Australian Competition and Consumer Commission v On Clinic Australia Pty Ltd

REASONS FOR JUDGMENT The applicant, the Australian Competition and Consumer Commission ("the ACCC") instituted proceedings in this Court by an application dated 12 August 1996. The three respondents named in the proceedings were Optell Pty Ltd, a company that is now in liquidation, Geoffrey Allan Beckett and Clinton Wade Andela. Initially, it was claimed that Optell and the third respondent, Mr Andela, had engaged in conduct that constituted breaches of several provisions of Pt V of the Trade Practices Act 1974 (Cth) ("the TPA") and that the second respondent, Mr Beckett, had been "directly or indirectly, knowingly concerned in or party to contraventions of the Act by the First and Third Respondents ...": see par 75B(1)(c) of the TPA which provides: "A reference in this Part to a person involved in a contravention of a provision of Part IV, IVA or V shall be read as a reference to a person who: (a) ... (b) ... (c) has been in any way, directly or indirectly, knowingly concerned in, or part to, the contravention; or (d) ..." The nature of the relief that was originally sought against the respondents was based on their admissions that Optell and Mr Andela were carrying on business in partnership and that Mr Beckett was a director of and the principal executive officer of Optell. However, because of the liquidation of Optell, the ACCC decided not to proceed against that company. An amended application was filed without objection on the first day of the trial and thereafter the ACCC proceeded only against Mr Beckett and Mr Andela. However, even though Mr Beckett and Mr Andela are the only respondents, it remains necessary to discuss the activities of Optell. The applicant was represented by Mr Forrest of counsel. Mr Beckett and Mr Andela were both present in Court but without legal representation. By agreement Mr Beckett represented their joint interests. The gravamen of the ACCC's complaints was that Optell and Mr Andela used postal services to distribute unsolicited material to business houses in circumstances that inferred that the addressees were under some form of compulsion to remit "registration fees". The documents that were posted out also solicited addressees to enter their names onto a "Register" or a "Guide". The applicant proceeded against Mr Andela by virtue of the provisions of subs 6(3) of the TPA. That subsection provides: "(3) In addition to the effect that this Act, other than Part X, has as provided by subsection (2), the provisions of Part IVA and of Divisions 1 and 1A of Part V have, by force of this subsection, the effect they would have if: (a) those provisions (other than section 55) were, by express provision, confined in their operation to engaging in conduct to the extent to which the conduct involves the use of postal, telegraphic or telephonic services or takes place in a radio or television broadcast; and (b) a reference in those provisions to a corporation included a reference to a person not being a corporation." In addition to seeking declaratory orders and injunctive relief under s 80 of the TPA, the ACCC also sought orders, pursuant to s 80A of the Act, that Mr Beckett and Mr Andela write those persons who had paid over money, informing them that they were entitled to a refund. The ACCC also sought orders that Mr Beckett and Mr Andela advertise, Australia wide, that such refunds were available. Orders in such terms may be made in appropriate cases under that section. THE NATURE OF THE RESPONDENTS' BUSINESSES The case for the applicant was that Optell and Mr Andela operated two businesses out of an address on the Gold Coast, Queensland. Each business had the same basic structure in that unsolicited mail was sent out to a variety of people urging them to respond in the manner set out in the documents and to pay an appropriate fee. Neither Mr Beckett nor Mr Andela have challenged the allegations that each of the businesses was conducted by a partnership of Optell and Mr Andela and that Mr Beckett was the sole director, a shareholder and the chief executive officer of Optell and I make findings accordingly. Certain basic issues were not in dispute and as a consequence I am able to make the following findings. I find that Optell was a body corporate duly incorporated pursuant to the Corporations Law and that it was formed within the limits of Australia as a trading corporation within the meaning given to that term by the TPA. I further find that the second respondent, Mr Beckett was the "alter ego" of Optell. He was its governing force; what was done by Optell was done or caused to be done by Mr Beckett; what Optell omitted to do was omitted because of Mr Beckett's conduct. As a matter of reality, it was a case of the two men engaging in a series of activities together; as a matter of form, Mr Beckett opted to operate through his company and the case has been presented by the applicant and accepted by Mr Andela and Mr Beckett upon the premise of the partnership to which reference has been made. The first of those businesses was initially called the "Australian Business and Companies Register" ("ABCR" or the "Register"). There is evidence that the name of that business changed as a result of complaints from the Victorian Office of Consumer Affairs about the use of the word "Register". That word was deleted and, in lieu thereof, the word "Guide" was inserted. This occurred sometime in mid 1996 but it is not possible to be more specific. The evidence of Mrs Grogan, to which reference is made later in these reasons, demonstrates that documents using the word "Register" were still being used in May 1996. Some minor changes were also made to the text of the documents that were used by the partnership but, for practical purposes, I find that the "Australian Business and Companies Guide" ("ABCG" or "the Guide") was the changed name for the same business that had earlier been conducted by Optell and Mr Andela under the name of "Australian Business and Companies Register". I do not consider that it is necessary to examine those changes. The second business that was conducted by the partnership was styled "The Certified Quality Assured Companies of Australia" ("CQA"). It also engaged in a saturation mail process. The business canvassed addressees whose names appeared in a "Purchasing Guide"; it also canvassed others to undertake Quality Assurance. Those last mentioned addressees were urged to register with CQA. Upon registration, CQA held out that it would then have a consultant contact the registrant so that the consultant could assess the registrant's quality assurance needs. The applicant has complained that some of the contents of the documents that were distributed by Optell and Mr Andela were clearly wrong and, that without more, the acts of distribution amounted to conduct that breached several provisions of the TPA. THE DOCUMENTS Attached to the statement of claim, and forming part of it, were eleven documents marked "A" to "K". These were samples of the documents that, on the applicant's case, were posted by the respondents to various business houses throughout the country. They were tendered as exhibits in the trial as a bundle: Ex A4. The first document, a letter ("Document "A") that was distributed by the respondents under the name "Australian Business and Companies Register" had in the top left hand corner a map of Australia and within that map there were the prominent letters "A B C". Slightly to the right of centre there appeared four addresses for Brisbane, Melbourne, Sydney and Adelaide and on the far right hand side of the letter at the top under the words "postal address" was a telephone number, facsimile number and a GPO Box number in Melbourne. The body of the letter was as follows: "The Australian Business and Companies Register has been formed and developed under the terms of various Federal, State, Local Government and Private purchasing policies. The Australian Business and Companies Register will supply purchasing departments customer confidence of consistently receiving a product or service from a Registered Business or Company. It is now apparent in todays competitive marketplace that