FEDERAL COURT OF AUSTRALIA
Australian Competition and Consumer Commission v Artorios Ink Co Pty Ltd (No 2) [2013] FCA 1292
IN THE FEDERAL COURT OF AUSTRALIA |
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VICTORIA DISTRICT REGISTRY |
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AUSTRALIAN COMPETITION AND CONSUMER COMMISSION Applicant |
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AND: |
ARTORIOS INK CO PTY LTD (ACN 133 112 419) First Respondent TUAN MINH NGUYEN Second Respondent THUAN MINH NGUYEN Third Respondent |
DATE OF ORDER: |
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WHERE MADE: |
UNDERTAKINGS:
1. The Second Respondent (Tuan Nguyen) and the Third Respondent (Thuan Nguyen) each undertake to the Court for a period of five years from the date of these orders not to manage, or be a director of, any corporation.
THE COURT DECLARES THAT:
2. The First Respondent (Artorios), in trade or commerce:
a. engaged in conduct that was misleading or deceptive, or likely to mislead or deceive, in contravention of s 18 of the Australian Consumer Law; and
b. in connection with the supply or possible supply of goods, falsely represented that a person had agreed to acquire goods in contravention of s 29(1)(d) of the Australian Consumer Law,
by representing to the “Jetts Fitness” gym located at St Mary’s, South Australia (Jetts Fitness St Mary’s) on or about 18 January 2012 and to the “Jetts Fitness” gym located at Morphett Vale, South Australia (Jetts Fitness Morphett Vale) on or about 18 January 2012 that:
a. Fitness Australia Pty Ltd trading as “Jetts Fitness Australia” (Jetts Fitness Australia) had agreed that “Jetts Fitness” gyms would purchase printer cartridges from Artorios;
b. Artorios was a current or regular supplier of printer cartridges to Jetts Fitness Australia and ‘Jetts Fitness’ gyms; and/or
c. there was an existing, ongoing supply relationship between Artorios and Jetts Fitness Australia whereby Jetts Fitness Australia had purchased and agreed that it would purchase and Artorios had supplied and agreed that it would supply printer cartridges to Jetts Fitness Australia and “Jetts Fitness” gyms,
when in fact:
a. Jetts Fitness Australia had not placed an order for printer cartridges with Artorios or agreed that “Jetts Fitness” gyms would purchase printer cartridges from Artorios;
b. Artorios was not a current or regular supplier of printer cartridges to Jetts Fitness Australia or “Jetts Fitness” gyms; and
c. there was not an existing ongoing supply relationship between Jetts Fitness Australia, or “Jetts Fitness” gyms, and Artorios.
3. Artorios, in trade or commerce:
a. engaged in conduct that was misleading or deceptive, or likely to mislead or deceive, in contravention of s 18 of the Australian Consumer Law; and
b. in connection with the supply or possible supply of goods, falsely represented that Artorios had an approval in contravention of s 29(1)(h) of the Australian Consumer Law,
by representing to Jetts Fitness St Mary’s on or about 18 January 2012 and Jetts Fitness Morphett Vale on or about 18 January 2012 that Artorios was an approved supplier of printer cartridges to Jetts Fitness Australia and “Jetts Fitness” gyms when in fact Artorios was not an approved supplier of printer cartridges to Jetts Fitness Australia or “Jetts Fitness” gyms.
4. Artorios, in trade or commerce:
a. engaged in conduct that was misleading or deceptive, or likely to mislead or deceive, in contravention of s 18 of the Australian Consumer Law; and
b. in connection with the supply or possible supply of goods, falsely represented that a person had agreed to acquire goods in contravention of s 29(1)(d) of the Australian Consumer Law,
by representing to the business trading as the “Glen Cromie Caravan Park” (Glen Cromie Caravan Park business) on or about 10 August 2011 that the owner or operator of the Glen Cromie Caravan Park business had agreed to purchase printer cartridges from Artorios when in fact the owners and operators of the Glen Cromie Caravan Park business had not placed an order for printer cartridges with Artorios or agreed to purchase printer cartridges from Artorios.
5. Artorios, in trade or commerce:
a. engaged in conduct that was misleading or deceptive, or likely to mislead or deceive, in contravention of s 18 of the Australian Consumer Law; and
b. in connection with the supply or possible supply of goods, falsely represented that Artorios had an approval in contravention of s 29(1)(h) of the Australian Consumer Law,
by representing to the Glen Cromie Caravan Park business on or about 10 August 2011 that Artorios was an approved supplier of printer cartridges to the Glen Cromie Caravan Park business when in fact Artorios was not an approved supplier of printer cartridges to the Glen Cromie Caravan Park business.
6. Artorios, in trade or commerce:
a. engaged in conduct that was misleading or deceptive, or likely to mislead or deceive, in contravention of s 18 of the Australian Consumer Law; and
b. in connection with the supply or possible supply of goods, falsely represented that a person had agreed to acquire goods in contravention of s 29(1)(d) of the Australian Consumer Law,
by representing to Vinsan Corporation Pty Ltd trading as “Vinsan Salvage” (Vinsan Salvage) in about March 2011 that:
a. Vinsan Salvage had agreed to purchase printer cartridges from Artorios;
b. Artorios was a current or regular supplier of printer cartridges to Vinsan Salvage; and/or
c. there was an existing, ongoing supply relationship between Artorios and Vinsan Salvage whereby Vinsan Salvage had purchased and agreed that it would purchase and Artorios had supplied and agreed that it would supply printer cartridges to Vinsan Salvage,
when in fact:
a. Vinsan Salvage had not placed an order for printer cartridges with Artorios or agreed to purchase printer cartridges from Artorios;
b. Artorios was not a current or regular supplier of printer cartridges to Vinsan Salvage; and
c. there was not an existing ongoing supply relationship between Vinsan Salvage and Artorios,
and by representing on or about 20 April 2011 to Vinsan Salvage that:
a. Artorios was a current or regular supplier of printer cartridges to Vinsan Salvage; and/or
b. there was an existing, ongoing supply relationship between Artorios and Vinsan Salvage whereby Vinsan Salvage had purchased and agreed that it would purchase and Artorios had supplied and agreed that it would supply printer cartridges to Vinsan Salvage,
when in fact:
a. Artorios was not a current or regular supplier of printer cartridges to Vinsan Salvage; and
b. there was not an existing ongoing supply relationship between Vinsan Salvage and Artorios.
7. Artorios, in trade or commerce:
a. engaged in conduct that was misleading or deceptive, or likely to mislead or deceive, in contravention of s 18 of the Australian Consumer Law; and
b. in connection with the supply or possible supply of goods, falsely represented that Artorios had an approval in contravention of s 29(1)(h) of the Australian Consumer Law,
by representing to Vinsan Salvage in about March 2011 and on or about 20 April 2011 that Artorios was an approved supplier of printer cartridges to Vinsan Salvage when in fact Artorios was not an approved supplier of printer cartridges to Vinsan Salvage.
8. Artorios, in trade or commerce, engaged in conduct that was misleading or deceptive, or likely to mislead or deceive, in contravention of s 18 of the Australian Consumer Law, by representing to Vinsan Salvage on or about 29 June 2011 that:
a. Artorios had commenced legal proceedings against Vinsan Salvage in the Magistrates’ Court of Victoria; and
b. Vinsan Salvage would incur costs as a consequence of the legal proceedings,
when in fact Artorios had not commenced legal proceedings against Vinsan Salvage in the Magistrates’ Court of Victoria.
9. Artorios, in trade or commerce:
a. engaged in conduct that was misleading or deceptive, or likely to mislead or deceive, in contravention of s 18 of the Australian Consumer Law; and
b. in connection with the supply or possible supply of goods, falsely represented that a person had agreed to acquire goods in contravention of s 29(1)(d) of the Australian Consumer Law,
by representing to Realway Property Consultants Australia Pty Ltd (Realway) on or about 12 May 2011 and on or about 16 November 2011 that:
a. Realway had agreed to purchase printer cartridges from Artorios;
b. Artorios was a current or regular supplier of printer cartridges to Realway; and/or
c. there was an existing, ongoing supply relationship between Artorios and Realway whereby Realway had purchased and agreed that it would purchase and Artorios had supplied and agreed that it would supply printer cartridges to Realway,
when in fact:
a. Realway had not placed an order for printer cartridges with Artorios or agreed to purchase printer cartridges from Artorios;
b. Artorios was not a current or regular supplier of printer cartridges to Realway; and
c. there was not an existing ongoing supply relationship between Realway and Artorios.
10. Artorios, in trade or commerce:
a. engaged in conduct that was misleading or deceptive, or likely to mislead or deceive, in contravention of s 18 of the Australian Consumer Law; and
b. in connection with the supply or possible supply of goods, falsely represented that Artorios had an approval in contravention of s 29(1)(h) of the Australian Consumer Law,
by representing to Realway on or about 12 May 2011 and on or about 16 November 2011 that Artorios was an approved supplier of printer cartridges to Realway, when in fact Artorios was not an approved supplier of printer cartridges to Realway.
11. Artorios, in trade or commerce, engaged in conduct that was misleading or deceptive, or likely to mislead or deceive, in contravention of s 18 of the Australian Consumer Law, by representing to Realway on or about 9 August 2011 that:
a. Artorios had commenced legal proceedings against Realway in the Magistrates’ Court of Victoria; and
b. Realway would incur costs as a consequence of the legal proceedings,
when in fact Artorios had not commenced legal proceedings against Realway in the Magistrates’ Court of Victoria.
12. Artorios, in trade or commerce:
a. engaged in conduct that was misleading or deceptive, or likely to mislead or deceive, in contravention of s 18 of the Australian Consumer Law; and
b. in connection with the supply or possible supply of goods, falsely represented that a person had agreed to acquire goods in contravention of s 29(1)(d) of the Australian Consumer Law,
by representing to the business trading as the Shaver Shop, Canberra (Shaver Shop) on or about 24 April 2011 that:
c. the Shaver Shop had agreed to purchase printer cartridges from Artorios;
d. Artorios was a current or regular supplier of printer cartridges to the Shaver Shop; and/or
e. there was an existing, ongoing supply relationship between Artorios and the Shaver Shop whereby the Shaver Shop had purchased and agreed that it would purchase and Artorios had supplied and agreed that it would supply printer cartridges to the Shaver Shop,
when in fact:
a. the Shaver Shop had not placed an order for printer cartridges with Artorios or agreed to purchase printer cartridges from Artorios;
b. Artorios was not a current or regular supplier of printer cartridges to the Shaver Shop; and
c. there was not an existing ongoing supply relationship between the Shaver Shop and Artorios,
and by representing to the Shaver Shop in about August or September 2011 that:
a. Artorios was a current or regular supplier of printer cartridges to the Shaver Shop; and/or
b. there was an existing, ongoing supply relationship between Artorios and the Shaver Shop whereby the Shaver Shop had purchased and agreed that it would purchase and Artorios had supplied and agreed that it would supply printer cartridges to the Shaver Shop,
when in fact:
a. Artorios was not a current or regular supplier of printer cartridges to the Shaver Shop; and
b. there was not an existing ongoing supply relationship between the Shaver Shop and Artorios.
13. Artorios, in trade or commerce:
a. engaged in conduct that was misleading or deceptive, or likely to mislead or deceive, in contravention of s 18 of the Australian Consumer Law; and
b. in connection with the supply or possible supply of goods, falsely represented that Artorios had an approval in contravention of s 29(1)(h) of the Australian Consumer Law,
by representing to the Shaver Shop on or about 24 April 2011 and in about August or September 2011 that Artorios was an approved supplier of printer cartridges to the Shaver Shop when in fact Artorios was not an approved supplier of printer cartridges to the Shaver Shop.
14. Artorios, in trade or commerce, asserted a right to payment for unsolicited goods without reasonable cause to believe that there was a right to payment, in contravention of s 40(1) of the Australian Consumer Law, by:
a. on or about 24 January 2012, sending to Jetts Fitness St Mary’s a package containing printer cartridges and a written invoice for printer cartridges;
b. on or about 10 August 2011, sending to the Glen Cromie Caravan Park business a package containing printer cartridges and a written invoice numbered 6646 and dated 10 August 2011;
c. on or about 29 April 2011, sending to Vinsan Salvage a package containing printer cartridges and a written invoice numbered 5139 and dated 29 April 2011;
d. on or about 29 June 2011, sending to Vinsan Salvage a letter dated 29 June 2011 requesting payment for the printer cartridges sent to Vinsan Salvage and stating that an application to the Victorian Magistrates Court under its Civil Claims list at Dandenong had been made requesting a court date be listed for the matter, and attaching a document headed “In the Victorian Magistrates’ Court At Dandenong”;
e. on or about 1 June 2011, sending to Realway a package containing printer cartridges and a written invoice numbered 5440 and dated 1 June 2011;
f. on or about 9 August 2011, sending to Realway a letter dated 9 August 2011 requesting payment for the printer cartridges sent to Realway and stating that an application to the Victorian Magistrates Court under its Civil Claims list at Dandenong had been made requesting a court date be listed for the matter, and attaching a document headed “In the Victorian Magistrates’ Court At Dandenong”;
g. on or about 29 April 2011, sending to the Shaver Shop, a package containing printer cartridges and a written invoice numbered 5120 and dated 29 April 2011,
on each occasion in circumstances where there had been no request made for printer cartridges from Artorios.
