FEDERAL COURT OF AUSTRALIA

Australian Competition and Consumer Commission v Albert [2005] FCA 1311

TRADE PRACTICES – Remedies – declaratory and injunctive relief – consent orders –power to make orders – whether appropriate to make orders

Trade Practices Act 1974 (Cth) – ss 51A, 51AD, 52, 58, 59, 75B, 80

Federal Court Act 1976 (Cth) – s 21

Corporations Act 2001 (Cth) - s 471A

Federal Court Rules – Order 35A rule 2

Ainsworth v Criminal Justice Commission (1992) 175 CLR 564 referred to

Arthur v Vaupotic Investments Pty Limited [2005] FCA 433 applied

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

Australian Competition and Consumer Commission v Australian Securities and Investment Commission (2000) 174 ALR 688 referred to

Australian Competition and Consumer Commission v Black on White Pty Limited

(2001) 110 FCR 1 referred to

Australian Competition and Consumer Commission v Goldy Motors Pty (2001) ATPR 41-801 referred to

Australian Competition and Consumer Commission v Real Estate Institute of Western Australia (1999) 95 FCR 114 referred to

Australian Competition and Consumer Commission v Target (2001) ATPR 41-840 referred to

Australian Competition and Consumer Commission v Z-Tek Computer Pty Limited (1997) 78 FCR 197 referred to

Australian Federation of Construction Contractors v Australian Building Construction Employees’ v Builders Labourers’ Federation (1984) 73 FLR 61 referred to

Australian Securities Commission v McLeod (1994) 54 FCR 309 referred to

BMW Australia Limited v Australian Competition and Consumer Commission (2004) 207 ALR 452 referred to

Commissioner of Taxation v Finn (1960) 103 CLR 165 referred to

Corporate Affairs Commission (NSW) v Transphere Pty Limited (1988) 15 NSWLR 596 referred to

Grey v Mango Pre Paid Calling Cards Pty Limited [2004] FCA 1664 referred to

ICI Australia Operations Pty Limited v Trade Practices Commission (1992) 38 FCR 248 referred to

Matheson Engineers Pty Limited v El Raghy (1992) 37 FCR 6 applied

News Limited v Australian Rugby Football League Limited (1996) 64 FCR 410 referred to

Tobacco Institute of Australia Limited v Australian Federation of Consumer Organisations Inc (1993) 41 FCR 89 referred to

Trade Practices Commission v GLO Juice (1987) 73 ALR 407 referred to

Trade Practices Commission v Santos Limited [1993] ATPR 41-221 referred to

Trade Practices Commission v Walplan Pty Limited (1985) 7 FCR 495 referred to

Truth about Motorways Pty Limited v Macquarie Infrastructure Investment Management (1999) 200 CLR 591 referred to

Zomba Production Music (Australia) Pty Limited v Roadhouse Productions Pty Limited (2001) 190 ALR 288 referred to

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION v DANIEL ALBERT AND GREGORY ZIMBULIS

NSD 472 of 2005

JACOBSON J

20 SEPTEMBER 2005

SYDNEY

THE COURT ORDERS THAT:

1.      Within 14 days the parties are to provide draft short minutes of order giving effect to the reasons of judgment delivered today.

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

REASONS FOR JUDGMENT

Introduction

1                     On 29 March 2005, the applicant, the Australian Competition and Consumer Commission (“the ACCC”) filed an application and statement of claim alleging contraventions by the respondents of ss 51AD, 52, 58, and 59 of the Trade Practices Act 1974 (Cth) (“the Act”).

2                     The respondents are in default pursuant to O 35A r 2 of the Rules of the Federal Court because they have not filed defences within the time ordered by the Court.

3                     The respondents appeared before the Court at a directions hearing on 11 August 2005 and indicated their consent to the making of final orders to dispose of the proceedings.  The first respondent was represented by a solicitor.  The second respondent appeared in person.

4                     Three essential questions fall for determination.  The first is whether I have power to make orders in the absence of evidence in support of the application.  The second is whether I ought to make declarations in respect of the conduct of corporations which are not parties to the proceedings but which were the primary contraveners.  The third is whether I ought to make injunctions in the very wide terms which have been consented to by the respondents.