unregistered Businesses and Companies are unscrupulously quoting and conducting their operations not in accordance with the fair trading act. The Australian Business and Companies Register will supply the purchasing sectors with the security and confidence to readily access products and services from Registered Companies and Businesses. We expect over the next 12 months the Australian Business and Companies Register will be an integral link between registered Businesses and Companies. Enclosed is the registration form displaying your current Business or Company registration number. Please check the registration form. If all information is correct, please sign and return. If there are any changes or amendments please annotate and correct the registration form, and return in reply paid envelope. Please note that the Australian Business and Companies Register shall not register a Business or Company unless the proposed name is accompanied with a relevant ACN or BN number, therefore your application for registration of the Business or Company must be signed and lodged with the Australian Business and Companies Register in reasonable time to allow registration to be effected during the period of the reservation. Please quote the reference number shown on the registration form in all enquiries and correspondence with the Australian Business and Companies Register relating to this matter." The form, Document "B" that accompanied the letter, "Document "A"", also contained the map of Australia, the letters "ABC" and the various addresses in identical terms to those appearing in the letter. It also carried the title "Australian Business and Companies Register". Underneath this printed material, in the top left section of the documents, there was a shaded oblong area or "box" where the particulars of the name and address of the addressee were inserted. Underneath that box there was typed in bold lettering "Application for Australian Business and Companies Register". That type face was larger than all other printing other than the name of the business. To the right, there was an entry "A.B.C. Ref No:" after which a number was inserted. This was followed by an entry "A.B.C. Registration Fee $186". Above those entries was a bar code and beneath them was an entry: "Form 912". A thick line was then scored across the page and underneath that line there was provision for the entry of particulars that were personal to the addressee. Thus the name of an addressee was inserted by the respondents in a box appearing opposite the entry "Company/Business Name". The address was also typed in as was the addressee's telephone number. But boxes for its facsimile number, its mobile number and for its "number of employees" were left vacant. The box for "Description of Products/Services" was left vacant but Optell and Mr Andela inserted details of the addressee's Australian Standard Industry Code ("ASIC") Number. Towards the bottom of the form the following entry appeared: "This registration form must be signed by a current director, secretary or principal executive officer of the company or business. I declare that the information given on this registration form is complete and correct at the date of signing." Thereafter there was provision for the name of the declarant to be printed, for his or her capacity to be inserted, and finally provision for a signature and the date. Document "C" was probably the most abrasive of the documents that were distributed by Optell and Mr Andela. Like Documents "A" and "B", it was on the letterhead of Australian Business and Companies Register and it carried the same addresses and telephone numbers. It directed the addressee in the following terms: "On the Registration Form enclosed, please insert the relevant company or business details applicable. Once your business or company Registration Form has been completed and returned, the Department of the Australian Business and Companies Register will issue you with a completed Registration Form for your records." Mr Beckett was quick to volunteer during the course of his cross-examination that only about twenty such letters were posted before he intervened and changed the letter by deleting the reference to the words "Department of Australian Business and Companies Register." I propose to consider the case presented by ACCC without reference to Document "C". The use of the word "Department" connotes a connection with Government but if, as Mr Beckett said, only twenty such letters were distributed, it might be unfair to assess the respondents' conduct on such a small distribution. Document "D" was an invoice on the letterhead of Australian Business and Companies Register. It contained in the following entry; "12 Month Registration Fee in the Australian Business and Companies Register $186.00." There was then an entry: "nett 14 days" and the figure of $186.00 appeared again. Underneath that entry there was printed the following advice: "The Australian Business and Companies Register is distributed to Federal, State and Local Government purchasing authorities. The purchasing sectors of all Registered Business and Companies with the Australian Business and Companies Register and will soon be accessible on the Internet (sic)." Following this endorsement there is a perforation and below the perforation in bold type are the words "Remittance Advice" followed by a series of "boxes" in which the respondents had typed the invoice number, its date, the company name, the amount payable and the due date. The lay-out of the document, its contents and, in particular, its reference to a sum of money and a due date for payment, all point to the conclusion that the recipient was obliged to pay the registration fee. In the top left hand corner of the Remittance Advice appeared the statement: "No claim is made to this charge." This entry also appeared in Document "K" to which reference is made hereafter. I will discuss the effect of this entry at that stage. Documents "E" and "F" were the standard letter and application form that were issued under the name of Australian Business and Consumer Guide; they are the equivalent of Documents "A" and "B" and need not be further considered. Document "G" was the circular letter that was distributed by Optell and Mr Andela on the letterhead of CQA or "The Certified Quality Assured Companies of Australia". Mr Andela, in an affidavit that he swore on 23 August 1996, exhibited copies of the documents that he claimed were then being used by the Western Australian and Queensland governments setting out their respective quality assurance policies. Thus, there appears in the Western Australian guidelines an advice that since 1 August 1992, "a public authority shall only award a contract for the supply of goods and services to a supplier meeting the type of quality assurance specified in the tender or quotation document." Later there appeared the following statement: "Guidelines have been prepared to assist government purchasing officers and suppliers to apply and understand the intent of the quality assurance policy, which is to ensure that suppliers achieve specified standards of quality in the provision of goods and services to public authorities." It is not difficult to accept therefore that in 1996 there might have been business houses who were keen to do business with Government departments but who did not possess the necessary quality assurance accreditation. The letter, Document "G", had a map of Australia in its top left hand corner and the same addresses and telephone details as appeared in the ABCR letter, Document "A". The body of the CQA letter, Document "G" was in the following terms: "The Purchasing Department has been advised that your business is available to supply your products and/or services to the Queensland Government. After 1st January 1996, if your business or company wishes to supply a product or service to the Queensland Government you must undertake a Certified Quality Assurance System that meets with the Queensland Government's buyers specified requirements, upon assessing the risk associated with the purchase. All Purchasing Officers and Departments within the Queensland Government under the terms of the State