FEDERAL COURT OF AUSTRALIA

Australian Competition and Consumer Commission v Excite Mobile Pty Ltd

(No 2) [2013] FCA 1267

FEDERAL COURT OF AUSTRALIA

Australian Competition and Consumer Commission v Excite Mobile Pty Ltd

(No 2) [2013] FCA 1267

CORRIGENDUM

1.    In Order 22 on p 11 of the Orders, the amount of $455,000 be amended to $555,000.

2.    In [107] the amount of $455,000 be amended to $555,000.

Associate:

Dated:    23 December 2013

THE COURT DECLARES THAT:

1.    Between at least 24 December 2008 and at least 4 November 2010, Excite Mobile Pty Ltd (Excite Mobile), in trade or commerce, promoted and supplied mobile telecommunications services to customers in Australia:

(1)    The supply of which was subject to the following unusual and unfair terms:

(i)    the customer was required to pay a minimum monthly access fee and in exchange they would receive a credit of a certain value of calls and text messages per day (the day-cap);

(ii)    the credit provided under the day-cap effectively gave the customer no real usage before considerably higher rates for the services would be charged;

(iii)    if unused the day-cap expired at the end of each day;

(iv)    a $75 fee was payable to Excite Mobile in the event that the customer exercised their cooling off rights;

(v)    a payment of $195 was payable for any damage to a mobile phone or its packaging regardless of the actual damage caused; and

(2)    using telemarketers who failed to explain fairly and adequately the operation of the terms of the mobile telecommunications services contract to customers (mobile contracts) described in (1) above, including the day-cap;

(3)    using a sales script that was presented in a way to conceal the fact that the day-cap was destined to expose customers to quite substantial monthly charges;

and by so doing, Excite Mobile, in trade or commerce, in connection with the supply or possible supply of goods and services to customers or potential customers, engaged in conduct that was, in all the circumstances, unconscionable, in contravention of s 51AB of the Trade Practices Act 1974 (Cth) (TPA).

2.    Between about 21 January 2009 and about 12 May 2010 Excite Mobile, in trade or commerce, by representing to at least 17 customers that the mobile telecommunications services provided by Excite Mobile would be available and accessible at their home address, when this was not the case:

(1)    engaged in conduct which was misleading, deceptive and likely to mislead and deceive in contravention of s 52 of the TPA; and

(2)    made representations which were false and misleading in contravention of s 53(c) of the TPA.

3.    Between about 17 September 2009 and about 2 August 2010, by representing to customers, by use of the Telecommunications Industry Complaints (TIC) name and a separate telephone number for the TIC service, that

(1)    the TIC service was a complaints handling service; and

(2)    the TIC was independent of Excite Mobile;

when this was not the case, in that:

(3)    the TIC name was registered, owned and used by Excite Mobile; and

(4)    calls made to the TIC number were answered by persons acting on behalf of Excite Mobile;

Excite Mobile, in trade or commerce:

(5)    engaged in conduct which was misleading, deceptive and likely to mislead and deceive in contravention of s 52 of the TPA; and

(6)    made representations which were false and misleading in contravention of s 53(g) of the TPA.

4.    Between about 7 January 2010 and about 30 June 2010, by sending letters to customers (the Jerry Hastings letters) which:

(1)    were in the name of Jerry Hastings;

(2)    included a photograph of a man in the top right hand corner; and

(3)    included the telephone number 1800 805 846 to contact Jerry Hastings (the Jerry Hastings number);

and represented that:

(4)    Jerry Hastings was an independent debt collector, or an agent of an independent debt collector; and

(5)    the debt which Excite Mobile claimed to be owed to it by the particular customer had been referred to Jerry Hastings for collection;

when

(6)    Jerry Hastings was a fictitious character;

(7)    the letters were not from a debt collector or a representative of a debt collector but were created and sent by Excite Mobile; and

(8)    the debt allegedly due to Excite Mobile from the customer had not been referred to a debt collector or a lawyer;

Excite Mobile, in trade or commerce, engaged in conduct which was misleading, deceptive and likely to mislead and deceive in contravention of s 52 of the TPA.

5.    Between about 7 January 2010 and about 30 June 2010, by sending letters to customers (the Times Are Bad, Last Warning and Failure to Pay letters) which made representations that:

(1)    unless the customer entered into an agreement to pay the alleged debt, Jerry Hastings would go to court to recover the debt allegedly owed to Excite Mobile by the customer, and if he did, the court would make orders:

(i)    requiring the customer to pay an additional charge equal to 20% of the customer’s alleged debt for failing to pay on time; and

(ii)    to repossess all assets of value owned by the customer, including children’s toys;

when Excite Mobile would not:

(iii)    routinely have had an entitlement to obtain orders for repossession of the customer’s assets, nor all assets of value, nor children’s toys; and

(iv)    have been able to get an order requiring the customer to pay an additional charge equal to 20% of the customer’s alleged debt for failing to pay on time;

Excite Mobile, in trade or commerce:

(2)    engaged in conduct which was misleading, deceptive and likely to mislead and deceive in contravention of s 52 of the TPA; and

(3)    made representations which were false and misleading in contravention of s 53(g) of the TPA.

6.    Between about 11 January 2010 and about 23 June 2010, during telephone calls with customers (the Jerry Hastings calls) Excite Mobile represented that:

(1)    the representative of Excite Mobile who partook in the telephone calls was from Jerry Hastings’ office;

(2)    Jerry Hastings’ office was a debt collector acting for Excite Mobile; and

(3)    Jerry Hastings’ office had no connection to, or was independent of, Excite Mobile;

when this was not the case, and by doing so Excite Mobile, in trade or commerce, engaged in conduct which was misleading, deceptive and likely to mislead and deceive in contravention of s 52 of the TPA.

7.    Between about 7 January 2010 and about 30 June 2010, by:

(1)    sending one or more of the Jerry Hastings letters referred to at (4) above to customers;

(2)    operating the Jerry Hastings number; and

(3)    making the representations in the letters referred to at (4) and (5) above and in the telephone calls referred to in (6) above;

Excite Mobile created a fictitious debt collector called Jerry Hastings so that the customers who received the letters and partook in the telephone calls would form the belief that they were dealing with a debt collector and, that if they did not agree to pay a sum in satisfaction of the alleged debt to Excite Mobile, they would be taken to court and have judgment entered against them:

(4)    requiring them to pay an additional charge equal to 20% of the alleged debt; and

(5)    requiring repossession of their assets in satisfaction of the debt;

and by so doing, Excite Mobile, in trade or commerce, used undue coercion, in connection with the payment for mobile telecommunications services by customers in contravention of s 60 of the TPA.

8.    Between about 7 January 2010 and about 30 June 2010, by sending the Times Are Bad, Last Warning and Failure To Pay letters which contained false assertions that, in proceedings taken to recover an alleged debt:

(1)    a court would make an order imposing, in essence, an extra charge of 20% of the outstanding debt for late payment; and

(2)    that a court would make a repossession order of all assets of the debtor, including personal assets such as children’s toys;

Excite Mobile, in trade or commerce in connection with the supply or possible supply of goods and services to customers, engaged in conduct that was, in all the circumstances, unconscionable, in contravention of s 51AB of the TPA.

9.    Obie Brown (Mr Brown), as a person:

(1)    with responsibility for the management of Excite Mobile;

(2)    who established Excite Mobile’s business operations;

(3)    who designed the method or system by which Excite Mobile promoted and supplied mobile telecommunications services to customers in Australia referred to in paragraph 1;

(4)    who authorised the terms of the mobile contracts, including the “cooling off” fees;

(5)    who authorised the representations made as to the coverage provided by Excite Mobile referred to in paragraph 2;

(6)    who created the TIC number and directed that the representations referred to in paragraph 3 about its independence be made;

(7)    who drafted the content of the letters referred to in paragraph 4 above;

(8)    who made or directed to be made the representations made in the telephone calls referred to in paragraph 6;

was directly or indirectly knowingly concerned in, or party to, each of the contraventions referred to in paragraphs 1 to 6 above.

10.    David Samuel (Mr Samuel), as a person:

(1)    with responsibility for the management of Excite Mobile;

(2)    who established Excite Mobile’s business operations;

(3)    who authorised the method or system by which Excite Mobile promoted and supplied mobile telecommunications services to customers in Australia referred to in paragraph 1;

(4)    who authorised the terms of the mobile contracts, including the “cooling off” fees;

(5)    who authorised the creation of the TIC number and supported the representations made as to its independence referred to in paragraph 3;

(6)    who authorised the content of the letters referred to in paragraph 4 above;

(7)    who authorised the representations made in the telephone calls referred to in paragraph 6;

was directly or indirectly knowingly concerned in, or party to, each of the contraventions referred to in paragraphs 1 and 3 to 6 above.

11.    Fiona Smart (Ms Smart) as a person:

(1)    who sent the letters referred to in paragraphs 4 and 5 above; and

(2)    who made the representations in the telephone calls referred to in paragraph 6;

was directly or indirectly knowingly concerned in, or party to, each of the contraventions referred to in paragraphs 4 to 6 above.

THE COURT ORDERS THAT:

Mr Brown

12.    Mr Brown be restrained, for a period of seven years from the date of this order, in connection with supply or possible supply of mobile telecommunications services by any corporation (Supplier), from aiding, abetting, counselling or procuring, or being directly or indirectly knowingly concerned in or party to the promotion or supply of mobile telecommunications services to customers in Australia by a Supplier through a system which:

(1)    uses contract terms which require the payment of a fee when the client chooses to exercise their cooling off rights under the Australian Consumer Law (being Schedule 2 to the Competition & Consumer Act 2010 (Cth)) or its successor, including any fee for damage to goods which is more than the costs to the Supplier for that good; or

(2)    uses a sales method or promotion that does not adequately disclose to a customer that they will incur call charges much higher than those included in the monthly access fee, such as a day cap.

13.    Mr Brown be restrained, for a period of seven years from the date of this order, in connection with the supply or possible supply of mobile telecommunications services from aiding, abetting, counselling or procuring, or being directly or indirectly knowingly concerned in or party to the making of any of the following representations by a Supplier:

(1)    the mobile telecommunications services provided by a Supplier are available and accessible at the home address of customers or potential customers;

(2)    that there is a complaints handling organisation for consumers of telecommunications services which is independent from the Supplier; or

(3)    a Supplier’s employees or agents represent a debt collector;

when this is not the case.

14.    An injunction restraining Mr Brown, for a period of seven years from the date of this order, in connection with the supply or possible supply of mobile telecommunications services from aiding, abetting, counselling or procuring, or being directly or indirectly knowingly concerned in or party to sending letters to customers containing representations by a Supplier, or representing to customers in the course of telephone calls, that:

(1)    the letters or telephone calls are from an independent debt collector or a representative of an independent debt collector; or

(2)    the debt allegedly owed to the Supplier from the customer had been referred to a debt collector for collection;

when this is not the case.

Note:    In this order and orders 15, 16, 19, 20 and 21 hereof, the term “Supplier” excludes an independent debt collector.

15.    An injunction restraining Mr Brown, for a period of seven years from the date of this order, in connection with the supply or possible supply of mobile telecommunications services from aiding, abetting, counselling or procuring, or being directly or indirectly knowingly concerned in or party to the making of any representations by a Supplier that if legal proceedings are taken in respect of any alleged debt, orders can be obtained:

(1)    requiring the customer to pay an amount additional to the customer’s alleged debt for failing to pay on time; or

(2)    for repossession of all assets of value owned by the customer, including personal assets or children’s toys;

when there is no such entitlement.

