Australian Competition & Consumer Commission v High Adventure Pty Ltd

BETWEEN: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION

AND: HIGH ADVENTURE PTY LIMITED (ACN 096 423 255)

The nature of the proceeding 1 These reasons for judgment are concerned with the appropriate orders to be made in a case in which it is agreed that the first respondent has engaged in resale price maintenance, in contravention of s 48 of the Trade Practices Act 1974 (Cth) ('the Trade Practices Act'), and that the second respondent was knowingly concerned in or party to that conduct. By consent, the parties seek declarations and injunctions in terms agreed. It is necessary for the Court to determine whether it is appropriate to make orders in the agreed terms. The applicant also seeks the imposition of a pecuniary penalty on each respondent, and an order that the respondents pay its costs of the proceeding. The task of determining the appropriate level of penalty is a major element of these reasons for judgment. 2 On 19 December 2003, the applicant commenced the proceeding by filing an application and a statement of claim. Initially, the respondents were represented by solicitors. A series of consent orders was made, extending the periods originally set for the taking of interlocutory steps. On 3 May 2004, the respondents' solicitors filed a defence, substantially admitting the allegations in the statement of claim. The solicitors thereafter ceased to act for the respondents, who were unrepresented for the rest of the proceeding. 3 On 7 July 2004, the solicitors for the applicant filed a statement of contentions of fact and law of 20 pages, a three page statement of orders sought by consent and a 16 page statement of agreed facts, to which was attached a further 27 pages of copy documents, mostly documents quoted at length in the agreed statement of facts. On 15 October 2004, the applicant filed a court book, although there had been no direction requiring it to do so. At the same time, it filed another version of its contentions of fact and law, containing references to pages of the court book. Five days later, the applicant filed a list of authorities. At the hearing on 25 October 2004, counsel for the applicant handed up a six page outline of submissions. 4 At the hearing, which lasted less than a day, the applicant was represented by counsel. The second respondent appeared in person. I granted leave for the first respondent to be represented by the second respondent. Counsel for the applicant tendered a folder of documents containing copies of tax returns of the respondents for the years ended 30 June 2002 and 30 June 2003. The second respondent gave oral evidence and tendered copies of statements from a bank, relating to the second respondent's overdraft account and credit card account.

The legislation 5 Section 48, in Part IV of the Trade Practices Act, provides: 'A corporation or other person shall not engage in the practice of resale price maintenance.' 6 The phrase 'practice of resale price maintenance' is defined in s 4(1) as meaning the practice of resale price maintenance referred to in Pt VIII. In Pt VIII of the Trade Practices Act is found s 96. So far as relevant to the present case, s 96 provides as follows: '(1) Subject to this Part, a corporation (in this section called the supplier) engages in the practice of resale price maintenance if that corporation does an act referred to in any of the paragraphs of subsection (3). … (3) The acts referred to in subsections (1) and (2) are the following:

(a) the supplier making it known to a second person that the supplier will not supply goods to the second person unless the second person agrees not to sell those goods at a price less than a price specified by the supplier; … (c) the supplier entering into an agreement, or offering to enter into an agreement, for the supply of goods to a second person, being an agreement one of the terms of which is, or would be, that the second person will not sell the goods at a price less than a price specified, or that would be specified, by the supplier; … (f) the supplier using, in relation to any goods supplied, or that may be supplied, by the supplier to a second person, a statement of a price that is likely to be understood by that person as the price below which the goods are not to be sold.' 7 Section 75B of the Trade Practices Act provides, so far as relevant to this case: '(1) A reference in this Part to a person involved in a contravention of a provision of Part IV...shall be read as a reference to a person who:

… (c) has been in any way, directly or indirectly, knowingly concerned in, or party to, the contravention'. 8 Section 76 of the Trade Practices Act, so far as relevant to this case, provides: '(1) If the Court is satisfied that a person: (a) has contravened any of the following provisions: (i) a provision of Part IV; … (e) has been in any way, directly or indirectly, knowingly concerned in, or party to, the contravention by a person of such a provision … the Court may order the person to pay to the Commonwealth such pecuniary penalty, in respect of each act or omission by the person to to which this section applies, as the Court determines to be appropriate having regard to all relevant matters including the nature and extent of the act or omission and of any loss or damage suffered as a result of the act or omission, the circumstances in which the act or omission took place and whether the person has previously been found by the Court in proceedings under this Part or Part XIB to have engaged in any similar conduct. [Note omitted] (1A) The pecuniary penalty payable under subsection (1) by a body corporate is not to exceed: ... (b) for each other act or omission to which this section applies - $10,000,000. (1B) The pecuniary penalty payable under subsection (1) by a person other than a body corporate is not to exceed $500,000 for each act or omission to which this section applies. … (3) If conduct constitutes a contravention of two or more provisions of Part IV, a proceeding may be instituted under this Act against a person in relation to the contravention of any one or more of the provisions but a person is not liable to more than one pecuniary penalty under this section in respect of the same conduct.'