15. Tuan Nguyen was directly or indirectly knowingly concerned in or a party to the contraventions by Artorios of ss 18, 29(1)(d), 29(1)(h) and 40(1) of the Australian Consumer Law referred to in paragraphs 2 to 14 hereof.
16. Thuan Nguyen was directly or indirectly knowingly concerned in or a party to the contraventions by Artorios of ss 18, 29(1)(d), 29(1)(h) and 40(1) of the Australian Consumer Law referred to in paragraphs 2 to 7, 9, 10 and 12 to 14 hereof.
THE COURT ORDERS THAT:
17. In respect of the contraventions of ss 18, 29(1)(d), 29(1)(h) and 40(1) of the Australian Consumer Law:
a. Tuan Nguyen pay to the Commonwealth of Australia a pecuniary penalty of $50,000, payable in 60 monthly instalments of $833.33 each, to be paid on the 15th day of the month, commencing on 15 January 2014;
b. Thuan Nguyen pay to the Commonwealth of Australia a pecuniary penalty of $50,000; payable in 60 monthly instalments of $833.33 each, to be paid on the 15th day of the month, commencing on 15 January 2014.
18. In the event that there is a default in the making of any of the instalment payments referred to in paragraph 17 above and that default continues for fourteen days, the whole of the outstanding amount is due and payable by:
a. Tuan Nguyen in respect of the payments referred to in subparagraph 17(a) above; and
b. Thuan Nguyen in respect of the payments referred to in subparagraph 17(b) above.
19. Tuan Nguyen and Thuan Nguyen pay a contribution to the applicant’s costs of the proceeding, fixed in the amount of $5,000, payable in 60 monthly instalments of $83.33 each, to be paid on the 15th day of the month, commencing on 15 January 2014.
20. In the event that there is a default in the making of any of the instalment payments referred to in paragraph 19 above and that default continues for fourteen days, the whole of the outstanding amount is due and payable by Tuan Nguyen and Thuan Nguyen.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
VICTORIA DISTRICT REGISTRY |
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GENERAL DIVISION |
VID 652 of 2012 |
BETWEEN: |
AUSTRALIAN COMPETITION AND CONSUMER COMMISSION Applicant
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AND: |
ARTORIOS INK CO PTY LTD (ACN 133 112 419) First Respondent TUAN MINH NGUYEN Second Respondent THUAN MINH NGUYEN Third Respondent
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JUDGE: |
MORTIMER J |
DATE: |
3 DECEMBER 2013 |
PLACE: |
MELBOURNE |
REASONS FOR JUDGMENT
Introduction and summary
1 Artorios Ink Co Pty Ltd (in liquidation) (ACN 133 112 419) (Artorios) operated a business involving the sale of printer ink cartridges. Mr Tuan Nguyen (the second respondent) was the Managing Director and a 50% shareholder in the company, and Mr Thuan Nguyen (the third respondent) held the remaining 50% of the shares. The men are brothers who both worked in the company and were responsible for its day-to-day operation. Artorios carried on this business by, amongst other things, telephone marketing and sales to small businesses. Between March 2011 and January 2012, a series of telephone calls were made by Artorios staff members to five small businesses across Australia. The calls followed a pattern, and their purpose was to encourage the recipients of those calls to believe either that the small businesses had already placed orders for printer ink cartridges which simply required confirmation, or to lead them to place such orders because Artorios was an existing supplier. Cartridges were then sent out and payment demanded. There was no basis in fact for the representations that orders had been placed or that Artorios was an existing supplier. Some of the businesses paid the invoices as demanded, others did not. The Australian Competition and Consumer Commission (the ACCC) brought proceedings alleging contraventions by the first, second and third respondents of ss 18, 29(1)(d) and (h) and 40(1) of Sch 2 to the Competition and Consumer Act 2010 (Cth) (the CCA), known as the Australian Consumer Law (the ACL).
2 I am satisfied that the ACCC has proven the contraventions of the provisions of the ACL which it alleged in this proceeding. I am satisfied declarations should be made in respect of the conduct of all three respondents, and penalties imposed on each of the second and third respondents in the sum of $50,000 each, payable by way of instalments. I am prepared to order costs against the second and third respondents in the sum agreed between the parties, namely $5,000.
3 I am not satisfied that injunctions should issue against the second and third respondents in the terms sought, even with the modifications suggested by the ACCC in response to some questions raised during the penalty hearing.
4 Artorios was placed into voluntary liquidation on 25 February 2013. On 1 August 2013, I granted leave to the applicant pursuant to s 500(2) of the Corporations Act 2001 (Cth) to proceed against Artorios in relation to these alleged contraventions. That leave was granted subject to certain undertakings as to costs given by the ACCC in favour of the liquidators of Artorios. At the hearing of the application for leave to proceed against the company, the liquidators of Artorios advised the Court that, subject to those undertakings, the liquidators would not oppose the final relief sought by the ACCC against Artorios. Artorios and its liquidators did not appear at the hearing on final relief.
5 Although this proceeding was actively contested by Mr Tuan Nguyen and Mr Thuan Nguyen for some time, ultimately the parties prepared agreed documents by way of joint submissions, agreed facts and proposed orders for the Court’s consideration. At the penalty hearing, counsel for the ACCC and the legal representative of Mr Tuan Nguyen and Mr Thuan Nguyen addressed the Court by way of oral submissions.
6 The Statement of Agreed Facts is Annexure A to these reasons for judgment.
7 The ACCC and Mr Tuan Nguyen and Mr Thuan Nguyen submitted that the Court should decide the matter on the basis of these joint submissions and agreed facts, together with jointly proposed orders. Save for the question of whether it is appropriate to grant the injunctions sought (as reformulated at the hearing) I am satisfied there is sufficient material before the Court to find the contraventions proven and make the remainder of the orders sought.
relevant legislative provisions
8 Section 18(1) of the ACL provides that “[a] person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive”.
9 Relevantly, s 29(1) of the ACL provides:
(1) A person must not, in trade or commerce, in connection with the supply or possible supply of goods or services or in connection with the promotion by any means of the supply or use of goods or services:
…
(d) make a false or misleading representation that a particular person has agreed to acquire goods or services; or
…
(h) make a false or misleading representation that the person making the representation has a sponsorship, approval or affiliation; …
10 Section 40(1) relates to the assertion of right to payment for unsolicited goods or services:
A person must not, in trade or commerce, assert a right to payment from another person for unsolicited goods unless the person has reasonable cause to believe that there is a right to payment.
contraventions
11 The admitted conduct is set out in Annexure A. I am satisfied on the material before me that the conduct set out in Annexure A occurred in the way there described. What follows is a summary of that conduct.
12 Artorios primarily sold printer cartridges over the telephone to new and existing customers. Artorios employed a small sales team to sell the printer cartridges over the telephone. Training was given to members of the sales team shortly after commencing employment with Artorios. During that training, staff were given a folder of scripts with sales pitches. They were also required to listen in to how existing sales staff made sales calls. Thuan Nguyen was one of the Artorios employees training the new staff. Each trainer wore headsets through which they could listen in on the sales calls and coach the new sales staff, without the customer hearing them. Staff worked in a small open-plan office in close proximity to one another and to Thuan Nguyen.
13 Sometimes sales staff used aliases when making the calls. Tuan Nguyen’s alias was “John”. Thuan Nguyen used aliases such as “Tom” or “Tommy”. The calls comprised two parts. First, sales staff called existing customers or cold-called potential customers. Then confirmation calls were made, in which other Artorios staff members called the customers purportedly to confirm or verify the orders.
14 The contraventions alleged concerned calls to five small businesses across Australia. It was alleged, and I find, that on nine separate occasions employees of Artorios made representations that:
1. the small business had agreed that it would purchase printer cartridges from Artorios;
2. Artorios was an approved supplier of printer cartridges to the small business;
3. Artorios was a current or regular supplier of printer cartridges to the small business; and/or
4. there was an existing, ongoing supply relationship between Artorios and the small business whereby the small business had purchased and agreed that it would purchase and Artorios had supplied and agreed that it would supply printer cartridges to the small business.
15 In fact, each of the businesses had not placed any orders with Artorios, nor had they agreed to purchase printer cartridges. Artorios was not at the time of the calls or otherwise an approved (nor current nor regular) supplier of printer cartridges to any of the businesses, and there was no ongoing supply relationship between the small businesses and Artorios.
16 Notwithstanding these facts, and being misled into believing there was such a supply relationship, each of the businesses confirmed orders with Artorios.
17 After each of the five small businesses confirmed the false orders, Artorios sent printer cartridges and an invoice to each of them. In doing so, it asserted a right to payment for the printer cartridges, even though they were unsolicited goods. Artorios subsequently sent letters to two of the small businesses demanding payment of the invoices.
18 The second and third respondents were directly and significantly involved in this conduct. Tuan Nguyen was the sole director and the Managing Director of Artorios. He worked in close proximity to sales staff. He knew of the relevant matters and directed the sales staff to engage in the contravening conduct.
19 Thuan Nguyen was the Sales Manager of Artorios. Thuan Nguyen helped in training sales staff, and supervised and directed them in the performance of the sales and marketing aspects of Artorios’ business. The sales staff reported to him. Together with other senior employees, Thuan Nguyen prepared some of the sales scripts provided to the sales staff and used by them in the calls to the five small businesses. He knew of the relevant matters and directed the sales staff to engage in the contravening conduct.
20 The contravening conduct occurred over a period of 11 months, in respect of small businesses located in five states and territories, and involved multiple contraventions of the ACL in relation to each business. The businesses targeted were small, and in one case different stores of the same business were targeted. The businesses targeted were a caravan park, fitness centres, a salvage company, property consultants and a retail shaver shop.
21 I infer there was a deliberate and calculated plan constructed to misrepresent to small businesses (through calls to unsuspecting employees or shop managers) some kind of existing supply relationship, then to take advantage of the misrepresentation to supply goods and then demand payment. The conduct followed what appears to have been a premeditated pattern, designed expressly to induce unsuspecting employees of these businesses to act as they did, and then further to try and put pressure on the businesses to pay for the unsolicited goods by sending invoices and demands for payment, in circumstances where there was no right to payment and the assertion of such a right was false, and (I infer) known to be false.
22 The conduct involved deceit of these businesses for the financial benefit of Artorios. Due to their positions as the sole shareholders of Artorios, the contravening conduct was also designed to enrich each of Tuan Nguyen and Thuan Nguyen. I infer the pattern of contravening conduct was something for which they were individually responsible. I infer each of them intended the conduct to result in “sales” which would benefit themselves and Artorios.
23 I find Artorios’ conduct contravened ss 29(1)(d), 29(1)(h) and 40(1) of the ACL.
24 The next matter is what consequences should be imposed on each of the respondents by reason of the contraventions.
Relief and penalties
25 The ACCC seeks declarations, injunctions and pecuniary penalties in respect of the contravening conduct. In relation to Artorios, the relief sought is limited to declarations. In the proposed orders and submissions the relief is expressly based on an undertaking given to the Court by the second and third respondents, which I consider in more detail below.
General principles in relation to relief by consent
26 This Court has repeatedly recognised the public interest in having proceedings brought under either the ACL or its predecessor legislation, the Trade Practices Act 1974 (Cth) (the TPA), disposed of by way of agreed facts and orders proposed by consent. Enforcement proceedings resolved in this way produce significant savings in time, cost and resources to the Court and the regulator, and therefore also to the public. For both the regulator and the corporation involved, resolution brings finality, which is always an important consideration in the administration of justice.
27 Efficient and timely resolution of enforcement proceedings does not absolve the Court from its responsibility to ensure contraventions are proven, and that the relief sought is appropriate and within power: Australian Competition and Consumer Commission v Real Estate Institute of Western Australia Inc (1999) 161 ALR 79 at [18] per French J; Australian Competition and Consumer Commission v Virgin Mobile Australia Pty Ltd (No 2) [2002] FCA 1548 at [1] per French J. The Court can take the consent of the respondents to the orders proposed as an admission of the facts necessary or appropriate for the grant of relief against them: Thomson Australia Holdings Pty Ltd v Trade Practices Commission (1981) 148 CLR 150 at 164 per Gibbs CJ, Stephen, Mason and Wilson JJ.
28 Satisfaction of those matters should not involve the Court impeding an agreed resolution, nor imposing its own views in respect of relief as if the proceeding had been fully contested: see Lee J in Australian Competition and Consumer Commission v Target Australia Pty Ltd [2001] FCA 1326 at [24]. The Court cannot and does not know the factors which have led the parties to the agreement reached. The content of what has been agreed may be the product of various factors. The Court should assume, especially where all parties are legally represented, that care has been taken both in the terms of the facts agreed and the orders proposed. A level of judicial restraint should be applied to consideration of the resolution proposed by the parties.
29 These considerations do not all pull in one direction. In considering a proposed resolution the Court must balance the need for restraint against ensuring the judicial power of the Commonwealth is exercised on proper material, in accordance with principle and within the range of what is appropriate given the circumstances of the individual proceeding.
30 In Australian Competition and Consumer Commission v Real Estate Institute of Western Australia Inc (1999) 161 ALR 79 at [1], French J described the task thus:
The cost and delays involved in the litigation process are notorious. Fortunately, only a small proportion of proceedings commenced actually go to trial and judgment. The great majority is settled one way or the other. As a general principle fair and appropriate settlements are encouraged to reduce the burden of litigation on both public and private resources. Courts are frequently asked to play their part by accepting formal undertakings or making orders by consent which prohibit parties from certain conduct or require them to do certain things. Sometimes they are asked to impose agreed pecuniary penalties. In carrying out those functions, courts are conscious of the public interest in the settlement of cases. They must also be conscious, however, that the laws they apply are public laws. It is in the public interest that, in considering agreements between parties requiring orders of a court, the court does not act as a mere rubber stamp. What is proposed must always be scrutinised to determine whether undertakings or consent orders are within power and are appropriate. There is sometimes a tension between these components of the public interest as the present case illustrates.
