FEDERAL COURT OF AUSTRALIA
Australian Competition and Consumer Commission v Safety Compliance Pty Ltd (in liq) [2015] FCA 211
IN THE FEDERAL COURT OF AUSTRALIA | |
JUDGE: | |
DATE OF ORDER: | |
WHERE MADE: |
THE COURT DECLARES THAT:
1. From about June 2010 until at least May 2012, Safety Compliance Pty Limited (Safety Compliance), in trade or commerce, in connection with the supply or possible supply of goods, represented to prospective customers by means of calls made by telemarketers that workplace health and safety laws required businesses to maintain “Workplace Safety Materials”, namely “Workplace Safety and Emergency Procedures Wall Charts” (Wall Charts) or information and materials of the same nature as the Wall Charts when in fact such laws did not so require and thereby:
(a) engaged in conduct which was misleading or deceptive or likely to mislead or deceive in contravention of s 52 of the Trade Practices Act 1974 (Cth) (TPA) in relation to conduct prior to 1 January 2011 and s 18 of the Australian Consumer Law (ACL) set out in Schedule 2 to the Competition and Consumer Act 2010 (Cth), in relation to conduct on and from 1 January 2011; and
(b) made false or misleading representations concerning the need for the Workplace Safety Materials in contravention of s 53(f) of the TPA in relation to conduct prior to 1 January 2011, and s 29(1)(l) of the ACL in relation to conduct on and from 1 January 2011.
2. From about December 2010 until at least May 2012, Safety Compliance, in trade or commerce, in connection with the supply or possible supply of goods, represented to prospective customers by means of calls made by telemarketers and by sending or publishing a form styled a “First Aid Kit, Fire Blanket & Emergency Procedures Chart Order Confirmation” or a “First Aid Kit & Fire Blanket Confirmation” which contained a statement that “Under state and territory legislation ALL WORKPLACES MUST HAVE AT LEAST ONE FIRST AID KIT” that workplace health and safety laws required businesses to maintain a first aid kit of the same nature as the first aid kits offered for sale by Safety Compliance when in fact such laws, other than for New South Wales, did not so require and thereby:
(a) engaged in conduct which was misleading or deceptive or likely to mislead or deceive in contravention of section 52 of the TPA in relation to conduct prior to 1 January 2011 and s 18 of the ACL in relation to conduct on and from 1 January 2011; and
(b) made false or misleading representations concerning the need for the first aid kits in contravention of s 53(f) of the TPA in relation to conduct prior to 1 January 2011, and s 29(1)(l) of the ACL in relation to conduct on and from 1 January 2011.
3. From about June 2010 to at least May 2012, Safety Compliance, in trade or commerce, in connection with the supply or possible supply of goods, namely Workplace Safety Materials by means of calls made by telemarketers:
(a) represented to prospective customers that it was affiliated with the relevant workplace health and safety agency, when in fact it was not, and thereby:
(i) engaged in conduct which was misleading or deceptive or likely to mislead or deceive in contravention of s 52 of the TPA in relation to conduct prior to 1 January 2011, and s 18 of the ACL in relation to conduct on and from 1 January 2011; and
(ii) made false or misleading representations that Safety Compliance had a sponsorship, approval or affiliation in contravention of s 53(d) of the TPA in relation to conduct prior to 1 January 2011, and s 29(1)(h) of the ACL in relation to conduct on and from 1 January 2011; and
(b) represented to prospective customers that it was a relevant workplace health and safety agency when in fact it was not and thereby:
(i) engaged in conduct which was misleading or deceptive or likely to mislead or deceive in contravention of s 52 of the TPA in relation to conduct prior to 1 January 2011, and s 18 of the ACL in relation to conduct on and from 1 January 2011; and
(ii) made false or misleading representations that the Workplace Safety Materials were of a particular standard or quality in contravention of s 53(a) of the TPA in relation to conduct prior to 1 January 2011, and s 29(1)(a) of the ACL in relation to conduct on and from 1 January 2011.
4. In or about November 2011, Safety Compliance, in trade or commerce, in connection with the supply or possible supply of goods, when communicating with a number of store managers of Paterson Group Video Ezy stores in Western Australia by means of calls made by telemarketers, represented that Ms Karen Cleverley of the Paterson Group Video Ezy Head Office or another person at Paterson Group Video Ezy had agreed to acquire Workplace Safety Materials when in fact she had not so agreed, in contravention of ss 18 and 29(1)(d) of the ACL.
5. Mr King was involved in the contraventions of the ACL by Safety Compliance referred to in Orders 1 and 3 above in the period on or after mid April 2011 to at least 15 February 2012.
6. Mr Black was involved in the contraventions of the TPA and ACL by Safety Compliance referred to in Orders 1 and 3 above in the period from June 2010 up to at least 23 August 2011.
7. Ms Schimmel was involved in the contraventions of the ACL by Safety Compliance referred to in Orders 1 and 3 above on and from March 2011 to at least May 2012.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
NEW SOUTH WALES DISTRICT REGISTRY | |
GENERAL DIVISION | NSD 547 of 2012 |
BETWEEN: | AUSTRALIAN COMPETITION AND CONSUMER COMMISSION Applicant |
AND: | SAFETY COMPLIANCE PTY LTD (IN LIQ) ACN 144 638 826 First Respondent DEAN JAMES KING Second Respondent SHANE JOHN BLACK Third Respondent FIONA ELLEN SCHIMMEL Fourth Respondent |
JUDGE: | FARRELL J |
DATE: | 13 March 2015 |
PLACE: | SYDNEY |
REASONS FOR JUDGMENT
1 The proceedings relate to the way the first respondent (Safety Compliance) conducted its telesales business from June 2010, selling wall charts depicting workplace health and safety procedures and from about December 2010 selling first aid kits. The target market was small business owners and managers.
2 The Australian Competition and Consumer Commission (ACCC) commenced these proceedings on 16 April 2012. On 21 September 2012, liquidators were appointed to Safety Compliance. On 17 October 2012, the liquidators informed the ACCC that Safety Compliance would not take part in the proceedings. On 3 December 2012 the Court granted leave to the ACCC to proceed on the basis that the ACCC will not take any step to enforce against Safety Compliance any order which would ultimately require it to pay money without further leave of the Court. The case against Safety Compliance therefore proceeded by way of no contest and it was not represented at the hearing. Mr King, Mr Black and Ms Schimmel (Active Respondents) participated in the proceedings and they were represented at the hearing by the same legal representative.
3 In accordance with case management orders made before the hearing, the question of contravention and whether the ACCC is entitled to declaratory and injunctive relief is to be determined separately from and before other questions in the proceedings.
Background
4 The wall charts and kits are themselves of no concern to the ACCC.
5 The ACCC’s essential complaint is that through unsolicited telemarketing calls, Safety Compliance made misleading or false representations to prospective customers by expressly or impliedly telling them that they were required under workplace health and safety laws to have wall charts and first aid kits of the kind sold by Safety Compliance when there was no such requirement, and that Safety Compliance was either affiliated with or was itself a government workplace health and safety agency.
6 The ACCC says that the combined effect of the representations was to convey the impression to consumers that they had no choice but to agree to purchase those items because someone affiliated with the government was calling them at their business and telling them that they were required to have the items which Safety Compliance was selling. Further, the ACCC alleges that Safety Compliance used threats that the government would enforce these requirements through random inspections and in relation to the collection of debts. It says that the combined effect of the Representations and threats amounts to coercion.
7 There is also a discrete complaint that a member of Safety Compliance’s staff attempted to trick a number of Video Ezy franchisees to agree to purchase wall charts by telling them that a member of head office staff had already agreed to the purchases. The ACCC has referred to this as the “Agreement to Acquire Wall Charts Representation” but for ease of reference I will refer to it as the “Video Ezy Representation”.
8 The ACCC says that there were not just isolated incidents but that the whole Safety Compliance business model fostered an environment which facilitated and encouraged representations of the kind of which it complains. The aspects of the business model of concern are the Safety Compliance name itself, the documents provided to sales staff in the performance of their duties and Safety Compliance’s lack of internal systems.
9 As the conduct and representations complained of span the period before, on and after 1 January 2011, there are alleged contraventions of the Trade Practices Act 1974 (Cth) (TPA) in relation to the period before 1 January 2011 and the Australian Consumer Law (ACL) set out in Schedule 2 to the Competition and Consumer Act 2010 (Cth) (CCA) in relation to the period on or after 1 January 2011.
10 Except in relation to the Video Ezy Representation, the ACCC also claims that each of the Active Respondents has accessorial liability for Safety Compliance’s contraventions of the TPA and ACL. The ACCC contends that the Active Respondents were involved in the establishment and management of Safety Compliance’s business and that the scripts (commonly called spiels) used by telemarketers and other documents were obtained, created or settled variously by the Active Respondents.
11 The Active Respondents say that if Safety Compliance were to be found liable for the alleged contraventions they were not knowingly concerned in the contraventions and mistake, inefficiency or someone doing their incompetent best is not sufficient to reach the standard required for accessorial liability.
ACCC Investigation
12 The ACCC issued notices to Safety Compliance under s 155(1) of the CCA on 22 March 2011 and 27 February 2012 requiring the disclosure of information and documents. Documents were provided on 27 April 2011 and 20 March 2012 respectively.
13 Under notices issued on 18 July, 18 November and 1 December 2011 respectively, the ACCC examined Ms Schimmel on 11 August 2011 and Mr King and Mr Black on 15 December 2011. The Active Respondents relied on the transcript of the s 155 examinations at the hearing and were cross-examined.
14 Mr Christopher Kent is Mr King’s brother and he was a director of Safety Compliance from June 2010 to 23 August 2011 and Mr King and Mr Black say he invested in it. Mr Kent is not a party to, nor was he a witness in, these proceedings despite his roles with Safety Compliance. Mr Justin Leach, who is a senior investigator in the NSW Branch of the ACCC’s Enforcement Operations, gave evidence by affidavit sworn on 3 September 2012 of futile attempts in October and November 2011 to serve a notice under s 155(1)(c) on Mr Kent personally and through Arcuri Lawyers, the firm which then represented Safety Compliance in relation to the ACCC’s investigation. Mr Leach also gave evidence of one telephone conversation with Mr Kent (who said he was then away) and unsuccessful attempts to follow up until the end of March 2012.
Summary of claims made by ACCC
15 The ACCC claims that employees of Safety Compliance made unsolicited telemarketing calls to prospective customers in which they engaged in the following conduct (Conduct). They:
a. identified themselves as being from “Safety Compliance” or used other terminology of an officious nature;
b. made statements to the effect that the call was in relation to workplace health and safety;
c. made statements relating to workplace health and safety legislative requirements;
d. made statements to the effect that those legislative requirements were applicable to the prospective customer;
e. made statements to the effect that those legislative requirements would or could be enforced through inspections by workplace health and safety regulators ; and/or
f. made statements to the effect that the products offered by Safety Compliance (wall charts and/or first aid kits) were authorised or approved or compliant with those legislative requirements.
Wall Chart Representations
16 The ACCC claims that because of the Conduct in the period from June 2010 to the commencement of proceedings and thereafter up to at least May 2012, Safety Compliance represented to prospective customers that health and safety laws required businesses to maintain information and materials of the same nature as the wall charts offered for sale by Safety Compliance (Wall Charts Representation). The ACCC says that in fact, workplace health and safety laws did not require that and the Active Respondents knew that workplace health and safety laws did not require that.
Government and Affiliation Representations
17 The ACCC claims that because of the Conduct in the period from June 2010 to at least May 2012, Safety Compliance represented to customers that it was the relevant workplace health and safety agency (Government Representation) or affiliated with such an agency (Affiliation Representation). It says that Safety Compliance was not affiliated with, and was not itself, a workplace health and safety agency and the Active Respondents knew that.
First Aid Kits Representations
18 The ACCC claims that Safety Compliance sent or published to customers or prospective customers a form styled a “First Aid Kit, Fire Blanket & Emergency Procedures Chart Order Confirmation” or a “First Aid Kit & Fire Blanket Confirmation” (First Aid Kit Order Confirmation Form) which contained a statement that:
Under state and territory legislation
ALL WORKPLACES MUST HAVE AT LEAST ONE FIRST AID KIT
19 The ACCC claims that because of the Conduct and/or by sending or publishing this form in the period from December 2010, Safety Compliance represented to customers that health and safety laws required businesses to have materials of the same nature as the first aid kits offered for sale by Safety Compliance (First Aid Kits Representation).
20 The ACCC says that in fact, workplace health and safety laws (other than New South Wales) did not require businesses to maintain information and materials of the same nature as the first aid kits and the Active Respondents knew that. As originally pleaded, the ACCC suggested that the Australian Capital Territory should also be excluded, but the claim was amended to exclude only New South Wales.
Coercion
21 The ACCC claims that, in the period from June 2010 to at least May 2012, because of the Conduct and from time to time sending letters containing threats to take steps to adversely affect a customer’s credit rating and/or commence legal proceedings unless the customer completed the purchase, Safety Compliance coerced consumers to purchase wall charts or first aid kits and consumers purchased wall charts or first aid kits.
22 It also claims that the Active Respondents knew that customers purchased wall charts and first aid kits on that basis.
Video Ezy Representation
23 The ACCC claims that in about November 2011, employees of Safety Compliance made telemarketing sales calls in relation to wall charts to a number of store managers of Video Ezy stores in Western Australia in which they made statements to the effect that Ms Karen Cleverly of the Video Ezy Head Office or another person at Video Ezy had already agreed to the purchase of the wall charts (Video Ezy Representation) when in fact neither Ms Cleverly nor any person at Video Ezy had agreed to the purchase of wall charts.
Position of Safety Compliance
24 In the Fast Track Response, Safety Compliance admitted that:
telesales staff did identify themselves as being from Safety Compliance;
from December 2010 its employees sent or published the First Aid Kit Order Confirmation Form containing the statement quoted at [18] above;
in fact workplace health and safety laws (other than New South Wales and the ACT) did not require businesses to maintain a first aid kit of the same nature as the first aid kit offered for sale by Safety Compliance; and
in about November 2011, employees of Safety Compliance made calls to a number of store managers of Video Ezy stores in Western Australia in relation to the sale of wall charts;
but otherwise did not admit the ACCC’s claims.
Alleged contraventions by Safety Compliance
25 The Fast Track Statement claims that each of the pleaded Representations is misleading or deceptive conduct in contravention of s 52 TPA/s 18 ACL, however, the ACCC’s application seeks declarations to that effect only in relation the Wall Chart Representation, the First Aid Kit Representation and the Affiliation Representation. The ACCC conducted its case on the basis set out in the Fast Track Statement.
26 In addition, the ACCC seeks declarations, pecuniary penalties and other orders against Safety Compliance for conduct which it alleges occurred in trade or commerce in connection with the supply or possible supply of goods in Australia as follows:
a. The Wall Charts Representation and the First Aid Kits Representation: under s 53(f) TPA/s 29(1)(l) ACL for making a “false or misleading representation concerning the need for any goods” in connection with the wall charts and the first aid kits respectively;
b. The Affiliation Representation: under s 53(d) TPA/s 29(1)(h) ACL for making a false or misleading representation that the corporation has “a sponsorship, approval or affiliation”;
c. The Government Representation: under s 53(a) TPA/s 29(1)(a) ACL for making a false or misleading representation that the wall charts and/or the first aid kits were of a particular standard or quality by representing that Safety Compliance was the relevant workplace health and safety agency when it was not;
d. The Video Ezy Representation: under s 29(1)(d) ACL for making a “false or misleading representation that a particular person had agreed to acquire goods”; and
e. Using coercion in connection with the supply or possible supply of goods in contravention of the prohibition under s 60 TPA (in relation to consumers)/s 50(1)(a) ACL.
Alleged involvement of Active Respondents
27 The ACCC claims that, except in respect of the Video Ezy Representations, Mr King and Mr Black aided, abetted, counselled or procured or were directly or indirectly knowingly concerned in or party to the alleged contraventions of the TPA and ACL by Safety Compliance and were therefore involved in the contraventions within the meaning of s 75B TPA/s 2 ACL. The same claim is made in relation to Ms Schimmel but only under the ACL in relation to the period on or after 1 January 2011. The Active Respondents do not admit these claims.
28 The ACCC seeks orders disqualifying the Active Respondents from managing corporations and pecuniary penalties.
29 In the Fast Track Statement, the ACCC claims that the Active Respondents were involved in Safety Compliance’s conduct because of the knowledge of Mr King, Ms Schimmel and Mr Black as set out at [16], [17], [20] and [22] above and their roles as set out in [30], [32] and [34] below. The Active Respondents do not admit the knowledge attributed to them in the Fast Track Response referred to in [16], [17], [20] and [22].
30 The ACCC’s case is that through companies and trusts he owns and controls, Mr King deliberately shielded himself from any directly visible role in Safety Compliance, using his brother, Mr Kent, as the director of Safety Compliance and their nephew, Mr Black, as its manager. The ACCC claims that from June 2010 Mr King:
arranged for the establishment of Safety Compliance and provided funding for and investment into Safety Compliance;
assisted in developing the initial business plan for Safety Compliance and was consulted on a number of occasions on the conduct of Safety Compliance’s business;
prepared, reviewed, approved and provided consultation on materials used in sales by Safety Compliance; and
was the sole director of Wotam Holdings Pty Ltd (Wotam) and Wotam was the sole beneficiary of the Safety Compliance Trust, the owner of the premises out of which Safety Compliance conducted its business, the recipient of regular payments from Safety Compliance and until 15 February 2012, the sole shareholder of Safety Compliance.
