The Applicant has leave to file and serve an amended originating application in the form provided to the Court and the respondent on 25 November 2020.
Injunction
The Respondent, whether by itself, its servants, agents or affiliates, is restrained for a period of three years from the date of this order, from, in trade or commerce:
(a) supplying services to consumers and requiring or accepting payment for services from consumers following an unsolicited telemarketing call without waiting at least until after 10 business days have passed from when documents evidencing the agreement for the provision of the services are given to the consumer;
(b) making representations in connection with the supply of services to consumers that the Respondent or its sales representatives have an affiliation with, or the approval of the consumer's existing provider of telecommunication services, when that is not the case; and
(c) making representations in connection with the supply of services to consumers that consumers are not entitled to a cooling off period, or are not entitled to any refund of deposits paid to Superfone, or that consumers would face large fees if they terminate an agreement with Superfone when that is not the case.
Pecuniary Penalty
Within 30 days of the date of this order, the Respondent must pay to the Commonwealth of Australia a pecuniary penalty pursuant to s 224(1) of the Australian Consumer Law being Schedule 2 to the Competition and Consumer Act 2010 (Cth), in the sum of $300,000 in respect of the contraventions referred to in the declarations made in Orders 1, 2, 3, 4, 5 and 6 of the orders made on 16 June 2020.
Corrective publication and consumer redress
Within 14 days of the date of this Order, the Respondent issue a communication by email, in the form of Annexure A to these orders, to all consumers who:
(a) entered into an unsolicited consumer agreement (Agreement) with the Respondent between 1 June 2017 and 7 December 2018 (Affected Consumers); and
(b) subsequently paid a termination fee to Superfone on cancellation of their contract (Termination Fee).
Within 14 days of receiving any claim for a refund of a Termination Fee by an Affected Consumer, the Respondent refund the full amount of the Termination Fee paid to Superfone by the Affected Consumer, plus interest at the rate prescribed under the Penalty Interest Rates Act 1983 (Vic) calculated from the date of the payment of the Termination Fee until the date of the refund.
Within 14 days of the date of this Order, the Respondent issue a communication by email, in the form of Annexure B to these orders, to all other Affected Consumers not referred to in Order 4.
Within 14 days of the date of this Order, the Respondent issue a communication by email, in the form of Annexure C to these orders, to all other Affected Consumers whose Agreement with the Respondent has expired but to whom the Respondent has continued to supply services, without the express oral or written agreement of the Affected Consumer.
The Respondent provide an affidavit to the Applicant within three months of sending out Annexures A, B and C referred to in the Orders 4, 6 and 7, respectively, setting out:
(a) a list of the consumers to whom Termination Fees were reimbursed or refunded pursuant to Orders 4 and 5 and the total amount of Termination Fees reimbursed to all those customers;
(b) a list of the consumers who terminated their Agreement with the Respondent following receipt of the communications referred to in Orders 6 and 7; and
(c) a list of the consumers (and their email addresses) to whom the Respondent has sent the communication referred to in Order 7.
Each party has liberty to apply in relation to the implementation and outcomes of the consumer redress scheme referred to in Orders 4 to 7.
Costs
The Respondent pay the Applicant's costs of the proceeding, to be taxed if not agreed.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
Annexure A
Subject line: Important notice: You are eligible for a refund. Superfone's breach of Australian Consumer Law
Contact us today to receive your refund.
You entered into a contract with Superfone Pty Ltd (Superfone) between 1 June 2017 and 7 December 2018 relating to a plan for mobile, landline or internet services (your Contract).
You subsequently terminated your Contract and were charged a termination fee to exit your Contract.
You are eligible for a refund of the termination fee you paid to Superfone.
The ACCC is overseeing this refund process. If you have concerns about the legitimacy of this email, you can find more information by searching 'Superfone' on the ACCC website (accc.gov.au) or calling the InfoCentre on 1300 302 502.
How to make a claim for a refund
You can make a claim by choosing from these options:
by email at [insert email address where cancellation notification can be provided]
by telephone, on [insert number] [specify contact hours]
by post at: [specify postal address].
We will contact you within 14 days after we receive your claim, to confirm your bank account details to process your refund.
Background and reason for refund
On 16 June 2020, the Federal Court declared that, between 1 June 2017 and 7 December 2018, Superfone breached laws designed to protect consumers from issues which can arise from unsolicited telemarketing calls (the Australian Consumer Law).
Superfone apologises unreservedly for this breach. Superfone has subsequently implemented a comprehensive Australian Consumer Law compliance program so that further breaches do not occur.
Specifically, Superfone's breaches of the Australian Consumer Law included:
failing to provide information to consumers about their rights, and failing to provide agreement documents. This included:
failing to tell consumers, before the agreement was made, that they had a right to terminate their agreement during the termination period, and how they could exercise that termination right;
failing to tell consumers, before the agreement was made, that Superfone was prohibited from supplying services or accepting or requiring any payment for the services, until after 10 business days after the consumer was given an agreement document;
failing to provide the consumers with a written agreement document within 5 business days after negotiating the agreement by telephone, or at all;
supplying consumers with services, accepting payment for services and/or requiring payment for the services without first providing a written agreement document to the consumer and then waiting at least a further 10 business days;
making false or misleading representations to consumers that consumers were not entitled to a cooling off period, or were not entitled to a refund of any deposit paid to Superfone, or would face large fees if they terminated the agreement at any time;
making false or misleading representations to consumers that Superfone or the sales representative was calling from, or affiliated with, or had the approval of, the consumers' existing telecommunications provider; and
making false or misleading representations to consumers that they were calling to offer a special deal or discount on the consumer's current plan, when the purpose of the call was to entice consumers to purchase the services offered by Superfone.
On 26 March 2021 the Federal Court made orders, including that:
Superfone must pay a pecuniary penalty of $300,000;
Superfone must reimburse any termination fees paid by consumers who entered into a plan for mobile, landline or internet services with Superfone between 1 June 2017 and 7 December 2018;
Superfone must offer all other consumers who entered into a plan for mobile, landline or internet services with the Respondent between 1 June 2017 and 7 December 2018 the option to cancel their agreement without fee; and
Superfone must issue a notice to all consumers who entered into a plan for mobile, landline or internet services with the Respondent between 1 June 2017 and 7 December 2018, advising them of the Federal Court's orders.
Annexure B
Subject line: Important notice: Superfone's breach of Australian Consumer Law. Cancel your Superfone contract at no charge.
Contact us today to exit your contract at no charge.
You entered into a contract with Superfone Pty Ltd (Superfone) between 1 June 2017 and 7 December 2018 relating to a plan for mobile, landline or internet services (your Contract).
You may if you wish exit your Contract with Superfone without incurring a termination fee.
The Australian Competition and Consumer Commission (ACCC) is overseeing this process. If you have concerns about the legitimacy of this email, you can find more information by searching 'Superfone' on the ACCC website (accc.gov.au) or calling the ACCC InfoCentre on 1300 302 502.
How to cancel your contract with Superfone
If you wish to cancel your Contract with Superfone, please notify us:
by email at [insert email address to which the cancellation notification can be sent]
by telephone, on [insert number] [specify contact hours]
by post at: [specify postal address].
We will contact you [within 14 days] after receiving your cancellation notification, to process your cancellation and transfer your number to your preferred provider.
Background
On 16 June 2020, the Federal Court declared that, between 1 June 2017 and 7 December 2018, Superfone breached laws designed to protect consumers from issues which can arise from unsolicited telemarketing calls (the Australian Consumer Law).
Specifically, Superfone's breaches of the law included:
failing to provide information to consumers about their rights, and failing to provide agreement documents. This included:
failing to tell consumers, before the agreement was made, that they had a right to terminate their agreement during the termination period, and how they could exercise that termination right;
failing to tell consumers, before the agreement was made, that Superfone was prohibited from supplying services or accepting or requiring any payment for the services, until after 10 business days after the consumer was given an agreement document;
failing to provide the consumers with a written agreement document within 5 business days after negotiating the agreement by telephone, or at all;
supplying consumers with services, accepting payment for services and/or requiring payment for the services without first providing a written agreement document to the consumer and then waiting at least a further 10 business days;
making false or misleading representations to consumers that consumers were not entitled to a cooling off period, or were not entitled to a refund of any deposit paid to Superfone, or would face large fees if they terminated the agreement at any time;
making false or misleading representations to consumers that Superfone or the sales representative was calling from, or affiliated with, or had the approval of, the consumers' existing telecommunications provider; and
making false or misleading representations to consumers that they were calling to offer a special deal or discount on the consumer's current plan, when the purpose of the call was to entice the consumer to purchase the services offered by Superfone.
On 26 March 2021 the Federal Court ordered that:
Superfone must pay a pecuniary penalty of $300,000;
Superfone must reimburse any termination fees paid by consumers who entered into a plan for mobile, landline or internet services with Superfone between 1 June 2017 and 7 December 2018,
Superfone must offer all other consumers who entered into a plan for mobile, landline or internet services with Superfone between 1 June 2017 and 7 December 2018 the option to cancel their agreement without fee;
Superfone must issue a notice to all consumers who entered into a plan for mobile, landline or internet services with the Respondent between 1 June 2017 and 7 December 2018, advising them of the Federal Court's orders.
Annexure C
Subject line: Important notice: Superfone's breach of Australian Consumer Law. You may choose to stop receiving services from Superfone without having to pay a termination fee.
Contact us today if you do not wish to continue receiving services from Superfone.
You entered into a contract with Superfone Pty Ltd (Superfone) between 1 June 2017 and 7 December 2018 relating to a plan for mobile, landline or internet services (your Contract). Your Contract has expired, but Superfone has continued to supply services to you.
You may, if you wish, stop receiving services from Superfone without having to pay a termination fee.
The Australian Competition and Consumer Commission (ACCC) is overseeing this process. If you have concerns about the legitimacy of this email, you can find more information by searching 'Superfone' on the ACCC website (accc.gov.au) or calling the ACCC InfoCentre on 1300 302 502.
How to stop receiving services from Superfone
If you wish to stop receiving services from Superfone, please notify us:
by email at [insert email address where cancellation notification can be provided]
by telephone, on [insert number] [specify contact hours]
by post at: [specify postal address].
