FEDERAL COURT OF AUSTRALIA

Australian Competition and Consumer Commission v Lux Distributors Pty Ltd (No 2) [2015] FCA 903

THE COURT ORDERS THAT:

1.    The respondent pay to the Commonwealth of Australia, within 30 days of the date of this order, a pecuniary penalty pursuant to s 76E of the Trade Practices Act 1974 (Cth) in the sum of $185,000 in respect of the conduct referred to in Order 2(b) made by the Full Court on 15 August 2013.

2.    The respondent pay to the Commonwealth of Australia, within 30 days of the date of this order, a pecuniary penalty pursuant to s 224 of the Australian Consumer Law in Sch 2 to the Competition and Consumer Act 2010 (Cth) in the sum of $185,000 in respect of the conduct referred to in Order 2(c) made by the Full Court on 15 August 2013.

3.    The respondent be restrained, whether by itself, its agents, servants or howsoever otherwise, in trade or commerce, from:

(a)    contacting any person to arrange for any of its sales agents to attend at that person’s residence without disclosing in that communication that:

(i)    the person who will be attending the residence is the respondent’s sales agent;

(ii)    while attending the residence, the respondent’s sales agent may offer a Lux product for sale; and

(iii)    the person may wish to arrange to have another person present to assist them when the respondent’s sales agent attends that person’s residence;

(b)    demonstrating, or continuing to demonstrate, a Lux product to any person at their home who has asked the price of that product without first telling that person the price at which the product is offered for sale;

(c)    selling or attempting to sell a Lux product to any person after having represented to that person that their existing vacuum cleaner is unsafe, dangerous, unserviceable or otherwise not fully functional without first informing that person of the option of having their existing vacuum cleaner repaired; and

(d)    in respect of the sale of a Lux product to a person at that person’s residence, accepting any consideration from that person, including a post dated cheque or bank debit details, until a period of 10 days has elapsed following the date on which that person agreed to purchase the Lux product.

4.    The respondent:

(a)    establish the Compliance and Education / Training Program set out in Annexure 1 to this Order for its employees, its agents or other persons involved in its business, being a program designed to :

(i)    ensure their awareness of the responsibilities and obligations in relation to the conduct declared by the Full Court to be in contravention of s 51AB of the Trade Practices Act 1974 (Cth) and s 21 of the Australian Consumer Law and any similar or related conduct; and

(ii)    revise the internal operations of its business which ked to it engaging in the conduct declared by the Court in this proceeding to be in contravention of s 51AB of the said Act and s 21 of the said Law;

(b)    maintain and administer, at its own expense, the Compliance and Education / Training Program set out in Annexure 1 for a period of three years; and

(c)    provide, at its own expense, a copy of any documents to be provided to the ACCC pursuant to Annexure 1.

5.    There be no order as to costs.

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

ANNEXURE 1

COMPLIANCE AND EDUCATION / TRAINING PROGRAM

Interpretation

(1)    In this Annexure:

(a)    “ACCC” means the Australian Competition and Consumer Commission;

(b)    “ACL” means the Australian Consumer Law comprising Schedule 2 to the Competition and Consumer Act 2010 (Cth);

(c)    “CCA” means the Competition and Consumer Act 2010 (Cth);

(d)    “Compliance Advisor” means the person defined in paragraph 6 below;

(e)    “Compliance Officer” means the person appointed under paragraph 2 or 3 below;

(f)    “Compliance Policy” means the policy defined in paragraph 8 below;

(g)    “Compliance Program” means the Compliance and Education / Training Program in this Annexure;

(h)    “Compliance Program Review Report” is the report defined in paragraph 20 below;

(i)    “Compliance Trainer” is defined in paragraph 15 below;

(j)    “Contravening Conduct” means the conduct declared by the Federal Court of Australia in these proceedings to be in contravention of Part 2-2 of the ACL;

(k)    “External Reviews” means the reviews required by paragraph 19 below;

(l)    “Lux” means the respondent;

