Australian Communications and Media Authority v Atkinson [2009] FCA 1565

FEDERAL COURT OF AUSTRALIA

COMMUNICATIONS LAW – consideration of a joint submission by the parties in relation to a contravention by the respondent of s 16 of the Spam Act 2003 (Cth) – consideration of the principles to be applied in assessing a pecuniary penalty in the context of joint submissions as to the proposed penalty – consideration of the extent to which the principles governing assessment of a pecuniary penalty in the context of a joint submission derived from proceedings under the Trade Practices Act 1974 (Cth) might usefully apply in the assessment of a penalty under the Spam Act – consideration of the formulation of a declaration as to contravention and the framing of an injunction restraining threatened future contraventions – consideration of the particular vice the Parliament of the Commonwealth sought to address in enacting the Spam Act

Spam Act 2003 (Cth), ss 4, 6, 7, 16, 24, 25

Crimes Act 1914 (Cth), s 4AA

Chief Executive, Department of Internal Affairs v Atkinson & Ors CIV‑2008‑409‑002391 - cited

Federal Trade Commission v Atkinson & Ors, United States District Court for the Northern District of Illinois, Eastern Division, Case No. 08CV5666 - cited

Australian Communications and Media Authority v Clarity1 Pty Ltd [2006] FCA 1399; (2006) 155 FCR 377 - cited

Australian Communications and Media Authority v Mobilegate Limited A Company Incorporated in Hong Kong (No 4) [2009] FCA 1225; (2009) 261 ALR 326 – cited

Australian Communications and Media Authority v Mobilegate Limited A Company Incorporated in Hong Kong (No 6) [2009] FCA 1533 – cited

Trade Practices Commission v Stihl ChainSaws (Aust) Pty Ltd (1978) ATPR 40‑091 - cited

Markarian v The Queen (2005) 228 CLR 357 - cited

Minister for Industry, Tourism and Resources v Mobil Oil Australia Pty Ltd [2004] FCAFC 72 - cited

Trade Practices Commission v TNT Australia Pty Ltd (1995) ATPR 41‑375 - cited

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

Australian Communications and Media Authority v Radio 2UE Sydney Pty Ltd (No 2) [2009] FCA 754 - cited

Australian Competition and Consumer Commission v Leahy Petroleum Pty Ltd (No 3) (2005) 215 ALR 301 - cited

AUSTRALIAN COMMUNICATIONS AND MEDIA AUTHORITY v LANCE THOMAS ATKINSON

QUD 252 of 2009

GREENWOOD J

22 DECEMBER 2009

BRISBANE

IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION	QUD 252 of 2009

BETWEEN:

AUSTRALIAN COMMUNICATIONS AND MEDIA AUTHORITY

Applicant

AND:

LANCE THOMAS ATKINSON

Respondent

JUDGE:	GREENWOOD J
DATE OF ORDER:	22 DECEMBER 2009
WHERE MADE:	BRISBANE

THE COURT DECLARES THAT:

1. The respondent, between approximately 25 October 2006 and 17 December 2007, by, in the course of his operation of the Sancash Business,

1.1 recruiting individuals (“the Sancash Affiliates”) to market particular products via the internet (“the Sancash products”);

1.2 receiving and paying commissions in respect of sales of the Sancash products as a result of internet marketing by Sancash Affiliates;

1.3 communicating electronically with the Sancash Affiliates in relation to the Sancash Business;

1.4 creating and registering, and causing to be created and registered, domain names and providing and causing to be provided those domain names to the Sancash Affiliates, which domain names were to be included as links in electronic messages sent by the Sancash Affiliates to market the Sancash products;

1.5 providing and causing to be provided subject lines to Sancash Affiliates for use in electronic messages sent by the Sancash Affiliates to market the Sancash products; and

1.6 providing customer service support for orders for the Sancash products generated by the Sancash Affiliates by the electronic messages they sent, including dealing with flawed orders and responding to customer queries,

caused to be sent by the Sancash Affiliates electronic messages which:

1.7 were sent for the purpose of offering to supply, or promoting, the Sancash products, and were thereby commercial electronic messages within the meaning of s 6 of the Spam Act 2003 (Cth) (the “Spam Act”);

1.8 were not designated commercial messages within the meaning of Schedule 1 of the Spam Act because the messages contained other than factual information with or without directly related comment;

1.9 were accessed by computers, servers or devices located in Australia, and sent to electronic-account holders who were individuals physically present in Australia when the message was accessed, and thereby had an Australian link within the meaning of s 7 of the Spam Act;

and has thereby caused to be sent unsolicited commercial electronic messages in contravention of s.16(1) of the Spam Act.

THE COURT ORDERS THAT:

2. The respondent be restrained for a period of seven years from the date of this order from sending, or causing to be sent, or being knowingly concerned in or party to any person sending or causing to be sent, an unsolicited commercial electronic message as that term is understood for the purposes of the Spam Act 2003 (Cth) or unsolicited commercial electronic messages for the purposes of that Act from a person in Australia to anywhere, or from anywhere to persons in Australia.

3. The respondent pay to the Commonwealth of Australia, in respect of the respondent’s contraventions of the Spam Act, a pecuniary penalty in the amount of $210,000.00, such penalty to be paid within 60 days of this order.

4. The respondent pay the applicant’s costs of and incidental to these proceedings in the agreed amount of $15,000.00 within 60 days of this order.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using Federal Court search on the Court’s website.

IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION	QUD 252 of 2009

BETWEEN:

AUSTRALIAN COMMUNICATIONS AND MEDIA AUTHORITY

Applicant

AND:

LANCE THOMAS ATKINSON

Respondent

JUDGE:	GREENWOOD J
DATE:	22 DECEMBER 2009
PLACE:	BRISBANE

REASONS FOR JUDGMENT

1 In this application, the Australian Communications and Media Authority (the “Authority”) seeks declarations as to contraventions by the respondent, Mr Atkinson, of s 16(1) of the Spam Act 2003 (Cth) (the “Spam Act”), injunctions restraining Mr Atkinson from engaging in contravening conduct in the future and an order for the imposition of a pecuniary penalty in respect of the contended contraventions.

2 The application was listed for final hearing and determination on the footing that the parties have reached agreement as to the facts giving rise to contraventions of s 16 of the Spam Act and, subject to discretionary considerations, the parties are agreed as to the formulation of the proposed declarations and injunctions to be made. In addition, the parties have reached agreement as to the pecuniary penalty they jointly submit the Court ought to order having regard to all of the statutory considerations going to that question.

3 Those matters are supported by extensive written joint submissions filed by the parties and supplementary written submissions in relation to additional matters to be mentioned later in these reasons.

4 Mr Atkinson admits the contraventions alleged against him, based on the agreed facts. The joint submissions go beyond simply questions of fact and extend to joint submissions as to matters relevant to the exercise of the power to impose a pecuniary penalty.

5 The agreed facts, extracted from the joint written submissions, are these:

Facts

7. The material facts relied on and the details of the conduct the subject of the proceedings are set out in the statement of claim and below.

8. Between approximately 25 October 2006 and 17 December 2007, Mr Atkinson operated a business, under the name “Sancash”, which promoted various herbal products, adult products, and replica watches (the Sancash products), by means of unsolicited email messages (the spam emails) sent by a series of approximately 45 recruited individuals (the Sancash affiliates).

9. If a recipient purchased a Sancash product as a result of the spam emails sent by a Sancash affiliate, Mr Atkinson received a commission payment from the supplier of the product, and in turn paid a commission to the Sancash affiliate.

10. A spam email sent by a Sancash affiliate would contain an internet link through which the recipient of the spam email could order a promoted product. Sancash affiliates were allocated their own specific internet links to include in the spam emails that they sent. This enabled a Sancash affiliate to be identified in relation to a particular purchase and for a commission to be paid.

11. The operation of the Sancash business between October 2006 and December 2007 involved the sending of millions of spam emails worldwide by Sancash affiliates.

12. Mr Atkinson did not personally send the spam emails. Mr Atkinson caused the emails to be sent as he:

12.1 managed and operated the Sancash business, including recruiting Sancash affiliates, communicating with them electronically, monitoring their sales, paying commissions to them, and providing customer support services for orders generated by the Sancash affiliates, including responding to customer queries;

12.2 established and provided, or caused to be established and provided, to the Sancash affiliates internet domain names (including causing to be established and provided the domain names in Attachment 1 to these submissions) and website templates through which they were able to direct sales in the spam emails; and

12.3 created and provided, or caused to be created and provided, particular subject lines for use in the spam emails, to assist in avoiding automatic spam filters. Subject lines that Mr Atkinson caused to be created and provided, by a subordinate, include the subject lines in Attachment 2 to these submissions.

13. The spam emails were sent for the purpose of offering to supply, or promoting, the Sancash products, and were accordingly commercial electronic messages within the meaning of that expression in s.6 of the Spam Act. The spam emails did not fall within the exception in s.16(1)(b) of the Spam Act for “designated commercial messages”, as defined in Schedule 1 of the Spam Act, as they contained content other than factual information, being a promotional message in relation to the Sancash products.

14. The spam emails were sent to persons including recipients in Australia, and included messages accessed using computers, servers or devices located in Australia, and messages sent to electronic account-holders who were individuals physically present in Australia when the emails were accessed. Such emails had an Australian link within the meaning of that expression in s.7 of the Spam Act.

15. This proceeding is confined to the conduct of Mr Atkinson in causing to be sent those spam emails which had an Australian link (the Australian spam emails).

16. Mr Atkinson says that he requested some new affiliates not to send the email messages to some Australian email addresses. Mr Atkinson did not retain any records of such communications and the records produced by him or otherwise obtained by the ACMA do not contain any of these statements. The precise terms of Mr Atkinson's requests accordingly cannot be specified. Mr Atkinson admits that he gave no instruction or direction that would be capable of ensuring no Australian address received the spam emails and he in fact observed that orders were received from Australian customers. Mr Atkinson also did not take effective steps to check whether such instructions as may have been given about Australian addresses were complied with. He also suspected, but did not check, that at least one of the affiliates was based in Australia.

17. Attachment 3 to these submissions is a CD of emails identified by the applicant as Australian spam emails sent by the Sancash affiliates, and caused to be sent by Mr Atkinson, during the period between 18 October 2007 and 17 December 2007. The emails are extracted from a database maintained by the applicant, referred to as the “SpamMatters database”, through which members of the public in Australia are able to report, and forward to the ACMA, unsolicited commercial emails received at their email accounts.

18. The extracted emails contained in Attachment 3 comprise those from the ACMA’s SpamMatters database which incorporated one of the domain names identified at Attachment 1 as created by the respondent.