            Evidentiary Foundation

5                     No evidence was filed in the proceedings, nor did the parties file an agreed statement of facts. 

6                     It was, until recently, well settled that there was no presumption, upon default by the respondent, of the correctness of the applicant’s claim: Commissioner of Taxation v Finn (1960) 103 CLR 165.  It was not open to the Court to make an order for default judgment except on the bringing of a motion on notice supported by evidence as to the merits of the application: Australian Securities Commission v McLeod (1994) 54 FCR 309; see also Grey v Mango Pre Paid Calling Cards Pty Limited [2004] FCA 1664 and Zomba Production Music (Australia) Pty Limited v Roadhouse Productions Pty Limited (2001) 190 ALR 288.

7                     However, recent authorities indicate that the introduction of Order 35A of the Federal Court Rules eliminates the requirement of proof by way of evidence of the applicant’s claims, at least where the application is supported by a statement of claim.  All that is necessary is that on the face of the statement of claim there is a claim for the relief sought and jurisdiction to grant the relief: Arthur v Vaupotic Investments Pty Limited [2005] FCA 433 at [3] per Heerey J; see also Australian Competition and Consumer Commission v 1Cellnet LLC [2005] FCA 856 at [14] per RD Nicholson J.

The Facts disclosed on the Pleading

8                     The essential facts disclosed on the face of the statement of claim may be summarised as set out below.

9                     The first respondent was Chief Executive Officer/Managing Director of three companies (jointly referred to as “the companies”) being i.e. Networks Pty Limited (“Networks”), Photo Safe Australia Pty Limited (“Photo Safe”) and Data Vault Services Pty Limited (“Data Vault”).  He was also sole director of Networks and Photo Safe, sole shareholder of Networks, and a shareholder of Photo Safe and Data Vault.  The second respondent was Sales Manager of the companies. 

10                  The first and second respondents, for and on behalf of Networks, Photo Safe and Data Vault, engaged in the marketing, promotion and sale of distributorships for services provided by those companies.  The Networks services were internet access terminals and mobile download terminals by which consumers could access the internet, their email account, send text messages and download mobile phone ring tones.  The Photo Safe service was to duplicate and store photographs and negatives on compact disc and/or the internet.  The Data Vault service was a service to facilitate the secure storage of data from a person’s computer. 

11                  Between February 2002 and May 2004, Photo Safe and Data Vault entered into franchise agreements termed “Exclusive Agency Agreements” (“franchise agreements”) with various individuals and companies appointing them sole and exclusive agents for the promotion and sale of Photo Safe or Data Vault services.  The franchisees provided consideration ranging between $60,000 and $160,000.

12                  The first and second respondents, for and on behalf of Networks, sought to enter into similar franchise agreements with various individuals.  Several prospective franchisees paid between $15,000 and $76,000 as a deposit for the purchase of  Networks terminals.

13                  Contrary to s 51AD of the Act, the companies failed to comply with various regulations in the Franchising Code of Conduct (“the Code”) prior to entering into the franchise agreements.  The companies failed to give a copy of the Code to prospective franchisees (cl 10) and failed to create a disclosure document (reg 6).  Photo Safe and Data Vault also failed to provide a current disclosure document to the franchisees, contrary to reg 6B and 10 of the Code.

14                  Furthermore, contrary to clause 11 of the Code, prior to entering into the franchise agreements, Photo Safe and Data Vault failed to obtain written statements from each of the franchisees that they had received, read and had reasonable opportunity to understand the disclosure document and the Code, and failed to obtain signed statements from each of the franchisees that they had been given independent advice about the proposed franchise agreements. 

15                  In addition, between June 2002 and May 2004, the companies and the respondents made various oral and written statements to franchisees and prospective franchisees.  Among other things, these statements indicated a high level of demand in the market for companies’ services, provided an indication of the profitability and risk that a franchisee might expect, and the level of support which would be provided by the companies to the franchisees, including expenditure on national advertising campaigns and arrangements which it had negotiated with various retailers.  The companies also made representations that the franchisee’s business activities could be carried out at their place of residence.

16                  The Amended Statement of Claim contains a multitude of bases upon which these representations were misleading or deceptive, or likely to mislead or deceive, contrary to s 52 of the Act.  Broadly, neither the companies nor the respondents had in their possession market research that established extensive demand for the companies’  services.  Nor did they have a reliable or reasonable basis for the sales data and financial models provided to the prospective franchisees (which was also contrary to s 59 of the Act).  In addition, contrary to representations made, the companies and the respondents did not have arrangements in place, nor budgeted for, national advertising and public relations campaigns, nor did the companies have agreements in place with retailers.  Finally, representations that the franchisee’s business activities could be carried out at their place of residence were misleading.