(m)    “Order of the Court” means the relevant order(s) of the Federal Court of Australia made in these proceedings;

(n)    “Relevant Provisions” means section 21 of the ACL which was contravened by the Contravening Conduct and Division 2 of the ACL which is relevant to the Contravening Conduct;

(o)    “Respondent’s Program” means the steps taken by Lux to comply with the Order of the Court in relation to the Compliance Program;

(p)    “Reviewer” is defined in paragraph 19(b) below;

(q)    “Risk Assessment” means the assessment required by paragraph 6 below;

(r)    “Risk Assessment Report” means the report required by paragraph 7 below;

(s)    “Training” means the training required by paragraph 14 below.

Compliance Officer

(2)    Lux must, within one month of the date of the Order of the Court, appoint a Director or a senior employee with suitable qualifications or experience in corporate compliance as Compliance Officer with responsibility for ensuring that the Compliance Program is effectively established, maintained and administered in accordance with the Order of the Court.

(3)    After the appointment of the Compliance Officer in accordance with paragraph 2, Lux must take all reasonable steps to ensure that, for the duration of the Order of the Court, there is a Director or a senior employee with suitable qualifications or experience in corporate compliance appointed as Compliance Officer with responsibility for ensuring that the Compliance Program is effectively established, maintained and administered in accordance with the Order of the Court.

(4)    Lux must take all reasonable steps to ensure that for the duration of the Order of the Court the Compliance Officer discharges his or her responsibility of ensuring that the Compliance Program is effectively established, maintained and administered in accordance with the Order of the Court.

(5)    Lux must take all reasonable steps to ensure that the Compliance Officer reports in writing to Lux’s director(s) every six months with respect to the on-going maintenance and administration of the Compliance Program including, in particular, whether the Respondent’s Program is effectively:

(a)    ensuring an awareness by the employees and other persons involved in Lux’s business of their responsibilities and obligations in relation to the Relevant Provisions; and

(b)    revising the internal operations of Lux’s business which led to Lux engaging in the Contravening Conduct.

Risk Assessment

(6)    Lux must, within one month of the date of the Order of the Court, appoint a qualified, internal or external, compliance professional with expertise in trade practices issues (Compliance Advisor) to conduct a risk assessment to:

(a)    identify the areas of Lux’s business where it is at risk of contravening the Relevant Provisions;

(b)    assess the likelihood of any such contravention occurring;

(c)    identify where there are deficiencies in Lux’s procedures for managing any such risk;

(d)    make findings concerning sub-paragraphs (a) to (c) above; and

(e)    make recommendations for action having regard to sub-paragraphs (a) to (d) above (Risk Assessment).

(7)    Lux must instruct the Compliance Advisor to set out, and must take all reasonable steps to ensure that the Compliance Advisor sets out, the findings and recommendations of the Risk Assessment in a written report (Risk Assessment Report), to be provided to Lux’s director(s) within two months of his or her appointment.

Compliance Policy

(8)    Lux must, within 30 days of the date of the Order of the Court, establish a policy (Compliance Policy) which is communicated in writing to all employees and other persons involved in Lux’s business regarding compliance with the ACL, which must include:

(a)    a statement of commitment by Lux to comply with the Relevant Provisions;

(b)    a direction to all employees or other persons involved in Lux’s business to report any compliance related issues and ACL compliance concerns to the Compliance Officer;

(c)    a statement guaranteeing that employees or other persons involved in Lux’s business making a complaint or report in relation to Lux’s compliance with the Relevant Provisions will not be prosecuted or disadvantaged in any way by reason of their complaint or report and that their complaint or report will be kept confidential and secure; and

(d)    a statement that Lux will take disciplinary action against any persons who are knowingly or recklessly concerned in a contravention of the Relevant Provisions and will not indemnify them.

(9)    Lux must take all reasonable steps to ensure that the Compliance Program is maintained and administered in a manner that is consistent with the Compliance Policy for the duration of the Order of the Court.