16.    An injunction restraining Mr Brown, for a period of seven years, from the date of this order, in connection with the supply or possible supply of mobile telecommunications services from aiding, abetting, counselling or procuring, or being directly or indirectly knowingly concerned in or party to the use of coercion by a Supplier in connection with the payment for telecommunications services by:

(1)    creating a fictitious debt collector so that customers form the belief that they are dealing with a debt collector and not the Supplier; or

(2)    making representations that if a customer does not agree to pay a sum in satisfaction of an alleged debt to the Supplier, they will be taken to Court and risk the Supplier obtaining orders:

(i)    requiring the customer to pay an additional amount on top of the alleged debt for late payment other than reasonable and proper costs and interest properly recoverable; or

(ii)    ordering repossession of the customer’s personal assets or children’s toys in satisfaction of the debt;

where there is no such entitlement.

Mr Samuel

17.    An injunction restraining Mr Samuel for a period of seven years from the date of this order, in connection with supply or possible supply of mobile telecommunications services by a Supplier, from aiding, abetting, counselling or procuring, or being directly or indirectly knowingly concerned in or party to the promotion or supply of mobile telecommunications services to customers in Australia by a Supplier through a system which:

(1)    uses contract terms which require the payment of a fee when the client chooses to exercise their cooling off rights under the Australian Consumer Law (being Schedule 2 to the Competition & Consumer Act 2010 (Cth)) or its successor, including any fee for damage to goods which is more than the costs to the Supplier for that good; or

(2)    uses a sales method or promotion that does not adequately disclose to a customer that they will incur call charges much higher than those included in the monthly access fee, such as a day cap.

18.    An injunction restraining Mr Samuel for a period of seven years from the date of this order, in connection with the supply or possible supply of mobile telecommunications services from aiding, abetting, counselling or procuring, or being directly or indirectly knowingly concerned in or party to the making of any of the following representations by a Supplier:

(1)    that the TIC service is independent from the Supplier, or that there is a complaints handling organisation for consumers of telecommunications services which is independent from the Supplier; or

(2)    a Supplier’s employees or agents represent a debt collector;

when this is not the case.

19.    An injunction restraining Mr Samuel for a period of seven years from the date of this order, in connection with the supply or possible supply of mobile telecommunications services from aiding, abetting, counselling or procuring, or being directly or indirectly knowingly concerned in or party to either:

(1)    sending letters to customers containing representations by a Supplier; or

(2)    representing to customers in the course of telephone calls by a Supplier, that:

(i)    the letters or telephone calls are from an independent debt collector or a representative of an independent debt collector; or

(ii)    the debt allegedly owed to the Supplier from the customer had been referred to a debt collector for collection;

when this is not the case.

20.    An injunction restraining Mr Samuel for a period of seven years from the date of this order, in connection with the supply or possible supply of mobile telecommunications services from aiding, abetting, counselling or procuring, or being directly or indirectly knowingly concerned in or party to the making of any representation by a Supplier that if legal proceedings are taken in respect of any alleged debt, orders can be obtained:

(1)    requiring the customer to pay an amount additional to the customer’s alleged debt for failing to pay on time; or

(2)    for repossession of all assets of value owned by the customer, including children’s toys;

when there is no such entitlement.

21.    An injunction restraining Mr Samuel for a period of seven years from the date of this order, in connection with the supply or possible supply of mobile telecommunications services from aiding, abetting, counselling or procuring, or being directly or indirectly knowingly concerned in or party to the use of coercion by a Supplier in connection with the payment for telecommunications services by:

(1)    creating a fictitious debt collector so that customers form the belief that they are dealing with a debt collector and not the Supplier; and further;

(2)    making representations that if a customer does not agree to pay a sum in satisfaction of an alleged debt to the Supplier, they will be taken to Court and risk the Supplier obtaining orders:

(i)    requiring the customer to pay an additional amount on top of the alleged debt other than reasonable and proper costs and any interest properly recoverable; or

(ii)    ordering repossession of the customer’s assets in satisfaction of the debt;

where there is no such entitlement.

Pecuniary Penalties under s 76E of the TPA

22.    Excite Mobile pay to the Commonwealth of Australia pecuniary penalties in the sum of $455,000.

23.    Mr Brown pay to the Commonwealth of Australia pecuniary penalties in the sum of $55,000;

24.    Mr Samuel pay to the Commonwealth of Australia pecuniary penalties in the sum of $45,000;

25.    Ms Smart pay to the Commonwealth of Australia pecuniary penalties in the sum of $3,500.

Disqualification Orders under s 86E(1B) of the TPA

26.    Mr Brown be disqualified from managing a corporation for a period of three years from the date of these orders.

27.    Mr Samuel be disqualified from managing a corporation for a period of two years and six months from the date of these orders.

Order for findings of fact under s 83 of the TPA

28.    The reasons for judgment with the seal of the Court affixed thereon be retained on the Court file for the purposes of s 83 of the TPA until 31 December 2017.

Costs

29.    Excite Mobile, Mr Brown and Mr Samuel pay to the applicant the costs of, and incidental to, this proceeding, to be taxed if not otherwise agreed.

30.    Ms Smart pay to the applicant 10 per cent of the costs of, and incidental to the proceeding, to be taxed if not otherwise agreed.

Other

31.    Excite Mobile has 28 days to pay the pecuniary penalty imposed by order 22 hereof.

32.    The applicant, Excite Mobile, Mr Brown, Mr Samuel and Ms Smart each have until 24 January 2014 to apply for such order as they may be advised as to the time for payment, or the means of payment, of the pecuniary penalties imposed by orders 22, 23, 24 and 25 hereof.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

1    On 18 April 2013, judgment was delivered in this matter on the issues of liability. The question of the orders which should be made in the light of the findings and conclusions made was deferred to a later date, for such further evidence and submissions as the parties considered appropriate: Australian Competition & Consumer Commission v Excite Mobile Pty Ltd [2013] FCA 350 (the liability judgment).

2    This judgment deals with the orders which should now be made. It should be read with the liability judgment. I will use the same descriptions of the parties and other terms as used in the liability judgment, and for the reasons given at [4] of the liability judgment. I will continue to refer to the relevant legislation as the Trade Practices Act 1974 (Cth) (the TPA). I have had the benefit of further evidence and both written and oral submissions from the parties.

3    In the liability judgment, the Court found that Excite Mobile contravened:

(1)    s 51AB of the TPA by the sales methods adopted by Excite Mobile, its marketing and sale package, its imposition of the cooling off fee of $75, its imposition of a fee of $195 for any damage to a mobile phone (including to any aspect of the packaging) if a customer exercised cooling off rights and the phone was returned; and by sending certain of the Jerry Hastings letters, namely the Times are Bad Letter, the Last Warning Letter and the Failure to Pay Letter;

(2)    ss 52 and 53(c) of the TPA by making misleading and deceptive representations to each of seventeen consumers that there was mobile coverage through the Optus network at their home address (the Coverage Conduct);

(3)    ss 52 and 53(g) of the TPA by making misleading and deceptive representations to customers, by using the TIC name and separate telephone number, that TIC was a complaints handling organisation for consumers of telecommunications services; and that it was independent of Excite Mobile;

(4)    s 52 of the TPA by engaging in conduct that was misleading and deceptive and likely to mislead and deceive, by representing in each of six different types of the Jerry Hastings letters that Jerry Hastings was an independent debt collector, or an agent of an independent debt collector; and the debt which Excite Mobile claimed to be owed to it by the particular customer had been referred to Jerry Hastings for collection;

(5)    ss 52 and 53(g) of the TPA by making false and misleading representations to customers, in the Times are Bad Letter, the Last Warning Letter and the Failure to Pay Letter, as to the existence or effect of rights which Excite Mobile, Jerry Hastings and his lawyers had; and as to remedies available to Excite Mobile, Jerry Hastings and his lawyers;

(6)    s 52 of the TPA by making false and misleading representations during telephone conversations with customers who had contacted Jerry Hastings’ office, that Ms Smart and Mr Brown were from Jerry Hastings office, that Jerry Hastings was a debt collector acting for Excite Mobile, and that Jerry Hastings’ office had no connection to, or was independent of, Excite Mobile; and

(7)    s 60 of the TPA by using undue coercion in relation to customers who received the Jerry Hastings letters and took part in the Jerry Hastings calls by intimidating them through the combination of the presented independence of Jerry Hastings, and the descriptions of the nature of his lawyer and of the consequences which would follow if no agreement was reached for the repayment of the asserted debt.

4    The Court also found that:

(1)    Mr Brown was involved in and knowingly concerned in all of Excite Mobile’s contraventions of ss 51AB, 52, 53(c), 53(g) and 60;

(2)    Mr Samuel was knowingly concerned in each of Excite Mobile’s contraventions of those sections, other than the Coverage Conduct; and

(3)    Ms Smart was knowingly concerned in Excite Mobile’s contraventions of ss 52 and 53(g) set out in [3] at (4), (5) and (6) above.

5    The ACCC submits that the Court should grant declaratory relief under s 21 of the Federal Court of Australia Act 1976 (Cth) in relation to all respondents, and should impose pecuniary penalties under s 76E of the TPA also in relation to all respondents. It also seeks injunctive orders under s 80 and disqualification orders under s 86E of the TPA in relation to Mr Brown and Mr Samuel. The final remedial order that the ACCC seeks is an order under s 83 of the TPA. It also seeks costs of the proceedings against the respondents jointly.

DECLARATORY ORDERS

6    There was no real dispute about whether the declaratory orders sought by the ACCC should be made in the terms sought. It is therefore convenient to address that aspect before considering more generally the ACCC submissions and those of the respondents.

7    I am satisfied that the discretion of the Court to make declarations, in accordance with s 21 of the Federal Court of Australia Act 1976 (Cth), should be exercised as proposed by the ACCC set out below. The applicable criteria are explained in Forster v Jododex Australia Pty Ltd (1972) 127 CLR 421 at 437-8 and are clearly satisfied. There is no opposition to making those declarations, I have also considered the observations of Nicholson J in Australian Competition and Consumer Commission v Construction, Forestry, Mining and Energy Union [2006] FCA at [6] affirming the utility of declaratory orders, provided the circumstances are otherwise appropriate to make them, where such orders are consented to. The same reasons as his Honour expressed support the making of declaratory orders in this matter.

8    Accordingly, I will make the declaratory orders sought. I have altered the style of drafting a little. As that conclusion is reflected in the orders made with this judgment, I do not set out the declaratory orders themselves in these reasons for judgment.

PECUNIARY PENALTIES

9    This is the most significant issue between the parties. It is one of emphasis, rather than of principle. Nevertheless, it is important because the respective positions are so different.

10    The ACCC contended that the contraventions of the TPA were at the most serious end of the scale, in relation to the provisions contravened. It proposed that the following pecuniary penalties be imposed:

    Excite Mobile – the sum of $5 million

    Mr Brown – the sum of $500,000

    Mr Samuel – the sum of $450,000

    Ms Smart – the sum of $30,000

11    Excite Mobile did not appear at the hearing on liability or at this hearing. Each of Mr Brown, Mr Samuel and Ms Smart, through their submissions, made it plain that they considered that a dramatically lower range of penalties should be imposed, although they did not suggest particular figures. For the reasons which follow, in my view the appropriate pecuniary penalties should be much less than those proposed by the ACCC. As a starting point, it is fair to say that the penalties proposed appear to bear no relationship to the range of penalties imposed in other matters involving contraventions of the former Part V – Consumer Protection of the TPA (now part of the Australian Consumer Law (ACL) as Schedule 2 to the Competition and Consumer Act 2010 (Cth) (CCA)). At least, the ACCC did not point to any instances where a relatively small company and its directors had contravened one or more provisions of Part V of the TPA or of Chapters 2 or 3 of the ACL and had suffered penalties in the range now proposed under s 76E of the TPA or s 224 of the ACL.

12    That, of course, does not mean that the ACCC’s proposed penalties are not appropriate. It is the specialist regulator, and its views should be carefully considered: Australian Competition and Consumer Commission v Dataline.Net.Au Pty Ltd (in liq) (2007) 161 FCR 513-527.

