Australian Competition and Consumer Commission v EDirect Pty. Ltd.

Factual background 4 According to the ACCC's statement of claim in these proceedings, from at least 21 July 2006 to 10 September 2010, EDirect, trading as VIPtel, carried on business in Australia supplying mobile telephone services and related equipment to its customers. The mobile telephone services were supplied to its customers exclusively via the Optus General Service Mobile telecommunications network (Optus GSM Network). The related equipment comprised a VIPtel subscriber identity module (SIM) card either with or without a mobile telephone. 5 During the period in question, EDirect used direct telemarketing to promote and sell its services to its potential customers. In that process, the telemarketers would: request and obtain an address from each potential customer; inform each potential customer that any agreement to supply him or her with mobile network services would be conditional upon their nominated address being verified by EDirect to be an address which was located in an area covered by the Optus GSM Network; subject to coverage being established, enter into a contract with each customer to supply the mobile network services for a 24 month period using a VIPtel SIM card either with or without a mobile telephone requiring him or her to pay a minimum monthly access fee; and enter into a direct debit service agreement with each customer that authorised EDirect to deduct the minimum monthly access fee, plus any additional charges payable under the contract, from his or her bank account. 6 The ACCC has identified 350 customers of EDirect who it claims went through the telemarketing process outlined above and commenced making payments to EDirect, or one of its related entities, without having any mobile telephone coverage for the VIPtel SIM card, or mobile telephone EDirect provided to them. Unsurprisingly, all of these customers were located in regional and remote areas of Australia, mainly across northern Australia.

Procedural history 7 These proceedings were issued in late March 2011. The originating application was accompanied by a statement of claim setting out the details of EDirect's alleged contraventions of the TPA and the relief sought against it. Those documents were served on EDirect in early April 2011. A day after the documents were served, Receivers and Managers were appointed to EDirect. About a month later, the Receivers and Managers stated in a letter to the ACCC's lawyers that they did not propose to defend the proceedings. The ACCC then sought judgment by default against EDirect under O 35A r 3(2)(c) of the former Federal Court Rules (Rules) (now Rule 5.23(2)(c) of the Federal Court Rules 2011). Because the ACCC's application pre-dated the commencement of the new Rules on 1 August 2011, the former Rules continue to apply: see Rule 1.04 of the Federal Court Rules 2011. 8 Shortly after the ACCC made its application for default judgment, the Commissioner of Taxation commenced winding up proceedings against EDirect. A winding up order was made on that application on 18 August 2011. The ACCC subsequently applied for, and obtained, the necessary leave under s 471B of the Corporations Act 2001 (Cth) to continue these proceedings notwithstanding the intervention of EDirect's winding up. That leave was granted on the ACCC's undertaking that: … it will not take any step to enforce against the respondent any order for the payment of any amount of money, whether by way of penalty, costs or otherwise, without the further leave of the Court … 9 The ACCC's statement of claim refers to a Confidential Schedule A. That schedule contains details of the names and addresses of the 350 customers of EDirect who were supplied mobile telephone services without them being in a mobile telephone coverage area. Because it contained personal details of those customers, ACCC treated the schedule as confidential and did not include it as an attachment to the statement of claim that it initially served on EDirect. Instead, at the first directions hearing of these proceedings, the ACCC applied for and obtained orders that the publication of the information contained in Schedule A be restricted under s 50 of the Federal Court of Australia Act 1976 (Cth). The ACCC then served a copy of that order, a copy of the Confidential Schedule A and a copy of its application for default judgment on EDirect at its registered office and on the Receivers and Managers who had been appointed by that time. 10 Prior to the hearing of the ACCC's application for default judgment, it filed a number of documents comprising: three affidavits which deposed to the service of the various documents referred to above and to the service of material the ACCC subsequently filed; an affidavit of Ms Katrina Eckermann; and the ACCC's outline of submissions on its application for default judgment. Two of the affidavits were deposed to by Mr David Sutherland, a lawyer employed by the Australian Government Solicitor (AGS), which service acts for the ACCC. One of his affidavits deposed to the fact that EDirect had not entered an appearance in the proceedings and the other deposed to the results of a search he had conducted of Australian Securities and Investments Commission (ASIC) records showing the appointment of the Receivers and Managers to EDirect. That affidavit also had annexed to it a bundle of correspondence passing between the AGS and the Receivers and Managers for EDirect. Included in that bundle was a letter from Mr Algeri, one of the Receivers and Managers, where he stated: I confirm that the Receivers and Managers will not be defending the proceedings. Based on the information currently available and the realisable assets of the company it is unlikely that there will be any funds available for distribution amongst the Company's unsecured creditors. 11 Attached to Mr Algeri's letter was a report as to affairs he had lodged with ASIC. Among other things, that report disclosed that EDirect had estimated realisable assets of $10 million and creditors of slightly less than $14 million, including employees' claims of $12,965, secured creditors of $9,809,329 and unsecured creditors of $4,125,501. 12 Finally, there was the affidavit of Ms Eckermann mentioned above. Ms Eckermann was a Senior Investigator employed by the ACCC. Her affidavit is in two parts. The first part sets out and annexes various pieces of information obtained from EDirect in response to notices the ACCC had issued to it in 2009 and 2010 under s 155 of the TPA, together with information obtained from EDirect's solicitors, HWL Ebsworth, and a company called M2 VIPtel Pty Ltd, which had acquired certain customer contracts from EDirect on or about 27 March 2011. The second part of Ms Eckermann's affidavit contained an analysis of the abovementioned information. In summary, that analysis showed that: (a) as at 7 October 2010, EDirect had 43,360 current customers; (b) in April 2011, EDirect transferred 62,418 active customers to its creditor, M2 Telecommunications Pty Ltd; (c) up until 22 December 2010, EDirect had refunded a total of $88,725.84 in telephone service charges and bank fees and interest to its customers who either complained to it of having no coverage at their nominated address, or whose nominated address was identified by EDirect in a review of its records to have no coverage; (d) up until 29 November 2010, EDirect had received a total of $121,193.64 in telephone services charges from customers whom it had identified in a review of its records to have no coverage at their nominated address, but whose service records indicated what EDirect considered to be regular usage of the service, none of which amounts had been refunded to those customers; (e) 219 of the 350 customers in Confidential Schedule A had either despatch dates, activation dates, or dates of first payment that occurred on or after 15 April 2010.

The procedural and substantive issues that arise 13 The intervention of EDirect's liquidation after the commencement of these proceedings has spawned a number of procedural issues in this application for default judgment. They are as follows: (a) Can the ACCC rely upon O 35A to obtain default judgment for the declaratory relief it has sought? (b) What, if any, evidence can the ACCC adduce in support of its application? (c) Is EDirect a proper contradictor on the ACCC's claim for declaratory relief? (d) Can a pecuniary penalty be imposed on a company in liquidation? 14 In addition to these procedural issues, the following substantive issues arise: (e) If a declaration can be made, should it be made in the terms sought by the ACCC? (f) If a pecuniary penalty can be applied to EDirect, what level of pecuniary penalty should be imposed on it in all the circumstances? 15 I will now turn to consider these issues in the order they appear above. 16 Before doing so, it is appropriate to set out the relief which the ACCC seeks in its originating application. Excluding those parts of that relief that have since been abandoned, it is as follows: 1. A declaration that the Respondent (EDirect), by representing to each of the persons listed at Confidential Schedule A hereto that it could supply mobile telecommunications services at the person's nominated address, when in fact it could not supply such services at each person's nominated address, has, in the case of each person, in trade or commerce: 1.1. engaged in conduct that was misleading or deceptive or likely to mislead or deceive in contravention of section 52 of the of the TPA or, in relation to conduct that occurred on or after 1 January 2011, section 18 of the ACL; and 1.2. in connexion with the supply or possible supply of services, made a false or misleading representation as to the performance characteristics, uses or benefits of its services, in contravention of section 53(c) of the TPA or, in relation to conduct that occurred on or after 1 January 2011, section 29(g) of the ACL. 2. A declaration that EDirect, by accepting payment from each of the persons identified at Table A.2 in Schedule A hereto for the supply of mobile telecommunications services at nominated addresses, in circumstances where, at the time of acceptance: 2.1. there were reasonable grounds, of which EDirect was aware or ought reasonably to have been aware, for believing that EDirect would not be able to supply the said services within a reasonable time; and 2.2. further, or in the alternative, EDirect intended to supply services materially different from the services in respect of which payment was accepted; has contravened section 58 of the TPA or, in relation to conduct that occurred on or after 1 January 2011, section 36 of the ACL. ... 4. An order that EDirect pay to the Commonwealth such pecuniary penalty as the Court determines to be appropriate in respect of: 4.1. the contraventions of sections 53(c) and 58 of the TPA occurring on or after 15 April 2010; and 4.2. the contraventions of sections 29(g) and 36 of the ACL; pleaded in the statement of claim. ... (Emphasis in original)

