FEDERAL COURT OF AUSTRALIA

Australian Competition and Consumer Commission v ABG Pages Pty Ltd [2018] FCA 764

ORDERS

THE COURT DECLARES THAT:

1.    From at least 1 January 2011 until mid-2016, the first respondent, ABG Pages Pty Ltd (ABG Pages), in trade or commerce, engaged in a system of conduct in connection with the supply or possible supply of on-line advertising services, that was, in all the circumstances, unconscionable within the meaning of:

(a)    for conduct occurring prior to 1 January 2012, s 22 of the Australian Consumer Law, which is schedule 2 of the Competition and Consumer Act 2010 (ACL); and

(b)    for conduct occurring from 1 January 2012, s 21 of the ACL,

by reason of some, or all, of the following:

(c)    misleading potential customers as to the number and nature of the businesses which advertised on the ABG Pages directory;

(d)    using high-pressure sales tactics to pressure potential customers to enter into advertising contracts;

(e)    using written contracts that contained terms which were contradictory, ambiguous or misleading as to the total cost and duration of the contracts;

(f)    failing to explain to potential customers the material terms of the proposed advertising contracts, including that the stated duration of the contract would automatically renew unless the customer gave written notice before a specified number of days prior to an unspecified renewal date;

(g)    refusing to accept customers’ attempts to provide notice to cancel advertising contracts;

(h)    refusing to cancel contracts which customers did not want and did not intend to enter;

(i)    misleading customers into signing further unwanted advertising contracts for additional categories of advertising;

(j)    misleading customers who wanted to end their relationship with ABG Pages into signing a further contract for 12 or 24 months;

(k)    persistently telephoning and emailing customers (often contacting customers multiple times a day on multiple days of a week) when attempting to collect money ABG Pages claimed was due under the advertising contracts.

2.    ABG Pages, in trade or commerce, by engaging in or attempting to engage in some or all of the conduct described in paragraphs (a) to (k) above, in connection with the supply or possible supply of on-line advertising services to each of the customers listed below:

(a)    Berrico Consultants;

(b)    Bruce Ridge Early Childhood Centre and Preschool;

(c)    Daramalan College;

(d)    Family Business Australia;

(e)    First Impressions Beauty Belconnen;

(f)    Manuka Park Serviced Apartments;

(g)    Menindee Local Aboriginal Land Council; and

(h)    Pasadena High School;

engaged in conduct that was, in all the circumstances, unconscionable in contravention of s 21 of the ACL.

3.    From about March 2013 until about mid-2016, ABG Pages, by publishing advertisements for a large number of businesses, including high profile businesses such as Telstra Corporation Limited and Kmart Australia Limited, explicitly or impliedly represented that those businesses chose to advertise on the ABG Pages website, when in fact they did not and thereby made false or misleading representations in connection with the supply or possible supply of on-line advertising services:

(a)    that the businesses had agreed to acquire services, within the meaning of s 29(1)(d) of the ACL; and

(b)    that the ABG Pages directory was affiliated or associated with the businesses within the meaning of s 29(1)(h) of the ACL.

4.    From at least 1 January 2011 until about mid-2016, ABG Pages, by explicitly or impliedly representing to customers that the advertising contracts:

(a)    were for a specified term, often at a discounted price; and

(b)    could be terminated by providing written notice before a specified number of days prior to the renewal date;

when in fact it was the case that:

(c)    the advertising contracts were designed so that the term of the contract would automatically renew;

(d)    when the customer ticked the box that indicated they had read and agreed to the terms and conditions, ABG Pages asserted that the duration of the contract was automatically renewed for a further term;

(e)    when a customer attempted to provide notice within the specified number of days to terminate the agreement, ABG Pages would not accept the notice of termination and would seek to enforce the extended contract period;

(f)    after the first year, the cost of the advertising contract often increased to the full price which was up to 10 times the discounted price;

and thereby made false or misleading representations in trade or commerce in connection with the supply or possible supply of on-line advertising services:

(g)    that the customer had agreed to acquire advertising with ABG Pages, within the meaning of s 29(1)(d) of the ACL;

(h)    as to the total term and therefore total price of the advertising contracts, within the meaning of s 29(1)(i) of the ACL;

(i)    as to the existence or effect of a condition, right or remedy of a contract between the customer and ABG Pages for advertising services, within the meaning of s 29(1)(m) of the ACL.

5.    From at least 1 January 2011 until about mid-2016, ABG Pages, by explicitly or impliedly representing to customers that:

(a)    they needed to initial a document and return it to confirm their listing;

(b)    they could list in an additional category without additional cost by initialling a document and returning it; and

(c)    the customer had to sign and return a document after marking the opt-out box to cancel an existing advertising contract;

when in fact initialling and signing and returning the document was treated by ABG Pages as entry into a further advertising contract, made false or misleading representations in trade or commerce in connection with the supply or possible supply of on-line advertising services:

(d)    that the customer had agreed to acquire advertising with ABG Pages in those terms, within the meaning of s 29(1)(d) of the ACL;

(e)    as to the existence or effect of a condition, right or remedy of a contract between the customer and ABG Pages for advertising services, within the meaning of s 29(1)(m) of the ACL.

6.    From at least 1 January 2011 until about mid-2016, by engaging in the conduct outlined at Orders 3 to 5 above, ABG Pages engaged in conduct in trade or commerce that was misleading or deceptive or likely to mislead or deceive in contravention of s 18 of the ACL.

7.    Either for the purpose of attempting to pressure customers to enter into an advertising agreement or to chase payment of a disputed invoice, ABG Pages called:

(a)    Menindee Local Aboriginal Land Council at least 993 times between 1 July 2014 and 9 December 2015, including calling over 20 times on 3 separate days and 48 times on one day;

(b)    Pasadena High School at least 206 times between 1 July 2014 and 18 March 2015 and 13 times on 18 March 2015; and

(c)    First Impressions Beauty Belconnen at least 205 times between September 2014 and July 2015;

and thereby engaged in conduct in connection with the supply or possible supply of on-line advertising services which amounted to undue harassment in contravention of s 50 of the ACL in relation to each of the aforementioned customers.

8.    The second respondent, Ms Michele McCullough (Ms McCullough):

(a)    as sole director and shareholder of ABG Pages;

(b)    having managed and controlled the day to day operations of ABG Pages since its incorporation in August 2009;

(c)    having designed the unconscionable system referred to in Order 1;

(d)    having designed the detailed telephone scripts, email templates, staff manuals, advertising proposal documents and written terms and conditions;

(e)    having trained staff to follow the unconscionable system referred to in Order 1;

(f)    having enforced staff compliance with the unconscionable system referred to in Order 1;

(g)    having approved the form of the ABG Pages website;

was knowingly concerned in the conduct of ABG Pages outlined at Orders 1 to 6 above and therefore the contraventions of sections 18, 21 (from 1 January 2012), 22 (prior to 1 January 2012) and 29 of the ACL by ABG Pages.

THE COURT ORDERS THAT:

Injunctions

9.    ABG Pages must not for 5 years from the date of this order, whether by itself, its servants, agents or howsoever otherwise, in connection with the supply or possible supply of advertising services:

(a)    enforce any contracts entered into before the date of this order; and

(b)    enter into contracts after the date of this order;

with terms which automatically renew or renew upon ticking a box agreeing to the terms and conditions.

10.    ABG Pages must not for 5 years from the date of this order, whether by itself, its servants, agents or howsoever otherwise, in connection with the supply or possible supply of advertising services, make any of the following representations:

(a)    a business has agreed to advertise on the ABG Pages on-line directory;

(b)    a contract is for a specified term and can be terminated at the end of that term by giving written notice;

(c)    a customer has agreed to acquire advertising with ABG Pages by signing documents;

when this is not the case.

11.    ABG Pages must not, whether by itself, its servants, agents or howsoever otherwise, pursue payment from customers who have, before the date of this order, entered into a contract with ABG Pages in connection with the publication of an advertisement.

12.    Ms McCullough must not for 5 years from the date of this order in connection with the supply or possible supply of advertising services by an on-line directory services provider (Supplier), aid, abet, counsel or procure, or be directly or indirectly knowingly concerned in or party to the promotion or supply of, advertising services to customers in Australia by a Supplier through the use of contract terms which automatically renew or renew upon ticking a box agreeing to the terms and conditions.

13.    Ms McCullough must not for 5 years from the date of this Order in connection with the supply or possible supply of advertising services to customers in Australia by a Supplier, aid, abet, counsel or procure, or be directly or indirectly knowingly concerned in or party to, the making of any of the following representations by a Supplier:

(a)    a business has agreed to advertise on the Supplier’s on-line directory;

(b)    a contract is for a specified term and can be terminated at the end of that term by giving written notice;

(c)    a customer has agreed to acquire advertising with the Supplier by signing documents;

when this is not the case.

Compliance Program orders

14.    Pursuant to s 246(2) of the ACL, ABG Pages is to:

(a)    within 90 days of recommencing trading, establish and implement an ACL compliance program to be undertaken by each employee who deals with or who may deal with Australian Consumers, being a program designed to minimise ABG Pages’ risk of future contraventions of sections 18, 21, 29 and 50 of the ACL;

(b)    for a period of 3 years from the date ABG Pages recommences trading, maintain and continue to implement the ACL compliance program referred to in the Order above.

