FEDERAL COURT OF AUSTRALIA

Australian Competition and Consumer Commission v MSY Technology Pty Ltd (No 2) [2011] FCA 382

THE COURT ORDERS THAT:

1.    The parties bring in short minutes of order within 7 days.

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 Law Search on the Court’s website.

REASONS FOR JUDGMENT

Introduction

1    In this fast track proceeding the applicant Commission (the “Commission”) seeks orders restraining the respondents from making various representations in its stores about the limited nature or non-existence of customers’ warranty rights. The respondents are a group of merchants selling computers, computer parts, electronic goods and software (“computer goods”). The Commission also seeks declarations that the respondents have engaged in the conduct it alleges, orders for corrective advertising, orders requiring the implementation of a trade practices compliance programme and the imposition upon the respondents of civil penalties.

2    After the commencement of the proceedings on 28 October 2010, the respondents swiftly admitted all of the conduct alleged against them in the Commission’s application, agreed to all of the Commission’s proposed relief and otherwise fully co-operated. The immediate question is whether the Court should grant the relief which both parties are now agreed upon.

3    The matter was called on for hearing before me on 3 March 2011. The parties agreed both on a statement of agreed facts and a proposed set of orders. The agreed statement of facts was tendered as Exhibit 1 before me pursuant to s 191 of the Evidence Act 1995 (Cth). Section 191 provides:

(1)    In this section:

"agreed fact" means a fact that the parties to a proceeding have agreed is not, for the purposes of the proceeding, to be disputed.

(2)    In a proceeding:

(a)    evidence is not required to prove the existence of an agreed fact; and

(b)    evidence may not be adduced to contradict or qualify an agreed fact;

unless the court gives leave.

(3)    Subsection (2) does not apply unless the agreed fact:

(a)    is stated in an agreement in writing signed by the parties or by Australian legal practitioners, legal counsel or prosecutors representing the parties and adduced in evidence in the proceeding; or

(b)    with the leave of the court, is stated by a party before the court with the agreement of all other parties.

4    A part of a single page of Exhibit 1 entitled “Confidential Exhibit A” was the subject of a confidentiality order made pursuant to s 50 of the Federal Court of Australia Act 1976 (Cth) which is the subject of a separate set of reasons: Australian Competition and Consumer Commission v MSY Technology Pty Ltd [2011] FCA 204. The effect of Exhibit 1 and s 191 is to relieve the Commission from the obligation of having to lead evidence to prove the existence of the facts contained within it. This, however, does not entail that the Court must necessarily accept the facts agreed upon in Exhibit 1: cf. Minister for the Environment, Heritage and the Arts v PGP Developments Pty Limited (2010) 183 FCR 10 at 20 [35] per Stone J. There may be circumstances where there are ambiguities, contradictions or deficiencies in form within an agreed statement of facts which may reduce its utility as a source of evidence. Furthermore, since the rules of evidence are directed to the adduction of material which is thought to be reliable, it is unlikely that an agreed statement of facts which, on its face, contains inadmissible evidence which is unreliable, will be a useful source of material upon which to make findings of fact. On the other hand, the fact that the parties are in agreement on a fact will very often, at least in inter partes litigation, be thought to provide a level of comfort on the issue of unreliability. Whether the mechanics of rejecting an agreed fact as evidence requires the Court first to grant leave under s 191(2) or whether the Court may simply reject the fact out of hand need not presently be resolved and I express no view about it.

5    Insofar as the agreed proposed orders deal with the implementation of a trade practices compliance programme, corrective advertising, the release of undertakings and the question of costs I am content to make the orders by consent with little elaboration. In relation to those orders, which do not have a public element to them, it is sufficient that the Court be satisfied that it has the power to make the orders upon which the parties are agreed. One source of this Court’s power to order corrective advertising and the implementation of a compliance programme is s 86C of the Act formerly known as the Trade Practices Act 1974 (Cth). That Act was amended and partially renumbered with effect from 1 January 2011 by the Trade Practices Amendment (Australian Consumer Law) Act (No 2) 2010 (Cth). At the same time, the Trade Practices Act was renamed by item 2 of Schedule 5 to the Trade Practices Amendment (Australian Consumer Law) Act (No 2) to become the Competition and Consumer Act 2010 (Cth). That name suggests that the Act was originally passed in 2010 but this is incorrect. The Act was originally passed in 1974 which is an unerasable historical fact. The practice of including information in the Parliamentary roll which is both incorrect and misleading is one which ought to be decried. In any event, item 7(1) of Schedule 7 to the Trade Practices Amendment (Australian Consumer Law) Act (No 2) provides that the Trade Practices Act as in force immediately before 1 January 2011 continues to apply to any proceedings under that Act that were commenced but not concluded before 1 January 2011. This proceeding was commenced on 28 October 2010 so that the unamended form of the Trade Practices Act continues to apply to it. Accordingly a power to make orders for the implementation of a trade practices compliance programme and for corrective advertising rests in s 86C(2)(b) and (d) and, therefore, exists. It is likely, in any event, that the Court’s general powers ran to the same extent.

6    The position is slightly different in the case of the injunction. Notwithstanding the operation of the transitional arrangements, s 80 of the Act formerly known as the Trade Practices Act does not apply because, for reasons which elude me, item 7(2) of Schedule 7 to the Trade Practices Amendment (Australian Consumer Law) Act (No 2) deems proceedings taken under the former s 80 to be proceedings taken under s 232 of what the item refers to as the “Australian Consumer Law”. The Australian Consumer Law is contained in Schedule 2 to the Competition and Consumer Act. Section 232 of that Schedule is not, for present purposes, relevantly different to the former s 80. Further, section 233 expressly authorises an injunction to be ordered by consent. It follows that I am satisfied that the Court has the power to make those orders and I am content to do so.

7    The parties’ agreement on the proposed declarations and civil penalties does not, however, relieve the Court of the obligation to satisfy itself that they are appropriate. The need for the Court’s satisfaction arises from the potentially public nature of those kinds of orders. Declaratory relief may affect or declare the state of the law which may, in some circumstances, affect parties not before the Court. So too, the imposition of a penalty serves the end, amongst others, of deterring similar conduct by others not before the Court. The gauging of that kind of consideration means that the fixing of a penalty cannot be solely a matter for the parties.

8    It is convenient to deal first with the declarations.

The making of declarations by consent

9    There are two related principles which suggest that a Court should not make declarations in circumstances such as the present. They are:

(a)    a principle flowing from the Court of Appeal’s decision in Wallersteiner v Moir [1974] 1 WLR 991 which suggests that declarations should not be made on submissions but only on evidence;

(b)    a principle flowing from the speech of Lord Dunedin in Russian Commercial and Industrial Bank v British Bank for Foreign Trade Ltd [1921] 2 AC 438 (“Russian Commercial and Industrial Bank”) which suggests that a declaration may not be made in the absence of a contradictor.

10    These principles are related but not identical. It is useful to consider their status separately.

(a) Declarations on admitted facts

11    In Wallersteiner v Moir Buckley LJ said (at 1029):

It has always been my experience and I believe it to be a practice of very long standing, that the court does not make declarations of right either on admissions or in default of pleading. A statement on this subject of respectable antiquity is to be found in Williams v Powell [1894] WN 141, where Kekewich J, whose views on the practice of the Chancery Division have always been regarded with much respect, said that a declaration by the court was a judicial act, and ought not to be made on admissions of the parties or on consent, but only if the court was satisfied by evidence.