Purchasing Policy, must refer to a business or companies Quality Assurance Certification details before purchasing a product or service. The Queensland Government spends approximately 4.7 billion dollars on products and services from private businesses and companies. To benefit from this Queensland Government expenditure, you should implement a Quality Assurance Certification program now. Not only will a Quality Assurance System help your business obtain Government work, private businesses and companies will be encouraged to use products and services from other Quality Assured Clients. Quality Assurance is just a common sense method of assuring that the customer's expectations are met. For suppliers it means consistent production and delivery of a product or service, and for the customer confidence of consistency receiving a product or service that meets their specification. Upon receipt of your Quality Assurance Assessment Application, an authorised representative from the Certified Quality Assured Companies of Australia (CQA) will assist with your Quality Assurance Program." The form that accompanied the CQA letter was Document "H". In most respects, it was similar to Document "B" and Document "F", save that it was described as a "Quality Assurance Assessment Application Form" and the registration fee was $97.50. It was said to be Form 914. Like its counterparts, Documents "B" and "F", it had typed in it the name of the addressee, its address, telephone number and its ASIC number. One material difference when comparing the lay-out of Document "H" with that of Documents "B" and "F" is that the following entry appears at the end of Document "H": "Lodgment: This form should be lodged with the office of the Certified Quality Assured Companies of Australia (CQA) together with the Application Fee in the reply paid envelope enclosed. After your application form has been received, a representative from the CQA will contact you to arrange your Quality Assurance Certification. Telephone enquiries regarding your Quality Assurance Certification should be directed to the CQA on 1800 - 674 166 toll-free. This Quality Assurance Assessment Application form must be signed by a current director, secretary, principal executive officer, owner, or proprietor of the company or business when registering for Quality Assurance Assessment. I declare that the information given on this registration form is complete and correct at the date of signing." Document "I" was a letter that Optell and Mr Andela circulated to business houses extolling the virtues of a "purchasing guide", including the advice that it will contain "all relative Quality Assurance particulars as displayed on the registration form (enclosed)". The letter claimed that "the Certified Quality Assured Companies of Australia Purchasing Guide is an essential reference ... " thereby holding out, as I find, that such a purchasing guide existed. The accompanying "Registration Form", Document "J", carrying a sub-title: "Quality Assurance Certification and Company Registration", contained details of the addressee's name, its "Company Quality Assurance Registration" number and its "Certification Body". In the bottom right hand corner there appeared the words and figures "Registration Fee $108". In addition to these documents, CQA issued an unsolicited "Renewal Invoice", Document "K", in the sum of $108 for "12 months registration fee for the Certified Quality Assured Companies of Australia." Document "K" also contained a similar entry to that which appeared in the ABCR invoice , Document "D", "No Claim is made to this charge." The substance of those words appear in par 64(5)(e) of the TPA; that is the section dealing with the subject of an assertion to a right to payment for unsolicited goods or services or for making an entry in a directory. Subsection (5) of that section states that a corporation shall be taken to assert a right to a payment for (inter alia) making an entry in a directory if the corporation does one of several things thereafter listed including sending an invoice setting out the charge for making the entry "and not stating as prominently (or more prominently) that no claim is made to the payment ...". The presence of the endorsement in Documents "D" and "K" warrants these comments. First, it shows that the author of the documents had some knowledge of the provisions of the TPA; Mr Andela, at first, claimed in evidence that the entry was intended to mean that a consumer could not make a claim against his business. In making that statement, I find that he was deliberately attempting to distance himself from any knowledge of the provisions of the TPA. I did not believe him. I am quite satisfied that he knew the important significance of these words. The entry refutes any suggestion that these documents were unwittingly prepared, not knowing the provisions of the relevant legislation. On the other hand, the author lacked care and attention to detail. The words "No claim is made to this charge" appearing in Document "D" and Document "K" is less prominent than the remainder of the printed material. ACCC has therefore sought and is entitled to orders that these documents have breached under s 64 of the TPA. CONSUMER WITNESSES The first witness for the applicant was Mrs Mandy Grogan, a solicitor employed by Mayne Nickless Limited. Mayne Nickless Limited is a corporation that is engaged in the provision of transport services, logistics services and health care services throughout Australia and overseas. Armaguard is a business division of Mayne Nickless Limited; it engages in the provision of secure transportation and the storage of cash, bullion and other items of value throughout Australia and overseas. Mrs Grogan's duties as a solicitor include the responsibility for the provision of legal advice to Mayne Nickless Limited. In her affidavit dated 22 August 1997, she said that letters were received in the ordinary course of the post by Mayne Nickless Limited and Armaguard on or about 10 May 1996. The contents of each envelope included a letter and a form, each with the letterhead of "Australian Business and Companies Register" ("ABCR"). She exhibited to her affidavit a copy of the letter and a copy of the form that were respectively received by Mayne Nickless and Armaguard. Their contents are consistent with the contents of Document "A" and Document "B". Mrs Grogan deposed in these terms: "When I read through the letter I initially formed an impression that ABCR may be in some way affiliated with a government organisation. I formed this impression after reading the ABCR letter and the ABCR form for the first time. In particular, the references to Federal, State and Local Government purchasing policies and the need for the registration application to be accompanied with a relevant ACN or BN." Mrs Grogan also stated in her affidavit that each letter suggested that the addressee should pay to ABCR $186 to record its registration details with that business house. However, she acknowledged in cross-examination that the letter did not expressly require or demand payment. Mrs Grogan was not persuaded to respond to the letter or to the form. She said that she became suspicious and that she rang the toll-free telephone number that appeared in the form. She was not satisfied with the results of her inquiries and as a consequence, she reported the matter to the Australian Securities Commission. The next witness for the applicant was Mr Peter McMeikin. Mr McMeikin was a driver-operator and director of P & L Concrete Pumping Pty Ltd. That company was the proprietor of a business known as "Yarra Valley Concrete Pumping". Mr McMeikin said that in about mid May 1996 he received a letter in the mail. It was from the Australian Business and Companies Guide. It would seem from other references in his affidavit that the word "Guide" was an error and that it should have been "Register" but nothing turns on that mistake. The envelope contained, in addition to the letter, an application form. Mr McMeikin has destroyed the letter that he received but he attached to his affidavit and identified a letter and a form which he said were identical to the letter and the form that he had