31 This tension is apparent in the current proceeding, in relation to the injunctions sought against the second and third respondents, with their consent. I have determined that, notwithstanding the caution apparent in some authorities, the injunctions sought are neither appropriate nor in accordance with principle, for the reasons I set out at [45]-[73] below. Therefore, no injunctions will be granted.
Undertakings
32 The caution concerning judicial restraint has application in this proceeding in relation to the undertakings proffered by Tuan Nguyen and Thuan Nguyen. The undertakings take the place of what otherwise might be disqualification orders under s 248 of the ACL. The effect of the undertakings is for each of Tuan Nguyen and Thuan Nguyen to be disqualified from managing, or being a director of, any corporation for a period of five years. An undertaking is a formal promise to the Court to act or refrain from acting in a particular way, and breach of an undertaking constitutes contempt of this Court: Hamersley Iron v National Competition Council (2008) 247 ALR 385 at [130]-[131] per Weinberg J.
33 In OD Transport Pty Ltd v WA Government Railways Commission (1987) 13 FCR 500 at 504-505 French J stated:
The acceptance of an undertaking by the court is the exercise of a power and is akin to the grant of an injunction against the party giving the undertaking. Its breach is enforceable by proceedings for contempt.
It is a power that was considered by the High Court in Thomson Australian Holdings Pty Ltd v Trade Practices Commission (1981) 148 CLR 150. There it was held that as an undertaking is given in lieu of an injunction and is enforceable in like manner, the principles governing the grant of an injunction by a court must guide it in deciding whether it should accept an undertaking.
34 The disqualification power is available in respect of contraventions of a provision of Pt 3-1 of the ACL (which contains ss 29 and 40): s 248(1)(a), in circumstances where the Court considers disqualification is justified: s 248(1)(b). The person’s conduct in relation to the management, business or property of any corporation and any other matters the Court considers appropriate are to be taken into account in determining whether disqualification is justified: s 248(2).
35 The Court is not asked to exercise the power in s 248 in the present proceeding and accordingly the principles developed in the joint submissions, and the authorities to which they refer, are not directly applicable. The only question is whether it is appropriate to accept the undertaking in the circumstances of this proceeding. For the reasons set out by French J in OD Transport, the principles and authorities on s 248 and on the substantially similar provisions in ss 206C and 206E of the Corporations Act provide guidance on whether it is appropriate for the Court to accept, and act on, those undertakings. For example, if the period over which the undertaking as to disqualification was to operate was such that it seemed inconsistent with those principles and authorities, the Court might determine not to accept it.
36 The joint submissions, joint proposed orders and agreed facts are evidence of the cooperation of both Tuan Nguyen and Thuan Nguyen with the ACCC in bringing these proceedings to a timely conclusion. The proffering of an undertaking by each of them can be seen as further evidence of that cooperation. The period for which each undertakes not to be involved in the management of, or be a director of, a company is five years. That period sits at the lower end of the medium range for disqualifications imposed by the Courts under ss 206C and 206E of the Corporations Act: see Australian Securities and Investments Commission v Adler (2002) 42 ACSR 80 at [56].
37 The nature and seriousness of the contraventions are critical considerations to the exercise of any disqualification power: Gillfillan v Australian Securities and Investments Commission (2012) 92 ACSR 460 at [194] per Sackville J. Those considerations should be applied to the five-year period which is the subject of the undertaking. While the contravening conduct here did not cause, on the evidence, substantial losses to the small businesses, it was nevertheless part of a pattern of misleading and deceptive behaviour by the second and third respondents, using the vehicle of Artorios. The behaviour was designed to enrich Artorios, and they in turn were the individuals who stood to benefit from this. The most serious aspect of the conduct was its premeditated character, the implementation of a system of deceiving unsuspecting employees and owners of small businesses into believing they had ordered printer cartridges and were obliged to pay for them. The undertakings operate over a sufficiently long period to reflect the seriousness of the conduct — the period is far from token.
38 Disqualification is a consequence imposed both to prevent future occurrences of the contravening conduct and to provide deterrence to persons involved in managing corporations: see Rich v Australian Securities and Investments Commission (2004) 220 CLR 129 at [48] per McHugh J; Australian Securities and Investments Commission v Healey (No 2) (2011) 196 FCR 430 at [106]-[109]. The period of any undertaking should also be capable of achieving these objectives. In my opinion, a period of five years is capable of ensuring neither the second nor third respondent are in a position through a corporation to design and implement a similar scheme. That period also sends a message to others involved in managing corporations that participation in activities such as those in Annexure A is likely to shut them out of corporate management for some time.
39 Other factors referred to in the authorities, and set out by Santow J in Adler 42 ACSR 80 at [56] (such as personal deterrence, hardship to the individuals and their financial or business interests, remorse or contrition shown by the individuals concerned) are in my opinion also appropriately addressed by an undertaking which remains in effect for five years. That period is sufficiently long enough to have a real impact on the two individual respondents, limiting the way they can earn income and develop further business interests.
40 In the circumstances, it is appropriate for the Court to accept the undertakings proffered by the second and third respondents. It is also appropriate to consider the remainder of orders sought on the basis that they will be made in the context of undertakings by each of the second and third respondents in the terms set out in the orders.
Declarations
41 There is no question about the Court’s power to grant declarations in the current proceeding, pursuant to s 21 of the Federal Court of Australia Act 1976 (Cth). Declarations are sought against all respondents.
42 The agreed facts and admissions by the second and third respondents provide a sufficient basis for the grant of declaratory relief. I am satisfied the declarations relate to real questions of contravention of the ACL, which the declaratory relief resolves. The proposed declarations relate to conduct that contravenes the ACL and the matters in issue have been identified and particularised by the parties with precision. The ACCC is the public regulator under the CCA and has a genuine interest in seeking the declaratory relief.
43 Each of Tuan Nguyen and Thuan Nguyen are proper contradictors. Although they have not taken an active part in the proceedings after orders were made under s 500(2) of the Corporations Act, the liquidators are also proper contradictors in respect of Artorios’ contraventions of the ACL. Each of them has a genuine interest in whether declaratory relief is granted.
44 The provisions of the ACL concerning unsolicited goods are intended to protect consumers from conduct of the kind in question and the detriment that results when consumers are unfairly forced to pay for goods they did not request. I accept the joint submissions that the declarations sought are appropriate because they serve to record the Court’s disapproval of the contravening conduct, and that they are capable of serving the purpose of general deterrence: see Australian Competition and Consumer Commission v Construction, Forestry, Mining and Energy Union [2007] ATPR 42-140 at [6] per Nicholson J.
Injunctions
45 Initially, the joint submissions proposed a single injunction directed to the second and third respondents, covering all of the conduct sought to be restrained. After the Court raised some issues about the form of the injunction at the hearing, the ACCC (with the agreement of the second and third respondents) submitted reformulated proposed injunctions. The injunctions proposed by the ACCC at the hearing were in the following terms:
Each of Tuan Nguyen and Thuan Nguyen be restrained, whether by himself, his agents, servants or otherwise, from being in any way directly or indirectly knowingly concerned in or party to any corporation, whether by its agents, servants or otherwise, in trade or commerce, making representations to the effect that a person has agreed to purchase goods from the corporation, unless that person has agreed to purchase goods from the corporation.
Each of Tuan Nguyen and Thuan Nguyen be restrained, whether by himself, his agents, servants or otherwise, from being in any way directly or indirectly knowingly concerned in or party to any corporation, whether by its agents, servants or otherwise, in trade or commerce, making representations to the effect that the corporation is a current or regular supplier of goods to a person or business, unless the corporation is a current or regular supplier of goods to that person or business.
Each of Tuan Nguyen and Thuan Nguyen be restrained, whether by himself, his agents, servants or otherwise, from being in any way directly or indirectly knowingly concerned in or party to any corporation, whether by its agents, servants or otherwise, in trade or commerce:
making representations to the effect that there is an existing, ongoing supply relationship between the corporation and a person or business whereby the person or business has purchased and agreed that they would purchase and the corporation had supplied and agreed that it would supply goods to that person or business, unless:
there is an existing, ongoing supply relationship between the corporation and that person or business whereby the person or business has purchased and agreed that they would purchase and the corporation has supplied and agreed that it would supply goods to that person or business.
Each of Tuan Nguyen and Thuan Nguyen be restrained, whether by himself, his agents, servants or otherwise, from being in any way directly or indirectly knowingly concerned in or party to any corporation, whether by its agents, servants or otherwise, in trade or commerce, making representations to the effect that the corporation is an approved supplier of goods to a person or business, unless the corporation is an approved supplier of goods to that person or business.
Each of Tuan Nguyen and Thuan Nguyen be restrained, whether by himself, his agents, servants or otherwise, from being in any way directly or indirectly knowingly concerned in or party to any corporation asserting a right to payment for goods unless the corporation has received a prior request for the goods from the person to whom the assertion of a right to payment is sent or made.
46 In the joint submissions and at the hearing, the second and third respondents consented to the grant of injunctions, both in the original and revised forms. Their consent does not relieve the Court of its responsibility to ensure the orders are within power and appropriate.
47 In light of the clear evidence that none of the respondents are likely to continue to engage in the marketing and sale of printer ink cartridges, the proposed injunctions have been drawn more broadly. As drawn, they propose restraint of the second and third respondents by reference to the kind of representations which, on the evidence, were made in the past to induce prospective customers to purchase printer cartridges. There is no restriction on the kinds of goods and services over which the restraint would operate, nor any time period during which the restraint would operate.
48 The Court’s power to grant injunctions is to be found in s 232 of the ACL. In terms, it is identical to the power conferred by s 80 of the TPA, and the authorities concerning s 80 remain relevant.
49 There is no debate about the width of the Court’s power to grant injunctions, once contraventions of the ACL (or the TPA) are established: see ICI Australia Operations Pty Ltd v Trade Practices Commission (1992) 38 FCR 248 at 256 per Lockhart J; see also French J in OD Transport 13 FCR 500 at 508.
50 The joint submissions identified three limitations on the Court’s power (see Australian Competition and Consumer Commission v Z-Tek Computer Pty Ltd (1997) 78 FCR 197 at 203-204 per Merkel J; Australian Competition and Consumer Commission v SMS Global Pty Ltd [2011] ATPR 42-364 at [59] per Murphy J):
• the relief should be designed to prevent a repetition of the contravening conduct;
• there must be a sufficient nexus or relationship between the contravention and the injunction; and
• the injunction must relate to the case or controversy.
51 The joint submissions contended that none of these limitations were exceeded because the relief:
(a) is designed to prevent Tuan Nguyen and Thuan Nguyen from having any further involvement in the making of misleading representations or the assertion of a right to payment for unsolicited goods similar to those that are the subject of the proceeding;
(b) is expressed in terms that are closely tied to the terms in which Tuan Nguyen and Thuan Nguyen has each admitted being knowingly concerned in the contraventions of the ACL; and
(c) arises in the circumstances of this proceeding.
52 The injunctions sought are permanent in nature. It is submitted they are appropriate because part of the function of an injunction is to deter repetition of the contravening conduct, and because the conduct of the second and third respondents was wilful.
53 Although in a given case the last two factors may be relevant and, indeed, accorded considerable weight by a Court in considering whether to grant injunctions, in this proceeding they have little application. Artorios is in liquidation. The second and third respondents have given undertakings which preclude them from future involvement in a corporation for a period of five years. There is no evidence they are engaged in any ongoing businesses (let alone businesses of the kind to which the injunctions might apply) in their own right or as employees or agents. This is a very different situation to, for example, that facing the Court in Australian Competition and Consumer Commission v Pepe’s Ducks Ltd [2013] FCA 570, where there was an ongoing business of precisely the same nature as that which gave rise to the contraventions.
54 Here, the specific deterrence sought through the injunctions relates to new contravening conduct, not a repetition of the contraventions found by the Court. Any future conduct subject to the injunctions could only occur in different circumstances, by reason of the liquidation of Artorios, the disqualification undertakings and the changed circumstances of the second and third respondents. It may be accepted, by reason of the agreed facts and the admissions, that the conduct of the second and third respondents was wilful. However, this factor has weight for an injunction where the wilfulness of the conduct indicates a willingness or likelihood of repetition. In relation to other remedies (such as a pecuniary penalty) wilfulness may of course carry different weight and invoke different considerations.
55 The three limitations identified in the joint submissions are not quite as easily disposed of as the joint submissions might suggest. As to the first limitation, injunctions to restrain repetition of similar conduct have clear work to do where a respondent continues to engage in trade and commerce, and especially of the kind which gave rise to the contraventions. That is not the case in this proceeding. This distinction also weakens the nexus between the contravening conduct and the injunctions sought. Indeed, the injunctions sought here are much broader than the contravening conduct — by necessity, since there is no basis to suppose the second and third respondents plan to conduct any further business in the sale of printer ink cartridges. There is no evidentiary basis on which the Court could conclude the second and third respondents propose to (or have the capacity to) engage in any business, or any conduct in trade or commerce. As to the third limitation, the injunctions relate to the proceeding in the most general of ways — they are directed to two of the three respondents and they concern conduct that is capable of contravening the same provisions of the ACL, albeit necessarily in very different factual circumstances.
