FEDERAL COURT OF AUSTRALIA

Commissioner for Consumer Protection v Unleash Solar Pty Ltd (in liq) (No 2) [2016] FCA 1177

ORDERS

THE COURT DECLARES THAT:

1.    By representing that:

1.1.    a consumer who had a solar photovoltaic systems (System) installed after 30 September 2011 would receive 1 to 1 payments for electricity produced by the consumer's System;

1.2.    under the Western Australian government Residential Net Feed-in Tariff Scheme (FiT Scheme), a consumer who installed a System would only be eligible for payments at the FiT rate if that consumer's total system generation during a billing cycle exceeded their total household consumption during that billing cycle;

1.3.    if a consumer used 1,000kW of power and the consumer's system produced 900kW of power, the consumer would only pay for 100kW of power plus the service fee; and

1.4.    the closure of the FiT scheme would not affect consumers whose electricity bills did not exceed $175 or $200 each two month billing cycle and who installed a 1.5kW or 2kW System, even if they installed that System after 30 September 2011;

when in fact:

1.5.    a consumer who had a System installed after 30 September 2011 would not receive 1 to 1 payments for electricity produced by the consumer's System;

1.6.    a consumer who installed a System prior to 30 September 2011 would export energy to the electricity grid and be eligible for payments at the FiT rate (FiT Rate) whenever the electricity generated by the System exceeded the energy demand of the consumer's house at that particular time;

1.7.    conversely, a consumer who installed a System would purchase energy from the electricity grid at the applicable residential tariff (Residential Tariff) whenever the electricity generated by the System was less than the energy demand of the consumer's house at that particular time;

1.8.    the FiT Rate and the Residential Tariff were, at all material times, different;

1.9.    a consumer who installed a System after 30 September 2011 would not be eligible for payments at the FiT Rate for energy they exported to the electricity grid;

1.10.    if a consumer used 1,000kW of power and the consumer's system produced 900kW of power, the consumer would not necessarily only pay for 100kW of power plus the service fee. That amount the consumer would pay would depend upon:

(a)    the FiT Rate;

(b)    the Residential Tariff;

(c)    the amount of energy exported to the electricity grid; and

(d)    the amount of energy purchased from the electricity grid; and

1.11.    the closure of the FiT Scheme would affect all consumers of Systems whose Systems were installed after 30 September 2011 because those consumers:

(a)    would be likely to export energy to the electricity grid at some times of the day; and

(b)    would no longer be eligible for the Fit Rate for those exports;

the First Respondent:

1.12.    engaged in conduct that was misleading or deceptive, alternatively, likely to mislead or deceive in contravention of Australian Consumer Law (ACL), section 18(1) and Australian Consumer Law (WA) (ACL (WA)), section 18(1);

1.13.    made a false or misleading representation about the benefits of installing a System in contravention of ACL, section 29(1)(g) and ACL (WA), section 29(1)(g); and

1.14.    made a false or misleading representation about the effect of a right in contravention of ACL, section 29(1)(m) and ACL (WA), section 29(1)(m).

2.    The First Respondent, in trade or commerce, accepted payment for the supply and installation of Systems from the following consumers but failed to supply and install those Systems in contravention of ACL, section 36(4) and ACL (WA), section 36(4):

3.    The First Respondent, in trade or commerce, offered free item, being the Powerboost solar panel cleaner, to the following consumers but failed to supply in contravention of ACL, section 32(2) and ACL (WA), section 32(2):

4.    The Second Respondent was knowingly concerned in and party to the contraventions of the First Respondent.

THE COURT ORDERS THAT:

5.    Pursuant to section 232(1) of the ACL, the Second Respondent be restrained, for a period of 3 years from the date of this order, whether in an individual capacity or as an employee or officer or a corporation, from managing or being otherwise concerned in carrying on a business of promoting or supplying photovoltaic solar panel systems in Australia.

6.    The First Respondent pay to the State of Western Australia a pecuniary penalty of $390,000 pursuant to s 224(1) of the ACL (WA) by reason of the contraventions of ss 29(1), 32(2) and 36(4) ACL (WA).

7.    The Second Respondent pay to the State of Western Australia a pecuniary penalty of $145,000 pursuant to s 224(1) of the ACL (WA) by reason of the contraventions of ss 29(1), 32(2) and 36(4) ACL (WA).

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

REASONS FOR JUDGMENT

MCKERRACHER J:

1    The Commissioner for Consumer Protection applies for default judgment against Unleash Solar Pty Ltd (in liquidation) (the first respondent) and Mr Dionysis Perdikoyiannis (the second respondent).

2    The Commissioner contends that both Unleash Solar and Mr Perdikoyiannis contravened the Australian Consumer Law (Cth) (ACL) (which is Sch 2 to the Competition and Consumer Act 2010 (Cth)) and Australian Consumer Law (WA) (ACL WA) (which is contained in the Fair Trading Act 2010 (WA)). Further, the Commissioner seeks declarations, injunctions and pecuniary penalties.

3    For the reasons that follow, the applicant is entitled to default judgment against the respondents.

APPLICATION FOR DEFAULT JUDGMENT

4    At all relevant times, Unleash Solar carried on business in trade or commerce supplying and installing solar photovoltaic systems (Systems) to consumers in Western Australia. Unleash Solar is currently in liquidation. I granted leave for the Commissioner to commence proceedings against Unleash Solar pursuant to s 471B of the Corporations Act 2001 (Cth) on 15 April 2015 (Commissioner for Consumer Protection v Unleash Solar (in liq) [2015] FCA 348).

5    At all relevant times, Mr Perdikoyiannis was the sole director of Unleash Solar.

6    By interlocutory application filed 12 July 2016, the Commissioner applies for default judgment against the respondents pursuant to r 5.23(2)(c) of the Federal Court Rules 2011 (Cth) on the basis that:

(1)    Unleash Solar has failed to file a notice of address for service (r 5.02) or a defence (r 16.32); and

(2)    Mr Perdikoyiannis has failed to file a notice of address for service (r 5.02).

7    By the interlocutory application for default judgment, the Commissioner seeks orders in those terms with the modifications set out in the ‘Proposed Orders’ filed 20 July 2016.