12    Scarman LJ put it this way (at 1030):

When a defendant fails to plead, it is ordinarily in the interest of justice that the plaintiff should be able without more ado to obtain judgment for the money or property for which he is suing; the defendant is not without remedy after judgment in default, for, if he can show a bona fide defence, he can get it set aside before it is enforced. But, when what is sought is a declaration, there is the risk of irremediable injustice: the court has spoken and words cannot be recalled, even though later they be negatived; “nescit vox missa reverti”, Horace, Ars Poetica, line 390. The power of the court to give declaratory relief upon a default of pleading, of course, exists, but, for the reason crystallised by Horace in those four words of his, should be exercised only in cases in which to deny it would be to impose injustice upon the claimant.

13    So far as I can see these statements suggest three reasons why declarations should not be made on agreed facts. These are:

(a)    Kekewich J said so in Williams v Powell [1894] WN 141;

(b)    the spoken words of a declaration cannot be recalled even if later reversed on appeal; and

(c)    Horace made the same point in Horace, Ars Poetica, line 390.

14    Since Cook v Cook (1986) 162 CLR 376 at 390 per Mason, Wilson, Deane and Dawson JJ, the authority of the English Court of Appeal in this country is co-extensive, as in the case of other “great common law courts”, with its ability to persuade. In my opinion, this aspect of Wallersteiner v Moir is, with respect, distinctly unpersuasive. To begin with (a), Kekewich J said nothing so absolute as Buckley LJ suggests. Resort to the report of the decision shows why. It consists of a very short set of reasons probably delivered ex tempore. They are reported in the Weekly Notes for the week ending 21 July 1894. Williams v Powell was delivered on 14 July 1894 which was a Saturday, underscoring the ex tempore nature of the reasons.

15    As was the style with the Weekly Notes the actual judgment is not reported but instead an account of it by a reporter “C.C.M.D”. His short report is as follows:

KEKEWICH, J., said that a declaration by the Court was a judicial act, and ought not to be made on admissions of the parties or on consent, but only if the Court was satisfied by evidence. His Lordship had always so held, and intended so to hold until corrected; but in order to avoid expense, he would adopt a course which he had adopted on other occasions. Evidence that all parties were before the Court and of the title might be produced to the chief clerk, who, without making any certificate, would look into the matter and inform the Court whether he was satisfied with the title, and, if he was, the order might then go.

(emphasis added)

16    The emphasised portion shows that Kekewich J was content to make declarations on the basis of having been told by the chief clerk that he was satisfied of the correctness of the factual matter upon which the parties agreed.

17    I confess I cannot see how such a statement has gone on to serve as the grandsire of the present principle. Contrary to Buckley LJ’s statement, the passage in question suggests that a declaration can be made where the parties proceed on admissions if a subordinate officer of the Court satisfies himself as to the facts. I cannot see how it can be objectionable for a judge to do the same thing. In my opinion, Williams v Powell is simply not authority for the proposition for which Buckley LJ cited it.

18    As to (b) and (c), the logic of this, with respect, confounds me. A declaration which has been made may be set aside on appeal. It is true that Horace said that a published word cannot be recalled but this was in the context of an exhortation against amateur poets (“Yet he who knows nothing of verse still dares to write”). In the section cited by Scarman LJ, Horace suggests that the amateur poet put away his manuscript for nine years: “you can always destroy what you haven’t published: once out there’s no recall”. Engaging though this is I do not think it has much to do with the theory underpinning declaratory relief. The same may also be said of any order of the Court.

19    In those circumstances, I do not accept that Williams v Powell requires the conclusion that declarations should not be made except on evidence; it is certainly not what Kekewich J did in that case. Insofar as Wallersteiner v Moir is concerned this aspect of its reasoning is, with respect, based on a misreading of Williams v Powell together with a reason which is altogether tenuous.

20    The learned author of the second edition of Declaratory Orders says this (at [601]):

It has long been the rule that a declaration is a judicial act and ought not to be made merely on admissions of counsel or by consent, but only if the court was satisfied by evidence: Williams v Powell [1894] WN 141. This rule has been adopted by the English Court of Appeal in Wallersteiner v Moir [1974] 3 All ER 217; 1 WLR 991, by the Full Federal Court in BMI Ltd v Federated Clerks Union of Australia (1983) 51 ALR 401 where the first edition of this work is cited with approval and by the New South Wales Court of Appeal in Termijtelen v Van Arkel [1974] 1 NSWLR 525 at 533. In Canada see Re Bell; Marshall v Montgomery [1953] 3 DLR 521 and Grys v Sewell and Jaffray [1972] 1 OR 733.

21    It will follow from what I have said that the first two references leave me unmoved. The citation of the Full Court’s judgment in BMI Ltd v Federated Clerks Union of Australia (1983) 6 IR 416 (“BMI”) does, however, require further comment.

22    In that case, having referred to Wallersteiner v Moir, Keely and Beaumont JJ went on to say (at 425):

For the reasons advanced by Buckley LJ and Scarman J, supra, we think that it is generally undesirable that the court should grant relief by way of declaratory orders under s 108 in the absence of any contest on the question: see Forster v Jododex Aust Pty Ltd, supra, at 437–8); Halsbury's Laws of England 4th ed, vol 37 at p 192; Metzger v Department of Health and Social Security [1977] 3 All ER 444 at 451. If the matter were merely one of private right between particular parties, for example, a question as to the respective rights of parties under a contract, it may well be appropriate for a court to make a declaration as to those rights by consent. In such a case, the public and other parties cannot be affected, let alone bound, by such a declaration (see Hanson v Radcliffe Urban District Council [1922] 2 Ch 490 at 507; Halsbury's Laws of England 4th ed, vol 1 at pp 174–6).

(bold emphasis mine)

23    The reference to Forster v Jododex Australia Pty Ltd (1972) 127 CLR 421 (“Forster”) is important. For reasons I return to below the passage cited does not stand for the proposition that there must be a “contest” but for the different, and more subtle, proposition that there must be a contradictor. More importantly, it is clear that Keely and Beaumont JJ did not say anything about whether declarations could, or could not, be made on agreed facts. Indeed it will be noted that the Court’s conclusion was not that it could only act on evidence but rather that there needed to be contest. A reading of the full report of BMI shows why: the parties were not asking the Court to act on agreed facts or admissions. To the contrary, the Court had affidavit evidence before it, as the reference to Mr McKimm’s affidavit of 30 November 1982 in the judgment of Keely and Beaumont JJ at 426 inevitably shows. The dissenting reasons of Northrop J also disclose the substantial affidavit evidence which was before the Court (at 418). Once that is appreciated it becomes plain that their Honours could not have been speaking of the practice discussed in Wallersteiner v Moir. It is also just as plain that it cannot be authority for the proposition for which it is cited in P W Young QC’s Declaratory Orders (2nd Ed, 1984).

24    In Australian Competition and Consumer Commission v Allergy Pathway Pty Ltd [2009] FCA 960 (“Allergy Pathway”) Finkelstein J had before him an application by the Commission for certain declarations to which the respondent consented. Actual evidence was placed before his Honour about the contravening conduct. His Honour nevertheless indicated that he would not have made the declarations without that evidence (at [10]) which suggests that his Honour was focussing on the principle in Wallersteiner v Moir, that declarations are not made without evidence, rather then the principle in Forster that they are not made without a contradictor.

