Australian Competition & Consumer Commission v Commercial and General Publications Pty Ltd

· The low percentage of complaints suggested that perhaps it might have been the complainants who were at fault rather than Mr Hassett, or at the very least that there might be a reasonable doubt as to the reliability of their accounts. · The expense and publicity of criminal proceedings could well destroy Mr Hassett's business, regardless of the court outcome.

16 If, for the kind of considerations referred to, it was decided not to prosecute s 64(2A) charges, the case loses a great deal of its sting. The complainants who had not received their money's worth for the aborted 1999 edition of On Service had simple and unanswerable civil claims which, if necessary, the Commission could have brought on their behalf. 17 Mr Hassett closed down CGP's business at the end of 1999. He deposes, and one can well accept, that in the small Tasmanian publishing industry he knew he would not be able to continue publishing due to the manner in which word had already spread about the Commission's investigations. Prior to the trial a friend brought to him a Commission brochure which had been placed on the display counter at a Hobart restaurant and which detailed the charges brought against him. This caused Mr Hassett "immense distress". 18 He obtained part time work with the Tasmanian Senior and Tasmanian Farmer newspapers. He lost much time off as a result of stress. His anxiety and stress were such that in October 2001 he found he could no longer work and he lost his job. 19 He retained the assistance of a Mr Alex Graeme-Evans, believing him to be a lawyer. Mr Evans made various submissions to Parliament, the Commission and other bodies. It subsequently appears Mr Graeme-Evans did not have a legal practising certificate. Mr Hassett paid Mr Graeme-Evans $27,500. He obtained the funds for this by mortgaging his home. 20 Subsequently Mr Hassett had to sell his home. After the discharge of the mortgage and other costs he has approximately $101,000 in a credit union account. Mr Hassett wants to keep this for his daughters. He was separated from his wife in 1996 and left with their twin daughters, now aged 19 and students at the University of Tasmania. His only source of income is a Centrelink pension and his daughters' Austudy allowances. They live in a rented home. Finances are very tight. It has been difficult to provide textbooks for the girls and at times there is not enough money for food or heating. 21 Since 1984 Mr Hassett's general practitioner has been Dr Martin Ward of Kingston. Dr Ward first treated Mr Hassett for some twelve years for severe hay fever and allergies. In 1996 Mr Hassett's separation, divorce and property settlement had led to severe stress. From late 1999 Mr Hassett saw him in relation to the medical consequences of the Commission's investigations and the prosecution. In a report dated 9 October 2002 Dr Ward says: "Virtually every one of the sixteen consultations that year [ie 2000] consisted largely of debriefing over the state of the case and his stress levels. With his divorce he was severely stressed to begin with but rapidly got on top of it. This year however he did not improve and the nineteen consultations in 2001 were much the same as the year before. For the first time I prescribed a powerful benzodiazepine for him to help cope. The state of his physical health became of secondary importance to him and I had great difficulty getting him to have a couple of physical problems I was concerned about followed up as they should be. Previously he had looked after himself very well. 2002 has been a bit better but he is not back to anywhere near his normal self. He has been anxious, totally taken up with his court case to the detriment of his normal life and health. He should perhaps have been on more medication but could not really afford to risk blunting his ability to think clearly. I have been impressed previously with his ability to bounce back from adversity but I am not all sure that he can come back from this easily or at all. At the moment he is driven by a determination to vindicate himself but what will happen to him when this is truly over is not clear." 22 While the personal situation of Mr Hassett excites considerable sympathy, the fact remains that he has contravened the TPA. Practically speaking he is unlikely to get back into the publishing business again on his own account (he is aged 58) and even if he does I think the trauma of the present proceedings will be such that any further contravention by him is extremely unlikely. 23 As to general deterrence, an important consideration in the deterrence of s 58(b) contraventions is that the amount of the penalty should be substantially more than the amount of the payment accepted. The risk/reward calculation is very relevant for this kind of offence. Traders should not be encouraged to think that it is worthwhile to accept and retain payments for services which are not likely to be delivered because if the worst comes to the worst the penalty might be a bit more than the payment. 