FEDERAL COURT OF AUSTRALIA

Australian Competition and Consumer Commission v Harrison (No 2) [2017] FCA 182

ORDERS

THE COURT ORDERS THAT:

1.    Each of the second, fifth, sixth, eighth, ninth, tenth and eleventh respondents, and the third respondent (up to 26 November 2014, being the date upon which a liquidator was appointed) and the fourth respondent (up to 4 March 2015, being the date upon which a liquidator was appointed), in trade or commerce, engaged in a system of conduct or pattern of behaviour which was unconscionable in all the circumstances, in contravention of s 21 of the Australian Consumer Law (ACL), which is contained in Schedule 2 of the Competition and Consumer Act 2010 (Cth) (CCA). The key elements of the system or pattern were:

(a)    the transfer of customer contracts from one company to another without the customer’s consent;

(b)    the failure to notify the customer of the transfer;

(c)    save in relation to the second transfer (from the fourth respondent to the fifth respondent), the adoption of the same trading name before and after the transfer;

(d)    at least in the case of the third transfer (from the fifth respondent to the sixth respondent) and the fourth transfer (from the sixth respondent to the eighth, ninth, tenth and eleventh respondents), the sending of invoice documentation in substantially the same form before and after the transfer; and

(e)    the ‘transferee’ company demanding payment of an early termination fee (or threatening to impose such a fee) if the customer wished to end a contract early.

2.    The first respondent (Mr Harrison), the director of each of the second to eleventh respondents:

(a)    was directly or indirectly knowingly concerned in and a party to; or

(b)    aided and abetted, counselled or procured,

the contraventions by the second, third, fourth, fifth, sixth, eighth, ninth, tenth and eleventh respondents of s 21 of the ACL.

3.    Each of the respondents referred to below used undue harassment in connection with the supply or possible supply of services and the payment for services to the following customers:

(a)    the fifth respondent in relation to Margaret Adams;

(b)    the fifth respondent in relation to Iryna Krepak;

(c)    the sixth respondent in relation to Charles Clements; and

(d)    the eleventh respondent in relation to Kevin Phillips,

in contravention of s 50 of the ACL, in seeking payments which the customers were under no obligation to make to the transferee companies, and in making oral or written threats or demands against the customers either directly or through a debt collection agency or a law firm.

THE COURT ORDERS THAT:

4.    Pursuant to s 232 of the ACL, each of the second and fifth to eleventh respondents, whether by itself, its officers, servants, agents or otherwise, in trade or commerce, be restrained for a period of two years from the date which is 30 days after the making of these orders, from carrying on a business or supplying services in connection with telecommunication (including as a retailer or wholesaler).

5.    Pursuant to s 232 of the ACL, Mr Harrison, whether by himself, his servants, agents or otherwise, in trade or commerce, be restrained for a period of two years from the date which is 30 days after the making of these orders, from:

(a)    carrying on a business or supplying services in connection with telecommunication (including as a retailer or wholesaler); and

(b)    being in any way directly or indirectly knowingly concerned in, or a party to, or aiding and abetting, counselling or procuring, conduct of a corporation of the kind restrained in paragraph 4 or 5(a) above.

6.    Pursuant to s 224 of the ACL, each of the second, fifth and sixth respondents pay to the Commonwealth of Australia within 30 days a civil penalty in respect of the contraventions referred to in paragraphs 1 and 3 above in the amount of $50,000.

7.    Pursuant to s 224 of the ACL, each of the eighth to eleventh respondents pay to the Commonwealth of Australia within 30 days a civil penalty in respect of the contraventions referred to in paragraphs 1 and 3 above in the amount of $12,500.

8.    Pursuant to s 224 of the ACL, Mr Harrison pay to the Commonwealth of Australia within 30 days, or such other period of time as the Court may determine, a civil penalty in respect of the contraventions referred to in paragraph 2 above in the amount of $50,000. If Mr Harrison wishes to apply for the period of time to be extended, he may apply to the Court within 14 days of the date of this order.