25    After reviewing a number of authorities, including Wallersteiner v Moir, his Honour concluded that BMI bound a judge of this Court “not [to] grant a declaration involving a public right in the absence of evidence that supports the declaration.” (at [19]). For the reasons already given, BMI is not, with respect, authority for that proposition.

26    It is then necessary to refer to some decisions which are contrary to the conclusion in Allergy Pathway. Three cases suggest that the presence of an agreed statement of facts under s 191 releases the operation of the “principle” that declarations may not be made on agreed facts. The first of these preceded in time Allergy Pathway: Australian Competition and Consumer Commission v Skins Compression Garments Pty Ltd [2009] FCA 710. There Besanko J merely said (at [13]):

In the ordinary case, a Court will not make a declaration by consent unless it is satisfied by evidence that it should do so. In this case, I have the statement of agreed facts under s 191 of the Evidence Act 1995 (Cth) and, by reason of that section, evidence is not required to prove the existence of the agreed facts.

27    To similar effect are the decisions of Stone J in Minister for the Environment, Heritage and the Arts v PGP Developments Pty Limited (2010) 183 FCR 10 at 17-20 [25]-[37], where her Honour noted that Finkelstein J’s comments were obiter and concluded, in any event, that s 191 overcame any difficulty. In Australian Competition and Consumer Commission v Jetplace Pty Ltd [2010] FCA 759 Gilmour J reached the same conclusion at [50]-[61]. Finkelstein J returned to the issue in Australian Competition and Consumer Commission v Bridgestone Corporation (2010) 186 FCR 214 rejecting the position adopted by Besanko J in Australian Competition and Consumer Commission v Skins Compression Garments Pty Ltd as “plainly incorrect” (at 217 [12]). On the view I take of things the principle said by Finkelstein J to be the ratio of BMI is not and the binding effect his Honour perceived as flowing from that decision does not, with respect, arise. Given what appears to me to be the anaemic jurisprudential basis upon which the principle is said to rest I have no reticence in embracing the notion that all such difficulties are dissolved by s 191 of the Evidence Act. I turn then to the requirement that there be a contradictor.

(b) the principle that there should be no declaration granted in the absence of a contradictor

28    This Court is bound to the existence of this principle by Forster. There Gibbs J considered the circumstances relevant to the exercise of the discretion to grant a declaration. At 437 his Honour said:

It is neither possible nor desirable to fetter the broad discretion given by s. 10 by laying down rules as to the manner of its exercise. It does, however, seem to me that the Scottish rules summarized by Lord Dunedin in Russian Commercial and Industrial Bank v. British Bank for Foreign Trade Ltd, should in general be satisfied before the discretion is exercised in favour of making a declaration:

“The question must be a real and not a theoretical question; the person raising it must have a real interest to raise it; he must be able to secure a proper contradictor, that is to say, some one presently existing who has a true interest to oppose the declaration sought.”

(footnotes omitted)

29    There are two things which should be said about this. First, it was a considered statement and one in which McTiernan, Stephen and Mason JJ joined. The passage from Lord Dunedin’s speech in the House of Lords was plainly approved. It is true that the conclusion that a declaration should not be made in the absence of a contradictor was not essential to the reasoning in Forster and, therefore, is an obiter dictum. But McTiernan, Gibbs, Stephen and Mason JJ constituted a majority on this point. It follows that, as a considered dictum of a majority of the High Court, I am bound to apply it unless some later development in the High Court qualifies that conclusion or unless statute intervenes: Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89 at 150 [134].

30    Secondly, I can perceive no suggestion that the principle has in any way been narrowed. In Ainsworth v Criminal Justice Commission (1992) 175 CLR 564 Mason CJ, Dawson, Toohey and Gaudron JJ quoted the first sentence in the quotation from Forster set out above and went on to say of the discretion (at 582):

…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”.

(footnotes omitted)

31    I do not think that there is no “matter” in the requisite constitutional sense where a case has settled and the Court is asked to make consent orders disposing of the proceedings. The controversy exists in the Court’s pleadings and the proceedings must be brought to an end somehow. But I perceive in Ainsworth v Criminal Justice Commission (1992) 175 CLR 564 no hint that anything said in Forster was being narrowed; indeed the notion that a declaration “must be directed to the determination of legal controversies” suggests to my mind that there was no pulling back from the need for a contradictor laid down in Forster.

32    The second decision is BMI itself. In that case, as I have already indicated, the apparent basis of the decision was the absence of “contest” (not the absence of evidence). All parties were before the Court and were consenting; it was the absence of opposition, in that case, which was fatal. It is clear, however, that Keely and Beaumont JJ thought that the need for a contradictor required there to be a party arguing against the granting of the relief and that this could not be satisfied where the matter proceeded by consent.

33    This raises the question of what a contradictor is and that brings one back to Lord Dunedin’s summary of the Scottish law recited in Forster. Ordinarily I would not regard a detour through the state of Scottish practice in 1921, when Lord Dunedin was speaking, as a useful exercise. Two matters, however, incline me to take that course. The first is the undoubted fact that Lord Dunedin was summarising the Scottish position in Russian Commercial and Industrial Bank. Although Gibbs J only set out the actual principles applied by Lord Dunedin the full quote of what his Lordship said was as follows (at 448):

…It may be that I am swayed by my experience of another system of law, but a rule which can be expressed in the form of a principle may well be proper to any legal system. Your Lordships are aware that the action of declarator has existed for hundreds of years in Scotland. It was praised, with envy, by Lord Brougham, in your Lordships’ House, in the case of Earl of Mansfield v Stewart long before the genesis of Order xxv. r. 5. The rules that have been elucidated by a long course of decisions in the Scottish Courts may be summarized thus: The question must be a real and not a theoretical question; the person raising it must have a real interest to raise it; he must be able to secure a proper contradictor, that is to say, some one presently existing who has a true interest to oppose the declaration sought.

(footnotes omitted)

34    It is clear, therefore, that Lord Dunedin was applying established Scottish practice. The second is that it is just as plain that Gibbs J was doing the same thing: “[i]t does, however, seem to me that the Scottish rules summarised by Lord Dunedin… should in general be satisfied before the discretion is exercised in favour of making a declaration” (at 437).

35    That being so it is legitimate in seeking to ascertain what a contradictor is to look to the Scottish law of which our present rule appears to be but an instantiation. The first decision to which reference should be made is the Court of Session’s decision in Harveys v Harvey’s Trustees (1860) 22 SC 1310 where Lord Justice-Clerk Inglis refused a declarator (a declaration) in a suit concerning the construction of certain trusts. The pursuers were a brother and sister. It is apparent that the Court was concerned that the issue raised was potentially hypothetical. It is also clear, however, that it was concerned that parties beyond those before it might be effected by the outcome. Lord Justice-Clerk Inglis said (at 1326):

In these circumstances, I am not disposed to entertain this conclusion. I think it is quite objectionable, for the reasons that I have already explained; and although there are at first sight some cases which seem to come near to this, I do not think any of them are distinguished by this peculiarity, unless it be one to which I shall particularly refer immediately; but certainly, as regards all the rest of them, they are not distinguished by this peculiarity, that the judgment pronounced would not be res judicata against all persons who can become interested in the matter.