13    The process to be applied in arriving at a particular penalty figure was considered in the context of criminal sentencing by the High Court in Markarian v The Queen (2005) 228 CLR 357 (Markarian). The same process is also applicable to the assessment of pecuniary penalties under s 76E of the TPA: see Singtel Optus Pty Ltd v Australian Competition and Consumer Commission [2012] FCAFC 20 (Singtel) at [13] (Keane CJ, Finn and Gilmour JJ) (Singtel). I have accordingly adopted that approach for the purposes of arriving at appropriate penalties. There was no dispute about that approach so I do not need to set it out.

14    Relevantly, under s 76E(1) of the TPA, penalties may be imposed for each act by Excite Mobile that was in contravention of ss 51AB, 53(c), 53(g) or 60 as the Court determines to be appropriate, and for each act of Mr Brown, Mr Samuel and Ms Smart in which they were knowingly concerned in a contravention by Excite Mobile.

15    For each such act, a penalty of up to 10,000 penalty units may be imposed upon a body corporate and 2000 units on an individual: Items 1 and 2 of s 76E(3) of the TPA. As each penalty unit was worth $110 at the relevant time: s 4AA of the Crimes Act 1914 (Cth), the maximum penalty available to be ordered against Excite Mobile is $1.1 million for each act and the maximum penalty against the individual respondents is $220,000 for each act.

16    Section 76E(4) of the TPA provides that if “conduct constitutes a contravention of 2 or more provisions” referred to in s 76(1)(a), “a person is not liable to more than one pecuniary penalty in respect of the same conduct”.

17    I accept that in determining the maximum penalties available for the purposes set out in Markarian, the Court should not routinely isolate every such act as described above. As the ACCC submitted, I should apply the one transaction principle and group together a number of separate acts of Excite Mobile in contravention of the TPA into a smaller number of “courses” or “episodes” of conduct, in order to determine the maximum penalties available. In the case of the individuals, the relevant acts are those of being knowingly concerned in each episode of conduct.

18    The one transaction principle was considered and endorsed in Singtel at [53]-[55], which quoted with approval the authoritative statements of principle collected by Middleton J in Australian Competition and Consumer Commission v Telstra Corporation Ltd (2010) 188 FCR 238 at [231]-[235] and [250]-[251].

19    At [235], Middleton J held that, in the final analysis, in applying the one transaction principle, the question is one of discretion in coming to the correct, adequate and appropriate penalties. His Honour then quoted a passage from the majority of the Full Court in Construction, Forestry, Mining and Energy Union v Cahill [2010] FCAFC 39 (Cahill) at [41]-[42]. The majority in Cahill in turn drew upon statements of principle of the Full Court in Construction, Forestry, Mining and Energy Union v Williams [2009] FCAFC 171.

20    Those references make clear that the one transaction principle is drawn from the criminal law, that it may be relevant to the proper exercise of the sentencing discretion but its application is not mandatory, that it requires sufficient interrelationship between the legal and factual elements of two or more offences before it can apply; and that it is used to ensure that an offender is not punished twice for the same criminality.

21    Consequently, the assessment of what is the same contravening conduct in each case is a question of fact specific to that case. But identity of motive or the reasons for the conduct will generally not be sufficient to support the conclusion that the detailed contraventions constitute one transaction. Indeed, even if the contravening conduct arises from both legal and factual elements that are sufficiently interrelated, a judge is not obliged to apply the one transaction principle or to start from a premise that the maximum penalty is solely the penalty for one offence.

22    The ACCC points out, too, that to the extent that the application of the one transaction principle results in episodes of acts which share some similarities and possible points of overlap, the cumulative total of such penalties is to be moderated, if necessary, by the application of the totality principle: Clean Energy Regulator v MT Solar Pty Ltd [2013] FCA 205 at [80] per Foster J.

23    In applying the principles to Excite Mobile’s acts found to contravene the TPA in this matter, the ACCC submits that a number of those acts may properly be characterised as arising from the one transaction, and grouped into an episode of conduct. It has proposed that overlapping legal and factual elements should lead to grouping into the following eight separate transactions or episodes of conduct:

(1)    each act in contravention of s 51AB of the TPA by the use by Excite Mobile of the sales method to each consumer, and marketing of the Excite Mobile package (the Sales Conduct);

(2)    each act in contravention of s 51AB of the TPA by entering a contract with the cooling off fee and the damage fee (the Contract Conduct);

(3)    each act in contravention of s 53(c) of the TPA by making a misleading representation to each consumer that there was mobile coverage at his or her home and constituting the Coverage Conduct;

(4)    each act in contravention of s 53(g) of the TPA by making a misleading representation by use of the TIC name and separate telephone number to each consumer (the TIC Conduct);

(5)    each act of sending a Times are Bad Letter to each consumer – it emphasises that by sending such a letter, Excite Mobile made a series of misleading representations, each of which was in contravention of s 53(g) (the Times are Bad Conduct), and two of which also comprised the unfair threats which also amounted to contraventions of s 51AB, so that s 76E(4) applies and only one maximum penalty is available for this conduct;

(6)    each act of sending a Last Warning Letter to each consumer – it says that by sending each such letter, Excite Mobile made a series of misleading representations, each of which was in contravention of s 53(g) (the Last Warning Conduct), and two of which also comprised the unfair threats which also amounted to contraventions of s 51AB, so that s 76E(4) applies, and only one maximum penalty is available for this conduct;

(7)    each act of sending a Failure To Pay Letter to each consumer – it says that by sending each such letter, Excite Mobile made a series of misleading representations, each of which was in contravention of s 53(g) (the Failure To Pay Conduct), and one of which comprised one of the unfair threats which formed part of the contravention of s 51AB, so that s 76E(4) applies and only one maximum penalty is available for this conduct; and

(8)    each act in contravention of s 60 that amounted to the use of undue coercion in relation to each consumer (the Coercion Conduct).

24    As a matter of practical assessment, in my view that break-up in the present matter is a little too refined.

25    It is first worthy to note, as the ACCC contended, that each of its eight separate transactions or episodes of conduct affected, or potentially affected, a diminishing (and therefore different) class or number of customers. The diminishing classes start with all customers of Excite Mobile (the Sales Conduct), those directly affected by the attempt to exercise cooling off rights and thereby suffered loss (the Contract Conduct), those without coverage (the Coverage Conduct), those who endeavoured to complain to Excite Mobile about its conduct in one respect or another (the TIC Conduct), and then in separate stages those who did not pay the amounts claimed by Excite Mobile and who received one or more of the Jerry Hastings letters (thereby suffering one or more of the Times are Bad Conduct, the Last Warning Conduct, the Failure to Pay Conduct and the Coercion Conduct). There is no basis upon which – with the exception of the Coverage Conduct – it is possible to make any precise finding of the number of customers of Excite Mobile affected by the various transactions or episodes suggested by the ACCC.

26    In my view, the more practical break-up of the transactions or episodes is into four categories:

(1)    the sales process including the marketing of the particular Excite Mobile package, and the day cap including the imposition of the cooling off fee of $75, the damage fee under the sales contracts, thus incorporating some of the contraventions of s 51AB of the TPA (the Selling Conduct) (I have adopted that term simply to distinguish it from the term used by the ACCC in its submissions);

(2)    the Coverage Conduct, reflecting also contraventions of s 53(c) of the TPA;

(3)    the TIC Conduct, reflecting also contraventions of s 53(c) of the TPA; and

(4)    the Debt Recovery Conduct, incorporating each of the Jerry Hastings letters with their progressively more vigorous terms and ultimately their unlawful coercive quality in combination with the telephone contact, reflecting contraventions of ss 51AB, 53(g) and 60 of the TPA (the Debt Recovery Conduct).

27    It is important to bear in mind that contraventions of s 52 of the TPA do not attract liability for pecuniary penalties under s 76E of the TPA.

28    I have adopted the Selling Conduct as one transaction because it encapsulates the process of locking in customers from the initial telephone contact to the terms of the contract, sent with the product and the Welcome to Excite Mobile Letter. It would be a little artificial to break up the various stages of that process, when the contract was sent out to the same, or much the same, customers who considered (and perhaps exercised) their right under the cooling off terms and who incurred also the damage fee. The decision of some or many customers to “cool off” may also have been influenced by a lack of appreciation of the day cap fee, and how it would work. It would be difficult to make a meaningful separate quantitative assessment of those separate elements of the Selling Conduct.

29    I accept that the Coverage Conduct was of a different and less pejorative character, and was not shown to have been a primary feature of the Selling Conduct. It affected 17 customers of Excite Mobile. It is not apparent that, whatever the customer reaction, the telemarketer was required or expected to press a contract on a potential customer if it were clear that no Optus coverage could be offered.

30    I also accept that the TIC Conduct should be addressed separately. Its purpose was to ensure complaints were directed to Excite Mobile, rather than to the independent Telecommunications Industry Ombudsman (TIO), on the evidence at least in part to avoid the cost or fee imposed by that office. It is not part of the case of the ACCC that Excite Mobile intended to have any complaints directed to it simply for the purpose of ignoring them rather than trying to resolve them, but the evidence does not show that it responded to complaints in a way which did not routinely satisfy its customers. However, as the evidence understandably did not go into that matter, I have proceeded on the basis that Excite Mobile, through the TIC Conduct nevertheless did intend to try and satisfy customer concerns or complaints.

31    In my view, it is more practical to treat the several stages of the debt collection process together as one transaction or episode. There may have been many customers of Excite Mobile who were subject to each of those stages. It reflects that there was one strategic decision, to be implemented progressively and to escalate the customer’s motivation to pay the outstanding debt asserted or to make some arrangement to do so. The Jerry Hastings letters were, in that way, related to rather than independent of each other. Moreover, they were not intended to have their effect independently, but (as necessary) cumulatively. What the ACCC described as the Coercion Conduct was the ultimate step in its progressively firmer action to secure payment of its claimed debts or some arrangement for their payment.

32    Having regard to the maximum penalties referred to above, and my assessment of there being four separate transactions to be addressed, the maximum penalties available in respect of Excite Mobile’s contraventions is $4.4 million and, as a matter of arithmetic only, for Mr Brown (each of the four transactions) $880,000 and for Mr Samuel (three transactions as he was not knowingly involved in the Coverage Conduct) $660,000 and for Ms Smart (the Debt Recovery Conduct) $220,000.

33    It is now appropriate to note briefly the relevant factors in determining the appropriate levels of pecuniary penalties.

Determining Penalties

34    Section 76E was introduced into the TPA by the Trade Practices Amendment (Australian Consumer Law) Act (No 1) 2010 (Cth) and commenced operation on 15 April 2010. The ACCC seeks pecuniary penalties in relation to the four transactions or episodes of conduct which took place on and from 15 April 2010.

35    Section 76E was in similar terms to s 76(1) of the TPA, which section conferred power on the Court to order a person to pay a pecuniary penalty to the Commonwealth if the Court was satisfied that a person had contravened a provision of Part IV. Part IV contained prohibitions upon restrictive trade practices. It did not therefore include contravention of ss 51AB, 53(g) or 60 of the TPA. It is, however, helpful to look at how s 76(1) was addressed as it directs the Court to have regard to, in essence, the same factors as those identified under what was s 76E(2) at material times, with the exception of a particular cross-reference that is not material in this matter: Global One Mobile Entertainment Pty Ltd v Australian Competition and Consumer Commission [2012] FCAFC 134 (Greenwood, Logan and Yates JJ) at [119].

36    In Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191, Mason J said at 204:

The object of Pt V is to protect the consumer by eliminating unfair trade practices, just as the object of Pt IV is to promote competition by eliminating restrictive trade practices. … The statutory policy, as it seems to me, is that the interests of a consumer of goods or services will best be served when manufacturers compete vigorously without adopting restrictive practices and observe prescribed standards of conduct in their dealings with consumers.