31 Mr King does not admit or denies most but not all of these allegations.
32 The ACCC claims that from June 2010 to at least December 2011 Mr Black:
assisted in developing the initial business plan for Safety Compliance;
assumed responsibility for the preparation, review and approval of materials used in sales by Safety Compliance;
reviewed and approved debt collection letters used by Safety Compliance;
had or assumed day to day management responsibilities for Safety Compliance;
was one of the persons to whom employees reported, including Ms Schimmel, including in relation to complaints regarding the conduct of Safety Compliance; and
provided support services to Safety Compliance through his company, Executive Marketing Solutions Pty Ltd (Executive Marketing Solutions).
33 Mr Black admits these allegations other than that he assumed day to day management responsibility for Safety Compliance which he says was attended to by Ms Schimmel.
a. She was employed by Mr Black as a member of Safety Compliance’s telesales staff in June 2010 after responding to a job advertisement; she says she had no previous involvement with any of Mr Kent, Mr King or Mr Black.
b. She became the sales manager in March 2011 and was employed as such until at least July 2012 (the date of the Fast Track Response). No one had that position before her; she says that Mr Black did any necessary supervision. In that role she:
had responsibility for overseeing the telesales team and keeping them focussed;
assumed day to day management responsibilities at Safety Compliance;
assisted in the preparation, review and approval of materials used in sales by Safety Compliance; and
prepared, or assisted in preparing, the complaints handing processes regarding the conduct of Safety Compliance.
c. She became the sole director and secretary of Safety Compliance on 23 August 2011, replacing Mr Kent. She became the sole shareholder in February 2012 replacing Wotam.
Formation and operation of Safety Compliance
35 Before June 2010, premises at 23 Corporation Circuit Tweed Heads (Premises) were occupied by Australian Workplace Services (AWS) from which it conducted a telemarketing business selling first aid kits and workplace safety equipment. AWS paid Wotam rent of $500 per week.
The Premises were owned by Wotam. Mr King was the sole director and shareholder of Wotam.
Mr King is also known as Dean Kent. Mr Black is the nephew of Mr King and Mr Kent. Mr Black and Mr Kent had a business operated by Executive Marketing Solutions which had offices located near the Premises.
When AWS vacated the Premises he found first aid kits, spiels (perhaps one or two), wall charts, invoices, bank statements with credit card transactions and other documents from which it appeared that AWS’s telemarketing business had been profitable (without knowing what its overheads were) and he formed the view that workplace safety materials filled a business need. I note that these materials were not provided to the ACCC in response to its notices.
Mr King brought the AWS materials to Executive Marketing Solutions’ offices to show Mr Kent and Mr Black as an idea for a business on the condition that the Premises would be used for the conduct of any business developed from the idea. He says that he did not have the time to pursue the opportunity because he was involved in his then company, Promo Direct Pty Ltd.
It was agreed that Safety Compliance would lease the Premises from Wotam for $1,000 per week and Mr King says that getting the rent was his prime motive.
37 Mr King denies having discussions with Mr Kent and Mr Black about how Safety Compliance would be run. Mr King says it was unnecessary to do so because each of them had experience in running telemarketing companies. The understanding was that it would follow the same “pitch” as AWS. Mr King commented that it did not involve “rocket science” – it was just ringing up businesses and asking if they wanted to buy a product – helping them to be more aware of safety in their workplace.
38 It is uncontentious that Mr King, Mr Kent and Mr Black went to Mr King’s accountant to set up a company to operate the business. Safety Compliance was registered on 16 June 2010. An extract from the register maintained by the Australian Securities and Investments Commission records that Mr Kent was its sole director and secretary, its principal place of business was at the same address as given for Mr Kent’s residential address and Wotam held the only issued share “non-beneficially”. Safety Compliance’s registered office was the same as Wotam’s address. Mr Black says the name “Safety Compliance” was Mr Kent’s idea.
39 Mr King admits that he invested $10,000 (by way of loan) to assist in the start-up of Safety Compliance and says that his brother invested the same amount. That accords with Mr Black’s understanding.
40 Mr King’s evidence to the ACCC was that:
I’m not saying that I had no knowledge [that through Wotam he was the sole shareholder of Safety Compliance]. When it was set up … because I took Shane [Mr Black] and Chris [Mr Kent] to my accountant’s office to set it up – my accountant put me as a shareholder of that business, as I said, so I could be safeguarded for that $10,000. I forgot that I was a shareholder of it, because I had no participation in the business. My only concern was … getting rent from … the factory that they were leasing. So that $10,000 I was going to put into it, I knew I was going to get that back, and my factory was going to be leased, because it was vacant.
At the hearing he strongly resisted the suggestion that he “took” Mr Kent and Mr Black to his accountant to set up Safety Compliance so that they could operate it on his behalf.
41 Mr King denies any intention to create a sham. He said that he instructed the accountant to protect his investment which the accountant did by issuing the only share in Safety Compliance to Wotam. He denies understanding that because of that he had power to appoint and remove Mr Kent as the sole director and control the affairs of Safety Compliance. He says he does not know why Mr Kent was not a fifty-fifty shareholder, given his equal investment. Mr King told the ACCC that Mr Kent “had more control” by reason of being signatory to Safety Compliance’s bank accounts. Mr King suggests that he had a limited understanding of directors’ duties (referring to tax, competition and fair trading obligations of directors) but denied understanding that directors’ obligations prohibited a director from taking money from a company. Although he initially denied much experience with companies, he ultimately admitted that he was a director or shareholder of six or seven private companies, as disclosed by an ASIC search.
42 He says he does not know why he would be named as the settlor of the Safety Compliance Trust; he attributes the existence of that trust to the accountant’s action to secure his $10,000 investment in Safety Compliance. Mr King denied knowledge that he is the settlor of the Safety Compliance Trust or what a “settlor” is or of how that trust operates including whether it has anything to do with the operations of Safety Compliance.
43 It appears that Safety Compliance is the trustee of the Safety Compliance Trust since “The Trustee of the Safety Compliance Trust” is the registered owner of the domain for the Safety Compliance website. The Australian Business Number for the Safety Compliance Trust is the same as Safety Compliance’s ABN.
44 The trust deed for the Safety Compliance Trust is not in evidence. It is therefore unclear whether either or both of Mr Kent and Mr Black were beneficiaries of the Trust. In the Fast Track Response, Mr King admits that Wotam is trustee of the Kent Discretionary Trust, that in that capacity Wotam was the principal beneficiary of the Safety Compliance Trust and the beneficiaries of the Kent Discretionary Trust are himself and his two children.
45 Mr Black says that he was attracted to the idea of selling workplace safety materials and thought: “Great concept. It just needs to be done a little bit better.” He was not financially able to invest in Safety Compliance so he agreed to be the person who “does the running around” and help with “organising the staff”. He said: “I’m always looking at new ventures. I want to try and get ahead in life. I’m trying to be a businessman myself.” The reason he did not mind working was that he believed that the position would be re-evaluated in twelve months or so. He said: “We all hoped to benefit from it at some stage.” He acknowledged that Mr King was getting something out of it by getting the Premises rented.
46 Mr Black denies that he sought to minimise Mr King’s role. Instead, Mr Black sought to position himself as acting under the direction of Mr Kent; he acted in Mr Kent’s absences. He believed that Mr Kent was the director and shareholder of Safety Compliance and he would talk to Mr Kent and “run things by” him. He had “a whinge” to Mr King when Ms Schimmel was appointed (he thought by Mr Kent) to replace Mr Kent as director in August 2011. Following the issue of a notice by the ACCC in late 2011, he was told by Mr King that a company controlled by Mr King was the shareholder of Safety Compliance. In December 2011, Mr Black acknowledged he had no ongoing role with Safety Compliance and the possibility that he had been “left out in the cold”.
47 He says he does not understand company structures despite being a director of Executive Marketing Solutions and having been involved in some other businesses. He left school in year 8. He says he had no knowledge of how the “Trustee of the Safety Compliance Trust” came to be the registered owner of the domain for the Safety Compliance website.
48 Mr King denies that he had any active involvement in the operations of Safety Compliance or in the preparation, review, approval or consultation of the materials used in sales by Safety Compliance. Ms Schimmel says that the only instances of Mr King visiting Safety Compliance at the Premises occurred when the air conditioning and plumbing malfunctioned.
49 Mr King admits that he had occasional casual conversations about Safety Compliance with Mr Black at social occasions; indeed they saw each other socially most days. Mr King says that the conversations were in general terms about how to conduct a telemarking business based on his long experience in telemarketing and his general business acumen. The conversations included how to encourage and motivate people and how to make sales through telemarketing.
50 Mr Black admits that he spoke to Mr King on a range of topics but says that it was not at Mr King’s instigation. Topics discussed included how to make the wall charts better, strategies for motivating staff and financial performance. He denies discussing staffing levels. He says he consulted Mr King’s advice as his uncle and as a successful business man. Mr King also referred to Mr Black a person who was “becoming an OH&S officer” to assist him in his research of emergency procedures and a person who could assist Mr Black in building a data base for Safety Compliance.
51 Mr Black denies that he sent an email from safetycompliance@gotalk.net.au to an officer of the ACCC on 29 April 2011 which stated: “Mr Kent is not involved in the day to day operation of the company. Shane Black is the General Manager of the business.” He says Mr Kent told him that that is what he told the ACCC, although he did not know that Mr Kent had signed Mr Black’s name to the email.
52 Mr Black denies that he assumed day to day management responsibility for Safety Compliance or had any formal role in the company. He says that that was Ms Schimmel’s role. Mr Black says he received no wages from Safety Compliance but that he did receive some recompense for his time and outgoings such as fuel. He also received refunds of some expenses outlaid on Safety Compliance’s behalf such as topping up wages when there was insufficient money to pay them and for printing wall charts. Executive Marketing Solutions provided some accounting and clerical services to Safety Compliance; it was paid $25,000 by Safety Compliance.
53 Mr Black concedes that initially he was “the main person in charge”. Ms Schimmel’s evidence given in August 2011 is that Mr Black was an “overseer” and attended at the offices of Safety Compliance daily although he was not there all day. Mr Black agrees that until 23 August 2011, he was the “responsible person” and if Ms Schimmel had an issue, she would take it to him and he would take it to Mr Kent. Until Ms Schimmel became a director of Safety Compliance on 23 August 2011, Mr Black was the signatory to the bank account (in Mr Kent’s absence) and responsible for paying accounts such as wages and rent and monitoring cash flow.
54 Mr Black explains Ms Schimmel’s appointment as director of Safety Compliance on 23 August 2011 on the basis that Mr Kent formed the view that the business was going downhill and was not viable; Mr Kent said that he had no money to throw into it and then the “whole ACCC thing came about”. Ms Schimmel and Mr Black believed in the business and she wanted to continue with it. Mr Black was not aware of whether Ms Schimmel invested money at that time, but thought not. However, as director, she took over paying accounts. Mr King denies knowing how this came about. There is no evidence of the source of funds out of which Ms Schimmel paid accounts.
55 There is also no evidence of the terms on which Wotam transferred its share in Safety Compliance to Ms Schimmel on 15 February 2012 or whether Safety Compliance conducted its business as trustee of the Safety Compliance Trust thereafter. It is therefore unclear whether the change in ownership of shares in Safety Compliance which occurred in February 2012 had any bearing on who might have expected to benefit from any profit made by that business after that time.
56 It is difficult to gauge the extent of Mr Kent’s involvement in Safety Compliance other than the fact that he was a director until August 2011. The evidence is:
Messrs King and Black say Mr Kent invested $10,000, presumably as a loan, but the basis is not clear.
Mr Kent did not do much because he was overseas for six to eight months a year and was semi-retired.
Ms Schimmel saw Mr Kent approximately four times between June 2010 and August 2011, if that. Mr Black says that to his knowledge Mr Kent never visited the Premises.
Mr Black would talk to Mr Kent and “run things by” him.
It was unnecessary for Mr Black and Mr Kent to speak about Safety Compliance’s business regularly as “it just basically [ran] itself”.
Safety Compliance’s Business
Sales method
57 Ms Schimmel described the sales method employed by Safety Compliance as follows:
a. Safety Compliance marketed wall charts and first aid kits to prospective customers throughout Australia through unsolicited telemarketing calls;
b. Telesales staff members were supplied with a spiel and a weekly list of “leads” targeting small businesses throughout Australia which they were required to work their way through. They were remunerated on a minimum rate of $18 per hour. If they sold 40 charts per week, they received a bonus of $50 and if they sold 50 charts their hourly rate moved to $20 and they received a $100 bonus;
c. If a person purchased a wall chart or first aid kit as a result of a telephone call, the staff member would tell Ms Schimmel;
d. At least from March 2011 (when Ms Schimmel became sales manager) she would make “telecheck” calls to confirm the sale. After that process became too time-consuming (in approximately July 2011), she would send a fax or email with information confirming the order. Mr Black says that before Ms Schimmel’s appointment, he would perform the follow up calls, however, there is no documentary evidence to support this claim; and
e. The wall chart or first aid kit would be sent by post to the customer with an invoice for payment.
Sales staff
58 When Ms Schimmel was first employed in June 2010, telesales staff received no training; they were given a spiel relating to wall charts and a telephone.
59 From the time of her appointment as sales manager, telesales staff members were given sales training but at no time were they given occupational health and safety training. As Ms Schimmel described it, their training was from a sales perspective and comprised the Wall Charts Spiel (see [165] below), how to conduct themselves and speak clearly and to direct customers to government websites for occupational health and safety related questions and the Official Warning (see [190] below).
60 Telesales staff had a copy of the Wall Charts Package (see [62]-[64] below) and from December 2010 a copy of a First Aid Kit Order Confirmation Form (see [224] below).
61 From early 2011, the cubicle signs referred to at [192] below (Cubicle Signs) were placed in each telesales staff member’s cubicle.
Wall Charts Package
62 There were a number of documents sent to a customer who ordered a wall chart. The “package” (Wall Charts Package) included: the wall chart (see [63]); a single page “CPR Chart” demonstrating steps for cardio-pulmonary resuscitation; a single page “Workplace Fire Escape Plan” with a grid for drawing the escape plan; a single page “Staff Training Attendance Sheet”; and an invoice. From December 2010, the package also included the First Aid Kit Order Confirmation Form (see [224] below).
63 The wall charts offered for sale by Safety Compliance comprised 10 A4 pages which were spirally bound. The original format used by Safety Compliance was:
The cover page entitled “Workplace Safety & Emergency Procedures Wall Chart”. Originally, this page had a list of State and Territory agencies responsible for workplace health and safety headed “TO REPORT INCIDENTS OR SITUATIONS IN THE WORKPLACE”;
“Emergency Procedures” with information in relation to reporting an emergency and an emergency evacuation procedure;
“Fire Extinguisher Operation” with instruction on that topic;
“Safety Equipment Location” with a table for listing safety equipment and specifying location. It also provided a checklist for the contents of the first aid kit;
“Sun Protection in the Workplace” with a “slip, slop, slap” message;
“First Aid Treatment for Sprains and Strains” information;
“First Aid Treatment for Eye Injuries” information;
“First Aid Treatment for Burns” information;
“First Aid Treatment for Wounds and Bleeding” information; and
“Incident Injury Report” which is a formatted page for the name of the person injured, the injury, how it happened, whether medical treatment was required and provision for it to be signed and dated.
64 The wall chart appears to have changed over time, though generally not substantially. For instance, one version appears to have included a page dealing with lifting heavy objects. A more substantial change was made when the list of government agencies was moved from the front page to the back: see [202] below.
Payment follow up
65 If payment was not made by a customer, the customer was contacted by telephone by an employee who dealt with accounts. Safety Compliance claims that it pursued a “normal business debt recovery process”. Mr Black admits that that included sending out the debt recovery letters set out at [255] and [256] below.
Evidence of small business witnesses
66 The ACCC relied on affidavit evidence from small business owners in New South Wales, Queensland, Victoria and Western Australia who say that they were contacted by Safety Compliance. The ACCC also relied on affidavits of officers of Paterson Group Video Ezy at its head office and three franchisees in Western Australia. No objection was taken to the affidavits and the witnesses were not required for cross-examination.
Ms Maija Moore
67 Ms Maija Moore is a beauty therapist in Queensland. A company owned by Ms Moore and her husband operates a business known as “Nail Perfection”. It is a mobile business and Ms Moore visits clients at either their home or another location.
68 Ms Moore’s evidence is that on 16 December 2010, she received an unsolicited telephone call from a male caller to her mobile telephone (the number which appears in the Yellow Pages telephone directory) and a conversation to the following effect ensued:
Caller: Hi, I’m calling from _______. All workplaces are now required to display workplace health and safety procedures information.
Me: I don’t have a regular workplace as I’m a mobile service so will not be able to display the information.
Caller: It doesn’t matter as all businesses are now required to have this information. The government is cracking down on this legislation and will be conducting random checks with fines being issued if the information is not displayed.
Me: I don’t have anywhere to keep this.
Caller: Well you can keep and display the information in your car. The information and display materials will be posted to you with an invoice. The cost is $50.
Me: I may as well put $50 in my glove box.
Caller: The government is going to enforce the legislation and fines will definitely be issued to those not displaying the required materials.
Me: Is this a state or federal government initiative?
Caller: It’s federal government. You’ll receive the information in the mail soon with an invoice enclosed.