36    The concern thus disclosed was the necessity of ensuring that the declaration would bind all persons with an interest in the outcome so as to generate a res judicata. A similar concern emerges from the Court of Session’s decision in Allgemeine Deutsche Credit Anstalt v Scottish Amicable Life Assurance Society (1907) 15 SLT 427. In that case German bankers sought a declaration that they had good title to an insurance policy originally issued in favour of a Mr Philipp. Ownership of the policy had passed through a number of hands. In the suit for the declaration they joined the insurer. The Lord President said (at 429):

…I have never known, and counsel have been unable to produce to us, any action of declarator where the Court gave a declarator as to a right without there being a proper contradictor present. It seems to me that the whole argument we have listened to this morning was vitiated by an assumption as to who the contradictor in this case is. The insurance company is not the contradictor as in the question of whom the insurance policy belongs to. The contradictor must be found among the ranks of the parties to whom at various times the policy belonged, and depends upon the question of whether these various steps or links of the chain of title are or are not correct. The insurance company have no interest whatever, except simply to pay the policy, when it becomes a proper claim. Therefore, it seems to me that the whole of the cases where declarators have been obtained have really no application to the case before us. I propose to your Lordships that we adhere.

37    Lord Kinnear agreed and Lord Dundas added (at 430) “[t]here is no proper contradictor here and no actual lis….” The same point was made again in Baillie’s Trustees v Baillie (1910) 2 SLT 6. It follows from these decisions that the Scottish practice as at the time Lord Dunedin was writing in 1921 was one which required the presence of a party in respect of whom there could be a meaningful res judicata and that this is what Scottish law meant by the notion of a “contradictor”.

38    This conclusion about the state of Scottish law also appears to be consistent with the present state of New South Wales law. In ACS v Anderson [1975] 1 NSWLR 212 at 215 Hutley JA (with whom Moffitt P agreed) said “[t]he power given to the Court is to make binding declarations of right, that is, not right in the abstract, but right as against a particular designated legal person”, a sentiment subsequently reiterated in Smith v Commissioner of Corrective Services [1978] 1 NSWLR 317 at 329 per Hutley JA.

39    In this Court, French J reached a similar conclusion in IMF (Australia) Ltd v Sons of Gwalia Ltd [2004] FCA 1390 at [47]. There, having just referred to the passage from Lord Dunedin’s speech in Russian Commercial and Industrial Bank his Honour continued:

47    The requirement of a proper contradictor in a declaratory context is not merely to ensure that the Court will be provided with all materials but also that absent a contradictor there is no person to be bound by the relief sought – Acs v Anderson (1974) 1 NSWLR 212 at 215 (Hutley JA) citing PW Young, Declaratory Orders at 210. A proper contradictor, for jurisdictional purposes, in my opinion cannot be confined to the class of party who comes to court ready to oppose the relief sought. There may be a case in which a party, whether a private person or body or a statutory regulator, expresses opposition to, and an intention to oppose, a proposed course of action by another party on the basis that it is in breach of some contractual or statutory prohibition. The party opposing the conduct may however decide for any one or more of a variety of reasons not to contest declaratory proceedings about the lawfulness of the proposed conduct. So the declaration may be made by consent or may be uncontested. This does not mean that the Court lacks jurisdiction or power to grant the declaration in such a case. The proceedings will have resolved a pre-existing controversy….

…

49    I do not express any concluded view on whether, for jurisdictional purposes, the existence of a proper contradictor is essential to the declaratory jurisdiction of the Court. Nor do I express any concluded view on the range of circumstances in which a party with an interest in opposing a particular course of conduct and a declaration in respect of it can be characterised as a contradictor.

(This case is also reported at 216 ALR 231 but the reporting of [47] is defective and materially different from the actual judgment).

40    I am not sure Forster permits a judge of this Court to be as uncertain as French J suggests in [49] although neither am I sure that Forster is to be read as a statement about jurisdiction. It does, however, appear to be a binding statement that the Court should not make declarations absent a proper contradictor. It does not, however, foreclose the question of whether a contradictor might nevertheless be present in a case which is unopposed as French J leaves open in [49]. For the reasons already given a contradictor does not connote a party who is, in fact, arguing to the contrary but rather all parties whose interests are opposed and who can be bound to the outcome.

41    The difficulty, however, is the decision in BMI. There Keely and Beaumont JJ approached the matter on the basis that consenting proper defendants did not constitute proper contradictors for the purposes of this principle (“…there [is] no contradictor in the present case” (at 426)). In this, with respect, I think they are likely to have been incorrect in light of the Scottish position. Were it open to me not to follow that aspect of BMI I would not do so. Their Honour’s conclusion, however, was the basis of their decision. I have considered whether BMI might be distinguishable on the basis of a statement appearing at 425:

If the matter were merely one of private right between particular parties, for example, a question as to the respective rights of parties under a contract, it may well be appropriate for a court to make a declaration as to those rights by consent. In such a case, the public and other parties cannot be affected, let alone bound, by such a declaration (see Hanson v Radcliffe Urban District Council [1922] 2 Ch 490 at 507; Halsbury’s Laws of England 4th ed, vol 1 at pp 174-6).

42    Recourse to Hanson v Radcliffe Urban District Council [1922] 2 Ch 490 does not provide support for the proposition for which it is cited. Conceptually their Honour’s statement is, with respect, analytically opaque. Forster requires a contradictor; Beaumont and Keely JJ held that there was no contradictor because there was no contest. There is nothing in Forster to indicate that the contradictor requirement was different in cases involving public as opposed to private rights. The origin or nature of the private rights exception is obscure. That does not mean that the fact that public rights are involved is irrelevant. To the contrary the public nature of the rights involved will almost always be relevant to whether a declaration should be granted. The present point is that that proposition has got nothing to do with the contradictor rule.

43    In any event, this case involves public rights. The Commission is a regulator and it seeks vindication of the public’s right not to be misled. The principle reason the Commission desires, understandably, to have the declarations made is to serve that purpose and to educate. These are public matters. For that reason, I do not think that I can distinguish BMI.

Conclusions in summary:

(a)    the suggested principles that declaration should only be made on evidence is dubious in origin, insubstantial in its persuasive content and is not required either by Forster or BMI;

(b)    to the extent that Allergy Pathway suggests that BMI propounds such a rule it is, with respect, plainly wrong because it overlooks the fact that the Court in BMI had evidence before it and did not decline the declarations on the basis suggested;

(c)    in any event, the rule, even if it exists, is overcome by s 191 of the Evidence Act in the present case;

(d)    this Court is bound by Forster not to make declarations without a contradictor;

(e)    as a matter of correct legal doctrine a contradictor will be present when all proper defendants have been joined and so are bound to the result. They will not cease to be contradictors merely because they consent to the proposed declarations;

(f)    BMI has, as its ratio decidendi, the contrary proposition which binds me.