We will contact you within 14 days after receiving your cancellation notification, to process your cancellation and transfer your number to your preferred provider.
Background
On 16 June 2020, the Federal Court declared by consent that, between 1 June 2017 and 7 December 2018, Superfone breached laws designed to protect consumers from issues which can arise from unsolicited telemarketing calls (the Australian Consumer Law).
Specifically, Superfone's breaches of the law included:
failing to provide information to consumers about their rights, and failing to provide agreement documents. This included:
failing to tell consumers, before the agreement was made, that they had a right to terminate their agreement during the termination period, and how they could exercise that right;
failing to tell consumers, before the agreement was made, that Superfone was prohibited from supplying services or accepting or requiring any payment for the services, until after 10 business days after the consumer was given an agreement document;
failing to provide the consumers with a written agreement document within 5 business days after negotiating the agreement by telephone, or at all;
supplying consumers with services, accepting payment for services and/or requiring payment for the services without first providing a written agreement document to the consumer and then waiting at least a further 10 business days;
making false or misleading representations to consumers that consumers were not entitled to a cooling off period, or were not entitled to a refund of any deposit paid to Superfone, or would face large fees if they terminated the agreement at any time;
making false or misleading representations to consumers that Superfone or the sales representative was calling from, or affiliated with, or had the approval of, the consumers' existing telecommunications provider;
making false or misleading representations to consumers that they were calling to offer a special deal or discount on the consumer's current plan, when the purpose of the call was to entice consumers to purchase the services offered by Superfone.
On 26 March 2021 the Federal Court made orders, including that:
(1) Superfone must pay a pecuniary penalty of $300,000;
(2) Superfone must notify all consumers who entered into a plan for mobile, landline or internet services with Superfone between 1 June 2017 and 7 December 2018, whose Agreement has expired, but to whom Superfone has continued to supply services without the express oral or written agreement of the consumer, that they have the option to cease receiving services from Superfone without payment of termination fee.
[2]
MURPHY J:
1 The applicant in this proceeding, the Australian Competition and Consumer Commission (ACCC), brought a proceeding against the respondent, Superfone Pty Ltd alleging contraventions of ss 18, 29(1)(h), (g) and (m), 76, 78, 79 and 86 of the Australian Consumer Law (ACL) being Schedule 2 to the Competition and Consumer Act 2010 (Cth) (the Act). On 16 June 2020 declarations of contravention were made by consent. The ACCC now seeks relief for the admitted contraventions by way of injunctions, a pecuniary penalty, non-party consumer redress orders and interest. Superfone accepts that such orders are appropriate but contends that the pecuniary penalty the ACCC seeks is excessive and argues that the cohort of consumers to whom the non-party consumer redress orders apply should be more limited than the ACCC proposes.
2 The ACCC seeks the imposition of a pecuniary penalty of $400,000, coupled with extensive consumer redress orders. Superfone submits that a penalty of $60,000 together with lesser consumer redress orders is appropriate. For the reasons I explain I have concluded that it is appropriate to impose a pecuniary penalty of $300,000 coupled with the consumer redress orders sought by the ACCC. There is a possibility that orders imposing a $300,000 penalty, coupled with the consumer redress orders and costs will push Superfone into insolvency, but having regard to the seriousness of the contraventions and the principal object of deterrence in my view the imposition of such a penalty is appropriate.
[3]
The CONTRAVENING CONDUCT
3 For the purpose of the proceeding, pursuant to s 191 of the Evidence Act 1995 (Cth), the parties entered into a Statement of Agreed Facts and Admissions in relation to Liability (SAFA on Liability) and a Statement of Agreed Facts and Admissions in relation to Relief (SAFA on Relief). The following salient matters can be drawn from both SAFAs.
4 The admitted contraventions stem from unsolicited telemarketing calls made to consumers by sales representatives employed by Inspire Telecom PvT (Inspire Telecom), an Indian-based company related to Superfone. At Superfone's direction, the sales representatives made unsolicited telephone calls from the Inspire Telecom call centre in Delhi, India to prospective consumers in Australia, for the purposes of agreeing contracts for the provision of mobile, landline and internet services by Superfone to consumers in Australia (the Services).
5 Those unsolicited telephone calls resulted in the making of 1,447 unsolicited consumer agreements (Agreements) between Superfone and new customers in the period 1 June 2017 to 7 December 2018 (the relevant period). The Agreements constituted "unsolicited consumer agreements" within the meaning of s 69(1) of the ACL which were "negotiated by telephone" within the meaning of s 78(3) of the ACL. The sales representatives were "dealers" within the meaning of s 71 of the ACL.
6 Superfone has admitted that those Agreements were made using the method of marketing and sales described in paragraph 6 of the SAFA on Liability. In summary, the marketing and sales method involved:
(a) the use of a "lead generation script" for the calls which contained a series of statements and questions designed to entice the consumer to purchase the Services;
(b) Superfone provided a training manual to the sales representatives directing them how to respond to and overcome common objections by consumers to acquiring the Services;
(c) if the sales representative was able to conclude a verbal agreement between Superfone and the consumer during the telephone call the Agreement was recorded (the voice recording call or VRC). Superfone directed the sales representative to recite, during the VRC, the terms and conditions stated in a "VRC script" provided by Superfone to the sales representatives;
(d) it was standard practice for Superfone , by its sales representative, to obtain bank details from the customer during the VRC and to deduct the first payment for the Services from the consumer's nominated bank account as soon as possible and almost always within 10 days of the Agreement, and to commence supplying the Services to the consumer;
(e) prior to July 2018, Superfone did not provide consumers any documentation evidencing the Agreement. From around July 2018 it started providing, only to some consumers, standard form documents entitled, respectively, "service agreement", "critical information summary", "pro-rata explainer" and "porting process explainer" (collectively, the Documents). Superfone did not keep records of when Documents were sent. The recipients were requested to insert their banking and identification details into the "service agreement", sign and date it, and return it to Superfone; and
(f) some customers that purchased mobile phone services received a Sim card from Superfone, at which time a sales representative made a "connection call" to set up the mobile connection, using a "connection request script" provided by Superfone.
7 Superfone has admitted that during the sales calls the sales representatives often:
(a) gave the incorrect impression that the purpose of the call was to provide discounts or savings on the consumer's existing plan for telecommunication services, when in fact the actual purpose was to sell the Services to the consumer;
(b) the sales representative was calling from, or had an affiliation with, the consumer's existing telecommunication provider; and/or
(c) the Services were being offered with the approval of the consumer's existing telecommunication provider.
There were 1,447 Agreements concluded during the relevant period and, as I infer, a greater number of telephone calls in which such representations were made. On 16 June 2020, the Court declared that this conduct constituted misleading or deceptive conduct contravening s 18(1) of the ACL and amounted to false or misleading representations in contravention of ss 29(1)(g) and (h) of the ACL.
8 Superfone has admitted that during the VRCs the sales representatives often gave the incorrect impression that the consumer:
(a) had no right to a "cooling off period" (when in fact the consumer was entitled to terminate the Agreement without incurring any fees during the period specified in s 82(3) of the ACL (the statutory cooling off period));
(b) was not entitled to any refund of any deposit paid by the consumer (when in fact the consumer was entitled to a refund under s 84 of the ACL if they terminated the Agreement during the statutory cooling off period, and any term to the contrary was void under s 89 of the ACL); and/or
(c) would face large fees if they terminated the Agreement (when in fact the consumer had an unqualified right to terminate the Agreement within the statutory cooling off period without incurring any fee, and any term to the contrary was void under s 89 of the ACL).
On 16 June 2020, the Court declared that this conduct constituted misleading or deceptive conduct contravening s 18(1) of the ACL and amounted to false or misleading representations in contravention of s 29(1)(m) of the ACL.
9 Superfone has admitted that the sales representatives did not, before making each Agreement:
(a) give the consumer information as to the consumer's right to terminate the Agreement during the statutory cooling off period, or the way in which the consumer could exercise that right; and
(b) inform the consumer that Superfone was prohibited from supplying the Services or accepting or requiring any payment or other consideration in connection with them, until after 10 business days had passed after the consumer was given the agreement document[s] providing for the Agreement.
On 16 June 2020, the Court declared that this conduct contravened ss 76 and 77 of the ACL. I infer that the conduct occurred in respect of most of the 1,447 Agreements made during the relevant period.
10 In relation to the requirements under the ACL to provide consumers with a document evidencing the Agreement which complied with the requirements of the ACL, Superfone has admitted that:
(a) it did not at any time during the relevant period provide consumers with documents evidencing the Agreement within five business days after the Agreement. Superfone therefore breached ss 76, 77 and 78 of the ACL, and by consequence of the contraventions of ss 76 and 78 it contravened s 79 of the ACL on 1,447 occasions;
(b) for all Agreements made prior to July 2018 it did not provide the consumers with any documentation evidencing the Agreement at all. Superfone therefore breached ss 76, 77, 78 and 79 of the ACL in relation to all Agreements made before July 2018;
(c) for most of the Agreements made between July and 7 December 2018, Superfone did not provide the consumers with any documentation at all. Superfone therefore contravened ss 76, 77, 78 and 79 of the ACL in relation to all of those Agreements;
(d) for some of the Agreements made between July and 7 December 2018 Superfone provide the standard form Documents. The Documents did not, however, comply with the requirements of s 79 of the ACL including because they did not:
(i) set out in full all the terms of the Agreement, the total consideration to be paid by the consumer or the way in which it was to be calculated;
(ii) include on the front page a notice that conspicuously and prominently informed the consumer of their right to terminate the Agreement, or how that right was to be exercised;
(iii) include a notice that could be used by the consumer to terminate the Agreement;
(iv) include a notice that conspicuously and prominently set out the required text explaining the consumer's right to: (1) cancel the agreement within 10 business days from the date of execution or receipt of the Agreement; (2) detailed the consumer's additional rights to cancel the agreement; and
(v) conspicuously and prominently set out Superfone's business address.
On 16 June 2020, the Court declared that this conduct contravened ss 76, 77, 78 and 79 of the ACL.
11 Superfone proceeded to supply Services to consumers, and required and accepted payment for Services from consumers, without waiting at least until after 10 business days had passed from when the Documents (if any) had been given to the consumer. Superfone therefore committed 1,447 breaches of s 86(1) of the ACL. On 16 June 2020, the Court declared that this conduct contravened s 86 of the ACL.