8    The originating application filed 22 June 2016 seeks the following declarations and orders:

1.    A declaration that, by representing that:

1.1    a consumer who had a System installed after 30 September 2011 would receive 1 to 1 payments for electricity produced by the consumer's System (1 to 1 Payments Representation);

1.2    under the Fit Scheme, a consumer who installed a System would only be eligible for payments at the FiT rate if that consumer's total system generation during a billing cycle exceeded their total household consumption during that billing cycle (Excess Generation Representation);

1.3    if a consumer used 1,000kW of power and the consumer's system produced 900kW of power, the consumer would only pay for 100kW of power plus the service fee (Example Representation); and

1.4    the closure of the FiT scheme would not affect consumers whose electricity bills did not exceed $175 or $200 each two month billing cycle and who installed a 1.5kW or 2kW System, even if they installed that System after 30 September 2011 (No Excess Representation);

together the FiT Scheme Representations.

when in fact:

1.5    a consumer who had a System installed after 30 September 2011 would not receive 1 to 1 payments for electricity produced by the consumer's System;

1.6    a consumer who installed a System prior to 30 September 2011 would export energy to the electricity grid and be eligible for payments at the FiT rate (FiT Rate) whenever the electricity generated by the System exceeded the energy demand of the consumer's house at that particular time;

1.7    conversely, a consumer who installed a System would purchase energy from the electricity grid at the applicable residential tariff (Residential Tariff) whenever the electricity generated by the System was less than the energy demand of the consumer's house at that particular time;

1.8    the FiT Rate and the Residential Tariff were, at all material times, different; and

1.9    a consumer who installed a System after 30 September 2011 would not be eligible for payments at the FiT rate for energy they exported to the electricity grid;

1.10    if a consumer used 1,000kW of power and the consumer's system produced 900kW of power, the consumer would not necessarily only pay for 100kW of power plus the service fee. That amount the consumer would pay would depend upon:

1.10.1    the FiT Rate;

1.10.2    the Residential Tariff;

1.10.3    the amount of energy exported to the electricity grid; and

1.10.4    the amount of energy purchased from the electricity grid.

1.11    the closure of the FiT Scheme would affect all consumers of Systems whose Systems were installed after 30 September 2011 because those consumers:

1.11.1    would be likely to export energy to the electricity grid at some times of the day; and

1.11.2    would no longer be eligible for the Fit Rate for those exports.

the First Respondent:

a.    engaged in conduct that was misleading or deceptive, alternatively, likely to mislead or deceive in contravention of Australian Consumer Law (ACL}, section 18(1) and Australian Consumer Law (WA) (ACL (WA)), section 18(1);

b.    made a false or misleading representation about the benefits of installing a solar photovoltaic system (System) in contravention of ACL, section 29(1)(g) and ACL (WA}, section 29(1)(g); and

c.    made a false or misleading representation about the effect of a right in contravention of ACL, section 29(1)(m) and ACL (WA), section 29(1)(m).

2.    A declaration that the First Respondent, in trade or commerce, accepted payment the supply and installation of Systems but failed to supply and install those Systems within a reasonable time in contravention of ACL, section 36(4) and ACL (WA), section 36(4).

3.    A declaration that the First Respondent, in trade or commerce, offered a gift or free item, being the Powerboost solar panel cleaner but failed to supply it within a reasonable time or at all in contravention of ACL, section 32(2) and ACL (WA), section 32(2).

4.    A declaration that the Second Respondent was knowingly concerned in, or party to the contraventions of the First Respondent.

5.    Under section 232 of the ACL, an injunction restraining the Second Respondent, whether in an individual capacity or as an employee or officer of a corporation from managing or being otherwise concerned in carrying on a business of promoting or supplying photovoltaic solar panel systems in Australia for 3 years;

6.    Under section 224 of the ACL (WA), pecuniary penalties against the First and Second Respondents for breaches of:

a.    section 32(2) of the ACL (WA);

b.    section 36(4) of the ACL (WA);

c.    section 29(1)(g) of the ACL (WA);

d.    section 29(1)(m) of the ACL (WA).

7.    Under section 239 of the ACL, an order that the Second Respondent pay damages for non-party consumers;

8.    An order that the reasons for judgment with the seal of the Court be retained on the Court file for the purposes of section 137H of the Competition and Consumer Act 2010.

9    I am satisfied that the modifications set out in the ‘Proposed Orders’ are inconsequential, for example expanding upon terms used (such as ‘System’ and ‘FiT Scheme’).

10    In this interlocutory application the applicant relies upon the affidavits of Mr Jason Derby affirmed 20 May 2016 and 13 July 2016, and the affidavit of Ms Andrea Wilson affirmed 20 July 2016. The affidavit of Mr Derby of 20 May 2016 establishes service of the originating application and statement of claim upon the first respondent. The affidavit of Mr Derby of 13 July 2016 sets out the material that the Commissioner relies upon in support of its application for default judgment, being: the originating application filed 22 June 2016, the statement of claim filed 22 June 2016, the Certificate of Overseas Service dated 24 April 2016 and filed 11 May 2016, and the affidavit of Mr Derby of 20 May 2016. Mr Derby also says in his affidavit of 13 July 2016 that the Commissioner ‘does not seek to rely on an [a]ffidavit in support of this [a]pplication.’ The affidavit of Ms Wilson establishes service of the interlocutory application and affidavit of Mr Derby of 13 July 2016 upon both respondents. Ms Wilson also says that she caused to be posted to the respondents copies of the Commissioner’s outline of submissions, list of authorities and proposed orders filed in support of the default judgment application.

Jurisdiction and standing

11    The Commissioner relies upon the accrued jurisdiction of the Federal Court in respect of the relief sought under the ACL (WA): Moorgate Tobacco Co Ltd v Philip Morris Ltd (1980) 145 CLR 457; Re Wakim; Ex parte McNally (1999) 198 CLR 511.

12    The Commissioner is the regulator for the purposes of the Australian Consumer Law (WA), pursuant to the Fair Trading Act 2010 (WA).