received. They are consistent with Document "A" and Document "B". The letter and the application form that were identified by Mr McMeikin were the same as those identified by Mrs Grogan. It was Mr McMeikin's evidence that he thought that the letter had come from some government department as it looked "official". He also deposed that the contents of the covering letter "convinced me most that ABCR must be a government body." In par 9 of his affidavit that was sworn on 8 August 1996 he said: "The cover letter stated that "if all the information is correct, please sign and return." There was no mention of a need to make a payment in the cover letter, simply a request to clarify that the details were correct. The cover letter stated that I was registered, clearly saying that I had a current registration number. As such, I believed that the so called "Application form" was, in my case simply a means by which to update the details of my already existent registration and that as such I was not required to make any payment but simply to provide the Government with more information. As such, I filled in the forms and sent them off, simply complying with what I believed was an official request for information from the government." Notwithstanding that Mr McMeikin returned the application form, he did not enclose a cheque. Indeed he acknowledged in cross-examination that he had not noticed the provision for payment of an application fee in the form when he read it. However, about three weeks after sending off the application form, he received another document from ABCR with the same map, the same addresses and the same postal address. This document was addressed to his company and entitled "Invoice Details". There was then a claim for a fee of $186. Mr McMeikin rang his accountant and, as a result of what his accountant informed him, Mr McMeikin wrote to ABCR rejecting any liability for payment. Not long after that however, he received yet another invoice similar to the first one but with an attachment which he described as "an overdue account sticker". He attempted thereafter to ring somebody at ABCR but he was unable to speak with anybody in authority. Ultimately he contacted officers of the ACCC. Mrs Margaret McGrath of Beaudesert, Queensland also gave evidence on behalf of the applicant. Mrs McGrath was a director and the secretary of Queensland Cryogenics Pty Ltd, a company that supplied liquid nitrogen and other technical products to various Queensland Government Departments. In June 1996 Mrs McGrath said that she received a letter addressed to her company enclosing a letter and a form both of which were entitled "Certified Quality Assured Companies of Australia". The letter was annexed to Mrs McGrath's affidavit which was sworn for the purpose of this proceeding on 27 August 1997. In its top left hand corner it had a map of Australia and within the map were the bold letters "CQA". Superimposed over the map was a heavy mark in the shape of a "tick". On the right hand side of the letter at the top were two addresses in Queensland and Victoria and on the far right at the top were details of telephone and facsimile facilities with a postal address in Queensland. The body of the letter was as follows: "Is your Business currently supplying products and/or services to the Queensland Government? Would your Business like to supply its' products and/or services to the Queensland Government? After 1st January 1996 in accordance with the State Government Purchasing Policy, if your Business or Company wishes to supply a product or service to the Queensland Government you must implement a Quality Assurance System that meets with the Queensland Government's buyers' specified purchasing requirements. All Purchasing Officers and Departments within the Queensland Government under the terms of the current State Purchasing Policy, must refer to a business or companie's Quality Assurance Certification details before purchasing a product or service. The Queensland Government spends approximately 4.7 billion dollars per annum on products and services from private businesses and companies. To benefit from this Queensland Government expenditure, you should implement a Quality Assurance Certification program now. Not only will a Quality Assurance System help your business obtain Government and private contracts, Quality Assurance will also provide an internal management system that will increase productivity, competitiveness and overall profit. In addition businesses and companies who have been accredited with Quality Assurance are encouraged to cross trade with other Quality Assured Certified suppliers. Quality Assurance is just a common sense method of assuring that the customer's expectations are met. For suppliers Quality Assurance means consistent production and delivery of a product or service, and for the customer, confidence of consistently receiving a product or service that meets their specification. Upon receipt of your Quality Assurance Assessment Application (Form 914), the Certified Quality Assured Companies of Australia (CQA) will have a Quality Assurance Consultant, authorised by The Certified Quality Assurance Companies of Australia contact you and assist your business with your Quality Assurance Program. Please note, if your business is currently implementing a Quality Assurance Program, please disregard the Quality Assurance Assessment Application Form (Form 914). However if your business has applied for Quality Assurance implementation but you have not been contacted, the CQA will coordinate with a Quality Assurance Assessment Consultant to contact you immediately your Quality Assurance Application Assessment form (Form 914) is returned." A comparison of this letter with Document "G" shows that one is a variation of the other but that both carry the same message. The accompanying form was also addressed to Mrs McGrath's company and in its right hand margin there was an entry "QA Reference No:" and alongside that appeared the letters "56504". Underneath that was an entry, "QA Application Fee:" and alongside that, in an oblong box, was the amount "$97.50". The form called upon the addressee to fill in the ACN or BN number and the number of employees employed in the business. It also contained provision for the insertion of the Australian Standard Industry code number but that had already been inserted in the form when it was received by Mrs McGrath. In her accompanying affidavit Mrs McGrath said that she thought that the letter and the form meant that "in order to do business with the Queensland Government I had to obtain quality assurance accreditation and that the way to gain such accreditation was to complete the form and pay the fee of $97.50." She then proceeded to set out in the balance of her affidavit the reasons why she formed that opinion. First, she referred to that section of the letter which said: "... in accordance with State Government Purchasing Policy, if your Business or Company wishes to supply a product or service to the Queensland Government you must implement a Quality Assurance System that meets with the Queensland Government's buyers' specified purchasing requirements." Next she drew attention to the title of the author of the letter. He was described as "Quality Assurance Co-ordinator, Tender Opportunities Division". Thirdly, she said that she formed the impression that the documents had their origins in a Queensland Government Department because of the reference in the form to "Form 914". She added "in my experience private sector organisations do not use such number references ...". She next noted reference to the bar code in the top right hand corner of the form and the reference to the Australian Standard Industry code number. All these factors lead her to the belief that the letter and the form had emanated from a Queensland Government Department. Accordingly on 4 July 1996 she made out a cheque for the sum of $97.50 in favour of "CQA" and posted it to the post office box number in Brisbane appearing in the top right hand corner of the letter. Approximately two months past without her hearing anything; she therefore rang the toll free number appearing in the top right hand corner of the CQA