[4]
Injunctive relief
12 The ACCC seeks injunctions in the following terms.
The Respondent, whether by itself, its servants, agents or affiliates, is restrained for a period of three years from the date of this order, from, in trade or commerce:
(a) supplying services to consumers and requiring or accepting payment for services from consumers following an unsolicited telemarketing call without waiting at least until after 10 business days have passed from when documents evidencing the agreement for the provision of the services are given to the consumer;
(b) making representations in connection with the supply of services to consumers that the Respondent or its sales representatives have an affiliation with, or the approval of, the consumer's existing provider of telecommunication services when that is not the case; and
(c) making representations in connection with the supply of services to consumers that consumers were not entitled to a cooling off period, or were not entitled to any refund of deposits paid to Superfone or that consumers would face large fees if they terminated an agreement with Superfone when that was not the case.
13 The Court has power to grant injunctions in respect of contraventions of the ACL under s 23 of the Federal Court of Australia Act 1976 (Cth) and s 232 of the ACL. The jurisdiction under s 232 is enlivened, relevantly, if the Court is satisfied that a person has engaged in a contravention of a provision of Chapter 2 of the ACL (which includes s 18) or Chapter 3 (which includes ss 29(1), 76, 78, 79 and 86, see: s 232(1)(a).
14 Superfone does not oppose an injunction in the terms sought by the ACCC. Superfone's conduct was intentional, and was not isolated; the contravening acts or omissions occurred on more than 1,447 occasions over one and a half years. In my view the injunctions proposed are appropriate to prevent repetition of the offending conduct by Superfone, to induce compliance with the law, and to counterbalance the injury to the public interest: ICI Australia Operations Pty Ltd v Trade Practices Commission (1992) 38 FCR 248 at 268 (French J (as his Honour then was)); Truth About Motorways Pty Ltd v Macquarie Infrastructure Investment Management Ltd [2000] HCA 11; (2000) 200 CLR 591 at [79]-[80] (Gummow J). I have granted injunctive relief in the terms sought by the ACCC, with some minor amendments.
[5]
Pecuniary Penalty
15 The ACCC seeks the imposition of a pecuniary penalty in the sum of $400,000 payable by Superfone in respect of its admitted contraventions of the ACL. Superfone did not, in terms, oppose the imposition of a pecuniary penalty, but it contends that a penalty of $400,000 is excessive. It submits that a penalty of $60,000, coupled with a timetable for payment, is appropriate. It also submits that, should a pecuniary penalty be ordered, it should not be ordered until such time as the consumer redress scheme is finalised.
16 The Court has power pursuant to s 224(1)(a)(ii) and (iv) of the ACL to order that Superfone pay a pecuniary penalty in respect of each act or omission which constitutes a contravention of ss 29(1)(h), (g), (m), 76, 78, 79 and 86 of the ACL (subject to s 224(4)(b) of the ACL which provides that where conduct constitutes a contravention of two or more of the above provisions which attract civil penalties, a person is not liable for more than one penalty for the same conduct).
[6]
The applicable principles
17 The parties are broadly in agreement as to the applicable principles in relation to assessing the appropriate pecuniary penalty. They differ in relation to the application of those principles to the facts of the case.
[7]
The applicable statutory provision
18 The discretion to be applied in setting a pecuniary penalty must be guided, first, by the applicable statutory provision. Section 224(2) requires the Court, in determining the appropriate pecuniary penalty, to have regard to all relevant matters including the following mandatory considerations:
(a) the nature and extent of the act or omission and of any loss or damage suffered as a result of the act or omission; and
(b) the circumstances in which the act or omission took place; and
(c) whether the person has previously been found by the Court in proceedings under Chapter 4 or this Part to have engaged in any similar conduct.
19 Other relevant matters are commonly referred to as discretionary factors, though as was noted by Edelman J in Australian Competition and Consumer Commission v Woolworths Ltd [2016] FCA 44 at [123] they are not truly discretionary. Once they become relevant they are considerations that the Court must have regard to. The commonly relevant factors have been considered in numerous decisions. They were conveniently summarised by Perram J in Australian Competition and Consumer Commission v Singtel Optus Pty Ltd (No 4) [2011] FCA 761; (2011) 282 ALR 246 at [11] as follows:
(a) The size of the contravening company.
(b) The deliberateness of the contravention and the period over which it extended.
(c) Whether the contravention arose out of the conduct of senior management of the contravenor or at some lower level.
(d) Whether the contravener has a corporate culture conducive to compliance with the Act as evidenced by educational programmes and disciplinary or other corrective measures in response to an acknowledged contravention.
(e) Whether the contravener has shown a disposition to co-operate with the authorities responsible for the enforcement of the Act.
(f) Whether the contravener has engaged in similar conduct in the past.
(g) The financial position of the contravener.
(h) Whether the contravening conduct was systematic, deliberate or covert.
20 In Director of Consumer Affairs Victoria v Gibson (No 3) [2017] FCA 1148 at [50] Mortimer J said, and I agree, that where a contravener shows remorse or contrition or otherwise indicates consciousness of the seriousness of the contravening conduct that may be relevant to penalty.
21 In Woolworths at [166] Edelman J said, and I agree:
…compensation is relevant directly as an action which is associated with the contraventions which attempts to redress, in the limited manner in which money can do it, the consequences of the contraventions: see also Australian Competition and Consumer Commission v AGL Pty Ltd [2015] FCA 399; (2015) 146 ALD 385, 391 [35] (White J). Section 224(2)(a) of the Australian Consumer Law directs attention to the loss or damage suffered as a result of the act or omission. If that loss or damage is ameliorated in any way then that amelioration should also be relevant….A payment of money will go some way to ameliorating loss or damage that involves a loss of income. And, as the common law concerning general damages recognises, the payment of money is awarded as "a substitute for that which is generally more important than money: it is the best that a court can do": McGregor H, McGregor on Damages (19th ed, Sweet & Maxwell, 2014) 13 [2-001]. Section 227 further emphasises the relevance of compensation to pecuniary penalties by creating a hierarchy between payments of compensation and pecuniary penalties requiring preference to be given to orders requiring payments of compensation to victims.
Thus, orders for compensation or consumer redress may be relevant to penalty.
[8]
Deterrence
22 The principal object of a pecuniary penalty is deterrence, directed both to discouraging repetition of the contravening conduct by the contravener (specific deterrence) and discouraging others who might be tempted to engage in similar contraventions (general deterrence). In Trade Practices Commission v CSR Ltd [1990] FCA 762; (1991) ATPR 41-076 at 52,152 (cited with approval in Commonwealth of Australia v Director, Fair Work Building Industry Inspectorate [2015] HCA 46; (2015) 258 CLR 482 at [55]), French J (as his Honour then was) said:
The principal, and I think probably the only, object of the penalties imposed by s 76 is to attempt to put a price on contravention that is sufficiently high to deter repetition by the contravener and by others who might be tempted to contravene the Act.
23 In Singtel Optus Pty Ltd v Australian Competition and Consumer Commission [2012] FCAFC 20 at [68]; (2012) 287 ALR 249 at 266 (Keane CJ (as his Honour then was), Finn and Gilmour JJ) (cited with approval in Australian Competition and Consumer Commission v TPG Internet Pty Ltd [2013] HCA 54 at [64]; (2013) 250 CLR 640 at 659 (French CJ, Crennan, Bell and Keane JJ)) the Full Court said:
The Court must fashion a penalty which makes it clear to [the contravener], and to the market, that the cost of courting a risk of contravention of the Act cannot be regarded as [an] acceptable cost of doing business.
To achieve general deterrence a penalty must be a sum that members of the public will recognise "as significant and proportionate to the seriousness of the contravention": Australian Competition and Consumer Commission v Leahy (No 3) [2005] FCA 265; (2005) 215 ALR 301 at [39] (Goldberg J).
24 A penalty must not however be so high as to be oppressive: Trade Practices Commission v Stihl Chainsaws (Aust) Pty Ltd (1978) ATPR 40-091 at 17,896 (Smithers J); cited with approval in NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission [1996] FCA 1134; (1996) 71 FCR 285 at 293 (Burchett and Kiefel JJ (as her Honour then was), Carr J agreeing); Australian Competition and Consumer Commission v Leahy Petroleum (No 2) [2005] FCA 254; (2005) 215 ALR 281 at [9] (Merkel J). However, unless it is sufficiently high a penalty may not have the appropriate specific and general deterrent effect. As the High Court said in Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union & Another [2018] HCA 3; (2018) 262 CLR 157 at [116] (Keane, Nettle and Gordon JJ), in respect of pecuniary penalties under the Fair Work Act 2009 (Cth):
… if a penalty is devoid of sting or burden, it may not have much, if any, specific or general deterrent effect, and so it will be unlikely, or at least less likely, to achieve the specific and general deterrent effect that are the raison d'être of its imposition.
[9]
The maximum penalty for each contravention of s 29 of the ACL
25 Pursuant to item 2 in the table in s 224(3) of the ACL, for the period prior to 1 September 2018, the maximum penalty for a body corporate for each contravention of s 29 of the ACL is $1.1 million. Pursuant to ss 224(3) and 224(3A), for the period from 1 September 2018, the maximum penalty for a body corporate for each such contravention was raised from $1.1 million so as to not exceed the greater of:
(a) $10 million; or
(b) if the court can determine the value of the benefit that the body corporate has obtained directly or indirectly and that is reasonably attributable to the act or omission - 3 times the value of that benefit; or
(c) if the court cannot determine the value of that benefit - 10% of the annual turnover of the body corporate during the 12 month period ending at the end of the month in which the act or omission occurred or started to occur.
Section 295 provides that the new, higher maximum penalties provided for in s 224(3A) apply only to acts or omissions that occur on or after 1 September 2018.
26 Superfone's contraventions occurred in the period from 1 June 2017 to 7 December 2018. Therefore, a maximum penalty of $1.1 million applies to the contraventions of s 29 of the ACL in the 15 month period from 1 June 2017 to 31 August 2018, and the higher maximum penalty available under s 224(3A) applies to such contraventions in the 14 week period from 1 September 2018 to 7 December 2018.