19. There are 140,789 emails extracted in the attached disk. They consist of the following numbers of emails sent on each day listed below:

Date	Number of Emails	Date	Number of Emails
18 October 2007	3045	18 November 2007	1899
19 October 2007	4156	19 November 2007	2522
20 October 2007	2815	20 November 2007	2721
21 October 2007	1406	21 November 2007	2069
22 October 2007	3748	22 November 2007	2135
23 October 2007	2744	23 November 2007	2398
24 October 2007	2732	24 November 2007	2444
25 October 2007	2830	25 November 2007	2471
26 October 2007	2785	26 November 2007	2659
27 October 2007	2679	27 November 2007	2056
28 October 2007	2093	28 November 2007	2525
29 October 2007	2294	29 November 2007	3164
30 October 2007	3929	30 November 2007	2605
31 October 2007	2718	1 December 2007	2479
1 November 2007	1744	2 December 2007	2124
2 November 2007	2460	3 December 2007	2724
3 November 2007	1858	4 December 2007	4628
4 November 2007	3247	5 December 2007	3083
5 November 2007	2562	6 December 2007	2231
6 November 2007	2058	7 December 2007	2028
7 November 2007	1429	8 December 2007	1594
8 November 2007	1076	9 December 2007	1381
9 November 2007	971	10 December 2007	1522
10 November 2007	616	11 December 2007	1368
11 November 2007	1550	12 December 2007	1274
12 November 2007	1696	13 December 2007	3056
13 November 2007	2225	14 December 2007	2887
14 November 2007	2192	15 December 2007	1354
15 November 2007	2673	16 December 2007	872
16 November 2007	2699	17 December 2007	911
17 November 2007	2575

20. As these constitute only the emails which both:

20.1 were formally reported to the applicant by members of the public in Australia; and

20.2 fall within the limitations described at paragraph 18 above;

the ACMA submits, and Mr Atkinson accepts, that these emails are likely to represent only a small proportion of the total number of Australian spam emails with an Australian link actually sent by the Sancash affiliates, and which Mr Atkinson caused to be sent.

21. On or about 17 December 2007, premises of an associate of Mr Atkinson who was apparently involved in the Sancash operations, Mr Roland Smits, were subject to searches by regulatory authorities in New Zealand and computer equipment was seized. The pleaded conduct occurred up to the time of that intervention.

22. The ACMA alleges, and Mr Atkinson admits, that by engaging in the conduct pleaded in the statement of claim, between approximately 25 October 2006 and 17 December 2007, he caused to be sent unsolicited commercial electronic messages, which had an Australian link, in contravention of s.16(1) of the Spam Act.

6 It can be seen from the agreed facts that between 25 October 2006 and 17 December 2007 Mr Atkinson operated a business called “Sancash” which promoted the sale of herbal products, adult products and replica watches by means of unsolicited email messages sent by approximately 45 recruited individuals who were paid a commission by Mr Atkinson. The joint submission also adopts the statement of claim in the proceeding filed on 21 October 2009 that describes the products as herbal products promoted or supplied by Genbucks Limited, adult sex toys supplied or promoted by Genbucks Limited and watches branded “King Replica”. The spam emails sent by Sancash affiliates contained an internet link to a website from which a product could be purchased. The operation of the Sancash business between the relevant dates involved the sending of millions of spam emails worldwide by Sancash affiliates. Mr Atkinson caused the emails to be sent. As the emails were sent for the purpose of offering to supply or promote Sancash products, they were “commercial electronic messages” within the meaning of that term in s 6 of the Spam Act and they did not fall within the exception in s 16(1)(b) of the Spam Act. The spam emails were sent to recipients in Australia using computers, servers or devices located in Australia and thus the conduct of Mr Atkinson had, at all relevant times, what is described as an “Australian link” for the purposes of s 7 of the Spam Act.

7 The period of the contravening conduct was almost 14 months in all. As the agreed facts make clear, millions of spam emails were sent by Sancash affiliates “worldwide” although these proceedings are confined to the conduct of Mr Atkinson in causing unsolicited commercial electronic messages to be sent which had an Australian link. The parties agree that over a period of 61 days, 140,789 emails that were caused to be sent by Mr Atkinson were formally reported to the Authority by members of the public in Australia. The emails incorporated as points of supply one of the many domain names identified at Attachment 1 to the joint submissions. Attachment 1 consists of a 10‑page document comprising five columns of domain names. There are approximately 2,090 domain names recited in Attachment 1. Mr Atkinson accepts that the 140,789 emails are likely to represent only a small proportion of the total number of Australian spam emails with an Australian link actually sent by the Sancash affiliates and which Mr Atkinson caused to be sent (para 20 of the agreed submissions). At para 12.3 of the agreed submissions, Mr Atkinson accepts that an element of causing the emails to be sent involved his conduct in causing to be created and provided, particular subject lines called “ManSter/VPXL Subject Lines”, for use in spam emails so as to attempt to prevent automatic spam filters detecting and deflecting unsolicited commercial electronic messages.

8 Accordingly, it is common ground that all of the integers of s 16 are made out and Mr Atkinson has sent or caused to be sent a commercial electronic message that has an Australian link and is not a designated commercial electronic message for the purposes of the Spam Act.

9 Section 24 of the Spam Act is in these terms:

24. Pecuniary penalties for contravention of civil penalty provisions

(1) If the Federal Court is satisfied that a person has contravened a civil penalty provision, the Court may order the person to pay to the Commonwealth such pecuniary penalty, in respect of each contravention, as the Court determines to be appropriate.

(2) In determining the pecuniary penalty, the Court must have regard to all relevant matters, including:

(a) the nature and extent of the contravention; and

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

(d) whether the person has previously been found by the Court in proceedings under this Act to have engaged in any similar conduct; and

(e) if the Court considers that it is appropriate to do so – whether the person has previously been found by a court in a foreign country to have engaged in any similar conduct.