15.    Pursuant to s 246(2) of the ACL Ms McCullough, is to, at her own expense:

(a)    within 90 days of the date of this order, attend and undertake a training session on the responsibilities and obligations under sections 18, 21 and 29 of the ACL;

(b)    ensure that the training referred to in paragraph ((a)) is administered by a suitably qualified compliance professional or legal practitioner with expertise in the ACL;

(c)    provide to the ACCC a written statement or certificate from the person conducting the training referred to in paragraph ((a)), within 14 days of completion of the training, verifying that such training has occurred.

Disqualification orders

16.    Pursuant to s 248 of the ACL, Ms McCullough is disqualified from managing corporations for a period of 5 years.

Order for findings of fact

17.    A copy of the reasons for judgment, with the seal of the Court affixed thereon, be retained on the Court file for the purposes of s 137H(3) of the CCA.

Pecuniary penalties

18.    Pursuant to s 224 of the ACL, ABG Pages pay to the Commonwealth of Australia pecuniary penalties totalling $300,000 in respect of its contraventions of the ACL, in instalments as follows:

(a)    $30,000 within 6 calendar months of the date of this order;

(b)    $30,000 within 12 calendar months of the date of this order;

(c)    $30,000 within 18 calendar months of the date of this order;

(d)    $30,000 within 24 calendar months of the date of this order;

(e)    $30,000 within 30 calendar months of the date of this order;

(f)    $30,000 within 36 calendar months of the date of this order;

(g)    $30,000 within 42 calendar months of the date of this order;

(h)    $30,000 within 48 calendar months of the date of this order;

(i)    $30,000 within 54 calendar months of the date of this order;

(j)    $30,000 within 60 calendar months of the date of this order;

provided that if any instalment is not paid on or before the specified date, the whole of the remaining penalties then outstanding shall become immediately payable.

19.    Pursuant to s 224 of the ACL, Ms McCullough pay to the Commonwealth of Australia pecuniary penalties totalling $40,000 in respect of being knowingly concerned in ABG Pages’ contraventions of ss 21 (from 1 January 2012), 22 (prior to 1 January 2012) and 29 of the ACL, in instalments as follows:

(a)    $4,000 within 6 calendar months of the date of this order;

(b)    $4,000 within 12 calendar months of the date of this order;

(c)    $4,000 within 18 calendar months of the date of this order;

(d)    $4,000 within 24 calendar months of the date of this order;

(e)    $4,000 within 30 calendar months of the date of this order;

(f)    $4,000 within 36 calendar months of the date of this order;

(g)    $4,000 within 42 calendar months of the date of this order;

(h)    $4,000 within 48 calendar months of the date of this order;

(i)    $4,000 within 54 calendar months of the date of this order;

(j)    $4,000 within 60 calendar months of the date of this order;

provided that if any instalment is not paid on or before the specified date, the whole of the remaining penalties then outstanding shall become immediately payable.

Costs

20.    ABG Pages and Ms McCullough pay to the applicant, a contribution of $25,000 towards its costs, in instalments as follows:

(a)    $2,500 within 6 calendar months of the date of this order;

(b)    $2,500 within 12 calendar months of the date of this order;

(c)    $2,500 within 18 calendar months of the date of this order;

(d)    $2,500 within 24 calendar months of the date of this order;

(e)    $2,500 within 30 calendar months of the date of this order;

(f)    $2,500 within 36 calendar months of the date of this order;

(g)    $2,500 within 42 calendar months of the date of this order;

(h)    $2,500 within 48 calendar months of the date of this order;

(i)    $2,500 within 54 calendar months of the date of this order;

(j)    $2,500 within 60 calendar months of the date of this order;

provided that if any instalment is not paid on or before the specified date, the whole of the remaining costs then outstanding shall become immediately payable.

21.    ABG Pages and Ms McCullough will be jointly and severally liable for the payment of the costs referred to in Order 20.

Endorsement pursuant to Rule 41.06

To:     ABG Pages Pty Ltd (ACN 138 706 251)

    Ms Michele Anne McCullough

You will be liable to imprisonment, sequestration of property or punishment for contempt if:

(a)     for an order that requires you to do an act or thing - you neglect or refuse to do the act or thing within the time specified in the order; or

(b)     for an order that requires you not to do an act or thing - you disobey the order.

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

REASONS FOR JUDGMENT

RANGIAH J:

1    The applicant, the Australian Competition and Consumer Commission (the ACCC) commenced proceedings against the first respondent, ABG Pages Pty Ltd (ABG Pages), and the second respondent, Michele Anne McCullough, alleging contraventions of the Australian Consumer Law (ACL), which is contained in Sch 2 to the Competition and Consumer Act 2010 (Cth) (CCA).

2    ABG Pages admitted a number of contraventions of the ACL. On 16 March 2018, I made orders against ABG Pages and Ms McCullough. These are my reasons for making those orders.

3    The ACCC, ABG Pages and Ms McCullough, filed a statement of agreed facts and joint submissions. ABG Pages made admissions that between 1 January 2011 and mid 2016, it engaged in conduct in relation to the supply and promotion of advertising services in contravention of ss 18, 21 (after 1 January 2012), 22 (between 1 January 2011 and 31 December 2011), 29 and 50 of the ACL.

4    Between 2009 and October 2017, the first respondent, ABG Pages, carried on the business of supplying advertising services to small businesses, schools, and associations in Australia through an online business directory which had the URL http://www.ABGPages.com.au (ABG Pages website).

5    Ms McCullough has been the sole director and shareholder of ABG Pages and managed and controlled its day-to-day operations. Ms McCullough has made admissions that she was knowingly concerned in ABG Pages’ contraventions of ss 18, 21, 22 and 29, within the meaning of s 224(1)(e) of the ACL. The ACCC did not allege that Ms McCullough was knowingly concerned in ABG Pages’ contraventions of s 50 of the ACL.

6    The parties were largely in agreement about the form of orders that should be made. However, there was no agreement as to the time that should be allowed for the payment of penalties.

Legal Principles

7    In determining whether orders that are jointly sought with the consent of all parties should be made, the Court must be satisfied that it has the power to make the orders proposed and that the orders are appropriate: Australian Competition and Consumer Commission v Real Estate Institute of Western Australia Inc (1999) 161 ALR 79 at [3]; Australian Competition and Consumer Commission v Virgin Mobile Australia Pty Ltd (No 2) [2002] FCA 1548 at [1]. In Commonwealth v Director, Fair Work Building Industry Inspectorate (2015) 258 CLR 482, the High Court held at [57] that it is consistent with the nature of civil proceedings for a court to make orders by consent and to approve a compromise of proceedings on terms proposed by the parties, provided the court is persuaded that what is proposed is appropriate.

Unconscionable conduct

8    Between 1 January 2011 and 31 December 2011, s 22 of the ACL proscribed unconscionable conduct in connection with the supply of goods or services to persons other than listed public companies. At the time, s 21 proscribed unconscionable conduct in connection with the supply of goods or services of a kind ordinarily acquired for personal, domestic or household use or consumption.

9    With effect from 1 January 2012, ss 21 and 22 of the ACL were amended and unified. The changes did not relevantly affect the substance of the prohibitions: see the Explanatory Memorandum to the Competition and Consumer Legislation Amendment Bill 2011 (the Explanatory Memorandum), paragraph 2.19. From 1 January 2012 onwards, s 21 of the ACL proscribed unconscionable conduct in connection with the supply of goods or services to persons other than listed public companies.

10    From 1 January 2012, s 21(4) stated that:

(4)    It is the intention of the Parliament that:

(a)    this section is not limited by the unwritten law relating to unconscionable conduct; and

(b)    this section is capable of applying to a system of conduct or pattern of behaviour, whether or not a particular individual is identified as having been disadvantaged by the conduct or behaviour; and

(c)    in considering whether conduct to which a contract relates is unconscionable, a court’s consideration of the contract may include consideration of:

(i)    the terms of the contract; and

(ii)    the manner in which and the extent to which the contract is carried out;

and is not limited to consideration of the circumstances relating to formation of the contract.

11    The Explanatory Memorandum at para 2.24 confirms that under s 21(4)(b), Parliament’s intention is that “the provision may apply whether or not there is an identified person disadvantaged by the conduct or behaviour”, which “ensures that focus is on the conduct in question, as opposed to the characteristics of a particular person, or the effect of the impugned conduct on that person.”

12    For conduct to be regarded as unconscionable, serious misconduct or something clearly unfair or unreasonable, must be demonstrated: Cameron v Qantas Airways Ltd (1995) 55 FCR 147 at 179; Hurley v McDonalds Australia Ltd [1999] FCA 1728 at [22]. The term ‘unconscionable’ refers to actions that show no regard for conscience, or which are irreconcilable with what is right or reasonable, and imports a pejorative moral judgment: Cameron v Qantas Airways Ltd at 283–284, 298.

False and misleading representations, misleading or deceptive conduct

13    Section 18 of the ACL provides that “a person must not in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive”. Contraventions of s 18 do not give rise to pecuniary penalties under s 224 of the ACL.

14    Section 29 of the ACL prohibits, inter alia, the making of false or misleading representations in connection with the supply or possible supply of goods or services or in connection with the promotion by any means of the supply or use of goods or services:

(a)    that a particular person has agreed to acquire goods or services: (s 29(1)(d));

(b)    that the person making the representation has a sponsorship, approval or affiliation: (s 29(1)(h));

(c)    with respect to the price of goods or services: (s 29(1)(i));

(d)    concerning the existence, exclusion or effect of any condition, warranty, guarantee, right or remedy: (s 29(1)(m)).