44    In those circumstances, I conclude that I should not make the declarations which are sought.

45    There are three footnotes to that conclusion. The first is that this case is not concerned with the granting of relief where a respondent had defaulted in appearances which are governed by Order 35A rule 3(2) of the Federal Court Rules: cf. Australian Competition and Consumer Commission v Dataline.Net.Au Pty Ltd (2006) 236 ALR 665 at 680-681 [54]-[59] per Kiefel J; Bank of Kuwait and the Middle East v Ship MV “Mawishi al Gasseem” (No 2) (2007) 240 ALR 120 at 122-123 [10]-[15] per Mansfield J.

46    The second is that there are a large number of decisions of this Court in which consent declarations have been made including at least one of my own: Lang v ACN 078 899 591 Pty Ltd [2009] FCA 987. My present understanding of BMI is that this should not have occurred.

47    The third footnote concerns declarations involving public rights of the kind referred to in BMI such as those declaring as invalid a statute. Such declarations are accepted as having an effect beyond the parties before the Court. In Pape v Federal Commissioner of Taxation (2009) 238 CLR 1 Gummow, Crennan and Bell JJ said (at 69 [158]):

…If the plaintiff succeeds in establishing, as a necessary step in making out his case for relief, that the Bonus Act is invalid, then the reasoning of the Court upon the issue of invalidity would be of binding force in the subsequent adjudications of other disputes. Hence the very great utility in granting declaratory relief in the plaintiff’s action. In this way the resolution pursuant to Ch III of the Constitution of the plaintiff’s particular controversy acquires a permanent, larger, and general dimension. The declaration would vindicate the rule of law under the Constitution. …

48    One finds similar resonances in the United States Supreme Court’s conclusions in Cooper v Aaron 358 US 1 (1958). For reasons already given, the wider effect of such a declaration will often provide a powerful discretionary reason against its making.

Civil Penalties

49    The agreed statement of facts before me provides evidence, which I accept, of the following matters. There are five respondents: MSY Technology Pty Ltd (“MSY”), MSY Technology (NSW) Pty Ltd (“MSY NSW”), MSY Technology (QLD) Pty Ltd (“MSY QLD”), MSY Technology (SA) Pty Ltd (“MSY SA”) and MSY Technology (WA) Pty Ltd (“MSY WA”). Each of the respondents has the same single director and, apart from MSY NSW, the same secretary. From a time prior to July 2010, MSY has been the proprietor of stores in Victoria at North Melbourne, East Malvern, Clayton, Pascoe Vale, Cheltenham, Brooklyn and Box Hill; MSY NSW has been the proprietor of two stores at Ultimo and Chipping Norton in New South Wales; and MSY QLD has been the proprietor of two stores in Queensland at Brendale and Morningside. From a time prior to August 2010 MSY SA has been the proprietor of three stores in South Australia in Currie Street Adelaide, Holden Hill and North Plympton; and MSY WA has been the proprietor of two stores in Western Australia at Balcatta and Cannington. From these stores the respondents sold the computer goods to the public.

50    From about 28 July 2010 to 28 October 2010 MSY displayed notices in, made available price lists from, issued receipts from and displayed and made available a pamphlet at its Victorian stores. MSY also made the price lists available on its website. Notices were displayed at the North Melbourne, Box Hill, Clayton, Pascoe Vale, Cheltenham and Brooklyn stores which contained statements disclaiming or excluding MSY’s responsibility for providing warranties to consumers for goods referred to in those notices. I will not set the full text of the notices out. A typical example of the statements involved was, for example, as follows: “We are unable to offer refund or exchange for these items”. The notices, price lists and receipts also contained statements which purported to restrict MSY’s warranty obligations to consumers for goods referred to in them. For example, one of the notices said: “all LCD monitors are cover[ed] against bright pixel defects by our 7 days DOA [dead on arrival] replacement warranty. Less than 3 Black Dead pixels… will not be covered.” (my emphasis)

51    In its Cheltenham and East Malvern stores MSY displayed and made available to its customers a pamphlet entitled “National Warranties… No Worries”. The pamphlet purported to provide information to customers regarding warranties available for purchase from a business known as National Warranty Services (ABN 86 675 940 843). I will not set the full text of the pamphlet out but it did contain the following passage:

Unfortunately, even good PC’s can have hardware faults. (You can take software faults as a given).

How much of a pain would it be not to have a working PC?

Now, usually your system comes with 12 months ‘free’ RTB warranty. RTB means Return To Base.

This means returning your system here for any free service. And picking it up when fixed.

So that means extra trips & time, or the cost & trouble of arranging a courier if you are not close enough.

Although we give you the best possible free service we can, and although we make the best quality systems we can for what you pay, RTB service is free, and we must give a higher priority to those customers who are paying us for high priority service. Now, that’s fair, right?

(my emphasis)

52    The Commission points out that the twelve month limitation is inaccurate and that the pamphlet fails to refer to any of the other warranties which exist at law when purchasing a PC system.

53    From at least about 1 July 2010 to 28 October 2010 MSY NSW displayed notices in its stores. The notices contained statements disclaiming or excluding MSY NSW’s responsibility for warranty obligations to consumers for the goods referred to in those notices. The statements were of a similar kind to those referred in MSY’s case. For example, one notice said: “we do not carry any warranty claims after purchasing”. The notices also contained statements purportedly restricting MSY NSW’s responsibility for providing warranties to consumers for the goods referred to in those notices. For example, one of them said: “All notebooks MSY sell are not covered by any dead pixel warranty” [sic].

54    From about 19 July 2010 to 28 October 2010 MSY QLD displayed notices in its stores. The notices also contained statements disclaiming or excluding its responsibility for providing warranties to consumers for the goods referred to in those notices. They were, in substance, in the same form as MSY NSW.

55    From about 10 August 2010 to 28 October 2010 MSY SA displayed notices in its stores and also made available price lists and issued receipts. Notices were displayed in the North Plympton store which contained statements disclaiming or excluding MSY SA’s responsibility for providing warranties to consumers for the goods referred to in those notices. The statements were, in substance, in the same form as MSY NSW. Notices were also displayed at the stores, price lists made available and receipts issued that contained statements purporting to restrict its responsibility for providing warranties to consumers for the goods referred to in those notices, price lists and receipts. For example, one of them said “You are not entitled to a refund/exchange if you purchase products which are incompatible or unsuitable for your purposes”.

56    From at least 7 August 2010 to 28 October 2010 MSY WA displayed notices in, made available price lists and issued receipts, from both its stores. It also made available a pamphlet and displayed certain promotional material. Notices and promotional material displayed at the Balcatta store contained statements purporting to disclaim or exclude its responsibility of providing warranties to consumers for the goods. The form of those notices were similar to those in the case of MSY NSW. The notices, price lists and receipts contained statements restricting its responsibility for providing warranties to consumers for the goods referred to in those notices, price lists and receipts. The dead pixel example previously given was typical. Additionally, from about 7 August 2010 in the Balcatta store MSY WA displayed and made available to its customers a pamphlet entitled “National Warranties… No Worries”. The pamphlet was in similar terms to that made available by MSY.

57    The statements set out above, may, I think, be classified into three categories. The first category consists of statements in which the respondents purported to disclaim or exclude their responsibility for providing warranties to consumers. The second consists of statements which purported to restrict the responsibility of the respondents for providing warranties to consumers in various ways. The third consists of statements suggesting that consumers were required to pay a fee for warranties beyond those provided by the manufacturer.