10 The maximum penalties for contraventions of s 16 of the Spam Act are set out in s 25 of the Spam Act. For a person who is an individual and who has not been previously found to have contravened the Spam Act, the maximum penalty prescribed by s 25(4) is 20 penalty units in respect of a contravention of s 16(1); or if the Federal Court finds that the person has, on a particular day, committed two or more contraventions of s 16(1), the total penalties payable under s 24(1) by the person in respect of those contraventions must not exceed 400 penalty units.

11 A penalty unit is defined in s 4 of the Spam Act as having the meaning given by s 4AA of the Crimes Act 1914 (Cth) which provides that a penalty unit is $110.00. Accordingly, the maximum applicable penalty for each of the 61 days on which more than one contravention is admitted and found by the Court to have occurred, is $44,000.00. The maximum penalty in respect of the contraventions admitted over the 61 days set out in the schedule at para 19 of the joint submission quoted at [5], is $2,684,000.00.

12 By para 35 of the joint submission, the parties contend that on the basis of the principles, factors and circumstances set out in the submission, it is appropriate that the Court impose upon Mr Atkinson in respect of the contraventions across the period of the 61 days, a single pecuniary penalty in an amount of $210,000.00. This represents a pecuniary penalty of 7.82% of the maximum penalty prescribed by s 25 of the Spam Act.

13 As to the five criteria identified in s 24 of the Spam Act, the parties jointly make these submissions. First, the Sancash spamming activity caused by Mr Atkinson was “deliberate, extensive, and occurred over a lengthy period” [emphasis added]. The parties agree that in view of the admissions made by Mr Atkinson as to the conduct, the authority does not seek to adduce evidence as to the likely numbers of spam emails with an Australian link that Mr Atkinson caused to be sent over the full period of the contraventions, namely, 14 months. At para 46, the parties jointly say:

… However, the parties jointly submit that it is a relevant consideration that the contravening conduct occurred over a significantly longer period than the 61 day period in relation to which a selection of detailed email records is provided.

14 The parties also say at para 47:

Mr Atkinson is not able to estimate the volume of emails he caused to be sent by the Sancash affiliates to persons in Australia. It should be noted that those emails contained in the attachment to these submissions comprise only those reported to the ACMA by members of the public. That this sample represents such a significant number of emails reported per day indicates that the extent of the conduct and volume of emails was very high.

[emphasis added]

15 At para 48 of the joint submissions the parties agree that the nature and extent of the contravening conduct is an aggravating factor in this case [emphasis added]. Although the nature and extent of any loss caused by the sending of the unsolicited commercial electronic messages is not quantifiable, the parties jointly submit that the Court should have regard to the Explanatory Memorandum (the “EM”) circulated by the Minister for Communications, Information Technology and the Arts, Senator Alston, upon the introduction of the Spam Bill 2003 to the House of Representatives, addressing the international problem affecting the efficient operation of internet telecommunications networks by reason of spam emails and the costs imposed on end‑users. The Court is directed to the following passage from the EM:

The dollar cost of spam is inherently difficult to estimate, but the following provides some appreciation of the orders of magnitude involved.

A European Union study in 2001 estimates that the worldwide cost of spam to Internet subscribers could be in the vicinity of €10 billion (A$18.4bn) per year. A recent study from Ferris Research estimates that US companies alone lost US$8.9 billion (A$15.2bn) in 2002 and estimate that the cost of spam in Europe was US$2.5 billion (A$4.3bn). According to figures from Star Internet, a large Internet service provider in the UK, the cost to business in lost productivity is estimated at £326 (A$915) per employee each year. Surfcontrol recently estimated that spam cost employers approximately $1 per spam received. Erado’s 2002 white paper on spam, viruses and other unwanted content estimates that annual cost of spam per employee is around US$1000 (A$1709).

These sorts of costs are usually borne by Internet users (and/or employers), through increased download times and lost productivity. Spammers themselves, on the other hand, bear relatively small costs in sending these messages. E-mail costs do not scale like sending surface mail or making telephone calls - the cost of sending out a million e-mails is not significantly more than the cost of sending out a hundred. …

The extremely low cost of sending spam, meaning that even a ‘hit rate’ of below 1% can be profitable, is the biggest single factor leading to its growth.

16 As to s 24(2)(c), the circumstances in which the contravention took place are outlined in the agreed statement of facts. As to s 24(2)(d), Mr Atkinson has not previously been found by the Court in proceedings under the Spam Act to have engaged in any conduct similar to a contravention of s 16(1). Section 24(2)(e) addresses the question of whether Mr Atkinson has previously been found by a Court in a foreign country to have engaged in any similar conduct. As to that matter, the parties make this joint submission at para 53:

In December 2008, Mr Atkinson was found by the High Court of New Zealand to have engaged in similar conduct arising from the same underlying facts [Chief Executive, Department of Internal Affairs v Atkinson & Ors CIV‑2008‑409‑002391, per French J, 19 December 2008]. Mr Atkinson cooperated with New Zealand authorities to resolve those proceedings, and paid a pecuniary penalty in the amount of NZ$100,000 in respect of contravening emails sent to recipients in New Zealand.

17 Mr Atkinson was the subject of proceedings in the United States: Federal Trade Commission v Atkinson & Ors, United States District Court for the Northern District of Illinois, Eastern Division, Case No. 08CV5666. At para 6 of supplementary joint written submissions provided to the Court on the day of the hearing, the parties said this about the United States proceedings:

United States judgment

6. Paragraph 54 of the October submissions refers to proceedings on foot against Mr Atkinson in the United States, arising from the same conduct as is the subject of these proceedings. Default judgment has now been handed down in the United States proceedings, in the matter of Federal Trade Commission v Atkinson & Ors, United States District Court for the Northern District of Illinois, Eastern Division, Case No. 08CV5666. An amount of US$15,151,029 was imposed jointly and severally upon Mr Atkinson and Inet Venture Pty Ltd, as equitable monetary relief for violations of the Federal Trade Commission Act (FTC Act) and the Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003 (CAN-SPAM Act).