Undue harassment

15    Section 50 of the ACL provides that “a person must not use…undue harassment…in connection with…(a) the supply or possible supply of goods or services; or (b) the payment for goods or services…”

16    In Australian Competition and Consumer Commission v Maritime Union of Australia and Others (2001) 114 FCR 472 at [60], Hill J explained that “the word ‘harassment’ means in the present context persistent disturbance or torment and that a person will be harassed by another when the former is troubled repeatedly by the latter”. In relation to whether that harassment is undue, His Honour stated that “where the frequency, nature or content of such communications is such that they are calculated to intimidate or demoralise, tire out or exhaust a debtor, rather than merely to convey the demand for recovery, the conduct will constitute undue harassment”. His Honour added that “the reasonableness of the conduct will be relevant to whether what is harassment constitutes undue harassment”.

declarations

17    The Court has a wide discretionary power to make declarations under s 21 of the Federal Court of Australia Act 1976 (Cth); Tobacco Institute of Australia Ltd v Australian Federation of Consumer Organisations Inc (No 2) (1993) 41 FCR 89 at 99.

18    It is open to the court to make declarations based on admissions, as distinct from evidence: Australian Competition and Consumer Commission v Dataline.Net.Au Pty Ltd (in liquidation) and Others (2007) 161 FCR 513 at [92]; Hadgkiss v Aldin (No 2) [2007] FCA 2069 at [21]–[22]; Pagasa Australia Pty Ltd [2008] FCA 1545 at [75]–[76]. In any event, the statement of agreed facts provides such evidence: s 191 of the Evidence Act 1995 (Cth).

19    In Forster v Jododex Australia Pty Limited (1972) 127 CLR 421 at 437–438, Gibbs J identified three requirements that should be satisfied before the discretion is exercised in favour of making a declaration.

20    The first requirement is that the question must be a real one and not a hypothetical or theoretical one. In this case, declarations made relate to conduct that contravenes the ACL, and the matters in issue were identified and particularised with precision: see Australian Competition and Consumer Commission v MSY Technology Pty Ltd (2012) 201 FCR 378 at [19]. Further, the declarations contain sufficient indication of how and why they relate to conduct that contravenes the ACL: BMW Australia Ltd v Australian Competition and Consumer Commission (2004) 207 ALR 452 at [35].

21    The second requirement is that the applicant must have a real interest in raising the relevant question. The ACCC has a genuine interest as the public regulator under the ACL in seeking declaratory relief.

22    The third requirement is that there must be a proper contradictor. ABG Pages and Ms McCullough are the subject of the declarations, which are adverse to them: Australian Competition and Consumer Commission v MSY Technology Pty Ltd. Accordingly, ABG Pages and Ms McCullough are proper contradictors.

23    I considered that it was appropriate to make the declarations sought by the ACCC. The declarations made record the Court’s disapproval, vindicate the ACCC’s claims against ABG Pages and Ms McCullough, assist the ACCC to carry out its duties as conferred upon it in the CCA, inform the public of the harm of ABG Pages and Ms McCullough’s conduct, and deter other corporations from contravening the ACL: Australian Competition and Consumer Commission v Construction, Forestry, Mining and Energy Union (2007) ATPR 42-140 at [6].

Injunctions

24    The Court has the power under s 232 of the ACL to impose injunctions. The object of an injunction is to restrain repetition of the conduct found to have been in contravention: Mikasa (NSW) Pty Ltd v Festival Stores (1972) 127 CLR 617 at 651. It is not necessary to show that commission, continuance, or repetition of contravening conduct is threatened or apprehended: s 232(4) of the ACL. However, it is necessary to demonstrate that the injunction will serve a purpose: Australian Competition and Consumer Commission v Dataline.Net.Au Pty Ltd (in liquidation) and Others at [107]–[111].

25    An injunction may be ordered for the purpose of general and specific deterrence, the Court having regard to the public interest, as well as to traditional equitable considerations: ICI Australia Operations Pty Ltd v TPC (1992) 38 FCR 248 at 254–256, 263–268. An injunction must be directed specifically to the impugned conduct: Australian Competition and Consumer Commission v Z-Tek Computers Pty Ltd (1997) 78 FCR 197 at 203–204. It must be capable of being readily obeyed without the requirement of Court supervision: Australian Competition and Consumer Commission v Marksun Pty Ltd (2011) ATPR 42-363 at [62].

26    Injunctions are appropriate as ABG Pages remains solvent and may commence trading again and supplying to consumers. ABG Pages may seek to pursue payment from customers who have previously entered into contracts with it. Ms McCullough’s future employment may involve the supply of goods or services and the admitted contraventions are sufficiently serious, repeated and recent to warrant injunctive relief.

27    An injunction is necessary to prevent Ms McCullough from engaging in the admitted conduct again, in any capacity. The terms of the injunctions are appropriate to deter repetition of the conduct.

Determining Appropriate Penalties

28    The process to be undertaken by the Court when setting penalties under s 224 of the ACL is similar to the process of arriving at the appropriate sentence for a criminal offence: Australian Competition and Consumer Commission v Coles Supermarkets Australia Pty Ltd (2015) 327 ALR 540 at [6]; Australian Competition and Consumer Commission v Reckitt Benckiser (Australia) Pty Ltd (2016) 340 ALR 25 at [44]. The process involves assessing the relevant factors and synthesising a conclusion as to penalty: Australian Competition and Consumer Commission v Reckitt Benckiser (Australia) Pty Ltd at [44], similar to the intuitive or instinctive synthesis of relevant factors used when sentencing for a criminal offence: see Markarian v The Queen (2005) 228 CLR 357 at [37].

29    In Markarian it was held at [31] that:

Careful attention to maximum penalties will almost always be required, first because the legislature has legislated for them; secondly, because they invite comparison between the worst possible case and the case before the court at the time; and thirdly, because in that regard they do provide a yardstick.

…

30    The maximum penalty for each act or omission in relation to ABG Pages’ contraventions of ss 21 (after 1 January 2012), 22 (between 1 January 2011 and 31 December 2011), 29 and 50 is $1.1 million: s 224(3) of the ACL. The maximum penalty for each act or omission in relation to Ms McCullough being knowingly concerned in ABG Pages’ contraventions of ss 21 (after 1 January 2012), 22 (between 1 January 2011 and 31 December 2011) and 29 is $220,000: s 224(3) of the ACL.

31    For conduct which constitutes a contravention of two or more of the provisions, ABG Pages and Ms McCullough are not liable for more than one pecuniary penalty in respect of the same conduct: s 224(4) of the ACL.

Totality principle

32    In determining the appropriate penalty, the Court must take into account the ‘totality principle’. In TPC v TNT Australia Pty Ltd (1995) ATPR 41-375, at 40, 169, the Court held that the total penalty for related offences ought not exceed what is proper for the entire contravening conduct involved.

33    In Australian Competition and Consumer Commission v Safeway Stores Pty Ltd (1997) 145 ALR 36, the Court considered the totality principle in the civil penalty context at 53:

The totality principle is designed to ensure that overall an appropriate sentence or penalty is appropriate and that the sum of the penalties imposed for several contraventions does not result in the total of the penalties exceeding what is proper having regard to the totality of the contravening conduct involved. But that does not mean that a court should commence by determining an overall penalty and then dividing it among the various contraventions. Rather the totality principle involves a final overall consideration of the sum of the penalties determined.

…

It is explicit in this statement that a sentencer or penalty fixer must, as an initial step, impose a penalty appropriate for each contravention and then as a check, at the end of the process, consider whether the aggregate is appropriate for the total contravening conduct involved.

Course of conduct

34    The contraventions took place in the context of a wider course of conduct. That means that the Court may, if it considers it appropriate in the circumstances of the case, have regard to the ‘one transaction’ or ‘one course of conduct’ principle. The principle was explained in Construction, Forestry, Mining and Energy Union v Cahill (2010) 269 ALR 1:

(a)    where there is an interrelationship between the legal and factual elements of two or more offences, care must be taken to ensure that the offender is not punished twice for what is essentially the same criminality (at [39]);

(b)    doing so requires careful identification of what is “the same criminality”, and that is necessarily a factually specific enquiry (at [39]);

(c)    the principle is one of the applicable sentencing principles to guide the Court in the exercise of the sentencing discretion (at [41]);

(d)    further, the principle is a tool of analysis which the Court is not compelled to utilise, as the exercise of the sentencing discretion remains “a matter of judgment to be exercised according to the facts of each case and having regard to conflicting sentencing objectives” (at [42]).

35    The Full Court recently considered the application of the course of conduct principle in Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union [2017] FCAFC 113 (ABCC v CFMEU) where it was held that:

148.    The important point to emphasise is that, contrary to the Commissioner’s submissions, neither the course of conduct principle nor the totality principle, properly considered and applied, permit, let alone require, the Court to impose a single penalty in respect of multiple contraventions of a pecuniary penalty provision. There is no doubt that, in an appropriate case involving multiple contraventions, the Court should consider whether the multiple contraventions arose from a course or separate courses of conduct. If the contraventions arose out of a course of conduct, the penalties imposed in relation to the contraventions should generally reflect that fact, otherwise there is a risk that the respondent will be doubly punished in respect of the relevant acts or omissions that make up the multiple contraventions. That is not to say that the Court can impose a single penalty in respect of each course of conduct. Likewise, there is no doubt that in an appropriate case involving multiple contraventions, the Court should, after fixing separate penalties for the contraventions, consider whether the aggregate penalty is excessive. If the aggregate is found to be excessive, the penalties should be adjusted so as to avoid that outcome. That is not to say that the Court can fix a single penalty for the multiple contraventions.

