Australian Competition & Consumer Commission v Australian Taxation Information Services Pty Ltd

(c) there is no legal requirement whatsoever to register with the Australian Taxation Service or to acquire any services from it; and

(d) if the recipient has sent a cheque or money order, there are now court orders in place requiring that either the cheque or money order be returned or, if banked, that the recipient receive a full refund,

such failure being in breach of par 3 of the order of Kiefel J made on 16 July 1999.

The Court holds the second respondent to be in contempt of the Court in that he failed to:

On or before 23 July 1999 send a letter to each person to whom the first respondent had sent a GST registration form ("a recipient"), such letter to be in a form approved by the applicant and to clearly state that:

(a) neither the first respondent nor the second respondent has or has had any association whatsoever with the Australian Taxation Office or any agency or department of the Commonwealth of Australia;

(b) the service offered by the first respondent is an information service that is not endorsed, sponsored or approved in any way by the Australian Taxation Office or any agency or department of the Commonwealth of Australia;

(c) there is no legal requirement whatsoever to register with the Australian Taxation Service or to acquire any services from it; and

(d) if the recipient has sent a cheque or money order, there are now court orders in place requiring that either the cheque or money order be returned or, if banked, that the recipient receive a full refund,

such failure being in breach of par 3 of the order of Kiefel J made on 16 July 1999.

The Court further holds that the second respondent is in contempt of the Court in that he failed to file and serve an affidavit on or before 20 July 1999 setting out a full mailing list as at the date of the said order, of all persons, companies or other entities to whom the GST registration form was sent, contrary to the provisions of par 12 of the said order. The Court orders that: 1. The first respondent pay a fine of $5,000;

2. In connection with the second respondent's failure to comply with par 3 of the order, he be committed to theMelbourne Assessment Prison for the period of three months from this day or until other earlier order;

3. A warrant for committal of the said second respondent issue pursuant to Order 39 rule 9 of the Rules of Court;

4. In connection with the failure to comply with par 12 of the said order, there be no penalty;

5. The respondents pay the applicant's costs of these proceedings to be taxed on a "solicitor and client basis".

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

BETWEEN: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION

AND: AUSTRALIAN TAXATION INFORMATION SERVICES PTY LTD ACN 087 899 563

REASONS FOR JUDGMENT 1 These are proceedings for contempt of court constituted by failure to comply with orders made by Kiefel J in Brisbane on 16 July 1999, arising out of proceedings commenced by the Australian Competition and Consumer Commission against Australian Taxation Information Services Pty Ltd and Michael Phillip Ivanoff, a director thereof. The proceedings arose out of a venture undertaken by the first respondent, by which it circulated small businesses with material suspiciously similar in appearance to Australian Taxation Office documents, inviting them to send money in connection with the proposed introduction of a goods and services tax. 2 The applicant was concerned that the conduct was misleading and deceptive and commenced proceedings in this Court, the result of which was embodied in the consent orders made by her Honour on 16 July 1999. Two orders are relevant for present purposes. The first is contained in par 3 as follows: The first and second respondents on or before 23 July 1999 send a letter to each person to whom the first respondent has sent a GST registration ("a recipient"), such letter to be in a form approved by the applicant and to clearly state that: (a) neither the first respondent nor the second respondent has or has had any association whatsoever with the Australian Taxation Office or any agency or department of the Commonwealth of Australia;

(b) the service offered by the first respondent is an information service that is not endorsed, sponsored or approved in any way by the Australian Taxation Office or any agency or department of the Commonwealth of Australia;

(c) there is no legal requirement whatsoever to register with the Australian Taxation Service or to acquire any services from it; and

(d) if the recipient has sent a cheque or money order, there are now court orders in place requiring that either the cheque or money order be returned or, if banked, that the recipient receive a full refund.

3 The second is in par 12 as follows: A full affidavit be sworn and filed by the second respondent on or before 20 July 1999, which sets out a full mailing list as at the date of this order, of all persons, companies or other entities to whom the GST registration form was sent.