13    The Commissioner seeks an injunction against Mr Perdikoyiannis in respect of the contraventions of the ACL pursuant to s 232 ACL. The Commissioner is not the 'regulator' for the purposes of the ACL. Instead, the Commissioner relies upon being ‘any other person’ for the purposes of ACL s 232(2): see further Commissioner for Consumer Protection v Unleash Solar Pty Ltd (in liq) [2015] FCA 348 (at [4]-[8]); Director of Consumer Affairs, Victoria v Dimmeys Stores Pty Ltd (2013) 213 FCR 559 (at [14]).

14    In relation to the pecuniary penalties sought, the Commissioner does not have standing to seek an order for a pecuniary penalty under s 224 ACL: see s 228(1) ACL. The Commissioner does have standing to seek a pecuniary penalty under s 224 ACL (WA): see s 228(1) ACL (WA). Section 22 of the Fair Trading Act provides that the Commissioner is the 'regulator' for the purposes of the ACL (WA).

Default judgment - relevant principles

15    Where the respondent is in default and the applicant has filed an originating application supported by a statement of claim, the Court may give judgment against the respondent for the relief claimed in the statement of claim to which the Court is satisfied that the applicant is entitled: r 5.23(2)(c) of the Federal Court Rules.

16    The application for default judgment does not require proof by way of evidence of the applicant's claim: Australian Competition and Consumer Commission v Dataline.Net.Au Pty Ltd (2006) 236 ALR 665. The applicant must show that on the face of the statement of claim there is a claim for the relief sought and that the Court has jurisdiction to grant that relief: Arthur v Vaupotic Investments Pty Ltd [2005] FCA 433 per Heerey J (at [3]) and Australian Competition and Consumer Commission v 1Cellnet LCC [2005] FCA 856 per Nicholson J (at [14]). An applicant will be entitled to the relief sought in the statement of claim if each element of the relevant civil wrong is properly and discretely pleaded: Macquarie Bank Ltd v Seagle (2005) 146 FCR 400 (at [24]) and Macquarie Bank Ltd v Seagle [2008] FCA 1417 (at [20]).

17    The Court has a discretion to order additional or varied relief to that contained in the statement of claim depending on the nature of the case, the order sought, and whether the respondent is, or can be taken to be, cognisant of the prospect of such an order being made: Dataline (2006) 236 ALR 665 (at [47]).

18    As the application for default judgment follows service abroad of the originating application and a certificate of service was filed, r 10.70 applies: r 10.69 of the Federal Court Rules. Rule 10.70 provides:

10.70    Restriction on power to enter default judgment if certificate of service filed

(1)    This rule applies if:

(a)    a certificate of service of initiating process has been filed in the proceeding (being a certificate in due form (within the meaning of rule 10.66(2)), stating that service has been duly effected; and

(b)    the respondent has not appeared or filed a notice of address for service.

(2)    In circumstances to which this rule applies, default judgment may not be given against the respondent unless the Court is satisfied that:

(a)    the initiating process was served on the respondent:

(i)    by a method of service prescribed by the internal law of the Convention country for the service of documents in domestic proceedings on persons who are within its territory; or

(ii)    if the applicant requested a particular method of service (being a method under which the document was actually delivered to the respondent or to the respondent’s residence) and that method is compatible with the law in force in the country, by that method; or

(iii)    if the applicant did not request a particular method of service, in circumstances where the respondent accepted the document voluntarily; and

(b)    the initiating process was served in sufficient time to enable the respondent to enter an appearance in the proceeding.

(3)    In paragraph (2)(b), sufficient time means:

(a)    42 days from the date specified in the certificate of service in relation to the initiating process as the date service of the process was effected; or

(b)    such lesser time as the Court considers, in the circumstances, to be a sufficient time to enable the respondent to enter an appearance in the proceeding.

19    The affidavit of Mr Derby of 20 May 2016 confirms that Unleash Solar was served with the originating application and statement of claim by ordinary post to its liquidators.

20    The Certificate of Overseas Service dated 24 April 2016 and filed 11 May 2016 confirms that Mr Perdikoyiannis was served in accordance with Art 5 of the Hague Convention.

21    The affidavit of Ms Wilson of 20 July 2016 establishes that service of the interlocutory application and supporting documents was properly effected in accordance with r 17.01(2) of the Federal Court Rules.

The Commissioner's allegations

FiT Scheme Representations

22    The Western Australian government operated a Residential Net Feed-in Tariff scheme (FiT Scheme) from 1 August 2010 to 1 August 2011. Under the FiT Scheme, owners of a renewable energy system, including Systems of the type supplied by Unleash Solar, could obtain payments in exchange for energy exported by the owner to the electricity grid.

23    In May 2011, the Western Australian government announced a reduction in the rate applicable for energy exported to the grid and that the FiT Scheme would close once the systems to which it applied reached a certain energy capacity. In August 2011, the Western Australian government announced the closure of the FiT Scheme.

24    In September 2011, the respondents sent to at least four customers a letter (FiT Letter) containing the following statements:

(1)    ‘As you are all aware, the Western Australian government has set a date for closure at the 30th of September 2011. However please be assured that you will not get $0 in return for your solar system even if we do not manage to have your system installed by the 30th of September 2011.’

(2)    ‘The FEED in is only for EXCESS power that you produce.’

(3)    ‘There is a huge misconception within the public with the belief that you will not receive. anything in return, however, you will still receive 1 to 1 payments for the electricity you produce. It is only excess power that you send back into the grid which you would be paid the higher feed in rate.’

(4)    ‘Many of our customers have only signed up for a 1.52kW or 2kW system, which will only produce a saving of between $175 and $250 every 2 months. If your electricity bill does not exceed this amount, you would not qualify for excess power, thus the feed in is not applicable to you. You will however, just get PAID BACK the price for what you pay for electricity and it will be deducted from your electricity bill.’

(5)    ‘For example, if you were to use 1000kW of power, and your system produces 900kW of power, you will only have to pay 100kW of power at the price you pay for electricity, plus the service fee your retailer charges you.’

(6)    ‘Therefore, as a customer installing before or after 30th September 2011, it is a WIN, WIN situation.’