[10]
The maximum penalty for each contravention of ss 76, 78, 79 and 86 of the ACL
27 Pursuant to item 5 in the table in s 224(3), the maximum penalty for a body corporate for each contravention of ss 76, 78, 79 and 86 of the ACL is $50,000. Section 77 is not a civil penalty provision.
[11]
Relevant principles to maximum penalty
28 The "maximum penalty is not just a limit on power, it provides a statutory indication of the punishment for the worst type of case, by reference to which the assessment of the proportionate penalty for other offending can be made, according to the will of Parliament": Pattinson v Australian Building and Construction Commissioner [2020] FCAFC 177 at [62] (Allsop CJ, White and Wigney JJ, with whom Besanko and Bromwich JJ agreed).
29 As I said in Australian Competition and Consumer Commission v Optus Mobile Pty Limited [2019] FCA 106 at [28]-[30]:
[28] The process to be used in setting a civil penalty for contravention of statutory provisions is similar to that used in criminal sentencing: Australian Competition and Consumer Commission v Coles Supermarkets Australia Pty Ltd (2015) 327 ALR 540; [2015] FCA 330 (Coles Bread Case) at [6] (Allsop CJ); Australian Competition and Consumer Commission v Liquorland (Australia) Pty Ltd (2005) ATPR 42-070; [2005] FCA 683 at [68] (Gyles J). The maximum penalty must be given due attention because the legislature has seen fit to legislate for them, they invite comparison between the "worst possible case" and the case before the court at the time, and they provide a form of yardstick: Markarian v The Queen (2005) 228 CLR 357; [2005] HCA 25 at [31].
[29] In Markarian Gleeson CJ, Gummow, Hayne and Callinan JJ held at [27], [31] and [39] that:
(a) assessment of the appropriate penalty is a discretionary judgment based on all relevant factors but careful attention to maximum penalties will almost always be required;
(b) it will rarely be appropriate for a Court to start with the maximum penalty and proceed by making a proportional deduction from that maximum, and the Court should not adopt a mathematical approach of increments or decrements from a predetermined range, or assign specific numerical or proportionate value to the various relevant factors; and
(c) accessible reasoning is necessary in the interests of all, and, while there may be occasions where some indulgence in an arithmetical process will better serve this end, it does not apply where there are numerous and complex considerations that must be weighed.
[30] Their Honours described the appropriate sentencing process as one of "instinctive synthesis". McHugh J described this process (at [51]) as one in which:
… the judge identifies all the factors that are relevant to the sentence, discusses their significance and then makes a value judgment as to what is the appropriate sentence given all the factors of the case. Only at the end of the process does the judge determine the sentence.
30 Where a large number of contraventions is involved, the maximum penalty may rise to a number such that there is no meaningful overall maximum penalty. In such circumstances the maximum penalty should not be applied mechanically and should instead be treated as one of a number of relevant factors, albeit an important one. In such cases the appropriate penalty range may be best assessed by reference to other factors: Australian Competition and Consumer Commission v Reckitt Benckiser (Australia) Pty Ltd [2016] FCAFC 181; (2016) 340 ALR 25 at [156]-[157] (Jagot, Yates and Bromwich JJ); Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union [2017] FCAFC 113; (2017) 254 FCR 68; at [143]-[146] (Dowsett, Greenwood and Wigney JJ).
31 The Court in Reckitt Benckiser said at [156]:
Care must be taken to ensure that the maximum penalty is not applied mechanically, instead of it being treated as one of a number of relevant factors, albeit an important one. Put another way, a contravention that is objectively in the mid-range of objective seriousness may not, for that reason alone, transpose into a penalty range somewhere in the middle between zero and the maximum penalty. Similarly, just because a contravention is towards either end of the spectrum of contraventions of its kind does not mean that the penalty must be towards the bottom or top of the range respectively. However, ordinarily there must be some reasonable relationship between the theoretical maximum and the final penalty imposed.
[12]
The course of conduct principle
32 This principle recognises that where there is sufficient interrelationship in the legal and factual elements of the acts or omissions that constitute a contravention, the Court may, in its discretion, penalise the acts or omissions as a single course of conduct. The principle was explained in Construction, Forestry, Mining and Energy Union v Cahill [2010] FCAFC 39; (2010) 269 ALR 1 (Middleton and Gordon JJ) at [47] and [41] as follows:
[47] The principle recognises that where there is an interrelationship between the legal and factual elements of two or more offences for which an offender has been charged, care must be taken to ensure that the offender is not punished twice for what is essentially the same criminality.
…
[41] In other words, where two offences arise as a result of the same or related conduct that is not a disentitling factor to the application of the single course of conduct principle but a reason why a Court may have regard to that principle, as one of the applicable sentencing principles, to guide it in the exercise of the sentencing discretion. It is a tool of analysis which a Court is not compelled to utilise.
(Citations omitted, emphasis in original.)
33 As the ACCC submits, a "course of conduct" analysis involves considering whether a single overall penalty should be imposed on contravening conduct arising out of a single course of conduct. The principle does not operate to limit the maximum penalty: Australian Competition and Consumer Commission v Coles Supermarkets Australia Pty Ltd [2015] FCA 330; (2015) 327 ALR 540 at [17] (Allsop CJ). It does not have paramountcy in the process of assessing an appropriate penalty and it cannot of itself unduly fetter the proper application of the legislation or operate as a defacto limit on the penalty to be imposed for contraventions: Australian Competition and Consumer Commission v Hillside (Australia New Media) Pty Ltd trading as Bet365 (No 2) [2016] FCA 698 at [24]-[25] (Beach J), approved in Reckitt Benckiser at [141].
[13]
The parity principle
34 Assessments of penalty in analogous cases may also provide guidance to the Court in assessing an appropriate penalty, by assisting equal treatment in similar circumstances and thereby meeting the principle of equal justice. However, penalties set in other cases can only be a guide because the circumstances in different cases are rarely precisely the same as the case then before the Court: see Australian Competition and Consumer Commission v SMS Global Pty Ltd [2011] FCA 855 at [80] and the cases there cited.
[14]
The totality principle
35 Pursuant to this principle, where there are multiple contraventions the Court must apply this principle to ensure that, overall, the total penalty does not exceed what is appropriate for the totality of the contravening conduct involved. This principle operates as a final check to ensure that the aggregate penalty imposed for a course of conduct is just and proportionate to the circumstances of the case: Mill v The Queen [1988] HCA 70; (1988) 166 CLR 59 at 63 (Wilson, Deane, Dawson, Toohey, Gaudron JJ); Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd [1997] FCA 450 at [40]; (1997) 145 ALR 36 at 53 (Goldberg J).
[15]
Consideration
36 Superfone opposes the ACCC's application for imposition of a pecuniary penalty of $400,000. It does not contend that it is inappropriate to impose a pecuniary penalty, rather it argues that a penalty of $60,000 is appropriate.
[16]
The relevance of the injunctions
37 Superfone contends that it is appropriate to take the injunctions into account when setting the pecuniary penalty. If the injunctions are relevant to the assessment of an appropriate penalty it can only be in relation to the extent to which assessment of the appropriate penalty is concerned with specific deterrence. It can be accepted that should Superfone breach the injunctions they may face sanction for contempt of court, which risk may itself act as a specific deterrent against a repetition of similar conduct. But beyond that I consider the injunctive relief granted, by consent, to be of little significance to determining the appropriate penalty.
[17]
Single course of conduct
38 Superfone submits that the contravening conduct has been pleaded as a single course of conduct and should be regarded as such. It contends that its contraventions are all based in the business practice of making unsolicited telephone calls for the purposes of forming contracts for the provision of telecommunications services to customers. It notes that in Coles the ACCC argued that the four types of contravening conduct in that case each comprised a course of conduct while Coles contended that the conduct was a single marketing strategy which comprised a single course of conduct: Coles at [19]-[20]. Allsop CJ chose to identify a single penalty in respect of all contraventions in accordance with the totality principle, bearing in mind that the four courses of conduct formed part of a single marketing strategy: at [85].
39 Superfone argues that its contravening conduct also involved one marketing strategy which should be treated as one course of conduct. It also submits that this would give effect to s 224(4)(b) of the ACL which provides that a person is not liable to pay more than one pecuniary penalty in respect of the same conduct.
40 In the circumstances of the present case I do not accept that it is appropriate to treat the contravening conduct as involving a single course of conduct. Essentially that is because the conduct comprising the contraventions of ss 18(1), 29(1)(g) and (h) is different to the conduct comprising the contraventions of ss 18(1) and 29(1)(m), and different again from the conduct comprising the contraventions of ss 76, 78 and 79 and 86:
(a) the conduct in breach of ss 18(1) and ss 29(1)(g) and (h) comprises representations by Superfone's sales representatives to consumers, conveying the misleading impression that the purpose of their telephone call was to provide discounts or savings on the consumer's existing telecommunications plan, that the sales representative was calling from the consumer's existing telecommunication provider and/or the Services were being offered with the authorisation of or with the approval of the consumer's existing telecommunication provider;
(b) the conduct in breach of s 18(1) and s 29(1)(m) comprises representations by the sales representative to consumers conveying the misleading impression that the consumer had no right to a cooling off period, was not entitled to a refund of any deposit paid, and would face large fees if they terminated the agreement; and
(c) the conduct in breach of ss 76, 78, 79 and 86 was, amongst other things, the failure to give consumers information as to their right to terminate the agreement during the statutory cooling off period, the failure to provide documents evidencing the Agreement to consumers within five business days, or at all, and, where it provided the Documents they were deficient.
41 This is not akin to the position in Coles in which each of the contraventions involved marketing behaviour by Coles making representations to the effect that the various baked goods which were advertised for sale were "freshly baked", "baked today, sold today", "baked fresh" and "freshly baked in-store" when the products were in fact partially baked off-site, snap frozen and then baked to completion at a Coles Supermarket: Coles at [1].
42 I do not accept that every contravening act or omission in the present case comprises marketing behaviour or a single marketing strategy. Nor do I accept that each factual and legal element of the contravening conduct is so interrelated that the contraventions should be treated as single course of conduct. In my view there are at least two broad categories of conduct: (a) the conduct during the sales calls (being the misleading representations) and; (b) the conduct following the making of the Agreement (being the failure to provide the prescribed information about the Agreements including copies of the Agreements themselves, and requiring and accepting payment during the cooling off period).