9.    Pursuant to s 248 of the ACL, Mr Harrison be disqualified from managing corporations for a period of three years from the date which is 30 days after the making of these orders.

10.    Pursuant to s 239 of the ACL, each of the second, fifth, sixth, eighth, ninth, tenth and eleventh respondents must:

(a)    within 60 days of the date of these orders, take all reasonable steps to provide a refund to any customer whose contract was transferred, or purportedly transferred, between two or more of the respondents without express written consent (Transferred Customers) of any cancellation fees or termination fees (and any associated collection fees and legal fees) paid by the customer to the relevant respondent or its agent (including eCollect Pty Ltd or EC Legal Pty Ltd) after the transfer or purported transfer took place;

(b)    within 70 days provide to the applicant an affidavit from an appropriate officer detailing the steps taken to comply with paragraph (a) and the amounts refunded;

(c)    discontinue all debt collection procedures (including any legal proceedings) against Transferred Customers for the recovery of cancellation or termination fees (and any associated collection fees and legal fees); and

(d)    not enforce cancellation or termination fees against any Transferred Customer who seeks to terminate his or her or its contract.

11.    The reasons for judgment dated 20 December 2016 with the seal of the Court affixed thereon be retained on the Court file for the purposes of s 137H of the CCA until 31 December 2021.

12.    The first, second, fifth, sixth, eighth, ninth, tenth and eleventh respondents pay the applicant’s costs of this proceeding, to be taxed if not agreed.

13.    Liberty to apply.

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

REASONS FOR JUDGMENT

MOSHINSKY J:

1    On 20 December 2016, I published reasons for judgment in respect of liability: Australian Competition and Consumer Commission v Harrison [2016] FCA 1543 (the Reasons). As noted in the Reasons, the respondents requested that I publish reasons on liability and then provide an opportunity for the parties to put on further written submissions on relief; and the ACCC did not oppose this course. I therefore made orders for the filing and service of written submissions on relief. The parties have now filed written submissions, and responding written submissions, on relief. The matter was also listed for hearing yesterday as I had some questions in relation to the parties’ submissions. These reasons, which deal with relief, should be read together with the Reasons. I will adopt the abbreviations used in the Reasons.

2    Together with its primary relief submissions, the ACCC filed a minute of proposed orders. Subsequently, together with its responding submissions on relief, the ACCC filed a revised minute of proposed orders, which took on board certain matters raised by the other parties. I will refer to this latter document as the ACCC’s Proposed Orders.

3    The issues to be considered fall under the following headings:

(a)    declarations;

(b)    injunctions;

(c)    pecuniary penalties;

(d)    disqualification orders;

(e)    orders for redress of non-party consumers;

(f)    orders for a compliance program; and

(g)    costs.

I will consider each of these issues in turn.

Declarations

4    There is no dispute between the parties that it is appropriate for declarations to be made reflecting the findings as to contraventions set out in the Reasons. The ACCC submits, and I accept, that the proposed declarations satisfy the requirements identified in Forster v Jododex Australia Pty Ltd (1972) 127 CLR 421 at 437-438 as: (a) the issues are real and not hypothetical or theoretical; (b) the ACCC, as regulator, has a real interest in raising them; and (c) Mr Harrison and the Harrison Companies are proper contradictors because they (apart from the companies in liquidation) filed a Concise Response which opposed the relief sought, having a true interest in the subject-matter. It should also be noted that Mr Harrison and the Harrison Companies (other than the companies in liquidation) appeared at trial and contested the contraventions.

5    The liquidators for the third and fourth respondents made submissions in relation to relief, to the effect that the periods of contraventions by those companies be limited in time to the date on which an order was made for each respondent to be wound up. The ACCC accepts this proposed change.

6    I will make some other changes to the wording of the proposed declarations to reflect more closely the contravention findings. Among other changes, I will not include the seventh respondent in the declarations of contravention as I did not make a finding in the Reasons that it had engaged in the relevant conduct (see, for example, the Reasons at [72], [125], [128]).