56 These matters raise a question of the appropriateness of the grant of injunctions in this proceeding, notwithstanding the consent of the second and third respondents. After the hearing, the Court notified the parties of its concerns by correspondence, and invited further submissions on the appropriateness of the injunctions sought. The ACCC and the legal representatives of the second and third respondents made written submissions in response to the invitation.
57 The ACCC noted two of the principal authorities referred to in the Court’s correspondence, namely BMW Australia Ltd v Australian Competition and Consumer Commission (2004) 207 ALR 452, and Australian Competition and Consumer Commission v Dataline.Net.Au Pty Ltd (2007) 161 FCR 513, and repeated the tenor of the joint submissions, to the effect that the Court’s powers under s 232 relate to public interest injunctions, and for that reason the powers are deliberately broad and expressly (see s 232(4)) unconstrained by the requirements which may attend private law injunctions. The ACCC also repeated the submission that the Court should exercise judicial restraint in scrutinising settlements proposed with the consent of all parties. The ACCC’s further submission helpfully referred the Court to three categories of relevant authorities: first, cases where the ACCC had brought contempt proceedings against respondents in respect of breaches of injunctions or undertakings; second, other cases where injunctions had been granted against individual respondents where contraventions and injunctions had been agreed; and third, cases where injunctions were granted against individuals where the primary corporate contravener was in liquidation at the time of the orders.
58 In a way which is not entirely consistent with the conduct of this matter to date, the further submissions on behalf of the second and third respondents departed from those of the ACCC. Those submissions sought to build on the issues raised by the Court and to submit the Court should not grant injunctions at all against the second and third respondents. The authority to which those submissions refer — Australian Competition and Consumer Commission v Jones (No 3) [2010] FCA 908 at [94] per Logan J — does not advance the second and third respondents’ submissions and, if anything, tends to confirm the ACCC’s submissions that it can and does enforce injunctions imposed by this Court and is astute to try to detect breaches of this Court’s orders. More pertinent is the reliance on a passage from the judgment of Selway J in Australian Competition and Consumer Commission v 4WD Systems Pty Ltd (2003) 200 ALR 491 at [212]-[216]. His Honour there expresses the same kinds of principles as those discussed in Dataline and set out below. In particular his Honour stated at [213]:
It is clearly inappropriate to make an injunction as broad as the ones sought by the applicant, for example, an injunction restraining the respondents from breaching the TPA. It is entirely inappropriate to use the enforcement powers of this court effectively to add a further provision to Pt VI of the TPA.
59 The submissions of the second and third respondents also contend that a formulation enjoining the second and third respondents from being “in any way directly or indirectly knowingly concerned in or party to any corporation” contravening these provisions of the ACL is of limited utility because of the breadth of its expression, and because of the difficulties of detection and enforcement to which it might give rise.
60 The ACCC’s submission about judicial restraint is misplaced in this context. Judicial restraint in approaching orders proposed by consent in regulatory proceedings does not involve a Court acquiescing to orders it considers are not appropriate merely because the parties urge those orders upon the Court and because they are the product of a timely and efficient resolution of a proceeding. The Court’s duty to be satisfied the orders are appropriate requires the Court to be satisfied they are appropriate in law and in fact, on the basis of the evidence before the Court.
61 The operation of s 232(4) does not make the factors to which it refers irrelevant: see ICI Australia Operations 38 FCR 248 at 267 per Gummow J. Those factors are not preconditions to the grant of an injunction under s 232, and the presence of this subsection indicates a legislative intention to broaden the circumstances in which public law injunctions under the ACL may be granted. However, like any other order a court makes, injunctions, if granted, must have utility and that utility must be sufficiently connected with the contraventions in the proceeding in which they are granted, and with the persons against whom they are directed.
62 As French J noted in ICI Australia Operations 38 FCR 248 at 268, public law injunctions freed of the traditional constraints that otherwise attend the grant of injunctions are able to serve a deterrent effect, as well as perform the more traditional role of restraining likely future conduct. The deterrent effect arises from the prospect of contempt proceedings upon breach of an injunction. In this way, what the Court does in granting an injunction is exercise its power to add to the legal consequences already present in a regulatory scheme the prospect of punishment for contempt. The Court must be satisfied the conduct in question warrants the application of those more stringent consequences: see BMW 207 ALR 452 at [39] per Gray, Goldberg and Weinberg JJ.
63 In Dataline 161 FCR 513, a Full Court of this Court reviewed the principles concerning the purpose of the grant of injunctions in the context of regulatory schemes such as s 80 of the TPA. The ACCC had appealed from orders made by Kiefel J, in circumstances where her Honour refused to make some of the orders, including some of the injunctions, sought by the ACCC. The respondent corporations in that case were in liquidation. Her Honour granted a limited injunction against the individual who had controlled the corporations and who had been found to have contravened the TPA through the accessory liability provisions.
64 The Full Court observed at [96] that:
The ACCC frequently claims injunctive relief such as that presently sought. The problems inherent in such relief are regularly identified but, in our experience, rarely resolved.
65 Having reviewed the authorities and principles set out in them, the Court stated at [110]-[114] (I reproduce only the relevant parts) :
We are inclined to think that in general, a court order requiring a person to conduct themselves in a particular way when a statute requires that conduct in any event, will add little to the statutory prescription or proscription and the statutory sanctions attending non-compliance. We accept that such an order may add the possibility of imprisonment for contempt where the relevant contravention would not otherwise lead to that consequence. However, if Parliament has not provided for imprisonment in connection with a contravention, it may not be appropriate for a court to enjoin such conduct simply in order to create the possibility of imprisonment. While Parliament has provided for an injunction as a possible remedy, it may be doubted that it intended that an injunction would be a remedy granted in the ordinary course in the face of the statutory sanctions Parliament has itself provided. Moreover, a Court has an interest in maintaining the efficacy of injunctive relief which requires that orders be respected. They will only be respected if they consistently serve a useful purpose and if breaches are discovered and punished. It may also be doubted that a court order requiring conduct which a statute otherwise requires will be seen to have some greater or different significance to the statutory requirement.
Many contraventions simply will not justify injunctive relief.… The discretion is at large. It is for the relevant applicant to demonstrate that the injunction will serve a purpose….
Any purpose will only be served if the injunction is expressed in terms which can be understood by those to whom it is directed, others who might also be involved in contraventions, and members of the public to whose notice it may come.… The court must consider carefully the terms of any proposed injunction. …
The experience of the law is that unlawful or illegal conduct does not lead to an injunction against repetition of such conduct being sought or granted. A range of other remedies exist in the civil and criminal law which are treated as adequate and appropriate sanctions for such conduct. Normally, it is only where there is a real risk of further misconduct that injunctive relief is contemplated. It is, we think, no answer to this experience to say that subss (4) and (5) [of s 80 of the TPA] provide that absence of any threat of further contravention is no longer a bar to the grant of such relief. An injunction should not be seen as a necessary vindication of the applicant’s conduct in bringing the proceedings. Other relief may better serve that purpose. Nor should an injunction be sought primarily for public relations purposes, however worthy such purposes may be.
66 In answer to some of the observations made in these passages, the ACCC’s further submission contended that here the conduct was deliberate and spread over the course of 11 months, that the terms of the injunctions are clear and capable of being obeyed by the second and third respondents and, finally, that the ACCC does pursue respondents for contempt and will continue to do so, so that the Court can be satisfied injunctions which the Court grants will be enforced by the ACCC in appropriate circumstances.
67 All those matters may be accepted. Against them needs to be balanced the considerations referred to by the Full Court in the extracts above. Added to the considerations mentioned by the Full Court is the fact that the injunctions sought are permanent in nature. It is proposed that the second and third respondents have the threat of contempt proceedings hanging over them for an indefinite period, no matter what kind of business they may engage in, or what kind of employment they may take up. Apprehension about possible breaches of the ACL, and the prospect of contempt proceedings, might inhibit their choice of future business or employment, even though what they propose to do is entirely lawful: see Dataline 161 FCR 513 at [118]. While it would be open to the second and third respondents to apply to have the injunctions discharged at some point, their costs and resources and those of the Court and the ACCC would be involved in considering and determining any such application.
68 While it is true that the terms of the proposed injunctions fix on conduct likely to be caught by the same provisions of the ACL as the Court has found to have been contravened in these proceedings, that is the extent of the connection between the injunctions and the contraventions identified in this proceeding. There is no evidence on which to base a formulation of injunctions relating to particular kinds of sales or supply businesses, or particular products which the second and third respondents might operate, or be involved in operating, in the future. As the Full Court pointed out in Dataline 161 FCR 513 at [121]-[127], when the person who is subject to the proposed injunctions has incurred liability because she or he has been “involved” in contraventions, injunctions formulated to prohibit such “involvement” have the capacity to inhibit the person from engaging in lawful activities, and restricting her or his choice of business activities, for fear of being caught up in conduct which could ultimately be found to have contravened the regulatory scheme, although the conduct might appear lawful. In Dataline 161 FCR 513 at [126], the Full Court found such generally formulated injunctions were neither permissible nor sufficient. That is also the case in this proceeding.
69 The further submissions of the second and third respondents, to which I have already referred, were correct to observe that the generality of the formulations in the injunctions weighed against their grant and could give rise to difficulties of detection and enforcement. That is so because, unlike many of the circumstances in the existing authorities, there is no ongoing corporation with which the second and third respondents are associated, no ongoing business activities, no foreshadowed business activities, and no identified goods and services or any other particular conduct to which the prohibitions could be directed on the evidence. The ACCC has not suggested, and it would not in any event be appropriate, that injunctions be restricted to the sale and supply of printer ink cartridges.
70 Even if the problems and difficulties in principle in granting injunctions in the current circumstances are put to one side then, given the other orders which will be made, the purpose to be served by the grant of injunctions in the present proceeding is unclear. Deterrence — both general and specific — is served by the pecuniary penalties to be imposed. The Court’s marking out of the boundaries of unlawful conduct and some level of general deterrence is addressed by the declarations. The costs orders, limited though they are, in the circumstances of these two respondents impose additional financial burdens likely to diminish the risk of prepetition by them of conduct contravening these ACL provisions.
71 Turning to whether the injunctions are appropriate in fact, there is no evidence before the Court which could found an acceptance of the ACCC’s submission that “the Second and Third Respondents may become involved in other telemarketing or telesales businesses”. Nor is there evidence firmly to ground the submission by the second and third respondents that “the risk of further misconduct by the Respondents is at best low”. The absence of evidence of any previous conduct similar to that established by the contravention, together with the disqualification undertakings and the respondents’ apparent need to pay the proposed penalties and costs by instalments, might found an inference of that nature, but some degree of speculation by the Court would be involved. The clearer position is that the Court simply has no evidence about the present circumstances of the second and third respondents, their qualifications, training and skills (if any), nor about what they might or might not do by way of business undertakings in the foreseeable future. There is no evidence to suggest that the risk, or likelihood, that either or both of them might engage in contravening conduct in the future is any different to the risk or likelihood other members of the community might do so. That general risk is addressed by the presence of the prohibitions in the ACL and the legal consequences of contraventions, of which the second and third respondents are now more aware than other members of the community.
72 The authorities to which the ACCC refers in its supplementary written submissions reinforce the distinction between the current circumstances and many of those in which injunctions have previously been granted. Some of those authorities (such as Australian Competition and Consumer Commission v Stott [2013] FCA 88; Australian Competition and Consumer Commission v Adepto Publications Pty Ltd [2013] FCA 247) involve injunctions directed at specific conduct which constituted at least in part the contravening conduct. Others involve injunctions where the restraint was limited to a period of time, often 3 to 5 years. One particularly serious contravention — with very much larger penalties — involved an injunction for a period of 15 years: see Australian Competition and Consumer Commission v Chaste Corporation Pty Ltd (in liq) [2005] FCA 1212; Australian Competition and Consumer Commission v Allergy Pathway Pty Ltd (No 2) (2011) 192 FCR 34; Australian Competition and Consumer Commission v Willesee Healthcare Pty Ltd [2011] FCA 301; Australian Competition and Consumer Commission v Sampson [2011] FCA 1165; Australian Competition and Consumer Commission v Halkalia Pty Ltd (No 2) [2012] FCA 535. In proceedings subsequently brought by the ACCC for contempt, in relation to breaches of injunctions previously granted, the injunctions which were the subject of the breach were much more specific than those sought by the ACCC in this case: see Australian Competition and Consumer Commission v Jutsen (No 6) [2012] FCA 809; Australian Competition and Consumer Commission v Allphones Retail Pty Ltd (No 4) (2011) 280 ALR 97; Australian Competition and Consumer Commission v Levi (No 3) [2008] FCA 1586.
73 The ACCC did not submit any further modifications to the form of injunctions proposed at the hearing, although it could have done so, both in terms of the conduct to be restrained and the period of the restraint. While injunctions restricted to a period of between one and five years may have addressed some of the difficulties to which I have adverted, the remaining considerations still weigh against a conclusion that the injunctions are an appropriate form of relief in this proceeding. Chief amongst those remaining considerations are the factors referred to by the Full Court in Dataline, together with the breadth of the injunctions as formulated and the inappropriate and disproportionate chilling effect they are capable of having on the employment the second and third respondents might seek, or the business activities in which they might seek to engage. In any event, injunctions in those terms were not sought.