25    The Commissioner alleges that these statements would have conveyed to the ordinary reader the following FiT Scheme Representations:

(1)    a consumer who had a System installed after 30 September 2011 would receive 1 to 1 payments for electricity produced by the consumer's System (1 to 1 Payments Representation);

(2)    under the FiT Scheme, a consumer who installed a System would only be eligible for payments at the FiT rate if that consumer's total system generation during a billing cycle exceeded their total household consumption during that billing cycle (Excess Generation Representation);

(3)    if a consumer used 1000kW of power and the consumer's system produced 900kW of power, the consumer would only pay for 100kW of power plus the service fee (Example Representation); and

(4)    the closure of the FiT scheme would not affect consumers whose electricity bills did not exceed $175 or $200 each two month billing cycle and who installed a 1.5kW or 2kW System, even if they installed that System after 30 September 2011 (No Excess Representation).

26    The Commissioner says that, contrary to each of these representations:

(1)    a consumer who installed a system after 30 September 2011 would not receive 1 to 1 payment for electricity;

(2)    a consumer who installed a System prior to 30 September 2011 would:

(a)    purchase energy from the electricity grid at the applicable residential tariff (Residential Tariff) whenever the electricity generated by the System was less than the energy demand of the consumer's house at that particular time; and

(b)    export energy to the electricity grid and be eligible for payments at the FiT rate (FiT Rate) whenever the electricity generated by the System exceeded the energy demand of the consumer's house at that particular time;

(3)    the FiT Rate and the Residential Tariff were, at all material times, different;

(4)    a consumer who installed a System after 30 September 2011 would not be eligible for payments at the FiT Rate for energy they exported to the electricity grid;

(5)    if a consumer used 1000kW of power and the consumer's system produced 900kW of power, the consumer would not necessarily only pay for 100kW of power plus the service fee. The amount the consumer would pay would depend upon:

(a)    the FiT Rate;

(b)    the Residential Tariff;

(c)    the amount of energy exported to the electricity grid; and

(d)    the amount of energy purchased from the electricity grid; and

(6)    the closure of the FiT Scheme would affect all consumers of Systems whose Systems were installed after 30 September 2011 because those consumers:

(a)    would be likely to export energy to the electricity grid at some times of the day; and

(b)    would no longer be eligible for the Fit Rate for those exports.

27    Section 18 of the ACL prohibits conduct, in trade or commerce, which is misleading or deceptive or likely to mislead or deceive.

28    Section 29(1)(g) ACL provides that a person must not, in trade or commerce, in connection with the supply or possible supply of goods or services make a false or misleading representation about benefits of goods or services.

29    Section 29(1)(m) ACL provides that a person must not, in trade or commerce, in connection with the supply or possible supply of goods or services make a false or misleading representation about the effect of a right.

30    Conduct will be in trade or commerce if it is an aspect or element of activities which of their nature, bear a trading or commercial character: Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594 (at 603).

31    In relation to representations with respect to any future matter, s 4 ACL provides:

(1)    If:

(a)    a person makes a representation with respect to any future matter (including the doing of, or the refusing to do, any act); and

(b)    the person does not have reasonable grounds for making the representation;

the representation is taken, for the purposes of this Schedule, to be misleading.

(2)    For the purposes of applying subsection (1) in relation to a proceeding concerning a representation made with respect to a future matter by:

(a)    a party to the proceeding; or

(b)    any other person;

the party or other person is taken not to have had reasonable grounds for making the representation, unless evidence is adduced to the contrary.

32    In summary, the following principles relevantly apply in relation to s 18 ACL:

    Section 18(1) ACL applies to “conduct” which is misleading or deceptive or likely to mislead or deceive. “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”: Australian Competition and Consumer Commission v Dukemaster Pty Ltd [2009] FCA 682 (at [10]); Global Sportsman Pty Ltd v Mirror Newspapers Ltd (1984) 2 FCR 82 (at 87).

    Whether conduct is misleading or deceptive must be considered by reference to a hypothetical individual who would have been a member of the class of consumer affected by the conduct. Where the representation is to the public at large the conduct must be assessed by reference to the ordinary or reasonable members of the class: Campomar Sociedad Limitada v Nike International Ltd (2000) 202 CLR 45 (at [102]-[106]).

    The test is objective and the Court must determine the question for itself: Australian Competition and Consumer Commission v Dukemaster Pty Ltd [2009] FCA 682 (at [10]); Global Sportsman Pty Ltd v Mirror Newspapers Ltd (1984) 2 FCR 82 (at 87).

33    Each of the FiT Scheme Representations was a representation as to a future matter, namely, what benefits could be obtained under the FiT Scheme in the future. In the absence of evidence to the contrary, they are taken to be misleading.

34    In any event, it is apparent that the representations were actually misleading, deceptive and false. The representations conveyed to the ordinary, reasonable reader of the letter that a person who installed a System could, notwithstanding the FiT Scheme's closure, offset the cost of electricity consumption by the amount produced on a 1 to 1 basis. These representations were false and contrary to the actual position.

35    Whether consumers installed a System before or after 30 September 2011, they could not receive a 1 to 1 offset of electricity costs because patterns of consumption and production would differ such that they would not always equally offset one another. Further, those who installed it after 30 September 2011 would receive no offset at all under the FiT Scheme for extra energy produced by a System, meaning that excess production could have no effect on offsetting consumption costs at other times of the day.

36    Notably, each of these representations concerned both the benefits of a System and the rights of a System owner under the FiT Scheme, namely, the capacity to offset energy costs through excess generation.

37    These misleading and deceptive representations would have led consumers into error and were thus in contravention of s 18(1) ACL.

Non-supply of Systems

38    Between November 2010 and April 2011, Unleash Solar entered into contracts for the supply of a System and accepted a deposit from 19 consumers. The Commissioner does not pursue the allegations in relation to the 13 consumers whose systems were supplied.

39    In the remaining 6 cases, Unleash Solar failed to supply the Systems at all after entering into an agreement to do so and accepting a deposit, as depicted in the following table that is substantially reproduced from an annexure to the statement of claim:

40    Section 36(4) ACL provides that a person who, in trade or commerce, accepts payments for goods or services must supply all the goods or services within the period specified or within a reasonable time.