(10)    Lux will provide to all new employees, agents or other persons involved in its business at the commencement of their employment or involvement with Lux:

(a)    a copy of the Compliance Policy; and

(b)    a copy of the Court’s order in the proceeding issued by the ACCC against Lux in April 2012.

Complaints Handling System

(11)     Lux must establish, maintain and administer a trade practices complaints handling system which records all complaints it receives in respect of its direct selling activities and all steps it has taken in response to those complaints.

(12)    Within 14 days of receiving a written request from the ACCC, Lux must provide the ACCC with a summary of the complaints it has received and recorded and the steps it has taken in response to those complaints together with a copy of any correspondence by which the complaint was made or by which Lux has responded to the person who made the complaint pursuant to paragraph 11 above.

(13)    Lux must take all reasonable steps to ensure that the trade practices complaints handling system is in accordance with AS/ISO 10002:2006 Customer satisfaction – Guidelines for complaints handling in organizations, though tailored to its own circumstances and the particular requirements under paragraphs 11 and 12 above (Complaints Handling System).

Training

(14)    Lux must take all reasonable steps to ensure that all directors, officers, employees, representatives and agents of Lux, whose duties could result in them being concerned with conduct that may contravene the Relevant Provisions, receive practical training regarding the ACL (Training) no less than once annually.

(15)    The Training must be conducted by either a suitably qualified compliance professional or legal practitioner with expertise in the ACL (the Compliance Trainer).

(16)    Lux must instruct the Compliance Trainer to design the Training, and must take all reasonable steps to ensure that the Training is designed, to ensure that the persons at the Training are made aware of:

(a)    the responsibilities and obligations in relation to the Relevant Provisions;

(b)    the potential consequences of contravening the Relevant Provisions;

(c)    (c) the areas of Lux’s business where it is at risk of contravening the Relevant

(d)    Provisions, as identified in the Risk Assessment Report; and

(e)    (d) the content of the Compliance Program.

(17)    Lux must provide to the Compliance Trainer, for the purposes of conducting the Training, a copy of:

(a)    the Order of the Court;

(b)    the Compliance Policy;

(c)    the Complaints Handling System; and

(d)    the Risk Assessment Report.

(18)    Lux must take all reasonable steps to ensure that an awareness of the Compliance Program forms part of the induction of all new directors, officers, employees, representatives and agents, whose duties could result in them being concerned with conduct that may contravene the Relevant Provisions.

External Review

(19)    Lux must take all reasonable steps to ensure that annual reviews of Lux’s compliance with the Order of the Court are carried out in accordance sub-paragraphs (a) to (d) below (External Reviews):

(a)    Scope of the External Reviews – The External Reviews are to ascertain whether the Respondent’s Program:

(i)    has made the employees and other persons involved in Lux’s business aware of their responsibilities and obligations in relation to the Relevant Provisions;

(ii)    has revised the internal operations of Lux’s business in relation to the Relevant Provisions and the circumstances that led to the Contravening Conduct; and

(iii)    is effectively maintaining and administering the Compliance Program.

(b)    Independence of Reviewer – Lux must take all reasonable steps to ensure that all External Reviews are carried out by a suitably qualified, independent compliance professional with expertise in the ACL and/or the CCA (Reviewer). The Reviewer will qualify as independent on the basis that he or she:

(i)    is not a present or past director, employee or officer of Lux;

(ii)    has no significant shareholding or other interests in Lux;

(iii)    has not acted for or consulted to, and does not act for or consult to, Lux in any matters involving alleged contraventions of the ACL and/or the CCA;

(iv)    has not acted for or consulted, and does not act for or consult to, Lux or provide other services in relation to this Compliance Program, other than as the Reviewer in a previous year; and

(v)    has no conflict of interest in carrying out the Reviews.