4 The order contained in par 3 required compliance on or before 23 July 1999. this was apparently because, perhaps by analogy to the tax system, the relevant documents had invited responses by 30 July. It was feared that substantially more people might respond in the week leading up to 30 July. 5 The applicant seeks orders dealing with the first and second respondents for contempt, alleging non-compliance with orders 3 and 12. Such non-compliance is admitted by both respondents. The claimed contempts are clearly demonstrated on the evidence. I am satisfied beyond all reasonable doubt that they have occurred. 6 There has been some belated attempt to comply. With respect to order 3, relevant letters have allegedly been prepared, this having occurred sometime late in September of this year, well after the time for compliance. The letters have not been posted, allegedly because the respondents are not in a financial position to do so. As to par 12 of the order, the second respondent has complied to the extent of forwarding to the applicant a disk which contains the relevant information, but no affidavit deposing to its accuracy or comprehensiveness. The applicant concedes that in those circumstances, the non-compliance is largely formal, and that no significant consequence should, in the circumstances, flow from that breach. It is the breach of order 3 with which I am primarily concerned. 7 These proceedings have been conducted upon the basis that the respondents are, in effect, alter egos, each for the other. We have concentrated on the financial position of the second respondent, but it seems that the first respondent was very much dependent upon the second respondent for funding. In view of the fact that they were both obliged to comply with the order contained in par 3, this is probably not of much significance. 8 As I have said, par 3 was to be complied with within a relatively short period of time, that is, between the date the order was made (16 July) and the date specified in the order (23 July). There is no dispute that it was consented to upon appropriate instructions from the second respondent on his own behalf and on behalf of the first respondent. There can be no doubt that he must have understood what was involved. 9 He says now that he did not understand the seriousness of failure to comply, but I have considerable difficulty in accepting that assertion. He seems to be a person who has had some substantial business experience. Further, much of the conduct which has occurred since the applicant commenced proceedings for contempt suggests that he is aware of the need at least to appear to be trying to comply with the order. Of course, it is possible that the significance of the matter has been explained to him since the order was made, but as I say, I find it difficult to accept his assertion that he did not understand the significance of the order.

10 The respondents took no step between 16 July and 23 July to effect compliance. Nothing in the second respondent's affidavit material explains how he thought he could comply with the order at the time that he gave instructions to consent to it. There is a garbled explanation of sorts at pars 4 and 5 of his affidavit of 11 November 1999, where he says:

I say that at the time that I instructed my former solicitor, John Henderson, to sign the consent orders I was relieved that the matter was resolved and I believed at that time I could comply with the consent order. On reflection it soon became apparent that by 13 August 1999 I was not in a financial position to post the 20,000 letters at a cost of $9000.