7. As set out at paragraphs 37 and 53- 55 of the October submissions, s.24(2) of the Spam Act provides that a relevant consideration for the Court is:

if the Court considers that it is appropriate to do so - whether the person has previously been found by a court in a foreign country to have engaged in any similar conduct.

8. The parties submit that the findings of the United States court are relevant and should be taken into account by the Court, but do not amount to prior findings of contraventions that pre-date the conduct the subject of these proceedings, as they arise from the same conduct, and accordingly are not an aggravating factor. As the penalties sought in the present proceedings are in respect only of such emails as are connected with Australia, the parties submit a penalty in the amount proposed remains appropriate.

18 On 4 November 2009, default judgment in the United States case was entered against five of the six defendants in the proceeding, including Mr Atkinson. The proceeding, commenced by the Federal Trade Commission (“FTC”), alleged a range of contraventions of the Federal Trade Commission Act (the “FTC Act”), concerning contended deceptive practices in connection with the sale of certain purported herbal products and a pharmaceutical medication, some of which involved representations as to sexual enhancement. There seems to be some correlation between the products in issue and those the subject of these proceedings. In addition, the proceedings involved contended contraventions of the United States Controlling the Assault of Non‑Solicited Pornography and Marketing Act 2003 (the “CAN‑SPAM Act”). Various provisions of the CAN‑SPAM Act were relied upon by the FTC in the proceedings. The essential contention was that Mr Atkinson and others had initiated the transmission of unsolicited computer email messages in contravention of the Act in respect of the sale and promotion of the above products. The Court found, on the face of the FTC material, that there had been contraventions of the CAN‑SPAM Act, and that:

(A) the total amount of consumer injury caused by Defendants Lance Thomas Atkinson and [Inet Ventures Pty Ltd, a corporate defendant of which Mr Atkinson was found to be the sole officer] for the sale of their Hoodia Products [herbal products] Male Enhancement Products, prescription drugs, and other products through illegal commercial email messages is $15,151,029.

19 In those proceedings a range of findings were made in relation to the pleaded conduct and judgment was entered in favour of the FTC against Lance Thomas Atkinson and Inet Ventures Pty Ltd, jointly and severally, in the amount of $15,151,029 for violations of the FTC Act and the CAN‑SPAM Act.

20 The relevance and utility of the United States proceedings is simply that the Court should note that Mr Atkinson has been the subject of proceedings in the United States which in some respects bear similarities to the present proceedings. The United States proceedings will not fall within the scope of s 24(2)(e) simply on the footing that prior to the determination of a pecuniary penalty, a court in a foreign jurisdiction has made findings concerning the conduct of Mr Atkinson which, as to the distribution of electronic messages, bears some similarities with the conduct in these proceedings. It seems to me that on the question of penalty, s 24(2)(e) is directing the Court to take into account conduct on the part of Mr Atkinson, the subject of findings by a foreign court in respect of similar conduct to the conduct the subject of these proceedings, which occurred prior to the contraventions of the Spam Act.

21 It is true that the United States proceedings do not represent a foreign proceeding in which findings were made adverse to Mr Atkinson prior to the contraventions alleged in these proceedings between 25 October 2006 and 17 December 2007. It is not clear from the judgment precisely when the conduct in respect of the United States distribution of electronic messages occurred. Further, the proceedings involved contraventions of both the CAN‑SPAM Act and the FTC Act. In addition, the findings arose out of an application for judgment in default of appearance on all counts after service of the proceedings on all defendants.

22 The parties made joint submissions as to the deliberateness of the contraventions of the Spam Act and the period over which it extended. At para 57, the joint submission provides:

The conduct was highly deliberate, in that Mr Atkinson intended and facilitated the sending of large volumes of spam emails, over a period of some 14 months from October 2006 until December 2007, which ceased only with the intervention of authorities. Mr Atkinson profited directly from the contravening conduct, and engaged in it for the [purpose] of obtaining those profits.

[emphasis added]

23 Particular emphasis is given in the submissions at para 59 to the cooperation Mr Atkinson has provided to the Authority in seeking resolution of the issues. Paragraphs 59 and 60 are in these terms:

59. Mr Atkinson has co-operated with the ACMA in jointly seeking resolution of these proceedings. Mr Atkinson made substantive admissions to the ACMA at a relatively early stage of the investigation, obviating the need for time-consuming and costly evidence-gathering and forensic investigation on the part of the regulator. While admissions were initially made in the course of compulsory examination, rather than on a voluntary basis, Mr Atkinson proceeded in a co-operative manner following the examination, and provided documents and information to the ACMA on a voluntary basis.

60. Mr Atkinson’s consent to the proposed orders, and admissions in the proceedings, will also assist in minimising the impact of the proceeding on the resources of the Court.

24 As to the totality principle, the parties jointly submit that the conduct represents one class of conduct comprising a sequence of contraventions all of the same kind or character, and thus, it is appropriate to aggregate the contraventions and treat them as a single contravention made up of many parts notwithstanding that many unsolicited commercial electronic messages were caused to be sent by Mr Atkinson on each of the 61 days within a pattern of conduct over a 14 month period.