17                  The first and second respondents authorised the making of the representations with knowledge of the necessary elements of the contraventions of ss 52, 58 and 59 of the Act.

18                  To the extent that the representations involved future matters, the respondents were aware that the companies did not have reasonable grounds for making the representations, which are therefore taken to be misleading as provided in s 51A of the Act.

19                  Furthermore, Networks’ acceptance of payments from prospective franchisees for Networks terminals was contrary to s 58 of the Act, as Networks accepted payment when it did not intend to supply the terminals, or was aware that it did not have reasonable grounds for believing that it would be able to supply the terminals.  As stated above, the respondents had knowledge of the requisite elements of the contraventions.

20                  The remedies sought for the respondents’ admitted breaches of the Act consist of declarations and injunctions.  No pecuniary penalty was sought to be imposed pursuant to s 79 of the Act. 

Whether the Consent Orders should be made:  the applicable principles

21                  There is a general principle of judicial restraint in the scrutiny of proposed settlements.  The court will not substitute its own view of the orders and undertakings which it would have made if those proffered fall within the range of an appropriate disposition of the case: Australian Competition and Consumer Commission v Real Estate Institute of Western Australia (1999) 95 FCR 114 (“ACCC v Real Estate Institute”) at [37] per French J.    His Honour’s words are instructive and I will quote them as follows:-

“… It is not the function of the Court to impede settlements between parties legally represented and able to understand and evaluate the desirability of agreeing to a settlement nor to refuse to give effect to terms of settlement by refusing to make orders or accept undertakings where they are within the Court’s jurisdiction and are otherwise unobjectionable.  The Court will not substitute its own view of the orders or undertakings which it would have made if those proffered fall within the range of an appropriate disposition in the case.” 

22                  However, in the making of consent orders and the acceptance of undertakings the Court must not exceed its power.  As Justice French observed in ACCC v Real Estate Institute at [38]:

“The limitations affecting jurisdiction or power to grant the relief sought must be observed.  The Court cannot put itself in the position of enforcing conduct which it has no capacity to command or compel.  Parties cannot by consent confer power on the Court to make orders which the Court lacks power to make.  Moreover the power of the Court to make orders is an exercise of power defined and conferred by public law.  The Court, in exercising that power, does not merely give effect to the wishes of the parties.  It exercises a public function and must have regard to the public interest in doing so.  In consideration of the public interest, however, it must also weigh the desirability of non-litigious resolution of enforcement proceedings.”

23                  The declarations and injunctions sought in the orders are lengthy and detailed.  I will deal with each form of relief in turn. 

Declaratory Relief

24                  It is unnecessary to set out the proposed declarations out in full.  The ACCC seeks declarations in respect of the conduct of Networks, Photo Safe and Data Vault notwithstanding that those companies are not parties to the proceedings.  The declarations sought are that each of those companies contravened s 51AD of the Act and that they made representations which were misleading or deceptive in contravention of ss 52, 59(1) and 59(2) of the Act.  A declaration is also sought that Networks contravened s 58 of the Act.

25                  The ACCC also seeks declarations that the first and second respondents aided and abetted the companies’ contraventions of the Act.  That is to say, that they were persons involved in the contraventions in accordance with s 75B of the Act.  In addition, declarations are sought that the respondents personally engaged in misleading and deceptive conduct contrary to ss 52, 59(1) and 59(2) of the Act.

26                  Although the Act does not including provision for the making of declarations, the court has a wide, discretionary power to make declarations under s 21 of the Federal Court Act 1976 (Cth).  In Ainsworth v Criminal Justice Commission (1992) 175 CLR 564, the High Court said at 581-582 that :-

“…It is now accepted that superior courts have inherent power to grant declaratory relief.  It is a discretionary power which ‘(i)t is neither possible nor desirable to fetter …by laying down rules as to the manner of its exercise.’  However, it is confined by the considerations which mark out the boundaries of judicial power.  Hence, declaratory relief must be directed to the determination of legal controversies and not to answering abstract or hypothetical questions.  The person seeking relief must have ‘a real interest’ and relief will not be granted if the question ‘is purely hypothetical’, if relief is ‘claimed in relation to circumstances  that [have] not occurred and might never happen’ or if ‘the Court’s declaration will produce no foreseeable consequences for the parties’ …” (citations omitted)     

27                  Section 21 has been relied upon in a number of Full Court decisions where declarations of contraventions of the Act have been made: see Trade Practices Commission v Santos Limited [1993] ATPR 41-221; Tobacco Institute of Australia Limited v Australian Federation of Consumer Organisations Inc (1993) 41 FCR 89 (“Tobacco Institute”).  