149.    In an appropriate case, however, the Court may impose a single penalty for multiple contraventions where that course is agreed or accepted as being appropriate by the parties. It may be appropriate for the Court to impose a single penalty in such circumstances, for example, where the pleadings and facts reveal that the contraventions arose from a course of conduct and the precise number of contraventions cannot be ascertained, or the number of contraventions is so large that the fixing of separate penalties is not feasible, or there are a large number of relatively minor related contraventions that are most sensibly considered compendiously. As revealed generally by the reasoning in Commonwealth v Director, FWBII, there is considerably greater scope for agreement on facts and orders in civil proceedings than there is in criminal sentence proceedings. As with agreed penalties generally, however, the Court is not compelled to accept such a proposal and should only do so if it is considered appropriate in all the circumstances.

(Emphasis added.)

36    It is necessary to have regard to the conduct giving rise to the systemic unconscionable conduct allegations in order to form a view about whether that conduct should be viewed as part of a single episode of wrongdoing, or whether there are circumstances which warrant viewing the conduct as giving rise to multiple episodes of wrongdoing.

37    The parties jointly submitted that there exists a close interrelationship between the legal and factual elements of the systemic unconscionable conduct contraventions. Those contraventions occurred as part of a system engaged in by ABG Pages which extended from 1 January 2011 to mid-2016. While different elements of the system were used at different times in relation to different customers, the same system existed throughout this period and it was continuously applied by ABG Pages in relation to its dealings with customers and potential customers. Throughout the whole period, Ms McCullough enforced compliance with the system.

38    Having regard to these matters, it is appropriate to characterise the systemic unconscionable conduct as forming part of an ongoing, single episode of wrongdoing.

Penalty factors

39    In determining the appropriateness of a penalty under s 224(2) of the ACL, the Court must have regard to “all relevant matters”, including the nature and extent of the act or omission, any loss or damage suffered as a result of the act or omission, the circumstances in which the act or omission took place, and whether the person has previously been found by a court to have engaged in any similar conduct.

40    In addition to the specific matters identified in s 224(2)(a) to (c), the assessment of the appropriate penalty will also involve consideration of the factors derived from TPC v CSR Ltd (1991) ATPR 41-076. These additional factors, as espoused in Australian Competition and Consumer Commission v Singtel Optus Pty Ltd (No 4) (2011) 282 ALR 246 at 250–251, include:

(a)    the size of the contravening company;

(b)    the deliberateness of the contravention and the period over which it extended;

(c)    whether the contravention arose out of the conduct of senior management of the contravener or at some lower level;

(d)    whether the contravener has a corporate culture conducive to compliance with the ACL as evidenced by educational programmes and disciplinary or other corrective measures in response to an acknowledged contravention;

(e)    whether the contravener has shown a disposition to cooperate with the authorities responsible for the enforcement of the ACL in relation to the contravention;

(f)    whether the contravener has engaged in similar conduct in the past;

(g)    the financial position of the contravener; and

(h)    whether the contravening conduct was systematic, deliberate or covert.

See also Australian Competition and Consumer Commission v Coles Supermarkets Australia Pty Ltd (2015) 327 ALR 540 at 544 [8]–[9].

41    The central consideration for determining pecuniary penalties is deterrence, both general and specific: Singtel Optus Pty Ltd v Australian Competition and Consumer Commission [2012] FCAFC 20 at [41], [62]. Penalties must be set at a level which will not be seen as “an acceptable cost of doing business”: Australian Competition and Consumer Commission v TPG Internet Pty Ltd (2013) 250 CLR 640 at [64].

(1)    The nature and extent of the act or omission and the circumstances in which the act or omission took place

Systemic unconscionable conduct

42    From 1 January 2011 until about mid 2016, ABG Pages engaged in a system of unconscionable conduct. The unconscionable system used by ABG Pages began with “cold calls” to potential customers around Australia. ABG Pages sought to have customers enter into advertising agreements with ABG Pages as quickly as possible, and would then persist in seeking to obtain as much money as it could from each of those customers, by preventing them from terminating the contract and misleading the customer into entering additional contracts.

43    ABG Pages then frequently and persistently contacted customers to obtain payment of amounts it claimed were payable to it. The conduct was often engaged in over long periods of time in relation to individual customers. In some cases, ABG Pages persisted over a period of several years in seeking to obtain payments from individual customers.

44    The ABG Pages system involved some or all of the following elements:

(a)    misleading potential customers as to the number and nature of businesses which advertised on the ABG Pages website;

(b)    using high-pressure sales tactics to pressure potential customers into entering advertising contracts;

(c)    using written contracts that contained terms which were contradictory, ambiguous and misleading as to the total cost and duration;

(d)    failing to explain to potential customers the material terms of the advertising contracts, including that the stated duration would automatically renew unless the customer gave written notice before a specified number of days prior to an unspecified renewal date;

(e)    refusing to accept customers’ attempts to provide notice to cancel advertising contracts;

(f)    refusing to cancel contracts which customers did not want and did not intend to enter;

(g)    misleading customers into signing further unwanted advertising contracts for additional categories of advertising;

(h)    misleading customers who wanted to end their relationship with ABG Pages into signing a further contract for 12 or 24 months;

(i)    persistently telephoning and emailing customers (often contacting customers multiple times a day on multiple days of a week) when attempting to collect money it claimed was due under the advertising contracts.

45    ABG Pages was only able to achieve the level of sales achieved during the relevant period by making misleading representations and engaging in unconscionable conduct. ABG Pages’ unconscionable system was designed to obtain as much money as possible from each ABG Pages customer. At Ms McCullough’s direction, ABG Pages engaged in this conduct without regard for whether or not ABG Pages’ customers wanted the services supplied by ABG Pages, and without regard for the stress, anxiety and financial loss it would cause to many customers.

46    ABG Pages and Ms McCullough admit that a large proportion of the customers that had signed up for advertising agreements with ABG Pages did not want those advertising services. The online advertising services provided by ABG Pages were also of little value to customers. Although ABG Pages uploaded its customers’ advertisements to the ABG Pages website, the ABG Pages website had a very small footprint, and provided little marketing or promotional value to customers.

47    Ms McCullough was responsible for and involved in almost all aspects of ABG Pages’ business. She designed the unconscionable system, trained staff to follow it, enforced staff compliance with it, designed all the documents, scripts and manuals which were used as part of that unconscionable system, and determined the parameters as to, and in some cases decided, whether or not a customer could cancel their agreement with ABG Pages.

Unconscionable conduct in relation to specific customers

48    ABG Pages applied some or all of the system in its dealings with Berrico Consultants (Berrico), Menindee Local Aboriginal Land Council, Manuka Park Serviced Apartments, Daramalan College, Pasadena High School, Family Business Australia, First Impressions Beauty Belconnen and Bruce Ridge Early Childhood Centre and Preschool.

(i)    Berrico

49    Berrico engaged in a business assisting corporate and government organisations with their human resources initiatives by designing and delivering training to their staff. Mr Leape was a managing director and a management consultant of Berrico. In around July 2012, ABG Pages telephoned Mr Leape for the first time, offered online advertising on a trial basis for $99.95, and then sent him a ‘Verification of Proposal’. Mr Leape signed this proposal. In July 2013, ABG Pages sent Mr Leape a ‘Renewal of Proposal’ which Mr Leape signed.

50    In July 2014, ABG Pages sent Mr Leape an invoice for $149.95 in relation to the Renewal of Proposal. When Mr Leape had a telephone conversation with ABG Pages about this, he was told he had agreed to the renewal because the second contract was for 24 months. Mr Leape then confirmed this would now be his last term of advertising with ABG Pages. He sent ABG Pages a signed credit card authorisation form on which he confirmed that this would be the final term of advertising for Berrico and that no further use of Berrico’s credit card was authorised.

51    In June 2015, ABG Pages sent Mr Leape another invoice for $149.95 in relation to the Renewal of Proposal. When Mr Leape called ABG Pages disputing it, Ms Staci McCullough told him that the only way to opt out was to tick the box next to the words ‘[m]ark to ensure no future entries, a one off entry only is required’ in the Renewal of Proposal. Mr Leape followed these instructions. ABG Pages then deducted $154.44, $1,029.94 and $1,029.94 from Mr Leape’s credit card, and sent Mr Leape an invoice for $999.95. Mr Leape pursued ABG Pages demanding refunds. Eventually, he received refunds of $1,029.94 and $875.50, and decided it was not worth his time to pursue the outstanding amount.

(ii)    Menindee Local Aboriginal Council

52    Menindee Local Aboriginal Land Council (MLALC) aim to improve, protect and foster the best interests of all Aboriginal persons within the area. Ms Ferguson has been the Chief Executive Officer of the MLALC since at least May 2013. In May 2013, ABG Pages called Ms Ferguson, offered online advertising, and then sent her a ‘Verification of Proposal’. After a follow up phone call from ABG Pages a week later, Ms Ferguson agreed to advertise with ABG Pages. She understood the advertisement was for one year and could be cancelled at any time.