(c)    Evidence– Lux must take all reasonable steps to ensure that in the conduct of the External Reviews the Reviewer has access to all relevant sources of information in Lux’s possession or control, including access to:

(i)    any officers, employees, representatives or agents of Lux;

(ii)    any relevant records of Lux, including its complaints register/reports and any documents relevant to the Training or its induction program; and

(iii)    any documents created by Lux’s consultants or legal advisers for use in relation to the Respondent’s Program.

(d)    Timing– Lux must take all reasonable steps to ensure that the first External Review is completed within one year of the date of the Order of the Court and that each subsequent External Review is completed within one year thereafter, save that all steps to be taken by Lux in relation to the final External Review are to be completed one month prior to the expiration of the Order of the Court.

(20)    Lux must instruct the Reviewer to set out, and must take all reasonable steps to ensure that the Reviewer sets out, the findings of each of the External Reviews in a written report (Compliance Program Review Report) which addresses each of the following:

(a)    details of the evidence gathered and examined during the External Review;

(b)    the name and relevant qualifications/experience of the person appointed as the Compliance Officer;

(c)    if, and to what extent, the Respondent’s Program includes all the elements and requirements of the Compliance Program;

(d)    if, and to what extent, the Respondent’s Program covers the areas identified in the Risk Assessment; and

(e)    recommendations that the Reviewer considers are reasonably necessary to ensure that the Respondent’s Program effectively maintains and administers the Compliance Program.

(21)    Lux must instruct the Reviewer to complete and provide the Compliance Program Review Report to it, and must take all reasonable steps to ensure that the Compliance Program Review Report is completed and provided to it, within one month of each Review.

(22)    Lux must retain each Compliance Program Review Report.

(23)    Within 30 days of the receipt of each Compliance Program Review Report, Lux’s director(s) must hold a meeting to consider the matters described in paragraph 23 below.

(24)    At the meeting referred to in paragraph 23 above, Lux’s director(s) must consider:

(a)    the Compliance Program Review Report;

(b)    whether to make any changes to the Respondent’s Program to more effectively implement the Compliance Program for the purposes of:

(i)    ensuring an awareness for the employees or other persons involved in Lux’s business of their responsibilities and obligations in relation to the Relevant Provisions; and

(ii)    revising the internal operations of Lux’s business in relation to the circumstances that led to the Contravening Conduct; and

(c)    any recommendations of the ACCC for the purposes of sub-paragraph (b) above.

(25)    Within 14 days of holding the meeting referred to in paragraph 23 above, Lux must advise the ACCC in writing of:

(a)    details of when the meeting was held and who was present; and

(b)    the outcome of the meeting, including:

(i)    what, if any, changes Lux decided to make to the Respondent’s Program to more effectively implement the Compliance Program and details of the proposed implementation of any changes; and

(ii)    the decisions made by Lux about each of the recommendations that had been made by the ACCC (if any).

(26)    Within 14 days of holding a meeting referred to in paragraph 24 above at which Lux decides to make changes to the Respondent’s Program it must take all reasonable steps to communicate those changes to all employees or other persons involved in Lux’s business.

Supply of Documents to the ACCC

(27)    Lux must within 14 months of the date of the Order of the Court, cause to be produced and provided to the ACCC copies of each of the following documents:

(a)    documents evidencing the appointment of the Compliance Officer and Compliance Adviser;

(b)    the Risk Assessment Report;

(c)    the Compliance Policy and the documents evidencing its implementation; and

(d)    documents evidencing the provision of Training, including all materials used in the Training.

(28)    Lux must provide a copy of each Compliance Program Review Report to the ACCC within 14 days of its receipt from the Reviewer.

If requested in writing by the ACCC, Lux must, at its own expense, provide copies of documents and information constituting or evidencing compliance or non-compliance with the Order of the Court.

REASONS FOR JUDGMENT

1    On 15 August 2013, the Full Court set aside Orders 1 and 2 made in this proceeding on 8 February 2013, and made the following orders in lieu thereof:

(a)    The Court declares that in or around February 2010, in trade or commerce and in connection with the promotion and supply of a Lux vacuum cleaner to Mrs Hazel Oxley at her home on 12 February 2010, the respondent engaged in conduct that was, in all the circumstances, unconscionable in contravention of s 51AB of the Trade Practices Act 1974 (Cth).