58    At the time that all of those three classes of statement were made s 68 of the Act formerly known as the Trade Practices Act provided:

(1)    Any term of a contract (including a term that is not set out in the contract that is incorporated in the contract by another term of the contract) that purports to exclude, restrict or modify or has the effect of excluding; restricting or modifying:

(a)    the application of all or any of the provision of this Division;

(b)    the exercise of a right conferred by such a provision;

(c)    any liability of the corporation for breach of a condition or warranty implied by such a provision; or

(d)    the application of section 75A;

is void.

(2)    A term of a contract shall not be taken to exclude, restrict or modify the application of a provision of this Division or the application of section 75A unless the term does so expressly or is inconsistent with that provision or section.

59    The direct effect of s 68(1) was to make it impossible for the respondents to contract with their consumers on the basis that the three classes of statement were apt to suggest. In those circumstances, it is obvious that the statements were inherently misleading. Consumers had substantive warranty rights which were conferred by Part V Division 2 of the then Trade Practices Act which was itself entitled “Conditions and Warranties in consumer transactions”. They included, relevantly, the longstanding implied warranties as to quality and fitness under s 71 which necessarily left each of the respondents as vendors liable to any consumer for loss arising from the provision of defective equipment. Section 68(1) of the Trade Practices Act meant that, subject to presently irrelevant exceptions, those were warranties out of which it was not possible to contract. To suggest to customers that they had no such rights or that those rights were more limited than, in fact, they were was simply wrong. Further, and more importantly, it was a form of conduct which in its nature was likely to frustrate the evident statutory intent of the warranty provisions of Part V Division 2 of the Trade Practices Act.

60    The Commission contends, and the respondents agree, that this conduct was in breach of the then s 52 of the Trade Practices Act, which for reasons discussed above continues to be relevant. Section 52(1) provides:

A corporation shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.

61    For reasons already given breaches of this provision are established in the case of each respondent.

62    Section 53(g) provides, relevantly, that:

A corporation shall not, in trade or commerce, in connexion with the supply or possible supply of goods or services or in connexion with the promotion by any means of the supply or use of goods or services:

…

(g)    make a false or misleading representation concerning the existence, exclusion or effect of any condition, warranty, guarantee, right or remedy.

63    Since each of the three classes of misleading statements concerned the existence, exclusion or effect of the warranties and remedies to which consumers were entitled, contraventions of this provision are established in the case of each respondent.

Penalties

64    The Court is empowered to order a civil penalty by the former s 76E(1)(a)(ii) of the Trade Practices Act which authorises such a course where there has occurred a breach of Division I of Part V (apart from a breach of s 52). The fact that I have found breaches of s 53(g) enlivens the power. The maximum penalty for bodies corporate such as the respondents is 10,000 penalty units. A penalty unit is defined in s 4AA(1) of the Crimes Act 1914 (Cth) as $110. Accordingly, the maximum penalty for each contravention is $1,100,000.

65    The parties agree that the Court should impose a penalty of $18,500 for each substantive infringement on the basis that each of the three classes of statement is to be treated as a single contravention for sentencing purposes. The parties agree that the first respondent engaged in all three classes and should, therefore, be subjected to a civil penalty of $55,500; that the second respondent engaged in two classes and should be subject to a civil penalty of $37,000; that the third respondent engaged in only one class and should, therefore, receive a civil penalty of $18,500; that the fourth respondent engaged in two classes and should receive a civil penalty of $37,000; and that the fifth respondent engaged in all three classes and should receive a civil penalty of $55,500. The proposed penalties, total, in all, $203,500.

66    I agree with the parties’ analysis of the number of contraventions which took place. It would be disproportionate to treat each individual notice, price list, receipt or pamphlet as a separate infringement just as it would be wrong to treat the entire affair as but an instance of a single infringement. Each class represents a single genus of wrongdoing and it is appropriate, therefore, to treat each class as a single contravention.

67    In the imposition of a civil penalty the Court is, of course, not bound by the agreement of the parties but will not depart from an agreed penalty figure if it is within the permissible range which might be imposed: NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (1996) 71 FCR 285 at 291 (per Burchett and Kiefel JJ, Carr J agreeing) (“NW Frozen Foods”). For reasons which follow the proposed penalties are within the range appropriate penalties.

Principles

68    Section 76E(1) of the Trade Practices Act empowers the Court to order a contravener to pay “such pecuniary penalty, in respect of each act or omission… as the Court determines to be appropriate”. In determining the appropriate pecuniary penalty the Court is required to have regard to the three matters specified in s 76E(2). These are: first, the nature and extent of the act or omission and of any loss or damage suffered as a result of the act or omission; secondly, the circumstances in which the act or omission took place; and, thirdly, whether the contravener has previously been found by the Court in proceedings under Part VC or Part VI to have engaged in similar conduct. In Australian Competition and Consumer Commission v Gourmet Goody’s Family Restaurant Pty Ltd [2010] FCA 1216 Jagot J proceeded on the basis (at [6]) that principles applicable to s 76 of the Act should be applied to s 76E. Section 76 deals with the penalties which may be imposed consequent upon a contravention of the restrictive trade practices provisions set out in Part IV of the Act. There are, it is true, significant parallels between ss 76 and 76E. For example, the mandatory considerations under both provisions are the same. But there are differences, too. Sections 76(1A) and 76(5) erect, in the case of contraventions of Part IV, a detailed régime for imposing penalties by reference to the turnover of the contravener. No such provision appears in s 76E. On the other hand, each of Part IV and Parts VC and VI are concerned with matters of public interest – the former, broadly speaking, with the public interest in private parties not colluding; the latter, with the public interest in consumers receiving accurate information. In one sense, both of these reflect concerns about the regulation of markets: one seeks to ensure the market is fair; the other that it is fully informed. Given that, it is difficult to see that the subject matters of ss 76 and 76E require, in principle, a different approach to the question of how penalties are to be formulated.

69    Apart, therefore, from the question of turnover, I would accept that principles which have been applied in relation to the imposition of penalties under s 76 should be applicable to s 76E unless the context of the infringements makes plain that that cannot be so. The relevant factors under s 76 have been looked at in a number of decisions including Trade Practices Commission v CSR Ltd (1991) ATPR 41-076 at 52,152-52,153 per French J (“CSR Ltd”); NW Frozen Foods at 292-294 per Burchett and Kiefel JJ, Carr J agreeing; and J McPhee & Son (Aust) Pty Ltd v Australian Competition and Consumer Commission (2000) 172 ALR 532 at 574 [150]ff per Black CJ, Lee and Goldberg J (“J McPhee & Son”). I would accept the applicability of the matters set out in those decisions to penalties under s 76E with two exceptions. The first of these concerns the degree of market power of the contravener, as evidenced by its market share and ease of entry into the market (referred to by French J in CSR Ltd at 52,153). The second concerns the reference in NW Frozen Foods and J McPhee & Son to the effect on the functioning of the market and other economic effects of the contravening conduct. I would accept that these could conceivably have some bearing on matters arising from breaches of Part V but I do not think that Part V is concerned substantially with matters of that kind. Apart from those observations, however, the other factors referred to in those decisions do seem to me to be applicable to the imposition of a penalty under s 76E. They are:

1.    the size of the contravening company;

2.    the deliberateness of the contravention and the period over which it extended;

3.    whether the contravention arose out of the conduct of senior management of the contravener or at some lower level;

4.    whether the contravener has a corporate culture conducive to compliance with the Trade Practices Act as evidenced by educational programmes and disciplinary or other corrective measures in response to an acknowledged contravention;

5.    whether the contravener has shown a disposition to co-operate with the authorities responsible for the enforcement of the Act in relation to the contravention;

6.    whether the contravener has engaged in similar conduct in the past;

7.    the financial position of the contravener;

8.    whether the contravening conduct was systematic, deliberate or covert.