25 There have now been three judgments of the Court in respect of contraventions of s 16 (among other provisions) of the Spam Act. They are, Australian Communications and Media Authority v Clarity1 Pty Ltd [2006] FCA 1399; (2006) 155 FCR 377 per Nicholson J; Australian Communications and Media Authority v Mobilegate Ltd A Company Incorporated in Hong Kong (No 4) [2009] FCA 1225; (2009) 261 ALR 326 per Logan J; and a further ex tempore judgment by Logan J on 16 December 2009 concerning further respondents in the Mobilegate litigation (Australian Communications and Media Authority v Mobilegate Ltd (No 6) [2009] FCA 1533).

26 The decision of Nicholson J in Clarity1, involved conduct on the part of the corporation of sending 270,305,474 commercial electronic messages between 10 April 2004 and 13 April 2006. In the majority of these contraventions, Clarity1 had used harvested addresses in contravention of s 22(1) of the Spam Act. Mr Mansfield, the second respondent, was found to have aided, abetted, counselled and procured the contraventions and to have been knowingly concerned in or a party to them. The Court found Mr Mansfield to have been “closely involved” in the contraventions. The proceedings were contested. Nicholson J made findings of fact in a primary judgment and addressed the question of the pecuniary penalty in the judgment cited above.

27 Nicholson J took these matters into account: it was difficult to quantify the loss or damage caused by the conduct and thus the presence of loss or damage was treated as a possible aggravating circumstance; the contraventions involved a “huge volume” of electronic messages described by witnesses as “annoying, time consuming and frustrating” resulting in responses through filtering and blocking software; since the contravening conduct was the first conduct to be prosecuted under the Spam Act and the respondents genuinely believed that their conduct did not involve a contravention, these circumstances amounted to “an important factor in their favour”; the respondents had not been found by the Court to have engaged in previous contraventions; although the conduct of the respondents was deliberate, the deliberateness was an expression of their belief that their understanding of the new law was correct; and, the issue of capacity to pay a pecuniary penalty, although a relevant factor, was of less relevance when balanced against the necessity of imposing a penalty meeting the objective of general deterrence. His Honour applied the totality principle.

28 On the question of cooperation, the applicant acknowledged that the respondents had not attempted to hinder or prevent it from conducting its investigation of the respondent’s conduct. The applicant contended that cooperation flowed from the fact that at no time did the respondents entertain the possibility that their conduct might contravene the Spam Act. The respondents vigorously opposed the position asserted by the applicant that they had not shown any cooperation in relevant respects. Nevertheless, one point of distinction between Clarity1 and the present proceeding is that the respondents in Clarity1 contested the proceedings because they believed their conduct did not involve a contravention of the Act. Thus, they simply sought to ventilate their view of the quality of their conduct in the face of new legislative provisions.

29 In these proceedings, Mr Atkinson, in the face of enforcement proceedings, exhibited genuine cooperation with the Authority.

30 In approaching the assessment of the pecuniary penalty, Nicholson J considered that there is a need for “commercial realism in fixing penalties”. He also said this:

56. One difficulty which emerges in the application of the pecuniary penalty provisions in the new Act is that the maximum penalties are so high as to give rise to “an unrealistically large penalty”. The unrealistic character derives principally from the quantum of penalty viewed in relation to the capacity of either respondent to pay and the need for general as well as specific deterrence. It is not just the total quantum of a pecuniary penalty which can provide the element of general deterrence. That quality derives from a consideration of the penalty in relation to the conduct giving rise to it and the financial capacity of the offenders. Where the financial capacity is not great, a [lesser] pecuniary penalty in value will derive its quality of general deterrence from its magnitude in relation to that capacity.

57. [As to a penalty of $9.9m sought against Clarity1] A penalty in the amount of $9.9 million is clearly one beyond the capacity of Clarity1 to pay and so likely to lead to its liquidation. It is quite disproportionate to the commercial realities of Clarity1. Even as proposed it is in the particular circumstances “an unrealistically large penalty”. … It is overly weighted in favour of general deterrence. Importantly, it does not appear to be constructed on any allowance of the new character of the legislation and the entitlement of the respondents to test their view of the effect of the legislation.

31 Similar views were expressed in relation to the pecuniary penalty sought against the individual, Mr Mansfield. In the end result a pecuniary penalty of $1m was imposed upon Mr Mansfield. The pecuniary penalties imposed in the matter amounted to approximately 5% of the maximum penalties possible.

32 In Mobilegate, Logan J was addressing conduct involving the sending of unsolicited short‑message‑service messages to the mobile telephones of users who had been deceived into providing their mobile telephone numbers to representatives of either Mobilegate, the first respondent, or Winning Bid, the second respondent, under the belief that they were corresponding with individuals seeking to meet them and form relationships via dating web‑sites. Logan J described the respondents as “predators on the emotionally vulnerable for reward” which was “a particularly vile form of behaviour”. His Honour said the conduct was “duplicitous and exploitative” and “cruel and callous”. His Honour concluded that this class of conduct warranted a “very substantial penalty”. Among a number of considerations his Honour noted that the conduct was deliberate and covert and that penalties must be sufficiently significant to “deter the unscrupulous from taking a calculated business risk” but should not be so high as to be “oppressive” in the sense contemplated in Trade Practices Commission v Stihl ChainSaws (Aust) Pty Ltd [1978] FCA 104; (1978) ATPR 40‑091. In addition, the evidence demonstrated that there was approximately $4m of financial loss on the part of individual mobile telephone users who were charged communications fees. His Honour found that the conduct was “of such an intimate exploitive nature that the exploiter by the very conduct gives itself, himself or herself, a degree of insulation at a practical level from suits for financial recovery” and the conduct involved a “consistent pattern of studied deception”. It was deliberate contravening conduct with no mitigating circumstances.