69 Ms Moore says that from the reference to “Workplace Health & Safety” and to the government cracking down on the requirement to keep health and safety information on display, she formed the view that the caller was from a government occupational health and safety department or agency.
70 On 23 December 2010 Ms Moore received a parcel in the mail with no name of the sender on the parcel and no return address. It contained a spiral bound flipchart and loose A4 documents bearing the name Safety Compliance Pty Ltd which included a staff training attendance sheet, a check list of responsibilities at the workplace, a First Aid Kit Order Confirmation Form, and a tax invoice for materials received. The tax invoice was for $58.95, which Ms Moore said surprised her because it was more than she had been quoted on the telephone.
71 Ms Moore was suspicious of the sender’s address and decided to make further enquiries. She contacted her local member and the Queensland Office of Fair Trading. She did not pay the invoice.
Ms Ingeborg Bayer
72 Ms Ingeborg Bayer works as the art director of Bayer Studio which is a graphic and fine art business operated in partnership with her sister in Maryborough, Queensland. It is operated from her home. Ms Bayer has had a number of management roles and she served with the Australian Federal Police for 14 years.
73 Her evidence is that on 26 November 2010 she received a telephone call on her landline which is listed in the Yellow Pages directory for her business. She had a conversation to the following effect:
Melissa: Hi this is Melissa. I’m from Safety and Compliance and I’m ringing up to let you know about the new law that’s come in whereby every business must be compliant and have these new safety wall charts in the premises.
Me: But I work from home and it’s just my sister and I. Why would I need that?
Melissa: I understand what you’re saying. I just spoke to a taxi driver the other day and unfortunately he had to have one too.
Me: You’ve got to be kidding me! I don’t even get members of the public coming here.
Melissa: It’s $49.50. I’ll send you out the package.
Me: Well, if I have to have it, I have to have it.
74 Ms Bayer said she bought the safety wall chart because she thought it was a legal requirement and she had no choice. She said she was particularly persuaded that she was required to have it in order to comply with government regulation because of Melissa’s comment that even a taxi driver needed to have it.
75 Some time in December 2010 Ms Bayer received a parcel containing an invoice for $58.95 from Safety Compliance, a flipchart and loose sheets of photocopied pages which included a “Staff Training Attendance Sheet”, a “Responsibilities in the Workplace Checklist” and the First Aid Kit Order Confirmation Form. She put it to one side.
76 A couple of weeks later, Ms Bayer received a follow-up phone call from a person who identified himself as “Brian from Safety Compliance” in relation to the invoice and material sent to her. Ms Bayer asked for another invoice. Two days later she received a further follow-up call from “Brian”. She then received a further invoice.
77 Around 15 March 2011, Ms Bayer received the latest edition of the newsletter called “Club Training” which warned businesses to beware of callers who contact them about a requirement to display OH&S posters. She then rang the Queensland Office of Fair Trading. In April 2011 she returned the materials to Safety Compliance and advised them that she had made a complaint with the Office of Fair Trading.
78 On 13 May 2011 she received a letter from Safety Compliance in the form of a Final Demand Notice: see [256] below. The notice indicated that failure to pay within 14 days would result in the commencement of legal action and Ms Bayer would be liable for all costs or charges incurred in recovery of her debt. It also said:
A default notice will be lodged with Baycorp Advantage Group and your future applications for credit with any organisation (including banks and credit unions) will be adversely affected.
79 Ms Bayer was very concerned about the contact from Safety Compliance and the threat to report the business to Baycorp Advantage as a bad debt because of its possible impact on her future capacity to raise finance. As a result she contacted the Queensland Office of Fair Trading and BayCorp Advantage.
80 Ms Bayer received a message on her mobile phone on 19 May 2011 from a person who identified herself as Tracey from Safety Compliance apologising and acknowledging receipt of Ms Bayer’s letter and saying that they had not realised that she had returned the materials.
Ms Heather Olden
81 Ms Heather Olden, with her husband, operates Phoenix Patios and Outdoor Centre in Beaconsfield, Western Australia. The business is owned by a company of which they are both shareholders and directors.
82 Ms Olden says that in early 2011 she received a telephone call on her business landline as follows:
Caller: Hi this is Sharyn. I’m from … Safety … I’m ringing to see if you got these required signs on display at your business. You are required to have a fire safety sign displayed in your warehouse and accident prevention signs displayed in your outdoor centre.
Me: Well what kind of signs are these?
Caller: They provide information about fire and safety and how to comply with the workplace requirements.
Me: Is it legal? Do I have to have these signs?
Caller: Yes. There will be inspectors who will come round and check that the signs are displayed.
Me: Well how much are they?
Caller: About $75 and we will mail them up to you.
Me: Okay, send them out.
83 Ms Oldham says that because Sharyn described where she came from by using words to the effect of “fire and safety” and because she referred to complying with workplace requirements, she formed the belief that Sharyn was from a government department or authority and there was a legal obligation to have the signs in the workplace so that she felt obliged to purchase the materials in case an inspector came around.
84 Ms Olden received a package on 14 March 2011. It included an invoice for $65.95 in the name of “Safety Compliance Pty Ltd”. The parcel also contained a CPR Chart, a Workplace Fire Escape Plan, a spiral-bound book entitled “Workplace Safety & Emergency Procedures Wall Chart”, a “Responsibilities in the Workplace” form, a “Staff Training Attendance Sheet” and a First Aid Kit Order Confirmation Form.
85 Ms Olden was suspicious and spoke to both WorkSafe WA and wrote a letter of complaint to the Queensland Office of Fair Trading enclosing materials supplied by Safety Compliance.
86 On or about 21 March 2011, she received a phone call from a person who said they were calling from Safety Compliance in relation to the outstanding invoice and material sent to her. Ms Olden informed them that she knew that she was not legally obliged to have fire and safety material, that she would not pay and that she had forwarded the material to the “appropriate people”.
Ms Alexia Elson and Mr Andrew Elson
87 Ms Alexia Elson and Mr Andrew Elson run a family mechanics business known as Toowoomba Engine Centre in Toowoomba, Queensland.
88 Ms Elson says that in late October or early November 2010 she received a call on her business landline and had a conversation to the following effect:
Caller: Hi, it’s ___________ from Safety Compliance and I’m calling to tell you about the changes to the occupational health and safety laws requiring all workplaces to have visible information about workplace health and safety.
Me: Yes.
Caller: Due to new government legislation, businesses must have government compliant information about occupational health and safety.
We have authorised workplace health and safety compliant materials that we are sending to businesses to ensure that they comply with the law. In the event Workplace Health and Safety Queensland conducts an audit of your workplace, your business will have the correct information that is required by law.
We will post it out to you with an invoice and you can pay us when you receive it. Do you want us to send you one for your business?
Me: Yes.
89 Ms Elson says that based on the caller’s references to “occupational health and safety” and “workplace health and safety” in the conversation, she believed that Safety Compliance was contracted by Workplace Health and Safety Queensland to provide the materials to businesses and that her business was required to have the materials in order to comply with the legislative requirements.
90 In early December 2010, she received an envelope that contained a wall chart, a First Aid Kit Order Confirmation Form, a “Responsibilities at the workplace” information sheet, a staff training attendance sheet, a CPR chart, a fire plan and an invoice for $58.95 from Safety Compliance.
91 Ms Elson formed the view that the materials were of poor quality and did not look like they came from the government. She showed them to her husband.
92 On 7 March 2011 she received an email from the Motor Traders Association of Queensland alerting her to what they described as a telephone scam involving the selling of occupational health and safety materials to businesses. Based on that she lodged a complaint with the Office of Fair Trading in Queensland. She did not pay for the materials.
93 In early June 2012 Ms Elson says that she received a call on her business landline from a man who identified himself as being from Safety Compliance. He said to her:
Hi, it’s____________ from Safety Compliance. Are you aware, workplace laws are changing all the time. Therefore, you will need to make sure that your business is compliant. We have up to date workplace health and safety materials that contain information to assist businesses comply.
94 Ms Elson told him that he was not selling a legitimate product and that she did not want it. She has had no further contact from Safety Compliance.
95 Mr Elson also deposed to receiving a phone call in or around December 2010 from a person calling in relation to the “workplace safety package that we sent you”. Mr Elson said that he was not sure why it had been sent to them and the caller replied “every workshop is required to display the health and safety information”. Mr Elson said that he challenged the caller and then hung up. He has received no further contact from Safety Compliance.
Ms Judy Houghton
96 Ms Judy Houghton is the office manager of Bringelly Quality Meats, a butcher in Hoxton Park, New South Wales.
97 Ms Houghton says that in about October 2010, Bringelly Quality Meats purchased safety signs. She handles the paperwork for the shop and when she checked the accounting program which recorded the invoice for the signs she saw that it was paid to an entity called “Safety Compliance”.
98 Ms Houghton says that the purchase was authorised by the office manager, Mr Darren Grimes, and she became aware of it when a package arrived. When she asked what the signs were for, Mr Grimes said that the shop had to have them. The safety signs were installed in a prominent position.
99 On 2 May 2012, another employee received a call which was passed to Ms Houghton and she had a conversation to the following effect:
Caller: Under the government legislation, you have to display all the charts. If you do not have them, you will be fined. The charts will be current for five years.
Me: Well if it’s the legislation I suppose I better have them. I don’t want to be fined.
Caller: The charts will come within 5-10 working days. You will pay for them when you receive them.
100 Later that day she received a fax confirmation notification from Safety Compliance.
101 Ms Houghton then made a telephone call to the New South Wales Food Authority (the regulatory body with which the shop most often dealt) who directed her to WorkCover. She spoke with a person at WorkCover and sent a copy of the fax from Safety Compliance to them. She decided not to purchase the materials. She called the number for Safety Compliance and asked them to ring her back but they did not return her call.
102 In late May 2012 she received a package from Safety Compliance in the mail. She did not remove the materials from the envelope but the size and shape was consistent with the Safety Compliance signs which had already been installed. She made a small incision in the package, inserted in note advising Safety Compliance not to ring the shop again and returned the package by mail to Safety Compliance’s address at Tweed Heads. She did not pay for the materials.
103 A short time later an employee of the shop told Ms Houghton that Safety Compliance had called requesting payment. Ms Houghton rang Safety Compliance because she wished to question them about the legislative basis for the safety signs. She had a conversation to the following effect:
Rep: Safety Compliance, how can I help you?
Me: This is Judy Houghton from Bringelly Meats. We have returned the safety signs you sent us so stop chasing us up for the money. WorkCover has told me it is not a requirement to have the materials you have sent us. Where in the legislation does it say the signs are required?
Rep: There are 300 pages. I can’t tell you where, you should look it up.
Ms Nicole Pollard
104 Ms Nicole Pollard operates her own business as a hairdresser which trades as “Hair with Nicole” at Warrnambool, Victoria.
105 Ms Pollard says that around 18 July 2011 she received a telephone call to the following effect:
Caller: Hi my name is Marilyn Smith. Are you aware that workplace health and safety laws require businesses to have certain workplace health and safety materials?
Me: What kind of health and safety information are businesses required to have?
Caller: Under the workplace laws, business must have on display health and safety information including a fire evacuation plan, CPR chart and compliant first aid kit. It is also recommended for businesses to have a fire safety blanket.
Me: Am I required by law to have all these?
Caller: Yes. It is a legal requirement under WorkCover for your salon to have a wall chart with up-to-date health and safety information, a fire evacuation plan, a CPR chart and a compliant first aid kit. It is precautionary for businesses to have a fire safety blanket.
We have the latest wall charts with up-to-date health and safety information and compliant first aid kits and fire safety blankets that businesses can purchase to ensure that they comply with the legal requirements.
Me: How much is it?
Caller: If you purchased the wall chart, fire blanket and first aid kit you will only have to pay $171.00 instead of $207.90. Also you will be able to claim the purchase back on tax.
I can pop these in the post with an invoice and you can pay when you receive the items.
Me: OK.
106 On the basis of Ms Smith’s reference to “workplace health and safety”, the content of the conversation and her tone throughout, Ms Pollard formed the belief that she was calling from a government agency. Ms Pollard says she felt compelled to purchase the wall chart, fire safety blanket and first aid kit because she believed that it was required under workplace health and safety legislation and because of Ms Smith’s use of terms such as “must have” and “legal requirement”.
107 Ms Pollard received a package in the mail around 25 July 2011. The package included a spiral bound flipchart, some loose A4 documents as well as a fire safety blanket and a green canvas first aid kit. It included an invoice for $207.90 from “Safety Compliance Pty Ltd”. Ms Pollard called Safety Compliance querying the invoice for $207.90. She was told that it would be acceptable for her to pay $171, which she did. She has had no further contact from Safety Compliance.
Video Ezy
108 Paterson Group Video Ezy is a video hire franchise business that has 15 store locations across Western Australia. Its head office is in Hillarys in Perth.
Mr Christopher Jones
109 Mr Jones is the assistant manager at the Paterson Group Video Ezy store at Thomsons Lake in Western Australia.
110 Mr Jones says that in late November 2011 he received a telemarketing call from a female caller to the following effect:
Caller: Hi. It’s ____________ from Safety Compliance. We have a package of workplace health and safety information that we are sending to businesses. Every business in Australia is required to display two of these wall charts in store in a prominent location. Would you like to place an order?
Me: I can’t authorise that, all orders go through head office.
Caller: May I have the number for head office?
Me: [number]
Caller: Who do I need to speak to at head office?
Me: If you call the office and tell them where you are from, they will put you in touch with the right person.
111 Mr Jones says that he was willing to direct the caller to head office as he believed that it was required for the store to display the wall charts that the caller was selling. He believed this because the caller said that every business in Australia was required to display wall charts.
112 Mr Jones says that on 14 December 2011, the store manager at the Thomsons Lake store indicated that signage had been received. The package was dealt with in accordance with instructions from Ms Karen Cleverly, the accounts manager at Paterson Group Video Ezy.
Ms Sandra Blakeney
113 Ms Blakeney is the office manager at the head office of Paterson Group Video Ezy. Ms Blakeney says that the head office phone number is not publicly listed and is generally only circulated within Paterson Group Video Ezy.
114 On 21 November 2011 she received a telephone call from a person called “Peyton” to the following effect:
Peyton: Hi, I am calling from Safety Compliance. I’ve spoken to Karen previously about sending the Safety Compliance signage to each of the stores. I’m calling to get the mailing addresses for each of the stores so that I can send out some of the Safety Compliance signage.
SB: I’ve got a contact list for each of the stores if that would help with the distribution.
Peyton: That would be great. Are you able to email the list to “Attention Peyton safetycompliance@gotalk.net.au”?
115 Ms Blakeney sent the list to Peyton immediately after the phone call.
116 Ms Blakeney says that when Peyton stated that she was from Safety Compliance, Ms Blakeney believed that she was a person from the government because of her use of the word “compliance”. She believed that the signs were to be provided free of charge as part of a government initiative because Peyton did not refer to any pricing nor did she suggest that Paterson Group Video Ezy was required to order the signs. When Peyton referred to “Karen” she thought she was referring to Ms Karen Cleverly, the accounts manager in the Paterson Group Video Ezy head office.
117 On 24 November 2011, Ms Cleverly came to the office and asked if Ms Blakeney knew anything about workplace signs being ordered for Paterson Group Video Ezy stores. Ms Blakeney replied that nothing had been ordered but “I did receive a telephone call from someone the previous week who gave the impression that the signs were compulsory for workplaces” and she sent them a contact list.
118 In the afternoon of the same day, Ms Blakeney received a copy of an email sent to all Paterson Group Video Ezy stores advising them as to what they should do if they were approached by Safety Compliance in relation to workplace safety signs. It attached a copy of a notice dated 7 November 2011 from the ACCC warning about the alleged conduct of Safety Compliance.
Ms Karen Cleverly
119 Ms Cleverly confirmed that general purchasing decisions for all Paterson Group Video Ezy stores within the franchise chain are the responsibility of the head office.
120 Ms Cleverly says that she first became aware of telemarketing calls selling workplace signs on 24 November 2011 when she received a call from Lorretta Ferrone, the store manager at the Belridge store. Ms Ferrone advised that she had received a call from a woman who stated that she had spoken to Ms Cleverly and that Ms Cleverly had authorised the purchase of workplace signs. Ms Cleverly denied that. Shortly after, Ms Cleverly sent an email to store managers advising them to be cautious of telemarketing calls claiming to be from “workplace” or “work safe signs” and making representations that they had spoken to Ms Cleverly when they had not.
121 On the same day Ms Cleverly:
a. was advised by Ms Blakeney of the contact she received;
b. received an email from Ms Karen Merigan, the store manager of the Currambine store indicating that she had already been approached and had ordered signs since the caller indicated that she had spoken with Ms Cleverly; and
c. received a telephone call from Fanoula Toy (Kiranou), the manager of the Kalgoorlie store, indicating that she had already been approached and had ordered signs since they mentioned Ms Cleverly’s name.
122 Ms Cleverly denies ever having spoken to anyone at Safety Compliance at any time before 24 November 2011 nor had she asked Safety Compliance to contact store managers or supply signage. On 24 November, Ms Cleverly sent an email to Safety Compliance to this effect and asked that they not supply goods and advised them that she had spoken with the ACCC concerning the issue. On 25 November the managers at the Kalgoorlie and Currambine stores received confirmation of order emails from Safety Compliance bearing Ms Schimmel’s name. Ms Cleverly then sent a further email to Safety Compliance reaffirming that it should not send any goods to stores.