43 Even then, as I have said, there are some notable factual and legal differences within those two categories. The first broad category includes: (a) representations as to the affiliation with, authorisation of, and approval by the customer's pre-existing telecommunications provider made by the sales representatives as a tactic to engage the customer further in the offer to enter into the Agreement; (b) representations as to the benefits for the consumer by accepting Superfone's offer by way of savings or discounts; (c) once the customer had progressed to the making of an oral offer by Superfone's agent[s], representations that the consumer was not entitled to a "cooling off period", a refund of any deposit paid by the consumer, and that the consumer would incur a liability of a significant termination fee in the event of early termination of the Agreement by the consumer.
44 At a superficial level all of these representations occurred during the unsolicited telephone call prior to the Agreement being reached with the consumer. But the method of communication and the temporal proximity of each representation are an insufficient basis to conclude that factually separate and distinct representations, each of which are variously protected by different statutory norms under ss 18 and 29, should be considered to be so interrelated so as to be considered together as parts of a single course of conduct: Cahill [at [39].
45 Similarly, Superfone's post-Agreement conduct took at least three forms: (a) a complete failure or at least delay in providing the Agreement to the consumer; (b) a failure at all times to provide the statutorily prescribed information to consumers in the Documents; and (c) accepting payment prior to the end of the cooling off period. These are separate and distinct factual and legal features of the contravening conduct.
46 In any event Superfone's argument regarding the application of the single course of conduct principle provides little support for the imposition of a $60,000 penalty. Various considerations, particularly the seriousness of the contraventions, the lengthy period over which they occurred, and the requirement for deterrence, indicate that a substantially higher penalty is necessary. The course of conduct principle does not operate as a de facto limit on the penalty to be imposed for multiple, related contraventions and the Court is not obliged to apply it if doing so would fail to reflect the seriousness of the contraventions: Reckitt Benckiser at [141] citing Hillside at [24]-[25]; Australian Competition and Consumer Commission v Yazaki Corporation [2018] FCAFC 73; (2018) 262 FCR 243 at [235] (Allsop CJ, Middleton and Robertson JJ).
[18]
Maximum penalty
47 If each of the 1,447 occasions upon which the contraventions occurred is treated as a separate breach the maximum penalty for the s 29 contraventions alone (without having regard to the contraventions of ss 76, 78, 79 and 86 or the increase in applicable penalties for the final 14 weeks of the relevant period) is in the billions of dollars (an estimated 3000 to 4000 contraventions with a maximum penalty of $1.1 million, leading to an approximate maximum penalty of $4.7 billion). This estimate does not take into account the 14 week period from 1 September 2018 during which the maximum penalty for each contravention is $10 million.
48 In circumstances such as the present case, where the number of acts or omissions constituting contraventions is so large, there is no meaningful overall maximum penalty. The appropriate penalty range is better assessed by reference to other factors: Reckitt Benckiser at [157]. Neither party submits that the figure calculated by multiplying the maximum penalty against the number of contraventions is of assistance in determining the appropriate penalty. Taking such a mathematical approach would, in any event, be contrary to principle: Markarian at [31]; Reckitt Benckiser at [156]-[157]; Coles at [18].
49 Neither party contends that Superfones's conduct falls into the "worst-case" category, and the penalty sought by the ACCC and that proposed by Superfone both fall substantially short of the maximum penalty for even one contravention. In my view the penalties proposed by the parties confirm that, while the maximum penalty remains relevant, other considerations carry greater weight in the circumstances of the present case.
50 Superfone further argues that the gravamen of the contravening conduct related to its failures to allow for or inform consumers of the cooling off periods and termination rights set by ss 76, 78, 79 and 86 of the ACL, and for that conduct the relevant maximum penalty is $50,000. It submits that the "real and significant harm" arising from its conduct was the disregard for the statutory protections in relation to the cooling off period and entitlements for early termination. It therefore contends that the appropriate penalty should be assessed by reference to a maximum penalty of $50,000 rather than the maximum penalty of $1.1 million for contravention of s 29 (at least for the significant majority of the relevant period).
51 I do not accept this submission. Superfone's contravening conduct went further than breaches of ss 76, 78, 79 and 86. As I have said:
(a) the contraventions of ss 29(1)(g) and (h) comprised representations to consumers by sales representatives that gave the misleading impression that the purpose of the telephone call was to provide discounts or savings on the consumer's existing telecommunications plan, that the sales representative was calling from the consumer's existing telecommunication provider, and that the Services were being offered with the authorisation of or with the approval of the consumer's existing telecommunication provider; and
(b) the conduct in breach of s 29(1)(m) also comprised representations to consumers by sales representative that gave the misleading impression that the consumer was not entitled to a refund of any deposit paid, and a separate misleading representation that the consumer would face large fees if they terminated the agreement.
Contrary to Superfone's submission, it is not the case that the contraventions of s 29(1)(g) and (h), and at least one of the three contraventions of s 29(1)(m), were concerned with disregard for the statutory protections regarding cooling off periods or the right to terminate the Agreements.
52 The maximum penalty for a contravention of s 29 is set by the legislature and I do not accept that, because the facts, or some of the facts, underpinning the findings of contravention of s 29 also give rise to contraventions of other provisions for which a lower maximum penalty is available, the maximum penalty should be considered by reference to that lower amount. To treat the lower maximum penalty for contravention of a different statutory norm as applying to a contravention of s 29 would be to misconstrue the ACL.
53 Superfone also submits that the determination of the maximum penalty is affected by the proper construction of s 224(3A), which applied to its contravening conduct between 1 September 2018 and 7 December 2018. It relies on s 224(3A)(b) and contends that the Court should impose a penalty of $60,000, as that is three times the value of the benefit it received from the contravening conduct being approximately $20,000.
54 Superfone's submission misconstrues s 224(3A), which must be read with s 224(3). Item 2(a) in the table at s 224(3) provides that in respect of contraventions of a provision of Part 3-1 (which includes s 29) in respect of a body corporate the pecuniary penalty is not to exceed "the greater of the amounts mentioned in subsection (3A)" (emphasis added). The three alternative amounts mentioned in subs (3A) are:
(a) $10 million;
(b) if the court can determine the value of the benefit that the body corporate and any related body corporate obtained directly or indirectly, and that is reasonably attributable to the act or omission - three times the value of that benefit;
(c) if the court cannot determine the value of that benefit - 10% of the annual turnover of the body corporate during the 12 month period ending at the end of the month in which the act or omission occurred or started to occur.
55 Since 1 September 2018, the maximum penalty has been the greater of those three amounts. This construction is plain on the text and in the context of s 224(3A) and also consistent with the legislative intent in enacting the provision. The Explanatory Memorandum to the Treasury Laws Amendment (2018 Measures No. 3) Bill 2018 (EM) which amended the ACL to introduce the higher penalties in s 224(3A) expressly provides that the aim of the introduction of higher maximum penalties is to deter conduct that is non-compliant with the ACL where such conduct is "highly profitable" and where "[s]ome entities see these penalties as 'a cost of doing business'": see: EM paragraphs 1.6 and 1.13.
56 The evidence regarding the value of the benefit Superfone received directly or indirectly from its contravening conduct, or having regard to 10% of its annual turnover, shows that the greater of the three alternatives is $10 million, which is therefore the maximum penalty. Superfone's calculation that $60,000 represents three times the value of the benefit it received is not a proper basis from which to determine the maximum penalty.
57 Nor does Superfone's illustration of the operation of s 224(3A) by reference to Telstra's turnover assist it. Where $10 million is not the greater of the amounts mentioned in subs (3A), such as may be the case with a company of the size of Telstra, then the maximum penalty is to be assessed by reference to the other alternative amounts.
[19]
Mandatory factors under s 224(2)
58 The mandatory considerations under s 224(2) are:
(a) the nature and extent of the acts or omissions and any loss or damage suffered as a result of the act or omission;
(b) the circumstances in which the acts or omissions took place; and
(c) whether the person has previously been found by a Court to have engaged in any similar conduct.
59 It is uncontentious that Superfone has not previously been found to have engaged in any similar conduct, and this consideration can be put to one side.
60 First, Superfone submits that its contravening conduct is far from the worst case and contends that the extent and the objective seriousness of the conduct falls at the lower end of the range of seriousness. It also argues that the number of affected consumers is tiny when considered in the context of the broader telecommunications market for such services.
61 It is common ground that Superfone's conduct does not fall into the "worst case" category, but I otherwise do not accept its submission. Superfone committed serious contraventions of the ACL on approximately 1,447 occasions, over a lengthy period. I do not accept that its objective seriousness falls at the low end of the range.
62 Superfone's contention that the number of consumers affected is tiny when considered in the context of the national telecommunications market for such services has little force. The number of consumers affected is, of course, relevant to the objective seriousness of the conduct and the extent of damage suffered. I do not however accept that it is appropriate to give much weight to the fact that its conduct occurred within a much larger market. Nor do I treat the 1,447 occasions upon which the contraventions did occur as a minimal or trivial number of occasions.
63 Second, Superfone submits that the gravamen of the conduct related to failures to allow for or inform consumers of the cooling off periods and termination rights set by ss 76, 78, 79 and 86 of the ACL, and says that the "real and significant harm" arising from its conduct was the disregard for the statutory protections in relation to the cooling off period and entitlements for early terminations. As previously explained I do not accept that submission. Its contravening conduct was substantially broader than that.
64 Third, Superfone contends that the seriousness of its contraventions of ss 29(1)(g) and (h) is reduced because the misleading representations that the sales representatives were affiliated with, authorised by, or contacting the consumer with the approval of the consumer's existing telecommunication provider were corrected during the making of the oral Agreement and therefore the misleading impression was of short duration. Relatedly it argues that this conduct only had the effect of "opening the door" so that Superfone could compete for the consumer's business on price as against their existing telecommunications provider. It submits that the effect of the contraventions of ss 29(1)(g) and (h) was short lived and of limited effect.