(b)    The Court declares that in or around September 2010, in trade or commerce and in connection with the promotion and supply of a Lux vacuum cleaner to Mrs Mavis May at her home on 23 September 2010, the respondent engaged in conduct that was, in all the circumstances, unconscionable in contravention of s 51AB of the Trade Practices Act 1974 (Cth).

(c)    The Court declares that in or around July 2011, in trade or commerce and in connection with the promotion and supply of a Lux vacuum cleaner to Mrs Margaret Baird at her home on 5 July 2011, the respondent engaged in conduct that was, in all the circumstances, unconscionable in contravention of s 21 of the Australian Consumer Law.

(d)    The applicant’s application for relief in relation to the conduct of Lux in connection with the promotion and supply of a Lux vacuum cleaner to:

(i)    Mrs Hazel Oxley in or around February 2010;

(ii)    Mrs Mavis May in or around September 2010; and

(iii)    Mrs Margaret Baird in or around July 2011,

otherwise be remitted for hearing by a judge of this Court.

2    On 5 March 2015, the parties filed a minute of the orders that they proposed should be made in the final determination of the proceeding. Although the proposed orders were expressed to be “by consent” in that minute, that would not be an accurate description of the orders which the parties jointly sought. It is true that the terms of the orders are now a matter of agreement between the parties, but that agreement was made in the context of the final determination of a contested proceeding. The orders will reflect that determination.

3    Notwithstanding that terminological reservation, save in one respect to which I shall refer below, the orders sought by the parties are conventional ones uncontroversially reflecting the success which the applicant achieved in the Full Court. I consider them to be appropriate in the circumstances. The fact that they are the subject of agreement is relevant, of course, but there is nothing to suggest that they, or something very much like them, would not have been the orders which the court would have made if called upon to determine the matter by adjudication. Of the orders which accompany these reasons, Nos 3 to 5 are in this category.

4    The excepted category to which I have referred relates to the appropriate penalties for the second of the two contraventions of s 51AB of the Trade Practices Act 1974 (Cth) (“the TP Act”) (Mrs May) and the contravention of s 21 of the Australian Consumer Law (“the ACL”) (Mrs Baird) found by the Full Court. When the parties filed their minute of proposed orders, they included an agreed penalty figure for each of these contraventions. In a memorandum setting out the submissions which would jointly be made by the parties, and in the submissions in fact made on 24 February 2015, I was invited to approach that agreed figure by reference to the principles articulated in NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (1996) 71 FCR 285 and Minister for Industry, Tourism & Resources v Mobil Oil Australia Pty Ltd [2004] FCAFC 72.

5    On 1 May 2015, the Full Court delivered judgment in Director, Fair Work Building Industry Inspectorate v Construction, Forestry, Mining and Energy Union (2015) 229 FCR 331 (“the Building Industry case”). It ruled that, in a case in which civil penalties were sought for a contravention of a statutory provision, NW Frozen Foods and Mobil Oil should not be followed.

6    I gave the parties the opportunity to file further written submissions as to the significance of the Building Industry case to the task required of the court in the present case. They each took that opportunity.

7    On behalf of the applicant, it is now submitted that the court should not have regard to the parts of the joint submission and consent order that addressed the quantum of the pecuniary penalties sought jointly by the parties. The specific paragraphs of the joint submission to which the court should not refer are identified. On behalf of the respondent, it is now submitted that the court should not have regard to the parties’ written or oral submissions as to the appropriate penalties to be imposed. If there is a difference between these positions, it is a subtle one. Although it was invited to file its further submissions some three weeks after the applicant had filed its further submissions, and did so, the respondent did not take the opportunity to resist the approach which, in the submission of the applicant, should now be taken conformably with the Building Industry case. I propose to accept the applicant’s submissions in this regard.