letter. She was told that a representative would call "when next in the area". Another two months went by without any form of contact and Mrs McGrath rang the toll free number again. This was on 7 November 1996. On this occasion she received a recorded message in words to the effect, "Please check the number before dialling again". Upon checking telephone directories she was informed that there was no number listed for Certified Quality Assured Companies of Australia. As a result of this she rang Consumer Affairs who referred her to the ACCC. Under cross-examination by Mr Beckett, Mrs McGrath acknowledged that nowhere in the letter or in the form did it explicitly state that the documents emanated from a Queensland Government Department. She responded however by saying that this was the implication that the documents gave. The last of the "consumer witnesses" to give evidence on behalf of the applicant was Mr Terry Sharman of Sharmans Video Repairs Pty Ltd. He said that he received, on about 12 June 1996, a letter addressed to his business; it contained a letter and application form from the Certified Quality Assured Companies of Australia. In comparing the letter and form that he received with those received by Mrs McGrath there are changes which might be described as editorial changes. However, the substance is the same. In particular Mr Sharman noted the passage in the letter that he received which read: "After 1 January 1996, if your business or company wishes to supply a product or service to the Queensland Government you must undertake a Certified Quality Assurance System that meets with the Queensland Government's buyers specified requirements, upon assessing the risk associated with the purchase." Unlike Mrs McGrath, Mr Sharman did not consider that CQA was associated with the government nor did he believe that there was any compulsion upon him to remit a cheque. He did, however, believe that if his company wanted to receive quality assurance he would have to complete the application form and remit a cheque for $97.50. He deposed in his affidavit that was sworn on 27 August 1997 that he formed such an impression "because of the general language and layout of the CQA letter and the CQA form". Eventually Mr Sharman did send a cheque for $97.50 to the address in Brisbane as shown in the CQA letter but he never received any contact or response from CQA. The evidence in the trial did not establish the extent of the activities of either of the businesses. For example, there was material suggesting that up to seven people had been employed in one or other of the businesses during the first half of 1996. However, no wages' or employees' records could be found by investigating officers of the ACCC to corroborate such information. It was put to Messrs Andela and Beckett during the course of cross-examination that these seven names were fictitious and that fictitious names had been used so that Messrs Andela's and Beckett's names would not be publicised. There is no evidence to support these allegations and the respondents denied them. The only finding that I can make is to the effect that Optell and Messrs Andela and Beckett failed to maintain proper records of their employees. Two items of evidence can however be mentioned for they give some idea of the size of the activities that were conducted. It was agreed that the partnership received in excess of $100,00 by way of registration fees from business houses. There was also evidence that in one saturation mailing exercise about 22,000 letters were posted to addressees in Western Australia and that on another occasion there was a mailing of 70,000 letters. These two items of evidence, without more, show that the activities that were conducted by the partnership were substantial. THE DEFENCE Mr Andela and Mr Beckett denied that they, or either of them, have committed any breach of any provision of the TPA. They maintained that their activities did no more than constitute a mailing process in which they solicited addressees to join one or other of their Registers or Guides. They submitted that they could stand by the contents of their documents in that there were no statements in them that were false or misleading or deceptive. They further submitted that the inferences that the ACCC sought to draw could not reasonably be drawn. Finally, they submitted that, insofar as the documents contained statements that were or might be construed as future representations, there were reasonable grounds for making such representations. For example, each of them acknowledged that at the time when they were mailing out their correspondence to addressees, neither the Register nor the Guide existed. However, they did say that plans were afoot for publication and Mr Beckett gave evidence (which I accept) that in the past he had been instrumental in producing like publications. However, apart from that historical statement, the respondents advanced no evidence to satisfy the onus that s 51A of the TPA places on them concerning representations with respect to future matters. I will return to this subject when considering my further findings. AUSTRALIAN BUSINESS AND COMPANIES REGISTER AUSTRALIAN BUSINESS AND COMPANIES GUIDE I turn first to the allegations that have been made against Messrs Andela and Beckett with respect to the contents of the documents that were distributed first under the name of the Australian Business and Companies Register and later under the name of the Australian Business and Companies Guide. Most, but not all, of these allegations are common to both sets of documents. GOVERNMENT AFFILIATION It was alleged that the documents that were distributed under both names contained representations in connection with the supply of the Register or the Guide, (as the case may be), that the ABCR (and later that the ABCG) was a government office or was affiliated with government. It is true, as Mr Beckett emphasised, both in evidence and in submissions, that there is no passage in either the Register or Guide that states, openly and unequivocally, that the Register or the Guide emanated from a government office or possessed some government affiliation. But such a submission is one that seeks to rely on form whilst ignoring substance. The proper way to test this allegation is to commence by viewing the contents of the documents objectively and by asking whether the inference of government involvement is one that would be reasonably open to a person of average intelligence. In the course of performing that exercise it will be proper to have regard to the individual who has acted as a result of reading the document and to all circumstances surrounding the document, including the identity of the person who sent it, the person who received it, the object of the document and so on. It is not however, necessary to engage in a detailed examination of the language that was used in the documents for the purpose of seeing where there is, or may be, an innocent interpretation to the words used. As Tamberlin J said in Australian Competition and Consumer Commission v On Clinic Australia Pty Ltd (1996) 18 ATPR ¶41-517 at 42,457: "Language which can reasonably suggest either a true proposition or a false one can come within the ambit of misleading conduct." Northrop J has said in Keeton v Medical Benefits Fund of Australia Ltd (1977) 14 ALR 77 at 81 that a statement will be misleading "if it would lead one ordinary member of the public, likely to read the statement or be influenced by it, into error." Hill J referred to the decision of Northrop J in Keeton's case in Tobacco Institute of Australia Ltd v Australian Federation of Consumer Organizations (1992) 38 FCR 1 at 50 saying: "... the advertisement will be misleading or likely to mislead or deceive if any reasonable interpretation of it would lead a member of the class, who can be expected to read it, into error." But, as Deane and Fitzgerald JJ said in Taco Company of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 177 at 199: "The question whether particular conduct of which complaint is made is misleading or deceptive or likely to mislead or deceive is, in the ordinary case, a question of fact to be answered in the context