53    In July 2013, ABG Pages sent Ms Ferguson a ‘Verification of 2nd Proposal’. Ms Ferguson signed this document believing it was the same as the Verification of Proposal. She did not notice that this was a different proposal for additional advertising services, at a price of $4,999.95.

54    About a week later Ms Ferguson sent ABG Pages a cancellation notice pursuant to s 82 of the ACL. However, ABG Pages sent several emails with an invoice for $4,999.95 in relation to the Verification of 2nd Proposal. ABG Pages insisted MLALC was contractually bound to pay, and in a telephone conversation told Ms Ferguson that MLALC would be better off paying to avoid incurring interest and court costs. Ms Ferguson then agreed to pay for this invoice in instalments.

55    Between 30 September 2013 and 4 November 2013, MLALC paid several instalments totalling $2,249.97. During this time, ABG Pages frequently called Ms Ferguson, sometimes multiple times a day. ABG Pages pressured Ms Ferguson to make the payments. This included asking her to make them whilst she was on the phone, and speaking to her in a nasty and pushy manner.

56    After further requests for payment from ABG Pages, on 6 February 2014 Ms Ferguson informed ABG Pages orally and in writing that MLALC did not want to advertise with ABG Pages anymore. MLALC then paid $2,249.98, being the balance of the requested payment in relation to the Verification of 2nd Proposal.

57    The above written notice ought to have been sufficient to stop the Verification of Proposal from continuing into the next year pursuant to its rollover clause. However, in March 2014, ABG Pages sent MLALC an invoice for $989.95 in relation to the Verification of Proposal, stating the account was overdue. MLALC paid $899.95 in relation to this invoice.

58    Between 1 and 10 July 2014, ABG Pages called Ms Ferguson at least 93 times. On 10 July 2014, during one of those calls, Ms Staci McCullough faxed Ms Ferguson a Verification of 3rd Proposal, and told Ms Ferguson that to cancel advertising with ABG Pages it was necessary for Ms Ferguson to tick a box next to the words ‘[m]ark to ensure no future entries, a one off entry only is required’ in the Verification of 3rd Proposal, sign, and return the document. Ms Staci McCullough also asked Ms Ferguson to stay on the line while this was done. Ms Ferguson followed these instructions. This proposal was in fact a contract for advertisement with ABG Pages for $8,999.95 for ‘12 or 24 months’ with a rollover clause.

59    On 24 July 2014, ABG Pages sent Ms Ferguson two invoices for $8,999.95 each in relation to the Verification of 3rd Proposal, and called her 16 times.

60    Between 25 July 2014 and 5 August 2014, ABG Pages called MLALC at least 27 times. On 6 August 2014, ABG Pages sent to MLALC a Renewal of Proposal, and called her at least 8 times. During one telephone conversation, ABG Pages again told Ms Ferguson to tick the box next to the phrase ‘[m]ark to ensure no future entries, a one off entry only is required’. However, Ms Ferguson crossed out those words, wrote ‘no more entries’, and returned that signed proposal. This proposal was in fact a contract for advertisement with ABG Pages for $999.95 for 24 months, with a rollover clause and a cost of $5,499.95 for the second year.

61    ABG Pages then requested MLALC pay ABG Pages sums of $999.95, $5,499.95 and $8,999.95 in relation to the Verification of 3rd Proposal and Renewal of Proposal, and pursued these payments by regular emails and frequent phone calls. Between 7 August 2014 and 20 April 2015, ABG Pages called MLALC at least 372 times.

62    Throughout its dealing with MLALC between 1 July 2014 and 9 December 2015, ABG Pages called MLALC at least 993 times. ABG Pages even called Ms Ferguson on her mobile while she was on leave. Despite a letter of demand, ABG Pages refused to refund $15,799.78 it received from MLALC.

(iii)     Manuka Park Serviced Apartments

63    Manuka Park Serviced Apartments (MSA) is located in Griffith, Canberra, and provides short and long term accommodation. Mr Joel Smith was employed by MSA as the Apartment Manager.

64    In October 2015, ABG Pages contacted Mr Smith for the first time. The call left Mr Smith with the impression that MSA was already paying for a listing with ABG Pages, and the representative of ABG Pages was merely calling to renew it. Mr Smith did not want to go ahead with the proposed advertisement, so he did not reply to ABG Pages.

65    A few days later, ABG Pages sent MSA a ‘Verification of Proposal’, and called six times. When Mr Smith called ABG Pages and informed the representative of ABG Pages that he did not wish to advertise, the representative of ABG Pages told him that, to cancel advertising with ABG Pages, Mr Smith had to tick the box on the Verification Proposal next to the phrase ‘[m]ark to ensure no future entries required’, sign and return it. Mr Smith did this and stated that MSA “do not wish to proceed’.

66    Two days later, Mr Smith received another email from ABG Pages with the same Verification of Proposal. He replied to that email stating, ‘I have already responded with a signed attachment specifying that we WILL NOT be going ahead’.

67    In November 2015, ABG Pages sent Mr Smith an invoice for $999.95 in relation to the Verification of Proposal. When Mr Smith called ABG Pages to query it, he was told he had agreed to a 12 months listing. Mr Smith then wrote to ABG Pages several times disputing the invoice and eventually ABG Pages agreed to cancel this invoice.

(iv)    Daramalan College

68    Daramalan College is an independent Catholic school established in 1962 by the Missionaries of the Sacred Heart. It is a co-educational school for students in years 7 to 12, is located in Canberra.

69    Ms Rita Daniels was employed by the Missionaries of the Sacred Heart as Principal of Daramalan College and Ms Mandy Peacock was employed as Personal Assistant to the Principal.

70    In early 2013, ABG Pages telephoned Daramalan College for the first time, and sent a ‘Verification of Proposal’, and then a revised version of that document which discounted the price from $899.95 to 199.95 as a trial offer. Ms Daniels accepted this proposal, and it was paid for.

71    In May, ABG Pages sent Daramalan College a ‘Verification of 2nd Proposal’. Ms Daniels thought it was the same proposal as last time. ABG Pages sent an invoice for $199.90 in relation to this proposal. Daramalan College disputed this invoice and paid a discounted amount of $100.00.

72    In February 2014, ABG Pages sent Daramalan College a renewal proposal. Ms Daniels wrote to ABG Pages stating that Daramalan College did not want to advertise with ABG Pages. ABG Pages then sent another ‘Renewal of Proposal’. Ms Peacock called ABG Pages and was told that Daramalan College was listed in two different classifications and that it was bound for a second year in relation to one of those classifications because of the fine print (which related to the Verification of Proposal). However, ABG Pages agreed to reduce the amount for that classification from $999.95 to $499.95.

73    ABG Pages also stated that, to stop the advertising under both categories, Ms Daniels had to: (1) tick and sign the box next to the phrase ‘[m]ark to ensure no further entries, a one off entry only is required’ in the Renewal of Proposal; and (2) in relation to the other classification Daramalan College had (relating to the Verification of 2nd Proposal), Daramalan College needed to notify ABG Pages in writing of its election not to continue advertising with ABG Pages. Ms Daniels and Ms Peacock followed these instructions and also requested a confirmation from ABG Pages of its receipt of notice in relation to the Verification of 2nd Proposal. ABG Pages did not provide this confirmation.

74    ABG Pages then sent Daramalan College two invoices for $499.95 in relation to the Renewal of Proposal. After further ongoing correspondence, ABG Pages’ demands for payment, and numerous phone calls, Daramalan College paid one of the invoices.

75    In February 2015, ABG Pages sent an email to Daramalan College stating that Daramalan College’s listing with ABG Pages was due for renewal and next year’s advertising fee of $999.95 would be incurred. In June 2015, ABG Pages sent an email to Daramalan College which attached a new Verification of Proposal and stated that it attached ‘signed order, opt-out paperwork & ABG Pages terms as requested’. On both occasions, Ms Peacock had to engage in further correspondence with ABG Pages explaining that Daramalan College was not advertising with ABG Pages.

(v)    Pasadena High School

76    Pasadena High School (PHS) is a secondary school located in the southern Adelaide suburb of Pasadena. Ms Wendy House has been employed as its Principal since 2014.

77    In April 2013, PHS signed a ‘Verification of Proposal’ which offered advertising with ABG Pages for $199.95 as part of a trial offer, and PHS paid for it.

78    In January 2014, ABG Pages sent PHS an invoice for $899.95. PHS sought to cancel advertising with ABG Pages, but ABG Pages stated that PHS was bound to advertise for another year. This was not in fact the case, as the contract was only for 12 months subject to renewals. PHS then paid for this invoice.

79    In May 2014, ABG Pages sent Ms House a ‘Verification of 2nd Proposal’ offering to advertise with ABG Pages for $990.00 for ‘12 or 24 months’. During a telephone call, Ms House inquired about this document, and ABG Pages told her this was a confirmation of an existing listing, and it did not require PHS to make any further payments. Ms House then attended to this document, as advised by ABG Pages, and returned it.

80    ABG Pages sent an invoice for $990.00 in relation to this proposal. Ms House called ABG Pages and said that PHS did not want any further advertising and that she did not wish to pay the recently received invoice. ABG Pages insisted that PHS was required to pay for it.

81    Between June 2014 and March 2015, ABG Pages persistently emailed PHS chasing payment for this invoice. ABG Pages threatened “more serious recovery methods” which “could include legal action in the Magistrates Court which would result in additional legal costs to [you] and may adversely impact upon [your] credit rating”.