Pecuniary penalties
74 I was informed by counsel for the ACCC that this is the first time pecuniary penalties have been sought under s 40 of the ACL, although it may not be the first proceeding to deal with pecuniary penalties under s 29. It was not suggested however that any different approach should be taken to the question of what penalties are appropriate to impose under s 40 than has been taken previously in this Court either under the ACL or the TPA.
75 The ACCC, Tuan Nguyen and Thuan Nguyen jointly submit that the Court should make orders imposing pecuniary penalties pursuant to s 224 of the ACL on Tuan Nguyen in the amount of $50,000; and Thuan Nguyen in the amount of $50,000.
Applicable principles
76 Section 224 of the ACL empowers the Court to impose such pecuniary penalties for contraventions of the ACL, or involvement in contraventions as specified in s 224(1)(b)-(f), as the Court determines to be appropriate.
77 In reaching a determination about what is the appropriate pecuniary penalty, s 224(2) requires the Court to have regard to “all relevant matters”, but specifically:
(a) the nature and extent of the act or omission and of any loss or damage suffered as a result of the act or omission; and
(b) the circumstances in which the act or omission took place; and
(c) whether the person has previously been found by a court in proceedings under Chapter 4 or this Part to have engaged in any similar conduct.
78 Relevantly, s 224(3) imposes a maximum penalty for each act or omission that relates to a provision in Pt 3-1, including ss 29 and 40, of $220,000 for natural persons. Section 224(4) limits the Court’s power to the imposition of one pecuniary penalty in circumstances where the same conduct constitutes a contravention of more than one provision.
79 Consistently with the principles referred to earlier in this judgment, authorities in this Court have looked favourably on penalties agreed between the parties and submitted for the Court’s consideration as part of an agreed resolution in enforcement proceedings. Also consistently, this Court repeatedly emphasises that it is the responsibility of the Court to exercise power and to be satisfied the orders suggested to it are appropriate. What occupies much time in the authorities is the reconciliation of the Court’s task with the weight to be given to the specific penalties agreed between the parties and suggested to the Court.
80 That reconciliation has been variously expressed in different decisions of this Court. In NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (1996) 71 FCR 285 at 291, the Full Court held that a “proper figure is one within the permissible range in all the circumstances” and the Court will not depart from an agreed figure “merely because it might otherwise have been disposed to select some other figure, or except in a clear case”. Such an approach does not mean the Court’s task is limited to determining if the agreed penalty is within the permissible range and imposing the agreed penalty: see Minister for Industry, Tourism and Resources v Mobil Oil Australia Pty Ltd [2004] ATPR 41-993. In Mobil Oil, the Court explained that the exercise of power under s 224(1) where an agreed penalty was suggested could be undertaken in more than one way (at [54]):
[T]he sixth proposition drawn from the reasoning in NW Frozen Foods does not mean, in our opinion, that the Court must commence its reasoning with the proposed penalty and limit itself to considering whether that penalty is within the permissible range. A Court may wish to take that approach. However, it is open to a Court, consistently with the reasoning in NW Frozen Foods, first to address the appropriate range of penalties independently of the parties’ proposed figure and then, having made that judgment, determine whether the prepared penalty falls within the range.
81 There is no basis to think that the determination for which s 224(1) provides is one which excludes from the concept of “appropriate” the circumstance that the regulator and the contravening parties have reached agreement on penalty. For the reasons more fully set out in NW Frozen Foods, Mobil Oil and the many authorities in this Court which have applied them, consideration of all the circumstances of a case will include the substantial public interest in the early and final resolution of enforcement proceedings and the role of the Court in giving weight and effect to such resolutions.
82 There being no scientific formula to apply to reach a penalty appropriate in all the circumstances in a given case, the Court looks instead to the considerations express in or implied from the legislative scheme. These include the three matters set out in s 224(2), as well as other factors which might be said to form part of these three express considerations, or to fall within the general statutory concept of “all relevant matters”. Some of those factors are identified in Australian Competition and Consumer Commission v Singtel Optus Pty Ltd (No 4) (2011) 282 ALR 246 at [11] per Perram J.
83 Careful attention should also be paid to the maximum penalties available, although reasoning backwards from the maximum has been disapproved, as has any kind of mathematical approach: see Markarian v The Queen (2005) 228 CLR 357.
84 Finally, the purpose of the imposition of penalties is deterrence (both specific and general): Singtel Optus Pty Ltd v Australian Competition and Consumer Commission (2012) 287 ALR 249 at [41], [62]-[63]; Trade Practices Commission v CSR Ltd [1991] ATPR 41-076 at 52,152 per French J; NW Frozen Foods 71 FCR 285 at 294-295 per Burchett and Kiefel JJ. The power to determine what level of pecuniary penalty is appropriate under s 224(1) must be exercised bearing in mind this purpose.
A conflict of authority?
85 In Australian Securities and Investments Commission v Ingleby (2013) 275 FLR 171, the Victorian Court of Appeal held that the approaches set out in Mobil Oil and NW Frozen Foods should not be followed. Weinberg JA explained the reasoning on this point in detail, and Harper JA (at [99]) and Hargreave AJA (at [102]) agreed. Weinberg JA’s reasoning reflected a position his Honour had adopted while a Justice of this Court: see the account given by Weinberg JA of these previous cases in Ingleby 275 FLR 171 at [19]-[25]. The Court of Appeal saw those decisions as requiring a Court to impose an agreed penalty unless the Court considers the penalty is wholly outside the permissible range. His Honour summarised his reasoning in Ingleby 275 FLR 171 at [29]-[30]:
NW Frozen Foods and Mobil Oil were, in my opinion, wrongly decided because they treat the trial judge, who is to impose the pecuniary penalty, as though he or she is exercising an appellate role. Under the approach adopted in those cases, the judge is not independently arriving at the appropriate penalty, but rather asking an entirely different question — whether the agreed figure falls within the range of penalties reasonably available. That is, in substance, an appellate question, and not a first instance question. If the judge is unable to say that the agreed penalty is “wholly outside” the range, he or she is bound to impose that penalty irrespective of whether it is considered appropriate. That is, in my view, a fundamental departure from the judicial function in relation to sentencing, and one that simply ought not to be countenanced.
That is not to say that a judge faced with a negotiated settlement in a pecuniary penalty matter should not give due weight to any agreed figure, if one happens to be put forward. However, that figure should be regarded as nothing more than a submission. It should have no binding force of any kind, even if it happens to fall “within the range”.
86 The joint submissions contended that Mobil Oil and NW Frozen Foods are binding upon this Court. It was submitted that, since Ingleby was handed down, this Court has in three instances applied the approach in Mobil Oil and NW Frozen Foods to pecuniary penalties sought by consent under the CCA/TPA, and in one other instance the Court has ordered the pecuniary penalties agreed by consent under the CCA/TPA, without expressly referring to the reasoning in Mobil Oil or NW Frozen Foods: see Australian Competition and Consumer Commission v Hewlett-Packard Australia Pty Ltd [2013] FCA 653 at [4], [13] per Buchanan J; Australian Competition and Consumer Commission v Adepto Publications Pty Ltd [2013] FCA 247 at [29]-[30], [58] per Cowdroy J; Australian Competition and Consumer Commission v Pepe’s Ducks Ltd [2013] FCA 570 at [23]-[24] per Bromberg J; Australian Competition and Consumer Commission v Prysmian Cavi E Systemi Energia SRL (No 5) [2013] FCA 294.
87 Notwithstanding a different approach now adopted in Victoria, and despite the weight which might otherwise be accorded to Weinberg JA’s reasoning, a single Justice of this Court is bound to apply the approach in NW Frozen Foods, as explained in Mobil Oil. As a matter of substance and practical application, in my opinion it is difficult to see how the approach identified by Weinberg JA differs from the second approach set out in Mobil Oil.
Application to these proceedings
Loss and damage
88 Depending on the circumstances, the absence of loss and damage may not be a mitigating factor in determining penalty: see Trade Practices Commission v ICI Australia Operations Pty Ltd (1991) 105 ALR 115 at 118-119; Australian Communications and Media Authority v Clarity1 Pty Ltd (No 2) (2006) 155 FCR 377 at [29]. Whether the presence of loss and damage, especially at a substantial level, might result in a higher penalty may be a slightly different proposition: cf Singtel Optus 287 ALR 249 at [58].
89 There is no reason to suppose that the inclusion of this as an express factor in s 224 suggests that absence of loss and damage should count in mitigation. It may well be, as here, that contravening conduct does not achieve its ultimate aim in the circumstances. Here, Artorios induced unsuspecting businesses to agree to be supplied with goods they had not requested and demanded payment for those goods. The fact that only some businesses paid before the contraventions were uncovered affects neither the culpability nor the seriousness of the conduct of the respondents.
90 There is on the evidence before me some loss and damage from the contravening conduct, but it was of small monetary compass. Glen Cromie Caravan Park paid the sum of $1,040.60 as a result of the contraventions — a sum it was not liable to pay. The Shaver Shop paid the sum of $772.75 as a result of the contraventions, which it also was not obliged to pay.
91 The agreed facts provide some evidence of further claims made in the Victorian Civil and Administrative Tribunal by Artorios against a range of clients. I was invited by the ACCC to draw inferences from the agreed facts, and Annexure C to the agreed facts that, for the purpose of determining the amount of loss and damage caused by the contraventions, I could infer from this evidence the loss and damage was more widespread.
92 Those inferences are not available on the material before the Court. Annexure C on its face is not capable of proving the circumstances in which each of the claims at VCAT came to be, given the descriptions in the document of “withdrawn”, “dismissed” or “in favour of”. There is no evidence about the nature of these businesses and whether they were, for example, legitimate clients of Artorios who had requested and had been supplied with printer cartridges.
93 The only loss and damage established on the evidence before the Court is a total of $1,813.35, suffered by Glen Cromie Caravan Park and the Shaver Shop, in paying for unsolicited goods when they were not obliged to do so. The proven loss and damage is at such a modest level that I do not consider it should attract a heavier penalty than might otherwise be imposed if no loss or damage were proven on similar facts.
Circumstances in which the act or omission took place
94 Artorios was a relatively small company, but large enough to employ sales and other staff aside from the second and third respondents. The evidence as to its turnover suggests a fully-functioning small business. It is not possible from the evidence before the Court to draw any inferences about how much of its turnover may have come from activities of the same nature as those found to contravene the ACL. Only five contraventions have been proved. Contrary to some submissions made rather faintly on behalf of the ACCC, it is not possible to infer that the second and third respondents derived any particular personal benefit in fact from the contravening conduct. As I have observed earlier in these reasons, that it was their intention personally to benefit from the contravening conduct in their position as shareholders of Artorios is firmly established. But the evidence does not disclose any level of personal benefit in fact received.
95 As I have found at [11] to [23] above, the contravening conduct was part of a premeditated plan, conceived in some detail through the training and supervision of sales staff, to induce unsuspecting small businesses to believe they had ordered printer cartridges and were obliged to pay for them. The necessity of the product to the running of a small business, combined with it being relatively inexpensive, no doubt contributed to the ability of the respondents to deceive the small businesses their sales staff contacted. This is an important factor in the need for penalties to have a general deterrent effect: this is the kind of conduct which other suppliers might otherwise consider replicating.
96 The conduct was spread across Australia, and continued over a substantial period of time. I infer that, had it not been detected, the respondents would have continued the pattern they had established.
97 The contravening conduct had an aggravating aspect, by reason of the demands for payment sent by Artorios to some of the small businesses who were taken in by the scheme. Two of those letters of demand are annexed to the agreed facts. They exhibit a bullish and confrontational tone, implying the involvement of lawyers on behalf of Artorios and thus a wholesale determination to enforce payment to which Artorios was not entitled.
98 The purpose of prohibitions such as that contained in s 40 of the ACL is to protect consumers from having unsolicited goods thrust upon them and then to prevent the suppliers demanding payment for goods not requested. I find that the whole aim of the scheme undertaken by the respondents was to achieve precisely what s 40 was designed to prevent.
99 Cold-calling and telephone sales are occasions where members of the community can be involuntarily exposed to pressure to purchase goods or services they have not sought out. These tactics occur in circumstances, such as those existing on the evidence before the Court, where low-level employees of businesses can also be easily misled into committing the business to arrangements other than those the owners and managers of the business have authorised. Again, this is one of the characteristics of cold-calling and telephone sales — to target unsuspecting and low-level employees who nevertheless might commit a business to something an owner or manager might scrutinise more carefully, or have better information about so as to uncover the deception.
100 The penalties imposed in this proceeding should be sufficiently high to deter the second and third respondents from harbouring any ideas it is worth repeating this kind of conduct. The penalties should also be high enough to demonstrate a real financial impact on any other suppliers of goods who might consider engaging in such a scheme.
101 These factors, especially the calculated and deliberate nature of the conduct, the planning and preparation for it disclosed by the evidence, and the targeting of low-level employees and small businesses with a common and necessary product, could have led me to conclude that penalties higher than those proposed in the joint submissions should be imposed. However, taking into account the factors I set out at [102] to [105] below, I have reached the view that a figure of $50,000 for each of the second and third respondents is appropriate.
102 I take into account the cooperation of the respondents, their ultimate agreement to the facts necessary to found liability and the consequent saving of the public resources of both the regulator and the Court. These matters have led me to consider a lower figure than otherwise might have been the case.
103 The second and third respondents have lost the business they established. They have also undertaken not to be directors of, or be involved in the management of, any corporation for five years. These two matters produce significant and adverse changes to their personal circumstances and I take those into account in determining the appropriateness of the sum of $50,000 as a penalty for each of them.