Injunctions

7    The ACCC seeks an injunction (pursuant to s 232 of the Australian Consumer Law) against the second and fifth to eleventh respondents, for a period of five years, to restrain them from carrying on a business or supplying services in connection with telecommunication. In relation to Mr Harrison, the ACCC seeks an injunction, for a period of seven years, to restrain Mr Harrison from: (a) carrying on a business or supplying services in connection with telecommunication “and/or asset protection”; and (b) being in any way directly or indirectly knowingly concerned in, or a party to, or aiding and abetting, counselling or procuring, conduct of a corporation of the kind restrained by the other injunctions.

8    In the submissions filed by the first, second and fifth to eleventh respondents (the Harrison parties), they state that they do not oppose an injunction of two years restraining them from being directly or indirectly concerned (etc.) in the conduct of a corporation carrying on a business in connection with telecommunication. Thus the main areas of difference between the ACCC and the Harrison parties are the scope of the injunction with respect to Mr Harrison and the period of the injunctions.

9    It is convenient to deal first with the scope of the injunction against Mr Harrison. The contraventions in respect of which he was found to have been knowingly concerned related to the provision of telecommunication services; they had nothing to do with any business he conducts of providing “asset protection” advice. There was no detailed examination in the evidence of his “asset protection” advice business. It did not form part of the proceeding. In these circumstances, there is no basis to restrain Mr Harrison from providing “asset protection” advice services. In its responding submissions on relief, the ACCC submitted that it would be content to substitute the words “the provision of financial, insolvency and/or restructuring advice” for the words “asset protection”. But I think the same difficulties arise with these words.

10    In relation to the period of time for the injunctions, I note that the proposed injunctions relate to carrying on a business or supplying services in connection with telecommunication generally, rather than being confined to the particular conduct which constituted the contraventions. In circumstances where the Harrison parties do not oppose an order of that scope, I am content to make such an order. But I do not think there is a sufficient basis to restrain the Harrison parties for a period beyond two years (whether in relation to telecommunication generally or in more specific terms). It is true that, as the ACCC submits, Mr Harrison and his companies displayed a system or pattern of behaviour which occurred over the course of several years. (The precise period of the contraventions is unclear, but was between two and three years.) However, the evidence does not establish that there is a real risk of Mr Harrison or his companies engaging again in conduct of the type held to constitute a contravention in the period after two years from the making of these orders. Accordingly, the period of the injunctions will be two years, both in relation to Mr Harrison and in relation to the second and fifth to eleventh respondents. (I note for completeness that the Harrison parties did not oppose the seventh respondent being included in the injunction.)

11    The ACCC, in its submissions, refers to the Harrison Companies having repeatedly engaged in conduct causing harm to many consumers “despite customer complaints and investigations and adverse findings by the ACMA and the TIO”. But it needs to be remembered that this proceeding is not directed at whether the Harrison Companies complied with their obligations under the regulatory regime for telecommunications companies. The proceeding is brought by the ACCC – not the ACMA or the TIO – for specific contraventions of the Australian Consumer Law. The relief to be ordered must be referable to the contraventions of the Australian Consumer Law that the ACCC has been successful in establishing.

Pecuniary penalties

12    The maximum penalty for each contravention of ss 21 and 50 of the Australian Consumer Law is $1.1 million for a body corporate and $220,000 for a natural person: s 224(3) of the Australian Consumer Law.

13    The ACCC seeks the imposition of the following pecuniary penalties:

(a)    in relation to each of the second, fifth and sixth respondents: $500,000 (ie, a total of $1.5 million);

(b)    in relation to each of the seventh to eleventh respondents: $100,000 (ie, a total of $500,000); and

(c)    in relation to Mr Harrison: $400,000.