37    His Honour’s view of the legislative relationship between Pts IV and V of the TPA was adopted by the High Court in Campomar Sociedad Limitada v Nike International Ltd (2000) 202 CLR 45 at [97].

38    As a starting point, it should be noted that s 76E of the TPA was directed to the imposition of a pecuniary penalty, having regard to all relevant matters, arising out of a corporation’s failure to “observe standards of conduct” prescribed by Part V in its dealings with consumers, and directed to the elimination of unfair trade practices. Thus, the starting point is to assess a penalty of appropriate deterrent value: see per French J (as his Honour then was) in Trade Practices Commission v CSR Ltd [1991] ATPR 41-076 at 52,152.

39    In Singtel at [62] (Keane CJ, Finn and Gilmour JJ) the Court emphasised that the penalty should be such as not to be regarded by that offender and others as an acceptable cost of doing business. That is, deterrence has both a general community element and one personal to the particular contravener.

40    When assessing a penalty of appropriate deterrent value, s 76E(2) of the TPA requires the Court to have regard to all relevant matters including:

(1)    the nature and extent of the act or omission;

(2)    any loss or damage suffered as a result of the act or omission;

(3)    the circumstances in which the act or omission took place; and

(4)    whether the person has previously been found by the Court in proceedings under Pt VC or Pt V of the TPA to have engaged in any similar conduct.

41    It is obvious, too, that consideration should be given to the size of the contravener and its market share and ease of entry into the relevant market; the deliberateness of the contravention and the period over which it extended; whether the contravention arose out of the conduct of senior management of the contravener or at a lower level; whether the contravener has a corporate culture conducive to compliance with the TPA, as evidenced by educational programs and disciplinary or other corrective measures in response to an acknowledged contravention; whether the contravener has shown a disposition to cooperate with authorities responsible for the enforcement of the TPA in relation to the contraventions; and the financial position of the contravener and the financial effect on the consumer and the contravener: Global One Mobile Entertainment Pty Ltd v Australian Competition and Consumer Commission [2012] FCAFC 134 (Greenwood, Logan and Yates JJ) at [136] and [162].

42    The next step is to indicate how those considerations are applied to the respondents in this matter.

(a)    Excite Mobile

43    The conduct of Excite Mobile was egregious. By the Selling Conduct it undertook a mass telemarketing campaign, in which it promoted the day cap plans extensively to the public at large when it knew they were not suited to the “everyday user”, and the telemarketing campaign made it difficult for consumers to appreciate the significance of what they were agreeing to.

44    The recordings played and evidence led during the liability hearing show that the consumers affected included those with imperfect comprehension abilities, those in remote areas and indigenous communities, those who required the assistance of the State Trustee and those on Centrelink payments. The sales method failed to describe the day cap adequately. Excite Mobile knew that the nature of the day cap plans was of such significance that it should have been properly explained – so that the consumer might have some information about when the day cap might be exceeded and the cost of phone calls or other services once the day cap was exceeded. Instead of doing that, however, it designed its scripts to start with the bait, and consumers were given no real opportunity for reflection, but were instead encouraged to enter an oral contract with Excite Mobile, without even a mention of other terms, the imposition of which in and of themselves was, in all the circumstances, unconscionable.

45    Except in the case of some limited users of mobile phone services, the design of the Excite Mobile day cap plans was destined to expose its consumers to quite substantial monthly charges, but was presented in such a way that it effectively concealed that reality.

46    Excite Mobile chose to do this knowing both that its plan was unique, and that in 2009 and 2010 Excite Mobile was the only company offering a day cap plan. It resulted in many consumers becoming trapped in a $33 per month contract for two years that exposed them to quite substantial monthly charges if they wished to do much more than make two 30 second telephone calls and send one text on a given day. An example is given in the liability judgment at [173]-[174].

47    It was then only by the documents sent with the phone to its customers that there was reference, for the first time, to the cooling off and damage fees. Almost inevitably, the box containing the phone would be opened and then able to be treated as damaged by Excite Mobile. For consumers that elected to “cool off”, they could only have done so by incurring fees of $260. The fee for the cost of the “damaged” phone was almost twice the cost incurred by Excite Mobile.

48    As noted, the ACCC seeks a penalty for the Selling Conduct based on the customers that Excite Mobile signed up to any of its three day cap plans from 15 April 2010. The exact number of those consumers is not clear. It was obviously a significant number. At its peak, Excite Mobile had about 4000 customers, and over time in total, Excite Mobile had about 8000 customers. The Selling Conduct took place mainly from about 1 April 2009 to about 4 November 2010, equalling about 400 contracts per month. To be conservative, and to allow some drop-off in the latter months, I will proceed on the basis that it contracted with about 1500-2000 customers over the period from 15 April 2010 to 4 December 2010.

49    The ACCC contends that the Coverage Conduct added to, and had greater effect because of, the Selling Conduct because once the misleading statements were made, those consumers were locked into the contract, and were only in a position to know they had no coverage after they opened the packaging and tried to use the telephone. By this stage, the damage fee, at the least, had kicked in and they were confronted with the unconscionable “cool-off” option at considerable expense in any event. I am mindful of avoiding doubly penalising the respondents by treating the Coverage Conduct entirely independently of the Selling Conduct. The victims of the Selling Conduct include those customers affected by the Coverage Conduct.

50    The liability judgment also records at [184] that there was no “partial” coverage classification, so there is no explanation how entries that recorded Optus coverage as “partial” were made in Excite Mobile’s customer records. In all there were 7 affected customers.

51    The third category is the TIC Conduct. Again, I am mindful that its victims are included in those exposed to the Selling Conduct. Its impact was heightened by each of the four separate aspects of unconscionable conduct involved in the Sales and Contract Conduct.

52    The complaints of customers who had accepted the day-cap plans would mostly have been those who realised the true cost and operation of the day-cap plan. Many obviously complained to the TIO to seek redress. They did so in such great numbers that the fees charged by the TIO became a significant cost for Excite Mobile. Hence, the establishment of the TIC number. The evidence does not show that the TIC number was not intended to address complaints genuinely, but on the other hand, Excite Mobile did not choose to revisit its Selling Conduct which was clearly the foundation for many, if not most, of those complaints.

53    The TIC number was to dupe consumers, so as to deprive them of an opportunity to have their complaint resolved by the TIO, to improve Excite Mobile’s financial position by retaining moneys that would otherwise have been payable to the TIO in respect of its Selling Conduct and, I accept to try to resolve customer disputes. Some consumers were misled deliberately by being told that TIC was independent of Excite Mobile, or by the pretence that TIC did not have direct access to Excite Mobile’s records. One customer was told by an Excite Mobile representative to call the TIC number if it wished to escalate a concern.

54    The Debt Collection Conduct also has to be seen in the context, as I found in the liability judgment, that many customers of Excite Mobile had unconscionably been duped into agreeing to the day-cap plan that did not suit their needs and with terms which of themselves were not reasonable. Unsurprisingly, customers began to accumulate large debts. Excite Mobile by the TIC Conduct then proceeded to try and divert customers away from contacting the TIO with complaints.

55    In response to mounting outstanding accounts, Excite Mobile devised the strategy reflected in the Jerry Hastings letters. The Times Are Bad Letters were sent to 34 customers over the two month period from 15 April 2010 to 16 June 2010. They presented a fictitious debt collector with a fictitious lawyer, together with the threats contained with the letter.

56    If the Times Are Bad Letter did not result in payments or a payment arrangement satisfactory to Excite Mobile, the next step was the Last Warning Letter. The Last Warning Letter was sent to 93 customers over a 2.5 month period from 15 April 2010 to 30 June 2010. It too supported the presentation of a fictitious debt collector with a fictitious lawyer, together with the heightened threats contained with the letter.

57    The Failure to Pay Letter is the last step. It applied to customers who had either ignored earlier letters or had been misled into entering a repayment agreement but had not performed the obligations they had agreed to. As I found in the liability judgment at [217], the Failure to Pay Letter contained unfair and unreasonable threats, which attract a pejorative moral judgment and a high level of moral obloquy. The Failure to Pay Letter was sent to 35 customers in a two week period from 17 to 25 May 2010. It is unclear how more extensively it was used after 10 April 2010.

58    Whilst it is again important to bear in mind the penalty imposed for the Selling Conduct (and the TIC Conduct) so that the Debt Recovery Conduct should not impose a penalty which would doubly penalise for the two categories of conduct, the context means that the unlawful coercion as part of the Debt Recovery Conduct took place where earlier contraventions of the TPA in relation to each customer made the intimidation which was the culmination of Excite Mobile’s sequential process of Debt Recovery Conduct quite reprehensible.

59    In relation to the unlawful coercion, there are at least 27 acts over a two month period, from 15 April 2010 to 23 June 2010 which the ACCC has identified.

60    Each of Excite Mobile’s four episodes of acts in contravention of the TPA after 15 April 2010 directly caused significant loss and damage to individual consumers, although the broader effect of the Coverage Conduct was limited to 17 consumers.

61    In my view, it is a fair inference to conclude that the large majority of Excite Mobile customers would not have entered into a contract if the day-cap had been properly explained, and they had been made aware of the cooling off fee and the nature of, and circumstances in which, the damage fee was incurred.

62    Clearly, loss and damage cannot be quantified with any precision. At a minimum, most customers that commenced from 15 April 2010 incurred harm by paying, at least, $33 in advance for a day-cap plan, and probably much more than if they had entered into a different mobile plan contract. In the sample of 10 customers taken by the ACCC (not specifically selected to make a point) referred to in the liability judgment at [173], two commenced their Excite Mobile service from 15 April 2010. Their records show that they each made payments of $279.11 and $371.10. Excite Mobile had approximately 8000 customers throughout the entire period. A significant number of those that started on the day-cap plan from 15 April 2010 could be expected to have paid at least comparable amounts. Of course, allowance must then be made for the amounts they might otherwise have paid under a different contract without a day cap.

63    In addition, every payment of the cooling-off or damage fee by a customer from 15 April 2010 represents harm occasioned by the Selling Conduct. The precise amount of such loss is unable to be readily quantified.

64    The ACCC says, correctly, that loss and damage to other mobile telephone service suppliers was also sustained, because it can be inferred that these suppliers lost the opportunity to supply services at least to every customer that commenced an Excite Mobile service after 15 April 2010. The quantum of this loss to competitors cannot be quantified. In the overall market for mobile telephone consumer contracts, I do not know if that would be significant. Nevertheless, in a minor way in these circumstances, I take it into account for the purpose of assessing a penalty of appropriate deterrent value.

65    There is no evidence before the Court to quantify the specific loss and damage Excite Mobile caused consumers to suffer by its TIC Conduct. However, that is not to say that no harm was suffered. Consumers suffered the real harm of being diverted from the TIO and largely denied their right to raise, and have resolved, complaints they had in respect of the provision to them of telecommunication services by Excite Mobile. Many, as a result, lost the opportunity of receiving refunds or other redress. There is no evidence to quantify how much these consumers were worse off financially. At a minimum, Excite Mobile caused consumers the harm of being misled into telephoning the TIC number and the further harm of the wasted time the consumers spent seeking redress from Excite Mobile instead of the Ombudsman. The TIC Conduct is, as the ACCC says, an affront to fundamental consumer rights, specifically provided by the Parliament. Its design is an act that has no regard to good conscience. Moreover, whilst it is impossible to quantify, there are no doubt consumers who would have had their complaints addressed by the TIO but, by dealing with Excite Mobile through TIC, came to accept liabilities they need not have accepted or to make arrangements they need not have made.