104 The second and third respondents have agreed to pay a contribution towards the costs of the ACCC in this proceeding, in the sum of $5,000. That sum is no more than a modest contribution to the ACCC’s costs, but once again it is money the two individual respondents must earn and find, having lost their business and being now far more restricted in the ways they can derive income in the future.
105 Both the second and third respondents attended the penalty hearing before the Court. I am prepared to infer that their experiences in being subjected to these proceedings, and to public admissions and findings of wrongdoing, and their naming in proceedings such as this, has been difficult and somewhat shameful for them. Those effects should also be taken into account in the determination of penalty.
No previous findings against the respondents
106 Neither of the respondents has been found previously to have engaged in similar conduct under Ch 4 or Pt 5.2 of the ACL. This fact weighs in favour of a significant but not heavy penalty. I consider the sum of $50,000 to fit that description, given the maximum penalty is $220,000.
Relevance and weight to be attributed to information about Artorios
107 The joint submissions contained substantial material about what was said to be the “benefit” derived in financial terms by Artorios, and also by the second and third respondents, from the contravening conduct. Aside from circumstances where penalties may be calculated by reference to profits made through contravening conduct (see, eg, s 76 of the CCA, concerning contraventions of Pt IV of the CCA), the existence of a “benefit” to a contravening party seems to be no more than a factor in specific or general deterrence.
108 Tables said to reflect Artorios’ profit and loss between July 2010 and December 2012, and information derived from balance sheets including loans from Artorios to the second and third respondents, was also contained in tables in these submissions. That information was not supported by evidence in the agreed facts or annexed documents. After this was raised with the ACCC, reliance on paragraphs [96]-[97] of the joint submissions and the information contained in those paragraphs was withdrawn.
109 In order to support a submission made about the benefit said to flow to the second and third respondents from the contravening conduct, the ACCC filed in Court Annexure D to the Statement of Agreed Facts, being the Financial Report for Artorios, certified by a Certified Practising Accountant, for year ended 30 June 2011. This was filed with the consent of the second and third respondents.
110 I do not find that evidence of any assistance in establishing whether there was a benefit to the second and third respondents personally from the contravening conduct. The evidence may say something about the general financial position of Artorios between July 2010 and December 2012, and about its turnover. Given there are only five contraventions proven during this period, not amounting to any significant sum in light of the company’s turnover, there is no basis to infer any real financial benefit to Artorios, let alone to the second and third respondents. There is no evidence about the sources on which the figures representing assets and liabilities are based, nor how the loans to the (then) directors came to be made. There is no evidence about the costs of the printer cartridges, nor the gross or net profit on each sale. There is insufficient detail to make this evidence of any relevance or reliability in considering the appropriateness of the penalties for the second and third respondents.
Single penalty, parity and totality
111 I am satisfied a single penalty for each individual respondent is appropriate. It may not be possible to apply the terms of s 224(4) to the nine contraventions in relation to the five small businesses as it is not the “same” conduct: Trade Practices Commission v Simpson Pope Ltd (1980) 30 ALR 544 at 556 (applying s 76(3) of the TPA/CCA, upon which the terms of s 224(4) are based). Given there was no connection between the conduct perpetrated against each of the five businesses, it may also not be appropriate to characterise all the contraventions as a single course of conduct, in the sense that phrase is considered for the purposes of “sentencing” in the imposition of penalties: see Construction, Forestry, Mining and Energy Union v Williams (2009) 262 ALR 417 at [14]-[19] for an explanation of how and why a court might address this issue in considering penalties. The “single course of conduct” approach has been taken where there are clearer connections between the various contraventions: see Australian Competition and Consumer Commission v Turi Foods Pty Ltd (No 2) [2012] FCA 19 at [38]; Australian Competition and Consumer Commission v AirAsia Berhad Co [2012] FCA 1413 at [25]-[26] and the cases there referred to; cf Australian Competition and Consumer Commission v EDirect Pty Ltd (2012) 206 FCR 160 at [74.10], where Reeves J did apply a “single course of conduct” analysis in circumstances closer to those in the present proceeding.
112 In the present proceeding, the second and third respondents’ conduct in respect of each business followed a pattern and was so similar that there is no basis on which to differentiate between them in terms of the amount of penalty. The better course is to look at the contraventions in total, and consider what penalty is appropriate in respect of them all.
113 Some caution must be exercised in seeking out and relying on penalties imposed in other cases: see Singtel 287 ALR 249 at [60]; Australian Competition and Consumer Commission v Telstra Corporation Ltd (2010) 188 FCR 238 at [215] per Middleton J. Nevertheless because proceedings under the ACL (and its predecessor legislation) regularly come before this Court, and this Court is asked repeatedly to consider contravening conduct and the consequences which should flow from it in relation to a variety of corporations and individuals, it is relevant for the Court to consider — especially in relation to penalty rather than other forms of relief — whether the amounts fixed suggest consistent and relatively even-handed treatment of contravenors by the Court: see comments to some similar effect in NW Frozen Foods 71 FCR 285 at 295 per Burchett and Kiefel JJ.
114 In Australian Competition and Consumer Commission v Adepto Publications Pty Ltd [2013] FCA 247, the contravening conduct involved representations made to small business holders, deceiving them into believing that they had previously agreed to placing an advertisement in one of the magazines published by Adepto Publications (the first respondent) and then asserting a right to payment. Representatives of Adepto Publications also represented that publications produced by it had an affiliation with charities and community groups, when in fact no such affiliation existed. The second respondent, Mr Mitchell, was the sole director and shareholder of Adepto Publications, and directed and managed the business during the relevant period. Ms McKay, the third respondent, was the office manager, employed by Mr Mitchell to run the business on a daily basis and to manage the recruitment and training of staff. By consent of the parties, the Court made orders for pecuniary penalties of $500,000 against Adepto Publications, $150,000 against Mr Mitchell and $100,000 against Ms McKay.
115 In Australian Competition and Consumer Commission v Chaste Corporation Pty Ltd (in liq) [2005] FCA 1212, the contravening conduct involved misleading statements made in relation to the supply of a weight loss product called “TRIMit” and associated goods. The second respondent, Mr Webb, was the sole registered director and secretary of the first respondent, Chaste Corporation Pty Ltd, the company that manufactured and supplied TRIMit. Mr Webb opposed the imposition of any pecuniary penalty but did not appear at the penalty hearing. The Court made orders for a pecuniary penalty of $150,000 against Mr Webb.
116 Where there are multiple contraventions, which is the case in this proceeding, the principle of totality must be considered. Neither in the joint submissions nor in argument was it suggested that the proposed penalties of $50,000 for each of the second and third respondents were calculated by reference to the number of contributions in any mathematical sense. Nor would that be appropriate. The fact that there are multiple contraventions, which demonstrates repeated conduct, and in this case over a significant period of time and having impact across different parts of Australia, means that the penalty imposed should reflect this being more than an isolated event. I am satisfied that the figure of $50,000 for each of the second and third respondents reflects this adequately.
Payment by instalment
117 This Court has previously ordered payment of penalties by instalments: see Australian Competition and Consumer Commission v Humax Pty Ltd [2005] FCA 706; Australian Competition and Consumer Commission v Eternal Beauty Products Pty Ltd [2012] FCA 1124. The ACCC submitted that the second and third respondents’ agreement to the proposed program of payment by instalments should be taken as an acceptance of their capacity to meet the required payments. The second and third respondents submitted that the ACCC had been provided with sufficient information about the broader financial position of the second and third respondents to form its own view about their capacity to comply with the proposed payment scheme.
118 I accept those submissions. I am satisfied it is appropriate to order payment of both penalties and costs by the second and third respondents by instalments in the sums proposed.
I certify that the preceding one hundred and eighteen (118) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Mortimer. |
Associate:
Annexure A
STATEMENT OF AGREED FACTS
A. Introduction
1. This Statement of Agreed Facts (“SOAF”) is made jointly by the Applicant, the Australian Competition and Consumer Commission (“ACCC”); the Second Respondent, Tuan Minh Nguyen (“Tuan Nguyen”); and the Third Respondent, Thuan Minh Nguyen (“Thuan Nguyen”).
2. This Statement details:
(a) conduct by the First Respondent, Artorios Ink Co Pty Ltd (“Artorios”), in respect of which Tuan Nguyen and Thuan Nguyen were knowingly concerned in or a party to, that took place in 2011 and early 2012 in relation to Artorios’ marketing and supply of printer cartridges to the following small businesses located across Australia:
(i) Jetts Fitness, which is a chain of fitness centres, the relevant centres of which are located in Adelaide, South Australia;
(ii) Glen Cromie Caravan Park, a caravan park at Drouin, Victoria;
(iii) Vinsan Salvage, a building demolition, building material salvaging and recycling business at Bayswater, Western Australia;
(iv) Realway Property Consultants, a real estate franchise business based in Toowoomba, Queensland; and
(v) Shaver Shop Canberra Centre, a franchise store selling shaving products in Canberra, Australian Capital Territory; and
(b) admissions by Tuan Nguyen and Thuan Nguyen that each was knowingly concerned in or a party to contraventions by Artorios of:
(i) section 18 of the Australian Consumer Law (“ACL”) (consisting of Schedule 2 to the Competition and Consumer Act 2010 (Cth) (“the Act”)), by engaging in conduct in trade or commerce that was misleading or deceptive or likely to mislead or deceive;
(ii) sections 29(1)(d) and 29(1)(h) of the ACL, by making false or misleading representations in connection with the supply or possible supply of goods; and
(iii) section 40(1) of the ACL, by asserting a right to payment for unsolicited goods without reasonable cause to believe that there was a right to payment.
B. The Parties
3. The ACCC is a body corporate established by section 6A of the Act and is entitled to sue in its corporate name.
4. Artorios:
(a) is and was at all material times a company duly incorporated under the Corporations Act 2001 (Cth);
(b) is and was at all material times a trading corporation within the meaning of section 4 of the Act;
(c) at all material times from 5 September 2008 carried on business as a supplier of printer cartridges (“Business”);
(d) at all material times from 5 September 2008, in the course of the conduct of the Business, primarily sold printer cartridges to new and existing customers over the telephone;
(e) at all material times during the period March 2011 to January 2012 (“Relevant Period”), employed and trained a small sales team to sell printer cartridges to existing and new customers of Artorios over the telephone (“Sales Staff”);
(f) at all material times during the Relevant Period, carried on the Business from premises at 405 South Gippsland Highway, Dandenong and later at 2/123 Woodlands Drive, Braeside (“Premises”);
(g) was placed into voluntary liquidation on 25 February 2013.
5. Tuan Nguyen:
(a) is and was at all material times from 5 September 2008, the sole director of Artorios;
(b) at all material times from 5 September 2008, held 50% of the issued shares in Artorios;
(c) is the brother of Thuan Nguyen;
(d) at all material times during the Relevant Period, was the Managing Director of Artorios;
(e) at all material times during the Relevant Period, together with Thuan Nguyan, ran the Business;
(f) at all material times during the Relevant Period, made telephone calls to existing and new customers of Artorios to verify orders for printer cartridges;
(g) at all material times during the Relevant Period, processed orders for printer cartridges and arranged delivery of printer cartridges to customers;
(h) at all material times during the Relevant Period, had responsibility for overdue accounts;
(i) at all material times during the Relevant Period, had responsibility for customer service issues and complaints;
(j) at all material times during the Relevant Period, carried out his duties as Managing Director of Artorios and the tasks referred to in sub-paragraphs (e) to (i) above from the Premises in close proximity to the Sales Staff.
6. Thuan Nguyen:
(a) at all material times from 5 September 2008, held 50% of the issued shares in Artorios;
(b) is the brother of Tuan Nguyen;
(c) at all material times during the Relevant Period, together with Tuan Nguyen, ran the Business;
(d) is and was at all material times during the Relevant Period, an employee of Artorios who:
(i) held the position of Sales Manager;
(ii) conducted sales telephone calls to existing and new customers of Artorios;
(iii) made telephone calls to existing and new customers of Artorios to verify orders for printer cartridges;
(iv) processed orders for printer cartridges and arranged delivery of printer cartridges to customers;
(v) assisted in training Sales Staff;
(vi) supervised Sales Staff and was the manager to whom Sales Staff reported.
C. Facts relevant to Liability
Conduct in relation to Jetts Fitness
7. On 18 January 2012, an employee of Artorios, Kritsana Barnett, who identified himself as “Rick from AIC” (“Rick”), telephoned the ‘Jetts Fitness’ gym located in St Mary’s, South Australia (“Jetts Fitness St Mary’s”), and spoke to Kelley Schulte, the Manager of Jetts Fitness St Mary’s.
8. During the telephone call referred to in paragraph 7, Rick made statements to the following effect:
(a) “I’m just calling because we’ve been your ink cartridge supplier for a while. Your General Manager Tristan has dealt with us and has decided to get ink cartridges supplied through another company in the future”.
(b) “As a thank you for your business, we’re sending out free gift vouchers.”
(c) “I’ve spoken to Tristan and he’s okayed me sending the vouchers to you guys.”
(d) “I’ll just put in your final order and that will be the last batch you guys order from us.”
(e) “Someone will call back and confirm the order.”
9. In response to the statements referred to in paragraph 8, in a subsequent telephone call from a female employee of Artorios, Kelley Schulte confirmed an order for printer cartridges.