24 In the present case the amounts are not large and the complainants had effectively forgotten about them. The maximum penalty for an individual at the time of the offences was $40,000. Having regard to the fact that the amounts have been repaid, I think the penalty proposed by the Commission of $1000 for each offence for Mr Hassett is appropriate. 25 Mr Hassett's income position is parlous. While he understandably wants to retain his remaining capital for the benefit of his daughters I think it is better for him if no order for payment by instalments is made and the penalty paid out of his credit union account, thus bringing a conclusion to a very difficult episode in his life. 26 As to CGP, the Commission accepts that it has ceased trading and has no assets. In itself those are not circumstances which ought to prevent the imposition of penalties. In Australian Competition and Consumer Commission v The Vales Wine Company Pty Ltd (1996) ATPR 41-528 at 42,776 dealing with a defendant company in liquidation with no assets O'Loughlin J said: "Even though (the penalties) may not be recovered, they will serve as a warning throughout the wine industry and elsewhere of the attitude of the court to offences of this nature." 27 I recently followed that observation in Australian Competition and Consumer Commission v GIA Pty Ltd [2002] FCA 1298. However, in the present case there is the circumstance that CGP is the alter ego of Mr Hassett. The conduct which constituted a contravention of the Act was committed by Mr Hassett and nobody else. Such gain as would have resulted from a contravention would, as far as the evidence showed, have accrued to Mr Hassett and nobody else, he being the only shareholder in CGP. If CGP had any assets, to impose separate penalties on Mr Hassett would be punishing him twice. This kind of reality was recognised by Weinberg J in Australian Competition and Consumer Commission v Dimmeys Stores Pty Ltd [1999] FCA 1175. That case involved prosecutions of two companies for contravention of s 65C(1)(a) of the TPA by supplying children's bicycles which did not comply with prescribed consumer product safety standards. Starite Distributors Pty Ltd imported the bicycles and Dimmeys Stores Pty Ltd sold them at its retail outlets. 28 It was put to Weinberg J that Starite was no more than a conduit for Dimmeys, that there was in reality only one offence and that Starite should be discharged without conviction. In rejecting this argument His Honour held (at [33]) that Starite's offence, it being an importer, was entirely separate from, though related to, the offence committed by Dimmeys. However, his Honour was prepared to take into account in the defendants' favour the degree of community of ownership. His Honour said (at [39]): "The evidence establishes clearly that Starite is beneficially owned by Mr Zapelli and the members of his family. He and his family also have a substantial interest in Dimmeys. By fining each defendant separately, the Court is, in effect, punishing Mr Zapelli and his interests twice. Their conduct may warrant separate punishment, but some recognition should be accorded to the fact that the two offences are closely related. In my view these factors warrant the imposition of a somewhat lower penalty than would otherwise be merited upon one of the defendants." 29 The present case is stronger. In reality the identity of the two defendants is the same and the conduct which contravened the TPA is the same. For that reason I would not impose a penalty on CGP. Reference might be made to s 79(2) which discloses, in an analogous situation, a legislative intention that what is in substance one episode of contravening conduct should be punished once and once only. This is but elementary fairness. If it would be unjust to punish Mr Hassett twice over for the same conduct by imposing a penalty on a CGP which had assets, it would be paradoxical to impose a penalty merely because CGP has no assets. An observer might think that the Court was only imposing a penalty when it was satisfied the penalty could not be enforced. 30 As to general deterrence, a court is entitled to act on the assumption that the circumstances of the case in which the penalty is imposed will not be misunderstood or misrepresented. That may seem a trifle idealistic, but there is no other rational way to proceed. On that basis, anyone contemplating a s 58(b) contravention and learning of this case would know that when Mr Hassett, operating his business through a one man company, accepted five payments of just under $200 he was ordered to pay $5,000 even though he had returned the payments. I do not think the deterrent effect would be in any way increased by an empty penalty of the same amount against a company shell.