65 I do not accept this submission. Superfone's sales representatives gave the misleading impression that they were calling from the consumer's existing provider or that the Services were being offered with the approval of the consumer's existing provider. They did not explain that they were calling from a small telemarketing company from India which had no relationship with the consumer's existing telecommunication provider, which conduct opened the door to all of Superfone's subsequent breaches. Those breaches included giving consumers the misleading impression that they had no right to a cooling off period, were not entitled to a refund of any deposit paid and would face large fees if they terminated the Agreement. I have little doubt that these further representations were made in an attempt to lock the consumer into an Agreement reached in the course of an unsolicited telemarketing call. I do not accept that the harm flowing from the contraventions of ss 29(1)(g) and (h) was short lived and of limited effect.
66 Superfone's Managing Director, Mr Jaspreet Singh Budhraja, gave evidence that the misleading representations arose from sales representatives departing from the sales script in inappropriate ways. This evidence was in support of the submission that consumers were disabused of the misleading impression that Superfone was somehow affiliated with or approved by the consumer's existing telecommunication provider; in this respect he emphasised the references in the sales script to the Agreements being with Superfone. I am not persuaded that the contraventions were the result of rogue conduct by a few sales representatives. Superfone's activities in misleading consumers into thinking that the unsolicited telemarketing calls were made by or with the authority or approval of their existing telecommunication providers has the appearance of a deliberate strategy to get through the difficult early part of such a call and to entice consumers into its marketing web.
67 Further, the suggestion that the misleading representations were the result of a few sales representatives departing from the sales script is inconsistent with Superfone's admissions regarding the nature and scale of its contraventions. In paragraph [13] of the SAFA on Relief, Superfone admitted that "Superfone's senior management, including the individuals listed in paragraph 4 of this SAFA on Relief [being, Mr Budhraja, Amarpreet Singh Budhraja, Paul Robertson (also known as GaganDeep Singh)], knew, and approved of, the conduct described in paragraphs 7 to 11 of the SAFA on Liability." It is impermissible for Superfone to now retreat from that admission. The evidence does not support an inference that the contraventions were isolated incidences of inappropriate behaviour by employees who departed from the script. It indicates that that the contravening conduct was sanctioned by Superfone's management.
68 Relatedly, the evidence relied upon to support the contention that these misleading representations were corrected, is weak. It boils down to a contention that merely because Superfone later said to the consumer that their Agreement was with Superfone, the consumer must have understood that Superfone was not somehow affiliated with or approved by the consumer's existing telecommunications provider. In circumstances where Superfone did not make a positive correction or qualification of the misleading representation of affiliation or approval, I can see no good reason to infer that consumers joined the dots and understood that Superfone was not in fact related to the consumer's existing provider.
69 Superfone seeks to rely upon Australian Competition and Consumer Commission v Valve Corporation (No 3) [2016] FCA 196; (2016) 337 ALR 647 at [214] in which Edelman J discussed the relevance of qualifications and corrections made in documents which also contained misleading or deceptive representations. Its reliance is misplaced. Valve concerned the requirement, when deciding whether or not a representation is misleading, to consider the impugned representation together with any qualifications and corrections to that statement. That is different from the present case in which Superfone admits that, in a number of ways, it made misleading representations in contravention of s 29. Here the question is whether those misleading representations were later corrected. As I have said, I am not persuaded that they were.
70 Fourth, in aid of the contention that it provides a valuable service which is comparatively cheap, Superfone submits that its customer base includes many elderly people and people who receive social security benefits. It argues that if too great a penalty is imposed it will go into insolvency and these vulnerable consumers will be forced to pay more. As I later explain, I have taken into account the risk that Superfone may become insolvent but the nature of its customer base cuts both ways. It tends to show that Superfone targeted vulnerable consumers, or at least were only successful in securing Agreements with vulnerable consumers, who as a class were less capable of protecting their consumer rights. There is or at least may be a predatory dimension to Superfone's marketing strategy.
71 Fifth, in support of an argument that the contraventions were less serious than the ACCC says, Mr Budhraja said that they occurred because Superfone did not understand the regulatory scheme in Australia. I do not accept Mr Budhraja's evidence in this regard. While Superfone was a new entrant to the Australian market Mr Budhraja was not. He accepted in cross-examination that he had about 15 years' experience in the Australian telecommunications market and that prior to Superfone's entry into the Australian market he had undertaken research into the telecommunications industry in Australia and the domestic market.
72 Mr Budhraja's claim that he had never undertaken any compliance training in relation to his obligations under the ACL, up until he was contacted by the TIO, may or not be true. But it is unlikely, given his experience offering telecommunication services in the Australian market, that he was completely unaware of the obligations of telecommunications services providers to consumers. For example, the fact that Superfone recorded the formation of an oral Agreement with consumers, during which the sales representative was required to read out the terms and conditions of the Agreement, and the fact that Superfone's sales representations were alive to the relevance of a right to terminate, tends to show that Mr Budhraja had some understanding of Superfone's obligations.
73 In any event Superfone's claim to have been ignorant of the law is of little assistance to its submissions regarding penalty. Indeed, to some extent it tells against mitigation. A company seeking to conduct a business providing telecommunication services to consumers in Australia has an obligation to comply with the ACL and its State analogues, which entails familiarising itself with the relevant regulatory framework. Superfone should have known that misleading or deceptive conduct is prohibited. A failure to understand that provides little support for a reduction in the penalty for contraventions of the relevant norms.
74 Sixth, I do not accept Superfone's submission that the damage or harm done to affected consumers should be viewed as limited to the termination fees paid by persons who entered into Agreements with Superfone, and who subsequently terminated them. All 1,447 consumers who entered into the Agreements were the subject of misleading representations in contravention of s 29. It is open to infer that many of them would not have entered into the Agreement had they known that:
(a) they were contemplating entering into an Agreement with a small telecommunication provider based in India with a business based on unsolicited telemarketing calls;
(b) there was no basis for the representations made to them about affiliation with or approval by their existing telecommunication provider; and
(c) there was no basis for the representations made that they were not entitled to a refund of any deposit and would face large fees if they terminated the Agreement.
75 I can accept Superfone's submission that, if they did not incur termination fees either from Superfone or from their existing telecommunication provider, consumers were not financially disadvantaged by entering into the Agreements, as it appears the rates charged for the Services were at the low end. But I do not accept its contention that the value of the benefit it gained from the contravening conduct is only the termination fees it was paid by consumers. It submits that the maximum benefit that it could be considered as having received from the contravening conduct is $37,517.48. That submission, however, proceeds on the assumption that it received no further benefit from the 1,447 contracts it entered into, when it plainly did.
76 Further, Superfone's submissions in relation to the extent of the harm occasioned by its conduct are also, to an extent, inconsistent with its admissions that its contraventions may have resulted in consumers (and other businesses) suffering harm by:
(a) being enticed to consider engaging in communications or negotiations with it;
(b) entering into Agreements in circumstances where they would not otherwise have done so;
(c) incurring fees that were charged by their existing provider for 'exiting' their contract and changing to Superfone, in the mistaken belief that they were "locked in" to the Agreement they had made with Superfone;
(d) paying termination fees to Superfone, which Superfone were not entitled to charge;
(e) being denied the right to reconsider their decision to enter into the Agreements because Superfone did not inform consumers of the statutory cooling off period; and
(f) business being directed away from the existing or competing telecommunication providers.
77 I consider the contravening conduct to be serious and substantial, and the loss or damage suffered by consumers to be significant. The nature and extent of the contravening conduct, the extent of the loss or damage suffered, and the circumstance in which the acts or omissions took place, point away from a penalty in the amount proposed by Superfone.
[20]
Superfone's size and its financial position
78 Superfone is a very small company, making small profits. This is significant to the view I have reached in relation to penalty.
79 I broadly accept Mr Budhraja's evidence regarding the small profits Superfone made during the financial years covering the relevant period. However in my view it is also appropriate to take into account the payments made by Superfone to its related company Inspire Telecom, some of which were passed through to Mr Budharajah and others. Superfone's financial statements for the relevant period say that:
(1) in the financial year 2016/17 it made gross sales of $524,861 and a net loss of $8,226. $146,003 was paid to Inspire Telecom;
(2) in the financial year 2017/18 it made gross sales of $933,278 and a net profit of $5,332. $279,347 was paid to Inspire Telecom; and
(3) in the financial year 2018/19 it made gross sales of $1,009,478, and a net loss of $1,477. $298,345 was paid to Inspire Telecom.
It is apparent from these figures that Inspire Telecom received not insubstantial amounts from Superfone.
[21]
The deliberateness of the contravening conduct
80 I am satisfied that the contravening conduct was deliberate. This is significant to the view I have reached in relation to penalty.
[22]
Whether the contravention arose out of the conduct of senior management
81 Superfone admits that its senior management knew of and approved of the conduct that constituted the contraventions of the ACL. This too is significant to the view I have reached in relation to penalty.
[23]
Whether the contravener has shown a disposition to cooperate with the authorities responsible for the enforcement of the Act
82 Superfone has, since February 2019, developed a compliance program to ensure that it does not engage in further contraventions of the ACL. It also consented to the declarations of contravention and to the injunctive relief sought by the ACCC. Superfone also consented to consumer redress orders although expressed to cover a smaller cohort of consumers than those proposed by the ACCC, such that the disadvantages for it would be lessened.
83 Superfone submits that it has fully cooperated with the ACCC's investigation and these proceedings and is entitled to a substantial discount to any penalty set as a result of the cooperation. I accept that Superfone has cooperated with the ACCC which indicates a reduced penalty but its cooperation only went so far. The parties and the community did not avoid a contested hearing in relation to penalty, and Superfone's submissions in relation to penalty are overstated. While this factor points to a reduced penalty, Superfone's cooperation does not justify a reduction in the penalty to the level it seeks.
[24]
Whether the contravener accepts responsibility for the contravention, including by expressing remorse or contrition
84 Superfone has apologised and expressed remorse for the contravening conduct. It also consented to consumer redress orders which is further evidence of contrition: Woolworths at [166].
[25]
Whether compensation is to be paid to the affected consumers
85 I have made consumer redress orders, which reduces the loss and damage suffered by consumers. This operates in mitigation of the penalty to be imposed.
[26]
Deterrence
86 As earlier set out, the authorities show that the principal object of a pecuniary penalty under the ACL is to attempt to put a price on contravention that is sufficiently high to deter repetition by the contravener and by others who might be tempted to contravene the Act. The Court must fashion a penalty which makes it clear that the cost of courting a risk of contravention cannot be regarded as an acceptable cost of doing business. To achieve general deterrence a penalty must be a sum that members of the public will recognise as significant and proportionate to the seriousness of the contraventions, but a penalty must not however be so high as to be oppressive.