8    For the acts and omissions of the respondent constituting its contravention of s 51AB of the TP Act in respect of Mrs May, the court is empowered, under s 76E(1) of the TP Act, to order the respondent to pay to the Commonwealth such pecuniary penalty as the “as the Court determines to be appropriate”. Subsection (2) of s 76E provides:

In determining the appropriate pecuniary penalty, the Court must have regard to all relevant matters including:

(a)    the nature and extent of the act or omission and of any loss or damage suffered as a result of the act or omission; and

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

(c)    whether the person has previously been found by the Court in proceedings under Part VC or [Part VI] to have engaged in any similar conduct.

9    For the acts and omissions of the respondent constituting its contravention of s 21 of the Australian Consumer Law (“the ACL”) in respect of Mrs Baird, the court is empowered, under s 224(1) of the ACL, to order the respondent to pay to the Commonwealth such pecuniary penalty as the “as the court determines to be appropriate”. Subsection (2) of s 224 provides:

In determining the appropriate pecuniary penalty, the court must have regard to all relevant matters including:

(a)    the nature and extent of the act or omission and of any loss or damage suffered as a result of the act or omission; and

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

(c)    whether the person has previously been found by a court in proceedings under Chapter 4 or [Part 5-2] to have engaged in any similar conduct.

10    In the present case it is accepted by the parties that the references in ss 76E(2) and 224(2) to “all relevant matters” must be understood to encompass, additionally to what is set out in those subsections, matters such as the following:

    The size of the respondent.

    The deliberateness of the contraventions and the period over which they extended.

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

    Whether the respondent has a corporate culture conducive to compliance with the legislation, as evidenced by educational programs and disciplinary or other corrective measures in response to an acknowledged contravention.

    Whether the respondent has shown a disposition to co-operate with the authorities responsible for the enforcement of the legislation in relation to the contravention.

That is a modified version of the checklist proffered by French J in Trade Practices Commission v CSR Limited [1990] FCA 521 at [42] and endorsed by the Full Court in NW Frozen Foods (71 FCR at 292), the binding effect of the latter judgment in this respect not having been affected by the Building Industry case.

11    The parties agreed that I should also take into account the respondent’s financial position, and whether its contravening conduct was systematic, deliberate or covert.

12    An overarching consideration in the fixing of penalties in cases such as this, of course, is the primacy of deterrence, both specific and general. This has been recognised in a number of authorities over the years, and the parties in this case are agreed on it. The penalty to be fixed should be such as to deter the respondent itself from engaging in conduct in contravention of provisions of the ACL in the future and, I would add given the nature of the contraventions found by the Full Court, to provide a real incentive to the respondent to tread cautiously, and in doubtful cases to take legal advice, when minded to deploy unconventional techniques in its quest to maximise the sales of its products. The penalty should also be such as will send a message to other manufacturers and traders that pecuniary penalties attendant upon findings of contraventions of the ACL are not to be regarded as no more than part of the cost of doing business in Australia.

13    The parties treated the nature and extent of the respondent’s contravening conduct, and the circumstances in which the conduct took place, as a single, composite, consideration.

14    In their joint written submission, the parties referred, at some length, to the facts of the case as I had found them in my reasons of 8 February 2013, both at the general level and in respect of the conduct of the respondent’s representatives who called upon Mrs May and Mrs Baird. The Full Court found that those facts were to be characterised as demonstrating unconscionable conduct on the part of the respondent in each instance.

15    At the general level, the parties in their joint written submission emphasised that the feature of the respondent’s conduct involved –

(a)    a Lux representative making a scripted telephone call in which they offered to arrange a time for another Lux representative to provide a “free maintenance check” to a prospective customer, which was a “deceptive ruse” to gain entry to the home;

(b)    the carrying out of the maintenance check by the Lux representative in the home, which was the first part of a body of conduct that saw the representative remain in the home long enough to win the confidence of the person and to convince the person that the tests conducted by the Lux representative disclosed the need for a new vacuum cleaner.