of the evidence as to the alleged conduct and as to relevant surrounding facts and circumstances." Later, on the following page, their Honours said: "The nature of the erroneous assumption which must be made before conduct can mislead or deceive will be a relevant, and sometimes decisive, factor in determining the factual question whether conduct should properly be categorized as misleading or deceptive or as likely to mislead or deceive. Beyond that, generalizations are themselves liable to be misleading or deceptive." In Brown v Jam Factory Pty Ltd (1981) 53 FLR 340 Fox J discussed the same subjects saying at 349: "... but it is not precisely correct to apply the concept of the hypothetical reasonable man. One looks to the audience, or the relevant part of it, and, eccentricities and absurdities aside, asks whether the conduct complained of was to them misleading or deceptive; but the question is not simply whether they (or he) were (or was) misled. Whether the conduct was misleading or deceptive is a matter for the court (McWilliam's Wines Pty. Ltd. v. McDonald's System of Australia Pty. Ltd. (1980) 49 F.L.R. 455." Idiosyncratic evidence from various witnesses as to how they reacted upon reading the documents is not be ignored but it does not determine the issue. It is still necessary for the Court to make an objective assessment for itself. In the course of making that assessment, it will be open to the Court to have regard to the views of such witnesses and to make such use of them as is appropriate in the particular circumstances of each case. The role of the Court is not to supplant the views and reactions of the members of the public who have responded to the challenged conduct. Rather, it is to assess those views and reactions so as to be satisfied that they are reasonable. After performing that exercise, I have come to the conclusion that a fair and reasonable reading of the relevant documents would justify a person of average intelligence forming an opinion that the organisation that had written him or her had some association with a government body. I have come to this conclusion for a variety of reasons; they are as follows: · The first paragraph of the letters (Documents "A" and "E" respectively) contain an immediate reference to "Federal, State, Local Government & Private" purchasing policies. Even though the word "Private" has been inserted, a reader has been immediately introduced to the concept of "Government". · The use in the third paragraph of the word "unscrupulously" fosters the feeling of an unstated assertion that there is a need to regulate. · The engendered belief that the addressee's business is already recorded by the sender of the information. This comes from the printed reference number. · The strongest link with Government then comes in the seventh paragraph with the statement: "Please note that the Australian Business and Companies Register/Guide shall not register a Business or Company unless the proposed name is accompanied with a relevant ACN or BN number, therefore your application for registration of the Business or Company must be signed..." When this statement is studied, it is quite appropriate to observe that it does not contain words of compulsion. But, absent such a study, it creates an impression that one is required to act in a certain manner if one's business is to proceed with "security and confidence". I find the effect of this paragraph more insidious because of the devious use of the English language. · The knowledge that the sender of the communication already has about the addressee and the business of the addressee. · There is the overall impression that the letters and their accompanying forms create. There is the map of Australia, the officious title of the author of the letter - "Business and Companies Co-ordinator" - the fact that much material that is personal to the addressee has already been included in the application form, the use of a Bar code and a Form number - 912 - both of which suggest an organisation that is large and powerful. And, finally, there is the requirement that the addressee disclose the number of his or her employees. The need to know details of one's employees is more often required by Government than private enterprise. Mr Beckett said in evidence that the bar code was used to assist in establishing which form had been posted out to a person who was making a telephone inquiry. I do not accept that explanation. He also acknowledged that the businesses only had two documents that carried a number: that is, Form 912 and Form 914. He failed to offer any satisfactory explanation why he chose to use such high numbers. I find that it was a ploy to give readers the impression that they were dealing with a large organisation. None of the above matters, in isolation, might justify the adverse inference that the ACCC seeks the Court to draw. But the totality of them presents a very different picture and warrants a finding that Optell and Mr Andela engaged in conduct, in trade or commerce, that was misleading or deceptive or was likely to mislead or deceive, contrary to the provisions of s 52 of the TPA. It also justifies the further finding that Mr Beckett was directly knowingly concerned in that contravention. BUSINESS ADDRESSES The next complaint that must be addressed is the inclusion at the top of the letterheads of business addresses in Brisbane, Sydney, Melbourne and Adelaide. The ACCC alleged that Optell and Mr Andela held out that the Register and the Guide "had a presence at offices at each" of the nominated addresses, when in fact, neither of them had any such presence. It transpired that there is a business house that was named in the evidence as "Servcorp". Apparently, Servcorp carries on a legitimate business in those cities (and presumably others) offering various facilities for a variety of business houses who do not have their own business premises in those cities. I see nothing wrong in such an activity. I do not consider that there was any impropriety that would amount to a breach of a provision of the TPA by using Servcorp's accommodation addresses. THE REQUIREMENT TO REGISTER The ACCC has alleged that the letters and application forms that were sent out on behalf of the Register and later on behalf of the Guide had the effect of conveying to the addressee the message that "the addressee was required to register (either with the ABCR or the ABCG as the case may be) for inclusion in the Register or the Guide". For the reasons that I have set out when discussing the issue of "Government Affiliation" I am satisfied that this complaint has been made out. It is true that no such words of compulsion appear in the documents; rather it is the impression which the documents create. In my opinion the author of the document was very careful to ensure that there was no positive assertion of the requirement to pay but the clever positioning of the registration fee and the other material is capable of giving that impression. I am satisfied that the author of the letters and the forms deliberately set out to create this impression. This finding is supported by the subsequent conduct in issuing an invoice (see Document "D"). Reliance can also be placed on the contents of Documents "J" and "K". Both of these related to CQA but that business was owned and operated by the same parties. Document "J", containing as it did, the word "Renewal" and the words and figures "Registration Fee $108.00" and Document "K" entitled "Renewal Invoice" for an amount of $108 both present as documents that would convey to the addressee the requirement that he or she had to pay over a registration fee of $108. THE EXISTENCE OF A REGISTER Document "A" states that "The Australian Business and Companies Register has been formed and developed ..." Document "E" likewise states that "The Australian Business and Companies Guide has been formed and developed ...". It would have been so easy to have written that the Register and the Guide "are in the course of being formed" or "are about to be formed" or "will be formed". But to say that it "has been formed" is to assert that it is presently in existence - and that was false and knowingly false. Neither the Register