123 Ms Cleverly says that on 11 January 2012 she received a call from a person called “Caroline” requesting payment for the workplace signage that had been sent to one of the stores and they had a conversation to the following effect:
Caller: Hi. My name is Carolyn from Safety Compliance. I’m calling about an outstanding invoice …
Me: As I mentioned in my emails to Safety Compliance we do not want the signs.
Caller: I personally have not received your emails. What did they say?
Me: In my email I said that someone had called our stores and falsely stated that they had spoken to me and that I had authorised the signs. I hadn’t. I’ve sent three emails to Safety Compliance. The first one advised of the unsolicited supply of the goods in our stores and directed that you not send anything. The other two emails were in response to emails sent from Safety Compliance to our stores after my initial email, advising the stores their stock had been sent, to which my response was not to send anything to our stores. We have no interest in your product.
Caller: You might not have up-to-date information and I can’t stress how important it is for companies to have occupational health and safety in the workplace.
Me: The signs were unsolicited and we do not want them.
Caller: I don’t understand what you mean by “unsolicited”.
Me: Unsolicited means that the signage was sent to our stores without my authority. I did not authorise Safety Compliance to send any signage to our stores and we don’t want them. You have three months to arrange for the signs to be collected from our stores. After this time they will be destroyed.
Caller: I will advise the person in the office that the stock was sent under false pretences. You can keep the product and I’ll reverse the invoice.
124 Ms Cleverly says there has been no further contact from Safety Compliance.
Ms Karen Merigan and Ms Fanoula Toy (Kiranou)
125 Ms Karen Merigan and Ms Fanoula Toy (Kiranou) gave evidence consistent with Ms Cleverly’s account.
126 Ms Merigan said that she received a call “regarding the legal requirements in relation to workplace health and safety [that] it is a necessity that businesses have information about workplace health and safety displayed in their stores”. She consented to receive materials because during the call she was told that the head office had approved it and they specifically mentioned Ms Cleverly’s name.
127 Ms Toy gave evidence that she received a follow-up phone call from a person at Safety Compliance two weeks after receipt of the package containing materials. She told the person that the purchase had not been approved by head office. The person said that Ms Toy could keep the materials.
Relevant Legal Principles
128 There was no dispute by the Active Respondents that the conduct of Safety Compliance which is the subject of these proceedings related to the supply of goods (wall charts and first aid kits) in trade or commerce to customers throughout Australia.
129 There was also no dispute about the statement of principles applicable to consideration of the alleged contraventions by Safety Compliance proposed by the ACCC.
Misleading or deceptive conduct: s 52 TPA/s 18 ACL
130 These provisions are in essentially the same form:
A [TPA: corporation shall not/ACL: person must not], in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.
131 Whether conduct is misleading or deceptive is a question of fact to be determined having regard to the context in which the conduct takes place: Taco Company of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 177. That question is to be approached by reference to what a reasonable person in the class to which the conduct is directed is likely to understand from the impugned conduct: Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191.
132 In Australian Competition and Consumer Commission v Dukemaster Pty Ltd [2009] ATPR 42-290; [2009] FCA 682 (ACCC v Dukemaster), Gordon J usefully summarised the relevant principles at [10]:
1. A contravention of s 52(1) of the TPA is established by “conduct” which is misleading or deceptive or likely to mislead or deceive: Global Sportsman Pty Ltd 2 FCR 82, 87. The “conduct”, in the circumstances, must lead, or be capable of leading, a person into error (Hannaford (trading as Torrens Valley Orchards) v Australian Farmlink Pty Ltd [2008] FCA 1591 at [252] citing Taco Company of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 177 at 200; Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 198) and the error or misconception must result from “conduct” of the corporation and not from other circumstances for which the corporation is not responsible: Global Sportsman Pty Ltd 2 FCR 82, 91. “Conduct” is likely to mislead or deceive if there is a “real or not remote chance or possibility regardless of whether it is less or more than fifty per cent”: Global Sportsman Pty Ltd 2 FCR 82, 87.
2. Section 52(1) is concerned with the effect or likely effect of “conduct” upon the minds of that person or those persons in relation to whom the question of whether the “conduct” is or is likely to be misleading or deceptive falls to be tested. The test is objective and the Court must determine the question for itself: Global Sportsman Pty Ltd 2 FCR 82, 87. Section 52 is not designed for the benefit of persons who fail, in the circumstances of the case, to take reasonable care of their own interests: Elders Trustee and Executor Co Ltd v E G Reeves Pty Ltd (1987) 78 ALR 193 at 241. Moreover, it would be wrong to select particular words or acts which although misleading in isolation do not have that character when viewed in context: Elders Trustee 78 ALR 193 at 241 citing Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 199.
3. “Conduct” can, of course, include making a statement which is misleading or deceptive or likely to mislead or deceive: Global Sportsman Pty Ltd 2 FCR 82, 88.
4. By making a statement of past or present fact, a corporation’s state of mind is irrelevant unless the statement involved the state of the corporation’s mind: Global Sportsman Pty Ltd 2 FCR 82, 88. Contravention of s 52(1) does not depend upon the corporation’s intention or its belief concerning the accuracy of the statement of fact but upon whether the statement conveys a meaning which is false. A false meaning will be conveyed if what is stated concerning the past or present fact is inaccurate but also if, although literally true, the statement conveys a meaning which is false.
5. Precisely the same principles control the operation of s 52(1) to statements involving the state of mind of the maker when the statement was made (e.g. promises, predictions and opinions). A statement which involves the state of mind of the maker ordinarily conveys the meaning (expressly or impliedly) that the maker of the statement had a particular state of mind when the statement was made and, commonly, that there was a basis for that state of mind: Global Sportsman Pty Ltd 2 FCR 82, 88.
6. A statement of opinion will not be misleading or deceptive or likely to mislead or deceive merely because it turns out to be incorrect, misinforms or is likely to do so: Elders Trustee 78 ALR 193, 242 and Bateman v Slatyer (1987) 71 ALR 553, 559. An incorrect opinion does not of itself establish that the opinion was not held by the person who expressed it or that it lacked any or any adequate foundation: Global Sportsman Pty Ltd 2 FCR 82, 88. An expression of an opinion which is identifiable as an expression of opinion conveys no more than that the opinion is held and perhaps that there is a basis for the opinion. If that is so, an expression of opinion however erroneous misrepresents nothing: Global Sportsman Pty Ltd 2 FCR 82, 88.
7. However, an opinion may convey that there is a basis for it, that it is honestly held and when it is expressed as the opinion of an expert, that it is honestly held upon rational grounds involving an application of the relevant expertise. If the evidence shows that the opinion was not held or that it lacked any or any adequate foundation, particularly if the opinion was expressed as an expert, a statement of opinion may contravene s 52 of the TPA: Elders Trustee 78 ALR 193, 242, proposition (4): see also Hannaford [2008] FCA 1591 at [253] and RAIA Insurance Brokers Ltd v FAI General Insurance Co Ltd (1993) 41 FCR 164; Murphy v Overton Investments Pty Ltd (2004) 216 CLR 388; NC Seddon and MP Ellinghaus, Cheshire and Fifoot’s Law of Contract (9th Australian Edition, 2008), [11.116].
133 A contravention may occur at the point where a representation engenders an erroneous belief even if the customer may come to appreciate the true position before a transaction is concluded: Medical Benefits Fund of Australia Ltd v Cassidy (2003) 135 FCR 1 (MBF v Cassidy) at [43].
134 Evidence of members of the target audience as to how they reacted upon receiving a telemarketer’s call or reading documents is relevant to and may be persuasive on the issue of whether conduct is misleading or deceptive or likely to mislead or deceive. It is not necessary for there to be any such evidence but if there is, it is not conclusive. It is necessary for the Court to make an objective assessment for itself of whether an ordinary and reasonable member of that target audience would be likely to be misled or deceived.
False or misleading conduct: ss 53(a), 53(d) and 53(f) TPA/ss 29(1)(a), 29(1)(d), 29(1)(h) and 29(1)(l) ACL
135 Section 53 of the TPA relevantly provides as follows:
53 False or misleading representations
A corporation shall not, in trade or commerce, in connexion with the supply or possible supply of goods or services or in connexion with the promotion by any means of the supply or use of goods or services:
(a) falsely represent that goods are of a particular standard, quality, value, grade, composition, style or model or have had a particular history or particular previous use;
…
(d) represent that the corporation has a sponsorship, approval or affiliation it does not have;
…
(f) make a false or misleading representation concerning the need for any goods or services;
…
136 Section 29(1) of the ACL relevantly provides:
29 False or misleading representations about goods or services
(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:
(a) make a false or misleading representation that goods are of a particular standard, quality, value, grade, composition, style or model or have had a particular history or particular previous use; or
…
(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; or
…
(l) make a false or misleading representation concerning the need for any goods or services;
…
137 Insofar as contraventions of s 53 TPA/s 29(1) ACL rely on establishing that there was a “false or misleading” representation, there is no material difference between that phrase and “misleading or deceptive”: ACCC v Dukemaster at [14].
138 “False” means “contrary to fact”, irrespective of the knowledge or intent of the representor: ACCC v Dukemaster at [12] and Darwin Bakery Pty Ltd v Sully (1981) 36 ALR 371.
139 A representation is a statement made orally or in writing or by implication from words or conduct relating to a matter of fact: Given v Pryor (1979) 39 FLR 437. Representations may be made either to a particular person or to the world at large: Green v Ford (1985) ATPR 40-603.
140 I accept the ACCC’s submission that, in the absence of contrary authority, the words “agreed to acquire” in s 29(1)(d) should bear their ordinary meaning.
141 Although there is a slight difference of language between s 53(d) TPA and s 29(1)(h) ACL, it is immaterial. The words “sponsorship, approval or affiliation” in s 53(d) TPA/s 29(1)(h) ACL import the existence of a third party; so, a representation that an entity has approval or sponsorship of the government or is associated with it will satisfy the provision, but a representation that the entity is the government will not, although it may otherwise be misleading or deceptive: Australian Competition and Consumer Commission v Optell Pty Ltd (1998) 41 IPR 49 (ACCC v Optell) at 67 per O’Loughlin J. In determining whether a small business owner or manager is likely to be misled, it is appropriate to adopt a practical approach: see Mark Foys Pty Ltd v TVSN (Pacific) Ltd (2000) 104 FCR 61 at [57] per Beaumont, Tamberlin and Emmett JJ.
142 There is also an immaterial difference in the language of s 53(a) TPA and s 29(1)(a) ACL. The word “particular” means an “indicated” or “certain” rather than “precise” standard or quality; it is not necessary to show that the represented “standard” has any statutory significance but it is necessary to demonstrate “a definite degree of any quality, viewed as a prescribed object of endeavour”; “standard” is a narrower concept than “quality” which means “[a]n attribute, property, special feature. The nature, kind or character (of something)”: see Gardam v George Wills & Co Ltd (1988) 82 ALR 415 at 422-423 per French J.
143 The term “need” in s 53(f) TPA/s 29(1)(l) imports the concept of requirement, whether or not legislatively based. For instance, in Janssen Pharmaceuticals Ltd v Pfizer Pty Ltd (1985) 6 IPR 227 the suggested “need” was for worm tablets to address three types of worm, when scientifically only one was significant; in ACCC v Optell the suggested “need” was a form of business registration which was not, in fact, mandated by legislation.
Coercion: s 60 TPA/s 50(1)(a) ACL
144 Section 60 of the TPA provides as follows:
60 Harassment and coercion
A corporation shall not use physical force or undue harassment or coercion in connection with the supply or possible supply of goods or services to a consumer or the payment for goods or services by a consumer.
145 There was no dispute that the prospective customers of the wall charts and first aid kits were “consumers” within the definition in s 4B of the TPA. The goods were offered for $49.95 and $99 (plus GST and postage and handling), well below the $40,000 threshold, and they were not sold for re-supply.
146 Section 50(1) of the ACL relevantly provides as follows:
50 Harassment and coercion
(1) A person must not use physical force, or undue harassment or coercion, in connection with:
(a) the supply or possible supply of goods or services; or
(b) the payment for goods or services;
…
147 “Coercion” is not defined in either the TPA or ACL. It generally imports some form of compulsion, whether by threat of force or otherwise. Repetition is not required. See Hodges v Webb [1920] 2 Ch 70. Coercion requires some negation of choice or freedom to act: see Australian Competition and Consumer Commission v Maritime Union of Australia (2001) 114 FCR 472 (ACCC v Maritime Union of Australia) at [61] per Hill J. Whether conduct is coercive will depend not on line by line analysis but rather the overall impression: Australian Securities and Investments Commission v Accounts Control Management Services Pty Ltd [2012] FCA 1164 (ASIC v ACMS) at [17] per Perram J.
148 Comments of French J (as he then was) in Australian Competition and Consumer Commission v McCaskey (2000) 104 FCR 8 (ACCC v McCaskey) have caused debate as to whether “undue” qualifies “coercion” as well as “harassment”. Appositely to this case, in ACCC v McCaskey at [51], French J said in the context of debt collection:
The collection of debts may involve coercion in the sense that the debtor is subjected to the pressure of the demand and the legitimate threat of civil process for recovery with the additional cost and damage to credit which that can involve. Such pressure may be thought of as coercion but is entirely legitimate and not “undue”. Where the demand includes content which does not serve legitimate purposes of reminding the debtor of the obligation and threatening legal proceedings for recovery but is calculated otherwise to intimidate or threaten the debtor, then the coercion may be undue. So if a threat is made of criminal proceedings, or of the immediate seizure and sale of house and property, a remedy not available in the absence of retention of title or some form of security, the coercion is likely to be seen as undue. The threat of criminal proceedings itself may be an offence against State laws. Quite apart from content the manner or circumstances of a demand or communication, including the language used, the time and place at which it is made and the person to whom it is communicated, may go beyond the legitimate purposes of drawing attention to the existence of the obligation and the consequences for non-compliance. Again such a communication may amount to undue coercion.
149 In ACCC v Maritime Union of Australia, Hill J said at [60] and [62]:
The word “harassment” in my view connotes conduct which can be less serious than conduct which amounts to coercion. The word “harassment” means in the present context persistent disturbance or torment. In the case of a person employed to recover money owing to others, as was the first respondent in McCaskey, it can extend to cases where there are frequent unwelcome approaches requesting payment of a debt. However, such unwelcome approaches would not constitute undue harassment, at least where the demands made are legitimate and reasonably made. On the other hand where the frequency, nature or content of such communications is such that they are calculated to intimidate or demoralise, tire out or exhaust a debtor, rather than merely to convey the demand for recovery, the conduct will constitute undue harassment: (see French J in McCaskey at [48]). Generally it can be said that a person will be harassed by another when the former is troubled repeatedly by the latter. The reasonableness of the conduct will be relevant to whether what is harassment constitutes undue harassment. Like French J in McCaskey at [47] I get little assistance from cases in the context of sexual harassment where the word has almost taken on a technical meaning.
…
It is clear that the word “undue” suggests that what is done must, having regard to the circumstances in which the conduct occurs, extend beyond that which is acceptable or reasonable. It thus adds, as French J observes at 27 [48] in McCaskey, “an extra layer of evaluation”. The word “undue”, when used in relation to “harassment”, ensures that conduct which amounts to harassment will only amount to a contravention of the section where what is done goes beyond the normal limits which, in the circumstances, society would regard as acceptable or reasonable and not excessive or disproportionate. It would, however, be somewhat unusual to qualify the concept of coercion with the word “undue”. If there is such a qualification it would suggest that the policy behind s 60 accepted that some normal level of coercion or force overbearing choice or will was, having regard to the circumstances in which the conduct occurred, acceptable or reasonable in a civilised society and that it was only where that acceptable level of coercion was exceeded so that the coercion became “undue” that coercion was intended to be prohibited. I note that J D Heydon in Trade Practices Law 2nd ed at [13.620] likewise is of the view that undue does not qualify coercion. But if undue does qualify coercion it would not seem to add much to it, whereas I am of the view that qualitatively the word “undue” adds the quality of unreasonableness, unacceptability or lack of proportionality to the general concept of harassment.
150 Sadly, in drafting s 50 of the ACL, parliament did not resolve the issue of whether “undue” qualifies “coercion” but arguably heightened the ambiguity instead by the placement of commas. Like Perram J in ASIC v ACMS at [15], I am persuaded by Hill J’s reasoning. I consider that Hill J’s reasoning applies equally to s 50 of the ACL.
Involvement in contravention
151 Section 75B of the TPA provides:
A reference in this Part to a person involved in a contravention of a provision of Part IV, IVA, IVB, V or VC, or of section 75AU, 75AYA or 95AZN, shall be read as a reference to a person who:
(a) has aided, abetted, counselled or procured the contravention;
(b) has induced, whether by threats or promises or otherwise, the contravention;
(c) has been in any way, directly or indirectly, knowingly concerned in, or party to, the contravention; or
(d) has conspired with others to effect the contravention.
152 Section 2 of the ACL provides:
involved: a person is involved, in a contravention of a provision of this Schedule or in conduct that constitutes such a contravention, if the person:
(a) has aided, abetted, counselled or procured the contravention; or
(b) has induced, whether by threats or promises or otherwise, the contravention; or
(c) has been in any way, directly or indirectly, knowingly concerned in, or party to, the contravention; or
(a) has conspired with others to effect the contravention.