41    In the six cases that the Commissioner presses, there was no supply at all in contravention of s 36(4).

Non-supply of gift or free item

42    In connection with the supply of a System to each of the consumers in the table below, Unleash Solar offered a free gift, namely, a 5 or 10 year supply of a product called 'Powerboost', which is a solar panel cleaner.

43    Section 32(2) ACL provides that a person who offers any gift or other free item in connection with the supply of goods or services must, within the period specified or within a reasonable time, supply the gift or other free item in accordance with the offer.

44    The above 11 consumers did not receive the Powerboost item in contravention of s 32(2) ACL. The Commissioner does not pursue the allegations in relation to the seven consumers who ultimately received the Powerboost item.

Mr Perdikoyiannis

45    The Commissioner alleges that Mr Perdikoyiannis was knowingly concerned in, party to and/or aided and abetted Unleash Solar’s contraventions of the ACL.

46    In Yorke v Lucas (1985) 158 CLR 661, a majority of the High Court (Mason ACJ, Wilson, Deane and Dawson JJ) said (at 670):

There can be no question that a person cannot be knowingly concerned in a contravention unless he has knowledge of the essential facts constituting the contravention. … [A] person could only properly be said to be "party to" a "contravention" if his participation was in the context of knowledge of the essential facts constituting the particular contravention in question.

47    Their Honours continued (at 670):

In our view, the proper construction of par. (c) [of the equivalent of s 2 ACL definition of ‘involved’] requires a party to a contravention to be an intentional participant, the necessary intent being based upon knowledge of the essential elements of the contravention.

48    An alleged accessory must have knowledge of the essential facts of the contraventions, but not necessarily that they amount to a contravention: Rafferty v Madgwicks (2012) 203 FCR 1 per Kenny, Stone and Logan JJ (at [254]).

49    The Fit Letter was sent in the name of and signed by Mr Perdikoyiannis. It can be inferred that Mr Perdikoyiannis knew of the existence of the letter, approved its contents and, based on the announcements in May 2011 as to changes to the FiT Scheme and the terms of the letter itself, knew that what was being said was false.

50    It can be inferred from the following that Mr Perdikoyiannis was closely involved in the business of Unleash Solar and must have been aware of the instances in which Unleash Solar did not supply the Systems or Powerboost items:

    Mr Perdikoyiannis was involved in the management and operation of the business of Unleash Solar;

    Mr Perdikoyiannis personally authorised Unleash Solar’s financial transactions;

    Mr Perdikoyiannis was aware that Unleash Solar was trading insolvent from at least April 2011 and allowed Unleash Solar to continue entering into new agreements to supply Systems to consumers; and

    Mr Perdikoyiannis received complaints from consumers and was forwarded complaints from other consumers by staff of Unleash Solar.

51    Further, the evidence in the affidavit of Mr Prout affirmed 4 September 2015 establishes the intimate involvement of Mr Perdikoyiannis in the business of Unleash Solar and his knowledge of the ongoing difficulties that Unleash Solar had in meeting its obligations to suppliers and consumers.

APPROPRIATE RELIEF

Declarations

52    There must be some utility in the granting of declaratory relief. The remedy of a declaration is not an appropriate way of recording in a summary form, conclusions reached by the Court in reasons for judgment: Warramunda Village Inc v Pryde (2001) 105 FCR 437 (at [8]).

53    Declarations may have utility if they set out the basis of the liability found and the basis for the penalty imposed: Rural Press Ltd v Australian Competition and Consumer Commission (2003) 216 CLR 53 (at [95]). Declarations must therefore be in a form that provides adequate particulars of the conduct giving rise to the relevant contravention, or they will lack the necessary utility.

54    Declarations are also:

(1)    in appropriate cases, an appropriate vehicle to record the Court's disapproval of the contravening conduct: Tobacco Institute of Australia Ltd v Australian Federation of Consumer Organisations Inc (1993) 41 FCR 89 (at 100);

(2)    of assistance to a consumer regulator in performing statutory duties and functions in promoting and enforcing compliance with relevant legislation: Australian Competition and Consumer Commission v Goldy Motors [2000] FCA 1885 (at [34]); and

(3)    of assistance in clarifying the law: Goldy Motors (at [34]).

55    The questions before the Court involve conduct by market participants and the lawfulness of that conduct. The declarations proposed by the Commissioner are specific to the conduct alleged against the respondents and have an appropriate level of detail. They are appropriate for recording the Court's findings and disapproval of the contravening conduct.

Injunctions

56    The Commissioner does not seek injunctions against Unleash Solar as it is in liquidation. However, injunctions are sought against Mr Perdikoyiannis on the basis that, although he is presently not in Australia, there remains a possibility that he could seek to again operate or carry on similar businesses in Australia in the future.

57    Section 232 ACL relevantly provides:

(1)    A court may grant an injunction, in such terms as the court considers appropriate, if the court is satisfied that a person has engaged, or is proposing to engage, in conduct that constitutes or would constitute:

(a)    a contravention of a provision of Chapter 2, 3 or 4; or

(b)    attempting to contravene such a provision; or

(c)    aiding, abetting, counselling or procuring a person to contravene such a provision; or

(d)    inducing, or attempting to induce, whether by threats, promises or otherwise, a person to contravene such a provision; or

(e)    being in any way, directly or indirectly, knowingly concerned in, or party to, the contravention by a person of such a provision; or

(f)    conspiring with others to contravene such a provision.

(2)    The court may grant the injunction on application by the regulator or any other person.

...

(4)    The power of the court to grant an injunction under subsection (1) restraining a person from engaging in conduct may be exercised:

(a)    whether or not it appears to the court that the person intends to engage again, or to continue to engage, in conduct of a kind referred to in that subsection; and

(b)    whether or not the person has previously engaged in conduct of that kind; and

(c)    whether or not there is an imminent danger of substantial damage to any other person if the person engages in conduct of that kind.