66    The Coercion Conduct is the worst feature of the Debt Recovery Conduct. It builds on the other Jerry Hastings letters and the Jerry Hastings calls. It was by virtue of those letters and calls that Excite Mobile put into place each payment plan with customers and caused customers to suffer financial loss and damage by making payments to Excite Mobile. It caused particular harm to consumers, as it built on, and added to, the harm caused by each of the other two episodes of conduct (excluding the Coverage Conduct) which preceded it. While the amount of such loss cannot be quantified with precision, in my view it is significant to the customers who succumbed to that conduct. In addition, customers would have suffered non-financial harm such as the stress caused by threats and intimidation, for example that referred to at [128] of the liability judgment.

67    In addition, each of the consumers who telephoned the Jerry Hastings number or answered a phone call said to be made on behalf of Jerry Hastings after 15 April 2010 suffered the harm of the intimidation that the Coercion Conduct, by its very nature, was intended to inflict and the distress which naturally follows from the possibility of being exposed to repossession orders and 20% extra costs. This harm was suffered the more so as many of the payment plans that were entered into after sending a Jerry Hastings letter were with customers who were receiving Centrelink payments.

68    Excite Mobile is in the process of being deregistered. There is no evidence that it has any assets of substance or capacity to pay a substantial penalty or that it will continue to carry on any business. Consequently, specific deterrence has no role to play in assessing the penalty to be imposed on it. In assessing a penalty to impose upon Excite Mobile of appropriate deterrent value, only general deterrence is relevant.

69    In assessing the appropriate penalty, I accept that Excite Mobile made a conscious decision to engage in each of the transactions, or episodes of conduct, which from 15 April 2010 attract a penalty. In doing so, I find that it did not really consider the interests of potential consumers when devising and implementing the Selling Conduct as it knew the day-cap plan was not suited to the requirements of the many everyday users. It presented its proposal in a way that avoided drawing attention to the way the day-cap plan operated and so potentially expose consumers to quite substantial monthly charges. Cooling-off rights were fixed at a level which make it less likely that consumers would exercise those rights, especially if they realised the basis on which the damage fee would be incurred.

70    Excite Mobile was also apparently indifferent to the consequences of its Coverage Conduct. The evidence shows that Excite Mobile was aware that at least one customer did not have coverage at their home address, but continued to charge the customer in relation to a service that the customer could not use at that address. Whilst I do not think Excite Mobile deliberately set about selling mobile telephone services to customers where there was no Optus service, there is nothing to indicate that it was sensitive to an appropriate reaction when it emerged that that had occurred.

71    The TIC Conduct was a deliberate attempt to divert customers away from the TIO and some customers were deliberately misled by being told that TIC was independent of Excite Mobile or by the pretence that TIC did not have direct access to Excite Mobile’s records. It is not possible to assess the direct effect of that conduct on any particular consumer or consumers, but I am confident that some made agreements with Excite Mobile about payment they might not otherwise have made. I am also of the view that, apart from perhaps “doing a deal” so that less was paid than Excite Mobile demanded, there was little benefit in the process. For the reasons given in the liability judgment, most consumers should not have been in the position of having debts to Excite Mobile at all.

72    The Times Are Bad, Last Warning and Failure to Pay letters were all deliberate in their intent to mislead, and were designed to secure agreement by threats that were deliberately misleading and unfair, and as recorded above, the Jerry Hastings letters in some instances with personal contact meant that the Debt Recovery Conduct ultimately was unlawful because it was designed to secure agreement by intimidation.

73    Excite Mobile did not voluntarily provide any cooperation in the investigation and did not participate in the proceedings. Other than a modest allowance for discontinuing the conduct some time after the ACCC investigation commenced, no credit should be given in relation to this aspect of setting penalty. That is not to say that it was uncooperative. By the time the investigation had any real momentum, it was in effect a non-operating company.

74    The penalties are only available for, and sought for acts in each of the episodes of conduct that occurred from 15 April 2010. The Court has also made findings that Excite Mobile and the individual respondents contravened the TPA from about 24 December 2008 to 14 April 2010, mainly from about 1 April 2009.

75    The ACCC therefore submits that it is relevant to take into account the similar conduct of each respondent which they engaged in prior to 15 April 2010. It argues that their conduct from 15 April 2010 was not the first time that such acts, in contravention of the TPA, were committed by them. For instance, when Excite Mobile contravened ss 51AB and 53(g) by sending its first Times are Bad letter from 15 April 2010, there had been on the evidence some 480 earlier such letters. The conduct prior to 15 April 2010 was no less unlawful, unconscionable, misleading or coercive, even though it did not render the respondents vulnerable to pecuniary penalties.

76    The ACCC properly acknowledges that its submission is contrary to the findings by Marshall J in Australian Competition and Consumer Commission v BAJV Pty Ltd [2013] FCA 666 (BAJV) at [22]. In that matter, his Honour said at [38]:

… the Court is aware of admitted contraventions going back to 2006 but it would be erroneous to take them into account in assessing penalty. They have not been the subject of any prior finding by this Court.

77    The ACCC submits that the findings in BAJV conflated consideration of the factor commonly relevant to penalty, as in s 76E of “whether the person has previously been found by the Court in proceedings under Pt VC or this Part to have engaged in any similar conduct” with the factor which Heerey J in Australian Competition and Consumer Commission v NW Frozen Foods Pty Ltd [1996] ATPR 411-515 at 42,444 had regard to whether the contravener has engaged in “similar conduct in [the] past”.

78    In my view, it is now well settled that it is appropriate to take into account whether a contravenor has engaged in similar conduct in the past, even if there has been no court determination to that effect. The relevant remarks of Heerey J did not attract any adverse comments on appeal (see NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (1996) 71 FCR 285 (NW Frozen Foods)), and have been frequently applied since. There is no apparent reason why past contravening conduct should not be taken into account. Indeed, it is a common feature of sentencing that a prosecutor asks for any past conduct of the convicted person of the same character as the subject of the conviction to be taken into account. An example under the TPA is provided by Australian Competition and Consumer Commission v Cotton On Kids Pty Ltd [2012] FCA 1428, per Tracey J especially at [54].

79    In this matter, the “past conduct” is in a somewhat different category. It is not past conduct remote or separate from the conduct attracting liability for a pecuniary penalty. It is the continued conduct which commenced from about 24 December 2008, but in substance mainly from about 1 April 2009, and continued to about 4 November 2010. The contravening conduct only attracted liability for a pecuniary penalty from 15 April 2010.

80    The ACCC submits that the Court should recognise that those acts earlier than 15 April 2010 show a long history of similar, frequent and repeated contraventions by the respondents, so the acts for which penalties are presently sought are not isolated episodes. It says that the fact that the respondents’ similar conduct in the period prior to 15 April 2010 remained undetected is no reason to allow advantage to be taken of that.

81    In BAJV at [29], reference is made to the decision of Reeves J in Australian Competition and Consumer Commission v EDirect Pty Ltd (in liq) (2012) 206 FCR 160 (EDirect) at [74] to support the finding that “… it is only conduct from 15 April 2010 that can be taken into account in assessing penalty.”

82    In EDirect, Reeves J at [74] said that:

[s]ince s 76E of the TPA only applies to conduct that occurred after 15 April 2010 and the statement of claim is confined to the period up to September 2010, that is the period which I will take into account in assessing the pecuniary penalty.

The ACCC says that passage makes it clear that Reeves J is assessing the extent of the acts for which penalties are available, not applying a principle that acts prior to 15 April 2010 cannot be taken into account at all. So, it submits that the conduct prior to 15 April 2010 can be taken into account for which penalty is sought.

83    In my view, it is not appropriate to take into account in assessing the appropriate penalty for the respondents’ contravening conduct from 15 April 2010 the fact that they had been engaging in that conduct from December 2008 or April 2009. That is because the TPA did not provide that that contravening conduct prior to 5 April 2010 should expose the contravenors to any pecuniary penalty. Excite Mobile did, as the liability judgment records, contravene the TPA prior to 15 April 2010 in much the same (and continuing) way as it did after 15 April 2010, but the monetary remedy provided for under the TPA was confined to a claim for damages under s 82 of the TPA up to that time.

84    It would not therefore be appropriate to impose a higher penalty on the respondents for their conduct after 15 April 2010 by reason of prior conduct which did not attract the potential of a monetary penalty. In my view, that is consistent with the approach in BAJV and EDirect. Section 76E as in force at the material time does not, in my view, require the adoption of the ACCC contention. If it had been intended to so operate, the transitional provisions associated with its introduction would have so provided. They do not do so. The present situation is different from circumstances where, in determining the appropriate monetary penalty for a particular contravention, it emerges that the contravenor had previously engaged in similar conduct which itself could have attracted a monetary penalty.

85    In those circumstances, I do not need specifically to consider whether the continuous conduct referred to amounts to “prior conduct” which should be taken into account for the purpose of determining the appropriate pecuniary penalties for the conduct after 15 April 2010 where its essence is really of a continuous character. Nor do I need to consider how such conduct prior to 15 April 2010, which the Legislature has proscribed but without imposing a monetary penalty for its contravention, should result in a higher monetary penalty for contraventions which do attract that sanction.

86    I note the ACCC submissions that, while it cannot be stated with precision, prior to the Selling Conduct for which penalties are sought, Excite Mobile had engaged in similar conduct on hundreds, if not thousands, of occasions over a period of at least 14 months; that it had prior to the Coverage Conduct for which penalties are being sought, previously engaged in similar conduct on 14 occasions from 21 January 2009 to 4 February 2010; that it had prior to the TIC Conduct for which penalties are being sought, previously engaged in similar conduct on 40 occasions from 17 September 2009 to 15 April 2010; and that it had prior to the Debt Recovery Conduct for which penalties are being sought, previously issued the Times Are Bad letter on 481 occasions from 7 January 2010 to 15 April 2010; but that the Failure To Pay letter had not been issued prior to 15 April 2010; and that it had engaged in the Coercion Conduct for which penalties are being sought, and previously engaged in similar conduct on at least 74 occasions from 11 January 2010 to 15 April 2010.

87    It is clear that each of the four episodes of acts for which penalty is being sought was systematic and deliberate, and to the extent that the TIC Conduct was designed to, it did, divert some customers from contacting the TIO. It was also covert.

88    The financial effect of the conduct on the consumers for acts in contravention from 15 April 2010 is not quantifiable. Excite Mobile benefited and/or profited from the four categories of conduct by receiving revenue. It benefited from the TIC Conduct by retaining monies that otherwise would have been paid by Excite Mobile to the TIO and by the benefit of such “deals” it was able to achieve by its device. But for the Selling Conduct, it would not have received any revenue from any of the customers that commenced on a day-cap plan from 15 April 2010.

89    The ACCC submits that an instinctive synthesis of all relevant factors should result in the Court assessing penalties on Excite Mobile in the following ranges as having appropriate deterrent value. I record its submissions in relation to each of the eight categories of conduct for which it intended:

(1)    $900,000 to $1,000,000 for the Sales Conduct;

(2)    $815,000 to $900,000 for the Contract Conduct;

(3)    $25,000 to $50,000 for the Coverage Conduct;

(4)    $815,000 to $900,000 for the TIC Conduct;

(5)    $815,000 to $900,000 for the Times Are Bad Conduct;

(6)    $815,000 to $900,000 for the Last Warning Conduct;

(7)    $815,000 to $900,000 for the Failure To Pay Conduct; and

(8)    $815,000 to $900,000 for the Coercion Conduct.

90    If I adopt the higher figure in the range where I have not accepted the eight categories, the following would represent its submissions:

(1)    $900,000 to $1,000,000 for the Selling Conduct;

(2)    $25,000 to $50,000 for the Coverage Conduct;

(3)    $815,000 to $900,000 for the TIC Conduct; and

(4)    $815,000 to $900,000 for the Debt Recovery Conduct.