82    ABG Pages also persistently called PHS. In total, between 1 July 2014 and 18 March 2015, ABG Pages called at least 206 times. The high frequency of the phone calls and the intensity of the demands for payment from ABG Pages caused Ms House to feel harassed. These phone calls also caused the PHS office staff who answered the calls to feel very stressed.

83    In March 2015, a letter of demand was sent to ABG Pages on behalf of PHS. The demand requested that the harassing telephone calls to PHS cease. Ms McCullough responded and stated the phone calls would cease. After that, ABG Pages stopped contacting PHS.

(vi)    Family Business Australia

84    Family Business Australia (FBA) is the peak body representing the family business community in Australia, operating for the benefit of its members. FBA also operates as professional advisors of family businesses through education, networking events and conferences. Between February 2014 and May 2016, Ms Robin Buckham was employed by FBA as its Chief Executive Officer.

85    Between May 2014 and April 2016, Ms Alicia Lack reported directly to Ms Buckham, first as FBA’s Acting National Manager for Marketing and Membership, and then as FBA’s National Manager for Marketing and Membership. Ms Lack went on maternity leave in March 2016. Prior to holding these roles, Ms Lack held the role of Marketing and Membership Coordinator.

86    In September 2014, ABG Pages telephoned Ms Lack for the first time. ABG Pages said that FBA was due for a renewal of its services, and sent Ms Lack a ‘Verification of Proposal’. In fact, ABG Pages had never contacted FBA prior to this date. After this, ABG Pages persistently called FBA, often several times per day.

87    About a week after the initial contact, ABG Pages again sent FBA the Verification of Proposal. Ms Lack responded to ABG Pages and said that FBA would not be advertising with ABG Pages. ABG Pages then proposed a 12 month trial contract for a significantly reduced price of $149.95 from $999.95. Ms Lack decided that it was a small price to pay to end the constant contact from ABG Pages. She returned the signed proposal and asked ABG Pages to notify her of the date by which the 30 days’ notice was required. FBA paid for this proposal.

88    Shortly thereafter, a representative of ABG Pages called Ms Lack, said that the document that Ms Lack signed had been misplaced, and asked her to sign another Verification of Proposal. The representative of ABG Pages also said that ABG Pages had problems with its email and would fax this proposal. ABG Pages called Ms Lack several times asking her to sign the proposal and fax it back. Ms Lack eventually signed the proposal without reading it. This proposal offered advertising with ABG Pages for $599.95 for 24 months, with the cost for the second year being $999.95. ABG Pages sent FBA an invoice for $599.95.

89    Ms Lack called ABG Pages and challenged this invoice. A representative of ABG Pages said that Ms Lack had signed up to two listings with ABG Pages. FBA also wrote to ABG Pages and challenged the invoice. However, ABG Pages continued to email FBA chasing payment for this invoice, which included a threat of legal action resulting in additional legal costs to FBA and adverse impact on FBA’s credit rating. FBA eventually agreed to pay a reduced invoice to stop the constant contact from ABG Pages. FBA also confirmed in writing that it would not renew or enter into new contracts with ABG Pages, and asked ABG Pages to stop contacting them.

90    In April 2015, ABG Pages sent FBA an invoice for $999.95 in relation to the Verification of Proposal. FBA continued to challenge this invoice and pointed out to ABG Pages that it had already provided notice to terminate all contracts with ABG Pages. FBA again asked ABG Pages to stop contacting it.

91    In May 2015, ABG Pages sent FBA an invoice for $999.95 in relation to the Second Verification of Proposal referred to in paragraph 108.

92    ABG Pages continued to chase payments for these invoices. In one conversation, the ABG Pages representative said that if FBA didn’t pay, ABG Pages would keep rolling the contracts over and renewing them.

93    Eventually, in September 2015, ABG Pages emailed FBA, cancelled their final invoice, and confirmed that there were no other outstanding invoices.

94    In total, between 3 September 2014 and 22 September 2015, ABG Pages called FBA at least 78 times. The dealings with ABG Pages made Ms Lack feel very distressed. She felt bullied and unable to handle ABG Pages’ tactics and the volume of phone calls. In a number of calls, the tone used by the ABG Pages’ representatives was agitated and forceful.

(vii)    First Impressions Beauty Belconnen

95    First Impressions Beauty Belconnen (First Impressions) was located in Belconnen, Canberra. Ms Vanessa De Alvia purchased First Impressions on 1 July 2014 and was at all relevant times its owner.

96    In around August or September 2014, ABG Pages called Ms De Alvia for the first time. ABG Pages said they were calling to renew the listing, and that First Impressions had to be listed in the directory. As a result, Ms De Alvia believed the listing in the directory was not optional.

97    ABG Pages then sent Ms De Alvia a ‘Renewal of Proposal’ for $249.95 for 24 months of advertising, and continued to frequently call Ms De Alvia, sometimes multiple times a day, until she finally signed and returned this document. The signed Renewal of Proposal has three ‘ticked’ boxes: one of those boxes related to having Webslogo Designs create a website.

98    On 10 October 2014, ABG Pages sent Ms De Alvia an invoice for $249.95. Between then and 11 November, ABG Pages made at least 39 calls to First Impressions, and sent emails to Ms De Alvia which included threats of legal action resulting in adverse impact on First Impressions’ credit rating. After that, Ms De Alvia completed and provided ABG Pages with a credit card authorisation form which ABG Pages used to withdraw the payment for the invoice.

99    When Ms De Alvia found out that the advertisement with ABG Pages was not mandatory, she called and wrote to ABG Pages to attempt to cancel the advertisement and get a refund. ABG Pages refused to provide a refund but agreed not to charge any further amounts against Ms De Alvia’s credit card.

100    Between February 2015 and July 2015, First Impressions received emails and telephone calls regarding a website by ‘Webslogo Designs’, in connection with one of the boxes that was ticked on the Renewal of Proposal. ABG Pages called it at least 108 times. Then, in July 2015, ABG Pages deducted $499.95 from Ms De Alvia’s credit card as payment for the website. Ms McCullough sent an email to Ms De Alvia in which she referred to a telephone discussion and confirmed that Ms De Alvia’s credit card would not be charged again.

101    In total, between September 2014 and 29 July 2015, ABG Pages called First Impressions at least 205 times.

(viii)    Bruce Ridge Early Childhood Centre and Preschool

102    Bruce Ridge Early Childhood Centre and Preschool (BRECC) provides childcare services for the children of employees of Calvary Hospital in the Australian Capital Territory.

103    Ms Annerley was employed by BRECC as the Centre Director. Between April 2012 and May 2013, Ms Annerley was on leave. Between April 2012 and January 2013, Ms Sarah Boardman acted as Centre Director. Between January 2013 and April 2013, Ms Alex Cox acted as the Centre Director.

104    In September 2012, ABG Pages contacted BRECC for the first time, and sent a ‘Verification of Proposal’ offering advertising with ABG Pages for $2,999.95. This proposal was signed and paid for by BRECC.

105    In November 2012, Ms Boardman signed a ‘Verification of 2nd Proposal’ offering advertising with ABG Pages for $8,999.95. In December 2012, ABG Pages sent an email to Ms Boardman stating that BRECC would not be contacted for that category of advertising as soon as payment of the invoice has been received. BRECC ultimately paid for this advertisement.

106    In January 2013, Ms Boardman signed a ‘Verification of 3rd Proposal’ offering advertising with ABG Pages for $9,500.00, and on which she handwrote, ‘This is a final authorisation’. Several weeks later, Ms Cox attempted to cancel BRECC’s advertising with ABG Pages, but ABG Pages refused. BRECC paid for this advertisement.

107    ABG Pages then sent BRECC a ‘Verification of 4th Proposal’ offering advertising for $15,999.95. Ms Cox called ABG Pages and attempted to cancel the advertising. ABG Pages said it could not be cancelled, but told her to write on the bottom that BRECC did not wish to renew. Ms Cox followed these instructions. ABG Pages then sent an invoice for $15,999.95.

108    After this, ABG Pages chased BRECC for payment of the last invoice. BRECC stated that it did not want to advertise with ABG Pages, and challenged the invoice. Eventually, in June 2013, Ms McCullough sent an email to BRECC stating the invoice was cancelled, and BRECC will not be contacted by ABG Pages or be obliged to advertise with ABG Pages in the future.

109    In November 2013, ABG Pages started contacting BRECC again, chasing payment of an invoice for $9,500.00. In one letter to BRECC, Ms McCullough stated that ABG Pages would not contact BRECC again if BRECC pays the invoice. BRECC continued to challenge that invoice.

False and misleading representations

110    As part of the ABG Pages system, ABG Pages made a number of false and misleading representations. These representations were made as part of the unconscionable system.

Undue harassment

111    ABG Pages persistently called three of the specific customers, MLALC, PHS and First Impressions, for the purpose of either attempting to pressure those customers to enter into advertising agreements with it, or to chase the payment of money ABG Pages claimed was due under advertising contracts.

112    ABG Pages called:

(a)    MLALC at least 993 times between 1 July 2014 and 9 December 2015, including calling over 20 times on 2 July 2014, 28 times on September 2015 and 1 October 2015, and 48 times on 13 October 2015;

(b)    PHS at least 206 times between 1 July 2014 and 18 March 2015, and 13 times on 18 March 2015.

(c)    First Impressions at least 205 times between 9 September 2014 and 29 July 2015.

113    This conduct was engaged in as part of the unconscionable system. The conduct also amounted to undue harassment in contravention of s 50 of the ACL.