33 In addition, there was no evident cooperation in the administration of justice.

34 The entity, Mobilegate, was ordered to pay $5m which represented 6.87% of a possible maximum of approximately $72,820,000. The entity Winning Bid was ordered to pay $3,500,000 representing 8.51% of a possible maximum of $41,140,000. So far as the individuals were concerned, Logan J took into account that their involvement was extensive, knowing and persistent. However, in examining the implications which might be drawn from statutory maximum pecuniary penalties in the context of individuals found to be parties to contravening corporate conduct, Logan J considered assessment of the maximum penalty as a “theoretical exercise”. Significant pecuniary penalties were ordered against the individuals having regard to the quality of their engagement in the conduct of the corporation. There is little point isolating the amount of each penalty in respect of each individual in the circumstances of the findings.

35 Clearly, it is important to take into account the scale of penalties the Parliament has selected as the appropriate range leading to a maximum penalty in respect of contraventions of particular legislation. Often, careful attention will need to be given to the Parliament’s selection of maximum penalties as an expression of the Parliamentary intention that particular conduct, must be transparently deterred. This is entirely consistent with Markarian v The Queen (2005) 228 CLR 357. In addition, the Regulation Impact Statement at p 4 of the EM sets out the following statement of the problem sought to be addressed by the Spam Act at p 4.

B.1 Problem or issue identification

Unsolicited electronic messages or “spam” are reaching plague proportions and growing exponentially. It is causing immense frustration and reduced productivity for users, businesses and government agencies. If left unchecked it will reach proportions which will threaten the viability of the internet as a reliable communications medium. A recent comprehensive review of the problem by the National Office for the Information Economy recommended a multi‑layered approach to addressing the problem, including the implementation of specific anti‑spam legislation.

36 The EM describes the problem so identified as an international problem affecting the efficient operation of internet telecommunications networks and imposing costs on end‑users. At p 5, the EM notes, “There are clear signs of a deleterious impact on the performance of the global e‑mail network with some commentators predicting that the continuing proliferation of spam could mean the end of e‑mail as an effective form of communication”.

37 At p 67, the EM contains this observation in relation to penalties:

A daily ceiling for penalties has been set that may be charged for all contraventions against a particular provision that have occurred in one day. This has been included to ensure that a meaningful penalty may be charged for a single contravention without causing an unrealistically large penalty payable for multiple contraventions. For example, there are reported cases of dedicated spammers sending millions of unsolicited commercial electronic messages each day. Without a ceiling amount for daily contraventions, such a spammer could potentially be liable for a million contraventions. The ratio between the penalty payable for a person for single contravention and the ceiling amount is 20 times.

Conclusions

38 Accordingly, I propose to approach the assessment of the pecuniary penalty jointly put to the Court by the parties on this basis.

39 Firstly, I have taken into account each of the considerations identified in s 24(2) of the Spam Act in determining whether the proposed pecuniary penalty is appropriate. That question is to be approached by taking into account all of the relevant considerations including the criteria at s 24(2)(a) to (e) and any additional matters that enable the Court to determine whether the proposed penalty is within the range of penalties that might be imposed.

40 Secondly, I consider that the decisions of the Court in Clarity1 and Mobilegate engage factors which significantly differentiate those cases from the present case. Clarity1 was a fully contested proceeding involving a different class and scale of conduct. There was no cooperation in relation to the proceeding because the respondents took the view that their conduct did not involve a contravention of the relevant provisions especially in circumstances where the legislation had not been tested and no judicial determination was before the respondents which may have aided their analysis of the various integers contained in the sections. The respondents in Clarity1 cooperated in the conduct of the case but not in the sense of accepting the contention that its conduct contravened the Spam Act, so as to avoid the applicant incurring the costs of the proceeding.

41 The decision in Mobilegate involved truly reprehensible predatory conduct of a kind which warranted a penalty directed emphatically towards specific deterrence and transparent general deterrence. The class of conduct the subject of Mobilegate is not evident in these proceedings.

42 Thirdly, however, as to the class of conduct on the part of Mr Atkinson, there is simply no doubt that Australian citizens find large‑scale distribution of unsolicited commercial electronic messages promoting the sale of products, in the circumstances of this case, very irritating and annoying. It causes all users of computers to constantly update spam filters and other protective devices to try to deflect the unwanted rain of electrons and digits disseminated by those who wish to do what Mr Atkinson has done. The Parliament has made its intention plain that the unsolicited distribution of electronic emails (spam) is to be discouraged.

43 Notwithstanding these considerations, the Court ought to take into account and attach significant weight to Mr Atkinson’s cooperation with the Authority in isolating the extent of the conduct and in seeking to resolve the present claims on the basis of admissions and a joint submission.

44 Fourthly, Mr Atkinson is represented by independent lawyers and he has formed his view as to the various matters the subject of the submission with the assistance of that advice.

45 Fifthly, from the regulator’s perspective, there is much to be gained, in the public interest, in reaching the consensus reflected in the joint submission which, in truth, is a calculus of competing considerations which take their distilled form in the joint submission as a result of a range of considerations and, no doubt, positions put; some accepted; some rejected; and many negotiated, with a view to addressing the contraventions without the necessity of litigation. Plainly enough, significant costs will be avoided for the Authority as a result of this approach to the matter. Court time will be saved and matters of other litigants will be allocated to Court time that would have been consumed in hearing the present proceeding.

46 Sixthly, although Mr Atkinson has been the subject of New Zealand proceedings, I note that he also cooperated with the New Zealand authorities in resolving the matters in issue in that jurisdiction. I note that Mr Atkinson contends in the joint submissions that he made some attempts to prevent the distribution of the emails to Australian addressees although the attempts are undocumented and undefined. Nevertheless, I accept that some attempt was made to prevent that distribution.

