FEDERAL COURT OF AUSTRALIA

Australian Competition and Consumer Commission v Allphones Retail Pty Limited (No 5) [2011] FCA 807

THE COURT DECLARES THAT:

1.    The respondent is guilty of contempt of court by reason of its breach of undertaking 8 which it gave to the Federal Court of Australia on 9 October 2008 which breach occurred by the respondent:

(a)    on 11 June 2009, withholding consent to one of its franchisees, Evelyn Houghton (Mrs Houghton), assigning the franchise agreement between her and the respondent on the basis that Mrs Houghton had not released the respondent from liabilities that the respondent has or may have to Mrs Houghton in respect of issues the subject of the Notice of Dispute issued by the respondent and dated 29 August 2009; and

(b)    doing so in circumstances where Mrs Houghton had not required that the respondent release her from liabilities which she had or may have had to the respondent.

2.    The respondent is guilty of contempt of court by reason of its breach of undertaking 9 which it gave to the Federal Court of Australia on 9 October 2008 which breach occurred by the respondent:

(a)    on 11 June 2009, withholding consent to Mrs Houghton assigning the franchise agreement between her and the respondent on the basis that, for consent to be given by the respondent, the assignee must enter into a form of franchise agreement with the respondent which is different to Mrs Houghton’s franchise agreement; and

(b)    not giving the applicant 7 days notice in writing of its intention to withhold consent to Mrs Houghton assigning the franchise agreement between her and the respondent on the basis that the assignee must enter into a form of franchise agreement with the respondent which is different to Mrs Houghton’s franchise agreement.

3.    The respondent is guilty of contempt of court by reason of its breach of undertaking 9 which it gave to the Federal Court of Australia on 9 October 2008 which breach occurred by the respondent:

(a)    in February 2009 withholding consent to one of its franchisees Deep End Investments Pty Limited (Deep End) assigning the franchise agreement between it and the respondent on the basis that, for consent to be given by the respondent, the assignee must enter into a form of franchise agreement with the respondent which is different to Deep End’s franchise agreement; and

(b)    not giving the applicant 7 days notice in writing of its intention to withhold consent to Deep End assigning the franchise agreement between it and the respondent on the basis that the assignee must enter into a form of franchise agreement with the respondent which is different to Deep End’s franchise agreement.

THE COURT ORDERS THAT:

4.    The respondent be fined in the sum of $45,000 to be paid to the Registrar of this Honourable Court on behalf of the Commonwealth of Australia within 28 days.

5.    The respondent pay the applicant’s costs of and incidental to the motion dated 17 August 2009 on an indemnity basis as taxed or agreed.

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

1    I previously found that three of four charges of contempt brought against the respondent were made out. The essential facts relevant to those charges are set out in my earlier reasons for judgment: Australian Competition and Consumer Commission v Allphones Retail Pty Limited (No 4) [2011] FCA 338. The matter was stood over to give the parties an opportunity to make submissions in relation to penalties and costs. I have since received from the parties a written submission entitled “Joint Submission on Penalty”. As the title to that document implies, the parties are agreed as to what orders should now be made.

2    The parties have agreed upon the terms of various proposed declarations which give effect to my previous findings. I am satisfied that the proposed declarations reflect my findings and it is appropriate they be made.

3    The Joint Submission contends that a fine of $45,000 is an appropriate penalty in respect of the respondent’s three offences. While the fact that both parties have put this figure forward as representing an appropriate penalty is significant, they accepted that their figure is not binding upon the Court and that it remains for me to decide whether the suggested penalty is within the range of penalties that is appropriate in the circumstances.

4    The evidence before me at the time of the hearing (as reflected in my findings) indicated that each of the three contempts was serious. The conduct engaged in contrary to the undertakings was deliberate. It was engaged in by a number of the respondent’s senior personnel who – it may be inferred – were aware at all relevant times of the terms of the undertakings provided by the respondent to the Court. It does not follow that the employees concerned understood at the time they engaged in the relevant conduct that it would necessarily involve a contravention by the respondent of those undertakings. Nevertheless, at the time of engaging in the relevant conduct they were aware, or ought to have been aware, that there was a serious risk that it might do so.

5    The Joint Submission contains an acknowledgment by the respondent that its conduct was both wrongful and culpable. It also contains an apology not only to the Court but to the individual franchisees who were the target of the respondent’s conduct. The Joint Submission states that the respondent has already sent a written apology to the franchisees concerned.

6    The Joint Submission does not specify a penalty for each offence. But it does emphasize that the parties did not arrive at their overall figure of $45,000 simply by multiplying $15,000 by three. Nevertheless, for the purpose of testing the appropriateness of a total penalty of $45,000 I think it is necessary to look at what the total penalty implies by way of punishment for each of the respondent’s three offences.

7    In my view a fine of $15,000 for each offence is within the range of appropriate penalties in the circumstances of this case. On that basis I consider that a fine of $45,000 in respect of all three offences is also within the appropriate range.

8    The parties are agreed that the respondent should pay the applicant’s costs on an indemnity basis.

9    There will be declarations and orders accordingly.

Associate:

Dated:    19 July 2011