(a) Can the ACCC rely upon O 35A to obtain default judgment for the declaratory relief it has sought? 17 Order 35A r 3(2)(c) provides: (2) If a respondent is in default, the Court may: … (c) if the proceeding was commenced by an application supported by a statement of claim or the Court has ordered that the proceeding continue on pleadings - give judgment against the respondent for the relief that: (i) the applicant appears entitled to on the statement of claim; and (ii) the Court is satisfied it has power to grant; … 18 Order 35A r 2 defines the conduct that constitutes default as follows: … (2) For this Order, a respondent is in default if the respondent has not satisfied the applicant's claim and: (a) the time for the respondent to enter an appearance has expired and the respondent has failed to enter an appearance; or (b) the time for the respondent to file a defence has expired and the respondent has failed to file a defence; or (c) the respondent fails to attend a directions hearing; or (d) the respondent fails to comply with an order of the Court in the proceeding; or (e) the respondent fails to file and serve a pleading as required by Order 11; or (f) the respondent fails to serve a list of documents or an affidavit or other document, or does not produce a document as required by Order 15; or (g) the respondent fails to do any act required to be done by these Rules; or (h) the respondent fails to defend the proceeding with due diligence. 19 As is already adverted to above, these proceedings were commenced on application supported by a statement of claim. Thus, they meet the procedural requirements of O 35A r 3(2)(c) above. The defaults the ACCC has relied upon to found its application are EDirect's failure to enter an appearance (O 35A r 2(2)(a) above), its failure to attend the first directions hearing (O 35A r 2(2)(c) above) and its failure to deliver a defence (O 35A r 2(2)(b) above). Based on the evidence of Mr Sutherland (see at [10] above), and the contents of the Court file, I find that each of these defaults has occurred. 20 The question posed by 13 above about the operation of O 35A, particularly where the relief sought includes declaratory relief, was considered by Kiefel J in Australian Competition and Consumer Commission v Dataline.net.au Pty Ltd (2007) 236 ALR 665; [2006] FCA 1427 (Dataline). During a comprehensive examination of the apposite authorities (Dataline at [35]-[59]), her Honour concluded, among other things, that: (a) O 35A deems a respondent to have admitted the facts alleged in the applicant's statement of claim, but not to have conceded the entitlement to the relief sought therein: see Dataline at [44]. See also the subsequent decision of Bank of Kuwait and the Middle East v The Ship MV "Mawashi Al Gasseem" (No 2) (2007) 240 ALR 120; [2007] FCA 815 (Bank of Kuwait) at [8] and [13] per Mansfield J; (b) regard may be had to the deemed admitted facts as alleged in the statement of claim to determine whether the relief is made out: Dataline at [45]. See also Bank of Kuwait at [13] and two decisions to similar effect: Hadgkiss v Aldin (No 2) (2007) 169 IR 76; [2007] FCA 2069 (Hadgkiss) at [9] and [21]-[22] per Gilmour J and Speedo Holdings B.V. v Evans (No 2) [2011] FCA 1227 (Speedo) at [23] per Flick J; and (c) not only is no evidence required to support the application, it is not permitted to supplement or support the facts as pleaded in the statement of claim, nor to alter the case as pleaded therein: see Dataline at [48]-[51] and also Bank of Kuwait at [14]. 21 However, as Kiefel J went on to note (Dataline at [54]-[56]), when it comes to declaratory orders, these conclusions confront the views expressed by courts in the last millennium in England and by Young J in the New South Wales Supreme Court to the effect that: "… a declaration was a judicial act and ought not to be made on admissions of the parties, or on consent, but only if the Court is satisfied by evidence": see Wallersteiner v Moir (No 1) [1974] 1 WLR 991 (Wallersteiner) at 1029. In Dataline, having noted these views Kiefel J proceeded to observe (at [58]) that they were "based upon a practice, not a rule of law". About this practice, her Honour observed (Dataline at [58]): … [It] is one of long standing and might be seen as derived from views about litigation which pre-date more recent concerns expressed by the courts as to the costs of unnecessary litigation, the management of cases and efficiency overall. Views expressed in older cases may not take account of the increase in the use made of declaratory orders in developing areas of law which may involve matters of public interest. A caution with respect to the use of older authority is made in the White Book Service 2003 to the English Civil Procedure Rules 1998 (40.20.2). 22 Kiefel J then concluded at [59]: It may no longer be correct to have a practice which operates as a prohibition in every case of default and preferable to consider the circumstances pertaining to the particular case and the purpose and effect of the declaration. … Cases such as this, involving the protection of consumers, are of public interest. Declarations are often utilised in such cases to identify for the public what conduct contributes a contravention and to make apparent that it is considered to warrant an order recognising its seriousness. It is however important that there be no misunderstanding as to the basis upon which they are made. This could be overcome by a statement, preceding the declarations, that orders are made 'upon admissions which [the respondent in question] is taken to have made, consequent upon non-compliance with orders of the Court'. (Emphasis added) 23 This Dataline approach, viz proceeding on agreed or deemed admitted facts and without requiring any supporting evidence, has been followed, albeit on some occasions with expressions of caution, in: Bank of Kuwait at [15] per Mansfield J; Hadgkiss at [21]-[23] per Gilmour J; Secretary, Department of Health & Ageing v Pagasa Australia Pty Ltd [2008] FCA 1545 at [75]-[79] per Flick J; Australian Competition and Consumer Commission v AMV Holding Ltd [2009] FCA 605 at [8]-[9] per Moore J; Australian Communications and Media Authority v Mobilegate Ltd A Company Incorporated in Hong Kong (No 2) [2009] FCA 887 at [21] per Logan J; Australian Competition and Consumer Commission v Alvaton Holdings Pty Ltd [2010] FCA 760 at [35] per Gilmour J; Australian Building & Construction Commissioner v Abbott (No 3) [2011] FCA 340 at [14]-[16] per Gilmour J; Australian Competition and Consumer Commission v Yellow Page Marketing BV (No 2) (2011) 195 FCR 1; [2011] FCA 352 (Yellow Page Marketing) at [66] per Gordon J; and my own decisions in Australian Competition and Consumer Commission v EDirect [2008] FCA 65 (EDirect 2008) at [24] and Australian Competition and Consumer Commission v Grove & Edgar Pty Limited (2008) ATPR 42-269; [2008] FCA 1956 (Grove & Edgar) at [18]. But not every judge of this Court has agreed with the Dataline approach. In Australian Competition and Consumer Commission v Allergy Pathway Pty Ltd [2009] FCA 960 (Allergy Pathway) (at [10]-[19]), Finkelstein J strongly supported what he described as the established or usual rule, based upon Wallersteiner and other decisions to similar effect, a position which his Honour later confirmed in Australian Competition and Consumer Commission v Bridgestone Corporation (2010) 186 FCR 214; [2010] FCA 584 (Bridgestone) at [12]. 24 In Allergy Pathway, the ACCC sought to rely upon consent orders to obtain, among other things, declarations that various statements the respondent had made about allergy testing and treatment was misleading or deceptive in breach of various provisions of the TPA. The ACCC also sought to tender evidence by Professor Douglass expressing opinions as to why the statements the respondent had made about allergy testing and treatment were misleading or deceptive. The respondent objected to that evidence being tendered and the ACCC then elected to rely solely upon the consent orders and not pursue the tender. After his Honour indicated that he was not prepared to make the declaratory orders based solely upon the consent orders, the respondent withdrew its objections to the tender of Professor Douglass' evidence. His Honour then proceeded to make the declarations sought. However, in his reasons Finkelstein J outlined why he would not have made the declarations without the evidence of Professor Douglass (Allergy Pathway at [10]-[19]). In essence, his Honour proceeded on the basis of the views stated in Wallersteiner (see Allergy Pathway at [10]) and similar statements in other English decisions (see Allergy Pathway at [12]-[14]). His Honour also referred to the Full Court decision of BMI Ltd v Federated Clerks Union of Australia (1983) 51 ALR 401 (BMI) (Allergy Pathway at [15]) and particularly the statement in the joint judgment of Keely and Beaumont JJ (at 413-4) as follows: [W]e think that it is generally undesirable that the court should grant relief by way of declaratory orders … in the absence of any contest on the question. If the matter were merely one of private right between particular parties, for example, a question as to the respective rights of parties under a contract, it may well be appropriate for a court to make a declaration as to those rights by consent. In such a case, the public and other parties cannot be affected, let alone bound, by such a declaration. But different considerations apply in a case such as the present. If a declaration were made, even in the terms sought, its practical operation may well extend beyond the activities of the first applicant. (Citations omitted) 25 His Honour also referred to a number of New South Wales Supreme Court decisions that had taken a different approach (see Allergy Pathway at [16]-[17]), but he was not persuaded that they justified a departure from the established or usual rule. Accordingly, his Honour concluded (Allergy Pathway at [18]-[19]) as follows: The declaration cases, however, require proof by way of evidence. An assurance by parties (whether by admission or agreed statement) that asserted facts are true will not suffice. Moreover, the House of Lords did not think a departure from this rule was justified because of administrative expediency. For the time being, at least until a Full Court holds otherwise, it is, in my view, incumbent upon a single judge of the Federal Court to follow BMI and therefore not grant a declaration involving a public right in the absence of evidence that supports the declaration. 