47 Seventhly, in assessing whether the quantum of the proposed penalty is appropriate in all the circumstances, I have taken into account the agreed position concerning the facts of the contraventions; the unquantifiable but recognised costs and losses imposed on users by conduct such as Mr Atkinson’s conduct; the highly deliberate character of the conduct engaged in for profit‑making by Mr Atkinson; the attempts by Mr Atkinson to counteract filters used to prevent spam communications from reaching Australian users; and the other considerations earlier mentioned.

48 Eighthly, although the pecuniary penalty is a matter for the Court to determine (Minister for Industry, Tourism and Resources v Mobil Oil Australia Pty Ltd [2004] FCAFC 72), and the question of whether the Court ought to make declarations as to particular matters or injunctions framed in a particular way or at all necessarily involves discretionary considerations and questions of utility, the Court will attach significant weight to a negotiated settlement quickly reached between parties acting with the benefit of legal advice, provided the document identifies the conduct precisely; the responsibility of each respondent in that conduct is recognised (whether at the centre or at the margin); and the proposed penalty is within the range the Court would impose and is thus not manifestly inadequate: Trade Practices Commission v TNT Australia Pty Ltd (1995) ATPR 41‑375; NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (1996) 71 FCR 285; Australian Communications and Media Authority v Radio 2UE Sydney Pty Ltd (No 2) (2009) 178 FCR 199. The approach to the assessment of a pecuniary penalty under the Spam Act ought, in principle, to reflect some of the considerations applied by the Court in assessing a pecuniary penalty under the Trade Practices Act 1974 (Cth). In particular, the Court will have regard to the elements of specific and general deterrence and assess whether a proposed penalty might be so high as to be oppressive in all the circumstances: Australian Competition and Consumer Commission v Leahy Petroleum Pty Ltd (No 3) (2005) 215 ALR 301; TPC v Stihl Chainsaws (Aust) Pty Limited; NW Frozen Foods Pty Ltd v ACCC at 293.

49 I am satisfied that the proposed pecuniary penalty is within the range that the Court would impose, although I take the view that the proposed penalty in the joint submission is towards the lower end of that range having regard to the concessions made on the facts and the criteria informing the determination of a penalty. However, Mr Atkinson’s cooperation is a significant factor in determining whether the penalty is within the range and thus not manifestly inadequate. The proposed penalty of $210,000.00 is one which will impose specific deterrence upon Mr Atkinson and suggests to the broader community, as a matter of general deterrence, that contravention of the Spam Act attracts significant penalties. In addition, the public recognition that early and close cooperation with the Authority, when confronted with conduct in contravention of the Spam Act, is likely to significantly mitigate the pecuniary penalty ultimately imposed, is in the public interest, by creating incentives for contraveners to cooperate early and comprehensively.

50 The parties jointly urge the Court to make a declaration in the following terms and order that the respondent be restrained, in the following terms:

THE COURT DECLARES THAT:

1. The respondent, between approximately 25 October 2006 and 17 December 2007, by, in the course of his operation of the Sancash Business,

1.1 recruiting individuals (“the Sancash Affiliates”) to market particular products via the internet (“the Sancash products”);

1.2 receiving and paying commissions in respect of sales of the Sancash products as a result of internet marketing by Sancash Affiliates;

1.3 communicating electronically with the Sancash Affiliates in relation to the Sancash Business;

1.5 providing and causing to be provided subject lines to Sancash Affiliates for use in electronic messages sent by the Sancash Affiliates to market the Sancash products; and

caused to be sent by the Sancash Affiliates electronic messages which:

1.7. were sent for the purpose of offering to supply, or promoting, the Sancash products, and were thereby commercial electronic messages within the meaning of s.6 of the Spam Act;

1.8 were not designated commercial messages within the meaning of Schedule 1 of the Spam Act because the messages contained other than factual information with or without directly related comment;

and has thereby caused to be sent unsolicited commercial electronic messages in contravention of s.16(1) of the Spam Act.

THE COURT ORDERS THAT:

2. The respondent be restrained for a period of seven years from the date of order from sending, or causing to be sent, or being knowingly concerned in or party to any person sending or causing to be sent, unsolicited commercial electronic messages from a person in Australia to anywhere, or from anywhere to persons in Australia.

…

51 As to the declarations and injunctions, I am satisfied that the discretion ought to be exercised in favour of making the declarations and an injunction restraining Mr Atkinson as sought, subject, however, to the amendment suggested below. Mr Atkinson is to be ordered to pay to the Commonwealth of Australia, in respect of his contraventions of the Spam Act, a pecuniary penalty in an amount of $210,000.00, such penalty to be paid within 60 days of this order. A further order will be made by agreement that the respondent pay the applicant’s costs of and incidental to these proceedings in an agreed amount of $15,000.00 within 60 days of this order.

52 The injunction is to be expressed in these terms:

THE COURT ORDERS THAT:

…

2. The respondent be restrained for a period of seven years from the date of this order from sending, or causing to be sent, or being knowingly concerned in or party to any persons sending or causing to be sent, an unsolicited commercial electronic message as that term is understood for the purposes of the Spam Act 2003 (Cth) or unsolicited commercial electronic messages for the purposes of that Act from a person in Australia to anywhere, or from anywhere to persons in Australia.

I certify that the preceding fifty-two (52) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Greenwood.

Associate:

Dated: 22 December 2009

Counsel for the Applicant:	Mr M R Hodge

Solicitor for the Applicant:	Australian Government Solicitor

Solicitor for the Respondent:	Mr D Kake, Redchip Lawyers

Date of Hearing:	16 December 2009

Date of Judgment:	22 December 2009

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