91    As to the Selling Conduct, the ACCC submission is that it is towards the maximum end of the range. The conduct, in its nature, is comparable to the worst possible case. Had the conduct been engaged in by a much larger corporation, with the intention to actually contravene the law and involve every consumer in Australia for larger sums of money, the appropriate penalty might be closer to the maximum. However, the nature of the conduct is so serious, coupled with the irrelevance of specific deterrence because Excite Mobile is no longer operative and apparently has no assets of value, that a penalty towards the maximum end of the range is required in order to have appropriate general deterrent value to others who might be minded to engage in similar conduct.

92    As to the Coverage Conduct, the proposed range is said to be at the lower end of the range. The conduct for which penalty is sought was not as widespread, but nonetheless serious and made worse by the Selling Conduct which preceded it.

93    As to the TIC Conduct and the Debt Recovery Conduct, the ACCC submits that the nature of the conduct is at the upper end of seriousness, involving particularly reprehensible misrepresentations, and/or unconscionable or coercive conduct; and each episode of conduct was made even more affronting by the Selling Conduct which each consumer had suffered earlier in the process.

94    The most harm was caused by the Selling Conduct – extending to all monies paid by consumers for Excite Mobile’s contraventions. The ACCC accepts that the extent of each episode differed, in that the proliferation of the acts in each episodes varied. It contends that the TIC Conduct is “most reprehensible”, and at the upper end of seriousness for misleading representation contraventions; and the Debt Recovery Conduct is “particularly reprehensible” given that it followed and had greater impact because of Excite Mobile’s previous unconscionable and misleading conduct directed at each consumer.

95    In NW Frozen Foods, it was noted that “[a] hallmark of justice is equality before the law, and, other things being equal, corporations guilty of similar contraventions should incur similar penalties” but, that in the context of the TPA, “other things are rarely equal”, so that “[c]ases are authorities for matters of principle; but the penalty found to be appropriate, as a matter of fact, in the circumstances of one case cannot dictate the appropriate penalty in the different circumstances of another case”. Thus, the Full Court in Singtel at [60] warned:

It is convenient at this point to observe that the Court is not assisted by Optus’ citation of penalties imposed in other cases, where the combination of circumstances were different from the present, as if that citation is apt to establish a “range” of penalties appropriate in this case.

96    I accept the submission that there are no “like cases” to this matter. The ACCC says it has not seen conduct as serious in nature as this.

97    In determining the appropriate penalty for a multiplicity of offences, a penalty-fixer must have regard to the “totality principle”. In Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd (1997) 75 FCR 238 per Goldberg J at 243 (Safeway); Australian Competition and Consumer Commission v Rural Press Ltd [2001] ATPR 41-833 per Mansfield J at [19] and Australian Competition and Consumer Commission v Baxter Healthcare Pty Ltd [2010] FCA 929 at [22], the Court held that the total penalty for related offences ought not to exceed what is proper for the entire contravening conduct involved: see also Trade Practices Commission v TNT Australia Pty Ltd (1995) ATPR 41-375 per Burchett J at 40,169.

98    In Safeway, the Court addressed the application of the principle of totality in the civil penalty context. In reaching an appropriate overall penalty for Excite Mobile, I have of course been guided by those remarks.

99    The end result, according to the ACCC, is that Excite Mobile should have a penalty close to the total of the four figures referred to in [90] above. Its proposal was somewhat higher than that, based on its eight transactions analysis and was about 75% of the total of upper ranges for the eight transactions which it put forward.

100    I have carefully considered the ACCC submissions. As I indicated at [11], I consider that a pecuniary penalty considerably less than sought by the ACCC is appropriate.

101    I accept generally how the ACCC has characterised the conduct of Excite Mobile in its submissions. However, it should not be assumed that those who are sought to be influenced by the general deterrent effect of a pecuniary penalty will be unaware of the size of the contravenor. Excite Mobile was not a significant participant in the market for the provision of mobile telephony services. Although its overall conduct was serious, the deterrent effect of the penalty will be seen as that applicable to a “smaller player” in the market. But it must also be seen for the character that conduct had, its extent, and for the impact that conduct had upon consumers (at least so far as it can be roughly assessed). The evidence shows that neither Excite Mobile nor its directors in fact benefited from the contravening conduct in any significant way, although there is no doubt that the purpose was profit making. In its case, although I have considered the other matters variously discussed in the authorities, they do not figure largely in the balance I have struck.

102    In my view, the Selling Conduct should attract a pecuniary penalty of $300,000. Obviously, there is no particular science to that figure. It is, for a smallish company, a significant amount. I do not have the benefit of full details of its turnover, or of its gross profits, during the period from 5 April 2010 to November 2010. They may have led to a different, and perhaps lesser, figure. I do not know. For the relevant period, the consumers who contracted with it by reason of the Selling Conduct were (as I have noted above) in the order of 1500-2000 consumers. As a matter of arithmetic (and so as a cross check) the pecuniary penalty therefore represents about $150-$200 per transaction. That does not appear to me to be excessive. On the other hand, the maximum penalty must be adjusted to allow for an appropriate penalty for similarly improper conduct by a much larger company, or in relation to a much larger number of customers.

103    That is not intended to set a tariff for other cases. Each case will have to be assessed by reference to its particular circumstances. As the ACCC said, this conduct is certainly towards the more serious end of the scale.

104    The Coverage Conduct was much more limited in its effect upon consumers, and was I think mostly a consequence of inattention rather than deliberateness. I impose a pecuniary penalty of $15,000 for the Coverage Conduct.

105    The TIC Conduct was deliberately misleading, and was designed to divert consumers who had been victims of the Selling Conduct from using the resources of the TIO, an office established inter alia to receive and deal with complaints. The potential benefits to Excite Mobile, and the potential detriments to consumers, are discussed above. It was conduct seriously in contravention of the TPA, driven by self-interest. Because the range of those affected is smaller than those affected by the Selling Conduct, I consider the appropriate pecuniary penalty should be somewhat less, and I impose a pecuniary penalty of $100,000.

106    Similar comments apply to the Debt Recovery Conduct. I consider the appropriate penalty $140,000, even though on the evidence the consumers affected were likely to have been only in the order of a few hundred over the relevant period. I have taken into account the staged process that the Debt Recovery Conduct involved, and that it involved a serious element of improperly threatening consequences, including conduct constituting the contravention of s 60 of the TPA.

107    The total of those figures, namely $455,000, is in my view a proper one having regard to the totality of the contravening conduct I have found to have been established. I have stepped back and viewed that conduct overall to reach that conclusion.

108    Although it may be somewhat theoretical, I will allow Excite Mobile 28 days to pay that sum, and I will give it leave to apply within that period of 28 days if it seeks some different orders relating to the time for payment or for staged payment.

(b)    Mr Brown

109    Mr Brown was the primary architect of the Selling Conduct, including the day cap plan. He was aware of the Coverage Conduct in a general way, but I do not proceed on the basis that he deliberately set about procuring Excite Mobile to sell its product to those who he knew would have no coverage. Nevertheless, he knew that from time to time the Coverage Conduct took place when there was no such coverage, or where there was real doubt about coverage, and he chose to take no steps to address that problem.

110    Mr Brown also devised the TIC Conduct and arranged for it to be implemented. He was aware of the frequent complaints to the TIO and attempted by the TIC Conduct to divert such complaints to an ostensibly independent recipient. His motivation was in part to save money and in part to address complaints, but there was no evidence that addressing complaints through the TIC was much more than a means of telling concerned consumers of their contractual rights and obligations.

111    Mr Brown was also directly involved in the Debt Recovery Conduct. He oversaw the preparation of the Jerry Hastings letters, and the process of telephone conduct with those who responded to them. He knew Jerry Hastings was a fictitious debt collector with a fictitious lawyer, and was at the least capricious about the availability of the threatened recovery action and its consequences. He was the means by which Ms Smart became involved in the Debt Recovery Conduct.

112    The financial position of Mr Brown is a little hard to discern. That is partly because of an ongoing dispute between himself and Mr Samuel about the real ownership of certain real estate.

113    There are seven items of real estate in issue, one at Hackham, one at Willaston, one at Burnside and four at Normanville. The Hackham property is in the sole name of Mr Brown, and the others are in the joint or several names of himself and Mr Samuel. As best as can be discerned from the material before me, the real estate has values along the following lines:

    Hackham    $210,000 (now sold for $197,000 and net $182,734, and all applied to reduce the Westpac debt);

    Willaston        $180,000 (now being sold by Westpac)

    Burnside        $465,000 (now being sold by Westpac)

    Normanville 1        $50,000 (now being sold by Bankwest)

    Normanville 2        $50,000 (now being sold by Bankwest)

    Normanville 3        $50,000 (now being sold by Bankwest)

    Normanville 4        $50,000 (now being sold by Bankwest)

114    There are mortgages securing the funds borrowed to acquire those properties: two Westpac loans, both in their joint names with some $699,000 and $204,000 respectively outstanding after the proceeds of the sale of the Hackham house have been applied to reduce the debt outstanding at March 2013, and a Bankwest loan of nearly $184,000.

115    Consequently, if those figures are roughly correct, there is no equity in the real estate. The material also suggests that there are some outstanding rates and levies in relation to those properties in excess of $17,000. However, it is not clear how the bank mortgages operate. Mr Samuel says the larger Westpac loan is secured only by the Willaston and Burnside properties. In that event, there is no equity in either of those properties. He says the smaller Westpac loan is secured by mortgage over the Hackham property, so that there is a significant shortfall between the debt and the value. The Bankwest loan is, he says, secured over the four Normanville properties so their value is about equal to the outstanding loan. Unsecured debt to the banks, after realisation of security, will be recoverable jointly against Mr Brown and Mr Samuel in any event.

116    The dispute between Mr Brown and Mr Samuel is whether, as Mr Samuel contends, those properties were in part purchased with funds provided by Lime Australia Pty Ltd (a company now controlled by Mr Samuel) so that it has the residual equity in those properties, if there is any. That dispute is being ventilated in proceedings in the District Court of South Australia.

117    The position appears to be that Mr Brown has no significant assets capable of realisation to meet any pecuniary penalty imposed on him.

118    Mr Brown has had very modest taxable income in the financial year ending 30 June 2011 and 30 June 2012 of about $7,500 and $18,500 respectively.

119    Mr Brown’s conduct in relation to the ACCC investigation and the hearing entitles him to some credit on the issue of penalty.

120    He made a number of factual and legal admissions which facilitated the efficient presentation of the evidence, but he did so only at a relatively late stage shortly before the hearing and in part during its course.

121    Counsel for Mr Brown drew my attention to Australian Competition and Consumer Commission v Halkalia Pty Ltd (No 2) [2012] FCA 535 (Halkalia). Obviously, the facts are different as it concerned misleading representations about the prospects of a distribution business. It concerned contraventions of ss 52 and 59(2) of the TPA. The person who controlled the affairs of the contravening corporation was knowingly involved in its contraventions. He was bankrupt. The conduct extended relevantly (that is, after 15 April 2010) over 150 or so responses from possible distributors, but the evidence did not show that any had become distributors. However, that person had acted deliberately on breach of the TPA and had done so previously. The pecuniary penalty of $450,000 imposed on him was less than 25% of the maximum penalty available having regard to the number of transactions or contraventions. He was also disqualified from managing a corporation for a term of 15 years (an order which was not opposed). I have taken that decision into account only in a general way.

122    Australian Competition and Consumer Commission v High Adventure Pty Ltd [2006] ATPR 42-091; [2005] FCAFC 247 was a penalty appeal on a contravention of s 48 of the TPA for resale price maintenance. Nevertheless, it was assumed in the submissions on this hearing that the observations of the Full Court (Heerey, Finkelstein and Allsop JJ) apply equally to penalties imposed on contraventions of the TPA or the ACL under the CCA. One aspect, relevant to the present matter, was the extent to which the financial circumstances of a personal contravenor should be taken into account, as the trial judge had fixed a penalty which would not “ruin the respondents’ family”. The Full Court at [11] concluded that the primary judge had focused on the detriment to the respondents but had ignored the seriousness of the contravention and the need to deter future contraventions. So, it said, sometimes those considerations may result in the insolvency of the offender. Again, I accept those observations and take them into account in the present matter.