(2)    The size of the contravening company/financial position of the contravener

114    It is relevant to consider the level of the penalty necessary to achieve deterrence in relation to a company of a particular size.

115    While capacity to pay any penalty imposed can be a relevant factor, it cannot be relied upon to reduce the penalty below the amount necessary to secure deterrence (particularly general deterrence). The Full Court has emphasised that the importance of general deterrence is such that it may require the imposition of a penalty which would lead to the financial ruin of a contravener: Australian Competition and Consumer Commission v High Adventure Pty Ltd (2006) ATPR 42-091 at [11].

116    ABG Pages’ revenue during the relevant period for each financial year was as follows:

117    In the current financial year, ABG Pages has earned no revenue. As far as the ACCC have been able to ascertain, ABG Pages does not presently have any assets.

118    Ms McCullough is 32 and resides in New Zealand. She has 2 dependent children aged seven and nine.

119    Ms McCullough has a half share of a home in New Zealand with her husband, presently mortgaged in the amount of approximately $262,000 (NZD). Ms McCullough estimates that her home is valued at approximately $300,000 (NZD).

120    Ms McCullough is not presently working but intends to commence work as a naturopath.

121    ABG Pages’ conduct was systemic, deliberate and engaged in for a period of over five years. ABG Pages and Ms McCullough knew that there was a substantial risk that the conduct of ABG Pages contravened the ACL, for three reasons.

122    Firstly, Ms McCullough had engaged in similar conduct in the past. Between 2004 and 2008, before starting ABG Pages, Ms McCullough worked in a small telemarketing team for another person involving the sale of purported advertising services for online directories. Ms McCullough states that she was instructed to use a number of strategies when selling advertising services to customers which involved misleading customers, and using unfair tactics. Ms McCullough left for these reasons, however, applied a number of the strategies she used in that role to ABG Pages’ business.

123    Secondly, throughout the relevant period, ABG Pages received many complaints from customers who felt that they had been misled or deceived by ABG Pages’ conduct.

124    Thirdly, Ms McCullough did not seek to change the way the ABG Pages business operated to address the complaints made by customers, or to tell customers up front exactly what ABG Pages was seeking to sell. This is despite Ms McCullough periodically updating and amending the scripts and documents used by ABG Pages.

125    Despite being aware of a substantial risk of contravening the ACL, Ms McCullough, through ABG Pages, courted that risk in order to achieve high sales of advertising services.

(3)    Whether the contravention arose out of the conduct of senior management of the contravener or at some lower level

126    Since ABG Pages’ incorporation in August 2009, Ms McCullough has been the sole director and shareholder of ABG Pages and has managed and controlled its day-to-day operations.

127    The contravening conduct arose out of the highest level of management within ABG Pages. However, it is relevant that ABG Pages was itself a small company, with approximately 10–20 staff at a time during the relevant period, who reported directly or indirectly to Ms McCullough.

(4)    Whether the contravener has a corporate culture conducive to compliance with the ACL as evidenced by educational programmes and disciplinary or other corrective measures in response to an acknowledged contravention

128    ABG Pages and Ms McCullough did not have a culture conducive to complying with the ACL. ABG Pages did not train its staff in relation to their obligations to comply with the ACL.

129    Instead, ABG Pages staff were trained to follow the unconscionable system including using the detailed scripts and documents designed by Ms McCullough. Furthermore, Ms McCullough had not received training in relation to her obligations to comply with the ACL.

(5)    Whether the contravener has shown a disposition to cooperate with the authorities responsible for the enforcement of the ACL in relation to the contravention

130    ABG Pages has admitted that its conduct contravened the ACL and Ms McCullough has admitted that she was knowingly concerned in the conduct of ABG Pages which contravened the ACL. The admissions made by ABG Pages and Ms McCullough were made at a late stage of the proceeding, shortly before the trial was to commence.

(6)    Whether the person has previously been found by a court to have engaged in any similar conduct, and whether the contravener has engaged in similar conduct in the past

131    ABG Pages and Ms McCullough have not previously been found to have contravened the ACL.

132    Between 2004 and 2008, Ms McCullough engaged in similar conduct when she worked in a small telemarketing team for another person. During that time, she was instructed to use a number of strategies when selling advertising services to customers which involved misleading customers and using unfair tactics.

133    Ms McCullough drew upon and incorporated a number of these strategies into ABG Pages’ unconscionable system, including:

(a)    creating the false impression that potential customers had previously advertised with ABG Pages;

(b)    telling customers that they had committed to a contract which contained a rollover clause, although unlike the approach taken in her previous position, Ms McCullough incorporated the rollover clause into the documents sent to ABG Pages’ customers;

(c)    misleading customers into signing further advertising contracts for additional categories of advertising (similar to her previous position where she signed customers up for additional directories);

(d)    threatening customers with legal action if they refused to pay.

(7)    Any loss or damage suffered as a result of the act or omission, and any benefit or gain to the contravener

134    ABG Pages used high pressure sales tactics and engaged in unconscionable conduct to achieve sales. Its conduct caused many of its customers and potential customers stress and anxiety. Many were subjected to persistent and frequent calls and emails from ABG Pages, demanding that they sign documents and pay invoices. Some customers felt that they were unable to go to work anymore as a result of their dealings with ABG Pages.

135    In addition to this non-monetary damage, customers also suffered monetary loss or damage as a result of ABG Pages’ conduct, by paying ABG Pages for advertising services which they did not want or need. It is not possible to quantify the amount of the loss or damage suffered by these customers.

136    Similarly, it is not possible to quantify the revenue or profit that ABG Pages or Ms McCullough obtained from the conduct. ABG Pages and Ms McCullough accept, however, that the unconscionable system contributed to a large proportion of ABG Pages’ revenues throughout the relevant period.

Conclusion upon penalty

137    Taking into account the conduct of ABG Pages and Ms McCullough and the joint submissions and statement of agreed facts, I was satisfied that it is appropriate to impose a pecuniary penalty in the amount of $300,000 upon ABG Pages, and an amount of $40,000 upon Ms McCullough.

138    ABG Pages and Ms McCullough have agreed to pay a contribution to the ACCC’s costs of $25,000. ABG Pages and Ms McCullough have agreed to be jointly and severally liable for the payment of those costs. I was satisfied that it is appropriate to make the agreed costs orders.

Time to pay

139    The parties agreed that ABG Pages and Ms McCullough should be permitted to pay the pecuniary penalties in instalments, but disagreed as to the period over which they should be permitted to pay. ABG Pages and Ms McCullough submitted that they should be permitted to pay instalments over a period of 10 years, while the ACCC contended that the period should be four years, with the first instalment to be paid within three months.

140    Ms McCullough provided an affidavit deposing as to her limited financial resources and the difficulties that she would have in paying a pecuniary penalty. Ms McCullough was cross-examined upon her affidavit. As a result of the cross-examination, I was persuaded that Ms McCullough has greater financial capacity than she admitted to in her affidavit, although it is difficult to ascertain the extent of that capacity. However, I was satisfied that Ms McCullough would not be able to pay the first instalment of $3,000 within one month and would not be able to pay the whole of the penalty within four years.

141    The ACCC relied upon Director of Consumer Affairs (Victoria) v Hocking Stuart (Richmond) Pty Ltd (No 2) [2016] FCA 1435, where the respondent sought a payment instalment plan covering a period of four years. In that case, Middleton J declined to allow payment by a company over that period of time. His Honour said:

[19]     Hocking Stuart Richmond seeks an instalment plan as to the penalty extending to 31 January 2020. This is an excessively long period of time. In my view, an instalment arrangement over such a long period risks diminishing the general deterrent effect of the imposition of a penalty. Further, it is undesirable to impose substantial penalties over a lengthy period because this imposes a continuing hardship on the contravener, which is generally undesirable. In addition, in the case of a company in the nature of Hocking Stuart Richmond, if the payment of instalments spans a lengthy period, there is always the possibility of the company avoiding payment by restructuring or being wound up.

[20]     In this proceeding, it is important for the Court to impose a penalty that has a general deterrent consequence. Allowing the instalment plan sought by Hocking Stuart Richmond would not impose a sufficient penalty having particular regard to this important consideration. Whilst it is proper to focus on the detriment to Hocking Stuart Richmond in the imposition of a penalty, the Court must not overlook the seriousness of the contravention, as well as the need to fix upon an appropriate penalty by reference to the need to deter future contraventions. The instalment plan prepared by Consumer Affairs seems reasonable and achieves a proper balance, taking into account the financial position of Hocking Stuart Richmond and the need for general deterrence.

142    In Australian Competition and Consumer Commission v Leahy Petroleum Pty Ltd (No 2) (2005) 215 ALR 281 at [9], Merkel J observed:

The size of the contravening companies and their respective capacities to pay a penalty were relied on as factors in mitigation in the present case. Plainly, such factors can be relevant to the penalty that is necessary to deter the company from contravening the Act in the future … However, a contravening company’s capacity to pay a penalty is of less relevance to the objective of general deterrence because that objective is not concerned with whether the penalties imposed have been paid. Rather, it involves a penalty being fixed that will deter others from engaging in similar contravening conduct in the future. Thus, general deterrence will depend more on the expected quantum of the penalty for the offending conduct, rather than on a past offender’s capacity to pay a previous penalty.