87 As the Full Court said in Pattinson at [111]:
Proportionality is relevant not because a notion of retribution is being expressed or manifested in a free-standing principle, but because of a balance in the reaching of an "appropriate" penalty between an "insistence" on deterrence and an "insistence" on not imposing more than is reasonably necessary (NW Frozen Foods) as part of the reasonable and lawful exercise of judicial power (cf Banerji) in respect of a contravention before the court and in furtherance of the object of deterrence of contraventions of like kind.
88 In the circumstances of the present case the requirement for specific deterrence is a material but not central consideration in assessing the appropriate penalty. First, that is because Mr Budharaja gave unchallenged evidence that Superfone no longer engages in making unsolicited offers to consumers for its Services. Second, Superfone has consented to injunctions which restrain it from a repetition of similar conduct for three years from the date of the orders. Third, the training programs and compliance efforts made by Superfone since the contraventions will also assist it in avoiding a repetition of similar conduct: NW Frozen Foods at 294.
89 The requirement for general deterrence is, however, fundamental to the view I have reached. Proper regard must be had to the need to deter like conduct by other companies in the telecommunications industry from such serious, deliberate and sustained breaches of the ACL. In my view a penalty of $60,000 would be manifestly inadequate to do so. With contraventions of this nature and gravity over such an extended period of time I consider the aim of general deterrence is likely to be served by a penalty of $300,000. Such a penalty is substantial when seen in the context of the Superfone's size and financial capacity. It is unlikely to be seen by other companies in the telecommunications industry as being merely an acceptable cost of doing business, and it also takes into account the requirement to avoid a penalty which is oppressive. I would have ordered a substantially higher penalty for such contraventions had Superfone been larger and financially stronger.
90 Superfone submits that a pecuniary penalty, when coupled with the costs of meeting the consumer redress orders as well as paying the ACCC's costs, is likely to lead to insolvency and that an order leading to such a result is oppressive, relying on NW Frozen Foods at 294. I accept that the imposition of a pecuniary penalty of $300,000 may lead to Superfone becoming insolvent. It is, however, necessary to balance the requirement for deterrence against the risk of insolvency, and any such risk is no bar to the imposition of a penalty in an amount that the Court considers will achieve the important object of general deterrence: Australian Competition and Consumer Commission v High Adventure Pty Ltd [2005] FCAFC 247 at [11] (Heerey, Finkelstein and Allsop JJ); Australian Securities and Investments Commission v AGM Markets Pty Ltd (in liq) (No 4) [2020] FCA 1499 at [35] (Beach J) and the cases cited therein. As Merkel J said in Leahy Petroleum at [9]:
…a contravening company's capacity to pay a penalty is of less relevance to the objective of general deterrence because that objective is not concerned with whether the penalties imposed have been paid. Rather, it involves a penalty being fixed that will deter others from engaging in similar contravening conduct in the future.
91 In my view a penalty of $300,000 is not oppressive, as it is "a penalty that is no greater than is necessary to achieve the object of general deterrence". A penalty will not be oppressive merely because it also imposes a significant burden, even a very significant burden amounting to financial hardship on the contravener: NW Frozen Foods at 293; Leahy Petroleum at [9]; Commissioner of Taxation v Arnold (No 2) [2015] FCA 34; (2015) 324 ALR 59 at [204] (Edmonds J); Australian Communications Media Authority v Mobilegate Ltd A Company Incorporated in Hong Kong (No 4) [2009] FCA 1225; (2009) 180 FCR 467 at [36] (Logan J).
92 Finally, Superfone's submission that the assessment of the appropriate penalty is assisted by a comparison between it and a larger telecommunications provider as a theoretical contravener is not remotely useful. It would be redolent with error to assess an appropriate penalty by reference to the potential maximum penalty that may obtain in a hypothetical case involving different contraventions by a different company in the same industry rather than by reference to Superfone's circumstances and its contravening conduct.
[27]
Parity
93 As was noted by the Full Court in NW Frozen Foods at 295, and adopted in the ACL context in Woolworths at [129]-[137], while a hallmark of justice is equality before the law, and all things being equal, "corporations guilty of similar contraventions should incur similar penalties", the facts are rarely the same and comparisons may be difficult and of limited utility. It is axiomatic that Court decisions are authority for matters of principle, but a penalty decided on the basis of findings of fact in one case which differ from the circumstances of another case cannot dictate the penalty in that other case: Woolworths at [133].
94 Superfone seeks to rely on the decision in Australian Competition and Consumer Commission v BUPA Aged Care Pty Ltd [2020] FCA 602 (Mortimer J). It submits that the remediation in that case was three times larger than the penalty imposed. Having regard to the different facts of that case I derived little assistance from the decision. In that case the parties agreed that BUPA's misleading and deceptive conduct was not deliberate and was the consequence of inadequate systems of which its senior management were not aware until shortly before it voluntarily self-reported the conduct. BUPA put in place a remediation process for affected residents without having consumer redress orders being made, although consent orders were subsequently made permitting enforcement of that regime. It agreed to a penalty in return for which it received a discount that reflected the fact that BUPA had made admissions prior to the commencement of proceedings and provided early cooperation to the ACCC. That is different to the circumstances in the present case. The decision in BUPA does not dictate an approach of general application.
95 Superfone also seeks to rely on the settlement reached between the ACCC and BVivid Pty Ltd. Although there are some similarities between the present case and the unsolicited sales strategy used by BVivid in the supply of NBN services, and its contraventions of s 29, the cases are not comparable nor a useful analogue. First, BVivid's admissions were made at an early stage of the investigation and it resolved the dispute with the ACCC without any recourse to the institution of proceedings. That is markedly different to this proceeding, which has resulted in the considerable use of resources by the ACCC and the Court. Second, it is difficult to discern from the limited evidence before the Court what the contributing factors were in the agreement of a low pecuniary penalty. Third, BVivid admitted that it was likely that its conduct had contravened the ACL, it did not admit that it had done so. I derived little assistance from the settlement involving BVivid in assessing the appropriate penalty in this case.
[28]
The totality principle
96 Superfone submits that, when regard is had to the declarations made in the proceeding and the injunctions to which it has agreed, as well as the consumer redress orders, the application of the totality principle tells in favour of a penalty of $60,000.
97 I take a different view.
98 First, the terms of the injunction in essence require Superfone to act in a manner which is consistent with the provisions of the ACL. There is no punitive dimension to the injunctions and the grant of them has little relevance to the application of the totality principle.
99 Second, the consumer redress orders are compensatory in nature and not punitive: Australian Competition and Consumer Commission v Clinica Internationale Pty Ltd (No 2) [2016] FCA 62 at [244]-[247] (Mortimer J). While I have treated the requirement for Superfone to remediate consumers as relevant to the assessment of the appropriate penalty (Woolworths at [166]) the orders have limited relevance to the application of the totality principle.
100 Third, the declarations reflect the fact that Superfone has admitted the contraventions and, amongst other things, the Court's disapproval of its conduct. They may affect Superfone's reputation but they are not punitive in nature and they have little relevance to the application of the totality principle.
101 Fourth, the application of the totality principle requires an assessment as to whether, having regard to the admitted contraventions and the penalties to be fixed, the aggregate penalty is "just and appropriate": Mill at 63. The Court must consider the proposed penalty to see whether it looks wrong having regarding to the totality of the conduct and the factors relevant to the particular case.
[29]
Conclusion
102 I have undertaken an instinctive synthesis by reference to the multiplicity of breaches, taking a broad view of the courses of conduct, and assessing the overall extent and seriousness of the offending conduct including its deliberateness, the number of contraventions, the period over which they occurred, and the harm occasioned by them. I have also taken into account the other relevant considerations to which I have referred, including the size of Superfone, its limited financial capacity, and the risk that it may become insolvent, together with the fundamental importance of deterrence. In the circumstances I consider an aggregate penalty of $300,000 to be appropriate.
[30]
Power to order consumer redress
103 Section 239 of the ACL relevantly provides:
Orders to redress etc loss or damage suffered by non-party consumers
(1) [Order to redress non-party consumer]
If:
(a) a person:
(i) engaged in conduct (the contravening conduct) in contravention of a provision of Chapter 2, Part 3-1, Division 2, 3 or 4 of Part 3-2 or Chapter 4; or
(ii) is a party to a consumer contract who is advantaged by a term (the declared term) of the contract in relation to which a court has made a declaration under section 250; and
(b) the contravening conduct or declared term caused, or is likely to cause, a class of persons to suffer loss or damage; and
(c) the class includes persons who are non-party consumers in relation to the contravening conduct or declared term;
a court may, on the application of the regulator, make such order or orders (other than an award of damages) as the court thinks appropriate against a person referred to in subsection (2) of this section.
(2) [Order against person involved in conduct]
An order under subsection (1) may be made against:
(a) if subsection (1)(a)(i) applies - the person who engaged in the contravening conduct, or a person involved in that conduct; or
(b) if subsection (1)(a)(ii) applies - a party to the contract who is advantaged by the declared term.
(3) [Order must redress loss or damage]
The order must be an order that the court considers will:
(a) redress, in whole or in part, the loss or damage suffered by the non-party consumers in relation to the contravening conduct or declared term; or
(b) prevent or reduce the loss or damage suffered, or likely to be suffered, by the non-party consumers in relation to the contravening conduct or declared term.
…
104 As I said in Director of Consumer Affairs Victoria v Domain Register Pty Ltd (No 2) [2018] FCA 2008 at [13], ss 239 to 242 of the ACL are in substance the successors to s 87AAA of the Trade Practices Act 1974 (Cth) (the TPA), which was introduced into the TPA by the Trade Practices Amendment (Australian Consumer Law) Act (No 1) 2010 (Cth). In Australian Competition and Consumer Commission v Yellow Page Marketing BV (No 2) [2011] FCA 352; (2011) 195 FCR 1 at [128]-[129] Gordon J considered s 87AAA of the TPA and set out the criteria that must be satisfied before the Court may make an order. By analogy the same criteria apply to s 239(1).