153 For the Court to be satisfied that an individual was “involved” in a contravention of the TPA/ACL by a corporation, the evidence must disclose that the individual intentionally participated in the contravention and had the requisite knowledge. The Court must be persuaded that the individual had knowledge of the essential matters which go to make up the contravention whether or not he or she knows that those matters amount to a contravention: Yorke v Lucas (1985) 158 CLR 661 at 667-668.
154 Where the corporation’s contravening conduct is making a false or misleading representation, in order to establish accessorial liability it is not necessary that the alleged accessory knew that the representation was false or misleading. To be liable, all the accessory need know is the essential matters that enabled the representation to be characterised as false or misleading: MBF v Cassidy at [15]-[16] per Moore J, Mansfield J agreeing at [17], Stone J dissenting at [80]-[81] and [85].
155 In MBF v Cassidy, the essential matters were: (1) the publication by MBF of advertisements; (2) the content of the advertisements (being the visual images of a couple expecting a baby, the sound and the way they were formatted and sequenced) might lead members of the public to believe that waiting periods for people taking out insurance with MBF would be waived; and (3) in fact, waiting periods for pregnancy and obstetric care were not waived. The advertising agency which created the advertisements was found not to be liable as an accessory. Even though relevant staff of the agency knew that waiting periods did apply, the Court found that those staff members did not appreciate that the advertisements might be understood by members of the public as indicating that waiting periods did not apply so that the second essential element was not satisfied.
156 Knowledge must be actual, not constructive. Actual knowledge of an essential matter may be established as a matter of inference from the circumstances surrounding a contravention. Where knowledge is to be established by inference it is never the case that something less than knowledge may be treated as satisfying a requirement of actual knowledge: Giorgianni v R (1985) 156 CLR 473 at 504–7. It would be insufficient to show that the alleged accessory had shut his or her eyes to the obvious if that is intended as a substitute for actual knowledge. However, a combination of suspicious circumstances and a failure to enquire may sustain an inference of knowledge of an essential matter: see Compaq Computer Australia Pty Ltd v Merry (1998) 157 ALR 1 at 4-5 per Finkelstein J. It is the knowledge of the alleged accessory and not what might be postulated of a hypothetical person in the position of the alleged accessory which must be demonstrated, although what might be postulated of such a hypothetical person is not irrelevant. Knowledge must be the only rational inference available: see Pereira v Director of Public Prosecutions (1988) 82 ALR 217 at 219-220 per Mason CJ, Deane, Dawson, Toohey and Gaudron JJ.
Standard of proof
157 Although some of the contraventions claimed by the ACCC may expose Safety Compliance and the Active Respondents to civil penalties, the standard of proof remains satisfaction on the balance of probabilities. However, it is well recognised that the graver the matters in issue, the stricter the proof required: Briginshaw v Briginshaw (1938) 60 CLR 336 and s 140 Evidence Act 1995 (Cth) (Evidence Act).
Workplace Health and Safety legislation
158 The ACCC wrote to workplace health and safety agencies in each of the States and Territories to enquire, among other things, whether there was any requirement to have wall charts or first aid kits of the kind offered for sale by Safety Compliance. Based on their responses, and a canvass of the State and Territory legislation it appears that:
a. All of the legislation casts duties on employers to provide a healthy and safe workplace in broad terms. Most of the legislation includes a requirement for the employer to provide “information, training, instruction or supervision” that is necessary to protect a person from risks to their health and safety arising from work carried out as part of the conduct of a business;
b. Much of the legislation provides for codes of practice, but it is not mandatory that they be made and it is possible for an employer to demonstrate compliance with its duties in ways other than by compliance with a code;
c. The regulations made under the statutes also impose obligations on employers, but they are also cast very generally. For instance, “information, training and instruction” must be adequate having regard to the nature of the work carried out, the nature of the risks associated with the work and control measures implemented, and it must be readily understandable;
d. Regulations in some States and the Australian Capital Territory contain or contained requirements for arrangements or plans for emergency shutdown and evacuation procedures to be formulated and displayed. The regulations had requirements for workplace specific considerations such as the nature of the work or hazards at the workplace, the size and location of the workplace and the number, mobility and capability (or composition) of the people in the workplace; and
e. Workplace health and safety agencies conduct inspections.
Wall charts
159 There was no provision drawn to my attention which would require a business to display a wall chart of the kind offered for sale by Safety Compliance.
160 I accept the ACCC’s submission that the wall charts were too generic to satisfy the requirements of the regulations in New South Wales and the ACT (before their adoption of the model law on 1 January 2012), South Australia (before its adoption of the model law in 1 January 2013), and Western Australia for the formulation and display of emergency shutdown and evacuation procedures. Indeed, given that the “Emergency Procedures” page is obscured by the front cover of the wall chart offered for sale by Safety Compliance, it is questionable whether any requirement for “display” of the emergency procedure would be satisfied even if the generic nature of the information were otherwise capable of satisfying the requirement.
First aid kits
161 With the exception of cl 20 of the Occupational Health and Safety Regulation 2001 (NSW) (NSW cl 20) which was in place up to 31 December 2011, there was no legislation drawn to my attention which imposed an obligation to have a “first aid kit”.
162 Rather, regulations imposed an obligation on employers to provide first aid facilities or first aid equipment having regard to the nature of the work being carried out at the workplace, the nature of the hazards, the size and location of the workplace and the number and composition of the workforce and others in the workplace. It is possible that a first aid kit of the kind offered for sale by Safety Compliance might have assisted in satisfying this requirement but there is no assurance that it would have done so having regard to the size and nature of the work of the business.
163 NSW cl 20 imposed an obligation to have a first aid kit with three different content requirements depending on whether the employer was in the construction industry and the number of employees. It also imposed an obligation to have the first aid kit under the control of trained first aid personnel if the workplace had more than 25 people.
164 I find that a generalised statement that “Under state and territory legislation all workplaces must have at least one first aid kit” was not true in the period from December 2010 to May 2012. This is so even though the possession of a first aid kit of the kind offered for sale by Safety Compliance may, in respect of some businesses, have assisted an employer to satisfy its obligation to provide first aid facilities or equipment or, in New South Wales up to 31 December 2011, have enabled an employer to have a first aid kit of the required class, although no evidence was adduced that the first aid kits offered for sale by Safety Compliance did, in fact, answer the description of any of the prescribed classes.
Wall Charts Representation
165 Telesales staff members were supplied with a script or “spiel” to use as the basis for their calls. The Wall Charts Spiel was as follows (as written):
1. I _____________________calling for Safety Compliance. How are you today?
2. The reason for my call, I am sure you are aware being the owner/manager. It is your responsibility to keep up to date with on going training and emergency procedures in the workplace.
3. We are sending out our new updated emergency procedures chart to businesses throughout Australia. They are a glossy, A4 size, 10 page all in one flip chart, colour coded for each emergency.
4. It contains all state contacts for any accidents which occur in the workplace, it has first aid procedures. It also includes updated CPR Chart and an incident report form and a fire evacuation chart, which you must fill in and go through with your staff.
5. With your help it is our aim to minimise workplace accidents by helping employers with training and ongoing reviews of the emergency procedures in the workplace.
6. We are posting them out, they are only $59.95 for the whole package, keep in mind they are fully tax deductible. You need to display them on your wall near your First Aid Kit. You don’t pay until you receive it; there is a tax invoice with the charts.
7. What is your mailing address, name, fax, email? The accounts department will confirm all details before mailing out. You will receive your charts in the next 5-10 working days. Thank you for your time, have a great day!
166 The Wall Charts Spiel is a simplified version of an earlier one provided by Mr King from the AWS materials left at the Premises. Ms Schimmel (when she became sales manager in March 2011) and Mr Black both say that they worked on the spiel. The simplification was to remove detail of the individual sections of the wall chart and the reference to the requirement for credit card details.
167 I accept that statements were made by Safety Compliance telesales staff members to the effect deposed by the small business witnesses Ms Moore (see [68]), Ms Bayer (see [73]), Ms Olden (see [82]), Ms Elson (see [88] and [93]), Ms Houghton (see [99]), Ms Pollard (see [105]), Mr Jones (see [110]) and Ms Merigan (see [126]) in the period from November 2010 to at least 2 May 2012; their evidence was not challenged by Safety Compliance or by the Active Respondents.
168 I am satisfied that the statements made by Safety Compliance’s telesales staff members to the small business witnesses in the period from November 2010 to at least early June 2012 (Ms Elson) were likely to lead an ordinary and reasonable small business owner or manager to the belief that it was a legislative requirement to have wall charts of the kind sold by Safety Compliance on display and therefore that there was a “need” which must be fulfilled having regard to the threat of inspections and the risk of fines. This is because the statements made by Safety Compliance’s telesales staff members to the small business witnesses included references to “requirements” to “display” occupational health and safety materials under “new laws”, in some cases overt statements that there are “legal requirements” and because of statements that the requirements would be enforced by inspection and fines for failure to display “compliant” wall charts. I also take into account the evidence of the small business witnesses that they in fact formed the view on the basis of the calls that they were required to have and display wall charts of a kind sold by Safety Compliance on the basis of the calls.
169 The ACCC submitted that Safety Compliance’s business system including its name and the Wall Charts Spiel is further evidence that Safety Compliance made implied representations that businesses were required to have and display a wall chart under workplace health and safety legislation in the period from 10 June 2010 to May 2012. I accept the ACCC’s submission.
170 Ms Schimmel’s evidence is that telesales staff were trained to work on the basis of the Wall Charts Spiel and that they used it (or a version longer by reference to listing the contents of the wall charts) from the commencement of Safety Compliance’s business in June 2010. The language of the Wall Charts Spiel (which is set out at [165] above) is officious and there is no suggestion of choice about the need to have a wall chart:
a. The statement of owner/manager’s responsibility at [2] of the Wall Charts Spiel is followed by a statement of fact at [3] that “we are sending out our new updated emergency procedures chart to businesses throughout Australia”. This has the character of a mass mail out of required information without any suggestion of persuasion which might imply that the recipient of the call has an option about receiving the material.
b. The statements of responsibility at [1] and of aim at [5] have the tenor of serving a higher public purpose; there is no suggestion that it might assist other business motives such as preventing business disruption through saving of lost time or minimising insurance or medical costs incurred through workplace injuries.
c. The statement at [6] of the Wall Charts Spiel implies a mass mail out; there is no suggestion that the recipient of the call has a choice: “we are posting them out” not “would you like us to post one to you?” The statement of price appears to be advisory about the costs of materials; the receipt of and payment for the materials appears to be mandatory. It is followed by a reassurance that the payment will be tax deductible but there is no suggestion that the recipient of the call may elect not to receive the materials at all or, having received them, return them without obligation.
d. Finally, [7] of the Wall Charts Spiel is not a request for contact details; it is a demand for them followed by information about when the recipient of the call might expect to receive them.
171 Further, in my view the term “compliance” coupled with “safety” in the context of workplace health and safety materials conveys the impression of a body with some responsibility for or expertise in regulatory requirements relating to the avoidance of workplace accidents and injury.
172 I am satisfied that in the context of a telephone call, the name “Safety Compliance” coupled with officious language of the kind employed in the Wall Charts Spiel in relation to workplace health and safety materials is apt to create an impression in the mind of ordinary and reasonable small business owners and managers that possession of a wall chart is mandatory even though there is no express statement to that effect. This in fact occurred: Ms Schimmel’s evidence to the ACCC was that in her time at Safety Compliance there were five or six complaints a fortnight from customers who said that they had the impression from telesales calls that they were required to have wall charts for display at their business.
173 While there is evidence that Safety Compliance took measures designed to stop telesales staff from representing that Safety Compliance was a government agency, there is no evidence that Safety Compliance took measures to negate the implication that it was mandatory to have and display wall charts. For instance, the “Objections” cubicle sign was placed in the cubicles occupied by telesales staff members in early 2011. The “Objections” sign provided (as written):
OBJECTIONS
• Are you government?
No we are certainly “NOT”. We are safety company recommending that registered businesses should have emergency procedures in place to minimise further injuries in the workplace.
• Why should we have this in place?
For the safety of yourself and your valued staff and customers. It could save one life; don’t you think it’s worth it?
• What legislation states this?
Give website of state.
174 Ms Shimmel said that this document was for use in connection with the wall charts, but said she had often wondered to which legislation it referred. She denied that telesales staff members were directed to suggest that there was a legislative requirement for wall charts. Her evidence to the ACCC in relation to whether there is a requirement to have wall charts was:
Q: Are you aware whether or not companies are required to have a flip chart?
A. Whether they’re required to have one?
Q. Yes.
A. No, not to my knowledge, no.
175 I accept the ACCC’s submission that there is no evidence of a sufficiently systematic effort by Safety Compliance or Ms Schimmel to prevent the Wall Charts Representation. I accept Ms Schimmel’s evidence that if she received a complaint that, for instance, a telesales staff member had threatened inspections, that staff member was obliged to sit in on the conversation with the customer. Even if this activity can be characterised as seeking to educate telesales staff, it was only a response to complaints so that it would not relieve any customer who laboured under a misapprehension but did not complain. In any event, that activity was insufficient having regard to the continuing complaints experience which Ms Schimmel said persisted throughout the period from June 2010 to August 2011 at about the same level.
Safety Compliance
176 For the reasons at [158]-[160] above, I am satisfied that there was no legislative requirement, and therefore no “need”, for a small business owner or manager to possess or display a wall chart of the kind offered for sale by Safety Compliance in the period from June 2010 to at least early June 2012.
177 I am satisfied that in the period from June 2010 to at least the commencement of proceedings and thereafter on 2 May 2012 (the time a representation was made to Ms Houghton) and early June 2012 (the time a representation was made to Ms Elson), through its business system employing its name, the nature of the product, the Wall Charts Spiel, the evidence of representations actually made by telesales staff to the small business witnesses and the complaints experience attested to by Ms Schimmel, Safety Compliance engaged in the Conduct referred to at [15]. Because of the complaints experience, Safety Compliance’s relevant management was aware of the Conduct and its effect on customers. That Conduct did and would be likely to lead potential customers who were ordinary and reasonable small business owners and managers to the erroneous impression that there was a requirement under workplace health and safety laws to maintain a wall chart of the kind offered for sale by Safety Compliance. That Conduct did and was likely to give rise to an erroneous belief that there was a need to possess such a wall chart.
178 I am therefore satisfied that Safety Compliance made Wall Charts Representations which were misleading or deceptive and were false and misleading as to the requirement or need for a business to maintain wall charts of the kind offered for sale by Safety Compliance in the period June 2010 to the commencement of proceedings in April 2012 and thereafter until at least May 2012 in contravention of ss 52 and 53(f) of the TPA (to 31 December 2010) and ss 18 and 29(1)(l) of the ACL (from 1 January 2011).
Ms Schimmel
179 Given the nature of Ms Schimmel’s admitted management role from March 2011, her role in amending and approving the Wall Charts Spiel, her knowledge of the complaints experience without taking adequate steps to prevent the erroneous impression which she knew was being created, and her admission at the ACCC’s interview that she knows of no legislative requirement for a business to have a wall chart of the kind offered for sale by Safety Compliance, I am satisfied that Ms Schimmel was knowingly concerned in Safety Compliance’s contravention of ss 18 and 29(1)(l) of the ACL from March 2011 to at least May 2012.
Mr Black
180 As indicated at [33] above, Mr Black admits his involvement in the operations of Safety Compliance but denies that he was its general manager.
181 I am satisfied that Mr Black performed the role of general manager of Safety Compliance from June 2010 to at least 23 August 2011 (when Ms Schimmel replaced Mr Kent as the director of Safety Compliance):
Although Mr Black does not admit being general manager, the activities he admits to are consistent with that role particularly in the absence of anyone else performing the role.
Since he was not financially able to contribute to Safety Compliance he agreed to “do the running around” and “organise the staff”.
Ms Schimmel’s evidence given in August 2011 is that before she was appointed sales manager in March 2011, Mr Black was responsible for the sales staff. He was, from June 2010 to August 2011, an “overseer” and attended at the offices of Safety Compliance daily although he was not there all day. Mr Black agrees that he was the “responsible person” and if Ms Schimmel had an issue, she would take it to him and he would take it to Mr Kent.
Until Ms Schimmel became a director of Safety Compliance on 23 August 2011, Mr Black was responsible for the accounts, paying wages, paying rent and monitoring cash flow.
He was aware of and involved in complaint handling; he admits Ms Schimmel reported to him about complaints.
182 Mr Black says that the wall chart is completely different from the wall chart used by AWS, which was not in evidence. He admits that he drafted the wall chart offered for sale by Safety Compliance from materials compiled from the internet, saying “I can get on and Google and I Google things and then …, I just basically got things and then got the receptionist to do it up for me” and then arranged for printing. He did the same thing with CPR Charts and the Workplace Fire Escape Plan. He also admits that he is an author of, and approved, the Wall Charts Spiel.
183 There is ample evidence that Mr Black was concerned in Safety Compliance’s contravention of the TPA and ACL in the period from June 2010 to August 2011 by means of the Wall Charts Representation. The issue is whether or not Mr Black knew that there was no requirement for a business to maintain a wall chart of the kind offered for sale by Safety Compliance.
184 At his examination by the ACCC, Mr Black admitted that he had no expertise in relation to occupational health and safety matters and that he had not researched legislative requirements relating to occupational health and safety or emergency procedures when he created sales materials. His research, conducted using Google, was into emergency procedures adopted by other companies and from a Comcare website demonstrating emergency procedures in a virtual office. He took no professional or expert advice.