123    Adopting the upper range of the ACCC proposed penalties, and limiting them to the four episodes I have referred to above, Mr Brown (it contends) should suffer pecuniary penalties as follows:

(a)    the Selling Conduct            $125,000

(b)    the Coverage Conduct            $25,000

(c)    the TIC Conduct            $100,000

(d)    the Debt Recovery Conduct        $100,000

124    I have considered the submissions on behalf of Mr Brown. It is not said by the ACCC that he was deliberately fraudulent, but that he was quite reckless in the way he structured the Excite Mobile business. I agree with that.

125    I have made certain observations about the nature of the four transactions or types of conduct above, and to the extent possible about their consequences to consumers. I have noted the ACCC submission that Excite Mobile’s conduct would have unfairly been detrimental to other providers of mobile telephony services, but as I noted the number of Excite Mobile instances of contravening conduct after 15 April 2010 was likely to be a very small share of the potential market, so I do not think those consequences would lead to any alteration to the penalties to be imposed.

126    I have taken into account Mr Brown’s personal circumstances. He supports a household with two children. His company Chaser Marketing Pty Ltd is in the process of being wound up, at least partly as a result of loss of business following the report of the findings in the liability judgment. He has no interest in, and is no longer a director of, Lime Australia Pty Ltd. Any significant pecuniary penalty may lead to his bankruptcy. In my view, it is also appropriate to take into account that he will be disqualified for a period from acting as a director and manager of a corporation: Australian Securities and Investments Commission v Citrofresh International Ltd (No 3) [2010] FCA 292 at [15]. His prospects of employment in the future will be impaired as a consequence. I will not repeat the matters otherwise addressed above. I also accept that Mr Brown is now much more aware of the obligations of businesses such as Excite Mobile under the ACL, and is contrite for his active role in its contraventions. As a matter of practicality, I think he is unlikely to engage in similar conduct or indeed conduct in contravention of any provision of the ACL in the future.

127    I also note that there is no indication that he (or Mr Samuel) profited in any substantial way from the business of Excite Mobile. Their real estate investments preceded its business. If anything, Mr Brown is worse off financially by his own commitment to Excite Mobile (putting aside the penalties and disqualification orders to be made).

128    As the Full Court in Halkalia said, personal circumstances should not lead to a penalty which would not give the appropriate deterrent signals, both to the community and to Mr Brown. But it does not follow that his personal circumstances are irrelevant. The imposition of a significant penalty upon a person who is without assets or income would provide such signals, even though a higher penalty might be appropriate to provide similar signals in the case of an affluent person. Deterrence is signalled by the order made in all the circumstances; it is not objectively measured only by reference to the contravening conduct.

129    I consider that, for the separate transactions, the appropriate penalties to be imposed on Mr Brown are as follows:

(a)    the Selling Conduct             $30,000

(b)    the Coverage Conduct            $3,000

(c)    the TIC Conduct            $20,000

(d)    the Debt Recovery Conduct        $20,000

I have had regard to similar considerations as then applied in fixing the penalty of Excite Mobile.

130    I have looked at that total, namely $73,000, overall and in the particular circumstances. It seems to me that, as a totality, it is quite high in his particular circumstances. On the other hand, the conduct concerned was quite egregious and it extended over several months and affected a significant number of consumers.

131    In my view, the appropriate overall penalty is $55,000.

132    I will give leave to the ACCC and to Mr Brown to apply within 21 days to seek any order they propose relating to the terms for payment of that penalty.

(c)    Mr Samuel

133    Mr Samuel was a director of Excite Mobile at all times, and shared with Mr Brown the planning for the Selling Conduct, at least to the extent of being aware of the sales scripts and of the day cap plan which was the real point of difference which Excite Mobile had to offer.

134    Mr Samuel was not aware of, or complicit in, the Coverage Conduct.

135    Mr Samuel supported the setting up of TIC, and arranged for the registration of its name. He supported its false presentation as an independent authority. Mr Samuel also knew of the Debt Recovery Conduct. He was sent the Jerry Hastings letters for comment, and he provided some comment. He knew the debt collector was fictitious, that the lawyer referred to was fictitious, and that the threats within the Jerry Hastings letters were being made.

136    Mr Samuel is married with three young dependent children. His financial position is also not a positive one. His shared interest in the real estate with Mr Brown, after repayment of bank finance, appears to be worth nothing. That is putting aside the claimed equitable interest of Lime Australia Pty Ltd. He has no other significant assets. He has significant credit card debts.

137    His taxable income for the last three financial years has been a little over $10,000 (2011 and 2012) and $16,500 (2013).

138    He is the sole director of Lime Australia Pty Ltd, and he says (in evidence that is not challenged) that Lime Australia expended very considerable sums on paying expenses of Excite Mobile (presumably now reflected as advances to Excite Mobile, but also presumably now of no value). When the customer base of Excite Mobile was sold, Lime Australia received directly the amount received of $75,000 but its expenditure on behalf of Excite Mobile was very considerably in excess of that sum by several multiples. Lime Australia apparently was profitable in the period before Excite Mobile commenced operations, and (according to Mr Samuel) facilitated the investment of Mr Brown and Mr Samuel into their real estate ventures. There is, as noted, a dispute about whether Lime Australia is entitled to any equity in that real estate. At present, on Mr Samuel’s evidence (which I accept) Lime Australia will no longer carry on the business of trading in mobile telephones, but (subject to the consequences of the disqualification order I will make in respect of Mr Samuel) is an entity which is not insolvent and may continue trading in some other activity. Given that Lime Australia contributed substantially to the operating expenses of Excite Mobile, and that it will not recover that contribution, and that Lime Australia is now Mr Samuel’s company, I accept that Mr Samuel is quite significantly worse off by his involvement with Excite Mobile (again, putting aside the matters of pecuniary penalty and disqualification orders).

139    Mr Samuel, understandably, thinks that he has little prospect of further employment in the telecommunications industry, in which he has worked since 1995, partly as a result of the findings against him in the liability judgment. Also, not surprisingly, he is concerned about how he will be able to support his family in the future. He has sought professional medical treatment and support to manage his deep concerns.

140    It is necessary to mention one other aspect of his personal circumstances. In 2002 he established Limelight Foundation to support people with depression. It is an entity with deductible gift recipient status, and Mr Samuel chairs the Foundation. I accept his submission that it has received no donations since 2007, and I do not think his ongoing role is of significance to the assessment of the penalty to be imposed on him.

141    Mr Samuel’s position in relation to the ACCC investigation and the proceeding also entitles him to credit in relation to penalty. He was examined under s 155 of the TPA, and it is not suggested that he was other than frank and open at that point.

142    At the hearing, he indicated he contested no facts, other than the extent to which he was personally aware of and involved in the contravening conduct of Excite Mobile. He accepted such responsibility as devolved on him as one of its two directors, but I think he did not readily accept the consequences of his exposure as a working director, involved in the decision making about the systems of Excite Mobile. I have referred above to the level of his involvement.

143    Mr Samuel has not engaged in any other conduct contravening the TPA.

144    In the case of Mr Samuel, the ACCC contends (again adopting the upper figures in its range) that he should suffer pecuniary penalties as follows:

(a)    the Selling Conduct        $125,000

(b)    the TIC Conduct        $85,000

(c)    the Debt Recovery Conduct    $85,000

145    I consider Mr Samuel’s position is a little different from that of Mr Brown in one or two respects. As to the Selling Conduct, I regard their respective positions in much the same light. They were the two persons who developed the Excite Mobile plan. Mr Samuel was fully aware of the telemarketing plan. Neither he nor Mr Brown is to be attributed with the vagaries of the particular employees of the telemarketer departing from, or not completing, the selling script. But the essence of what the liability judgment finds to have amounted to contraventions remains, and is conduct in which they were both knowingly concerned. In the case of the TIC Conduct, Mr Brown conceived that approach but he informed Mr Samuel of it and Mr Samuel took the step of securing the registration of the TIC name. In his case, I think his involvement was a little less deep and perhaps caused by insufficient attention to the detail of what was planned, but nevertheless he was aware in general terms of what was planned and supported that action. The same comments apply to the Debt Recovery Conduct as to the TIC Conduct, but I note he was not involved in its day to day delivery and so he had a less direct means of apprehending its effect and its inappropriateness.

146    His personal circumstances are a little different from those of Mr Brown. I think his preparedness to accept the assertions of fact (as established) by the ACCC attracts a greater credit both at the time of his examination and at the commencement of the hearing. And, to some degree, I take into account that through Lime Australia significant funds were injected into or provided to support Excite Mobile, which have been largely unrecoverable, and which indirectly have caused him (or his family) significant losses.

147    Overall in my view, the penalty to be imposed on Mr Samuel for the three transactions for which he is accountable is:

(a)    the Selling Conduct        $25,000

(b)    the TIC Conduct        $15,000

(c)    the Debt Recovery Conduct    $15,000

148    It is necessary to apply the totality principle. Having regard to what I have discussed above, again I think the total figure of $55,000 is somewhat high. I consider that the different aspects, when given proper account, and weighed with the personal conduct and the personal considerations, together with the proposed disqualification, point to an appropriate overall penalty of $45,000.

149    Again, I will give leave to Mr Samuel and to the ACCC to apply within 21 days if either seeks an order relating to the terms of payment.

(d)    Ms Smart

150    Ms Smart became involved in the Debt Recovery Conduct through Mr Brown. She assisted him in part in his drafting the Times Are Bad Letter and, under his general supervision, she sent out variously the Jerry Hastings letters. She was aware that both Jerry Hastings and his lawyer were fictitious. I have accepted that she was uncomfortable about that conduct: see the liability judgment at [125]-[126]. Nevertheless, she dealt with some telephone contacts made by consumers in response to one or other of the Jerry Hastings letters and tried to secure agreement about a debt repayment arrangement. She did not stand to gain anything personally by her involvement, other than such wages as she received.

151    Ms Smart has two dependent children. She has no reliable assets of any substantial value and a modest income. It could not be suggested that she has income or assets capable of being applied to the payment of any pecuniary penalty.

152    As I noted in the liability judgment, Ms Smart was a frank and open witness. She did not have the conduct of her defence independently of Mr Brown (they were jointly represented) and I think it is clear that at no time did she attempt to conceal her role or to decline to provide to the ACCC such information as it sought. She was, in one sense, a passenger in the proceeding. Her role was a limited one. She played no part in any of the contravening conduct of Excite Mobile except the Debt Recovery Conduct. So, even though her formal position was apparent only shortly prior to the hearing, in my view she should get significant credit for the way she addressed the matters concerning her.

153    Using the upper range of the ACCC submission, but classifying the Debt Recovery Conduct as one episode, the appropriate penalty to impose on her is $20,000.

154    In my view, given her limited role and her personal circumstances, her contrition, and her cooperation, the appropriate pecuniary penalty to impose is $3,500. I consider that is a sufficient amount, particularly in the context of the other pecuniary penalties imposed, to signal the necessary deterrent to both the public and to her.

155    Again, I will allow the ACCC and Ms Smart 21 days to apply for any order either may seek about the terms of payment.

INJUNCTIONS

156    There is no real dispute that the Court should grant injunctions under s 80(1) of the TPA restraining Mr Brown and Mr Samuel from being involved in conduct of the kind which the Court has found to contravene the TPA. It is clearly appropriate to do so to prevent repetition of their conduct found to have been in contravention, even though I am not persuaded that continuance or repetition of the contravening conduct is threatened or apprehended: see Mikasa (NSW) Pty Ltd v Festival Stores (1972) 127 CLR 617 per Gibbs J at 651.