(See also Australian Competition and Consumer Commission v High Adventure Pty Ltd (2006) ATPR 42–091 at 44, 564; Australian Competition and Consumer Commission v SIP Australia Pty Ltd (2003) ATPR 41–937 at 47,077–47,078; Australian Competition and Consumer Commission v EDirect Pty Ltd (in liq) (2012) 206 FCR 160 at [70].)

143    The ACCC submitted that the consideration of general deterrence meant that the penalty should be ordered to be paid over a period of not more than four years.

144    I accept that deterrence is the primary objective of the imposition of a civil penalty. However, that is principally achieved by the amount of the penalty imposed. Whether the penalty is permitted to be paid in instalments, and the duration and amounts of those instalments, can also contribute to the deterrent effect of a penalty. However, those matters are of lesser significance than the size of the penalty. In considering the length of time over which a penalty should be permitted to be paid, it is relevant to consider the capacity of a contravener to pay. It is difficult to see that much, if anything, is added to the deterrent effect of a penalty by imposing an instalment plan that simply cannot be fulfilled. There may as well be no instalment plan at all. On the other hand, if allowing the contravener limited amount of additional time to pay is likely to result in full payment of the penalty, that must be in the public interest.

145    I accepted the ACCC’s submission that a period of 10 years to pay the penalty was too lengthy to achieve the objective of general deterrence. However, I considered that the penalty is likely to be paid in full if Ms McCullough is given a total of five years to pay, with the first instalment to be paid within six months. The ACCC’s rights in respect of recovery of the penalty are preserved, including by a term of the order that if an instalment is not paid on or before the specified date, the whole of the remaining amount then outstanding will become immediately payable. I considered that as a matter of parity, the penalty for ABG Pages should be payable over the same period.

DISQUALIFICATION ORDER

146    Under s 248 of the ACL, the Court has the power to make an order disqualifying a person from managing corporations for a period that the court considers appropriate if, on the application of the regulator, it is satisfied of the prescribed matters.

147    In relation to Ms McCullough, the Court must be satisfied, firstly, that Ms McCullough was involved in the contraventions by ABG Pages, and secondly, that the disqualification is justified: s 248(1)(a)(i), (ii), (1)(b) of the ACL.

148    In determining whether the disqualification is justified, the Court may have regard to:

(a)    Ms McCullough’s conduct in relation to the management of ABG Pages (s 248(2)(a)); and

(b)    any other matters that the Court considers appropriate (s 248(2)(b)).

149    A person disqualified under s 248 is disqualified from managing a corporation under s 206EA of the Corporations Act 2001 (Cth).

150    The principles to be applied when considering an order for disqualification were distilled by Santow J in Australian Securities and Investment Commission v Adler (2002) 42 ACSR 80. While the courts continue to apply those propositions, the High Court in Rich v Australian Securities and Investment Commission (2004) 220 CLR 129 held that Adler was not to be followed to the extent that it held that banning orders were purely protective in nature and not punitive.

151    In Australian Competition and Consumer Commission v Halkalia (No 2) [2012] FCA 535, Tracey J noted that these principles provide useful assistance when the court is considering opposed applications under s 86E of the CCA, which is relevantly identical to s 248 of the ACL.

152    In Australian Competition and Consumer Commission v Excite Mobile Pty Ltd (No 2) [2013] FCA 1267 at [170], Mansfield J summarised the principles under s 86E, including in relation to ss 206C and 206E of the Corporations Act 2001. This included the propositions distilled by Santow J in Australian Securities and Investment Commission v Adler:

…I proceed on the basis that 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. A banning order is designed to protect the public by seeking to safeguard the public interest in the transparency and accountability of companies and in the suitability of directors to hold office. Protection of the public also envisages protection of individuals that deal with companies, including consumers, creditors, shareholders and investors. It is also the case that a banning order has a purpose of personal deterrence, though it is not punitive, and the objectives of general deterrence are also sought to be achieved: Australian Competition and Consumer Commission v Excite Mobile Pty Ltd (No 2) [2013] FCA 1267 at [170].

In assessing the fitness of an individual to manage a company, it is necessary that that person has an understanding of the proper role of the company director and the duty of due diligence that is owed to the company.

Longer periods of disqualification are reserved for cases where contraventions have been of a serious nature such as those involving dishonesty. In assessing the appropriate length of prohibition, consideration has been given to the degree of seriousness of the contraventions, the propensity that the person may engage in similar conduct in the future and the likely harm that may be caused to the public. It is necessary to balance the personal hardship to the person to be banned against the public interest and the need for protection of the public from any repeat of the conduct. A mitigating factor in considering a period of disqualification is the likelihood of the contravenor reforming.

153    Applying these principles, a five year disqualification order in relation to Ms McCullough was appropriate, for the following reasons.

154    Firstly, the contraventions were of a serious nature and contrary to moral, legal and commercial standards. As set out in the SOAF, Ms McCullough was knowingly concerned in serious breaches of the ACL, in that she:

(a)    was responsible for and involved in almost all aspects of ABG Pages’ business;

(b)    designed the unconscionable system;

(c)    trained staff to follow the unconscionable system;

(d)    enforced staff compliance with the unconscionable system;

(e)    designed all the documents, scripts and manuals which were used as part of the system, and

(f)    determined the parameters as to, and in some cases decided, whether or not a customer could cancel their agreement with ABG Pages.

155    Secondly, a banning order is designed to protect the public by safeguarding the public interest in the transparency and accountability of companies and in the suitability of directors to hold office. This includes the protection of customers and individuals that deal with companies. Those customers and individuals require protection from any similar conduct in the future that could arise out of Ms McCullough occupying a management position within a corporation.

156    Thirdly, a banning order helps achieve personal deterrence. Such an order also achieves the object of general deterrence.

157    In her favour, with the settlement of this matter Ms McCullough has accepted responsibility for her conduct and consents to the proposed disqualification order being made. This shows a degree of contrition, which is a mitigating factor. Nevertheless, Ms McCullough was the person charged with the overall responsibility of ABG Pages and did not discharge her duties to the standards expected of her in this position. She allowed the conduct to continue for over 5 years, and personally gained from the conduct.

COMPLIANCE PROGRAM ORDERS

158    The ACCC sought two compliance orders pursuant to s 246(2) of the ACL.

159    The first order relates to ABG Pages. The ACCC sought an order requiring ABG Pages to develop and implement a compliance program that is designed to minimise ABG Pages’ risk of contravening of ss 18, 21, 29 and 50 of the ACL in the future.

160    Section 246(2)(b) of the ACL expressly provides for the making of orders for the implementation of a compliance program. In Australian Competition and Consumer Commission v Sontax Australia (1988) Pty Ltd [2011] FCA 1202; [2011] ATPR 42-379 (Sontax), Gordon J held that the purpose of such orders “is to ensure a company-wide awareness of responsibilities and obligations in relation to the contravening conduct or similar or related conduct”: Sontax at [36] (Gordon J). A compliance program order will be in the public interest where it would assist the company and its employees “in understanding the obligations” imposed by the CCA and “ensuring compliance with those provisions”: Sontax at [38] and there must also be a “nexus between the terms of the compliance program and the contravening conduct”: [36].

161    The compliance program is to operate for a period of 3 years upon ABG Pages recommencing trading, and is to be undertaken by each employee who deals or may deal with Australian consumers.

162    The second order requires Ms McCullough to undertake a training session on the responsibilities and obligations under ss 18, 21 and 29 of the ACL. For like reasons as those set out above, the parties submit that the proposed order satisfies the requirements set out by Gordon J in Sontax. The compliance training is concerned with the contraventions that Ms McCullough was knowingly involved in.

163    The order provides that the compliance program is to be administered by a suitably qualified compliance professional or legal practitioner and requires a written statement or certificate to be provided to the ACCC from the person conducting the training.

ORDER FOR FINDINGS OF FACT

164    A copy of these reasons for judgment with the seal of the Court affixed thereon, will be retained on the Court file for the purposes of s 137H(3) of the CCA.

165    Section 137H operates to make findings of fact in a proceeding prima facie evidence of those facts in subsequent proceedings: Australian Competition and Consumer Commission v Homeopathy Plus! Australia Pty Limited (No 2) [2015] FCA 1090, [85]. Section 137H applies where:

(a)    a finding of a fact is made by a court in proceedings under, inter alia, ss 232, 246 and 248 of the ACL; and

(b)    a person has been found to have contravened a provision of, inter alia, Chapter 2 (which includes ss 21, 29) or Chapter 3 (which includes s 50) of the ACL, or to have been knowingly concerned in the contravention of such a provision.

166    This Court has previously made similar orders providing for a copy of the reasons for judgment, with the seal of the Court affixed, to be retained on the Court file, in proceedings which were resolved on the basis of admissions by the parties: Australian Competition and Consumer Commission v South East Melbourne Cleaning Pty Ltd (in liq) (formerly known as Coverall Cleaning Concepts South East Melbourne Pty Ltd) [2015] FCA 25, [185]; Australian Competition and Consumer Commission v Lifestyle Photographers Pty Ltd [2016] FCA 1538, [61].

167    The Court has the power to make the order sought because, if findings of fact are made in the terms sought by the parties, findings of fact would be made in a proceeding to which s 137H applies. Any such findings would concern contraventions of Chapters 2 and 3 of the ACL by ABG Pages and Ms McCullough being knowingly concerned in the contraventions by ABG Pages of Chapter 2 of the ACL, being findings to which s 137H applies.

Associate:    

Dated:    28 May 2018