28                  Sheppard J observed in Tobacco Institute at 100 that the court’s power to make declarations may also be found within the Act itself.  Relying on the presence of s 80(4) and (5), Sheppard J found that the policy of the Act, concerned as it is with public interest, extends to the area of declaratory relief, for it marks the court’s disapproval of particular conduct which contravenes the Act.

29                  The terms of the declarations sought must be scrutinised.  In some cases it might be appropriate to simply make findings of fact that a respondent has contravened a provision of the Act.  However, conduct constituting contravention of the Act need not be dishonest or flagrant before a court, may, in its discretion, grant declarations:  Australian Competition and Consumer Commission v Goldy Motors Pty Limited (2001) ATPR 41-801 (“Goldy Motors”) at [30] and [32] per Carr J. 

30                  Further factors to be considered in the exercise of the court’s discretion include the fact that making declarations serves to vindicate an applicant’s claim and may also assist in clarifying the law: Goldy Motors at [34].  It has also been observed that there is a public interest in the court making declarations in cases involving admitted breaches of Part V the Act, for it is a piece of legislation of some importance to consumers and others engaged in trade and commerce: Goldy Motors at [34]; see also Australian Competition and Consumer Commission v Target (2001) ATPR 41-840 (“Target”) per French J at [18].  

31                  In the present matter, there exists sufficient material before the court in the case pleaded by the ACCC that a real controversy exists requiring resolution by court order.  The franchise agreements were entered into without the distributors having the advantage of disclosure documents, and without reasonable opportunity to obtain independent advice about the franchise agreements.  Furthermore, the companies, through the respondents, made various representations as to the attractiveness of the businesses which were misleading and deceptive, including profitability, risk, and the nature of the companies’ investment in national advertising campaigns.  It seems to me that these representations would have been a significant factor in the decisions to enter into the franchise agreements.

32                  There is little doubt that the ACCC, as the public body charged with enforcing the Act, has a “real interest” in seeking relief: Goldy Motors at [30]; see also Tobacco Institute at 110 per Foster J.  However, an issue arises as to whether the court has power to make declarations in relation to the conduct of the companies since they are not parties to the proceedings.

33                  Counsel for the ACCC gave evidence from the bar table that the companies are in liquidation.  He observed that ordinarily leave would be required to proceed against them, but in the circumstances, there would be little point in the ACCC seeking injunctions against the companies.  However, he argued, without making declarations in respect of conduct of the companies, it would not be possible for the court to declare the respondents knowingly concerned in the contraventions. 

34                  This submission cannot be accepted.  An action may be maintained against individuals alleged to have been involved in a contravention of s 52, within the meaning of s 75B of the Act, although proceedings are not pursued against the corporation which is the primary contravener:  Matheson Engineers Pty Limited v El Raghy (1992) 37 FCR 6 at [9] per French J; see also Australian Competition and Consumer Commission v Australian Securities and Investment Commission (2000) 174 ALR 688 at  [47] per Austin J; and see Australian Competition and Consumer Commission v Black on White Pty Limited (2001) 110 FCR 1 at [48]  per Spender J.

35                  Moreover, it would be an entirely inappropriate exercise of the court’s discretion to make declarations that companies which are not parties to the proceedings have contravened the provisions of the Act.  The companies’ rights would be affected by the declarations and there is no proper contradictor; see Corporate Affairs Commission (NSW) v Transphere Pty Limited (1988) 15 NSWLR 596 at 605-606 per Young J; News Limited v Australian Rugby Football League Limited (1996) 64 FCR 410 at 523 – 525.

36                  Counsel for the ACCC submitted that the respondents were proper contradictors because the first respondent was a shareholder/director (indeed sole shareholder and director of two of the companies) and the respondent was an officer of the companies.    This submission fails to take account of a basic principle of company law.  The effect of a winding up order is that although the company continues to exist it cannot act through its directors, officers or members; see Corporations Act 2001 (Cth) s 471A; see also Ford’s Principles of Corporations Law (12^th ed) at [28.090].