nor the Guide existed. THE DISTRIBUTION OF THE REGISTER In subpar 5(e) of the statement of claim it was alleged that Optell and Mr Andela despatched documents that contained a representation in connection with the supply of the Register: "(e) that the Register would be supplied to Federal, State and Local Government purchasing (departments);" A like allegation appears in subpar 7(e) with respect to the Guide. I do not think that these allegations have been made out. There are references in Documents "A" and "E" to the effect that the Register and the Guide "will supply purchasing departments" and "will supply purchasing sectors" with customer confidence and with security and confidence. But these statements are merely extolling the alleged values of the Register and the Guide. That differs from the allegations in the statement of claim that the Register and the Guide "would be supplied" to various bodies. In par 5 of the statement of claim there are two additional allegations of false representations with respect to the Register that do not appear in par 7 dealing with the Guide. They are as follows: "(f) that the Register is distributed to Federal, State and Local Government purchasing authorities; (g) that the Register is distributed to the purchasing departments of all businesses (sic) and companies registered with ABCR" The ACCC has not sought to make out this allegation against the Guide. As I have earlier stated, in Document "D" (the invoice) there is a positive statement in these terms: "The Australian Business and Companies Register is distributed to Federal, State and Local Government purchasing authorities. The purchasing sectors of all Registered Business and Companies with the Australian Business and Companies Register and will soon be accessible on the Internet." That is self-evidently false. Substantially the same passage appears in Document "K" and its effect is addressed when discussing the CQA documents. THE INTERNET The final complaint at this stage arises out of the following statement that appears in Document "D", (the invoice) for the Register. A similar statement does not appear in the documents that deal with the Guide: "The purchasing sectors of all Registered Business and Companies with the Australian Business and Companies Register and will soon be accessible on the Internet (sic)." Both Mr Beckett and Mr Andela were cross-examined carefully on this topic. Their evidence was not impressive. The most that could be said was that they had spoken to a student, aged 17, whom they regarded as having the necessary expertise in computers and in accessing the Internet. Even if one were to accept their evidence on this subject at its highest level, it would amount to no more than some general introductory discussions with a person of unproven ability. Those discussions would not, under any circumstances, justify that statement that has been quoted above. THE CERTIFIED QUALITY ASSURED COMPANIES OF AUSTRALIA I turn now to the allegations that have been made against Messrs Andela and Beckett with respect to the contents of the documents that were distributed under the name of "The Certified Quality Assured Companies of Australia". That material comprises the two letters Documents "G" and "I", the "Quality Assurance Assessment Application Form", Document "H", the "Registration Form (Renewal)" being Document "J" and finally the "Renewal Invoice" Document "K". For the reasons that I have stated when discussing the allegations against ABCR and ABCG, I am satisfied that the applicant has made out a case that the abovementioned documents held out that CQA was a Government Office or was affiliated with government. On the other hand, and for the same reasons as earlier stated, I do not consider that fault can be found by reference to the serviced addresses supplied by Servcorp. I have also come to the conclusion that the CQA documents are capable of being read by a person of ordinary intelligence as meaning that the addressee was required by law to register with CQA for quality assurance and to pay a registration fee. FUTURE REPRESENTATION The contents of the documents together with the evidence of Mrs McGrath, and to a lesser extent, Mr Sharman, all lead to the obvious conclusion that Optell and Mr Andela made a representation with respect to a future matter to the effect that, upon payment of the application fee, a representative of CQA would assist the addressee with the addressee's Quality Assurance Certification Program. Mr Andela and Mr Beckett, during the course of their evidence, had every opportunity to justify that expectation but they failed to do so. The respondents carry the burden pursuant to s 51A(2) of the TPA of proving to the Court's satisfaction, on the balance of probabilities, that they had reasonable grounds for making the future representations. They have failed to do so. THE PURCHASING GUIDE Reference has already been made to Document "I", the letter that Optell and Mr Andela circulated to business houses extolling the virtues of a Purchasing Guide. The contents of that letter are set out below: "Under the terms of various State, Local and Federal Government Purchasing Policies, Quality Assurance requirements must be addressed when purchasing goods and services. The Certified Quality Assured Companies of Australia purchasing guide is an essential reference to determining levels of Quality Assurance. Purchasing officers Local, State, Federal and Private Businesses can refer to the guide if they have a company or a specific product or service required and search for the relevant Quality Assured Certification details. The Certified Quality Assured Companies of Australia Purchasing Guide will contain all relative Quality Assurance particulars as displayed on the registration form (enclosed). If there are any further details about your Quality Assurance Certification or company details that our department should be made aware of, simply amend the registration form and return in the enclosed reply paid envelope. The Certified Quality Assured Companies of Australia Purchasing Guide will be distributed to Local, State and Federal Government purchasing authorities. The purchasing sectors of Australia's top companies and registered members of the Certified Quality Assured Companies of Australia and will soon be accessible on the Internet." Whereas Document "G" was written to various addressees with a view to having them pay a registration fee to obtain Quality Assurance, the letter, Document "I" was addressed to existing "Quality Assured" parties. When it is recognised that there was no "Purchasing Guide" in existence during the time that Optell and Mr Andela were disseminating copies of this letter, the letter is self evidently false. To say that "The Certified Quality Assured Companies of Australia Purchasing Guide is an essential reference ..." is to infer that such a guide is presently in existence. I have come to this conclusion even though the first sentence of the second paragraph contains the word "will" which, in isolation, might have warranted a contrary conclusion. I am also satisfied that the effect of this letter, Document "I", upon a person of average intelligence, would lead to the conclusion that the addressee was required by law to register for inclusion in the purchasing guide. I refer to the passage: "If there are any further details about your Quality Assurance Certification or company details that our department should be made aware of ...". The use of the word "department" was used in my opinion, to create an impression of government and a need for compliance. Then there are a series of future representations, none of which can be justified. They include such matters as: · The Purchasing Guide would be distributed to Local, State and Federal Government Purchasing Authorities, to purchasing sectors of Australia's top companies, and finally, to registered members of the Certified Quality Assured Companies of Australia. · The Purchasing Guide "will soon be accessible on the Internet". In the Renewal Invoice Document "K" there is a specific statement in the following terms: "The Certified Quality Assured Companies of Australia Purchasing Guide is distributed to Federal, State and Local Government Purchasing Authorities.