10. On or about 18 January 2012, Artorios sent Jetts Fitness St Mary’s:
(a) a package containing printer cartridges; and
(b) a written invoice numbered 8589 and dated 18 January 2012 addressed to Jetts Fitness St Mary’s requesting payment of $871.75 for the printer cartridges referred to in the invoice.
11. On 18 January 2012, an employee of Artorios, Kritsana Barnett, who identified himself as “Rick from AIC” (“ Rick”), telephoned the ‘Jetts Fitness’ gym located in Morphett Vale, South Australia (“Jets Fitness Morphett Vale”), and spoke to Cherise Madigan, the Manager of Jetts Fitness Morphett Vale.
12. During the telephone call referred to in paragraph 11:
(a) Rick made reference to Tristan Goc, the Managing Director of 247 Fitness Australia Pty Ltd trading as ‘Jetts Fitness Australia’ (“Jetts Fitness Australia”) and then made a statement to the following effect:
“Basically you should just order through me now.”
(b) In response Ms Madigan asked:
“Does this mean we don’t order through Tristan any more?”
(c) In response Rick stated:
“No, you can go directly through me now. I was talking to Tristan earlier. He’s given it the go ahead. All the ordering from across the clubs is going through me now.”
13. By making the statements referred to in paragraphs 8 and 12, Artorios represented that:
(a) Jetts Fitness Australia had agreed that ‘Jetts Fitness’ gyms would purchase printer cartridges from Artorios;
(b) Artorios was an approved supplier of printer cartridges to Jetts Fitness Australia and ‘Jetts Fitness’ gyms;
(c) Artorios was a current or regular supplier of printer cartridges to Jetts Fitness Australia and ‘Jetts Fitness’ gyms; and/or
(d) There was an existing, ongoing supply relationship between Artorios and Jetts Fitness Australia whereby Jetts Fitness Australia had purchased and agreed that it would purchase and Artorios had supplied and agreed that it would supply printer cartridges to Jetts Fitness Australia and ‘Jetts Fitness’ gyms.
14. The representations referred to in paragraph 13 were false, misleading or deceptive, or likely to mislead or deceive, because:
(a) in relation to paragraph 13(a), Jetts Fitness Australia had not placed an order for printer cartridges with Artorios or agreed that ‘Jetts Fitness’ gyms would purchase printer cartridges from Artorios;
(b) in relation to paragraph 13(b), Artorios was not an approved supplier of printer cartridges to Jetts Fitness Australia or ‘Jetts Fitness’ gyms;
(c) in relation to paragraph 13(c), Artorios was not a current or regular supplier of printer cartridges to Jetts Fitness Australia or ‘Jetts Fitness’ gyms; and
(d) in relation to paragraph 13(d), there was not an existing ongoing supply relationship between Jetts Fitness Australia, or ‘Jetts Fitness’ gyms, and Artorios.
15. By sending the printer cartridges and invoice referred to in paragraph 10, Artorios asserted a right to payment for printer cartridges from Jetts Fitness St Mary’s.
16. To the extent that Jetts Fitness St Mary’s confirmed an order of printer cartridges from Artorios as referred to in paragraph 9, it did so having been misled by Artorios into believing that Jetts Fitness Australia had already made an order for printer cartridges when no such order had been made.
17. Accordingly, Jetts Fitness St Mary’s did not make a request for printer cartridges from Artorios for the purpose of section 40(1) of the ACL.
18. By reason of the matters referred to in paragraphs 16 and 17, the printer cartridges sent by Artorios to Jetts Fitness St Mary’s were unsolicited goods within the meaning of section 2(1) of the ACL.
Conduct in relation to Glen Cromie Caravan Park
19. On or about 10 August 2011, an employee of Artorios, Sharene Tadrus, telephoned the business trading as the Glen Cromie Caravan Park in Drouin West, Victoria (“the Glen Cromie Caravan Park business”), and spoke to Matthew Azzopardi, the son of the owners of the Glen Cromie Caravan Park business.
20. During the telephone call referred to in paragraph 19, Sharene Tadrus made statements to the following effect:
(a) “Before your mother went on holiday she placed an order for printer cartridges that needs to be confirmed”.
(b) “If you confirm the order for the cartridges that your mother made straight away you will get a good deal and receive a free video camera.”
(c) “If you wait and confirm later, the order will cost more.”
21. In response to the statements referred to in paragraph 20, in a subsequent telephone call from a male employee of Artorios, Matthew Azzopardi confirmed an order for printer cartridges.
22. On or about 10 August 2011, Artorios sent the Glen Cromie Caravan Park business:
(a) a package containing printer cartridges; and
(b) a written invoice numbered 6646 and dated 10 August 2011 addressed to the Glen Cromie Caravan Park business requesting payment in the sum of $1,040.60 for the printer cartridges referred to in the invoice.
23. By making the statements referred to in paragraph 20, Artorios represented that:
(a) the owner or operator of the Glen Cromie Caravan Park business had agreed to purchase printer cartridges from Artorios; and/or
(b) Artorios was an approved supplier of printer cartridges to the Glen Cromie Caravan Park business.
24. The representations referred to in paragraph 23 were false, misleading or deceptive, or likely to mislead or deceive, because:
(a) in relation to paragraph 23(a), the owners and operators of the Glen Cromie Caravan Park business had not placed an order for printer cartridges with Artorios or agreed to purchase printer cartridges from Artorios; and
(b) in relation to paragraph 23(b), Artorios was not an approved supplier of printer cartridges to the Glen Cromie Caravan Park business.
25. By sending the printer cartridges and invoice referred to in paragraph 22, Artorios asserted a right to payment for printer cartridges from the Glen Cromie Caravan Park business.
26. To the extent that the Glen Cromie Caravan Park business confirmed an order of printer cartridges from Artorios as referred to in paragraph 21, it did so having been misled by Artorios into believing that it had already made an order for printer cartridges when no such order had been made.
27. Accordingly, the Glen Cromie Caravan Park business did not make a request for printer cartridges from Artorios for the purpose of section 40(1) of the ACL.
28. By reason of the matters referred to in paragraphs 26 and 27, the printer cartridges sent by Artorios to the Glen Cromie Caravan Park business were unsolicited goods within the meaning of section 2(1) of the ACL.
Conduct in relation to Vinsan Salvage
29. In about March 2011, a male employee of Artorios telephoned Vinsan Corporation Pty Ltd trading as ‘Vinsan Salvage’ (“Vinsan Salvage”), and spoke to Rene Faulkner, an administration clerk employed by Vinsan Salvage.
30. During the telephone call referred to in paragraph 29, the employee of Artorios made statements to the following effect:
(a) “I’m calling from your ink cartridge company about a standing order that Vinsan Salvage has made for ink cartridges. The order just needs to be authorised for delivery.”
(b) “We supply ink cartridges to Vinsan Salvage all the time. This is just a standing order that needs to be confirmed.”
31. On or about 20 April 2011, an employee of Artorios, Dimitri Jayaratne, also known as “Chris”, telephoned Vinsan Salvage and spoke to Rene Faulkner.
32. During the telephone call referred to in paragraph 31, Dimitri Jayaratne made statements to the following effect:
(a) “I have a voucher to send to you guys in appreciation for Vinsan Salvage being a longstanding customer. I just need to confirm that I can send that out.”
33. In response to the statements referred to in paragraph 32:
(a) during the telephone call referred to in paragraph 31, Rene Faulkner confirmed that the gift voucher could be sent out;
(b) in a subsequent telephone call from a male employee of Artorios who asked Rene Faulkner to confirm the delivery address for a gift voucher, Rene Faulkner confirmed the delivery address.
34. On or about 29 April 2011, Artorios sent to Vinsan Salvage:
(a) a package containing printer cartridges; and
(b) an invoice numbered 5139 and dated 29 April 2011 addressed to Vinsan Salvage requesting payment for the amount specified in the invoice, which included the sum of $568.15 for the printer cartridges referred to in the invoice.
35. On or about 29 June 2011, Artorios sent a letter to Vinsan Salvage dated 29 June 2011 and signed by Tuan Nguyen, Managing Director of Artorios. Annexure A to this SOAF is a copy of the letter dated 29 June 2011.
36. The letter referred to in paragraph 35:
(a) requested payment of the invoice referred to in paragraph 34;
(b) included the following statement:
Despite these various attempts the account remains over due, subsequently we write to notify you that an application to the VICTORIAN MAGISTRATES COURT under its Civil Claims list at Dandenong has been made requesting a court date be listed for this matter.
(c) had attached to it a document headed with the words “In the Victorian Magistrates’ Court At Dandenong”.
37. By making the statements referred to in paragraph 30, Artorios represented that:
(a) Vinsan Salvage had agreed to purchase printer cartridges from Artorios;
(b) Artorios was an approved supplier of printer cartridges to Vinsan Salvage;
(c) Artorios was a current or regular supplier of printer cartridges to Vinsan Salvage; and/or
(d) There was an existing, ongoing supply relationship between Artorios and Vinsan Salvage whereby Vinsan Salvage had purchased and agreed that it would purchase and Artorios had supplied and agreed that it would supply printer cartridges to Vinsan Salvage.
38. By making the statements referred to in paragraph 32, Artorios represented that:
(a) Artorios was an approved supplier of printer cartridges to Vinsan Salvage;
(b) Artorios was a current or regular supplier of printer cartridges to Vinsan Salvage; and/or
(c) There was an existing, ongoing supply relationship between Artorios and Vinsan Salvage whereby Vinsan Salvage had purchased and agreed that it would purchase and Artorios had supplied and agreed that it would supply printer cartridges to Vinsan Salvage.
39. The representations referred to in paragraphs 37 and 38 were false, misleading or deceptive, or likely to mislead or deceive, because:
(a) in relation to paragraph 37(a), Vinsan Salvage had not placed an order for printer cartridges with Artorios or agreed to purchase printer cartridges from Artorios;
(b) in relation to paragraphs 37(b) and 38(a), Artorios was not an approved supplier of printer cartridges to Vinsan Salvage;
(c) in relation to paragraphs 37(c) and 38(b), Artorios was not a current or regular supplier of printer cartridges to Vinsan Salvage; and
(d) in relation to paragraphs 37(d) and 38(c), there was not an existing ongoing supply relationship between Vinsan Salvage and Artorios.
40. By sending the letter referred to in paragraph 35, Artorios represented that:
(a) it had commenced legal proceedings against Vinsan Salvage in the Magistrates’ Court of Victoria; and
(b) Vinsan Salvage would incur costs as a consequence of the legal proceedings.
41. The representations referred to in paragraph 40 were misleading or deceptive, or likely to mislead or deceive, because Artorios had not commenced legal proceedings against Vinsan Salvage in the Magistrates’ Court of Victoria.
42. By sending the printer cartridges and invoice referred to in paragraph 34 and the letter referred to in paragraph 35, Artorios asserted a right to payment for printer cartridges from Vinsan Salvage.
43. To the extent that Vinsan Salvage confirmed a delivery address for a delivery of printer cartridges from Artorios as referred to in paragraph 33(b), it did so having been misled by Artorios into believing that it was authorising delivery of gift vouchers.
44. Accordingly, Vinsan Salvage did not make a request for printer cartridges from Artorios for the purpose of section 40(1) of the ACL.
45. By reason of the matters referred to in paragraphs 43 and 44, the printer cartridges sent by Artorios to Vinsan Salvage were unsolicited goods within the meaning of section 2(1) of the ACL.
Conduct in relation to Realway Property Consultants
46. On or about 12 May 2011, an employee of Artorios, Dimitri Jayaratne, also known as “Chris”, telephoned Realway Property Consultants Australia Pty Ltd of Toowoomba, Queensland (“Realway”), and spoke to Renee Allison, an events coordinator employed by Realway.
47. During the telephone call referred to in paragraph 46, Dimitri Jayaratne made statements to the following effect:
(a) “I’m just calling to confirm an order previously made by Realway.”
(b) “We also have a free voucher coming out to you because you guys have ordered so much from us in the past.”
(c) “This is order number ‘x’ for you guys, so you’ve reached ‘x’ amount of points on our reward system” (the precise number mentioned cannot be recalled).
(d) “I just need to confirm your printer’s make and model is a Canon IP 4500.”
(e) “I just need you to confirm that you are authorised to confirm this order.”
48. In response to the statements referred to in paragraph 47, Renee Allison stated that she was authorised to confirm the order.
49. On or about 1 June 2011, Artorios sent Realway:
(a) a package containing printer cartridges; and
(b) a written invoice numbered 5440 and dated 1 June 2011 addressed to Realway requesting payment for the amount specified in the invoice, which included the sum of $498.85 for the printer cartridges referred to in the invoice.
50. On or about 9 August 2011, Artorios sent a letter to Realway dated 9 August 2011 and signed by Tuan Nguyen, Managing Director of Artorios. Annexure B to this SOAF is a copy of the letter dated 9 August 2011.
51. The letter referred to in paragraph 50:
(a) requested payment of the invoice referred to in paragraph 49;
(b) included the following statement:
Despite these various attempts the account remains over due, subsequently we write to notify you that an application to the VICTORIAN MAGISTRATES COURT under its Civil Claims list at Dandenong has been made requesting a court date be listed for this matter.
(c) had attached to it a document headed with the words “In the Victorian Magistrates’ Court At Dandenong”.
52. On or about 16 November 2011, an employee of Artorios, Han-Hao Doung, who identified himself as “Brad Lee from AIC” (“Brad Lee”) telephoned Realway and spoke to Susan Barron, an administration and marketing assistant employed by Realway.