16    In relation to Mrs May, the parties emphasised that the respondent’s conduct involved its representative contravening ss 62B and 62E of the Fair Trading Act 1999 (Vic) by remaining on Mrs May’s premises for more than an hour without obtaining written consent and failing to inform her that he was not permitted by law to remain on her premises for more than an hour without consent. The parties drew attention to para 52 of the Full Court’s reasons:

An opportunity to sell a product through extended demonstration in the home was obtained by deception. The representative contravened a provision of State law designed to limit the time that the selling technique could be practised. In those circumstances, the 93-year-old householder was prevailed upon to buy the product against her better judgment in a state of exasperation. This was unconscionable.

17    In relation to Mrs Baird, the parties emphasised that the respondent’s conduct involved its representative failing to state the true purpose of his visit as soon as practicable upon calling on Mrs Baird in contravention of section 74 of the ACL. They drew attention to the finding that the respondent’s conduct in taking “advantage of a deceptive ruse practised on an 89-year-old woman living alone was unconscionable”; and to the following passage in the Full Court’s reasons (para 39):

[T]he sales method practised on an 89-year-old woman left her with the feeling that it was too late to say that she could not buy. [The representative] had, no doubt skilfully, undertaken his selling by unpacking and demonstrating the new model, thereby creating in an elderly woman a subtle but real sense of obligation to buy. Such feeling is generated by the solicitous conduct of the sales person going to such trouble in her home over a period of time. Once access was gained to the home of the elderly Mrs Baird, she was prevailed upon by a long process of demonstration and selling interaction to buy something expensive that she did not really want. The subtle vulnerability of Mrs Baird in her own home was made possible only by a deception, compounded by a contravention of a provision designed to protect her from the very process that was used to prevail upon her. She had said (during the telephone call) she did not want to buy. [The representative] knew why he should keep his true purpose to himself. By doing so, he was able to prevail upon Mrs Baird.

18    Of its nature, unconscionable conduct tends to be described in terms which imply ethical or moral culpability and which, therefore have the appearance of emphasising the seriousness of the wrongdoing concerned. Language of this nature may be seen in the reasons of the Full Court. It must be borne in mind, however, that their Honours were concerned only with the question whether the respondent’s conduct was unconscionable. They said nothing that would enable me to discern where they would place that conduct on the spectrum of unconscionable conduct, from the least to the most serious. Neither was any submission made on behalf of the applicant that the conduct was at or near the serious end of such a spectrum. That unconscionable conduct might ever be described as involving no more than a technical or token contravention of the relevant provision strikes one as anomalous but, subject only to that rider, I proceed on the basis that the nature and extent of the contraventions, and of the circumstances under which they occurred, were as stated by the Full Court, without any particular placement in the spectrum of seriousness.

19    In their joint written submission, the parties noted that the money paid by Mrs May and Mrs Baird for their vacuum cleaners had been refunded to them, and that, as a result, they did not suffer any quantifiable loss or damage.

20    The parties noted that, in 2004, the court found that the respondent had engaged in unconscionable conduct in relation to the sale of a vacuum cleaner to a vulnerable consumer during a single transaction on 26 August 1999. The court made declarations and ordered that a trade practices compliance program be implemented over two years.

21    The parties jointly submitted that the respondent is a small, family-owned, business currently trading at a loss. It is a minor supplier in the market for domestic vacuum cleaners in Australia, with a very small market share. Over the five financial years to 30 June 2014, the respondent’s total profit before tax was $411,458, of which $322,607 represented the gain made from selling the building which the respondent owned, and from which it operated its business. As at 30 June 2014, the respondent’s total assets were valued at $1,377,879 (including fixed assets of $53,015), and its total liabilities were valued at $7,514,646 (including long-term liabilities of $7,031,150).

22    Here I remind myself that the size of the contravenor is significant in the determination of an appropriate penalty chiefly because of its direct impact upon the deterrent which the penalty represents, both specifically and generally: see Australian Competition and Consumer Commission v BAJV Pty Ltd [2014] FCAFC 52 at [41]. I should fix a penalty in the present case which will deter the respondent itself, given its size and financial situation generally, and which will appear to others as an outcome, for a business of about the size and circumstances of the respondent, resolutely to be avoided.