70    These relevant matters are to be gauged by reference to the purpose for which a penalty is imposed under s 76E. Speaking of s 76 French J said in CSR Ltd at 52,152:

The principle, and I think probably the only, object of the penalties imposed by s 76 is to attempt to put a price on contravention that is sufficiently high to deter repetition by the contravener and by others who might be tempted to contravene the [Trade Practices] Act.

71    That approach was approved by the Full Court in NW Frozen Foods at 292-294. I see no reason in principle not to accept that the same deterrent purpose underpins the penalties in s 76E. The parties submitted, and I accept, that deterrence has two aspects. First, there is the need to provide specific deterrence in the case of the actual contravener and, secondly, to provide general deterrence to others “who may be disposed to engage in prohibited conduct of a similar kind” (Trade Practices Commission v Mobil Oil Australia Ltd (1984) 4 FCR 296 at 297-298 per Toohey J). The Full Court in NW Frozen Foods said that (at 294-295):

[t]he Court should not leave room for any impression of weakness in its resolve to impose penalties sufficient to ensure the deterrence, not only the parties actually before it, but also of others who might be tempted to think that contravention would pay…

72    There are remarks by a number of first instance judges that suggest that the penalty must be pitched at a sufficiently meaningful level to ensure that the penalties do not come to be seen as merely a cost of doing business: cf Australian Competition and Consumer Commission v ABB Transmission and Distribution Ltd (2001) ATPR 41-815 at 42,938 [13] per Finkelstein J; Australian Competition and Consumer Commission v McMahon Services Pty Ltd (2004) ATPR 42-031 at 49,228 [15] per Selway J; Australian Competition and Consumer Commission v Leahy Petroleum Pty Ltd (No 3) (2005) 215 ALR 301 at 309 [39] per Goldberg J. These comments were all made in the context of penalties imposed for breaches of Part IV but I cannot perceive from s 76E that the Parliament considers these kind of breaches to be less serious. I accept, of course, that the penalty must not be so high so as to be oppressive: NW Frozen Foods Pty Ltd at 293.

73    In Markarian v The Queen (2005) 228 CLR 357 (“Markarian”) the High Court set out the principles which should guide the formulation of criminal sentencing which, of course, is not quite the same area of discourse as the imposition of a civil penalty. Nonetheless, that approach to the imposition of civil penalties under s 76 was adopted by Gyles J in Australian Competition and Consumer Commission v Liquorland (Australia) Pty Ltd (2005) ATPR 42-070 at 43,116 [68] and I can see no reason, in principle, why it should not also be applied to penalties under s 76E. The critical aspects of that analysis are:

1.    the Court’s assessment of the appropriate penalty is a discretionary judgment based on all relevant factors (Markarian at 371 [27]);

2.    careful attention to the maximum penalties will almost always be required, first, because the Parliament has legislated for them; secondly, because they invite comparison between the worst possible case and the case before the Court at the time; thirdly, because in that regard they do provide, balanced with all of the other relevant factors, a yard stick (at 372 [31]);

3.    it will rarely be appropriate for a Court to start with the maximum penalty and proceed by making a proportional deduction from that maximum (at 372 [31]);

4.    the Court should not adopt a mathematical approach of increments or decrements from a predetermined range or assign specific numeric or proportionate value to the various relevant factors (at 373-374 [37]);

5.    it is not appropriate to determine an objective sentence and then adjust it by some mathematical value given to one or more factors such as the plea of guilty or assistance to authorities (at 373-374 [37]);

6.    the Courts “may not add and subtract item by item from some apparently subliminally derived figure” to determine the penalty to be imposed (at 375 [39]);

7.    since the law plainly favours transparency, accessible reasoning is necessarily in the interests of all. While there may be occasions where some indulgence in arithmetical process will better serve that end, it is unlikely to apply where there are numerous and complex considerations that must be weighed (at 375 [39]).

74    I turn then to the application of those principles to the present facts.

75    As I have indicated, the representations can be grouped into three classes. They appeared in the respondents’ notices, price lists, pamphlets and promotional material which emanated from its sixteen stores in five states within Australia. The representations applied to a variety of, or in some cases, all of the products within a given range of products. Despite that, the dissemination of the representations was contained in the sense that all of the representations (aside from those on price lists which were uploaded on to the respondents’ website) were made inside the stores belonging to the group.

76    I turn first, in light of those matters, to the three mandatory considerations in s 76E(2) and thereafter to the other discretionary matters.

The amount of loss or damage caused (s 76E(2)(a))

77    Neither party is aware of whether actual loss or damage was caused by the contravening conduct. The parties’ agreed written submissions argued that the absence of loss or damage or the inability to quantify accurately the extent of loss or damage is not a mitigating factor in the imposition of a penalty. Reliance was placed upon Trade Practices Commission v ICI Australia Operations Pty Ltd (1991) 105 ALR 115; and Australian Competition and Consumer Commission v Roche Vitamins Australia Pty Ltd (2001) ATPR 41-809 (“Roche Vitamins”).

78    Ms Beaumont, of counsel, who appeared for the respondents, submitted orally that Trade Practices Commission v ICI Australia Operations Pty Ltd is not really authority for that proposition. In that case Olney J said (at 119):

However, I do not think that the absence of loss or damage is necessarily a mitigating factor. In a case where the breach of the Act is an attempt to induce a reseller to impose a minimum price for goods supplied to the reseller, the question of loss or damage will rarely, if ever, arise. The Act does not distinguish in terms of culpability between the various types of conduct which constitute the practice of resale price maintenance.

79    I accept Ms Beaumont’s submission. The passage in question is directed to a situation where loss and damage rarely arises and where, therefore, its absence can hardly be seen as a mitigating matter. In cases where, as here, it is easy to imagine detriment to consumers I would accept that the absence of any evidence of suggested harm should be regarded as a mitigating factor. The reason for this is no more than commonsense: if harm is likely to have been suffered by reason of the contravening conduct but no evidence is led which suggests that it was, the respondent is entitled to be sentenced on the basis that the conduct has not caused harm which, plainly enough, will be a mitigating circumstance.

80    I reject the parties’ written submission that Roche Vitamins stands for the proposition that the absence of loss or damage is not a mitigating factor in the imposition of a penalty. I have not been able to locate in it any such statement.

Circumstances in which the conduct took place (s 76E(2)(b))

81    Both parties joined in submission that on or about 19 March 2010 (prior to the commencement of the proceedings) the Commission approached the respondents regarding concerns it had over the group’s terms of trade. The Commission alerted the respondents to various clauses within its terms of trade regarding the exclusion or otherwise of non-excludable conditions and warranties applicable to consumer contracts. The Commission explained in that correspondence what conditions and warranties it considered to be non-excludable and the reasons for this view. The correspondence continued throughout the first half of 2010 and, on 9 June 2010, the Commission queried the respondents regarding a notice placed in one of the MSY QLD stores advising customers to direct all notebook warranty claims to the manufacturer and not to MSY. In July 2010, the Commission commenced a review of various MSY stores to determine whether there were other notices or similar material concerning representations about the warranty rights of consumers. Investigators of the Commission found numerous notices and other material of concern. On 9 July 2010, the respondents incorrectly denied that an infringing notice existed at the relevant MSY QLD store.