53. During the telephone call referred to in paragraph 52, Brad Lee made statements to the following effect:
(a) “I’m calling because we have a choice of gift vouchers to send out to Realway in appreciation for being a good customer.”
(b) “The voucher will come with your final shipment, you only have one more shipment that needs to be organised to finalise your account, after that you can place orders on an as needs basis.”
(c) The shipment was for “ink cartridges.”
54. By making the statements referred to in paragraphs 47 and 53, Artorios represented that:
(a) Realway had agreed to purchase printer cartridges from Artorios;
(b) Artorios was an approved supplier of printer cartridges to Realway;
(c) Artorios was a current or regular supplier of printer cartridges to Realway; and/or
(d) There was an existing, ongoing supply relationship between Artorios and Realway whereby Realway had purchased and agreed that it would purchase and Artorios had supplied and agreed that it would supply printer cartridges to Realway.
55. The representations referred to in paragraph 54 were false, misleading or deceptive, or likely to mislead or deceive, because:
(a) in relation to paragraph 54(a), Realway had not placed an order for printer cartridges with Artorios or agreed to purchase printer cartridges from Artorios;
(b) in relation to paragraph 54(b), Artorios was not an approved supplier of printer cartridges to Realway;
(c) in relation to paragraph 54(c), Artorios was not a current or regular supplier of printer cartridges to Realway; and
(d) in relation to paragraph 54(d), there was not an existing ongoing supply relationship between Realway and Artorios.
56. By sending the letter referred to in paragraph 50, Artorios represented that:
(a) it had commenced legal proceedings against Realway in the Magistrates’ Court of Victoria; and
(b) Realway would incur costs as a consequence of the legal proceedings.
57. The representations referred to in paragraph 56 were misleading or deceptive, or likely to mislead or deceive, because Artorios had not commenced legal proceedings against Realway in the Magistrates’ Court of Victoria.
58. By sending the printer cartridges and invoice referred to in paragraph 49 and the letter referred to in paragraph 50, Artorios asserted a right to payment for printer cartridges from Realway.
59. To the extent that Realway authorised delivery of an order of printer cartridges from Artorios as referred to in paragraph 48, it did so having been misled by Artorios into believing that it had already made an order for printer cartridges when no such order had been made.
60. Accordingly, Realway did not make a request for printer cartridges from Artorios for the purpose of section 40(1) of the ACL.
61. By reason of the matters referred to in paragraphs 59 and 60, the printer cartridges sent by Artorios to Realway were unsolicited goods within the meaning of section 2(1) of the ACL.
Conduct in relation to Shaver Shop - Canberra
62. On or about 24 April 2011, an employee of Artorios, Dimitri Jayaratne, also known as “Chris”, telephoned the business trading as the ‘Shaver Shop’ located in the Canberra Centre, Canberra, Australian Capital Territory (“Shaver Shop”), and spoke to Stephanie Traycevska, an employee of the Shaver Shop.
63. During the telephone call referred to in paragraph 62:
(a) Dimitri Jayaratne made statements to the following effect:
“I’m just ringing to confirm your next order for ink cartridges.”
(b) Ms Traycevska replied by asking to the effect of:
“Is this something we usually do?”
(c) In response, Dimitri Jayaratne made statements to the following effect:
(i) “Yeah, this is something the store does every year. Kieran ordered the last batch of ink cartridges for you last year so you’ll be due for some more by now. They’ll need to be ordered again. I’d say you’ll need to order another year’s supply.”
(ii) “We’ll throw in a couple of Hoyts movie vouchers for you given that you’ve ordered so much from us in the past.”
64. In response to the statements referred to in paragraph 63, in a subsequent telephone call from a male employee of Artorios, Stephanie Traycevska confirmed an order for printer cartridges.
65. On or about 29 April 2011, Artorios sent to the Shaver Shop:
(a) a package containing printer cartridges; and
(b) an invoice numbered 5120 and dated 29 April 2011 addressed to the Shaver Shop requesting payment in the sum of $772.75 for the printer cartridges referred to in the invoice.
66. In about August or September 2011, a male employee of Artorios telephoned the Shaver Shop and spoke to Jamie Sanders, the manager of the Shaver Shop.
67. During the telephone call referred to in paragraph 66, the employee of Artorios made a statement to the following effect:
“We normally speak to Steph about ordering ink cartridges. She normally places orders for ink cartridges with us.”
68. By making the statements referred to in paragraph 63, Artorios represented that:
(a) the Shaver Shop had agreed to purchase printer cartridges from Artorios;
(b) Artorios was an approved supplier of printer cartridges to the Shaver Shop;
(c) Artorios was a current or regular supplier of printer cartridges to the Shaver Shop; and/or
(d) There was an existing, ongoing supply relationship between Artorios and the Shaver Shop whereby the Shaver Shop had purchased and agreed that it would purchase and Artorios had supplied and agreed that it would supply printer cartridges to the Shaver Shop.
69. By making the statements referred to in paragraph 67, Artorios represented that:
(a) Artorios was an approved supplier of printer cartridges to the Shaver Shop;
(b) Artorios was a current or regular supplier of printer cartridges to the Shaver Shop; and/or
(c) There was an existing, ongoing supply relationship between Artorios and the Shaver Shop whereby the Shaver Shop had purchased and agreed that it would purchase and Artorios had supplied and agreed that it would supply printer cartridges to the Shaver Shop.
70. The representations referred to in paragraphs 68 and 69 were false, misleading or deceptive, or likely to mislead or deceive, because:
(a) in relation to paragraph 68(a), the Shaver Shop had not placed an order for printer cartridges with Artorios or agreed to purchase printer cartridges from Artorios;
(b) in relation to paragraphs 68(b) and 69(a), Artorios was not an approved supplier of printer cartridges to the Shaver Shop;
(c) in relation to paragraphs 68(c) and 69(b), Artorios was not a current or regular supplier of printer cartridges to the Shaver Shop; and
(d) in relation to paragraphs 68(d) and 69(c), there was not an existing ongoing supply relationship between the Shaver Shop and Artorios.
71. By sending the printer cartridges and invoice referred to in paragraph 65, Artorios asserted a right to payment for printer cartridges from the Shaver Shop.
72. To the extent that the Shaver Shop authorised delivery of an order of printer cartridges from Artorios as referred to in paragraph 64, it did so having been misled by Artorios into believing that it had already made an order for printer cartridges when no such order had been made.
73. Accordingly, the Shaver Shop did not make a request for printer cartridges from Artorios for the purpose of section 40(1) of the ACL.
74. By reason of the matters referred to in paragraphs 72 and 73, the printer cartridges sent by Artorios to the Shaver Shop were unsolicited goods within the meaning of section 2(1) of the ACL.
Training of Sales Staff and sales
75. Sales Staff engaged by Artorios were provided with training shortly after they commenced employment with Artorios.
76. During training, Sales Staff were provided with a folder of scripts with sales pitches. Training also involved new Sales Staff listening to how existing Sales Staff made sales calls. The persons training the new Sales Staff wore headsets through which they could listen in on the sales call and coach the new Sales Staff, without the customer hearing them.
77. Sales of printer cartridges by Artorios were made almost exclusively by telephone. Sales calls were conducted in two parts. The first part involved the Sales Staff calling customers or cold calling potential customers. The second part involved a confirmation call, where another person from Artorios called the customer to confirm or verify the order.
78. The area in which the Sales Staff worked from the Premises was a small, open-plan area where the Sales Staff worked in close proximity to each other, under the supervision of the Sales Manager, Thuan Nguyen.
79. Sales Staff would, on occasion, use aliases to make sales calls. Tuan Nguyen’s alias was ‘John’. Thuan Nguyen used aliases such as ‘Tom’ or ‘Tommy’.
80. Sales Staff were paid a base salary plus commission.
81. Each week, Artorios set sales targets for the Sales Staff.
Applications issued in VCAT
82. Artorios issued 25 applications in 2010 and 15 applications in 2011 in the Victorian Civil and Administrative Tribunal in which Artorios alleged that the respondent was indebted to Artorios for the supply of printer cartridges. Annexure C to this SOAF is a letter dated 28 December 2011 from the Victorian Civil and Administrative Tribunal enclosing a litigation search on Artorios.
D. Formal Admissions
83. Tuan Nguyen admits that he was knowingly concerned in or a party to contraventions by Artorios of:
I. section 18 of the ACL, by the making of the representations referred to in paragraphs 13, 23, 37, 38, 40, 54, 56, 68 and 69 above, which comprised engaging in conduct, in trade or commerce, that was misleading or deceptive or likely to mislead or deceive;
II. sections 29(1)(d) and 29(1)(h) of the ACL, by the making of the representations referred to in paragraphs 13, 23, 37, 38, 54, 68 and 69 above, which comprised making false or misleading representations, in trade or commerce, in connection with the supply or possible supply of goods; and
III. section 40(1) of the ACL, by the making of the assertions of a right to payment referred to in paragraphs 15, 25, 42, 58 and 71 above, which comprised asserting a right to payment for unsolicited goods without reasonable cause to believe that there was a right to payment,
by reason that he:
(a) is and was at all material times from 5 September 2008, the sole director of Artorios;
(b) at all material times from 5 September 2008, held 50% of the issued shares in Artorios;
(c) is the brother of Thuan Nguyen;
(d) at all material times during the Relevant Period, was the Managing Director of Artorios;
(e) at all material times during the Relevant Period, together with Thuan Nguyan, ran the Business;
(f) at all material times during the Relevant Period, made telephone calls to existing and new customers of Artorios to verify orders for printer cartridges as described in paragraph 77 above;
(g) at all material times during the Relevant Period, processed orders for printer cartridges and arranged delivery of printer cartridges to customers;
(h) at all material times during the Relevant Period, had responsibility for overdue accounts;
(i) at all material times during the Relevant Period, had responsibility for customer service issues and complaints;
(j) at all material times during the Relevant Period, carried out his duties as Managing Director of Artorios and the tasks referred to in sub-paragraphs (e) to (i) above from the Premises in close proximity to the Sales Staff.
(k) signed the letters referred to in paragraphs 35 and 50;
(l) knew of the matters referred to in paragraphs 35 to 36, 40 to 41, 50 to 51 and 56 to 57;
(m) caused the applications referred to in paragraph 82 to be commenced in the Victorian Civil and dministrative Tribunal; and
(n) directed Sales Staff to engage in the conduct referred to in paragraphs 7 to 16, 19 to 26, 29 to 34, 37 to 39, 42 to 43, 46 to 49, 52 to 55, 58 to 59, 62 to 72..
84. Thuan Nguyen admits that he was knowingly concerned in or a party to contraventions by Artorios of:
I. section 18 of the ACL, by the making of the representations referred to in paragraphs 13, 23, 37, 38, 54, 68 and 69 above, which comprised engaging in conduct, in trade or commerce, that was misleading or deceptive or likely to mislead or deceive;
II. sections 29(1)(d) and 29(1)(h) of the ACL, by the making of the representations referred to in paragraphs 13, 23, 37, 38, 54, 68 and 69 above, which comprised making false or misleading representations, in trade or commerce, in connection with the supply or possible supply of goods; and
III. section 40(1) of the ACL, by the making of the assertions of a right to payment referred to in paragraphs 15, 25, 42, 58 and 71 above, which comprised asserting a right to payment for unsolicited goods without reasonable cause to believe that there was a right to payment,
by reason that he:
(a) at all material times from 5 September 2008, held 50% of the issued shares in Artorios;
(b) is the brother of Tuan Nguyen;
(c) at all material times during the Relevant Period, together with Tuan Nguyen, ran the Business;
(d) is and was at all material times during the Relevant Period, an employee of Artorios who:
(i) held the position of Sales Manager;
(ii) conducted sales telephone calls to existing and new customers of Artorios as described in paragraph 77 above;
(iii) made telephone calls to existing and new customers of Artorios to verify orders for printer cartridges as described in paragraph 77 above;
(iv) processed orders for printer cartridges and arranged delivery of printer cartridges to customers;
(v) assisted in training Sales Staff;
(vi) supervised Sales Staff as described in paragraph 78 above;
(vii) was the manager to whom Sales Staff reported;
(viii) prepared, with other senior employees, the scripts with sales pitches provided to Sales Staff as referred to in paragraph 26 above;
(ix) trained new Sales Staff, including by listening to sales calls and coaching the new Sales Staff as referred to in paragraphs 75 and 76 above;
(e) directed Sales Staff to engage in conduct referred to in paragraphs 7 to 16, 19 to 26, 29 to 34, 37 to 39, 42 to 43, 46 to 49, 52 to 55, 58 to 59, 62 to 72.
E. Financial Position
85. According to Tuan Nguyen and Thuan Nguyen, they are not in possession of records for Artorios in respect of the financial years ending 30 June 2011 and 30 June 2012.
86. According to Tuan Nguyen, in the financial years ending 30 June 2011 and 30 June 2012 (approximately), Tuan Nguyen received income/payments/dividends from Artorios of $125,224.00 and $73,000.00 respectively.
87. According to Thuan Nguyen, in the financial years ending 30 June 2011 and 30 June 2012 (approximately), Thuan Nguyen received income/payments/dividends from Artorios of $62,324.00 and $44,848.00 respectively.
88. According to Tuan Nguyen, as at 30 April 2013, he has assets valued at $476,073.87 and liabilities of $553,202.96.
89. According to Thuan Nguyen, as at 30 April 2013, he has assets valued at $825,850.97 and liabilities of $989,763.47.