23    I was told that there has been adverse publicity for the respondent in connection with this proceeding and the Full Court’s findings of contravention. This has caused significant damage to the respondent’s reputation and business, and is likely to have an adverse effect on its business into the future. The proceeding, the findings of contravention and the resultant publicity have coincided with a significant decline in the respondent’s sales and in the size of its operations.

24    The respondent’s contravening conduct was deliberate, as distinct from inadvertent. In this respect, the parties emphasised the Full Court’s observation that the scripted telemarketing approach used by the respondent was –

... at best, a deceptive half-truth. It was plainly designed to create an expectation of a free service by someone who was otherwise intending to be in the area. This expectation and acceptance of the invitation for a free maintenance check was plainly designed to gain entry for the sales person to the home of the customer for the purpose of selling a vacuum cleaner.

25    The parties submitted that the respondent’s senior management was not aware of the conduct of its representatives at the homes of Mrs May and Mrs Baird at the time that conduct occurred. Nor were they aware of every detail of the continuum of conduct that amounted to unconscionable conduct in contravention of the TP Act and ACL. However, the respondent’s senior management had responsibility for the script for the initial telemarketing call and the method of selling which involved offering and conducting the free maintenance check, which was central to the Full Court’s findings of unconscionability. The respondent’s senior management was also aware that Lux sales representatives did not stand to earn any remuneration for their attendance on consumers unless they sold a vacuum cleaner, in which case they were entitled to commission.

26    On the other hand, the present is not in that class of case in which the contravenor not only acts deliberately, but does so knowing that his or her conduct was unlawful, such as, perhaps, a case in which a statement known to be wrong is made in connection with the sale of a product. Here, it was not suggested that the respondent’s management actually knew that the conduct in question was unconscionable. That it was is now known by reason of the characterisation given the conduct by the Full Court. The point is that this is not a case in which the respondent set out to break the law, nor even one in which it engaged in conduct which, had it given the matter a moment’s thought, it must necessarily have appreciated would have amounted to a breach of the law.

27    In their joint submission, the parties informed me that, at the time of the contravening conduct, the respondent had no formal trade practices compliance program in place. But the training provided to its representatives did contain references to the ACL door to door trading (and other) requirements. In 2009, a member of the respondent’s staff provided training on the TP Act to its sales representatives, who each signed an agreement in relation to compliance with that Act.

28    The respondent co-operated with the the applicant’s investigation prior to the commencement of this proceeding by providing responses to its document requests and offering to give further assistance. In the immediate context of the hearing with which these reasons are concerned, the respondent co-operated by its willingness to resolve the question of relief by consent, avoiding the need for a contested hearing on that aspect.

29    I approach the determination of penalties in the present case on the footing that the respondent’s conduct in relation to Mrs May and Mrs Baird involved two contraventions, each separate from the other in form and in substance. The applicant accepted, however, that the totality principle is proper to be applied in this case. In taking that approach, the court is concerned that the totality of the respondent’s liability to penalties is just and appropriate having regard to all of the circumstances, including the linkages, and common factors, that may be observed as between the two contraventions.

30    For a corporation, the maximum penalty in each case is $1,100,000.

31    Taking all of the above matters into account, I consider that a just and appropriate penalty for each of the contraventions established in the present case is $185,000. This will result in the respondent having to pay a total of $370,000 in penalties, representing about 90% of its pre-tax profit over the five years to 30 June 2014. On one view, this may be regarded as a harsh outcome for a company involved in two contraventions, but, against the indication given by the legislature that, for the most serious cases, a penalty of $1,100,000 may be imposed for a single contravention, and having regard to the various matters discussed above in these reasons, I have come to the view that the proposed penalties are appropriate.

Associate:

Dated:    21 August 2015