26 Two things may be noted about this decision. First, Finkelstein J did not mention the observations of Kiefel J in Dataline which were directly on point. Secondly, the circumstances were quite extreme. The materials upon which Finkelstein J was being asked to make the declaratory orders were of the barest kind. In the absence of Professor Douglass' evidence, all his Honour had before him were the consent orders proffered by the parties. He did not, for example, have any agreed facts under s 191 of the Evidence Act 1995 (Cth) (Evidence Act), nor any deemed admitted facts in a statement of claim under O 35A of the Rules. However, both of these matters were addressed, at least to some extent, in his Honour's subsequent decision of Bridgestone. In Bridgestone, Finkelstein J was provided with a statement of agreed facts under s 191 of the Evidence Act and his Honour confirmed the position he had taken in Allergy Pathway that "generally speaking it was necessary before a declaration of contravention could be made that evidence had to be tendered that justified the relief" (see Bridgestone at [12]). 27 As well as confirming his earlier position, Finkelstein J concluded that s 191 of the Evidence Act did not alter the common law position that evidence was necessary to justify the declarations of contravention sought (see Bridgestone at [16]). On this aspect, his Honour rejected as "plainly incorrect" an earlier decision of Australian Competition and Consumer Commission v Skins Compression Garments Pty Ltd [2009] FCA 710 (Skins Compression Garments), where Besanko J held (at [13]) that, while "in the ordinary case, a Court will not make a declaration by consent unless it is satisfied by evidence that it should do so", by reason of s 191 of the Evidence Act "evidence is not required to prove the existence of the agreed facts". Finkelstein J appears to have concluded that Besanko J thought s 191 "altered the common law in that evidence was no longer required to obtain a declaration affecting public rights": see Bridgestone at [12]. It was the view of Finkelstein J that s 191 did: "no more than apply [the rules of pleadings] to an agreed statement of facts. That is, the section gives to agreed facts the status of a pleading. There is nothing in s 191 which suggests that it is intended to have a wider operation": see Bridgestone at [16]. It is not necessary for present purposes to decide how s 191 of the Evidence Act operates. What is clear for present purposes is that Besanko J considered that declaratory relief could be granted based on a set of facts agreed under s 191 of the Evidence Act and Finkelstein J considered that the usual or established rule applied to prevent that approach. It should be noted that Besanko J did not mention Dataline in coming to his conclusion. 28 But on this occasion, Finkelstein J did mention Dataline, at least peripherally. His Honour did that in the course of mentioning two possible exceptions to the established or usual rule. The first exception was where the grant of declaratory relief on an agreed statement of facts was necessary "to do justice between the parties" (see Bridgestone at [17]). The second, relying upon Dataline (at [59]), was that the granting of a declaration on admissions was "in the public interest". In such circumstances, his Honour noted at [18] that Kiefel J had observed that: "if a declaration was to be made, it should be made clear that it was made upon facts admitted by the defendant" (the full quotation is set out at [22] above). His Honour also noted (Bridgestone at [18]) that the Full Court had endorsed this approach in Australian Competition and Consumer Commission v Dataline.net.au Pty Ltd (in liquidation) (2007) 161 FCR 513; [2007] FCAFC 146 (Dataline FC) at [92]. Curiously, his Honour did not address the underlying reasoning Kiefel J had advanced for this departure from the established rule or practice (see Dataline at [58]-[59] summarised and partly quoted at [21]-[22] above). Having mentioned the appeal in Dataline, it is appropriate to interpolate that the operation of O 35A was not part of that appeal and that matter was therefore not considered in that decision (see Dataline FC at [90]). 29 There can be little doubt from a combination of the decisions in Allergy Pathway and Bridgestone that Finkelstein J considered he was bound by BMI to follow the usual or established view. However, it is significant for present purposes to note that neither of these decisions has been followed by any other judge of this Court. To the contrary, they have either been distinguished or expressly rejected. I will briefly turn to consider some of those decisions. The first, which in turn refers to two others, is Minister for Environment, Heritage and the Arts v PGP Developments Pty Ltd (2010) 183 FCR 10; [2010] FCA 58 (PGP Developments). In that matter, Stone J dealt with an application for declaratory relief under s 21 of the Federal Court of Australia Act 1976 (Cth) in relation to contraventions of the Environment Protection and Biodiversity Conservation Act 1999 (Cth). The parties put before the Court a set of proposed consent orders, the pleadings they had exchanged, an agreed statement of facts under s 191 of the Evidence Act and joint written submissions. In the course of considering whether to grant the declaratory relief, her Honour referred to and summarised the decision of Finkelstein J in Allergy Pathway (see PGP Developments at [24]-[28]). Having done so, her Honour noted (PGP Developments at [29]) that, in Australian Competition and Consumer Commission v Cosic Holdings Pty Ltd (2009) ATPR 42-304; [2009] FCA 1579 (Cosic Holdings) and Australian Competition and Consumer Commission v Wilson Parking 1992 Pty Ltd [2009] FCA 1580, Barker J was persuaded to follow the New South Wales Supreme Court cases that Finkelstein J declined to follow (see Allergy Pathway at [16]-[17] mentioned at [25] above). It should be noted that in taking this approach Barker J (Cosic Holdings at [51]) expressly disagreed with Allergy Pathway where Finkelstein J had eschewed the New South Wales Supreme Court approach. Stone J then observed (PGP Developments at [30]) that none of these decisions (those of Barker J, or Finkelstein J) mentioned s 191 of the Evidence Act and turned to consider the effect of that section. It should be noted that PGP Developments was delivered about four months before Finkelstein J delivered his decision in Bridgestone, where, as I have already noted (see at [27] above), his Honour did consider the effect of s 191 of the Evidence Act. In her consideration of s 191 of the Evidence Act, Stone J referred to the decision of Besanko J in Skins Compression Garments (see PGP Developments at [33]-[34]). It will be recalled that in Bridgestone Finkelstein J subsequently rejected the conclusion that Besanko J had reached in that case, saying it was "plainly incorrect": see at [27] above. Stone J set out her view of s 191 of the Evidence Act (PGP Developments at [35]) that: The effect of s 191 is to admit the agreed facts as evidence. It still remains for the Court to determine whether the facts are to be accepted as true and to determine what weight to attribute to that evidence. Whether the Court accepts the agreed facts, in whole or in part, may depend, among other things, on the coherence of the narrative created by the facts or their inherent credibility. If, for example, a statement contained mutually inconsistent facts the Court would be obliged to take account of the inconsistency. In attempting to resolve the problem it would not be entitled to require evidence although, as provided in s 191(2), it might give leave to the parties to adduce evidence to resolve the inconsistency. In the absence of further evidence, and taking the context provided by other evidence including other agreed facts, it might possibly accept one or other of those facts. Clearly, however, it could not accept both of the facts in question as true. (Emphasis in original) 30 Ultimately, Stone J considered she could proceed with, among other materials, the assistance of s 191 of the Evidence Act to make the declarations sought in that case (see PGP Developments at [36]). But it is important to record two things. First, Stone J did not expressly mention the observations of Kiefel J in Dataline. And secondly, her Honour declined to follow the decision of Finkelstein J in Allergy Pathway, saying it was "entirely obiter". Her Honour said (PGP Developments at [37]): I am conscious of the view expressed by Finkelstein J in ACCC v Allergy Pathway Pty Ltd however, with the greatest respect, his Honour's statement is entirely obiter. Despite the initial objections of the respondent, the evidence of Professor Douglass was admitted and his Honour was able to make the declarations sought. Moreover the circumstances before his Honour were entirely different from those here. The parties' consent to the declarations in ACCC v Allergy Pathway Pty Ltd, even if it had been in the form required by s 191(3), did not provide an evidentiary basis for the declarations. Their agreement that the declarations were appropriate was a joint opinion not an agreement as to fact. Professor Douglass' report contained expert opinion which was admissible as an exception to the opinion evidence rule under s 79 of the Evidence Act. For that reason his Honour was entitled to admit the opinion evidence and base his declarations on that opinion not on the agreement of the parties. 31 The second, and most recent, decision I wish to consider on this issue is that of Perram J in Australian Competition and Consumer Commission v MSY Technology Pty Ltd (No 2) (2011) 279 ALR 609; [2011] FCA 382 (MSY Technology). In that decision, Perram J expressly disagreed with the decision of Finkelstein J in Allergy Pathway. His Honour did so in the following terms (MSY Technology at [25]): After reviewing a number of authorities, including Wallersteiner, [Finkelstein J] concluded that BMI bound a judge of this Court "not [to] grant a declaration involving a public right in the absence of evidence that supports the declaration.": at [19]. For the reasons already given, BMI is not, with respect, authority for that proposition. 32 Earlier in his reasons, Perram J reviewed the decision of Wallersteiner and the primary decision relied upon therein of Williams v Powell [1894] WN 141 (Williams v Powell). His Honour pointed out (see MSY Technology at [16]) that in Williams v Powell, Kekewich J was "content to make declarations on the basis of having been told by the chief clerk that he was satisfied of the correctness of the factual matter upon which the parties agreed". Based on this, his Honour observed (MSY Technology at [17]) that: Contrary to Buckley LJ's statement [in Wallersteiner], the passage in question suggests that a declaration can be made where the parties proceed on admissions if a subordinate officer of the court satisfies himself as to the facts. I cannot see how it can be objectionable for a judge to do the same thing. In my opinion, Williams is simply not authority for the proposition for which Buckley LJ cited it. 33 Perram J then concluded (MSY Technology at [19]) as follows: In those circumstances, I do not accept that Williams requires the conclusion that declarations should not be made except on evidence; it is certainly not what Kekewich J did in that case. Insofar as Wallersteiner is concerned this aspect of its reasoning is, with respect, based on a misreading of Williams together with a reason which is altogether tenuous. 34 Having made some similar observations about the reliance placed on both Wallersteiner and Williams v Powell in the second edition of Young's Declaratory Orders (Butterworths, 1984) (see MSY Technology at [20]), Perram J then turned to consider the Full Court decision in BMI. He noted (at [22]) that in the joint decision of Keely and Beaumont JJ, their Honours referred to Wallersteiner and said: For the reasons advanced by Buckley LJ and Scarman J, supra, we think that it is generally undesirable that the court should grant relief by way of declaratory orders under s 108 in the absence of any contest on the question: see Forster v Jododex Aust Pty Ltd, supra, at CLR 437-8; ALR 1311-12 … (Emphasis in the extract appearing in MSY Technology) 35 His Honour then observed (MSY Technology at [23]) that: The reference to Forster v Jododex Australia Pty Ltd (1972) 127 CLR 421; [1972-73] ALR 1303 (Forster) is important. For reasons I return to below the passage cited does not stand for the proposition that there must be a "contest" but for the different, and more subtle, proposition that there must be a contradictor. More importantly, it is clear that Keely and Beaumont JJ did not say anything about whether declarations could, or could not, be made on agreed facts. Indeed it will be noted that the Court's conclusion was not that it could only act on evidence but rather that there needed to be contest. A reading of the full report of BMI shows why: the parties were not asking the court to act on agreed facts or admissions. To the contrary, the court had affidavit evidence before it, as the reference to Mr McKimm's affidavit of 30 November 1982 in the judgment of Keely and Beaumont JJ at ALR 414; IR 426 inevitably shows. The dissenting reasons of Northrop J also disclose the substantial affidavit evidence which was before the court: at 418. Once that is appreciated it becomes plain that their Honours could not have been speaking of the practice discussed in Wallersteiner. It is also just as plain that it cannot be authority for the proposition for which it is cited in P W Young QC's Declaratory Orders, 2nd ed, Butterworths, Sydney, 1984. (Bold emphasis added) 36 The references at the beginning of this paragraph to Forster and the "reasons I return to below" appear to be, at least in part, a reference to the following paragraph from Perram J's consideration of the other question he considered in MSY Technology, viz whether there must be a proper contradictor before declaratory orders could be made. In that context, his Honour returned to BMI and said (at [32]): … In that case, as I have already indicated, the apparent basis of the decision was the absence of "contest" (not the absence of evidence). All parties were before the court and were consenting; it was the absence of opposition, in that case, which was fatal. It is clear, however, that Keely and Beaumont JJ thought that the need for a contradictor required there to be a party arguing against the granting of the relief and that this could not be satisfied where the matter proceeded by consent. 37 Perram J set out a summary of his conclusions at [43]. For present purposes, viz whether a declaratory order can only be made where the Court is satisfied by evidence, the following parts of that summary are relevant: (a) The suggested [principle] that declaration[s] should only be made on evidence is dubious in origin, insubstantial in its persuasive content and is not required either by Forster or BMI. (b) To the extent that Allergy Pathway suggests that BMI propounds such a rule it is, with respect, plainly wrong because it overlooks the fact that the court in BMI had evidence before it and did not decline the declarations on the basis suggested. (c) In any event, the rule, even if it exists, is overcome by s 191 of the Evidence Act in the present case. 38 It should be noted that, ultimately, in MSY Technology Perram J decided he was bound by the decision in BMI to refuse the declarations sought by the ACCC. His Honour reached this conclusion because, based on what was said in BMI, there was no proper contradictor before the Court. That aspect of the matter was successfully appealed to the Full Court: Australian Competition and Consumer Commission v MSY Technology Pty Ltd [2012] FCAFC 56 (MSY Technology FC). However, that appeal did not apply to any of the conclusions his Honour had reached about the necessity for evidence to support the making of declaratory orders. 39 The reasoning of Perram J in MSY Technology is, in my view, and with respect, compelling. It means that, even as a practice, the so-called established rule is of dubious origins. That being so, there would appear to be even more reason to adopt the approach outlined by Kiefel J in Dataline (see at [22] above), which takes account of the modern approach to litigation, current case management practices and developments in areas of the law that have come to be described as public interest litigation. That obviously includes the litigation pursued as a part of the regulatory functions of the ACCC directed to the consumer protection provisions of the TPA. In a very different context, but still involving litigation with a significant public interest component, consent determinations of native title under s 87 of the Native Title Act 1993 (Cth) also readily come to mind. It follows that I consider declaratory orders of the kind sought here may be made on the admissions of the parties, whether deemed admissions, or agreed facts under s 191 of the Evidence Act, or otherwise, and the Court is not required to be satisfied by evidence before making such declaratory orders. Of course, when making declaratory orders that have an effect beyond the parties to the proceedings, the Court must still proceed with the caution mentioned in the various authorities I have referred to above, including Dataline and the decisions that have applied it (see at [23] above). It is also necessary to bear in mind that declaratory relief is discretionary in nature and a court must therefore have regard to any pertinent discretionary factors, including those identified below: the need for a proper contradictor and the question whether the issue at stake has become academic (see at [49]-[50]); whether it is appropriate to make a declaration against a respondent that is in liquidation (see at [52]-[54]) and the other more general principles identified (see at [55]). However, that does not, in my view, mean that the Court is constrained by the so-called established rule, nor is it bound to that course by the Full Court decision in BMI. 40 Returning to the particular question under consideration here (that set out at 13 above), since it has duly served its statement of claim on EDirect and, subsequently, a copy of the Confidential Schedule A, and since the Receivers and Managers of EDirect have specifically stated that they do not intend to defend these proceedings, the decisions to which I have referred above (with the exceptions of Allergy Pathway and possibly Bridgestone) mean that the ACCC may rely upon the facts pleaded in its statement of claim which are deemed to be admitted under O 35A r 3(2)(c) to seek the declaratory relief described in its originating application. Whether or not those deemed admitted facts are sufficient to support that relief is something I will come to later in these reasons.

(b) What, if any, evidence can the ACCC adduce in support of its application? 41 While evidence is not permitted to supplement, support or alter the facts pleaded in the statement of claim (see at 20 above), it is permitted on matters relevant to the exercise of the Court's discretion to grant relief: see Dataline at [49]-[50], Bank of Kuwait at [14], Yellow Page Marketing at [62] and Speedo at [25]-[26]. Some such matters were identified by Kiefel J in Dataline (at [51]) as: Evidence as to costs, an order for fixed sum being sought, can be relied upon. Evidence of company searches and of communications with the liquidators of Dataline and Australis, of the existence of the district court proceedings referred to in the statement of claim may be seen as necessary in relation to the utility of the orders sought … 42 In this matter, I consider this principle extends to the evidence of Mr Sutherland (set out at [10]-[11] above) and Ms Eckermann (set out at [12] above) because that evidence goes to matters that are pertinent to EDirect's default and to the relief sought, particularly fixing the amount of any pecuniary penalty to be imposed. 43 However, I do not consider the ACCC is entitled to rely upon matters contained in Ms Eckermann's affidavit that go beyond the facts as pleaded in the statement of claim. That includes those parts of that affidavit that were relied upon to make the following submissions: … 4. Until 2 August 2010, EDirect directed its staff that they could use a proxy for actually checking whether the customer's address was shown by the Optus coverage checker to have coverage - that is, they could ask the customer whether their existing mobile phone service was on the Optus network. If the customer said it was, EDirect relied on that as a basis to believe the customer was in a coverage area. That procedure left open two avenues - the applicant submits, obvious avenues - for mistake or abuse: one, that the customer mistakenly believed their existing service was on the Optus network; and two, that the telemarketer proceeded with a sale as if the customer had said they were on the Optus network, when in fact they had said they were not or that they did not know. EDirect subsequently identified at least 33 cases where its staff had deliberately exploited this procedural flaw to make a sale to a customer with no coverage. There is no evidence provided to the applicant or before the Court that any of the remaining 317 pleaded cases were not similarly deliberate acts of dishonesty by EDirect's telemarketers. … 31. The worst conduct notified to the applicant (involving 33 customers in Aurukun, Qld) was admitted to have been deliberately engaged in by a small (at best) number of 'rogue' telemarketing staff, who easily bypassed procedures that were obviously inadequate and that were tightened only as a result of government intervention. All of [the] contraventions occurred too easily and too frequently to be regarded as mere slips. (Emphasis added) 44 The statement of claim pleads that EDirect was aware of the address of each of the 350 affected customers (paragraph 10.1), that it represented to each of the 350 affected customers that any agreement would be subject to it verifying that they were located in a coverage area (paragraph 10.2) and that by entering into contracts with each of the 350 affected customers when the address they provided to EDirect was not located in a coverage area (paragraphs 10.3 and 11) EDirect contravened the nominated sections of the TPA. The statement of claim also alleges that EDirect could have used the Optus Open Network Coverage Locator on the Optus website, www2.optus.com.au, to verify whether the addresses nominated by the 350 affected customers fell into an Optus coverage area (pars 17.2 and 17.3). 45 However, the statement of claim does not plead that any of EDirect's telemarketers were directed that they could rely upon information obtained from the potential customer to determine whether or not he or she was in a coverage area. Nor does the statement of claim plead that any of EDirect's telemarketers deliberately and dishonestly entered into any of the contracts with the 350 affected customers knowing that the customer concerned was not in a coverage area, or that a small group of "rogue" EDirect telemarketers had deliberately bypassed EDirect's procedures, or that all of the 350 contraventions "occurred too easily and too frequently to be regarded as mere slips". 46 Consistent with the principles outlined in the authorities I have referred to above, I do not consider that the ACCC can rely upon any of this evidence, essentially because it seeks to alter the case it has pleaded in its statement of claim. Moreover, the statement of claim did not put EDirect on notice that these sorts of allegations would be pursued by the ACCC and it is well-established that an allegation of deliberate dishonesty such as that made above has to be pleaded with specificity and particularity: see Banque Commerciale S.A. En Liquidation v Akhil Holdings Limited (1990) 169 CLR 279 at 295 per Dawson J. 47 Further, I do not consider the ACCC is entitled to rely upon most of the following submissions, or the evidence relied upon to support them: 30. EDirect was previously found, in February 2008, to have engaged in similar conduct, described aptly, the applicant respectfully submits, as 'egregious' by Reeves J. New breaches occurred in the period it was ordered by the Court to maintain a compliance program to prevent similar conduct (that is, until February 2011). It is particularly troubling that nine of the customers listed at Table A.2 in the Confidential Schedule entered into mobile phone contracts with EDirect prior to the orders being made in that case, and EDirect continued to take payments from these customers right up until 2 August 2010 following a complaint by the Queensland Department of Community Services. Full refunds to Aurukun customers were not made until 14 October 2010 following the applicant's intervention. (Emphasis in original) 48 If the ACCC wished to pursue EDirect for allegedly breaching the orders made in 2008 (EDirect 2008), it should have commenced proceedings for contempt of court. It is entirely inappropriate to raise such a serious matter as an alleged contempt of court in these proceedings on the footing that the breaches of the 2008 orders are incidentally established on the evidence. Even if it was possible to raise such serious matters in these proceedings, it is noteworthy that there is absolutely no mention of them in the statement of claim. For these reasons, I do not intend to take into account these allegations about breaches of the 2008 orders when it comes to fixing the pecuniary penalty to be imposed on EDirect. However, this does not mean that I will not take into account the fact that EDirect was the subject of the 2008 orders as the result of conduct that was quite similar to that alleged in the statement of claim in these proceedings, viz supplying mobile telephone services to customers in areas that did not have any Optus GSM Network coverage.

(c) Is EDirect a proper contradictor on the ACCC's claim for declaratory relief? 49 This issue was authoritatively determined in the recent Full Court decision of MSY Technology FC. In that matter, from the outset of the proceedings, the respondents admitted all the conduct alleged against them and agreed to all of the ACCC's proposed relief. They also joined with the ACCC in providing an agreed statement of facts to the Court. Nonetheless, as has already been noted above (at [38]), Perram J reluctantly considered that the Full Court decision in BMI applied to prevent him making the declarations sought by the ACCC because he considered that the effect of the ruling in BMI was that the respondents ceased to be contradictors once they consented to the proposed declarations: see MSY Technology at [43]. In MSY Technology FC, the Full Court allowed the appeal and made the declaration sought. It considered that the respondents remained contradictors even though they had consented to the relief sought. It described the correct position as that stated by Dawson J in Oil Basins Limited v Commonwealth of Australia (1993) 178 CLR 643 and by French J in IMF (Australia) Ltd v Sons of Gwalia Ltd (admin apptd) (2004) 211 ALR 231; [2004] FCA 1390. On the former, it summarised the views of Dawson J as: for a "proper contradictor" to exist "… it was sufficient if the party had a true interest in the plaintiff's claim even if that party came to see that interest served by not opposing the relief claimed": see MSY Technology FC at [16]. In relation to the latter, it quoted from [47] of the decision of French J, as follows (MSY Technology FC at [17]): The requirement of a proper contradictor in a declaratory context is not merely to ensure that the court will be provided with all materials but also that absent a contradictor there is no person to be bound by the relief sought: Acs v Anderson [1975] 1 NSWLR 212 at 215 per Hutley JA citing PW Young, Declaratory Orders, 1st ed, Butterworths, Sydney, 1975, p 210. A proper contradictor, for jurisdictional purposes, in my opinion cannot be confined to the class of party who comes to court ready to oppose the relief sought. There may be a case in which a party, whether a private person or body or a statutory regulator, expresses opposition to, and an intention to oppose, a proposed course of action by another party on the basis that it is in breach of some contractual or statutory prohibition. The party opposing the conduct may however decide for any one or more of a variety of reasons not to contest declaratory proceedings about the lawfulness of the proposed conduct. So the declaration may be made by consent or may be uncontested. This does not mean that the court lacks jurisdiction or power to grant the declaration in such a case. The proceedings will have resolved a pre-existing controversy. A more difficult question arises where a party with an interest in opposing a particular course of conduct refuses to say whether it will take any action in respect of that conduct. Such a party may be said to be one which, notwithstanding its silence, has an interest in opposing the proposed conduct. [Emphasis in MSY Technology FC] 50 Thus, the Court concluded that: "the MSY parties had an interest to oppose the declaratory relief sought. That was sufficient to make them a proper contradictor": MSY Technology FC at [30]. Further, the Court considered that: "B.M.I. should be understood as a case where, because the question of the invalidity had become academic, that discretion had been exercised so as to refuse the declaratory relief sought": MSY Technology FC at [30]. Finally, the Court added (at [32]): It does not follow from B.M.I. that, in every case in which a justiciable controversy has become academic, declaratory relief should be refused. The matter is always one for the exercise of a judicial discretion. In some cases that feature may tell against the granting of such relief; in others the declaratory relief proposed to the court may be a feature of the agreement between the parties that has rendered that controversy academic. There can be no hard and fast rule. 51 In this case, EDirect was properly joined as a party and served with the ACCC's originating application and statement of claim. Absent any insolvency issues, it clearly had an interest in opposing these proceedings. The fact that its Receivers and Managers chose, for whatever reason, not to contest these proceedings, does not affect the position that it was, and is, a proper contradictor, for the purposes of considering the ACCC's application for declaratory relief. Thereafter, whether or not the declaratory relief is to be granted in the circumstances is a matter for judicial discretion, taking into account the factors identified by the Full Court in MSY Technology FC.

(d) Can a pecuniary penalty be imposed on a company in liquidation? 52 This issue was also authoritatively determined in a relatively recent Full Court decision: Dataline FC. This was the appeal from the Dataline decision mentioned above: see at [20] and elsewhere. The main issue in the appeal was the refusal of Kiefel J to impose a pecuniary penalty on the respondent company because it was, at the time, in liquidation. The Full Court dismissed the appeal on this aspect essentially because it found it was "tolerably clear that [the trial judge] did not decline to impose a penalty simply and only because the company was in liquidation": see Dataline FC at [18]. The Full Court concluded (at [21]) that: … the bare fact that a company is in liquidation is not, of itself, an immutable reason for not imposing a penalty. Nonetheless the fact that the company is in liquidation could be a factor militating against the imposition of a penalty. However there will be cases where other factors make it clearly desirable to impose a penalty on a company even though it is in liquidation. 53 The Full Court outlined various circumstances in which it might be appropriate to impose a penalty (Dataline FC at [19]-[20]) as follows: 19. There will be situations where notwithstanding that a company is in liquidation, it is appropriate, for one or a range of factors, to impose a penalty. However, significantly in this case, senior counsel for the appellant was unable to point to any fact or circumstance which would warrant the step of imposing a penalty on a party reasonably expecting that it would never be paid. There was no evidence from which the Court might infer that a third party or even a related company might meet the obligation of the company as happened in Australian Competition and Consumer Commission v Australian Securities and Investments Commission (2000) 174 ALR 688. Similarly there was no evidence from which the court might infer that at the completion of the liquidation there might be funds available to meet, in whole or in part, the penalty as happened in Commonwealth v Leahy Petroleum - Retail Pty Ltd (subject to deed of company arrangement) (2005) 55 ACSR 353. 20. It seems to us that if matters such as those discussed in the preceding paragraph are to be relied on by a regulatory authority in support of the imposition of a penalty on a company in liquidation, some evidence, even if slight, should be led to enable the Court to draw the inference. Additionally, a court may impose a penalty on a company in liquidation if, to do so, would clearly and unambiguously signify to, for example, companies or traders in a discrete industry that a penalty of a particular magnitude was appropriate (and was of a magnitude which might be imposed in the future) if others in the industry sector engaged in the same or similar conduct. This was exemplified in the judgment of O'Loughlin J in The Vales Wine Company Pty Ltd decision. (Bold emphasis added) 54 There is no evidence in this case that any pecuniary penalty imposed might be met in whole, or in part, by a third party, or from funds available at the completion of the winding up. Indeed, the evidence contained in Mr Sutherland's affidavits is to the contrary: see at [10]-[11] above. Nonetheless, I consider this is very much a case where a deterrent penalty of the kind described by the Court in Dataline FC (at [20] see [53] above) falls for consideration. I will turn to consider that issue in a short while, but first I will consider the other substantive issue: should a declaration be made in the terms sought by the ACCC?

(e) If a declaration can be made, should it be made in the terms sought by the ACCC? 55 Before answering this specific question, it is appropriate to reiterate some of the general principles that apply to the issue of declaratory relief. They were summarised in my decision in Grove & Edgar. They are as follows (at [17]-[20]): 17. … there is little doubt that the Court has a wide discretionary power to make declarations of right under s 21 of the Federal Court of Australia Act 1976 (Cth): see Forster v Jododex Australia Pty Ltd (1972) 127 CLR 421 ('Forster') at 437-438; Ainsworth v Criminal Justice Commission (1992) 175 CLR 564 ('Ainsworth') at 581-582 and Tobacco Institute of Australia Ltd v Australian Federation of Consumer Organisations Inc (No.2) (1993) 41 FCR 89 ('Tobacco Institute') at 99. 18. When the Court is asked to make declarations of right by consent it is required to scrutinise the orders sought to satisfy itself that it has the power to make those orders and to ensure, after due consideration, that they are appropriate: see ACCC v Real Estate Institute Industry of Western Australia Inc [1999] FCA 18; (1999) 161 ALR 79 at [1] and [17], ACCC v Virgin Mobile Australia Pty Ltd (No. 2) [2002] FCA 1548 at [1] and BMW Australia Limited v ACCC (2004) FCAFC 167, (2004) 207 ALR 452, (2004) ATPR 42-012 ('BMW') at [35]. On this aspect it should be noted that there is a long held view that a declaration, being a judicial act, should only be made on evidence and not simply on admissions or deemed admissions: see Bank of Kuwait and the Middle East v Ship MV Mawashi Al Gasseem (No.2) (2007) FCA 815 at [10] per Mansfield J and the cases referred to therein, particularly the observations of Kiefel J in ACCC v Dataline.Net.Au Pty Ltd [2006] FCA 1427, (2006) 236 ALR 665. 19. The strictures mentioned above mean, among other things, that the Court has to ensure that the declaration sought is directed to determining a legal controversy and not to answering abstract or hypothetical questions: see Ainsworth at 582. Further the Court is required to ensure that the party seeking the declaration has a real interest in seeking that relief: see Forster at 437 and Ainsworth at 582. And, finally, the Court has to ensure that there are sufficient consequences flowing from the making of the declaration that it is appropriate for it to exercise its discretion to do so. 20. This latter aspect may include the public interest in having such a declaration made to indicate the Court's disapproval of particular conduct, assist in clarifying the law on a particular matter, or assist to inform consumers about a particular matter of concern: see Medical Benefits Fund of Australia Limited v Cassidy [2003] FCAFC 289, (2003) 135 FCR 1, (2003) ALR 402 ('MBF') at [50]-[52]; ACCC v Info4PC.com Pty Ltd (deregistered) [2006] FCA 1534 at [8], ACCC v Goldy Motors Pty Ltd [2000] FCA 1885 at [30] and [34]; Tobacco Institute at 99-100, ACCC v Midland Brick Co Pty Ltd [2004] FCA 693; (2004) 207 ALR 392 at [21] and ACCC v Pacific Dunlop [2001] FCA 740 at [59]-[69]. 56 In this matter, the issue addressed by the declaratory orders sought (set out at [16] above) is not hypothetical. It relates to the characterisation of conduct affecting 350 identified customers of EDirect. As the regulator under the TPA, the ACCC clearly has a real interest in the declaratory orders it has sought. Further, in the circumstances of this case, I consider it is in the public interest that the conduct which underlies the imposition of the pecuniary penalty is clearly described in the declaratory orders so that the public is aware precisely what conduct it is that the pecuniary penalty seeks to deter. Of course, that will also be achieved in these reasons, but these reasons will not form a part of the judgment in the way that the declaratory orders will. For this reason, I consider it is necessary to make some small amendments to the declarations sought to make it clear that EDirect's misconduct affected 350 customers. On the same theme, I also consider that these declaratory orders should be preceded by a statement along the lines suggested by Kiefel J in Dataline (see at [22] above) as follows: "Upon admissions which EDirect is taken to have made consequent upon defaults under the Rules of Court". This should be done so the public is fully aware of the circumstances in which these orders were made. 57 Finally, I am satisfied that the facts pleaded in the statement of claim and which are deemed to be admitted under O 35A r 3(2)(c) are largely sufficient to support the terms of the declaratory orders sought. That includes the precise nature of EDirect's conduct and the manner in which that conduct involved the nominated contraventions of the TPA. However, there is one aspect of the declaratory orders that goes beyond the facts pleaded in the statement of claim and I consider the declaratory orders should be amended to remedy that. That is, the declaratory orders are expressed to relate to the period up to and after 1 January 2011, whereas the allegations in the statement of claim are confined to the period from 21 July 2006 to 10 September 2010. In saying this, I do not consider, in the circumstances, that the insertion of the words "at least" before these dates allows the ACCC to expand the precise commencing and concluding dates beyond those it has expressly pleaded.

(f) If a pecuniary penalty can be applied to EDirect, what level of pecuniary penalty should be imposed on it in all the circumstances? 58 The provision of the TPA the ACCC relies upon to ask the Court to impose a pecuniary penalty on EDirect is s 76E. A number of matters needs to be noted about that section at the outset. First, it was repealed as a result of the commencement of the Competition and Consumer Act 2010 (Cth) on 1 January 2011. However, it continues to apply to conduct occurring before 1 January 2011: see Trade Practices Amendments (Australian Consumer Law) Act (No 2) 2010 (Cth) Sch 7, Item 6. Secondly, s 76E only applies to conduct occurring after 15 April 2010: see s 2(1) of the Trade Practices Amendment (Australian Consumer Law) Act (No 1) 2010 (Cth). Thirdly, for the purposes of these proceedings, s 76E only applies to conduct that contravenes ss 53 and 58 and not s 52: see s 76E(1)(a)(ii). Fourthly, the maximum penalty for a breach by a body corporate of either s 53 or s 58 is 10,000 penalty units: see s 76E(3). Section 4AA(1) of the Crimes Act 1914 (Cth) provides that the expression "penalty unit" means $110. Fifthly, s 76E(4) provides that a person is not liable to have more than one penalty imposed in respect of "the same conduct". This requires care to ensure that an offender is not punished twice for the same conduct. Finally, s 76E(2) prescribes a number of matters the Court must have regard to in fixing a pecuniary penalty. They are: (2) In determining the appropriate pecuniary penalty, the Court must have regard to all relevant matters including: (a) the nature and extent of the act or omission and of any loss or damage suffered as a result of the act or omission; and (b) the circumstances in which the act or omission took place; and (c) whether the person has previously been found by the Court in proceedings under Part VC or this Part to have engaged in any similar conduct. 59 I will now turn to consider these matters and any other matters that are relevant to fixing the pecuniary penalty to be imposed on EDirect in these proceedings. 60 The factors set out in s 76E(2) are not exhaustive. Numerous decisions of this Court have confirmed that the principles relevant to the determination of penalties under s 76 of the TPA should, with some exceptions, also be considered when imposing civil penalties pursuant to s 76E: see Australian Competition and Consumer Commission v Global One Mobile Entertainment Limited (2011) ATPR 42-358; [2011] FCA 393 at [110]-[112] per Bennett J; Australian Competition and Consumer Commission v Gourmet Goody's Family Restaurant Pty Ltd [2010] FCA 1216 at [6] per Jagot J; and MSY Technology at [68]-[69] per Perram J. 61 A summary of the matters relevant to the determination of penalties under s 76 has been provided in a series of decisions over the years. They include Trade Practices Commission v CSR Limited (1991) ATPR 41-076 (CSR) at 52,152-53 and NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (1996) 71 FCR 285 (NW Frozen Foods) at 295 per Burchett and Kiefel JJ, Carr J agreeing. 62 More recently, in Australian Competition and Consumer Commission v Singtel Optus Pty Ltd (No 4) (2011) 282 ALR 246; [2011] FCA 761, Perram J reviewed these authorities and summarised the factors relevant to fixing a pecuniary penalty under s 76E as follows (at [11]): … 1. The size of the contravening company. 2. The deliberateness of the contravention and the period over which it extended. 3. Whether the contravention arose out the conduct of senior management of the contravener or at some lower level. 4. Whether the contravener has a corporate culture conducive to compliance with the Act (or the new Australian Competition and Consumer Law) as evidenced by educational programmes and disciplinary or other corrective measures in response to an acknowledged contravention. 5. Whether the contravener has shown a disposition to cooperate with the authorities responsible for the enforcement of the Act in relation to the contravention. 6. Whether the contravener has engaged in similar conduct in the past. 7. The financial position of the contravener. 8. Whether the contravening conduct was systematic, deliberate or covert. 63 Perram J also identified (at [12]) two further matters in relation to s 76 that pertain to the economic effects of the contravening conduct and the degree of market power of the contravener. However, I do not consider those matters to be relevant for present purposes. 64 This list was referred to without demur on appeal in Singtel Optus Pty Ltd v Australian Competition and Consumer Commission (2012) 287 ALR 249; [2012] FCAFC 20 (Singtel) at [37] per Keane CJ, Finn and Gilmour JJ. It has also since been relied upon in Australian Competition and Consumer Commission v Harvey Norman Holdings Ltd (2011) ATPR 42-384; [2011] FCA 1407 at [20] per Collier J and Australian Competition and Consumer Commission v Apple Pty Ltd (2012) ATPR 42-404; [2012] FCA 646 at [17] per Bromberg J. I also propose to rely upon it in fixing the pecuniary penalty in this matter. 65 However, it is important to note that the factors identified in this list do not include the principal object of a pecuniary penalty under ss 76 or 76E of the TPA, viz deterrence. In CSR, French J expressed that object in these terms: The principal, and I think probably the only, object of the penalties imposed by s.76 is to attempt to put a price on contravention that is sufficiently high to deter repetition by the contravener and by others who might be tempted to contravene the [Trade Practices] Act. 66 In a similar vein, the Full Court said in NW Frozen Foods (at 294-5) that: The Court should not leave room for any impression of weakness in its resolve to impose penalties sufficient to ensure the deterrence, not only of the parties actually before it, but also of others who might be tempted to think that contravention would pay and detection lead merely to a compliance programme for the future. 67 Other judges of this Court have identified other cogent reasons why a penalty must be pitched at a sufficiently high level to deter others from engaging in similar conduct. For example, in Australian Competition and Consumer Commission v McMahon Services Pty Ltd (2004) ATPR 42-031; [2004] FCA 1425 at [15], Selway J observed: Given these difficulties and the potential for large profits from such practices there is a chance that those in the market place might be prepared to factor the risk of a low penalty into its pricing structure as a 'business cost'. That would be inimical to the statutory purpose of ensuring that the practices do not occur. The penalty must be sufficiently high that a business, acting rationally and in its own best interest, will not be prepared to treat the risk of such a penalty as a business cost. 68 In a more recent decision, dealing with the Spam Act 2003 (Cth), Logan J identified the deterrence to others taking a calculated risk of non-detection, particularly where detection involves considerable diligence and expense on the part of the regulatory authorities as an important factor: Australian Communications and Media Authority v Mobilegate Ltd (No 4) (2009) 180 FCR 467; [2009] FCA 1225. Logan J observed (at [32]) that: "penalties must be of such an order that having regard to particular gains which might be involved, it is in effect commercial suicide to seek those gains via contraventions of the [legislation]." 69 It is also of particular relevance in this case to note that while specific deterrence has effectively been removed as a factor as a consequence of EDirect's liquidation, the Court should still give full effect to general deterrence. On this point, the observations of Goldberg J in Australian Competition and Consumer Commission v Leahy Petroleum Pty Ltd (No 3) (2005) 215 ALR 301; [2005] FCA 265 are pertinent. They were (at [39]) that: .. as specific deterrence is only one element and general deterrence must also be achieved, consideration of the party's capacity to pay must be weighed against the need to impose a sum which members of the public will recognise as significant and proportionate to the seriousness of the contravention. 70 For all these reasons, I consider that while EDirect is unlikely to have any capacity to pay the pecuniary penalty that is imposed upon it, general deterrence requires that a sufficiently high level of penalty should be imposed to deter others from even contemplating taking a risk of contraventions of a similar kind. 71 In the context of sentencing for criminal offences, the High Court has identified a number of principles which I consider also provide guidance in assessing this pecuniary penalty under s 76E of the TPA. In Markarian v The Queen (2005) 228 CLR 357; [2005] HCA 25, the plurality (Gleeson CJ, Gummow, Hayne and Callinan JJ) outlined those principles as follows: 1. the Court's assessment of the appropriate penalty is a discretionary judgment based on all relevant factors (at [27]); 2. "… 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, taken and balanced with all of the other relevant factors, a yardstick" (at [31]); 3. it will rarely be appropriate for a Court to start with the maximum penalty and proceed by making a proportional deduction from that maximum (at [31]); 4. the Court should not adopt a mathematical approach of increments or decrements from a predetermined range, or assign specific numerical or proportionate value to the various relevant factors (at [37] citing Wong v The Queen (2001) 207 CLR 584 at 611-612; [2001] HCA 64 at [74]-[76] per Gaudron, Gummow and Hayne JJ); 5. it is not appropriate to determine an "objective" sentence and then adjust it by some mathematical value given to one or more factors such as a plea of guilty or assistance to authorities (see [37] citing Wong v The Queen (2001) 207 CLR 584 at 611-612; [2001] HCA 64 at [74]-[76] per Gaudron, Gummow and Hayne JJ); 6. the Court "may not add and subtract item by item from some apparently subliminally derived figure" to determine the penalty to be imposed (at [39]); and 7. since the law strongly favours transparency, accessible reasoning is necessary in the interests of all, and, while there may be occasions where some indulgence in an arithmetical process will better serve the end, it does not apply where there are numerous and complex considerations that must be weighed (see [39]). 72 In addition, it is well-established that the penalty imposed must not be so high as to be oppressive: see Trade Practices Commission v Stihl Chainsaws (Aust.) Pty. Ltd. (1978) ATPR 40-091 at 17,896 (per Smithers J) and NW Frozen Foods at 293 (per Burchett and Kiefel JJ). Similarly, the "totality principle" requires that the total penalty for all the correlated offences should not be out of proportion to the seriousness of the entire contravening conduct: see Trade Practices Commission v TNT Australia Pty Limited (1995) ATPR 41-375 at 40,169 per Burchett J; Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd (1997) 75 FCR 238 at 243 per Goldberg J, Australian Competition and Consumer Commission v Rural Press Ltd (2001) ATPR 41-833; [2001] FCA 1065 at [19] per Mansfield J and Singtel at [51]-[55] per the Full Court. 73 Noting that the penalties imposed in other cases should not be used to make direct comparisons in determining a pecuniary penalty and should, instead, only be used by way of general guidance, the ACCC provided the details of the following penalties that have been imposed on respondents in recent consumer protection cases: 1. Yellow Page Marketing - $2.7m penalty for misrepresentations concerning a business directory; 2. Australian Competition and Consumer Commission v Marksun Australia Pty Ltd [2011] FCA 695 - $430,000 penalty for misrepresentations on the internet concerning footwear country of origin; 3. Australian Competition and Consumer Commission v Dimmeys Stores Pty Ltd [2011] FCA 372 - $400,000 penalty for product safety standard contraventions; 4. Australian Competition and Consumer Commission v Global One Mobile Entertainment Limited (No 2) [2011] FCA 670 - $375,000 penalty for misleading advertising of telephone premium content services; 5. Australian Competition and Consumer Commission v Smash Enterprises Pty Ltd [2011] FCA 375 - $300,000 penalty for product safety standard contraventions; and 6. MSY Technology - $203,500 penalty for misrepresentations as to consumers' warranty rights. 74 Applying these principles to the present case, the matters I propose to take into account in fixing the pecuniary penalty to be imposed on EDirect include the following: 1. Since s 76E of the TPA only applies to conduct that occurred after 15 April 2010 and the statement of claim is confined to the period up to 10 September 2010, that is the period which I will take into account in assessing the pecuniary penalty. In the circumstances, I consider this (approximately) five month period to be relatively long. Clearly there were numerous repetitive contraventions of the apposite sections of the TPA in this period. 2. Further, since s 76E of the TPA only applies to contraventions of ss 53 and 58 and not to contraventions of s 52, I must and will limit any pecuniary penalty to the conduct which involves contraventions of those sections. 3. Based on the evidence of Ms Eckermann (at [12] above), I find that 219 of the 350 customers listed in Confidential Schedule A to the statement of claim were the subject of the contraventions by EDirect of both ss 53 and 58 of the TPA. 4. The breaches of ss 53 and 58 of the TPA are described in the statement of claim as follows: In relation to s 53 16. By representing to the affected customers that the verification condition had been satisfied and that the affected customer's nominated address was located within the covered areas, when in fact none of the affected customers' nominated addresses was located within the covered areas, EDirect has, in the case of each of the affected customers, in trade or commerce: … 16.2. in connexion with the supply or possible supply of services, made a false or misleading representation as to the performance characteristics, uses or benefits of its mobile network services, in contravention of section 53(c) of the TPA … In relation to s 58 19. By engaging in the conduct pleaded at paragraph 14 above, by reason of the matters pleaded at paragraph 18 above, EDirect has, in trade or commerce, in the case of each of the persons identified at Table A.2 in Confidential Schedule A hereto, accepted payment for services where, at the time of acceptance: 19.1. there were reasonable grounds, of which EDirect was aware or ought reasonably to have been aware, for believing that EDirect would not be able to supply the services within a reasonable time; and … 19.2. EDirect intended to supply services, namely mobile network services that were not accessible at the nominated address, that were materially different from the goods or services in respect of which payment was accepted, namely mobile network services accessible at the nominated address; in contravention of section 58 of the TPA … Paragraph 14 14. EDirect accepted payment for its mobile network services from each of the persons listed in Table A.2 in Confidential Schedule A hereto on, respectively, each of the direct debit dates listed therein. Paragraph 18 18. … EDirect was aware, or ought reasonably to have been aware that, at the time it accepted payment from each of the persons listed in Table A.2 at Confidential Schedule A, it could not supply mobile network services to the said persons at the nominated address each person had provided to EDirect. 5. The conduct described above was, in my view, particularly serious. It essentially involved receiving money for the supply of mobile telephone services that were, for practical purposes, non-existent. That occurred in circumstances where EDirect knew, or ought to have known, that the services did not exist. That is so because, quite apart from the regional and remote locations of the addresses provided by the 219 customers, if it had any doubt, EDirect had at its disposal a relatively simple method of checking whether a particular customer was in an Optus coverage area by using the Optus Open Network Coverage Locator on the Optus website, www2.optus.com.au. Further, EDirect's deception of its customers was compounded by the fact that, in each case, EDirect's telemarketers assured the customer concerned that a check would be made to verify whether their addresses were in a coverage area before the contract came into effect. Obviously no such check was made in relation to any of the 219 customers concerned. Put in simple terms, EDirect took a relatively large amount of money from these 219 customers when they knew, or ought to have known, that they were not entitled to that money. 6. The particular context in which this conduct occurred is also significant. In EDirect 2008 (at [14]), I adopted the following submission of counsel: Vulnerable consumers have an increased risk of being victims of unscrupulous conduct when it occurs over the telephone. Telemarketing is frequently used in the telecommunications industry to contract new customers by way of voice contracts. I consider this quotation apt to describe the circumstances of this case as well. The vulnerability mentioned arises from the fact that the whole of each of the telemarketing interactions in this case was oral. It follows that, among other things, there was no written record of the telemarketer's promise to each customer to undertake the coverage check before the oral contract with each customer came into effect. Because of the relatively large number of customers who ended up committed to contracts without having any mobile telephone coverage, it is not difficult to infer that EDirect did not have any system in place to ensure the promised coverage check was undertaken by its telemarketers. While I consider I am constrained by the way the ACCC has pleaded its case (see at [45]-[46] above) from concluding this outcome was the result of deliberate or dishonest conduct on the part of EDirect's telemarketers, I do not consider this prevents me from concluding it was unscrupulous. It this context I take the word "unscrupulous" to mean that EDirect did not "hav[e] or [show] a strict regard for what is right" (Macquarie Dictionary, 4th Ed). If EDirect had such a strict regard for what was right, this outcome could not have occurred. I should add that I consider the deemed admissions of the facts pleaded above obviates the necessity for me to examine whether the state of mind of EDirect's telemarketers could be treated as being identified with the state of mind of the company: see the discussion in Australian Competition & Consumer Commission v Radio Rentals Limited [2005] FCA 1133 at [177]-[183] per Finn J. The deception of EDirect's affected customers in this case exemplifies the kind of unscrupulous telemarketing to which this quotation refers. It reinforces the need for companies that use telemarketers to ensure that they are properly supervised and controlled so that they comply with Australia's consumer laws. It is a notorious fact that each individual telemarketer is usually paid according to the number of sales he or she makes and this sometimes presents a temptation to them to "cut corners" to achieve a sale. The corners that are often cut involve matters going to the protection of the customer concerned. That was obviously present in this case where the telemarketers concerned clearly did not undertake the check that they assured the customers they would do to verify whether their addresses were in a mobile coverage area. In my view, all these factors compound the seriousness of EDirect's contravention of the TPA. 7. The evidence does not disclose precisely how much money was wrongly deducted from the bank accounts of the 219 customers concerned, but a measure of the total amount involved can be gained from the evidence of Ms Eckermann (see at [12] above) that up until 22 December 2010 EDirect had refunded a total of $88,725.84 to affected customers and, up until 29 November 2010, EDirect had received a total of $121,193.64 from customers whose nominated addresses were not in an Optus mobile coverage area. 8. While specific deterrence is not a factor given EDirect's insolvency, general deterrence remains a significant factor. Thus I consider the amount of the total pecuniary penalty to be imposed on EDirect should be at such a level as to make it, to use the descriptor adopted by Logan J, commercial suicide, for any other operators in the mobile telephone industry, or elsewhere, to even contemplate taking the risk of engaging in similar conduct. In this instance, I consider the need for this level of general deterrence is reinforced by the size of the mobile telephone industry in Australia and the obvious difficulties associated with regulating such a large and complex market. In this regard, I take account, under s 144 of the Evidence Act, of the fact that at the end of December 2011 there were 11 million mobile handset subscribers in Australia: see Australian Bureau of Statistics, Internet Activity, Australia, Dec 2011 (cat no 8153.0, ABS, 2012). In addition, I consider the penalty should act as a general deterrent to companies who use telemarketers in the way that occurred in this case. If such companies, whether mobile telephone companies or others, do not properly supervise and control their telemarketers to ensure that they comply with Australia's consumer protection laws, they can expect to be dealt with severely. 9. By way of general guidance only, I take into account the range of other pecuniary penalties recently imposed for similar consumer protection contraventions as being between $203,500 and $2.7 million. 10. The maximum penalty for each contravention of each of the sections involved is $1.1 million (10,000 penalty units x $110). Since I have found that 219 of the customers in Confidential Schedule A to the statement of claim were each the subject of a contravention of each of the sections involved, I find that at least 438 such contraventions have occurred. As noted in 74 above, these contraventions occurred over a period of (approximately) five months. However, I consider all of these contraventions were part and parcel of the one course of conduct and, in relation to each customer, the breach of each section (ss 53 and 58) occurred almost concurrently. That is, the false or misleading representations under s 53(c) and the acceptance of payments for the non-existent services under s 58, occurred at about the same time and during the same five months period. For these reasons, I consider I should impose one aggregate penalty for the whole course of conduct and all the contraventions of both sections. This does not, of course, mean that the aggregate penalty for all the contraventions in this one course of conduct is limited to the maximum penalty that could be imposed for one contravention, viz $1.1 million. 11. As I have already mentioned earlier in these reasons, I also propose to take into account the fact that in the recent past, EDirect was the subject of a series of orders in this Court (EDirect 2008) that were based on contraventions of the TPA in circumstances that included items of conduct that were very similar to the contravening conduct involved in this case, viz using telemarketers to supply mobile telephone services to customers whose addresses were located in areas that had no mobile telephone coverage. This prior history further underscores the need for a significant deterrent penalty in this case. 12. Turning to EDirect itself, the evidence of Mr Sutherland (at [10]-[11] above) shows that, as at about the time it was placed in liquidation, it had assets of about $10 million and creditors of about $14 million. Further, Ms Eckermann's evidence (at [12] above) shows that, as at 7 October 2010, it had 43,360 current customers and in April 2011 it transferred 62,418 active customers to its creditor. Apart from this evidence, I know little about the turnover of the company, or its size except to observe that, with a customer base of more than 62,000, its turnover is likely to have been at least $150,000 a month. I also know very little about its management structure and practices, or its corporate culture. However, in relation to the latter, insofar as it reflects upon its compliance with the consumer protection laws of this country, the fact that, as noted above, EDirect has now been before this Court twice in a relatively short period of time, suggests that its corporate culture relating to consumer protection was particularly poor. Finally, it is stating the obvious to say that EDirect's financial position is now dismal. It is currently in liquidation and the evidence of Mr Sutherland (at [10] above), particularly the statement of Mr Algeri, one of the Receivers and Managers, indicates that there are unlikely to be any funds available at the completion of the liquidation for distribution among the company's unsecured creditors. This obviously includes any pecuniary penalty that is imposed on it. EDirect's liquidation also means the money it wrongly received from its customers will be swallowed up in its winding up process and none of the affected customers will ever be compensated for their losses.

Conclusion 75 Ms Brennan, the counsel for the ACCC, submitted that a total pecuniary penalty, by way of general deterrence, in the range of $2 million to $2.5 million was warranted in this case. For the reasons I have given above, I agree entirely. Accordingly, I propose to fix an aggregate total pecuniary penalty under s 76E for EDirect's various contraventions of ss 53 and 58 of the TPA of $2.5 million between 16 April and 10 September 2010. Finally, I should record that in fixing on that amount, I have weighed it in proportion to the seriousness of the contravening conduct outlined above. While $2.5 million is a significant total amount, I consider it is not out of proportion to the seriousness of the wrongdoing and the other circumstances outlined above. I certify that the preceding seventy-five (75) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Reeves.