  It may also be caught by the extended operation of the TPA pursuant to ss 5 and 6, but this case was not conducted on that basis.  There may be a similar deficiency in the injunction granted by her Honour, but it is not subject to appeal.

130               The appeal must be dismissed. 

Associate:

Dated:         7 September 2007