FEDERAL COURT OF AUSTRALIA

Australian Competition and Consumer Commission v Zen Telecom Pty Ltd (No 2) [2015] FCA 1226

THE COURT ORDERS THAT:

1.    The respondent be discharged from any further compliance with the Compliance Program the subject of paragraph 6 of the orders made by consent on 30 September 2014.

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

REASONS FOR JUDGMENT

1    On 30 September 2014, as a result of admissions made by Zen Telecom Pty Ltd that, as alleged by the Australian Competition and Consumer Commission (ACCC), it had made false or misleading representations regarding its association with Telstra Corporation Limited and contravened unsolicited consumer agreement provisions of the Australian Consumer Law (Sch 2 to the Competition and Consumer Act 2010 (Cth)) (ACL), the Court made a number of orders for declaratory relief, injunctions, a pecuniary penalty, non-punitive orders and costs. See Australian Competition and Consumer Commission v Zen Telecom Pty Ltd [2014] FCA 1049.

2    Paragraph 6 of the orders made 30 September 2014 (Orders) required Zen Telecom to undertake a compliance program to the following effect:

6.    Zen Telecom will at its own expense:

(a)    establish, within three months of the date of this order, a Competition and Consumer Law Compliance Program (Compliance Program) which meets the requirements set out in Annexure A and maintain the Compliance Program for three years from the date on which it is established; or

(b)    if it already maintains an existing Compliance Program:

(i)    within three months of the date of this order, review the existing Compliance Program and make any amendments necessary to ensure that it meets the requirements set out in Annexure A; and

(ii)    maintain this program for at least three years from the date on which the amendments referred to in order (6)(b)(i) are made.

3    Zen Telecom now applies, by interlocutory application filed 14 October 2015, for an order that it be discharged from any further compliance with that Compliance Program.

4    The ACCC has confirmed, in correspondence to Zen Telecom, that it consents to the orders sought, on the basis of certain understandings.

5    The question is whether the Court should discharge Zen Telecom from further compliance with the Compliance Program the subject of para 6 of the Orders.

Background

6    The application of Zen Telecom is supported by an affidavit of Mr Sanjay Bhayani, who is and has been at all times since Zen Telecom was incorporated in June 2012 its sole director, secretary and shareholder. The company is the trustee of his family trust.

7    Mr Bhayani in his affidavit, dated 23 September 2015, deposes to the following background.

8    From August 2012 until 28 February 2015, Zen Telecom carried on business supplying telecommunications services to the public. The events that resulted in this proceeding being filed by the ACCC occurred in the course of that business. The proceeding was resolved through the making of the Orders.

9    With effect from 1 March 2015:

    Zen Telecom’s customer base was sold to Smart Business Telecom Pty Ltd, a company which was formerly Zen Telecom’s wholesale service supplier;

    Zen Telecom ceased carrying on business supplying telecommunications services to the public, or at all, and has no customers; and

    Zen Telecom remains registered only for the purpose of collecting various debts owed to it, complying with the Orders and otherwise finalising its affairs.

10    In fact, when Zen Telecom’s affairs have been finalised, Mr Bhayani says it is intended that Zen Telecom be wound up. It is anticipated this will occur within six months, depending on the rate of its debt collections.

compliance with the earlier orders

11    Mr Bhayani further states that Zen Telecom has complied with the Orders made on 30 September 2014 to the extent that they have already fallen due for compliance. In that regard he says as follows:

    Paragraphs 1 to 4 of the Orders contain injunctions that restrain Zen Telecom (whether by itself or through its servants and agents) from engaging in specified conduct in relation to telemarketing calls and other dealings with potential and actual consumers of telecommunications services for a period of three years from 30 September 2014.

    As noted above, as of 1 March 2015 Zen Telecom ceased providing telecommunications services (or any other services) to consumers.

    Further, Mr Bhayani undertakes to the Court on behalf of Zen Telecom that Zen Telecom will not carry on any business promoting, negotiating or engaging in the supply of telecommunications services to the public before 1 October 2017 (being the date on which the injunctions provided for by the Orders expire).

    Paragraphs 5 and 8 of the Orders provide for, respectively, the payment of pecuniary penalties and a contribution to the ACCC’s costs of the proceeding. Each of those orders provides for the payments to be spread over twelve monthly payments between October 2014 and September 2015.