11 This says nothing about how he thought he would comply by 23 July as required by the order. It seems that the likely present cost of addressing, sorting and posting the letters is the sum of $9000, or at least that is the figure he has put forward. 12 The absence from his affidavit of any attempt to explain the circumstances in which he consented to the order suggests strongly that he has nothing to say about that subject, or nothing that will help his case in any event. In the course of cross‑examination there was some suggestion that he had thought that he could rely on his family to provide money, but that his parents were themselves short of funds at the time. That had very much the taste of afterthought about it. 13 In any event, circumstances which have occurred since 23 July suggest that he probably had access to funds at the time. He is not a man without assets. He has a house in Western Australia which he claims is valued at something in the order of $220,000. It is presently mortgaged for a sum of about $206,000. How a person could borrow that amount of money on such security is a little difficult to understand. In one of his affidavits he said that his equity in the property was about $3500, but when pressed on that, having regard to his rough valuation, he was unable to justify that figure. On the evidence which he gave in court, his equity would be closer to $14,000, although I would not hold him to that precise figure, as he made it clear that the valuation was only a rough estimate. He has been paying interest on the loan at the rate of about $1100 a month, but the property is let for $240 per week. This would suggest that he has an income stream from the property which might well have been diverted towards meeting the obligations imposed by the order. Of course, sale of the property was another possibility, although it is unlikely that it could have been effected in the relevant time-frame. Nonetheless, he might have borrowed the money from the family in the short term. The family seems to have been very forthcoming in this way at other times. He cannot say that he had no cash flow. In addition to the rent, he had access to social security payments of about $376.30 a fortnight. Of course he had to live, and probably, most of that went to meet living expenses. Nonetheless, as was suggested in argument, if he were minded to comply with the order, he could have contributed something from his available funds. He also owned a car worth about $20,000. He says that his mother advanced him the money to buy the car and that had he sold it, she may well have called up the loan. I suppose that is possible, but it is also quite possible that she would not have done so. There is no suggestion that he sought to investigate this possibility. It is the absence of investigation of the possibility, rather than the fact that it was not done, which suggests that he was not concerned to comply with the order. 14 He also owned vending machines for which he paid $100,000 some two years ago. He says that they will only have a value if they are in place and operating, but he chose to pay $100,000 for them. It is simply not possible to accept at face value his assertion that none of these assets or sources of income was capable of being utilised to assist in complying with the obligations he had voluntarily undertaken by consenting to the order. 15 He also appears to have had access to other funds. Exhibit A to his affidavit of 1 October 1999 is a bank statement for the period from 7 July 1999 to 1 September 1999. This covers the period during which compliance with the order was called for. There are numerous deposits of not insubstantial amounts of money over that period. He seeks to explain them only by saying that they may have come from his flatmates as contributions towards rent and living expenses which he paid, or they may have come from his family. He was no more specific than that. It is also possible that they represented the remission of rent from his property in Western Australia. One might reasonably have expected that he would have tried to explain the not insubstantial cash flow identified by this exhibit in order to avoid the likely consequences of the present proceedings. That he has not chosen to do so once again suggests quite strongly that there is no satisfactory explanation, either of the source of these funds or of their ultimate destination. Some amounts have been explained, but many have not. One is left with the very clear impression that he has had access to funds either at, or shortly after the time at which he was to comply with the order and has deliberately chosen not to take advantage of such access. 16 In the circumstances I am unable to conclude that anything happened after the order was made on 16 July which incapacitated him from complying with the obligations which he had undertaken. It is quite clear that had he wanted to, he had assets which could have been deployed to assist in such compliance. His failure to comply with the orders cannot be justified by reference to his financial circumstances. 17 There was also evidence of his medical condition. It is suggested that over the last month, he has been suffering from depression. That is not immediately relevant because there is no suggestion that he was suffering from depression at the time of the earlier proceedings or at the time at which compliance with the order was called for. I suppose it may, in some marginal way, be relevant to sentence, but it cannot have much relevance. Most persons who face the prospect of being sent to jail probably have a degree of anxiety, although perhaps not depression. 18 In any event there must be some doubt about the validity of the complaints made to Dr Ungar when the second respondent saw him last Friday. When the matter was previously before me, a medical certificate from another doctor was provided. No explanation has been given as to why, for present purposes, he felt the need to consult a different doctor. One is inclined to be very suspicious, but it is not necessary to take that matter any further. 19 I am satisfied beyond all reasonable doubt that the first respondent is in breach of order 3 and that the second respondent is in breach of orders 3 and 12, made by Kiefel J on 16 July. No real attempt was made until September to comply with the order 3, although the value of such compliance probably substantially declined after 30 July. I take that as, to some extent, being an aggravating feature. 20 I hold that the first respondent is in contempt of the court in that it failed: on or before 23 July 1999 to send a letter to each person to whom the first respondent had sent a GST registration form ("a recipient"), such letter to be in a form approved by the applicant and to clearly state that: (a) neither the first respondent nor the second respondent has or has had any association whatsoever with the Australian Taxation Office or any agency or department of the Commonwealth of Australia; (b) the service offered by the first respondent is an information service that is not endorsed, sponsored or approved in any way by the Australian Taxation Office or any agency or department of the Commonwealth of Australia; (c) there is no legal requirement whatsoever to register with the Australian Taxation Service or to acquire any services from it; and (d) if the recipient has sent a cheque or money order, there are now court orders in place requiring that either the cheque or money order be returned or, if banked, that the recipient receive a full refund, such failure being in breach of par 3 of the order of 16 July 1999 made by the Honourable Kiefel J. 21 I hold the second respondent to be in contempt of the court in that he failed: on or before 23 July 1999 to send a letter to each person to whom the first respondent had sent a GST registration form ("a recipient"), such letter to be in a form approved by the applicant and to clearly state that: (a) neither the first respondent nor the second respondent has or has had any association whatsoever with the Australian Taxation Office or any agency or department of the Commonwealth of Australia; (b) the service offered by the first respondent is an information service that is not endorsed, sponsored or approved in any way by the Australian Taxation Office or any agency or department of the Commonwealth of Australia; (c) there is no legal requirement whatsoever to register with the Australian Taxation Service or to acquire any services from it; and (d) if the recipient has sent a cheque or money order, there are now court orders in place requiring that either the cheque or money order be returned or, if banked, that the recipient receive a full refund, such failure being in breach of par 3 of the order of 16 July 1999 made by the Honourable Kiefel J 22 I find that he was further in contempt of the court in that he failed to file and serve an affidavit on or before 20 July 1999 setting out a full mailing list as at the date of the said order, of all persons, companies or other entities to whom the GST registration form was sent, contrary to the provisions of par 12 of the said order. 23 I impose upon the first respondent a fine of $5000. 24 With respect to the second respondent, in connection with the failure to comply with par 3 of the order, I order: 1. that he be committed to the Melbourne Assessment Prison for the period of three months from this day, or until other earlier order. 2. that a warrant for committal issue pursuant to order 39 rule 9 of the Rules of Court. With respect to the failure to comply with par 12 of the said order I will impose no penalty. 25 In a case such as this, where the proceedings have been necessitated by the contumacious behaviour of the respondent, costs should be on a "solicitor and client" basis. I will therefore order that the respondents pay the applicant's costs to be taxed on a "solicitor and client" basis. 26 I will issue an interim warrant, but we will re-engross it, and it can be reissued later. I certify that the preceding twenty-six (26) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Dowsett.

Solicitor for the Applicant: Australian Government Solicitor

Dates of Hearing: 5 & 11 November 1999