14    Thus, in relation to the corporate respondents, the ACCC seeks penalties totalling $2,000,000.

15    On the other hand, the Harrison parties submit as follows:

(a)    in relation to the corporate respondents, an appropriate range for total penalties is $150,000 to $200,000; and

(b)    in relation to Mr Harrison, it is open to the Court not to impose any penalty. If the Court determines to impose a penalty, an appropriate penalty range would be $25,000 to $35,000, together with an extended period of 12 months to pay.

16    Under s 224(2), there are certain matters to which regard is to be had in determining the appropriate penalty. The principles relating to determination of civil penalties are well established: see, in particular, Trade Practices Commission v CSR Ltd [1991] ATPR 41-076 at 52,152 to 52,153 per French J; NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (1996) 71 FCR 285 at 292 per Burchett and Kiefel JJ; Australian Competition and Consumer Commission v Singtel Optus Pty Ltd (No 4) (2011) 282 ALR 246 at [11] per Perram J; Singtel Optus Pty Ltd v Australian Competition and Consumer Commission (2012) 287 ALR 249 at [61]-[63] per Keane CJ, Finn and Gilmour JJ; Australian Competition and Consumer Commission v TPG Internet Pty Ltd (2013) 250 CLR 640 at [65]-[66] per French CJ, Crennan, Bell and Keane JJ. The process to be applied in arriving at a particular penalty figure was considered in the context of criminal sentencing in Markarian v The Queen (2005) 228 CLR 357. The same process is also applicable to the assessment of pecuniary penalties in the present context: see Australian Competition and Consumer Commission v Excite Mobile Pty Ltd (No 2) [2013] FCA 1267 (Excite Mobile) at [13] per Mansfield J. Submissions by the regulator as to quantum can be received by the Court: Commonwealth v Director, Fair Work Building Industry Inspectorate (2015) 326 ALR 476 at [1], [60], [61] and [64] per French CJ, Kiefel, Bell, Nettle and Gordon JJ, at [68] per Gageler J, at [79] per Keane J.

17    Having regard to the matters specified in s 224(2) and applying the principles set out in the cases referred to above, the following matters are noted in relation to the contraventions by the second, fifth, sixth, eighth, ninth, tenth and eleventh respondents:

(a)    The size of each of the contravening companies is small (see Ex A35 at [10]-[20]). The profitability of the companies was modest. The revenue of the business conducted, at various times, by one or more of the companies was between about $80,000 and $100,000 per month (that is, between about $1 million and $1.2 million per year). The profit of the business was, at most, around 10% of revenue, being about $8,000 to $10,000 per month, or about $100,000 to $120,000 per year. The Harrison parties contend that the profitability of the companies was effectively halved due to the conduct of wholesalers, but I do not think that it is necessary to come to a concluded view on this submission. If size is considered by reference to the number of customers, the companies had a relatively small number of customers. For example, at the time of the second transfer there were about 1,900 customers.

(b)    The contravening conduct was serious, deliberate and extended over a period of about two to three years. The circumstances in which the relevant acts and omissions took place are described in the Reasons: see, in particular, the Reasons at [125]-[127].

(c)    The contraventions arose out of the conduct of senior management. Mr Harrison, the sole director of the companies, was ‘hands on’ in managing their day-to-day operations and was intimately involved in their conduct.

(d)    The contravening conduct was not ad hoc, but systemic and planned. The pattern of conduct, involving unauthorised transfers and unjustified threats or demands, was repeated several times. This demonstrates an absence of a corporate culture of regulatory compliance.

(e)    The contravening companies have not shown a disposition to co-operate with the authorities responsible for the enforcement of the Australian Consumer Law in relation to the contravention. Although it appears that the parties reached an ‘in principle’ settlement of the proceeding before trial, this was not finalised and hence the matter went to trial. That said, I do not accept the ACCC’s submission that the respondents “prolonged the trial” by, among other things, “taking many procedural points (eg objections to evidence)”. To the contrary, I consider that the respondents conducted the trial in a helpful and efficient manner.