37                  Accordingly, I will not make the declarations sought in respect of the companies but I will make the declarations sought against the first and second respondents.

Injunctive Relief

38                  The proposed injunctions relating to the first respondent, as contained in the consent short minutes, are in the terms set out below.  The proposed injunctions relating to the second respondent are in identical terms but they do not contain injunctions in the terms of [1] and [3].  I have set out the injunctions claimed against the first respondent in full to demonstrate the width of the relief sought.

“1.    Injunctions restraining the First Respondent from aiding, abetting, counselling or procuring, or being directly or indirectly, knowingly concerned in, or party to a contravention of section 51AD of the Act in which a corporation who is a franchisor  within the meaning of the Code   fails to :

(a)   create a disclosure document in accordance with the requirements of clause 6 of the Code;

(b)   provide a franchisee, or prospective franchisee, with a disclosure document in accordance with clause 6B of the Code;

(c)    provide a franchisee, or prospective franchisee, with a copy of the Franchising Code of Conduct in accordance with clause 10 of the Code;

(d)   obtain written statements from a franchisee that the distributor had received, read and had a reasonable opportunity to understand the disclosure document and the Code in accordance with sub-clause 11(1) of the Code; and

(e)    provide the franchisee with a reasonable opportunity to obtain independent advice about the Franchise Agreement, and to provide written statements to the franchisor to that effect, prior to entering into the Franchise Agreements in accordance with sub-clause 11(2) of the Code.

2.         Injunctions restraining the First Respondent, in trade or commerce, 

(a)   by himself, or by his servants or agents or otherwise, from inducing or attempting to induce persons to enter any business undertaking which involves the sale to the prospective purchaser of distribution rights to a product or service, by making any representations whilst engaging in conduct in trade or commerce among the States, within a Territory, or between a State or Territory, or involving, postal, telegraphic, or telephonic services which are misleading or deceptive or likely to be misleading or deceptive or which the First Respondent has no reasonable grounds to believe are true;

(b)   by his servants or agents or otherwise, from making misleading representations whilst engaging in conduct in trade or commerce among the States, within a Territory, or between a State or Territory, or involving, postal, telegraphic, or telephonic services concerning the profitability or risk or any other material aspect of any business which can be conducted from a person’s place of residence and which involves the sale to the prospective purchaser of distribution rights to a product or service; and

(c)    by his servants or agents or otherwise, from making misleading representations whilst engaging in conduct in trade or commerce among the States, within a Territory, or between a State or Territory, or involving, postal, telegraphic, or telephonic services concerning the profitability or risk or any other material aspect of any business which involves the sale to the prospective purchaser distribution rights to a product or service and which requires the performance of work, or the investment of monies and the performance by them of work associated with the investment. 

3.         Injunctions restraining the First Respondent, in trade or commerce, from aiding, abetting, counselling or procuring, or being directly or indirectly, knowingly concerned in, or party to the acceptance of payment in respect of public access terminals in circumstances where there is no intention to supply or no capacity to supply the goods.

4.         Injunctions restraining the First Respondent, in trade or commerce, by himself, his servants or agents or otherwise, from aiding, abetting, counselling or procuring, or being directly or indirectly, knowingly concerned in, or party to, a corporation

(a)   inducing or attempting to induce persons to enter any business undertaking which involves the sale to the prospective purchaser of distribution rights to a product or service, by making any representations which are misleading or deceptive or likely to be misleading or deceptive or which the First Respondent has no reasonable grounds to believe are true;

(b)   making misleading representations concerning the profitability or risk or any other material aspect of any business which can be conducted from a person’s place of residence and which involves the sale to the prospective purchaser of distribution rights to a product or service; and

(c)     making misleading representations concerning the profitability or risk or any other material aspect of any business  which involves the sale to the prospective purchaser   distribution rights to a product or service   and which requires the performance of work, or the investment of monies and the performance by them of work associated with the investment.

5.         Injunctions restraining the First Respondent, in trade or commerce, by himself his servants agents or otherwise from being knowingly concerned in or party to any corporation

(a) advertising, promoting or offering for sale any franchise, distributorship, partnership, purchasing or operating licence, marketing agreement or other business opportunity howsoever described (hereafter described as a “proposed agreement”) unless prior to doing any of these things they have and retain in their possession a solicitor’s notice as defined in these orders;

(b) selling or accepting payment or part payment for any proposed agreement unless a full copy of the solicitor’s notice as defined in these orders, and a copy of these orders are provided to the potential purchaser at least three days before entering into any binding agreement with that person or accepting any payment whatsoever from that person.