82    The parties accepted, therefore, that the Commission had engaged in extensive correspondence with the respondents regarding the concerns it had over efforts to exclude or restrict non-excludable conditions. During the currency of that correspondence the respondents continued to make representations which excluded or restricted conditions and warranties. During the discussions with the Commission at that time, the respondents denied such representations were being made in respect of one of MSY QLD’s stores. The Commission also found that there had been numerous problematic representations in the respondents’ stores around Australia. Except on the issue of co-operation I disregard the material relating to the problematic representations. The penalties are to be approached on the basis of the breaches which are found and not on other matters not before the Court. During the same discussions no attempt had been made by the respondents to correct its conduct otherwise than in relation to its terms of trade.

83    The commencement of the proceedings by the Commission on 28 October 2010 appears to have brought about a sudden change. Since that time the respondents have admitted the conduct alleged in the Fast Track statement, co-operated fully, agreed to all forms of relief sought in the Fast Track application and have significantly, therefore, reduced the time and expense of the proceeding and saved public time and resources including, importantly, those of this Court.

84    The Commission accepts that, as at 14 November 2010, the respondents have removed all notices, price lists and receipts containing the contravening representations; that as at 17 November 2010 corrective signage has been displayed at each of the relevant stores and has been uploaded onto the MSY website; and, as at the same date, the respondents have worked to educate its staff about statutory warranties by introducing a warranty procedure document concerning the rights of consumers for the internal use of its employees.

85    In summary, the circumstances bespeak an initial failure to grasp the seriousness of the matter but, following commencement of the proceedings, a vigorous, complete and adequate response to the Commission’s complaints.

Whether the contravener has previously been found by the Court to have engaged in similar conduct (s 76E(2)(c))

86    There was no evidence that the respondents had engaged in previous conduct.

87    I turn then to the general matters which authority indicates may also be taken into account.

The size of the contravening company

88    The parties submitted notwithstanding that s 76E did not (unlike s 76) make a reference to the annual turnover of the company, nevertheless, that was a relevant consideration for the imposition of penalties under that provision. I accept this submission. Unlike s 76, the turnover of a contravener is not a mandatory consideration but I see no reason why it is not a permissible consideration in an appropriate case. Given the significance of deterrence for s 76E it is difficult to see that it could be otherwise. Evidence was placed before me which was subject to a temporary confidentiality order pursuant to s 50 of the Federal Court of Australia Act preventing the publication of the profits and turnover of the respondents in the 2009-10 year whilst their commercial value remained current. There was also evidence before me of the respondents’ performance in the 2008-09 year which was not the subject of a confidentiality order. Those figures revealed that whilst the respondents’ turnover is reasonably significant, the manner in which the group operates means that the profit generated by the business is a very small percentage of its turnover. Whilst the figures vary it is not uncommon for the profit to be as little as 5% of the turnover.

89    With that in mind the parties submit that a penalty based on even a very small percentage of turnover – say, for example, 1% – is likely to represent a very significant percentage of profit which will not be proportional to any gain the respondents may have made from the conduct. The parties submitted, and I accept, that in the circumstances where the respondents have co-operated fully since the commencement of the proceedings and where it took prompt corrective action, a penalty on turnover would not reflect that those kinds of considerations had been taken into account.

The deliberateness of the contravention and the period over which it extended

90    The parties submitted, and I accept, that the conduct of the respondents was not deliberate.

Whether the contravention arose out of the conduct of senior management or at a lower level

91    The contravening notices and other material displayed by the respondents at each of its retail outlets were created without the knowledge or approval of either the Managing Director or the General Manager. I approach the matter on the basis that the contraventions have their origins in middle management.

Whether the company has a corporate culture conducive to compliance with the Trade Practices Act as evidenced by educational programmes and disciplinary or other corrective measures in response to an acknowledged contravention

92    At the time of the institution of the proceedings, the respondents did not have any compliance training or educational programmes for staff on compliance with the Trade Practices Act. At the time of institution of the proceedings, the respondents had not undertaken disciplinary or other corrective measures upon discovering that there had been breaches of the Trade Practices Act. All of this has, however, changed since November 2010, following the commencement of the proceedings. Adequate programmes of that kind are now in place.

Whether the company has shown a co-operative disposition towards the authorities

93    It is plain that until the commencement of the proceedings there was less than complete co-operation by the respondents with the Commission. However, upon the commencement of the proceedings the respondents’ co-operation has been full. I accept that it is a significant matter to be taken into account in its favour.

The financial position of the respondent

94    In this case, the issues which arise are the same as those concerning the size of the respondents.

The deterrent effect of the proposed penalty

95    Insofar as special deterrence is concerned I do not think that much is required. The respondents have now put in place appropriate programmes and have co-operated fully. I do not think that there is likely to be a repetition of the conduct.

96    Insofar as general deterrence is concerned, the breaches which occurred were, within their category, of a serious kind. I do not think that the breaches were of the worst kind but neither were they minor or frivolous. It is appropriate that it should be made plain to retailers in the position of companies such as the respondents that misrepresenting to consumers what their warranty rights are is an unacceptable form of commercial conduct and illegal. It is appropriate, therefore, to encourage retailers not to give consumers the impression either that their statutory rights are curtailed or non-existent or that warranties can only be obtained through payment. This, so it seems to me, is an important consideration.

Proposed penalty

97    The parties submitted that where there were multiple contraventions it is within the Court’s discretion to impose a separate penalty for each contravention or to impose one penalty for all contraventions. For reasons already given this is a case where it would be appropriate to impose a single penalty for each of the three classes of contravention. The parties submit that I should impose a penalty in respect of each such class of $18,500. The immediate question for me is whether that penalty is within the range of penalties which could be imposed. In my opinion, it is. Although the maximum penalty is $1,100,000 the relatively modest nature of the contraventions, the non-involvement of senior management, the prompt co-operation of the respondents and the absence of any prior contraventions point to a penalty at the lower end. Whilst I might have imposed a somewhat stiffer penalty myself that which has been agreed is plainly within the range.

98    In those circumstances I would impose penalties of $55,500 on MSY, of $37,000 on MSY NSW, of $18,500 MSY QLD, of $37,000 on MSY SA and on MSY WA of $55,500. I decline to grant the declarations sought. By consent I order the injunctions in paragraphs 6 to 10, the compliance programme in paragraphs 11 to 15 and the corrective advertising régime in paragraphs 21 to 24 of the proposed short minutes of order formulated by the parties. I impose the civil penalties set out in paragraph 16 to 20 of those short minutes of order. I make the costs order in paragraph 25. I do not make the order proposed in 26. Instead I will simply record that I release the respondents from the undertakings given to the Court on 12 November 2010. I will make the Orders in paragraph 27.

99    The parties should bring in short minutes of order reflecting the above reasons within seven (7) days.

Associate:

Dated:    15 April 2011