(sic) The purchasing sectors of Australia's top companies, members of the Certified Quality Assured Companies of Australia and will soon be accessible on the Internet." The presence of the full stop after the word "Purchasing Authorities" is confusing but it is apparent that there is a holding out that the Guide is distributed to the three groups being government, top companies and members of CQA. In view of the fact that the Purchasing Guide was not in existence those statements are clearly false. THE CONDUCT OF MR BECKETT AND MR ANDELA The ACCC also submitted that the respondents' conduct in the same period of time breached pars (aa), (c)(d) and (f) of s 53 of the TPA. Those paragraphs are in the following terms: "53. A corporation shall not, in trade or commerce, in connexion with the supply or possible supply of goods or services or in connexion with the promotion by any means of the supply or use of goods or services: (a) ... (aa) falsely represent that services are of a particular standard, quality, value or grade; (b) ... (bb) ... (c) represent that goods or services have sponsorship, approval, performance characteristics, accessories, uses or benefits they do not have; (d) represent that the corporation has a sponsorship, approval or affiliation it does not have; (e) ... (ea) ... (eb) ... (f) make a false or misleading representation concerning the need for any goods or services; or (g) ..." Insofar as I have found that the contents of the letters and application forms inferred some form of government affiliation and that their distribution constituted conduct that was misleading or deceptive, it would seem to me to follow that the same conduct breaches par (aa) because the services were not "Government services" and hence they were not of the represented standard or quality. I am also satisfied that the same conduct breached par 53(f) because the effect of the letters and the forms was a false and misleading representation that there was a "need" for the services that were offered by the Register and the Guides. On the other hand, I do not believe that the facts as found would justify a finding in terms of par 53(c). As to that paragraph, the ACCC has pleaded that Optell and Mr Andela made false and misleading representations that services had approval, uses or benefits that they did not have. I cannot find any concept of an approval (which must come from some third party) and I do not consider that the uses and benefits of the services were incorrectly stated. The evil rested in the sense of compulsion that the addressee needed the uses and benefits. Nor do I believe that the facts allow for a finding in terms of par 53(d) that there was a "sponsorship approval or affiliation". That would import the existence of some third party and that is not the case here. This is not a case of the respondents saying "We are a private organisation that has the sponsorship or the approval of or an affiliation with the Government"; I have found that the respondents have said "We are the Government". Finally, I agree with the ACCC that this conduct breached s 55A of the TPA in that it amounted to conduct that was liable to mislead the public as to the "nature" of each of the services. In addition to the findings that I have so far set out, I am also satisfied that the ACCC has placed sufficient evidence before the Court to warrant findings that Mr Andela, in trade or commerce: · asserted a right to payment for unsolicited services in connection with each of the Register, the Guide and the Purchasing Guide when he had no reasonable cause to believe that there was a right to payment in respect of each of the Register, the Guide and Purchasing Guide, contrary to s 64(2A) of the TPA Act; and · accepted payment for services in connection with each of the Register, the Guide and the Purchasing Guide when, at the time of acceptance there were reasonable grounds, of which he was aware, or ought reasonably to have been aware, for believing that he would not be able to supply services in respect of each of the Register, the Guide and Purchasing Guide within a reasonable time contrary to s 58 of the TPA Act. In respect of the breaches of subs 64(2A) and s 58 I also find that Mr Beckett was directly, knowingly concerned in each contravention. I find that the representations that were made in the various letters and forms that were sent out by Optell and Mr Andela were made in trade or commerce. Their making involved the use of postal services thus bringing into operation the provisions of subs 6(3) of the TPA. I am also satisfied that Mr Beckett was a party who was directly, knowingly concerned in the contraventions of the TPA by Optell. Pursuant to s 21 of the Federal Court of Australia Act 1976 (Cth) this Court has the power to make the declarations that the ACCC has sought in relation to the conduct of Mr Andela and Mr Beckett. I also consider it appropriate that the Court should enter injunctive orders restraining them from engaging in like conduct in the future. In pars 14 and 15 of its amended application the ACCC seeks the following additional orders: "14. Order requiring the Second and Third Respondents, at their own expense, to place advertisements in the terms of the statement at annexure "A" hereto, in each metropolitan daily newspaper circulating in each state or territory of Australia, such newspaper advertisements: (a) to be of a size not less than 100mm x 200mm; (b) to be in a text which is in type size of not less than 12 points; (c) to be placed within the first six pages of each newspaper; (d) to be published on a Wednesday and a Saturday in each newspaper within fourteen days of the making of this order. 15. An order requiring that: (a) within three days of the making of this order, the Second and Third Respondents write to all applicants who have made application for the Services, informing them of the terms of this order and offering to refund to them any administration fee or monies paid in connection with such application; (b) within three days of the receipt of any request for a refund of any such administration fee or monies paid, the Second and Third Respondents refund the fee or monies so requested." I consider that it is appropriate that such orders be entered. The purpose in making Mr Beckett and Mr Andela engage in corrective advertising is not to punish them but to protect the public interest: see Makita (Australia) Pty Ltd v Black & Decker (Australia) Pty Ltd (1990) 12 ATPR ¶41.030 at 51,477; ACCC v On Clinic (supra) at 42,459. Hospitals Contribution Fund of Australia Ltd v Switzerland Australia Health Fund Pty Ltd (1988) 78 ALR 483 was a case where, because of effluxion of time, the Court came to the conclusion that there was no purpose in ordering a correcting advertisement. However, that was a case where a business house had been unfairly advertising its products and its competitor had instituted proceedings. In contrast, this is a case where the advertising had induced members of the public to part with their money. The purpose of ordering corrective advertising in this case is not to address the inadequacies of the earlier advertising but, hopefully, to reach some of the public who have lost their money. Thousands of people are entitled to seek a refund of their moneys from the respondents. I further order that Mr Beckett and Mr Andela jointly and severally pay the ACCC's costs of and incidental to these proceedings and orders. Those costs are to be taxed in default of agreement. I direct the ACCC to bring in to Court minutes of order in terms consistent with these reasons. Those minutes are to be filed and served within twenty eight days of the date hereof and Mr Beckett and Mr Andela have, thereafter, a period of twenty one days within which to present to the Court their written submissions with respect to the orders and declarations sought by the ACCC. Thereafter any party is at liberty to relist the matter on seven days notice. Subject to the matters to which I have referred the matter is adjourned sine die. I certify that this and the preceding thirty one (31) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice O'Loughlin