    Mr Bhayani confirms that Zen Telecom has made each of the monthly payments required for the period from October 2014 to August 2015. The remaining payment is due at the end of September 2015. Zen Telecom has in place arrangements to ensure that it will comply with its payment obligation for this remaining month.

    Paragraph 7 of the Orders required Zen Telecom to take out corrective advertising in certain newspapers in Australia, and provide to the ACCC a copy of that advertising and the details of any consumer who contacted Zen Telecom in response to that advertising. Mr Bhayani confirms that Zen Telecom undertook each of the steps required under that order.

discharge from the compliance program

12    As Mr Bhayani states in his affidavit, the only order remaining unfulfilled is para 6 relating to the Compliance Program. By para 6 of the Orders, Zen Telecom is required to maintain the Compliance Program in accordance with the requirements set out in Annexure A to the Orders.

13    In that regard, Mr Bhayani further states as follows:

    In the form ordered, the Compliance Program requires that Zen Telecom undertake various positive actions that, in light of Zen Telecom’s changed circumstances, have been rendered nugatory or pointless. For example:

(1)    Paragraph 3.1 of Annexure A to the Orders requires Zen Telecom to ensure that certain staff are given annual training in relation to compliance with the ACL. As of March 2015, however, Zen Telecom has not employed any relevant staff and will not do so.

(2)    Paragraph 6 of Annexure A to the Orders requires Zen Telecom, at its own cost, to cause an annual review of the Compliance Program to be conducted by an independent reviewer. Again, given that Zen Telecom has ceased trading, this ongoing obligation represents an unnecessary expense and one that is unlikely to result in any meaningful benefit to Zen Telecom, the ACCC or the general public.

(3)    Paragraph 7 of Annexure A to the Orders requires Zen Telecom to use its best endeavours to have the independent reviewer create a written report of each annual review, which is to be provided to the ACCC. Again, this will be a cost borne by Zen Telecom for no benefit to any relevant party.

    As noted above, Zen Telecom is in the process of finalising its affairs, after which it is likely to be wound up. In the meantime, Zen Telecom wishes to avoid the administrative burden and cost of the ongoing obligations of the Compliance Program, which are now otiose but nevertheless on their face continue to apply under the Orders as they currently stand.

The ACCC does not oppose the application

14    Mr Bhayani further states in his affidavit that he is informed by Zen Telecom’s lawyers, Cooper Mills, that:

(a)    the ACCC has been approached with a view to seeking its consent to the Court making orders relieving Zen Telecom of any further obligation to comply with the Compliance Program; and

(b)    the ACCC has been sent a draft of the application and Mr Bhayani’s affidavit.

15    Mr Bhayani deposes that on 18 September 2015, the ACCC responded to Cooper Mills and indicated that it does not oppose orders in the form sought. Mr Bhayani produces the letter from the ACCC dated 18 September 2015.

consideration

16    In the circumstances described by Mr Bhayani, which the Court accepts as being accurate, the Court is satisfied that para 6 of the Orders no longer has any relevant efficacy.

17    Zen Telecom’s circumstances have changed such that it is appropriate that it be relieved from maintaining the Compliance Program in accordance with para 6 and Annexure A of the Orders.

18    It is reasonable in the circumstances to make the order sought as it will result in Zen Telecom not assuming the administrative burden and costs of an ongoing obligation to meet the Compliance Program, which is now otiose.

19    Significantly, as well, the ACCC does not oppose the proposed order in circumstances where Zen Telecom’s customer base has been sold to another company, it has ceased to carry on business supplying telecommunication services, it has no customers and it remains registered only for the purpose of collecting debts and finalising its affairs.

20    The ACCC makes it clear that it does not oppose the application on the understanding that Zen Telecom is not currently trading, and in any event, would not re-enter the telecommunication services market for a suitable period, that period being equivalent to the duration of the injunction earlier granted under the Orders, that is until October 2017.

21    On that understanding, which the Court shares, it is appropriate in all the circumstances that para 6 of the Orders earlier made be discharged.

order

22    The Court orders that:

1.    The respondent be discharged from any further compliance with the Compliance Program the subject of paragraph 6 of the orders made by consent on 30 September 2014.

Associate:

Dated:    11 November 2015