105 It is common ground between the parties that the Court has power to make consumer redress orders and that consumer redress orders are appropriate. The Court's power to make such orders is plain in circumstances where:
(a) Superfone has admitted the contraventions of ss 18, 29, 76, 77, 78, 79 and 86, which appear respectively in Chapter 2, Part 3-1 and Division 2 of Part 3-2: s 239(1)(a)(i).
(b) that contravening conduct caused, or at least was likely to cause, a class of persons to suffer loss or damage: s 239(1)(b).
(c) the class includes persons who are non-party consumers in relation to the contravening conduct: s 239(1)(c).
(d) the orders will redress, prevent or reduce the loss or damage suffered by non-party consumers in relation to the contravening conduct: s 239(3)(a) and (b).
106 The parties however differ as to the scope of the appropriate consumer redress orders.
107 The ACCC contends that Superfone should be ordered to email to affected consumers the notices in Annexures A, B and C to its proposed orders. Then, subject to the claim or election of the affected consumers, Superfone be required to refund any Termination Fees paid by the affected consumers with interest, and/or release the effective consumer from the Agreement without charging any Termination Fees should the consumer elect to exit the contract.
108 The ACCC submits that the notices in Annexures A, B and C to its proposed orders should be sent to the following classes of affected consumers:
(1) Persons who entered into Agreements in the relevant period with Superfone and subsequently terminated the Agreement, whether by way of early termination or where the Agreement was terminated by Superfone for non-payment of the consideration alleged to be payable to Superfone for the provision of the Services. Both categories of these consumers were required by Superfone to pay termination fees which Superfone had no entitlement to demand or be paid because the termination period under s 82(3)(d)(ii) had not and has not to date expired for any affected consumers because the contraventions of ss 76, 78 and 79 of the ACL had not and have not been rectified. The total amount of refunds payable by Superfone for this class of persons is estimated by the parties to be no more than: $37,517.48 plus interest - (Category 1).
(2) Persons who entered into Agreements in the relevant period with Superfone and subsequently continue to use the Services but can elect to terminate the Agreement using the process set out in Annexure B, without having to pay a termination fee - (Category 2).
(3) Persons who entered into Agreements in the relevant period with Superfone and whose Agreements have subsequently expired and who are presently receiving the Services on a month to month rolling basis, but who have not agreed, whether orally or in writing, to enter into a month to month rolling contract and may therefore be unaware of their rights to terminate the Agreement without being charged a termination fee - (Category 3).
109 Superfone opposes a consumer redress order in relation to persons in Category 3 on the basis that such an order would concern "consumers that are outside of the pleaded and admitted conduct in that they are (a) they are consumers that are not bound by any of the Agreements formed in the Relevant Period; and (b) as such they are consumers that do not have any possible liability to pay any fee under any Agreement from the Relevant Period should those consumers choose to terminate Superfone's supply of services to them."
110 I do not see how this submission is consistent with the proposed orders filed by Superfone, but in any event it is misconceived. The ACCC's proposed order in relation to persons in Category 3 applies to consumers whose Agreement has expired, but to whom Superfone has continued to supply services without the express oral or written agreement of the consumer, doing so on a rolling month-to-month basis. It does not apply to any persons who have entered into another agreement with Superfone for the supply of Services.
111 It is unclear how Superfone argues that the Agreements of consumers in Category 3 fall outside of the pleaded conduct or the admitted contraventions when they entered into their Agreements to receive the Services from Superfone during the relevant period, and Superfone has admitted that these Agreements were affected by the contravening conduct. By operation of s 82(3)(d)(ii) of the ACL the termination period applying to these Agreements has not expired. The section provides that the period during which the consumer can terminate the Agreement runs for 6 months, commencing on the day the consumer was given the agreement document relating to the agreement. It is unclear how many of the Category 3 consumers were given any document evidencing the Agreement prior to the expiry of the Agreement, but Superfone has admitted that at no time during the relevant period did the Documents it provided meet the requirements of s 79 of the ACL.
112 Superfone's submissions in this regard are unclear. If its submissions are to be understood as stating that the Category 3 consumers have a right to terminate their existing agreements without having to pay any fee because the relevant Agreements have expired and there is no liability for any termination fee under the original Agreement, then that can be accepted. But the fact that consumers have a right to terminate the Agreements without fee does not mean that there is no utility in their being provided a notice that communicates the substance of Superfone's unlawful conduct and that they have the right to terminate the Agreement without fee. The Agreements were entered into in contravention of the applicable consumer protections and it is appropriate that affected consumers receive notice of their rights in this respect.
113 Superfone also opposes Category 3 consumers being sent an Annexure C notice on the basis that it will adversely affect their continuing relationship with Superfone. I accept that Superfone's continuing relationship with these consumers may be adversely affected if consumers are given notice of its admitted unlawful conduct, including that such consumers may elect to end their relationship with the company. That is not, however, a good reason not to make the orders. Any such result is an outcome of Superfone's admitted contraventions. Superfone did not put on evidence to show that Category 3 consumers have positively elected to continue to use the Services on a month to month basis despite knowing of Superfone's contraventions. In the absence of such evidence I infer that many such consumers may be unaware their Agreement has expired and that they may exit the relationship with Superfone without fee.
114 Mr Budharaja said that the remaining customer base from Agreements entered into in the relevant period comprise approximately 291 persons. Superfone submits that the Annexure C notice may be the "straw that breaks the camel's back", and lead to their mass exodus. That may or may not be so. In the circumstances of the case I consider it appropriate that they be informed of Superfone's contravening conduct. Whether they elect to exit their Agreements with Superfone is a matter for them.
115 It is also worth noting that Superfone's submissions opposing Annexure C notices being provided to Category 3 consumers is contrary to the SAFA on Relief in which it accepted the requirement to issue corrective notices to all consumers who had entered into Agreements with it during the relevant period. Order 7 and the Annexure C notices fall squarely within this agreed form of relief.
[31]
The effect of consumer redress orders and pecuniary penalty orders
116 Although this issue was not squarely addressed by the parties, there is a question of preference between the consumer redress orders and the pecuniary penalty order. The issue emerges from Superfone's submission that if it is required to pay both a pecuniary penalty and compensation pursuant to the consumer redress orders it will become insolvent.
117 Section 227 of the ACL provides:
If a court considers that:
(a) it is appropriate to order a person (the defendant) to pay a pecuniary penalty under section 224 in relation to:
(i) a contravention of a provision referred to in subsection (1)(a) of that section; or
(ii) conduct referred to in subsection (1)(b), (c), (d), (e) or (f) of that section that relates to a contravention [of] such a provision; and
(b) it is appropriate to order the defendant to pay compensation to a person who has suffered loss or damage as result of that contravention or conduct; and
(c) the defendant does not have sufficient financial resources to pay both the pecuniary penalty and the compensation;
the court must give preference to making an order for compensation.
118 As Mortimer J said in Clinica at [246]-[247]:
The text of the provision indicates that it is only if the preconditions concerning the insufficiency of the respondents' assets are established that the Court's orders are required to be structured so as to give preference to compensation orders, if those are also to be made. The purpose is to ensure that where there is a limited pool of assets, the consumer protection objectives of the ACL are served by giving those consumers who have been adversely affected by the contravening conduct the best opportunity of recovering some compensation, before any payments are made to consolidated revenue.
119 In my view the requirement in s 227 for preference to be given to the consumer redress orders is not enlivened in the present case. It is unknown how much by way of refunds of Termination Fees will be claimed by former Superfone customers, and unknown how many affected consumers will terminate their Agreements with Superfone under either Order 6 or 7. Thus there is little evidence to show what Superfone will or may be required to pay through the consumer redress orders, or what Superfone's ongoing financial capacity will be. If Superfone wished to persuade me that it does not have sufficient financial resources to pay both a pecuniary penalty and compensation it needed to put on cogent evidence to that effect, and it did not. It can be accepted that its financial position is not strong, and that there is a risk or a prospect that it may become insolvent, but the evidence as to its financial position and ongoing capacity is limited and opaque.
120 In my view there is insufficient evidence to allow the Court to be satisfied that Superfone do not have sufficient financial resources to pay both a pecuniary penalty and compensation pursuant to the consumer redress scheme. Consequently, I am not persuaded that it is appropriate to order that the consumer redress orders be given preference in the hierarchy of payments.
[32]
Costs
121 Superfone has consented to an order that it pay the ACCC's costs in the proceedings, to be taxed if not agreed.
[33]
Conclusion
122 For these reasons I have made the attached orders.
I certify that the preceding one hundred and twenty-two (122) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Murphy.
sumer Commission v Yazaki Corporation [2018] FCAFC 73; (2018) 262 FCR 243
Australian Competition and Consumer Commission v Yellow Page Marketing BV (No 2) [2011] FCA 352; (2011) 195 FCR 1
Australian Securities and Investments Commission v AGM Markets Pty Ltd (in liq) (No 4) [2020] FCA 1499
Commissioner of Taxation v Arnold (No 2) [2015] FCA 34; (2015) 324 ALR 59
Commonwealth of Australia v Director, Fair Work Building Industry Inspectorate [2015] HCA 46; (2015) 258 CLR 482
Construction, Forestry, Mining and Energy Union v Cahill [2010] FCAFC 39; (2010) 269 ALR 1
Director of Consumer Affairs Victoria v Domain Register Pty Ltd (No 2) [2018] FCA 2008
Director of Consumer Affairs Victoria v Gibson (No 3) [2017] FCA 1148
ICI Australia Operations Pty Ltd v Trade Practices Commission (1992) 38 FCR 248
Mill v The Queen [1988] HCA 70; (1988) 166 CLR 59
NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission [1996] FCA 1134; (1996) 71 FCR 285
Pattinson v Australian Building and Construction Commissioner [2020] FCAFC 177; (2020) 384 ALR 75
Singtel Optus Pty Ltd v Australian Competition and Consumer Commission [2012] FCAFC 20; (2012) 287 ALR 249
Trade Practices Commission v CSR Ltd [1990] FCA 762; (1991) ATPR 41-076
Trade Practices Commission v Stihl Chainsaws (Aust) Pty Ltd (1978) ATPR 40-091
Truth About Motorways Pty Ltd v Macquarie Infrastructure Investment Management Ltd [2000] HCA 11; (2000) 200 CLR 591