(5)    Without limiting subsection (1), the court may grant an injunction under that subsection restraining a person from carrying on a business or supplying goods or services (whether or not as part of, or incidental to, the carrying on of another business):

(a)    for a specified period; or

(b)    except on specified terms and conditions.

    …

58    In respect of Mr Perdikoyiannis, the Commissioner seeks an injunction restraining him, whether in his individual capacity or as an employee or officer of a corporation, from managing or being otherwise concerned in carrying on a business of promoting or supplying Systems in Australia for a period of 3 years.

59    Mr Perdikoyiannis was the only director of Unleash Solar and was intimately involved in its management and direction. The injunction is necessary to prevent further contraventions by Perdikoyiannis and thereby protect consumers. The injunction sought is appropriately adapted to addressing Mr Perdikoyiannis' conduct and protecting consumers in Australia from similar conduct in the future.

Pecuniary penalties

Relevant principles

60    The Commissioner seeks pecuniary penalties under the ACL (WA). The Commissioner has previously undertaken not to enforce any penalty imposed against Unleash Solar. However, it remains appropriate to impose a penalty given the primacy, discussed below, of general deterrence.

61    If the Court is satisfied that a person has contravened, been knowingly concerned in or aided/abetted a contravention of a provision of Pt 3-1 of the ACL (WA) the Court may order the person to pay to the State such pecuniary penalty as the Court determines appropriate: s 224(1) ACL (WA).

62    The maximum penalty for each act or omission that relates to a contravention of a provision of Pt 3-1 (which contains ss 29, 32 and 36) is, in the case of a company, $1,100,000 and in the case of an individual, $220,000: s 224(3). Unleash Solar is subject to the maximum penalty of $1,100,000 in respect of each act or omission resulting in a contravention of the ACL (WA). Mr Perdikoyiannis is subject to the maximum penalty of $220,000 in respect of each instance in which he was knowingly concerned in or aided/abetted an act or omission resulting in a contravention of the ACL (WA).

63    It is clear that s 18 of the ACL which deals with misleading or deceptive conduct is not the subject of civil pecuniary penalties.

64    Where conduct contravenes two or more provisions of the ACL, a person is not liable to more than one pecuniary penalty in respect of the same conduct: s 224(4) ACL (WA).

65    Section 224 of the ACL (WA) replaced s 76E of the Trade Practices Act 1974 (Cth) (TPA) (now the Competition and Consumer Act). The following general principles apply in determining an appropriate penalty under s 224 ACL (WA):

(1)    assessment of the appropriate penalty by the Court is a discretionary judgment based on all relevant factors: Markarian v The Queen (2005) 228 CLR 357 per Gleeson CJ, Gummow, Hayne and Callinan JJ (at [27]); Australian Competition and Consumer Commission v Spreets Pty Ltd [2015] FCA 382 per Collier J (at [127]-[218]);

(2)    careful attention should be paid to the maximum penalty for each contravening act, which provides a yardstick that invites comparison and is to be taken and balanced with all of the other relevant factors, and the totality principle: Markarian (at [31]); Spreets (at [128]-[129]); Singtel Optus Pty Ltd v Australian Competition and Consumer Commission [2012] FCAFC 20; and

(3)    accessible reasoning is necessary in the interests of all, and, while there may be occasions where some indulgence in an arithmetical process will better serve the end, it does not apply where there are numerous and complex considerations to be applied: Markarian (at [37]-[38]); Spreets (at [128]).

66    The primary object of a pecuniary penalty is deterrence: Trade Practices Commission v CSR Ltd (1991) ATPR 41-076 (at 52,152); Australia Competition and Consumer Commission v TPG Internet Pty Ltd (2013) 250 CLR 640 (at [64]-[66]); Australian Competition and Consumer Commission v Dataline.Net.Au Pty Ltd (2007) 161 FCR 513 (Dataline FC) (at [60]). The penalty must be sufficient to deter the defendants from further contraventions of the ACL and to deter members of the public from engaging in similar contraventions: Dataline (at [60]).

67    In TPG the majority of the High Court (at [66]) noted with approval the statement from the judgment in SingTel (at [62]-[63]) that the penalty:

must be fixed with a view to ensuring that the penalty is not such as to be regarded by [the] offender or others as an acceptable cost of doing business. … [T]hose engaged in trade and commerce must be deterred from the cynical calculation involved in weighing up the risk of penalty against the profits to be made from contravention.

68    In determining the appropriate penalty, the Court must have regard to all relevant matters including (s 224(2) ACL):

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

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

(3)    whether the person has previously been found by a court in proceedings under Ch 4 or Pt 5 of the ACL to have engaged in any similar conduct.

69    In CSR, French J (as his Honour then was) (at 152,52 – 152,53) considered nine factors for the purpose of assessing a penalty of appropriate deterrent value:

(1)    the size of the contravening company (in this case, the business operated by the respondents);

(2)    the degree of market power of the contravener, as evidenced by its market share and ease of entry into the market;

(3)    the deliberateness of the contravention(s) and the period over which they extended;

(4)    whether the contravention arose out of the conduct of senior management or a lower level;

(5)    whether the company has a culture conducive to compliance; and

(6)    whether the individuals have shown a disposition to co-operate with the authority responsible for the enforcement of the ACL in relation to the contravention.

These considerations were approved and expanded upon by the Full Court of this Court in Australian Competition and Consumer Commission v NW Frozen Foods Pty Ltd (1996) 71 FCR 285 (at 292), Dataline FC (at [61]), and numerous other cases. The expansion encompasses consideration of whether the defendant has engaged in similar conduct in the past.

70    The variety of circumstances of conduct that attract penalties and the circumstances of that conduct means that a detailed examination of the penalties imposed in other cases can be of little utility: Dataline FC (at [67]). However, a consideration of penalties imposed in cases of similar contraventions may provide a ‘high level broad range within which an appropriate pecuniary penalty may be imposed having regard to the character and content of the contraventions and other considerations reflecting some elements broadly consistent with the evidence in the particular case’: Dataline FC (at [68]).

Application of penalty factors

Nature and extent of the conduct

71    The Commissioner has pleaded that the FiT Scheme Representations were made to at least four named consumers. However, it may be inferred that these were not the only consumers to have received the letter.