185 The deficiencies of Mr Black’s approach are obvious given the complex laws relating to workplace health and safety and the nature of the topic which calls for expertise in formulating advice as to adequate procedures. Mr Black was patently reckless in failing to obtain professional advice, albeit that the material in the wall charts is generic.
186 I am satisfied that Mr Black knew that there was no legislative requirement for a business to maintain a wall chart of the kind offered for sale by Safety Compliance. Mr Black told the ACCC that in the early days he received a print out of “stuff on emergency procedures and so forth” from a person who was “becoming an OH&S officer” who had been referred to him by Mr King. He went on to say:
I’ve basically looked at it, went, okay, there was no in particular thing that – you know, so once again I come back to it, I went what’s out there on the internet. There’s another 50 companies that are selling emergency procedure charts, and a lot of them are on bomb threats, and so forth, and I just thought… I could be wrong, but from what I read there’s - basically your emergency procedures is just some sort of training to your staff on the basis of … fire, accidents, CPR. … it doesn’t matter what accident is in the workplace … make sure your staff know how to react to that and know how to fix that problem.
187 For these reasons I am satisfied that Mr Black was knowingly concerned in Safety Compliance’s contravention of ss 52 and 53(f) of the TPA (to 31 December 2010) and ss 18 and 29(1)(l) of the ACL (from 1 January 2011) by reason of the Wall Charts Representations in the period June 2010 to 23 August 2011, when Ms Schimmel replaced Mr Kent as director of Safety Compliance. It is not clear what Mr Black’s role was between August and December 2011.
Government Representation and Affiliation Representation
188 At their examinations by the ACCC Mr Black and Ms Schimmel gave evidence of the complaints experience in relation to whether customers thought they had received a call from a government agency or affiliated organisation in relation to wall charts and first aid kits.
189 Ms Schimmel says it was Safety Compliance’s policy from early 2011 that the mention of any association with government would result in summary dismissal. Mr Black and Ms Schimmel suggested that because telesales staff who had been employed by other companies might make the suggestion that they were from the government in relation to workplace safety materials there were a number of preventative measures taken by Safety Compliance. Measures noted by Ms Schimmel were an Official Warning letter, Cubicle Signs, “telechecks” on sales, and amendments made to the wall chart, the wall chart confirmation fax and the website to state that Safety Compliance was a non-government business.
Official Warning
190 Ms Schimmel says that during training telesales staff members were provided with a copy of an official warning on Safety Compliance letterhead. She says the warning was issued to only one employee who had been the subject of a complaint by a customer that the employee had mentioned that workplace inspectors were in the area. The employee said she did this due to pressure to get sales. Another employee had overheard the conversation. The warning was as follows:
Official Warning
Date:
To:
Safety Compliance Pty Ltd is a private non-government company as explained to you in your training and also on signs displayed in your work area. Anyone caught using the terms government or workcover will be issued with one official warning and if it happens again, your position at Safety Compliance Pty Ltd will be terminated.
This is your first and final warning.
Thank you,
Management
191 Ms Schimmel said that this document was later amended to refer to instant dismissal.
Cubicle Signs
192 Ms Schimmel says that Mr Kent and Mr Black arranged for the four Cubicle Signs to be put up in telesales staff cubicles in early 2011 before she was appointed as sales manager. In addition to the “Objections” sign set out at [173] each telesales staff member had on the cubicle wall in front of them three others signs as follows.
A sign headed “____________ as you are aware we are not Government, but I can give you state websites to look at regarding First Aid Kits & Emergency Procedures in the workplace”. This was followed by a list of the websites for workplace health and safety agencies (for instance, Workcover) in each of the States and Territories.
A sign with “Safety Compliance Pty Ltd” in big bold type face followed by:
Our aim is to minimise workplace accidents by helping employers with training and ongoing reviews of the emergency procedures in the workplace.
We are not associated with any Government Department, we just keep workplaces informed Australia wide.
Thank you,
Management
A sign with “Safety Compliance Pty Ltd” in big bold type face followed by (emphasis in original):
Is not associated with any Government Department.
If anyone does use terms such as Government or Workcover etc they will lose their employment with Safety Compliance Pty Ltd.
Thank you,
Management
193 Ms Schimmel said that the purpose of the document setting out government websites was to enable telesales staff to assist customers with questions by referring them to the websites.
194 While I accept Ms Schimmel’s evidence that the Cubicle Signs were put up in early 2011, I consider that it is most likely that that coincided with the receipt by Safety Compliance of the s 155 notice dated 22 March 2011. Further, Ms Schimmel gave no basis for her understanding that Mr Kent had a role in the signs being put up and I therefore do not accept her statement as evidence of Mr Kent having such a role.
“Telechecks” and return faxes
195 Mr Black and Ms Schimmel both said that any impression that Safety Compliance was a government agency was addressed in the “telecheck” call if a person asked whether or not Safety Compliance was a government agency; Ms Schimmel suggested that there was therefore no benefit in making the representation.
196 Despite this evidence, none of the small business witnesses deposed that they received a “telecheck” call. Both Mr Black and Ms Schimmel say that “telecheck” calls were not always made even though they tried to make them for each sale.
197 Ms Schimmel said that after July 2011 she sent a “return fax” to customers to confirm their order because there were too many sales to make return calls. Ms Schimmel says that the form of wall charts return fax was amended to explain that Safety Compliance is not a government department. I do not accept this evidence concerning return faxes.
198 No return fax for a single purchase of wall charts was supplied in response to the ACCC’s notices. Ms Houghton received a fax back on 2 May 2012 which did not contain a statement that Safety Compliance was not affiliated with government. That fax back contained a listing of the content of the wall chart and offered a 10% discount for payment “today”, that is, in advance of Ms Houghton receiving the wall chart. It did not contain any statement that Safety Compliance was not a government agency but it did contain the statement:
We at Safety Compliance Pty Ltd believe that if we can prevent even just one accident in the workplace with our First Aid & Emergency Procedure Wall Charts then we are succeeding in our aim to minimise accidents in all workplaces Australia Wide.
That language does nothing to dispel any impression that Safety Compliance was, or was affiliated with, a workplace health and safety agency. It is language which would be suitable for such an agency to use.
199 Although a wall chart return fax for multiple purchases was given to the ACCC in response to its notice, that document also contains no language which indicates that Safety Compliance is a private firm not associated with the government. To the contrary, it states that:
As you are already aware, OH&S is a major issue in all areas of work life. We are endeavouring to minimise workplace accidents through ongoing training, inspection and revision of safe work practices.
200 Although Mr Black said that this paragraph referred to the obligation of the business owner, it carries an officious tone; the use of the term “inspection” is more apt to a regulatory body than a business owner. Mr Black prepared and authorised this document.
201 The First Aid Kit Order Confirmation Form used from December 2010 did not contain any language suggesting that Safety Compliance is not a government agency. Instead, it advises that first aid kits are required under State and Territory laws and refers to fines for non-compliance.
Amendment to Wall Charts
202 Ms Schimmel says that the list of government agencies to which incidents must be reported was removed from the front of the wall chart because it “gave people the impression that we were government”. The list was relocated to the final page of the wall charts along with another list of government emergency alert contacts. That information was followed by (as written):
www.emergencyalert.gov.au
About Safety Compliance Pty Ltd
Safety Compliance Pty Ltd is a non-government business endeavouring to help safe work practices and minimise workplace accidents through awareness of safety procedures.
‘Accidents’ in the workplace will always happen no matter what we do, but with the right procedures in place, many of these accidents can be prevented and injuries can be minimised if first aid is administered immediately and correctly.
At Safety Compliance we also sell hospital grade first aid kits and safety signs. Please do not hesitate to contact out friendly staff if you with to order anything else from us!
Email: safetycompaliance@gotalk.net.au | Web: www.safetycompliance.net au
203 The statement about what Safety Compliance is was not in early versions of the wall chart and the old format was sent to Ms Elson and Bringelly Meats in 2010. While Ms Schimmel suggested that the wall charts were amended around June 2011 to include the statement, the statement was included in the form of the wall chart supplied to the ACCC on 27 April 2011 in response to its notice to Safety Compliance on 22 March 2011. The wall chart sent to Ms Pollard in July 2011 was in the new format.
204 In any event, the wall chart was sent following the telemarketing call and the statement about Safety Compliance not being part of government was on the last page of the wall chart. The language was not included in the Wall Charts Spiel or the First Aid Kits Spiel (see [231]) (if that spiel was used) nor was it on the invoice demanding payment. The information as to what Safety Compliance is was provided too late; it was after any representations made in a telemarketing call which suggested that Safety Compliance was a workplace health and safety agency or affiliated with one.
Website
205 A screenshot of the home page on Safety Compliance’s website as at 26 July 2011 contains the first two paragraphs of the statements about Safety Compliance’s identity referred to at [202]. The sales channel was telemarketing; while the inclusion of the language on Safety Compliance’s website was appropriate, it is not relevant having regard to the business model.
Consideration
206 Both Mr Black and Ms Schimmel denied that they had any intention of creating the impression that Safety Compliance was a government agency or affiliated with one. Mr Black considered that it was a commercial advantage that Safety Compliance was not the government so that there was no incentive to make that representation. He said: “There was no point in saying we’re from the government. No point whatsoever. … To say I was from the government wouldn’t sell the product.”
207 There is no evidence that the telesales staff made overt statements that Safety Compliance is a workplace health and safety agency or affiliated with one. To that extent, it appears that the measures taken by means of the Cubicle Signs and the Official Warning letter were effective.
208 Ms Schimmel said that “for sure” it was a common issue in the period before she became sales manager that customers thought that they were being contacted by a government agency or organisation. She gave two named examples of telesales staff who had “threatened” to come through and do inspections. She overheard Mr Black speaking to these sales staff concerning the issue. She thought there may have been other instances.
209 Mr Black says that before Ms Schimmel was appointed sales manager, he asked one or two of the sales staff to report to him about any complaints and to make sure that sales staff stuck to the spiel. He says that no report was ever made. Once Ms Schimmel was appointed as sales manager in March 2011, she reported issues to Mr Black from time to time and his direction to her was to make sure people stuck to the spiel.
210 At the examination in August 2011, Ms Schimmel initially said that this complaint was still occurring “on a daily basis”, although she later resiled from that estimation of frequency. Ms Schimmel said that she would note down the complaint but did not keep a register. Mr Black said that he saw a complaint frequency of five to six calls a week as minimal. Mr Black did not see the complaints as a problem “because I knew we weren’t telling people we were from the government, and I didn’t want it to be that way”. I consider Mr Black’s evidence on this topic to be a transparent attempt to minimise the issue.
211 Both Mr Black and Ms Schimmel said that, when they asked customers why they thought that a call was from the government, they said that they “just assumed”; Ms Schimmel attributed this to the fact that the topic was workplace procedure charts. Some of the small business witnesses also formed the impression that Safety Compliance was a government department or agency (see Ms Moore at [69], Ms Olden at [83], Ms Pollard at [106], and Ms Blakeney at [116]) or affiliated with one (Ms Elson at [89]). The conversations with Ms Moore, Ms Olden and Ms Elson threatened inspection or audit. Although only one of the small business witnesses deposed that she thought that Safety Compliance was affiliated with a workplace health and safety agency, I consider that the conduct of Safety Compliance telesales staff deposed to was open to that interpretation.
212 The evidence of Safety Compliance’s customer complaints experience from Mr Black and Ms Schimmel referred to at [208]-[211] demonstrates that they knew that the telesales calls did convey to customers the impression that the call was “from the government” throughout the periods of their involvement with Safety Compliance despite the measures designed to prevent telesales staff members from saying that they were from the government or affiliated with it.
213 In the absence of any register of complaints, the evidence of the small business witnesses is that the impression conveyed encompassed both a workplace health and safety agency and an entity associated with such an agency. The statement in the Cubicle Signs is that Safety Compliance is “not associated with government” (see [192] above) and the language included in the back of the wall charts and the website is that Safety Compliance is a “non-government” business (see [202] above). It appears that Safety Compliance sought to address both situations and regarded them as interchangeable. This is not surprising: the language of “workplace health and safety agency” is capable of conveying both a sense of “government department” and an “agency” or organisation associated with government without being a government department.
214 Whatever the intention of Ms Schimmel and Mr Black, the steps taken by means of “telechecks” and amendments to the wall charts and website were not, nor were they likely to be, effective to prevent the creation of the impression that calls made by Safety Compliance’s telesales staff were from a workplace health and safety agency or an affiliate of such an agency. To do that, it would be necessary to amend the Wall Charts Spiel (which they both acknowledge they were involved in drafting) to include an express statement that Safety Compliance is not a workplace health and safety agency and is not affiliated with one. It would also have been of assistance to include a prominent statement that Safety Compliance is not, nor is it affiliated with, a workplace health and safety agency on the invoice for the wall charts and first aid kits.
215 In the context of telesales calls, I am satisfied that the business system employed by Safety Compliance and the Conduct of its telesales staff as pleaded and proved is capable of, and did, convey to ordinary and reasonable small business owners and managers the erroneous impression that the wall charts were of a particular standard or quality, that is, the charts had the attribute that they were being offered by Safety Compliance as a workplace health and safety agency or as an entity affiliated with a government agency of that kind and would therefore meet legal requirements. That business system comprises the name Safety Compliance coupled with the mandatory and officious language of the Wall Charts Spiel to be deployed in telesales calls and the fact that wall charts and first aid kits relate to occupational health and safety.
216 I am therefore satisfied that by the Conduct in accordance with its business system and having regard to the evidence of the small business witnesses referred to at [211], Safety Compliance through its telesales staff made the Government Representation and the Affiliation Representation and those representations were false, misleading and deceptive. The erroneous impressions formed by Safety Compliance’s customers would be enhanced if the language of the First Aid Kits Spiel was employed as acknowledged by Ms Schimmel: see [234] below. However, having regard to the conflict of evidence between Ms Schimmel and Mr Black about whether that spiel was used, I do not base this finding on the use of the First Aid Kits Spiel; it is unnecessary for me to do so.
217 Ms Schimmel and Mr Black admit that they knew that Safety Compliance was neither a workplace health and safety agency nor an affiliate of one.
Safety Compliance
218 For the foregoing reasons, I am satisfied that Safety Compliance contravened ss 52, 53(a) and 53(d) TPA and ss 18, 29(1)(a) and 29(1)(h) ACL from June 2010 until at least the commencement of the proceedings.
Mr Black
219 Having regard to Mr Black’s admissions referred to at [33] and [217], my finding that Mr Black performed the role of general manager of Safety Compliance from June 2010 to at least 23 August 2011 at [181] and in particular his role in drafting and approving the Wall Charts Spiel, his supervision of telesales staff in particular between June 2010 and March 2011 and his supervision of Ms Schimmel in the performance of that role until at least 23 August 2011 and his knowledge of and involvement in Safety Compliance’s continuing complaints experience involving some telesales staff threatening inspections and customer beliefs that they had received calls “from the government”, I am satisfied that Mr Black was knowingly concerned in Safety Compliance’s contraventions of ss 52, 53(a) and 53(d) of the TPA and ss 18, 29(1)(a) and 29(1)(h) of the ACL from June 2010 until at least 23 August 2011.
Ms Schimmel
220 Having regard to Ms Schimmel’s admissions referred to at [34] and [217], and in particular her role in drafting and approving the Wall Charts Spiel, her supervision of telesales staff from March 2011 and her knowledge of and involvement in Safety Compliance’s continuing complaints experience involving some telesales staff members threatening inspections and customer beliefs that they had received calls “from the government” I am satisfied that Ms Schimmel was knowingly concerned in Safety Compliance’s contravention of ss 18, 29(1)(a) and 29(1)(h) of the ACL at least from March 2011 until at least May 2012.
First Aid Kits Representation
Ms Pollard’s evidence
221 As previously indicated, I accept Ms Pollard’s uncontested evidence that in July 2011 she received a telephone call in which a caller said to her in July 2011:
Caller: Under the workplace laws, business must have on display health and safety information including a … compliant first aid kit. It is also recommended for businesses to have a fire safety blanket.
Me: Am I required by law to have all these?
Caller: Yes. It is a legal requirement under WorkCover for your salon to have … a compliant first aid kit. It is precautionary for businesses to have a fire safety blanket.
We have … compliant first aid kits and fire safety blankets that businesses can purchase to ensure that they comply with the legal requirements.
…
Caller: If you purchase the wall chart, fire blanket and first aid kit you will only have to pay $171.00 instead of $207.90. Also you will be able to claim the purchase back on tax.
I can pop these in the post with an invoice and you can pay when you receive the items.
222 Ms Pollard’s business is in Victoria. Following this, Ms Pollard received (among other things) a first aid kit and an invoice from Safety Compliance.
223 This is the only small business witness who was offered a first aid kit by a telesales caller. However, from December 2010, Safety Compliance included a First Aid Kit Order Confirmation Form in the materials sent to customers. Between December 2010 and November 2011, Ms Moore, Ms Bayer, Ms Olden, Ms Elson, Ms Merigan, Mr Jones and Ms Toy received such a form with materials from Safety Compliance.
First Aid Kit Order Confirmation Form
224 The form was as follows:
225 There was a variant of this form used in 2011 which was headed “[stop sign] Workplace Accidents” but it was materially the same.
226 Ms Schimmel says that Mr Black prepared the form and that she had a “brief look” at it but never had a great deal to do with it. She suggested no changes. Ms Shimmel says that no first aid kit was sold unless this form was first returned to Safety Compliance.