(f)    There is no evidence to suggest that any of the contravening companies has previously been found by a court in proceedings under the Australian Consumer Law to have engaged in similar conduct.

18    One of the matters specified in s 224(2) of the Australian Consumer Law is “the nature and extent of the act or omission and of any loss or damage suffered as a result of the act or omission”. It is important, here, to focus on the conduct found to have contravened the Australian Consumer Law. The system of conduct found to have contravened the Act is set out at [125] of the Reasons. The key elements of the system or pattern were: the transfer of consumer contracts from one Harrison Company to another without the customer’s consent; the failure to notify the customer of the transfer; save in relation to the second transfer, the adoption of the same trading name before and after the transfer; at least in the case of the third and fourth transfers, the sending of invoice documentation in substantially the same form before and after the transfer; and the ‘transferee’ company demanding payment of an early termination fee (or threatening to impose such a fee) if the customer wished to end a contract early. It is not clear how many customers were affected by the system of conduct or pattern of behaviour. On the basis of information in the eCollect database, it appears that eCollect pursued at least 100 customers who had been subjected to transfers for amounts totalling more than $100,000. It may be inferred (based on the number of customers and the amount involved) that many of these customers were the subject of the contravening system of conduct or pattern of behaviour. Further, there are likely to have been other customers affected by the system or pattern (for example, where one of the contravening companies itself demanded payment from the customer).

19    Both the ACCC and the Harrison parties made submissions regarding the ‘course of conduct’ principle, which may be of assistance in determining the appropriate penalty: see Australian Competition and Consumer Commission v Hillside (Australia New Media) Pty Ltd trading as Bet365 (No 2) [2016] FCA 698 at [24]-[25] per Beach J; approved in Australian Competition and Consumer Commission v Reckitt Benckiser (Australia) Pty Ltd [2016] FCAFC 181 at [141] per Jagot, Yates and Bromwich JJ.

20    In the present case, where the allegation was that each company engaged in a system of conduct or pattern of behaviour, it is appropriate to view the conduct of each company as a single course of conduct. I would apply this approach, not only to the fifth, sixth, eighth, ninth, tenth and eleventh respondents, but also to the second respondent. Although the second respondent engaged in the conduct in relation to all four transfers (not just one transfer), the system or pattern was the same, making it appropriate to treat its conduct as a single course of conduct. Similarly, I would treat Mr Harrison as having been knowingly concerned in a single course of conduct.

21    Although some of the companies contravened s 50 as well as s 21 of the Australian Consumer Law, given the considerable overlap in the acts or omissions constituting the contravening conduct, it is not necessary to consider this conduct separately for the purposes of imposing penalties on the relevant companies. This is consistent with the approach taken both by the ACCC and the Harrison parties in their submissions.

22    Taking into account the matters discussed in [17]-[21] above and having regard to the need for general and specific deterrence, I consider the appropriate penalties in relation to the second, fifth, sixth, eighth, ninth, tenth and eleventh respondents to be as follows:

(a)    in relation to the second respondent: $50,000;

(b)    in relation to the fifth respondent: $50,000;

(c)    in relation to the sixth respondent: $50,000; and

(d)    in relation to each of the eighth, ninth, tenth and eleventh respondents: $12,500 (making a total of $50,000).

23    The rationale for imposing a lower penalty on each of the eighth, ninth, tenth and eleventh respondents is that, under the fourth transfer, the business was in effect transferred to these four companies rather than (as with the earlier transfers) transferred to a single company. Accordingly, the size of the business and the extent of the contraventions is only (approximately) one quarter of the size and scope. This is consistent with the approach of the parties in their submissions.

24    I note that the total of the above penalties is $200,000. This represents considerably more than one year’s profit of the business that was, at various times, owned or operated by the respondents.