6.         In these orders, a “solicitors notice” means a certificate from an independent solicitor currently enrolled in any Australian state or territory and having a current practicing certificate as at the time of giving the certificate in which the solicitor:

a.      certifies that the solicitor is currently enrolled in an Australian state or territory and has a current practising certificate;

b.      certifies that the solicitor has been provided with all terms of the proposed agreement being advertised, promoted or offered for sale, which terms are annexed to the notice;

c.       states in bold and clear print on the front page of the certificate:

i.   that the solicitor has not been briefed with, and has not considered, any oral promise or statement that is not included in the written terms annexed to the notice and that any such promises or statements have not been considered as part of the agreement by that solicitor;

ii.  that in addition to considering the contents of the notice, the purchaser should also obtain their own legal advice;

iii.that the notice is provided in accordance with these orders;

d.   certifies whether the solicitor considers the proposed agreement to be a franchise agreement within the meaning of that expression set out in  the Code;

e.   certifies that, if the solicitor considers the proposed agreement to be a franchise agreement, the solicitor has been provided with such disclosure documents as are required to be provided under the Code, which disclosure documents are annexed to the notice;

f.    certifies that the solicitor considers that such disclosure documents as are annexed to the notice comply in all respects with the Code; and

g.   certifies that, whether or not the solicitor providing the notice considers the agreement to be a franchise, the solicitor has considered all representations as to future matters in the proposed agreement and sets out, in respect of each such representation, all matters and grounds relied on by the representors in making those representations.

          “Independent solicitor” means a solicitor who has not acted for or provided advice to either Respondent in respect of proceedings for contraventions of the Trade Practices Act 1974.

7.         Injunctions restraining the First Respondent, by himself, his servants, agents or otherwise from being knowingly concerned in or a party to any corporation selling, or accepting payment or part payment for any proposed agreement unless either:

(a)  the First Respondent or the said corporation has successfully conducted the business the subject of the proposed agreement for at least six months prior to it being offered for sale and the business has been profitable for at least the last six months prior to it being offered for sale; or

(b)  at least seven days prior to the earlier of entering into a binding agreement for the sale or accepting any payment whatsoever from a potential purchaser, the First Respondent has notified the potential purchaser in writing:

(i)   that he was a respondent in these proceedings and provided the potential purchaser with a copy of these orders;

(i)     of all names previously used by him;

(ii)   of full details of his actual experience and expertise in conducting or operating the business in question;

(iii)if any product is to be supplied or distributed or promoted under the proposed agreement, whether there is in place a concluded contract in relation to the acquisition of that product by the respondent or the other person offering the proposed agreement; and

(iv)whether the proceeds from entering into the proposed agreement are to be, or are likely to be, applied to paying any entitlement or amount due to another person with whom a corporation in which the  First Respondent had participated has previously entered into an agreement substantially similar to the proposed agreement.”

Whether the Injunctions are “appropriate”

39                  The power of the Court to grant an injunction is controlled by the concluding words of s 80(1) of the Act, “in such terms as the Court determines to be appropriate”; see ICI Australia Operations Pty Limited v Trade Practices Commission (1992) 38 FCR 248 (“ICI”) at 267 per Gummow J.

40                  The grant of injunctive relief which has no nexus or relationship to the matter before the Court would not be an appropriate exercise of the power to order an injunction; Australian Competition and Consumer Commission v Z-Tek Computer Pty Limited (1997) 78 FCR 197 (“Z-Tek”) at 203-4 per Merkel J. 

41                  Whether there is sufficient nexus between the orders sought and the contravention alleged in the proceedings involves an evaluative judgment; ACCC v Real Estate Institute at [39].

42                  It is undesirable, and therefore in most cases inappropriate, to grant injunctive relief in terms which leave unresolved the central issues in the case; Trade Practices Commission v Walplan Pty Limited (1985) 7 FCR 495 (“Walplan”) at 496 per Pincus J; Trade Practices Commission v GLO Juice (1987) 73 ALR 407 (“GLO Juice”) at 414 – 415  per Burchett J.