157    I have taken into account the circumstances, including the scale of the contravening conduct and the likelihood of damage to other persons as a result of any further proscribed conduct. Injunctive relief will serve the purpose of both general and specific deterrence. I note that, unlike penalties under s 76E which relate to “acts” of the respondents, the power to grant injunctions under s 80 is triggered if the Court is satisfied that a person has engaged in “conduct” that constitutes a contravention of provisions including ss 51AB, 52, 53 and 60, and injunctions are available to be ordered for all conduct in contravention of the TPA engaged in by the respondents, including that before 15 April 2010.

158    I propose to grant injunctions limited to a period of seven years from this date in relation to Mr Brown, and Mr Samuel. The injunction against Mr Samuel will not relate to the Coverage Conduct. For reasons which appear above, the nature of the conduct that Mr Brown and Mr Samuel engaged in as accessories related to conduct which, in relation to the customers of Excite Mobile, was quite egregious, and the damage caused as a result of Excite Mobile’s conduct to a large number of consumers was likely to have been substantial.

159    I have selected a period of seven years for the operation of the injunctions, rather than permanent injunctions, only because I think in the present circumstances it is a little unfair to Mr Brown and Mr Samuel to be exposed to the risk of being in contempt of Court by breaching an injunction for the remainder of their lives. There is presently no reason to think that either will engage in conduct of a character such as that which is to be injuncted, or indeed in breach of the CCA or the ACL. An injunction for seven years fixes a considerable period during which that will hang over their heads. Thereafter, whilst the injunctions themselves will not persist, the awareness of their past conduct and the potential consequences of any further conduct which contravenes the ACL will no doubt be a matter of acute awareness to them.

160    In the case of Ms Smart, her role in the contravening conduct was firstly accidental by reason of her relationship with Mr Brown, and secondly was from a relatively uninformed position contrasted to that properly expected from Mr Brown and Mr Samuel as directors of Excite Mobile. In my view, injunctive relief against her will not serve any general deterrent purpose. There is no other purpose really to be served, as I am confident her exposure to this matter generally, and to the pecuniary penalty she must pay, will ensure she does not further contravene the ACL in the way she contravened the TPA in this matter.

161    Subject to introducing the temporal limit referred to, I will make injunctive orders against Mr Brown and Mr Samuel in the terms sought by the ACCC, slightly adjusted to take account of their respective submissions. Neither Mr Brown nor Mr Samuel submitted that they were inappropriate, and I am satisfied that they are directed at the contravening conduct, that they are clear and specific, and that they are capable of being readily understood and complied with.

DISQUALIFICATION ORDERS

162    The ACCC also submits that the Court should make orders under s 86E(1B) of the TPA, disqualifying Mr Brown from managing, or being a director of, any corporation for a period of 15 years; and Mr Samuel from managing, or being a director of, any corporation for a period of 10 years.

163    The Court has the power to make orders under s 86E(1B) if it is satisfied that a person has been involved in a contravention of a provision of Part IVA or of Division 1 of Part IV (other than s 52); and that the disqualification is justified.

164    Mr Brown and Mr Samuel have been found by the Court to have been knowingly concerned in the contraventions by Excite Mobile of ss 51AB, 53(g) and 60 of the TPA, to all of which s 86E(1B) applies.

165    Section 86(2) provides that a court may have regard to the person’s conduct in relation to the management, business or property of any corporation; and any other matters that the Court considers appropriate in determining whether the disqualification is justified.

166    The Court has made disqualification orders under the TPA or ACL on two previous occasions. In Halkalia, the Court exercised its power to disqualify a person from managing a corporation for 15 years in respect of his contraventions of the TPA. That was an unopposed order. In Australian Competition and Consumer Commission v Stott [2013] FCA 88 (Stott), the Court agreed with the submission made jointly by the parties that the respondent be disqualified from managing a corporation for five years in respect of his contraventions of the TPA and ACL.

167    Both those cases drew upon the body of case law that has developed in relation to the banning of officers under ss 206C and 206E of the Corporations Act 2001 (Cth) (the Corporations Act). Section 206C of the Corporations Act is relevantly in identical terms to s 86E of the TPA. There is no submission that I should not also apply the principles discussed in cases under ss 206C and 206E of the Corporations Act when considering this aspect of the ACCC submission.

168    In Australian Securities and Investments Commission v Adler (2002) 42 ACSR 80 (Adler) at [56], Santow J distilled into 15 key propositions the principles in relation to banning orders which had been developed under the Corporations Act. While the courts generally continue to apply those propositions, the High Court in Rich v Australian Securities and Investments Commission (2004) 220 CLR 129 held that Adler was not to be followed to the extent that it held that banning orders were purely protective in nature and not punitive.

169    Recently, in In the matter of Idylic Solutions Pty Ltd – Australian Securities and Investments Commission v Hobbs [2013] NSWSC 106, the Court noted at [55] that the principles summarised by Santow J are guidelines only, each case turning upon its own considerations: Australian Securities and Investments Commission v Beekink (2007) 238 ALR 595. In Australian Securities and Investments Commission v Forge [2007] NSWSC 1489, White J (noting at [106] that Santow J had not purported to lay down three separate and water-tight categories of case leading to disqualification orders) considered that there would inevitably be cases where the appropriate period of disqualification would fall outside any of the periods considered in Adler.

170    Hence, relevantly for present purposes, I proceed on the basis that disqualification orders are designed to protect the public from the harmful use of the corporate structure or from use that is contrary to proper commercial standards. A banning order is designed to protect the public by seeking to safeguard the public interest in the transparency and accountability of companies and in the suitability of directors to hold office. Protection of the public also envisages protection of individuals that deal with companies, including consumers, creditors, shareholders and investors. It is also the case that a banning order has a purpose of personal deterrence, though it is not punitive, and the objectives of general deterrence are also sought to be achieved.

171    In assessing the fitness of an individual to manage a company, it is necessary that that person has an understanding of the proper role of the company director and the duty of due diligence that is owed to the company.

172    Longer periods of disqualification are reserved for cases where contraventions have been of a serious nature such as those involving dishonesty. In assessing the appropriate length of prohibition, consideration has been given to the degree of seriousness of the contraventions, the propensity that the person may engage in similar conduct in the future and the likely harm that may be caused to the public. It is necessary to balance the personal hardship to the person to be banned against the public interest and the need for protection of the public from any repeat of the conduct. A mitigating factor in considering a period of disqualification is the likelihood of the contravenor reforming.

173    In considering the particular circumstances applicable to Mr Brown and to Mr Samuel, it is not necessary to repeat the matters about their personal involvement in the several contraventions of the TPA by Excite Mobile. It is, however, not appropriate to take into account the indiosyncratic use of the script for communicating with potential consumers from the call centres for reasons already given. I accept the general submission of the ACCC that the Selling Conduct was aimed at the broad general range of consumers, despite being aware that the day cap plan was suitable only for a limited class of users of mobile telephony users.

174    In the case of Mr Brown, I also have regard to the findings in the liability judgment at [178] that he was not deliberately unfair or did not deliberately act unconscionably, but was indifferent to the consequences to those consumers who took up an Excite Mobile plan.

175    I do not accept that there is a real risk of Mr Brown contravening the relevant provisions of the ACL in the future. He has suffered the exposure of the liability judgment, and will suffer the further consequences of his involvement in the conduct of Excite Mobile. He has not previously been disqualified from acting as a director, and until the subject events there is nothing to suggest he had previously engaged in conduct of a character which might have exposed him to disqualification.

176    However, the above comments do demonstrate the need for a not inconsiderable period of disqualification. I am mindful that there is no evidence that Mr Brown has engaged with the public in any meaningful way since the contravening conduct first came to light by the ACCC investigation. I take into account that period. In my view, balancing the matters referred to above, I consider that the appropriate period of disqualification is three years.

177    In the case of Mr Samuels, again I have taken into account the matters relating to his personal circumstances and his involvement in the contraventions of the TPA (other than the Coverage Conduct) on the part of Excite Mobile. In his case, whilst he has not ceased acting as a director of Lime Australia, I do not think that there is material to suggest that, in the almost three years since the ACCC investigation commenced, he has been unaware of his responsibilities as a director of that company. In his case, too, in my view he is unlikely to engage in conduct of a kind similar to that he was involved with through Excite Mobile or to engage in conduct which might expose him to disqualification as a director in the future. Indeed, in my view, he has learnt a salutary lesson from his exposure to this proceeding and by his role in it.

178    In my view, the appropriate period of disqualification for Mr Samuel is two years and six months.

FINDINGS OF FACT

179    The ACCC seeks an order that, for the purposes of s 83 of the TPA (now s 83 of the CCA), the reasons for judgment in the liability judgment affixed with the seal of the Court be retained on the Court file.

180    I will direct that the sealed copy of the liability judgment in this matter be retained on the Court file until 31 December 2017. If any proceedings are brought arising out of the conduct of Excite Mobile between 2008 and 2011, the judgment will then be available for use as appropriate under s 83. By that date, it is unlikely that any such proceedings not then commenced will be commenced.

COSTS

181    The ACCC seeks an order for costs jointly against each of Excite Mobile, Mr Brown, Mr Samuel and Ms Smart.

182    Each of Mr Brown and Mr Samuel accept that the ACCC should recover its costs but they say they each should be liable for some only of the costs of the ACCC, so that their respective liability should be apportioned. Ms Smart contends that either no order or only a nominal order for costs should be made.

183    The respective submissions on the issue of costs were quite brief. No particular authorities were referred to to support the contentions of Mr Brown, Mr Samuel or Ms Smart. It may be that there is little authority to support the proposition: see the observations of Fisher J in Trade Practices Commission v Nicholas Enterprises Pty Ltd (No 3) (1979) 28 ALR 201 at 210. The usual order is that all defendants or respondents should be jointly and severally liable for the costs of a successful plaintiff or applicant: Ryan v South Sydney Junior Rugby League Club Ltd [1975] 2 NSWLR 660 at 663.

184    There is an obvious injustice in Ms Smart being jointly liable for the full costs of the matter. She was not involved in the Selling Conduct or in the Coverage Conduct and her role in the TIC Conduct and the Debt Recovery Conduct was, in relative terms, minor. Those aspects occupied only part of the hearing. In my view, this is not a case where Ms Smart should be jointly liable for all the costs. It would be unfair to her.

185    In other respects, I do not consider that there is sufficient reason shown to depart from the usual form of order for costs. The purpose of costs is to indemnify the successful party, in this case the ACCC, for its proper (taxable) costs. There is no real reason shown why the directors of Excite Mobile should not, together with Excite Mobile, be liable for its costs. There is no suggestion that, even at the point of the hearing on the proper orders to be made on the basis of the liability judgment, some proposal was put forward by any of Mr Brown, Mr Samuel or Ms Smart, which could show that the ACCC in any way pressed its claims for appropriate orders (including civil penalties) in any unreasonable way.

186    Accordingly, I order that Excite Mobile, Mr Brown and Ms Samuel pay to the ACCC its costs of the proceeding. Mr Brown and Mr Samuel will therefore be jointly liable for those costs with Excite Mobile.

187    In the case of Ms Smart, for the reasons I have given, I consider such an order would be unjust. I order that she pay 10 per cent of the costs of the ACCC of the proceeding. By that order, she will be jointly and severally liable with Excite Mobile, Mr Brown and Mr Samuel for that part of the costs of the ACCC but no more.

other orders

188    As I indicated above, I will also give Excite Mobile 28 days to pay the pecuniary penalty imposed upon it, and in any event I will give the ACCC and each of Excite Mobile, Mr Brown and Mr Samuel and Ms Smart 28 days to apply for any order they or any of them may seek relating to the time to pay, or to the manner in which payment made be made of, the pecuniary penalties fixed above.

Associate:

Dated:    29 November 2013