25    The penalties sought by the ACCC seem to me to be disproportionate to the size of the companies and the nature and extent of the loss caused by the contravening conduct. In this regard, it may be that the penalties sought by the ACCC were formulated by reference to the total number of customers whose contracts were transferred from one respondent to another without their consent (Transferred Customers), and the amounts paid by those customers after the transfers. The conduct found to have contravened the Australian Consumer Law was, however, more specific than that. It did not affect all Transferred Customers, only those where the ‘transferee’ company demanded payment of an early termination fee (or threatened to impose such a fee) if the customer wished to end a contract early.

26    I am mindful that, in fixing an appropriate penalty, the size of the companies is only one factor to which regard is to be had. Another important consideration is the need for general deterrence: see Australian Competition and Consumer Commission v Leahy Petroleum Pty Ltd (No 2) (2005) 215 ALR 281 at [9] per Merkel J; Australian Competition and Consumer Commission v High Adventure Pty Ltd [2006] ATPR 42-091 at 44,564 per Heerey, Finkelstein and Allsop JJ; Director of Consumer Affairs Victoria v Hocking Stuart (Richmond) Pty Ltd (No 2) [2016] FCA 1435 at [14]-[20] per Middleton J. I am comfortable, however, that total penalties of $200,000 are substantial penalties that will have a general deterrent effect.

27    Finally, having regard to the ‘totality principle’, I consider the total penalty that I propose to impose on each company to be appropriate as a total amount.

28    In relation to Mr Harrison, many of the matters set out above are also relevant. In addition, the following matters are noted:

(a)    The evidence indicates that he has only limited assets (see Ex A35 at [25]-[28]).

(b)    There is no evidence that he has previously been found by a court in proceedings under the Australian Consumer Law to have engaged in any similar conduct.

(c)    I found that he had knowledge of each of the matters that made the conduct unconscionable: see Reasons at [136]-[137].

29    Taking these matters into account, and having regard to the need for general and specific deterrence, I consider an appropriate penalty to be $50,000. This is slightly more than proposed by Mr Harrison and significantly less than that proposed by the ACCC. I do not think an amount of $35,000 is sufficient for the purposes of general and specific deterrence, given the seriousness of the conduct and given Mr Harrison’s role in relation to that conduct. On the other hand, a penalty of $400,000 would be ‘crushing’ for Mr Harrison given his limited means. In deciding that a penalty of $50,000 is appropriate, I have taken into account the impact of the other orders to be made, including the injunctions (dealt with above) and the disqualification order (dealt with below).

30    As noted above, Mr Harrison has sought a period of 12 months to pay any penalty imposed on him. Rather than deal with this submission on the basis of the limited material before the Court, I propose to order that the penalty be paid with 30 days, or such other period as the Court may determine, and to provide that Mr Harrison can apply within a limited period of time to have the time period for payment extended. Such an application would need to be supported by proper material.

Disqualification orders

31    The ACCC seeks an order under s 248 of the Australian Consumer Law disqualifying Mr Harrison from managing corporations. The preconditions to such an order are that the Court is satisfied that the person has contravened, has attempted to contravene or has been involved in a contravention of certain provisions of the Australian Consumer Law (which include a provision of Part 2-2 (which includes s 21) and a provision of Part 3-1 (which includes s 50)), and the Court is satisfied that the disqualification is justified. Disqualification orders are designed to protect the public from the harmful use of the corporate structure or from use that is contrary to proper commercial standards. They seek to safeguard the public interest in the transparency and accountability of companies and in the suitability of directors to hold office. In assessing an appropriate length of prohibition, consideration should be given to the degree of seriousness of the contraventions, the propensity of the person to engage in similar conduct in the future, and the likely harm that may be caused to the public: see Australian Securities and Investments Commission v Adler (2002) 42 ACSR 80 at [56] per Santow J; as qualified by Rich v Australian Securities and Investments Commission (2004) 220 CLR 129 at [34]-[35] per Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ.

32    The ACCC proposes a period of disqualification of seven years or such other period as the Court considers appropriate. Mr Harrison submits that, if the Court is to make an order for disqualification, a range not exceeding two to three years would be appropriate.