Costs 31 The Court has a general discretion to award costs under s 43(2) of the Federal Court of Australia Act 1976 (Cth). The discretion must be exercised judicially. However the discretion is unfettered and absolute, in the sense that it is not to be controlled by judge-made rules, as long as it is not exercised arbitrarily or capriciously, or on grounds unconnected with the litigation: Cretazzo v Lombardi (1975) 13 SASR 4 at 11, citing Campbell & Co v Pollak [1927] AC 732. 32 In recent times judges of this Court have adopted a broad brush approach, eschewing an isolation of particular issues and allocation of costs thereto. Rather there have been costs orders which recognise the extent to which parties have been significantly successful in the proceeding: Holder v Searle (1998) 44 IPR 1 at 23; Brimaud v Boston Securities Entertainment Investments Pty Ltd [1998] FCA 1392, Collector of Customs v Reg Russell and Sons Pty Ltd [1995] FCA 562, Beagle Management Ltd v Targridge Ltd [1997] FCA 31. Holder is quite close to the present case. There were three informations alleging copyright infringement. Two informations failed and the conviction on the third was in regard to fewer items than the prosecutor alleged. Spender J awarded the defendant one third of his costs. 33 In the present case my general impression is that three quarters of the trial was taken up with the charges which were dismissed. Apart from a quantitative comparison, the s 64(2A) charges were perhaps weightier in total in that each complainant's case required separate consideration. All in all, I think a just result would be to award the defendants one- half of their costs (i.e. three-quarters less one-quarter). I have not overlooked the Commission's submissions as to the failure of the defendants to abide orders to file and serve affidavits, but I do not see that as sufficient to outweigh the other considerations mentioned. Moreover, credit should be given the defendants for admissions which made it unnecessary to call the s 58(b) complainants. 34 As already mentioned in my earlier judgment, the defendants were represented by counsel under the Court's pro bono scheme established under Order 80 of the Federal Court Rules. Rule 9 of Order 80 provides: "(1) Subject to rule 10 [which deals with disbursements], a legal practitioner who provides legal assistance to a litigant under the scheme must not seek or recover any professional fees or disbursements for the legal assistance. (2) However, if an order for costs is made in favour of a litigant who is assisted under the scheme, the legal practitioner who has provided the legal assistance is entitled to recover the amount of fees and disbursements that another party is required to pay under the order." 35 Rule 9(2) does not say from whom the pro bono practitioner is entitled to recover. Is it from the assisted litigant for whom the practitioner acts, or is it from the party ordered to pay the costs? I think the former is the better view; sub-rule (2) is to be seen as an exception to the general rule of sub-rule (1) (which is in turn an exception to the general law which entitles legal practitioners to contract for the payment of fees for professional services, either absolutely or contingent on the success of litigation: Schokker v Commissioner of Taxation (No 2) (2000) 106 FCR 134 at [11].) The practice thus far where parties aided under O 80 have succeeded has been to make an order of costs in favour of that party rather than the practitioner: Chancliff Holdings Pty Ltd v Bell [1999] FCA 1783, Baig v Minister for Immigration & Multicultural Affairs [2002] FCA 380, Tennakoon v Minister for Immigration & Multicultural Affairs [2001] FCA 615. Rule 9(2) would then enable the practitioner to recover his or her fees and disbursements from the O 80 client either directly or by way of appropriation of monies received from the other party. 36 Problems might arise where the party ordered to pay costs seeks to set off that liability against some order for payment in its favour, such as the penalty I have ordered Mr Hassett to pay. In the present case, as it happens, Mr Hassett will be able to pay the penalty amount. However, as a matter of principle, no such set off should be allowed. For example, if in the present case Mr Hassett had no assets it would seem wrong that the Commission could set off the amount of the penalty against its liability for costs. It is within the general discretion of the Court when dealing with costs to make orders which determine who bears the ultimate burden. Thus, when an order for costs is made against a practitioner personally (see O 62 r 9, Da Sousa v Minister for Immigration, Local Government and Ethnic Affairs (1993) 114 ALR 708 at 711-713) the Court can direct that the practitioner not recover from his or her client an amount paid to the other party under the order. There is a substantial public interest in practitioners undertaking the often burdensome obligations of representation under O 80. In Chancliff Lee J said (at [14] - [15]): "Order 80 serves the public interest by encouraging practitioners to render public service by providing advice and representation free of charge to indigent parties engaged in litigation in the court. In part, the services are provided by practitioners in performance of a duty to assist the administration of law that arises out of rights and privileges practitioners obtain upon being admitted to practice, or upon being registered as entitled to practice, by a superior court. Order 80 has been included in the Rules in response to a marked increase in the number of litigants who appear in this Court, a number which continues to expand. If practitioners withdrew from participation in the "pro bono" scheme which operates under O 80 there would be a real risk that efficient disposal of the work of the Court would suffer. Furthermore, in endeavouring to fairly administer the law in circumstances where a party is unable to properly present its case, the impartiality of the Court may appear to be compromised." 37 So in a real sense the practitioner appearing under O 80 has a public role, in addition to the usual professional duties owed to his or her client. Where success, total or partial, in the litigation attracts a costs order, I think that practitioner should be entitled to the full fruits thereof. I will therefore order that the order for costs be not subject to any set off in respect of the penalties ordered to be paid. 38 There remains the question of quantum. In Chancliff Lee J said (at [16]-[17]): "…The object of O 80 r 9 is to make it clear to practitioners that if, in ordinary circumstances, it would be appropriate for a party to be ordered to pay the costs of the party for whom the practitioner appears an order will be made that will provide some remuneration to the practitioner notwithstanding that the practitioner is not entitled to recover fees from the party the practitioner represents. It is to be noted that a practitioner providing "pro bono" services undertakes similar duties and responsibilities to the party represented, and to the court, as a practitioner instructed by a client who retains the services of a practitioner for reward It does not follow, however, that the amount of fees the court orders a party to pay, and to be recoverable by the practitioner under 0 80 r 9, will be the full fees ordinarily rendered by the practitioner. The amount will be a sum set by the court after having regard to various matters, being an amount that appears to be a fair sum in all the circumstances." (emphasis added) 39 His Honour did not indicate the nature of the various matters to be regarded, other than noting that the hearing occupied two full days and involved an "important issue in bankruptcy proceedings". His Honour fixed the fees to be paid under O 80 r 9 at $7,000. 40 If his Honour's observation means that a practitioner recovering under O 80 r 9(2) should get less than he or she would on a party and party taxation where costs were awarded to a non-assisted client, then I must say I do not agree. The text of 0 80 r 9(2) provides no warrant for such a gloss. It may be, however, that all his Honour was saying was that O 80 r 9(2) does not confer a right to recover whatever the practitioner happens to charge. I think that in a substantial case like the present where I was not asked to fix fees (and would not have sufficient information to do so anyway) the quantum should be left to be determined by taxation, in default of agreement. I certify that the preceding forty (40) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Heerey.

Associate: Dated: 30 October 2002 Counsel for the Prosecutor: Mr G Livermore

Solicitor for the Prosecutor: Director of Public Prosecutions (Cth)