72    The FiT Scheme Representations were clearly false. It is open to infer from the terms of the letter that both Unleash Solar and Mr Perdikoyiannis were aware of the closure of the FiT Scheme and must have been aware of the terms upon which it was being closed. It would therefore have been apparent that the Scheme's closure had the potential to negatively impact Unleash Solar's business because it reduced the incentives for consumers to purchase (or continue with the purchase of) a System by, in effect, increasing the cost. The letter was an apparent attempt to mislead consumers that they could still obtain benefits under the FiT Scheme and thereby increase the chances of Unleash Solar obtaining or retaining contracts to supply Systems.

73    In respect of the contraventions relating to non-supply of Systems, this conduct amounts to a complete failure by Unleash Solar to complete its contractual obligations. Further, it occurred in circumstances where Mr Perdikoyiannis was aware that Unleash Solar was substantially in arrears with contractors and suppliers. The total amount accepted by Unleash Solar from the six consumers who were not supplied a System was $7,520.

74    In respect of the contraventions relating to non-supply of the Powerboost item, this conduct occurred in relation to 11 consumers. The 'strong attraction' of free offers has been noted. In this case, the offer was coupled with statements indicating the value of the offer ($500).

Loss or damage from the conduct

75    There is no evidence that the FiT Scheme Representations actually misled any person to enter into a contract to purchase a System or adhere to a contract already entered into. However, the potential for the Representations to have had that effect is clear.

76    In respect of the consumers who were not supplied with a system, three consumers received a refund, one did not, and for the remaining two it is unknown. However, even where consumers did ultimately receive a refund, there was the possibility of other losses, such as the lost opportunity to participate in the FiT Scheme.

77    In respect of the consumers who were not supplied the Powerboost item, there is a potential loss in that they may have had to separately obtain a similar item (solar panel cleaner) at a further cost.

Circumstances of the conduct

78    Unleash Solar was operating in the renewable energy sector, which is a market that has seen rapid growth in the last 10 years. It is also an area in which there have been a range of government programs and incentives, both at a State and Federal level, designed to encourage people to be more energy efficient.

79    The conduct of the respondents took advantage of consumers' knowledge of, and desire to obtain, these government incentives as well as the general desire of some consumers to, where possible, be more environmentally friendly.

80    It is important, in these circumstances, for a penalty to discourage similar businesses looking to enter a growth market from acting in a way that exploits consumers and is misleading or deceptive solely for the short-term commercial gain of that business.

Size of the business

81    The precise size of Unleash Solar's former business is not apparent. However it is clear from the number of consumers referred to in the enforceable undertaking that the business was taking a large number of orders for System in a short space of time. The Commissioner says that it was certainly a reasonable sized operation. But there is no evidence to its actual turnover and profitability, if any. Given its relatively sudden disappearance I should certainly not conclude that lots of orders in this period necessarily equated with substantial profit.

Deliberateness of the conduct

82    As noted above, it can be inferred from the terms of the FiT Scheme Letter that the respondents were aware of the closure of the FiT Scheme and acted deliberately to mislead consumers in order to prevent a negative impact upon Unleash Solar's business.

83    Further, it is apparent that the non-supply of the Systems and the Powerboost item occurred in circumstances where the business was in financial difficulty (in terms of both paying suppliers and supplying the goods to consumers). Thus, whilst is cannot be said that Unleash Solar deliberately failed to supply these items, it conducted its business in a manner that was objectively likely to result in such failures.

Role of the individuals within the business

84    Mr Perdikoyiannis was the sole director of Unleash Solar and was closely involved in its affairs.

Culture of compliance

85    It is not possible to assess the existence or otherwise of a culture of compliance in Unleash Solar's business.

Co-operation

86    Unleash Solar and Mr Perdikoyiannis co-operated with the Commissioner to the extent that they entered into an enforceable undertaking in respect of some aspects of their conduct.

Similar conduct in the past

87    Neither Unleash Solar nor Mr Perdikoyiannis have been previously found to have been in breach of the ACL.

False or misleading representations – contravention of s 29(1) ACL (WA)

88    Unleash Solar sent to at least four customers a letter containing false or misleading representations in contravention of s 29(1)(g) and (m) ACL (WA). The Commissioner says this constitutes eight contraventions, as it may, but having regard to s 224(4)(b) ACL (WA) (see [64] above), a person is not liable to more than one pecuniary penalty in respect of the same conduct. I would treat the sending of each letter as the relevant conduct, even though it may contravene two provisions (or, more precisely, two subsections within a provision).

89    The nature and type of contraventions of s 29(1) ACL are particularly variable and make direct comparisons between individual cases difficult.

90    In Australian Competition and Consumer Commission v Avitalb Pty Ltd [2014] FCA 222, the respondent company admitted to making a false or misleading oral representation as to the remedies available to a single consumer who had purchased a laptop computer from the respondent, contrary to s 29(1)(m) ACL. The Court ordered the respondent company to pay a pecuniary penalty in respect of the contravention of s 29(1)(m) in the amount of $10,000. In determining this penalty, the Court considered a number of factors, including that there was no evidence that the relevant statement was made with an intention to mislead or deceive the consumer, there was no evidence of any loss (as a full refund was paid on the day that the statement complained of was made), there was no evidence that senior employees or management were involved in the conduct, and the respondent had admitted liability.

91    The circumstances in Avitalb can be contrasted with the relevant conduct in the present case:

(1)    it can be inferred that Unleash Solar, through Mr Perdikoyiannis, acted deliberately to mislead consumers in order to prevent a negative impact upon Unleash Solar's business and that they knew the essential facts that made their statements misleading;

(2)    Mr Perdikoyiannis, the sole director of Unleash Solar, was closely involved in its affairs, and also signed the letters containing the representations that contravened the ACL (WA); and

(3)    the respondents have made no admissions of liability in this proceeding.