227 Ms Schimmel’s evidence to the ACCC was that she thought that the statement in the form that “Under state and territory legislation, all workplaces must have at least one first aid kit” was correct based on her “research”, which was reading a book which she obtained from the office of WorkCover NSW located near Safety Compliance’s office.
228 Although the form was used throughout Australia, Ms Schimmel was not aware of the legislative requirements outside New South Wales. She thought that Mr Black and Mr Kent had researched the issue.
229 Ms Schimmel was not aware of any justification for including the words “Can you afford for your business not to be compliant by law” or “The possible fines and or penalties for non- compliance far exceeds the purchase price of the first aid kit”. Ms Schimmel agreed that the telesales staff had no instruction on nor were they in any position to tell customers whether they would get fined if they did not have a first aid kit or whether the fine would exceed the purchase price of the kit or whether anyone was going to check if the customer was compliant. She said that “we couldn’t possibly answer” a question about that.
230 Ms Schimmel admitted that telesales staff did say to customers “are you aware that you are required to have a first aid kit” but denied that they said that it was “required by law”. Ms Schimmel rejected outright the suggestion that telesales staff told customers that they were exposed to fines because she said that they knew that they were not to represent that they were from the government; however, she admitted that the “best she could do” to ensure that they did not was to listen to all of them, although she could not “be there 24/7”.
First aid kits spiel
231 The first aid kits spiel is as follows (emphasis in original):
In NSW alone there were 142,500 injuries reported in the workplace in 2007-2008 and a total of 850 million compensation claims that year.
• Hi its _________ from Safety Compliance, how are you?
• Are you the owner or manager?
• I am sure you are aware that it is compulsory to have a compliant first aid kit in your workplace and we recommend you have an emergency procedure chart displayed or beside your first aid kit.
• We are sending our updated emergency procedures charts, which include a ten page gloss A4 size, spiral bound flip chart.
• Have you got these?
• These charts include state contacts for all accidents, all types of emergency first aid procedures (sprains, burns, wounds etc), fire escape plan, incident form and training attendance form to be signed and dated by all staff after going through procedures.
• There is a small cost involved of $59.95 which is fully tax deductible, you don’t have to pay until you receive the package or if you pay by within 7 days of receiving our first aid kit and wall chart, we will give you a 10% discount.
If they purchase:
• You will receive a call from our mailing department to confirm all details.
PRICES
FIRST AID KITS - $129 including P&H + GST (hospital grade)
PROCEDURE CHARTS - $59.95 including P&H + GST
FIRE BLANKET - $40.00 including P&H + GST
FULL PACKAGE - $189 including P&H + GST (order form must be sent to customer, signed by them and then returned to us via fax, email or post before you get the sale. Also ask them to circle how paying on form!)
Don’t forget postal address, to be delivered in 5 – 10 working days.
232 Mr Black says that he amended the First Aid Kits Spiel from a document provided by Mr King when he first came to Mr Black with the idea for the business. The amendment was to remove the requirement for a credit card number. The original document was not supplied in response to the ACCC’s notice.
233 With reference to the third bullet point of the spiel, Mr Black says that he formed the view that it was “compulsory” for a business to have first aid kits based on research which he did on the internet, but he could not point to any regulation which required a kit. He says of his research: “As I said, I’m not a real fanatic with it, so, you know, just get in there, Google it.” He denied that telesales staff used the term “compulsory” even though it was in the script.
234 He says that when he showed the spiel to Ms Schimmel she did not express concern with it. Ms Schimmel says that she demurred at the use of the words “compulsory” and “compliant” and preferred “mandatory”. Her concern at the use of “compulsory” and “compliant” was that she did not want people to think that Safety Compliance’s telesales staff members were from a government department. Mr Black said that had Ms Schimmel complained to him in those terms he would have thrown it back to her to change it.
235 Mr Black says that the First Aid Kits Spiel was used in the business from the time they started selling first aid kits (in December 2010) and it was still in use in December 2011. Ms Schimmel insists that the First Aid Kits Spiel was never used, although she acknowledged that first aid kits were referred to in telephone calls. I do not accept the suggestion at [212] of the ACCC’s written submissions that Ms Schimmel admitted that she wrote the First Aid Kits Spiel when she took over as sales manager. I understand Ms Schimmel to have been speaking of the Wall Charts Spiel.
236 I am not satisfied that telesales staff employed the First Aid Kits Spiel; I find Ms Schimmel a generally more reliable witness than Mr Black and her experience with the telesales staff was more direct.
Safety Compliance
237 I am satisfied that Safety Compliance engaged in the Conduct described at [15] in relation to first aid kits based on Ms Schimmel’s evidence that the Wall Charts Spiel was the spiel used by telesales staff and her admission that telesales staff did say to customers “are you aware that you are required to have a first aid kit”. For the same reasons as set out at [177], and having regard to what was in fact said to Ms Pollard, I am satisfied that the same business system applied to the sale of first aid kits as applied to the sale of wall charts.
238 There is also ample evidence that the First Aid Kit Order Confirmation Form was sent to the small business witnesses from December 2010 until at least June 2012 and Ms Schimmel admits that a signed form must be received in relation to the sale of a first aid kit.
239 I am satisfied that (except for New South Wales before 1 January 2012), there was in fact no legal requirement for a small business owner to possess a first aid kit of the kind offered for sale by Safety Compliance and therefore:
a statement in the First Aid Kit Order Confirmation Form that “under state and territory workplace legislation all workplaces must have a least one first aid kit” and “the possible fines and or penalties for non compliance far exceeds the purchase price of the first aid kit”; and
Conduct by telesales staff to the effect that there is such a requirement,
are misleading or deceptive and the representations are false.
240 I am also satisfied that the Conduct and the impugned statements in the First Aid Kit Order Confirmation Form are capable of inspiring the belief in small business owners and managers, and did induce in Ms Pollard (a resident of Victoria), the erroneous belief that there is both a legal requirement and need for a first aid kit of the kind sold by Safety Compliance.
241 I am therefore satisfied that Safety Compliance made First Aid Kit Representations which were misleading or deceptive and which were false and misleading as to the requirement or need for a business to have first aid kits of the kind offered for sale by Safety Compliance in the period from December 2010 to the commencement of proceedings in April 2012 up to June 2012 in contravention of ss 52 and 53(f) of the TPA and ss 18 and 29(1)(l) of the ACL.
Ms Schimmel and Mr Black
242 The ACCC successfully demonstrated that Mr Black and Ms Schimmel knew of and were responsible for the Conduct and the publication of the First Aid Kit Order Confirmation Form.
243 However, it is an essential element of the accessorial liability claim made against Ms Schimmel and Mr Black that it can be proved that they knew that workplace health and safety laws (other than in New South Wales) did not require businesses to maintain a first aid kit of the kind sold by Safety Compliance. That is how the ACCC pleaded it case. The evidence does not support that contention and this claim against Ms Schimmel and Mr Black must fail.
244 I accept Ms Schimmel’s evidence that she believed that a first aid kit was required from reading a publication which she obtained from WorkCover NSW. I also accept that Mr Black’s internet research led him to the same view. While the failure to take necessary steps to inform themselves of the correct position is undoubtedly reprehensible and contributed directly to Safety Compliance’s contravention of ss 52 and 53(f) of the TPA and ss 18 and 29(1)(l) of the ACL I am not satisfied that they knew the true position.
Coercion
245 The ACCC claims that Safety Compliance and the Active Respondents engaged in coercion. The ACCC relies on the Conduct of Safety Compliance’s telesales staff, in particular the representations that the wall charts and first aid kits were required and the requirement for charts and kits would be enforced by inspections. The ACCC also relies on the form of debt recovery engaged in by Safety Compliance which threatened to take steps which might adversely affect a customer’s credit rating.
Small business witnesses
246 Ms Bayer said that she purchased the wall chart following a telephone call on 26 November 2010 because she thought that it was a legal requirement so she had no choice; as she put it: “Well, if I have to have it, I have to have it.” A couple of weeks after she received the Wall Chart Package, Ms Bayer received two follow up telephone calls from “Brian” of Safety Compliance in a two day period. She returned the materials to Safety Compliance on 21 April 2011.
247 Around 13 May 2011, Ms Bayer received a Final Notice in the form set out at [256] below. She sent another letter to Safety Compliance advising that she had referred the matter to the Queensland Office of Fair Trading.
248 Ms Bayer remained concerned about the threat to her credit rating. On the advice of the Office of Fair Trading, she rang Baycorp Advantage Group and had a conversation with a person named Kylie to the following effect:
Ms Bayer: … I was told by the OFT to contact you to check what Baycorp’s policy is for listing bad debts.
Kylie: To be listed by Baycorp as a bad debt the amount in dispute must be over $100 and the party seeking to make the listing must be a member of Baycorp. A party would not be listed as a bad debt until after an investigation, which they would be made aware of, was completed.
249 Around 19 May 2011, Ms Bayer received a call on her mobile telephone from a person called “Tracey” from Safety Compliance who acknowledged receipt of Ms Bayer’s letter who said:
We hadn’t realised that you’d returned the materials. I’m sorry about the situation.
250 Ms Bayer believes that her original caller from Safety Compliance also tried to contact her.
251 Ms Olden and Ms Elson were told that it was a legal requirement that they have wall charts and inspectors would check compliance. Ms Olden believed the caller was from a government agency and Ms Elson believed the caller was from an entity contracted by such an agency. On that basis, they both agreed to receive wall charts. Both contacted appropriate agencies (WorkSafe WA and the Queensland Office of Fair Trading) to query their obligations. When they received follow up telephone calls from Safety Compliance telesales staff they indicated that they would not pay for the materials because they were not a “legitimate product”, as Ms Elson termed it. Neither had further contact with Safety Compliance.
252 Ms Moore and Ms Houghton were told that it was a legislative requirement to have wall charts. Ms Moore was told that the government was “cracking down” on the requirement and there would be random inspections. Ms Houghton was told the requirement would be enforced by fines. Neither paid for the materials after checking with WorkCover (Ms Houghton) and a local Member of Parliament (Ms Moore).
253 Neither Safety Compliance nor any of the Active Respondents challenged the admissibility or correctness of this evidence.
Debt recovery letters
254 Safety Compliance issued two forms of letter demanding payment. Both incorporated a threat of legal action and prejudice to credit rating for non-payment.
Tylers Letter
255 One form of letter purported to be issued by Tylers Recovery Agents. It provides as follows:
PARTICULARS OF CLAIM:Workplace Safety Emergency Procedures pack
AMOUNT OF DEBT: $49.95 + $4.99 GST + $4.00 = $58.95
FINAL DATE FOR PAYMENT: [Date]
IMPORTANT NOTICE: IF PAYMENT IS RECEIVED BY THE [DATE] YOUR TOTAL AMOUNT DUE WILL BE $40.00 INCLUSIVE OF GST
TAKE NOTICE that, as agent for the CREDITOR, we hereby DEMAND payment in full of the DEBT on or before the FINAL DATE shown above.
Non payment may result in your CREDIT RATING being affected.
If DEFAULT is made in payment by the FINAL DATED immediate legal proceedings by way of PLAINT or SUMMONS may be taken against you for the recovery of the DEBT, without further notice.
AFTER service of the SUMMONS on you and should you fail to defend the SUMMONS, then a JUDGEMENT may be entered against you for the DEBT plus LEGAL COSTS and all other amounts permitted by LAW.
ONCE JUDGMENT is entered against you, it may be ENFORCED by way of WARRANT OF EXECUTION. GARNISHEE PROCEEDINGS or an ATTACHMENT OF EARNINGS ORDER (served on your employer). LEGAL COSTS associated with the ENFORCEMENT of the JUDGEMENT WILL ALSO BE RECOVERED FROM YOU.
TO AVOID FURTHER ACTION, WE URGE YOU TO PAY THE FULL AMOUNT OF THE DEBT BY THE FINAL DATE, OR PHONE THE CREDITOR TO ARRANGE PAYMENT TERMS.
Alternatively, you should contact the CREDITOR on the above number to arrange payment, part payments or Resolution of the outstanding DEBT.
Thank you for your prompt attention.
Tylers Recovery Agents - Agent for the CREDITOR.
Baycorp Advantage letter
256 The form of letter sent to Ms Bayer was typical of the other form of debt recovery letter employed by Safety Compliance:
FINAL NOTICE
INVOICE AUTHORISING PERSON DUE DATE AMOUNT
7138 Inge Bayer 9/12/2010 $58.95
IMPORTANT NOTICE: IF PAYMENT NOT RECEIVED BY: 4th MAY 2011. YOUR TOTAL AMOUNT DUE WILL BE $45.00 INCLUSIVE OF GST
Dear Inge,
We hereby notify that failure to make payments within the next fourteen (14) days for your Workplace Safety Emergency Procedures Wall Charts, will result in the commencement of Legal Action. Any costs or charges incurred for the recovery of the debt will be liable to you.
A default notice will be lodged with Baycorp Advantage Group and your future applications for credit with any organisation (including banks and credit unions) will be adversely affected.
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257 Mr Black admitted approving the form of the letters. He admitted that “Tylers Recovery Agents” does not exist and the reference to the Agents was put in “just so the people would pay”. Mr Black suggested that people had the alternative of saying they did not want the materials and sending them back. That alternative is not apparent in the Wall Charts Package or on the invoice which accompanied it.
258 Mr Black admitted that Safety Compliance had no relationship with Baycorp Advantage Group, although he suggested that he had it in contemplation.
259 It is not evident that Mr Black had any contact with any credit rating agency to establish a relationship or what its requirements might be. He thought that anyone could list a bad debt with a credit rating agency. He did not resist the proposition that he had no basis for making threats of the kind in the debt recovery letters.
260 Ms Schimmel’s evidence in August 2011 was that if a customer did not pay after the follow up telephone call from “Accounts”, the customer was issued a “final notice” and then the debt was cancelled if they still did not pay. She said she was unaware of the form of the Final Notice and she had never heard of Baycorp Advantage or Tylers Recovery Agents.
Consideration
261 It is clear from the case law that referring to the fact that a creditor might take debt recovery action and that there may be consequences for failure to pay a debt does not amount, by itself, to coercion. However Mr Black was clearly unjustified in referring to a debt recovery agency which does not exist or Baycorp Advantage with which Safety Compliance had no relationship and with which, based on Ms Bayer’s call to Baycorp Advantage, it is unlikely that one would have come to pass. Those statements were intended to intimidate and they were misleading and deceptive. He was also not justified in his conviction that customers would have known that if they did not want the materials after inspection, all they had to do was send them back. That fact should have been clear from the telesales call and invoice sent with the Wall Charts Package but it was not.
262 Having said that, I am not satisfied that Safety Compliance’s Conduct and the despatch of the debt recovery letters can, in all of the circumstances, properly be described as coercive. The Conduct can properly be described as misleading, and actions in relation to debt recovery letters as an inept attempt at intimidation involving false representations of affiliation with debt recovery and reporting agencies. However, I do not accept that the necessary element of compulsion or serious threat is present even though the tenor of the phone calls and debt recovery letters was deliberately intimidating.
263 As pointed out by French J in ACCC v McCaskey at [51], quite apart from content, “the manner or circumstances of a demand or communication, including the language used, the time and place at which it is made and the person to whom it is communicated” are relevant in determining whether a communication goes beyond legitimate purposes, such as drawing attention to the existence of an obligation and the consequences for non-compliance.
264 It is true that some of the small business witnesses understood the telesales staff to be from a workplace health and safety agency (or an affiliate of one) who called to advise them of a legal requirement to have a wall chart at the risk of inspection and penalty with the result that they agreed to order a Wall Chart Package because they understood it to be required. It is also true that a small business owner or manager might be expected to be aware that workplace health and safety laws existed, but that they would not have any detailed knowledge of those complex laws. This is especially true of sole proprietors.
265 However, there was no pressure to complete the purchase through demand for immediate payment. Had there been a demand for immediate payment to complete the purchase, then the degree of intimidation inherent in a representation which leads a small business owner or manager to believe they are dealing with a government agency in a position to punish non-compliance by fines is likely to have tipped the balance into coercion of the purchase. I do not consider that an apt characterisation in this case.
266 The fact that customers received the product with an invoice some time after the telephone calls allowed a “cooling off” period. With time to think, and having regard to the presentation of the materials, the only witness who completed a purchase of the first aid kit and wall chart package was Ms Pollard. The others contacted relevant agencies, albeit in some cases because they were notified by trade organisations of a “scam” with respect to workplace health and safety. Most of the small business witnesses did not rush to payment.
267 While there were “follow up” telephone calls in relation to Wall Chart Packages which had not been paid for, they were not immediate. The price of the products was low, which is likely to lessen the general distress caused by being followed up. It appears that Safety Compliance did in fact accept return of the materials which is inconsistent with coercion. To the extent that the fact that a return had been made did not prevent follow up action in some cases, there is no evidence that this was a deliberate attempt to collect moneys which the caller knew were not payable but rather the outcome of inefficient business systems.
268 It appears that the Final Notices were sent some months after the packages. Bizarrely, those notices seem to demand less than the cost of the package, postage and handling set out on the face of the document: that was certainly the case in the Final Notice sent to Ms Bayer. I accept that Ms Bayer was concerned by the warning in the Final Notice that her credit rating might be affected by non-payment, however it did not incline her to pay for the products she had returned to Safety Compliance.