43                  As Pincus J observed in Walplan at 496 it is “unorthodox” simply to order a respondent not to breach s 52 of the Act.  Similarly, it is unorthodox and inappropriate to grant an injunction simply restraining a respondent from engaging in misleading or deceptive conduct or from being knowingly involved in such a contravention of the Act.  The reason for this is that it converts the consequences of a breach of the injunction into contempt proceedings and it makes those proceedings the occasion on which the question of whether the conduct breaches the section is to be decided; Walplan at 496; GLO Juice at 415; see also BMW Australia Limited v Australian Competition and Consumer Commission (2004) 207 ALR 452 at [39] per Gray, Goldberg and Weinberg JJ. 

44                  There are two further reasons why it is inappropriate to grant injunctive relief in those terms.  The first is that the Court must always be concerned to ensure so far as it can, that its orders are certain and state clearly what the parties affected by the injunction are bound to do or refrain from doing; see GLO Juice at 415 citing Australian Federation of Construction Contractors v Australian Building Construction Employees’ v Builders Labourers’ Federation (1984) 73 FLR 61 at 62.

45                  The second reason is that, at least where the injunction is framed without reference to the particular factual circumstances that gave rise to the proceedings, there will not be the requisite nexus with the controversy which is the subject of the existing proceedings.

46                  An examination of the injunctions sought by the applicant in the present case reveals that each seeks to restrain the respondents from engaging in conduct that is already prohibited by the Act.  Each paragraph infringes the principles stated by Pincus J in Walplan and by Burchett J in GLO Juice.  They leave unresolved the question of whether the conduct sought to be restrained is itself a breach of s 52 of the Act or whether the respondents are knowingly involved.  Those questions would fall for determination in contempt proceedings.

47                  Moreover, the proposed orders are not confined to the subject matter of the existing proceedings.  They seek to restrain the respondents from breaching the Act in ways that are in effect admitted on the pleading but which extend to a wide variety of future circumstances that are not so limited.  They therefore lack the requisite nexus of which Merkel J spoke in
Z-Tek and of which French J spoke in ACCC v Real Estate Institute.

48                  In coming to the view that it is not appropriate to make any of the injunctions sought, and indeed consented to, I have not ignored the width of the power conferred by s 80 or the public interest character of the proceedings.  I have taken into account the submissions put to me by the applicant that the purpose of s 52 of the Act is to protect the public from being misled and that the nature of injunctive relief under s 80 of the Act is for the protection of the public interest; see Truth about Motorways Pty Limited v Macquarie Infrastructure Investment Management Limited (1999) 200 CLR 591 at [17] per Gaudron J.

49                  Nor have I ignored the apparent seriousness or frequency of the contraventions of the Act revealed on the face of the statement of claim.

50                  The short answer to all of the submissions put by the applicant is that the form of the injunctions infringes the principles to which I have referred.  Of course, every injunction raises the possible consequence of contempt proceedings in the event of breach, but the terms of the injunction must state what is the conduct that may enliven the contempt power without leaving the central question of whether the conduct does or does not infringe the Act to be determined in the contempt application.

51                  It is true as French J said in ACCC v Real Estate Institute at [37] that the Court’s function is not to impede settlements, particularly where a respondent is legally represented.  But the proposed consent orders must, as his Honour said, fall within a range that is appropriate for the disposition of the case.  For the reasons set out above, the injunctions are not appropriate and I will not make the orders sought.

Other Orders Sought

52                  The draft consent orders in relation to the first respondent contain further miscellaneous orders, including an order for costs, in the following terms, which are identical to orders sought in relation to the second respondent:-

“i. An order that within 3 months of the making of this order, the First Respondent attend a Trade Practices Compliance Seminar (“the seminar”) at his own expense conducted by a person with expertise in trade practices law.  The seminar is to consist of presentations relating to Part V of the Act.

ii.    An order that the First Respondent, within one week of attending the seminar, file an Affidavit with the Court and serve a copy thereof on the Applicant verifying his attendance at the seminar, including the date and place of the seminar and the name of the person who conducted it.

iii.  The First Respondent pay the Applicant’s costs as agreed in the amount of $25,000.00.”

53                  I am content to make orders in these terms.

Conclusion

54                  Since I decline to make some of the proposed consent orders, it will be a question for the parties to determine whether they are prepared to consent to the more confined orders which flow from the reasons which I have given.  If the applicant does not oppose those orders it may do so without losing any right of appeal it would otherwise have; see Z-Tek at 205.

Associate:

Dated:              20 September 2005