33    In my view, a period of disqualification of three years is appropriate. At all material times, Mr Harrison: was the sole director and CEO of each of the Harrison Companies; oversaw the operations of each of the Harrison Companies and supervised the staff of each of these companies; and was in charge of compliance for each of the companies. He knew that the transfers were not valid and effective, and that there was no legitimate basis for the ‘transferee’ company to demand or threaten to impose an early termination fee if the customer wanted to end the contract early: Reasons at [137]. He was found to have been knowingly involved in the contraventions of s 21. The conduct of Mr Harrison was serious. Nevertheless, I consider that a period of greater than three years would not be justified given the nature of the conduct. I note that in Excite Mobile, Mansfield J imposed disqualification orders of, respectively, three years and two years for the two relevant respondents. While caution must always be exercised in comparing cases, the overall gravity of the conduct in this case does not appear to be worse than that found in Excite Mobile.

Orders for redress of non-party consumers

34    The ACCC seeks orders (pursuant to s 239 of the Australian Consumer Law) for Mr Harrison and the second and fifth to eleventh respondents to make refunds to Transferred Customers of amounts paid by way of cancellation fees or termination fees. The ACCC also seeks orders regarding the preparation of a register of all Transferred Customers, containing detailed information about their identity and circumstances.

35    The Harrison parties submit that the non-party orders proposed by the ACCC are inappropriate (particularly in relation to Mr Harrison), overly broad and ambiguous.

36    The third and fourth respondents, in their submissions in relation to relief, sought the appointment of a receiver and manager to the second, fifth, sixth and eighth to eleventh respondents. I indicated that I did not consider this application to form part of the process of making orders for final relief in this proceeding (brought by the ACCC). I indicated that any such application should be made separately in an appropriate proceeding (which may need to be a new proceeding). The third and fourth respondents have not, at this stage, made such an application. But they submitted that redress orders should not be made at this stage given their proposed application.

37    Section 239(1) of the Australian Consumer Law empowers the Court to make orders designed to redress, reduce or prevent loss or damage resulting from contraventions of a provision of (among others) Chapter 2 and Part 3-1. An order may be made against (relevantly) the person who engaged in the contravening conduct or a person involved in that conduct: s 239(2)(a). In determining whether to make such an order, the Court may consider the conduct of the person, and of the non-party consumers in relation to the contravening conduct since the contravention occurred: s 240(1). No finding is necessary about which persons are non-party consumers, or the nature of their loss or damage: s 240(3). A non-party consumer who accepts the redress is bound by that order, and gives up the right to make any other claim in relation to that loss or damage: s 241. Section 243 sets out a non-exhaustive list of the types of orders that the Court may make, including: declaring a contract or arrangement void in whole or in part; varying a contract or arrangement; refusing to enforce provisions of a contract or arrangement; and refunding moneys or returning property to the injured person. The principles applicable to the making of a redress order under s 239 were discussed by Mortimer J in Australian Competition and Consumer Commission v Clinica Internationale Pty Ltd (No 2) [2016] FCA 62 at [291]-[293].

38    In my view, an order should be made for the second, fifth, sixth, eighth, ninth, tenth and eleventh respondents to provide a refund to Transferred Customers of any cancellation fees or termination fees (and any associated collection fees and legal fees). I would not include a provision (as sought by the ACCC) for payment of interest at the penalty interest rate, as I think this is too elaborate given the relatively small amounts of money involved. I would also not include the proposed order relating to the preparation of a register with detailed information with respect to each Transferred Customer. Rather, I will include an order that the relevant companies, by a proper officer, provide an affidavit setting out the steps they have taken to comply with the order.

39    I do not propose to include Mr Harrison in the refund order. He did not receive the payments. Given his limited assets, and the other orders to be made with respect to Mr Harrison, it is unlikely that he would be in a financial position to pay the relevant amounts. Therefore, it is unlikely that a redress order requiring Mr Harrison to pay the relevant amounts would achieve the object of providing redress to the affected customers.