92    In Australian Consumer and Competition Commission v Launceston Superstore Pty Ltd [2013] FCA 1315 the respondent company made three statements to one consumer by means of one written statement on a receipt given to the consumer and two oral statements made to him by one sales representative. The statement misrepresented the consumer's statutory rights to a refund, in contravention of s 29(1)(m) ACL. The Court ordered the respondent to pay a pecuniary penalty of $32,000 for these contraventions.

93    In Launceston Superstore there was no evidence of involvement by senior employees or senior management and it was a mitigating factor that the company had admitted liability and co-operated with the Australian Competition and Consumer Commission. Again, these factors are not present in this case. Further, Unleash Solar made the representations to at least four separate consumers.

94    Where several contraventions are part of a single multi-faceted course of conduct, it is appropriate to impose a single or global penalty for all the contraventions: Australian Competition and Consumer Commission v South East Melbourne Cleaning Pty Ltd (in liq) [2015] FCA 25 (at [171]); Mornington Inn Pty Ltd v Jordan (2008) 168 FCR 383 per Stone and Buchanan JJ (at [41]). In the present case, a single penalty is appropriate as the contraventions occurred in one multi-faceted course of conduct.

95    Given that the Avitalb and Launceston Superstore cases involved conduct less serious than in the present case, the Commissioner submits that the penalty imposed should be considerably higher than in those cases.

96    The Commissioner submits that penalties in the following ranges are appropriate in respect of the eight contraventions:

(1)    a single penalty of between $80,000 and $100,000 for the contraventions by Unleash Solar; and

(2)    a single penalty of between $20,000 and $30,000 for the contraventions by Mr Perdikoyiannis.

97    In circumstances where the representations were made to a number of consumers, senior management was involved in the contraventions, the conduct was deliberate and the respondents have made no admissions of liability, and there is a strong need for deterrence of such conduct, but there is no indication of substantial business turnover, I consider that the following penalties for the false and misleading representations that contravened s 29(1) ACL (WA) are appropriate in the present case:

(1)    a single penalty of $75,000 for the contraventions by Unleash Solar; and

(2)    a single penalty of $18,000 for the contraventions by Mr Perdikoyiannis.

Non-supply of Systems - contravention of s 36(4) ACL (WA)

98    In Australian Competition and Consumer Commission v Chopra [2015] FCA 539 the respondent, an individual, admitted to four contraventions of s 36(4) ACL. He accepted payment totalling $4,176.44 for four transactions and failed to supply consumers within a reasonable time or, in the case of the three consumers, within the time specified. The Court, in that case, ordered the respondent to pay a pecuniary penalty of $10,000 for each contravention of s 36(4) ACL, totalling $40,000. It was a mitigating factor in Chopra that the respondent had admitted liability.

99    In the present case, Unleash Solar accepted $7,520 from six consumers. In contrast with Chopra, Unleash Solar did not only subject its consumers to delay but failed to supply these consumers with the agreed Systems at all. This failure represents a more serious contravention which should be reflected in the penalty imposed.

100    Further, Unleash Solar is subject to a maximum penalty five times that which was applicable to the respondent in Chopra.

101    In Chopra, the Court treated each contravention separately as the contraventions occurred as discrete incidents and related to different consumers (despite the respondent also being liable for a single penalty for contraventions of s 29(1), as in the present case). It is also appropriate for the Court to do so in the present case and impose six separate penalties in respect of each contravention. There may be a danger that where there is a greater number of contraventions the cumulative sum of the individual penalties will result in an overall penalty that is disproportionate to the contravening conduct. However this is not so in respect of these contraventions because the contraventions occurred as discrete incidents in relation to different consumers.

102    Taking into account these considerations and those outlined in the submissions, the Commissioner submits that penalties in the following ranges are appropriate in respect of these contraventions:

(1)    $40,000 - $60,000 per contravention, in respect of the 6 contraventions by Unleash Solar; and

(2)    $10,000 - $20,000 per contravention, in respect of the 6 contraventions by Mr Perdikoyiannis.

103    In the circumstances of this case, and particularly in light of the fact that the respondents failed to supply the Systems at all, in my view the following penalties are appropriate:

(1)    $25,000 in respect of each of the six contraventions of s 36(4) ACL (WA) by Unleash Solar, totalling $150,000; and

(2)    $12,000 in respect of each of the six contraventions of s 36(4) ACL (WA) by Mr Perdikoyiannis, totalling $72,000.

Non-supply of Powerboost - contravention of s 32(2) ACL (WA)

104    In connection with the agreement to supply Systems, Unleash Solar also failed to supply a gift or free item, namely a 5 or 10 year supply of a product called 'Powerboost', to 11 consumers in contravention of s 32(2) ACL (WA). This type of contravention is similar in nature to a contravention of s 36(4) (see [40] above).

105    The value of each free item was $500, totalling $5,500 in free items, which were offered but ultimately not supplied to consumers. Thus, there were a greater number of contraventions of s 32(2) than of s 36(4) but the total 'value' of those contraventions was less than for the s 36(4) contraventions.

106    In the absence of directly comparable cases concerning s 32(2), given the similarities between the s 32(2) and s 36(4) contraventions, Chopra can be used as a guide to the appropriate penalty. As the number of contraventions (11) is greater than in respect of s 36(4), 'totality' considerations justify some reduction of the individual penalties so as to ensure that the total penalty is not disproportionate to the conduct.

107    The Commissioner submits that penalties in the following ranges are appropriate in respect of these contraventions:

(1)    $25,000 - $40,000 per contravention, in respect of the 11 contraventions by Unleash Solar; and

(2)    $7,000 - $14,000 per contravention, in respect of the 11 contraventions by Mr Perdikoyiannis.

108    In the circumstances of the case, and particularly as the respondents failed to supply the free items at all, in my view the following penalties are appropriate:

(1)    $15,000 in respect of each of the 11 contraventions of s 32(2) ACL (WA) by Unleash Solar, totalling $165,000; and

(2)    $5,000 in respect of each of the 11 contraventions of s 32(2) ACL (WA) by Mr Perdikoyiannis, totalling $55,000.

conclusion

109    Orders will be made in accordance with the proposed short minutes of order, but incorporating the appropriate penalties for each contravention set out above.

Associate:

Dated:    30 September 2016