269 Ms Pollard’s evidence is that she did feel compelled to purchase from the tenor of the telephone call which she believed came from a government agency coupled with a discussion of a legal requirement to have a wall chart and first aid kit. She does not mention a threat of fines or inspections. In my view Ms Pollard was misled, not coerced.
270 As I have found that the claimed contravention of s 60 TPA/s 50(1)(a) ACL by Safety Compliance has not been made out, none of the Active Respondents can have accessorial liability.
Video ezy Representation
271 Having regard to the uncontested evidence of Ms Cleverly, Ms Blakeney, Mr Jones, Ms Merigan and Ms Toy referred to at [109]-[127] I find that Safety Compliance, through its telesales staff in November 2011, made statements to the effect that Ms Cleverly, or another representative of Paterson Group Video Ezy, authorised and agreed to the purchase of wall charts. I accept Ms Cleverly’s evidence that she had not spoken to anyone at Safety Compliance at any time before 24 November 2011 and that she did not authorise anyone at Safety Compliance to contact store managers or supply any of the Paterson Group Video Ezy stores with wall charts. I also accept Ms Cleverly’s evidence that she made attempts on 24 and 25 November 2011 to contact Safety Compliance by email to clarify that she had never spoken to anyone at Safety Compliance and to request that Safety Compliance not send goods. She ultimately confirmed that position again in a telephone call with a caller from Safety Compliance on 11 January 2012.
272 I therefore find that Safety Compliance made the Video Ezy Representation which was false, misleading and deceptive in contravention of ss 18 and 29(1)(d) of the ACL.
Mr King
273 The ACCC admits that there is no direct evidence that Mr King had actual knowledge of the matters on which it relies to establish the Representations and Mr King denies any real knowledge of or involvement in the conduct of Safety Compliance’s business.
274 The ACCC submitted that, taken as a whole, the evidence is capable of giving rise to an inference that Mr King was the true principal and controlling mind of Safety Compliance; that he was aware of the nature of the communications being made by Safety Compliance because they had not changed substantially from his initial idea; he continued to offer support and advice to Mr Black in managing the company on Mr King’s behalf throughout 2010 and 2011; he was specifically aware of the nature of the ACCC’s allegations from at least April 2011 as set out in the March 2011 s 155 notice issued by the ACCC to Safety Compliance; and he deliberately attempted to distance himself from any visible role in Safety Compliance because he was aware of the “scam” at the heart of its operations.
275 In summary, I am not satisfied that Mr King was knowingly concerned in Safety Compliance’s contraventions of the TPA and the ACL before April 2011, but I do accept that he was knowingly concerned in its contravention of ss 18, 29(1)(a), 29(1)(h) and 29(1)(l) of the ACL from mid April 2011 in relation to wall charts and related materials until at least 15 February 2012 for the following reasons.
276 As evidence of both motivation for shielding himself from a visible role in Safety Compliance and tendency, the ACCC relies on a consent order made by the Supreme Court of New South Wales on 2 May 2008 and entered on 11 June 2008 in the matter of the Commissioner for Fair Trading v Kent Publishing Pty Ltd and Dean James King in relation to contraventions of ss 52 and 64 of the TPA and ss 42 and 58 of the Fair Trading Act 1987 (NSW). Kent Publishing Pty Ltd (Kent Publishing) agreed that it had engaged in misleading or deceptive conduct and that it had falsely asserted a right to payment in connection with the solicitation of advertising from small business owners through a telemarketing operation. Mr King, who was Kent Publishing’s sole director, agreed that he had aided, abetted, counselled or procured, induced and was directly or indirectly knowingly concerned in and party to Kent Publishing’s conduct. Mr King opposed the admission of the tendency evidence on the basis that Mr King was not a director of Safety Compliance. I determined to admit the order as evidence of motivation but not of tendency, because I was not satisfied ultimately that it had significant probative value in relation to the issue of tendency as required by s 97(1)(b) of the Evidence Act.
277 Mr King is an intelligent and astute person with significant business experience. However, he was an unsatisfactory and unreliable witness. His answer to many direct questions was equivocal. Sometimes he added “I am not saying I didn’t” closely followed by words to the effect that “I’m not saying I did”. It was not unusual for Mr King to say “I might have”, even when he went on to give evidence relating to the topic of the question. As an example, at the ACCC interview, Mr King was unwilling to admit that he had accompanied his nephew to get legal advice after the ACCC issued a notice to Safety Compliance dated 22 March 2011 until it became clear that the ACCC knew of his visit to Mr Ponting (the lawyer Mr King used in connection with Kent Publishing) and that he ran into Mr O’Halloran (the principal of AWS) at Mr Ponting’s office. By way of further example, Mr King denied understanding fundamental obligations of directors and the implications of shareholding, seeking to minimise his experience until directly confronted by the ACCC with the evidence of his directorships and shareholding of private companies disclosed in an ASIC search.
278 Further, there is an obvious difficulty that Mr Kent made himself unavailable to the ACCC investigators and was not a witness in these proceedings. However, Mr King made it clear that he was able to contact his brother, which the ACCC could not. In so far as Mr King seeks to rely on the role which he alleges Mr Kent played, I am less inclined to believe him because it was open to him to call Mr Kent’s evidence in aid of his position but he has not offered any explanation for his failure to do so.
279 To my mind Mr King deliberately obfuscated his responses at both the ACCC’s examination in December 2011 and at the hearing; if this was designed to avoid an outright lie, it does not encourage belief in Mr King’s evidence which was often self-serving and deliberately inexact.
280 I find that Mr King (through Wotam and the Safety Compliance Trust) controlled Safety Compliance and controlled the distribution of any profit it might have made at least up to February 2012. While I accept that Mr King’s accountant put the arrangements in place, I do not accept that Mr King did not fully understand the nature of his interest in Safety Compliance and the control it conferred on him. It stretches credulity beyond belief that Mr King simply forgot that Wotam was Safety Compliance’s shareholder or that he was not at all times aware that he had effective ownership and control of Safety Compliance and the distribution of any profits it might make at least up to February 2012.
281 I accept that the consent order in Commissioner for Fair Trading v Kent Publishing Pty Ltd and Dean James King was a motive for Mr King to avoid being connected overtly with a telemarketing business based on the model of AWS.
282 The evidence given by Mr King and Mr Black supports the view that Mr Kent is a successful man of business who is semi-retired, living six to eight months a year outside Australia, often in Bali and Japan with another home in Forster in New South Wales. It is not credible that such a man would simply lend $10,000 to fund the start-up of Safety Compliance and take on the duties of sole director without protecting his own interests at least to the same extent as Mr King unless he understood that the arrangement was for Mr King’s benefit. It is not credible that Mr Kent would accept that the business would be set up in such a way that he had no say or control over whether or not he remained a director or how profits were to be shared if the business was successful if it was intended that he share in those benefits. I do not accept that Mr King and Mr Kent, as directors and shareholders of operating businesses over a number of years, would not understand that Mr King had the power to appoint and remove directors of Safety Compliance and that as a director Mr Kent was constrained in how he dealt with Safety Compliance’s money. It is difficult to see why he would accept that a business in which he had an interest would, in a start-up phase, pay inflated rent to his brother, double what the previous tenant paid. That rental structure allowed Mr King to take profits from Safety Compliance without it being apparent that he was doing so.
283 The structure of the ownership and control of Safety Compliance established by Mr King’s accountant with no arrangement for sharing profits, the payment of inflated rent and the likelihood and fact of Mr Kent’s scant presence leads me to conclude that Mr Kent had no interest in Safety Compliance and he took the office of director formally to oblige his brother. It is unsurprising that he was willing to resign in August 2011 with Safety Compliance’s profitability appearing problematic and the ACCC apparently serious about pursuing its enquiries with the examination of Ms Schimmel.
284 It is uncontentious that Mr King had the idea for Safety Compliance’s business and he admits that he read the AWS materials left at the Premises on the basis of which he decided that there was a good idea for a business on a model which was familiar to Mr King, Mr Kent and Mr Black, all of whom had experience in telemarketing. Mr King also concedes that it was the expectation that the business would use the AWS “pitch”. Mr King says that he was fully engaged with Promo Direct Pty Ltd at the time. I accept that Mr Black was eager to prove himself by doing the running around and supervising staff: he admits that he is not well educated but was ambitious to do well and admired his successful uncles and wanted to emulate them. I accept that Mr Black believed that they would all share the profits if the business was successful, but there were no arrangements in place to ensure that: Mr Black simply trusted his uncles.
285 That confidence may not have been well founded. Mr Black says that he thought that Mr Kent was the sole shareholder of Safety Compliance until he was told of Mr King’s ownership following the issue of a notice by the ACCC. The evidence demonstrates that Mr Black was not just wrong about the ownership of Safety Compliance; it appears that he received a number of unpleasant surprises, including the appointment of Ms Schimmel as a director to replace Mr Kent. While Mr Black attributed Ms Schimmel’s appointment to Mr Kent’s decision, it was a question for Mr King. Mr Black says that he ultimately felt “left out in the cold”. That the uncles might not have told him everything appears likely.
286 I am satisfied that Mr Black managed the business from June 2010 until at least August 2011 for the reasons set out at [181] and that Ms Schimmel had a significant role in management from March 2011 and was a director from August 2011 as she admitted. I accept that Mr King thought the business model simple; he could reasonably expect that it would not require significant involvement from him. By giving the AWS materials and management responsibility to Mr Black and then Ms Schimmel, Mr King had the benefit of exploiting the opportunity presented by the materials left behind by AWS without much effort from himself. It was a way of using the Premises which were available after AWS vacated them and, perhaps, giving his nephew an opportunity to prove himself.
287 The question which then arises is, having regard to his ownership and capacity to control Safety Compliance, what involvement did Mr King actually have? It is Mr Black’s evidence that he reported to Mr Kent when he was there but that was not often and he did seek guidance from Mr King as an experienced man of business. Mr Black and Mr King saw each other socially almost daily. It is clear that Mr King gave advice to Mr Black on telemarketing strategies, commented on Mr Black’s thoughts concerning wall charts and at least monthly discussed Safety Compliance’s financial performance. I accept Mr Black’s evidence that it was at his instigation and the advice was in general terms.
288 Apart from handing over the AWS materials, there is no evidence that Mr King had a role in drafting or approving the documents used by Safety Compliance in its business and Mr Black and Ms Schimmel say that they did that. At best, the evidence supports the view that Mr King was cognisant of the AWS materials and read them at least enough to assess that they provided a business opportunity and that the Wall Charts Spiel was changed by Mr Black and Ms Schimmel only by removing detail of the contents of the wall charts and the need to provide credit card details. It is likely that the consent order made in Commissioner for Fair Trading v Kent Publishing Pty Ltd and Dean James King had bearing on Mr Black’s decision to amend the Wall Charts Spiel so that credit card numbers were not requested, but there is no evidence that Mr King had a role in that decision. The evidence is that Mr King simply responded to questions from time to time asked by his nephew and he referred Mr Black to a person who was “becoming an OH&S officer” in relation to emergency procedures and to a person who might assist in building a data base for Safety Compliance. There is no evidence that Mr Black discussed Safety Compliance’s complaints experience with Mr King; Mr Black’s evidence is that he did not think that the complaints experience was significant.
289 I accept that Mr King only attended at the Premises during Safety Compliance’s occupancy because of a malfunctioning air conditioner and plumbing issues and that he had no role in relation to telemarketing staff or complaints handling. It appears that only Mr Black and Ms Schimmel had a role in dealing with the telemarketers and complaints handling.
290 There is no evidence that Mr King had any knowledge of workplace health and safety laws or that he cared about the contemporary content of the materials used by Safety Compliance before the ACCC issued its notice to Safety Compliance in March 2011.
291 The notice issued by the ACCC to the “Proper Officer” of Safety Compliance on 22 March 2011 relevantly provided as follows:
1. During the period from about October 2009 to the date of these Notices (Relevant Period) Safety Compliance Pty Ltd (Safety Compliance) made representations in trade or commerce, in connection with the supply to certain businesses of a “Workplace Emergency Procedure Flipchart” (Flipchart), “Safety Procedure Wall Chart” (Wall Chart) and/or other safety-related material, to the effect that:
(a) the relevant business were required, under relevant workplace laws or regulations to purchase the Flipchart, Wall Chart, and/or other safety related material;
(b) Safety Compliance was affiliated with WorkCover NSW or other government body; and/or
(c) Safety Compliance would arrange a visit from WorkCover NSW or other government body, for the purposes of undertaking a safety inspection of the businesses which declined to purchase the Flipchart, Wall Chart, and/or other safety related material;
when in fact:
(d) during the Relevant Period, it was not a requirement under the relevant state workplace laws or regulations, including the Occupational Health and Safety Act 2000 in NSW, for businesses to purchase the Flipchart, Wall Chart or other safety related material from Safety Compliance;
(e) during the Relevant Period, Safety Compliance was not affiliated with any government body, including WorkCover NSW; and
(f) WorkCover NSW does not conduct safety inspections of businesses which decline to purchase the Flipchart or other safety related material from Safety Compliance.
2. In making the representations referred to in sub-paragraphs 1(a) to 1(c) of these Notices, Safety Compliance engaged in conduct, in trade or commerce, that was false, misleading or deceptive or likely to mislead or deceive.
3. In making the representations referred to in sub-paragraphs 1(a) to 1(c) of these Notices, Safety Compliance, in connection with the supply or possible supply of goods, coerced certain businesses into purchasing the Flipchart, Wall Chart and/or other safety related material.
…
4. During the Relevant Period, Safety Compliance accepted payments(s) and /or sent tax invoices to certain businesses requiring payment, on one or more of the terms referred to in paragraphs 1(a) to 1(c) of these Notices.
292 Mr King’s accountant advised him of the receipt of the ACCC’s notice. On 12 April 2011 the accountant advised the ACCC by email that he had only just realised his error and that he should have sent it to Mr Kent who was Safety Compliance’s director. Mr King says that when he discussed the notice issued by the ACCC with Mr Kent, Mr Kent said “Whatever” because as far as he was concerned the allegations were “just completely not true anyway”. Mr King conceded that he supposed the allegations were serious.
293 Mr Black’s evidence is that because Mr Kent was absent and Mr King is his uncle, Mr Black approached Mr King for advice when he became aware from Ms Schimmel that the ACCC had served a notice on Safety Compliance at its registered office in March 2011.
294 Mr King went with Mr Black to see the solicitor Mr King used for Kent Publishing (Mr Ponting) for advice about the notice from the ACCC. There he ran into the owner of AWS (Mr O’Halloran). Mr Ponting was conflicted from acting for Safety Compliance because he acted for AWS in relation to the same sort of issue. Mr Ponting referred Mr King and Mr Black to another lawyer (Arcuri Lawyers). Mr King and Mr Black both attended the meeting about the notice with Arcuri Lawyers.
295 When questioned whether, on 20 April 2011, he had left a message on Mr O’Halloran’s office telephone to the effect that they would be “fighting this together”, Mr King first said that he “might have” done this, but then denied it. He was equivocal about whether he had a conversation with Mr O’Halloran about the ACCC notices two days later.
296 I do not accept Mr King’s evidence concerning his knowledge of the ACCC’s notice. He does not say that he did not read the notice, but that “he does not think” that he did. Mr King’s obfuscation is not credible. It is not credible that Mr King was unconcerned by the notice as it was issued to a company which he owned through Wotam and whose business he benefited from through the receipt of rent. Even assuming that he had no day to day role in Safety Compliance, Mr King had an interest in the company’s success. It is not believable that he would have no concern about being drawn into another ACCC investigation relating to telemarketing. I do not accept that Mr King went with his nephew to two lawyers to obtain legal advice about the notice simply to support his nephew. Further, Mr King admits knowing that the notice related to an allegation of false or misleading conduct by Safety Compliance. He was concerned enough to call Mr Halloran and leave a message about “fighting this together”.
297 I find that Mr King knew that Safety Compliance would conduct its business in accordance with the AWS “pitch”, including a wall charts spiel substantially the same as that which Safety Compliance adopted. He was made aware of the nature of the representations which the ACCC alleged Safety Compliance made about the requirement for wall charts and concerning whether it was, or was affiliated with a workplace health and safety agency from around at least mid-April 2011. I have found that the ACCC has made out those claims. Mr King was, in terms and from a credible source, put on notice that workplace health and safety laws do not require small business owners to own a wall chart of the kind sold by Safety Compliance and he knew that Safety Compliance was not in fact a workplace health and safety agency or affiliated with one. While it is true that Cubicle Signs were put up around the time that the ACCC issued its notice, for reasons previously expressed the Cubicle Signs were not effective to prevent customers forming the view that they were being contacted by a workplace health and safety agency (or an affiliate of one) and no steps were taken to prevent customers forming the belief that they were being told by the telemarketers that there was a requirement to have a wall chart of the kind sold by Safety Compliance.
298 The ACCC’s notice did not address in terms first aid kits and there is no evidence that Mr King was aware of the First Aid Kit Order Confirmation Form. I therefore make no finding that Mr King was involved in Safety Compliance’s contravention by reason of the First Aid Kits Representation.
Conclusion
299 I decline to make any disclosure order or adverse publicity order in relation to Safety Compliance having regard to the fact that it ceased to carry on business on or before September 2012. I will otherwise make declarations reflecting my findings in these reasons.
300 I will consult with the parties concerning a timetable for submissions relating to the nature and extent of any injunction, pecuniary penalties or disqualification orders which should be made and costs.
I certify that the preceding three hundred (300) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Farrell. |
Associate:
