Australian Competition and Consumer Commission v Goldstar Corporation Pty Ltd

Federal Court of Australia|1999-05-07|Before: Drummond J, Kiefel J

REASONS FOR JUDGMENT 1 The Australian Competition and Consumer Commission ("ACCC") alleges that Goldstar Pty Ltd ("Goldstar") has been guilty of contempt of orders of this Court, by conduct engaged in between November 1998 and February 1999. The orders in question were made by the Honourable Justice Drummond on 6 November 1998, following breaches of undertakings having been established against both Goldstar and its principal director, the second respondent Mr Hudson. His Honour made declarations, holding each to have been guilty of contempt in certain respects, and made orders as to penalty. A pecuniary penalty was imposed upon Goldstar. Mr Hudson was sentenced to two months imprisonment. His Honour, however, also ordered that the warrant for committal lie in the Registry and not be executed, providing that Mr Hudson refrain from contravening Part V Trade Practices Act 1974 for two years and that he also refrain, for the same period, from being knowingly involved in such contraventions by anyone else. The charges now brought are not based upon that part of his Honour's order, but upon particular breaches by Goldstar of the restraining orders made by his Honour, the terms of which are set out below, and Mr Hudson's failure to ensure that those orders were complied with. This was the principal focus of the proceedings, the case against Goldstar being the subject, ultimately, of substantial concessions.

The Original Charge 6 The initial charge concerned steps taken by Goldstar on about 19 November 1998 to obtain payment from Hawthorn International Education Ltd ("Hawthorn") for advertising services or the making of an entry in a directory called "The National Federal State and Local Government Advertiser" ("the Advertiser"), a publication of Goldstar, when no written order was held by it, a contravention of Order 3(a). Contraventions of paragraphs (b) and (c) of Order 3 were also alleged. They required that there be in existence an order prior to the date of Goldstar's request for confirmation and that Goldstar provide a copy of the original order. Given that no written order existed at all, these charges add nothing to the matter and in these reasons I shall not make reference to other similar charges. 7 The evidence disclosed that on about 19 November 1998 a facsimile transmission was forwarded to Hawthorn, addressed to Ms Reynolds, which asserted that a judgment had been obtained against Hawthorn in the sum of $986 and demanded payment within seven days. Threats of execution and oral examination were made. The letter was not signed but bore a reference to "Steve Hill, General Manager". It is not apparent who that person was. Ms Reynolds had previously received facsimile communications from persons associated with the Advertiser in May 1998. They had forwarded a proof for advertising and requested that it be checked and returned. Ms Reynolds then had some discussions with Goldstar staff concerning errors in the entry. The end result was that she signed a document confirming the entry's correctness and advising that printing proceed. No prior order had ever been made.

Proceedings and Adjournments 8 The matter came before the Court on 16 December 1998 and was adjourned for hearing to 19 January 1999, with directions. On the firstmentioned date, the solicitors for the respondents conceded that Goldstar had breached the Order in the respects alleged, but said that had resulted despite Mr Hudson's endeavours to ensure that staff were informed of the orders. The matter was again adjourned to 4 February 1999, when the ACCC foreshadowed the bringing of other charges. At this point, the possible need for the respondents to identify or call employees responsible for breaching the Orders was discussed. That date was vacated by consent and evidence heard on 25 and 26 February 1999. This timetable assumes some relevance when regard is had to the dates referred to in the additional charges. The Further Charges - Order 1

The Ageing and Disability Services Department 9 On 22 December 1998, some six days after the matter was first mentioned in Court, a male person from the Municipal Trade and Services Directory ("the Directory"), another publication of Goldstar, telephoned Ms Lane in the accounting section of the Ageing and Disability Services Department and enquired as to payment of an invoice he said had been rendered in April 1998. Upon request, a copy of that invoice and a document signed by Ms Bacon, apparently authorising an order, were forwarded. Payment was made on the basis of the lastmentioned document and an entry for the Department later appeared in the Directory, a copy of which was sent to the Department in December. 10 There is some doubt whether an invoice had been earlier sent on the date now put forward. Ms Bacon had signed the confirmation form and corrected a proof of advertisement on 28 April 1998, after having been required to do so by a Mr Mark Johns of the Directory who advised that the advertising space had already been reserved. No prior order had in fact been made, as Ms Bacon discovered when she later checked the records after receipt of the invoice a few weeks later. Mr Johns was shortly afterwards advised that no payment would be made and although he asserted a signed agreement existed, he did not forward it when requested to do so. However, when demand for payment was later made, a combination of the fact of the entry and the signed confirmation caused Ms Bacon to believe that payment was in order. 11 Breaches of Order 1(d)(i) and (ii) are established by the sending of the invoice and the demand for payment in respect of an advertisement where no prior order existed, and a further breach of Order 1(e) is constituted by Goldstar accepting. 12 Mr Hudson initially sought to place reliance upon procedures which he said would have been followed. He said that Goldstar would have telephoned the Department on 14 December 1998 to enquire whether it wished to advertise, but there is no evidence of such an enquiry. It was ultimately conceded that the company had breached the order.

Burwood East Motel 13 Mr Eslick, who conducted the abovementioned motel, received a telephone call from "Peter Hall" of the Directory on 5 January 1999 in relation to an invoice dated 4 September 1998. The invoice was sent following the return by him of a form "Confirmation of Advertising" which he had received from the Directory on 28 August 1998. He had signed it in the belief that it related to a free listing, in part because the price had been left blank on the facsimile order form. The invoice for the advertisement was for an amount of $399.00 and Mr Eslick says he noted on it that he had not authorised the payment and transmitted it to the Directory. He subsequently received two or three telephone calls, between September and December 1998, from male persons from the Directory pursuing payment and he advised that he would not pay since he had not signed an order for the amount they were claiming. On 5 January 1999 he received a telephone call, the subject of the charge. The caller told him that he had placed an order for $399 and, when challenged, asserted that he had Mr Eslick's signature on an order form in front of him. As requested, the caller forwarded a copy of the form that day. Mr Eslick had retained the original order and it has "N/A" inserted in handwriting next to "Cost $". The form which was sent on 5 January 1999 was clearly a copy of that form, but these letters have been removed and the figure "$399" inserted. 14 In cross examination it was suggested, but not accepted, that Mr Eslick or an employee had in fact authorised the insertion of the amount. This had also been suggested in a further telephone call between "Peter Hall" and Mr Eslick which took place on 12 January 1999. It was later admitted that that person was in fact Mr Hudson, who told Mr Eslick he had authorised him to make the amendment. The threat which was made in that conversation tended, in any event, to identify Mr Hudson. It was said that the matter was to be handed over to "the Government Solicitor" if the invoice was not paid. The Australian Government Solicitor acts for the Australian Competition and Consumer Commission in these proceedings. 15 The charges here are stated in the alternative, depending upon whether there was a prior order. There was an order in this instance, although it was placed on the mistaken basis that there would be no charge. The fact of a prior order excludes a contravention of Order paragraph 1(a). The alternative charges, of breaches of paragraphs 1(d)(ii) and (v) by demanding payment and threatening proceedings on each of 5 and 12 January 1999, are dependent upon there existing the circumstances referred to in Order 1(b) prior to that conduct. The paragraph refers to Goldstar having sent a document which misled or was likely to have misled a person such as Mr Eslick as to the effect of signing it or returning it. The document is not identified, but consistent with the other charges must be taken to refer to the "Confirmation of Advertising". The terms of the Order to be complied with are in this respect more general than others. I do not think it can reasonably be said that Mr Eslick was in fact misled by anything appearing on this first form, forwarded on 28 August 1998. He did not believe that he was confirming any prior order. He believed that what was being offered was a free entry but it could not reasonably be said that the terms of the form could have engendered that belief. Nevertheless, the form itself followed the practice of Goldstar and contained references to it being by way of confirmation. Whilst this does not appear to have operated upon Mr Eslick's mind, it was conduct such that a later demand for payment was prohibited under the terms of the 6 November Order. Goldstar concedes that the terms of the Order were breached in these respects. The further conduct which followed, when the form was altered by the insertion of a sum of money purporting to be that which had been agreed to be paid, and then sent to Mr Eslick, was plainly fraudulent. It does not, however, fall within the terms of the charge which has to do with a person's state of mind as to what transaction resulted from their signing or returning the document. This evidence may be relevant to the credit of Mr Hudson. I shall refer to this again later in these reasons.

ViaGrafix Pty Ltd 16 The Order of Drummond J prohibited reliance upon orders for advertising for directory services where particular warnings and details of the publication had not been included (Order 1(f)). An order form, signed by Mr Hart of the abovementioned company, was obtained by a "Paul Jamieson" acting on behalf of the Advertiser on 3 December 1998, and followed a series of telephone calls pressing for the order, although it is not suggested Mr Hart was confused or misled about the form constituting an order for a directory entry. The warning required was inserted. What the form omitted was reference to the date of intended publication, although this had been discussed with Mr Hart in the process of obtaining his order. Mr Hudson pointed to the words "Copy Date 11 December 1998" as fulfilling this requirement, but this clearly referred to the need to have the corrected advertisement ready by that date. The need for the date of publication to be inserted is not without importance, given that the conduct of Goldstar the subject of proceedings concerned the method by which it obtained orders. It was not however clear just when publication would occur, with the possibility that the promise of an earlier date would work as an additional inducement, when there was no real prospect of that occurring. Here, Mr Hart was told it was to be in early January 1999, whereas the evidence disclosed it was not likely to be until March. Part payment was made with respect to the advertisements. I should add that the ACCC sought, in submissions, to extend the ambit of charges in connexion with this conduct, but I did not consider that to be an appropriate course so late in the proceedings.

Crew Flagpoles 17 The same contravention as that just dealt with is made out in connexion with Goldstar's dealings with this business. Mr Viner was told by "Nathan Webber" of the Advertiser, in late November 1998, that the publication was to go to print at the end of December. The date for publication was not contained in the order form. Nevertheless, Goldstar sought to rely upon the signed form when later demanding payment. The demands continued through to 1 February 1999 when reference was made to the "Australian Government Solicitor" issuing writs against Mr H Viner or his business by the caller "Troy Doran". It is possible that it was Mr Hudson himself who made this threat as he had similarly done on other occasions, but this was not put to him. It is the demand on that day, and its reliance on the order form, which is the subject of the charge. A further demand was made on 8 February 1999, some 4 days after the adjourned date for hearing and again by the person with the improbable name of "Troy Doran". 18 Mr Hudson claimed that Goldstar did not pursue payments after 15 January 1999 and that another entity "Goldstar & Co Pty Ltd" did. I discuss this aspect of Goldstar's defence later in these reasons. The story is not credible.

Bayside Children's Centre 19 Mr Wright, the manager of the Bayside Children's Centre in Victoria, received several telephone calls after 1 December 1998 and through to 3 February 1999 from persons connected with the Municipal Trades and Services Directory concerning an unpaid invoice. On the lastmentioned date, Mr Wright received a facsimile transmission threatening legal action, and requiring payment to be made to Goldstar. The demands related to an "order form" dated 27 May 1998. Mr Wright said that he received a telephone call from a male person from the Directory on about 27 May 1998 who said that he was about to send through a copy of an advertisement Mr Wright had approved. Mr Wright received a facsimile which carried the notation "Confirmation of advertisement" and contained an advertisement for the Bayside Children's Centre and the words: "Further to our telephone conversation please check proof below and if there are any changes or additions required please correct accordingly." 20 Mr Wright assumed he must have previously ordered the enclosed advertisement, and so he checked its details and returned it, signed. He received an invoice in June for $395. Subsequently, however, he checked with the Centre's records and discovered that there had been no previous dealings with the Directory; thereafter he refused to pay the sum, despite some forty or fifty phone calls demanding payment. 21 Little of substance was put to Mr Wright in cross-examination. Reliance was again placed upon the fact that there must have been a prior order, because that was the procedure undertaken by Goldstar's staff. Evidence in these proceedings, and those before Drummond J, show clearly to the contrary. Reference was made by Mr Hudson to a record of a telephone call having been placed to a number, said to be that of the Centre, on the day before the order form was sent. In the background of other conduct and in the absence of any evidence from "Mark Johns", it is not possible to draw from this fact much of assistance to Goldstar and in the end a concession of contempt was made. Before that occurred however, and with respect to the final demand made on 3 February, Mr Hudson also sought to attribute the making of the demand to the new entity Goldstar and Co Pty Ltd. 22 The terms of Order 1(d) were here breached in that demands for payment and threats of legal proceedings were made, where there had been no order for services rendered. Door to Door Computers 23 The statements of charge relating to Mr Hinton's business concern three events. On about 15 December 1998, Goldstar telephoned Mr Hinton and demanded payment for a Directory entry. On 11 January 1999, an amended invoice issued. The third event concerns a threat to commence legal proceedings made on 3 February 1999. 24 The course of events starts in May 1998, when Mr Hinton was contacted by the Advertiser. There clearly exists, in this case, an agreement for the advertisement and Mr Hinton paid the sum of $495 on receipt of the invoice. 25 On 1 July 1998, a further transmission was received. It included the words "Further to our telephone conversation please check proof below and if there are any changes or additions required please correct accordingly." It contained a reference to $499, which Mr Hinton corrected to read "$495" and wrote the words "Paid" beside it, also specifying the cheque number, then signed it and returned it to the Advertiser. A later telephone call from "Martin" showed that Mr Hinton had been misled. This was not only likely to have occurred, it must have been intended. The Directory had sent the confirmatory order form in July, not the Advertiser. The Directory now claimed that Mr Hinton had placed an order with them. Goldstar was prohibited by the terms of the Order from pursuing payment on the confirmatory order form, which had no prior order referrable to it; it nevertheless did so on 15 December. 26 Goldstar later forwarded an amended invoice on 11 January 1999, which reduced the bill to the sum of $100, following discussions with Mr Hinton, because the entry made in the Directory was smaller than that the subject of the "order form" he had signed. Despite such agreement, Goldstar was again prohibited from sending an invoice based upon the misleading order form. 27 The third charge, which is also made out, refers to a threat made by Goldstar through one "Mathew Knight" to bring legal action if the amount was not paid. It also contained the advice that a default notice would be lodged with a credit reference body. 28 Mr Hudson's evidence, which I consider to be wholly unreliable on this point, was that Goldstar's procedures were such that a prior order would have been made. No such assertion appears to have been made by "Martin" when he spoke to Mr Hinton after the mistaken order had been placed. He persuaded Mr Hinton that he, Mr Hinton, was responsible for his own error in not identifying the different publications and that approach was confirmed by submissions made in these proceedings. 29 At one point, Mr Hudson also claimed that Goldstar & Co was involved. The assertion was a little difficult to understand, given that written demands required payment to be made to Goldstar.

Further contraventions of Order 1 30 The appendix to the amended statement of charges lists 33 occasions between 9 November 1998 and 18 December 1998 when Goldstar sent invoices, claiming these to have been services ordered, when the form signed had not contained the words: "This is an order for advertising/directory services. If you sign this you enter into a binding contract to pay $……" in breach of Order 1(f)(i). These contraventions are admitted. 31 It is also conceded that there were breaches of Order 1(f)(i) where invoices were sent relating to an order for advertising or directory services, but where the form did not include the cost of the entry or service, which the Order had required to be included before any reliance could be placed upon the order form as having been authorised. These number 4. 32 Apart from some duplicated allegations, which have now been identified and withdrawn, there are also some sixty-four breaches of Order 1(f)(ii), in that the order form sought to be relied upon did not set out the proposed date or dates of publication in respect of the service or entry to be provided.

Contraventions of Order 3 33 With respect to each of the Ageing and Disability Services Department, Bayside Children's Centre, Crew Flagpoles and Door to Door Computers, it is alleged that the circumstances adverted to above also disclose breaches of Order 3. Order 3 prohibited the taking of any step to obtain payment for a service or directory charge unless a written order for the entry or service, signed by an authorised person who clearly requested it, had been made at a time predating any request for confirmation. In the case of the Department, the written order form did not predate the request for confirmation. The additional charge, that a copy of the order was not also provided (Order 3(c)) adds nothing. There was no prior order from the Bayside Children's Centre. The order form signed by Mr Wright on 27 May asked for confirmation. It was submitted that calls made after 15 January 1999 were not made by Goldstar, but Goldstar & Co. Mr Viner signed a confirmation of order on 26 November 1998 without there being any prior order in existence. 34 It is further established, and now admitted, that on each of the 51 occasions referred to in the appendix to the charges, and between 9 November and 18 December 1998, invoices requesting payment were sent unaccompanied by an original order form, contrary to order 3(c).

Goldstar & Co Pty Ltd 35 The respondent Goldstar owed some $10,000 to a company controlled by Mr McMillan, Lineos Pty Ltd, which held a charge over Goldstar's assets. The charge was registered on 6 November 1998, the date of the making of the Order being considered in these proceedings. Goldstar had not kept up with repayments and on 19 December 1998 Mr McMillan caused a demand to be served. It is difficult to understand whether Mr McMillan was attempting to assist Mr Hudson in this and what follows. His relationship with Mr Hudson combined lender with business advisor, although in the latter capacity Mr McMillan was also concerned to protect his company's interests as lender. Whether or not there was also a connection with another member of Mr Hudson's family, as other evidence suggested might be the case, was not made clear. Mr McMillan said that he was becoming increasingly annoyed with Mr Hudson's conduct and Goldstar's lack of compliance with repayment obligations. In January 1999, at the same time as Mr Hudson attended Court in this matter, Goldstar was said by Mr McMillan to have surrendered its assets to his company. What those assets were and how this was effected, was not gone into. The only obvious asset was outstanding debts and the issue in these proceedings, at least with respect to contraventions occurring in January, was whether Goldstar and Mr Hudson were involved in collection of those monies, or whether it was the "new entity". 36 Mr McMillan said that after that time Goldstar ceased trading but that he instructed Mr Hudson that Goldstar ought to continue to recover debts and bank any funds received to "the new company", a reference to Goldstar & Co Pty Ltd. A banking account had been opened by that company for that purpose. The evidence was also that the sole shareholder of this new company was Mr Hudson's mother and the director one P Hurcom, who had been a director of Goldstar and was a friend of Mr McMillan. The purpose of the new company, according to Mr McMillan's evidence, was to receive monies paid to Goldstar and at some later point to recommence the business of Goldstar, so that he could sell it as a going concern. If Mr McMillan recovered more than the amount owed, Mr Hudson was to receive the balance. The involvement of Mr Hudson's mother in this set up was by way of some assurance. Mr McMillan's evidence in these respects differed from that earlier stated in his affidavit, where he had expressed an intention not to continue the business. Mr Hudson did not, however, pay over all sums received to the account of Goldstar & Co Pty Ltd. Mr McMillan believes that some monies were retained by Goldstar. 37 No analysis of the legal relations between Goldstar, Lineos or Goldstar & Co Pty Ltd was undertaken by the respondents, nor in my view would it have likely assisted them. It is apparent from Mr McMillan's evidence, and from evidence relating to the making of the demands throughout January 1999 and early February, that even if the money was to be paid to the new company the recovery process was undertaken by Goldstar, its staff and Mr Hudson, and it was their conduct to which the Orders of 6 November 1998 were directed. 38 The attempt to distance Goldstar, and himself, from demands made in this period is consistent with Mr Hudson's idiosyncratic view of the truth. Mr Hudson attempted, initially, to raise the possibility that "the new company", "with which I am not associated" had made some demands. The impression he sought to create was that the taking of these steps was not connected to him and his company and he knew little about it. It is plain that he knew at all times what the arrangement with Goldstar & Co Pty Ltd was, and that he and Goldstar's staff were to undertake recovery of debts.

Contempt by a Company 39 A finding of contempt requires that the act or omission, which breaches the Court's injunction, be deliberate in the sense that it is not merely casual, accidental or unintentional: A.M.I.E.U. v Mudginberri Station Pty Ltd (1986) 161 CLR 98, 113. The wrongful conduct is then adjudged wilful. The conduct may be constituted by omission. A company which fails to take adequate steps to ensure that whosoever may be involved in keeping the undertakings has a sufficient knowledge and understanding of the obligations imposed by them, will be guilty of contempt: see Re Galvanised Tank Manufacturers' Association's Agreement [1965] 1 WLR 1074, 1090; Madeira v Roggette Pty Ltd [1990] 2 Qd R 357, 364. The finding requires knowledge on the part of the corporation, although it has been said that it is enough if the substance of the prohibition is known: Madeira v Roggette, 366. Much will depend upon the circumstances of the case and the terms of the Order. The standard of proof to be applied with respect to the charge of contempt is proof of the necessary elements beyond a reasonable doubt: Witham v Holloway (1995) 183 CLR 525, 534-5. 40 The argument put for Goldstar was that it, through Mr Hudson, did what it reasonably could to inform staff of their obligations and that it sought proper advice and assistance from Mr McMillan as to what could or could not be done to ensure compliance.

Contempt by a Director 41 Directors who have notice of a Court order (as to which see Madeira v Roggette, 364) are under a duty to take reasonable steps to ensure that it is obeyed, and if they wilfully fail to do so and the Order is breached they may also be held liable for contempt: Attorney-General for Tuvalu v Philatelic Distribution Corporation Ltd [1990] 1 WLR 926, 336. As the judgment there shows, it may be a defence that the director reasonably believed some other director or officer was taking those steps. Omission may also suffice for a finding of contempt since a failure to supervise, investigate, "or wilful blindness" on the part of a director may qualify the conduct as contemptuous: A-G for Tuvalu, 938. 42 Mr Hudson defends these charges principally on the basis that he relied upon Mr McMillan in ascertaining the extent of Goldstar's obligations and that he took all reasonable steps to bring the terms of the Order to the attention of staff. 43 As I have mentioned earlier, Mr Hudson is not charged with contempt by reason of his direct action in contravention of the Order, although this would appear to have been open at least with respect to one matter.

Action undertaken by the Respondents 44 Mr Hudson's evidence implied that uncertainty may have existed with respect to the terms of the Order, at least until 17 November 1998, when a sealed copy of the orders was transmitted to Mr McMillan. The first breach of order the subject of charge was, in any event, after that time on 19 November 1998. I do not accept that a copy of the Orders as pronounced on 6 November 1998, together with reasons for them, was not provided to Mr Hudson, who appeared by himself in Court that morning. The evidence that he did is clear. 45 Why a person in Mr Hudson's position would not then provide a copy of the Order to staff and Mr McMillan is not apparent, save that he perceives some advantage to his position were I to doubt that he had the Order at an early point. He said that after he left Court on 6 November, he returned to the Gold Coast and spoke with Mr McMillan and informed him "of the orders", which I take to be a general reference to the finding of contempt. Mr McMillan said that he was given a copy of some draft orders which had been provided prior to the hearing by the Australian Government Solicitor. I have some doubts about that. That evening Mr McMillan asked for and was given, a copy of the undertakings which Mr Hudson had told him he had breached. The undertakings were, as I have said, in the same terms as the Orders of 6 November 1998. 46 Mr Hudson, at several points in his evidence, sought to suggest that the terms of the orders were difficult to comprehend and that he was unsure about what he was not to do. He did not identify the matters about which he was uncertain. The Orders, when read for the first time, would require a degree of concentration, but they are not unclear. There is nothing to suggest that he took the trouble to further acquaint himself with the terms of the Orders, but rather that he passed this responsibility to Mr McMillan. I say "further" because the undertakings, upon which the Orders were based, had previously been explained to him. One would expect this to have been done, but there was evidence on the point. Mr Hudson gave evidence before Drummond J that he had understood them, his barrister had taken him through them, and that he had remedied the order forms used by Goldstar. 47 I am satisfied that Mr Hudson knew of the Orders made on 6 November 1998 and what was involved in them. 48 Mr Hudson and Mr McMillan appear to have concentrated their endeavours initially upon the order form used by Goldstar. The need to further amend it was discussed on 10 November 1998. The only part of the order form which required consideration was the requirement that it not mislead the recipient as to what would be the effect of signing and returning it, which could only be a reference to Goldstar's practice of referring to the order as a confirmation. The balance of the Orders were specific in their terms, as to what had to be included in the form. Mr McMillan advised Mr Hudson that he thought the stationery complied but that he should seek a legal opinion. Mr McMillan drafted what he thought was a better version and gave it to Mr Hudson. Mr McMillan says that the drafts prepared by him were not adopted by Mr Hudson who later appeared to have simply used the form that he had provided to Mr McMillan. Little turns upon which of these forms was settled upon, for it is clear that on a large number of occasions non-complying forms were used. 49 In his affidavit filed early in the proceedings Mr McMillan's evidence suggested that he then advised Mr Hudson that he would: "age the debtors (sic) ledger, determine the viability of recovery and determine whether the First Respondent was entitled to recover those monies under the Order and notify him." It was not clearly explained how, and to what extent, this process was to satisfy the terms of the injunction, but I take it that what Mr McMillan was looking for was a date after which an amended order form was used, which form was thought reasonably to comply with the undertakings. Nevertheless, it could hardly be a satisfactory approach to compliance with the terms of paragraph (f) of Order 1. Further, that is about as far as Mr McMillan's involvement took the matter. Mr Hudson claimed reliance upon him could only be with respect to the forms used, and did not extend to the steps taken to ensure that staff did not pursue payment unless there was a prior written order. 50 It also appeared from Mr McMillan's evidence at the hearing that his principal concern was not with questions as to compliance with the Orders. He was anxious to ensure that the $10,000 might be recovered. It must have occurred to Mr Hudson that Mr McMillan was not a person well placed to advise him, since he had a particular interest in the recovery of any monies owed to Goldstar and he appears to have been applying some pressure. He may not then have been inclined to caution. Mr Hudson also attempted to paint Mr McMillan as a paid advisor, in an endeavour to elevate his status and the basis for his suggested reliance upon him; Mr McMillan eschewed any such notion. The fee of $600 that Mr Hudson referred to as having paid was, according to Mr McMillan, a basic fee paid by his customers for general advice by way of newsletters. 51 The advice proffered by Mr McMillan could not itself have suggested that he was concerned with the strict terms of the Orders. When asked what procedures Mr Hudson ought to adopt he suggested doing away with the letter of demand because it was "rude". He advised that Mr Hudson ought to comply "wherever possible" by sending back original orders to the customer when seeking payment; but where orders did not exist, staff should ring and confirm whether the customer was nevertheless happy with the work. Mr McMillan's position appears to have been that, so long as the customer was unlikely to complain, strict compliance with the Order did not seem to be necessary. 52 Mr McMillan sought copies of all correspondence and orders relevant to outstanding accounts. These were not supplied to him, as he reminded Mr Hudson sometime after 17 November 1998. That is to say, even if Mr Hudson placed some reliance upon the lists Mr McMillan was to prepare, they were not, to his knowledge, complete. On 17 November 1998, Mr McMillan delivered a list to Goldstar's office which reflected the three groups of files which he called "recoverables", "non-recoverables" and "recents". These files largely followed the general advice outlined above. The description of them did not identify why transactions fell within the prohibitions or what had to be done to correct the transaction before recovery was attempted; other work undertaken by Mr McMillan also failed to address the question of what the Court Orders required to be done when order forms or invoices were sent by staff. The "recoverable" files were those debts which were thought by Mr McMillan to be lawful to recover. The description of them indicates that they comprise only those debts where an amended form had been sent and which "could be collected". The second group were those where acceptance needed to be verified to ensure compliance. The "non-recoverables"were those which fell foul of the orders and where clients "need to be contacted and asked were they satisfied with your publication and artwork provided. If so forward them a statement". If the list was followed it was substantially flawed, as the number of proven breaches demonstrates. 53 Mr McMillan says he had no further contact with Mr Hudson until about 30 November 1998 when he was informed that accounts had been sent to various customers while Mr Hudson had been interstate. When they checked the files together they found that there was one account which should not have gone out, that to Hawthorn. By this time, the evidence discloses that there were many more that had been sent out in breach of the Order, but they made no mention of discovering any of them. Mr McMillan recommended to Mr Hudson that he ring the organisation to tell them to ignore the demand; Mr Hudson earlier informing him that he had tried but could not get through. I do not accept that Mr Hudson took any measures to mitigate the effect of what had occurred or that it concerned him at all until he was contacted by the Australian Government Solicitor. 54 On 30 November 1998, Mr McMillan advised Mr Hudson that he did not believe he had all the necessary information. This does not appear to have been provided. He also said that Mr Hudson attempted to seek further advices from him, but that he refused to assist, as he wished no further involvement. He stressed to Mr Hudson the need to seek legal advice. Whatever be the truth about the stand taken by Mr McMillan it does not appear that Mr Hudson received any further advices from Mr McMillan, and he did not seek any from anyone else. 55 Mr Hudson says that in addition to his conversation with Mr McMillan he called a meeting of staff members on 6 November 1998 and informed them of the orders made that day "as best as I was able", since he did not have a copy of them. He says that he told them that they were to obtain the client files and deliver them to Mr McMillan, who was to determine which accounts were to be pursued and what documentation was to be used. The timing of the meeting is questionable if Mr McMillan's evidence of a first meeting later that evening is accepted. Not much turns upon it, for there is evidence that some such meeting did take place about this time. He told his staff that Mr McMillan had to be given this information and that they were not to chase any accounts without Mr McMillan's say-so and that if they did, they would be fired. 56 Ms Roberts, who was undertaking work experience with Goldstar at that time, and whose evidence I have no reason to substantially doubt, confirms that Mr Hudson did have a conversation with staff and that this occurred over a reasonably lengthy period of 1˝ to 2 hours. He was angry and explained that he had been found guilty of contempt and that a further finding of contempt would be made against him if anything further was sent out on behalf of the company which was not "in accordance with" the order. He explained that the stationery was to be redone; and that no one was to send out any document without the approval of himself or that of Mr McMillan. Mr McMillan was to prepare a list of what could be recovered. Whilst Ms Roberts did not recall the discussion in detail, she recalled Mr Hudson referring to what the Judge had said and what they were not to do, but it was long and she was not concerned to take it in, since it was not related to her tasks. 57 According to Ms Roberts' evidence, Mr Hudson returned from his interstate trip on 19 November 1998. This was two days after Mr McMillan had left the three "piles" and the list with a person in the office. Curiously, it was on this day that Hawthorn was contacted. She said that Mr Hudson went into his office for a short time, emerged in a very angry mood and informed the staff that someone had been sending out documents from the files which Mr McMillan had returned. He threatened them with dismissal if he found out who had sent the documents and then left the office with all the files. This suggests he may have gone to Mr McMillan at this earlier date, not on 30 November 1998. The evidence is not clear but the later date may refer only to the time when the problem with demands made of Hawthorn was identified. I have some doubt that it ever was. Moreover, whilst Mr Hudson was concerned that correspondence had issued on the files, he does not appear to have taken the trouble to identify which of them contravened the order. 58 Some time after his return from Sydney, Mr Hudson gave instructions to the staff about differences between the groups of files. There is nothing to suggest that he had made arrangements for instructions or supervision in his absence. Further, if Mr McMillan was to advise staff about what could be sent, which seems most unlikely, he was not told this and no one in fact contacted him with such an enquiry. Ms Roberts also recalled that there were four or five staff present at the meeting and that Mr Hudson read out the terms of the Order and left a copy pinned up in the office area. She observed that some new staff had commenced work with Goldstar while he had been away. No detail was provided of employee records in the relevant period. In general terms, however, it was said that the business of Goldstar was of such a nature that it had a fairly high turnover of staff. 59 No other evidence was led about steps taken by Mr Hudson. He said, in answer to the question why he did not enlist the aid of a solicitor, that he could not afford to do so. I am unable to accept such assertions by Mr Hudson without other evidence. Monies continued to be earned by Goldstar and not all found their way to Mr McMillan's company. A solicitor would have been helpful to explain the Orders to staff and to check procedures, but they were largely matters within Mr Hudson's knowledge and competence. They required common sense to be applied to a will to comply with the Orders. 60 According to the schedule of charges, a large number of contravening forms were sent in the period to mid-December 1998. On about 15 December, Mr Hudson was informed of the first charge brought. 61 It remains to mention that no other person employed by Goldstar was called to give evidence. Mr Hudson said that he was unaware of their whereabouts. This is difficult to accept in relation to every person and more particularly as regards Nathan Webber. Mr Hudson's evidence was that only he and this person remained collecting debts after 15 December 1998 and through January 1999. It was not explained how this person's whereabouts had so recently become difficult to ascertain. There is, in the end result, no evidence to assist Mr Hudson. The other aspect of this evidence is that all communications after this date were referrable to either of these two persons and that Mr Hudson's level of control ought then to have been greater. Review of Action undertaken by Respondents 62 It was submitted that Goldstar and Mr Hudson had done all that they reasonably could be expected to do to ensure staff complied with the Orders. In this respect, Mr Hudson was at pains to distance himself from the making of demands for payment in the period from 6 November 1998 to early February 1999. This requires an assessment of what Mr Hudson says was done and the number and type of breaches occurring over this period. 63 The starting point must be the discussion with staff on 6 November 1998. If Mr Hudson is to be believed, he could not have conveyed much of worth to staff because he did not have a copy of the Order for another eleven days, and he undertook this task from recollection only. It would follow, from his version of events, that he took no step to obtain a copy and undertook a trip to Sydney without obtaining one and advising staff. I have dealt with the evidence on this point. I can only assume Mr Hudson thought that adding further uncertainty about the terms of the Order might assist him. Mr Hudson had a copy of the order and also the undertakings earlier given, which were in the same terms. When he says he spoke of the Orders as best he could recall, the likelihood is that he advised staff of the terms of the Orders which he had, particularly given Ms Roberts' evidence that he spoke at some length about it. This assists Goldstar and Mr Hudson to this point. The difficulty for them is that little else was done to ensure staff clearly comprehended the prohibitions and that they were supervised to ensure compliance. 64 The Orders required particular wording to be included in Goldstar's order forms, such as to ensure that a recipient knew that an order was, for the first time, being sought when advised of the amount to be paid for the entry and the date of intended publication. Goldstar's staff would then need to address whether a complying form had been used in obtaining any order, when they pursued payment, and also whether there existed a written order in those terms which predated any later written request for "confirmation". Additionally, they needed to ensure that a copy of the order form was sent back with any invoice or demand for payment. 65 Some allowance must be made for differing levels of ability to communicate this information. I accept that it may have taken Mr Hudson some time to do so, as Ms Roberts' evidence suggests. But this was not the first time when Mr Hudson had had to do so and the requirements had been explained to him earlier by his lawyers. If he had been in any doubt about the practices of Goldstar which the Court Orders addressed and what he had to do about them (and I do not accept that he was), he must have appreciated the need to seek further legal assistance. I do not accept the assertion that he was without sufficient funds to do so. The fact that he did not do so is properly explicable by his level of understanding as to what was required. An alternative inference is that he did not care. 66 I have accepted that some explanation of the Order was given. Nothing further was offered to staff in the event of doubt in a particular case. I do not accept that they were told to refer to Mr McMillan, who would not have been appropriate for the task in any event. He was simply to collate the lists of customers who might be pursued and those who should not. No other supervision was exercised. Indeed after 15 December 1998, when Mr Hudson said that only he and Nathan Webber remained, one would have thought this to be a relatively simple exercise. The fact that staff changes occurred regularly does not operate as an excuse, but required Mr Hudson to do more by way of explanation and supervision. 67 The charges relate in the main to invoices and demands for payment with respect to prior "orders". Nevertheless, there were some order forms used in this period to which reference may be made to ascertain how Mr Hudson approached the question of compliance. The order form which Mr Hudson intended staff to use, according to Mr McMillan, complied in most respects with the Order, although it also contained a reference to checking the "proof below" to see whether there were changes or additions required. It did not contain provision for the date of publication. 68 It would not appear, from what followed, that Goldstar's employees were either clear as to their duties, or took them seriously, as a check of correspondence on a regular basis would have disclosed. From as early as 9 November 1998, three days after the Orders in question were made, invoices were sent out with respect to earlier orders for services which had not contained the necessary warning. The threat of dismissal accompanied with an explanation of the Order obviously proved ineffective at the outset, as the number of invoices which were processed in November through to mid-December 1998 shows. In the period when Mr McMillan was said to be working on the files, invoices were being sent out. 69 Mr Hudson then left staff to work in accordance with the lists provided by Mr McMillan during his absence. He did so without ascertaining for himself that they acknowledged the prohibitions and that staff were properly advised of what they were to do in cases where the prior order had not complied. He ought to have been aware that the lists prepared by Mr McMillan were deficient in these respects and could not be relied upon by him or his staff. Perhaps he was more concerned with doing what Mr McMillan required of him. There is nothing to suggest he took any step to implement any procedures, provide supervision or monitor compliance prior to any document being forwarded, which appears to be what was required. If "Nathan Webber" occupied a supervisory position, he was not called to give evidence of anything undertaken. It is the lack of supervision, which was clearly practicable, which counts most strongly against the respondents. 70 A large number of contraventions are established by the sending of invoices and orders in the period from mid-November to a few days after notice was given of these proceedings. They continued even after the matter was first mentioned in Court on 16 December 1998. Supervision of the written communications would have revealed these facts and the extent of non-compliance. If Mr Hudson did not appreciate that it was occurring until his return on 19 November 1998 (although his lack of action here must itself be considered wilful) he says that he was alerted to the breach concerning Hawthorn. It is difficult to see how Mr Hudson and Mr McMillan could have identified only this transaction as problematic; or that having made this one discovery, they did not ascertain all the other breaches. 71 The demand for payment to be made by Hawthorn occurred on the day that Mr Hudson returned to Goldstar's offices, 19 November 1998. The "order" it related to was some five months old and there is nothing to suggest it had been pursued in the period June to November. A number of the other demands made in December were also in this category; for example, the earlier "orders" from the Ageing and Disability Services Department, Door to Door Computers and the Bayside Childrens' Centre. They had been elicited in April and May 1998, but had not been pursued for some months. This may have been because of the existence of the undertakings. Extraordinarily, then, a decision was made to pursue them after the Orders of 6 November 1998 were made. No explanation was offered as to how such a decision was arrived at. Again, if Mr Hudson seeks to shelter behind decisions made by staff, which seems unlikely to have been the case, he must accept responsibility for failure to monitor their communications which would have told him what was occurring. 72 In late November and in December 1998, payments were sought from Crew Flagpoles and ViaGraphix Pty Ltd, where the orders contained no date for publication, contrary to the Order. Simple supervision should have obviated these breaches. On 1 December 1998, the Bayside Children's Centre was subjected to demands, where there had been no prior order and the misleading practice of "confirming" orders entered into. On 15 December 1998, one day prior to the first Court hearing, Door to Door Computers was approached. On 22December, during the adjourned proceedings, the Ageing and Disability Services Department was again contacted with respect to a "confirming order". 73 Breaches continued through January and into February 1999. Mr Eslick was contacted on 5 and 12 January 1999. It is of some importance that Mr Hudson was himself directly involved on 12 January. There seems to me no reason to doubt that it was also he who was involved in the earlier contact, despite his suggestion that Nathan Webber may have shared the name "Peter Hall" on this occasion. According to Mr Hudson, it could only have been he or Nathan Webber communicating with clients in this period which, as I have earlier mentioned, raises the question as to why he could not better supervise client contact. 74 In February, demand was made of Crew Flagpoles, in which reference was made to the Australian Government Solicitor. Threats or demands continued to be made of Door to Door Computers, Bayside Children's Centre and Crew Flagpoles through to 8 February 1999, despite further charges being flagged and the matter being mentioned in Court. There is no suggestion that either Mr Hudson or anyone else on his behalf checked to see if these transactions complied with the Court Orders. It is not possible to accept that he could not ascertain what was going on.

Findings 75 With respect to each of the breaches established I am satisfied to the required standard that Goldstar and Mr Hudson had, at all times, notice of the Orders. The breaches cannot be considered as accidental or unintended. This also follows from the sheer number of them. 76 The liability of both respondents, turns largely upon Mr Hudson's acts and omissions. Judged by his conduct, Goldstar could not be said to have undertaken anything beyond an attempted explanation of the terms of the Orders of 6 November 1998 to its employees, who were then left unsupervised. Nothing Mr McMillan was to undertake could for a moment have been regarded as likely to meet the requirements of the Orders. 77 Mr Hudson is unable to avoid responsibility for his failure to ensure compliance with the Orders by his purported reliance upon Mr McMillan's advices or by what Mr Hudson himself undertook with respect to staff education and monitoring of their debt recovery procedures. It is impossible to accept that he could have believed Mr McMillan's advices to have properly addressed the terms of the injunctions. Mr Hudson was well able to comprehend what was required by the Orders and he had received full explanations of the undertakings upon which they were based at a much earlier time. He had no reason to believe Mr McMillan would attend to the matter properly. 78 It is difficult to understand why Mr Hudson could have done so little, when faced with a clear prospect of serving a term of imprisonment. I am not able to account for Mr Hudson's state of mind. The number of breaches and the period over which they occurred, in the context of a small business, permits of an inference that he turned his face against the requirements of the Orders. Indeed, that would seem to be the only rational explanation available. The conduct, including his own efforts in one case, can hardly be explained by even gross negligence. Penalty 79 This is the second set of charges brought on account of the respondents breaches of undertakings or Orders. The term of imprisonment of two months ordered by Drummond J, but stayed, was doubtless intended to give Mr Hudson an opportunity to rectify the operations of Goldstar and himself to comply with the terms of the Orders. He has failed to take advantage of that opportunity. The sheer number of breaches and their occurrence during these proceedings reflect his lack of willingness to ensure compliance to such an extent that one infers he could not have taken the Orders seriously. It needs hardly be said that penalties must reflect the Court's determination that its Orders be complied with and to deter further such conduct. In the case of each respondent, substantial penalties are in my view therefore demanded. 80 The first respondent will be fined $30,000. Mr Hudson will be committed to prison for a period of six months. The respondents will be ordered to pay the Australian Competition and Consumer Commission's costs of these proceedings. I certify that the preceding eighty (80) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Kiefel.

Associate: Dated: 7 May 1999 Counsel for the Applicant: Mr M L Robertson

Solicitor for the Applicant: Australian Government Solicitor

Solicitor for the First and Second Respondents: Kenneth Stewart & Co

Date of Hearing: 25, 26 February 1999; 10 March 1999

Date of Judgment: 7 May 1999

At a glance

Court

Decision date

Before

Source

Judgment (21 paragraphs)

Parties

Cases Cited (2)