40    I have considered the submission of the third and fourth respondents that a redress order should not be made at this stage in light of their proposed application for the appointment of a receiver and manager to the other corporate respondents. This application has not yet been made and is likely to be opposed. Rather than deferring making the redress orders, I will reserve liberty to apply so that the parties can apply to the Court to modify these orders if necessary depending on the outcome of any such application or if the corporate respondents should otherwise go into some form of external administration.

41    I will also include orders that each of the relevant respondent companies:

(a)    discontinue all debt collection procedures (including any legal proceedings) against Transferred Customers for the recovery of cancellation or termination fees (and any associated collection fees and legal fees); and

(b)    not enforce cancellation or termination fees against any Transferred Customer who seeks to terminate his, her or its contract.

Compliance program

42    The ACCC seeks an order, pursuant to s 246 of the Australian Consumer Law, that Mr Harrison, at his own expense, within three months of the date of the orders, attend and undertake a training session on the responsibilities and obligations under s 21 of the Australian Consumer Law; and certain associated orders.

43    Having regard to the injunctions and the disqualification order which I propose to make in relation to Mr Harrison, it is unnecessary to require him to undertake (and pay for) such a compliance program. It would be different if he was going to continue to operate and manage a telecommunications business of the kind operated by the Harrison Companies. In these circumstances, there would be utility in Mr Harrison undertaking a compliance program. But the effect of the injunctions and disqualification is that he will be precluded for a period of some years from doing so.

Costs

44    The ACCC seeks an order for costs against the first, second and fifth to eleventh respondents on the basis that they unsuccessfully defended the proceeding and therefore ought to pay the ACCC’s costs.

45    The Harrison parties submit that: s 43(3)(c) of the Federal Court of Australia Act 1976 (Cth) empowers the Court to make provision for the parties to pay costs in specified proportions; the ACCC’s case against the respondents included two limbs, being unconscionable conduct and undue harassment; other than the specific instances of undue harassment in relation to four of the six ACCC witnesses, there were no findings under s 50 against the corporate respondents and none at all against Mr Harrison; Mr Harrison was not found to have been knowingly concerned in relation to the specific circumstances of the six ACCC witnesses; and, in these circumstances, the Court should make an order apportioning Mr Harrison’s liability for costs to an amount not exceeding 50%.

46    In my view, the ACCC was successful in the proceeding and the usual costs order, namely that costs follow the event, should apply. Although the ACCC did not succeed in its undue harassment case against two of the six witnesses, and did not establish that Mr Harrison was knowingly concerned in the undue harassment of the other four witnesses, these were relatively minor aspects of the case brought by the ACCC. The ACCC was overwhelmingly successful, in that it established that the Harrison Companies engaged in unconscionable conduct and that Mr Harrison was knowingly concerned in that conduct. In the circumstances, the respondents (other than the third and fourth respondents, which did not participate in the trial, and the seventh respondent) should be liable for the ACCC’s costs. Given the almost complete overlap in the case brought against the Harrison Companies and the case brought against Mr Harrison for being knowingly concerned in that conduct, I do not think that there is a sound basis to ‘cap’ Mr Harrison’s responsibility for costs to 50% of the ACCC’s costs. In this regard, see Australian Competition and Consumer Commission v Homeopathy Plus! Australia Pty Limited (No 2) [2015] FCA 1090 at [90]-[92] per Perry J. Accordingly, the order will be that the first, second, fifth, sixth, eighth, ninth, tenth and eleventh respondents pay the ACCC’s costs of the proceeding. These costs will be payable on a joint and several basis.

Other matters

47    The ACCC seeks an order that, for the purposes of s 137H of the Competition and Consumer Act 2010 (Cth), a copy of the reasons for judgment, with the seal of the Court affixed thereon, be retained on the Court file. I will direct that the sealed copy of the liability judgment in this matter be retained on the Court file until 31 December 2021: see Excite Mobile at [180].

Associate:

Dated:    2 March 2017

SCHEDULE OF PARTIES