9 Section 77 provides that the Australian Competition and Consumer Commission may institute a proceeding in the Court for recovery on behalf of the Commonwealth of a pecuniary penalty referred to in s 76. 10 Section 80 grants to the Court specific powers in relation to injunctions. So far as relevant to the present proceeding, it provides: '(1) Subject to subsections (1A), (1AAA) and (1B), where, on the application of the Commission or any other person, the Court is satisfied that a person has engaged, or is proposing to engage, in conduct that constitutes or would constitute: (a) a contravention of any of the following provisions: (i) a provision of Part IV … (e) being in any way, directly or indirectly, knowingly concerned in, or party to, the contravention by a person of such a provision … the Court may grant an injunction in such terms as the Court determines to be appropriate. (1AA) Where an application for an injunction under subsection (1) has been made, whether before or after the commencement of this subsection, the Court may, if the Court determines it to be appropriate, grant an injunction by consent of all the parties to the proceedings, whether or not the Court is satisfied that a person has engaged, or is proposing to engage, in conduct of a kind mentioned in subsection (1). … (4) The power of the Court to grant an injunction restraining a person from engaging in conduct may be exercised: (a) whether or not it appears to the Court that the person intends to engage again, or to continue to engage, in conduct of that kind;

(b) whether or not the person has previously engaged in conduct of that kind; and (c) whether or not there is an imminent danger of substantial damage to any person if the first-mentioned person engages in conduct of that kind. (5) The power of the Court to grant an injunction requiring a person to do an act or thing may be exercised: (a) whether or not it appears to the Court that the person intends to refuse or fail again, or to continue to refuse or fail, to do that act or thing; (b) whether or not the person has previously refused or failed to do that act or thing; and (c) whether or not there is an imminent danger of substantial damage to any person if the first-mentioned person refuses or fails to do that act or thing.' 11 Section 86C of the Trade Practices Act provides: '(1) The Court may, on application by the Commission, make one or more of the orders mentioned in subsection (2) in relation to a person who has engaged in contravening conduct. (2) The orders that the Court may make in relation to the person are:

(a) a community service order; and (b) a probation order for a period of no longer than 3 years; and

(c) an order requiring the person to disclose, in the way and to the persons specified in the order, such information as is so specified, being information that the person has possession of or access to; and (d) an order requiring the person to publish, at the person's expense and in the way specified in the order, an advertisement in the terms specified in, or determined in accordance with, the order. (3) This section does not limit the Court's powers under any other provision of this Act.

(4) In this section: community service order, in relation to a person who has engaged in contravening conduct, means an order directing the person to perform a service that: (a) is specified in the order; and (b) relates to the conduct; for the benefit of the community or a section of the community. Example: The following are examples of community service orders: (a) an order requiring a person who has made false representations to make available a training video which explains advertising obligations under this Act; and (b) an order requiring a person who has engaged in misleading or deceptive conduct in relation to a product to carry out a community awareness program to address the needs of consumers when purchasing the product. contravening conduct means conduct that: (a) contravenes Part IV, IVA, IVB, V or VC or section 75AU or 75AYA; or (b) constitutes an involvement in a contravention of any of those provisions. probation order, in relation to a person who has engaged in contravening conduct, means an order that is made by the Court for the purpose of ensuring that the person does not engage in the contravening conduct, similar conduct or related conduct during the period of the order, and includes: (a) an order directing the person to establish a compliance program for employees or other persons involved in the person's business, being a program designed to ensure their awareness of the responsibilities and obligations in relation to the contravening conduct, similar conduct or related conduct; and (b) an order directing the person to establish an education and training program for employees or other persons involved in the person's business, being a program designed to ensure their awareness of the responsibilities and obligations in relation to the contravening conduct, similar conduct or related conduct; and

(c) an order directing the person to revise the internal operations of the person's business which lead to the person engaging in the contravening conduct.'

The facts 12 In determining the facts of the case, I have relied to a high degree on the agreed statement of facts. I do not propose to set it out in full, because it contains copious quotations from the documents annexed to it. 13 The first respondent is a corporation, conducting various business activities in relation to hang-gliding, paragliding and paramotoring. The second respondent is its sole director. A paraglider is a large, kite-like structure, composed of two flexible triangular sections joined side by side and designed to glide with a pilot to control its flight. A paramotor can be used in combination with a paraglider to achieve powered flight. The paraglider is sometimes described as the 'wing' for a paramotor. 14 Until the beginning of May 2004, the first respondent provided training courses for hang-gliding, paragliding and paramotoring, to members of the public. It also retailed hang-gliders, paragliders, paramotors and their accessories. From the beginning of May 2004, it ceased to provide training courses for hang-gliding and paramotoring. It continues to provide training courses for paragliding and continues to retail hang-gliders, paragliders, paramotors and their accessories. Somewhere between 150 and 200 retail sales of new paragliders take place in Australia each year. The first respondent's share of this market is approximately 20 per cent. In addition, from October 2002, the first respondent has been a wholesale supplier and distributor of paragliders and accessories manufactured by Sky Paragliders in the Czech Republic. 15 In August 2002, Pioneering Spirit Pty Ltd began trading as a retailer of paramotors, under the name Walkerjet. One of the two directors of Pioneering Spirit Pty Ltd was Ross Atkin. About October 2002, Walkerjet began retailing Sky Paragliders, imported from the manufacturer in the Czech Republic. Walkerjet does not provide training courses to the public. 16 In the July 2003 issue of a magazine called Soaring Australia, the first respondent placed an advertisement for Sky Paragliders. Its advertised price for a Sky Atis paraglider was $3600 'with flight suit'. In the same issue of the same magazine, Walkerjet placed an advertisement, offering three Sky Paragliders, the Sky Fides M at $2650, the Sky Atis M at $2800 and the Sky Brontes M at $2950. 17 This advertisement prompted the second respondent, on behalf of the first respondent, to send an email to Sky Paragliders on 2 July 2003, drawing attention to the Walkerjet advertisement and asking Sky Paragliders to find out where Walkerjet was buying paragliders. On the following day, Sky Paragliders sent an email to Walkerjet, containing the following: 'We have received some claims from our customers that you are relegating good [sic] name of the company by offering the gliders for very low prices. Therefore we would like to ask you not to sell our gliders "under the price" on Australian trade as this causes problems to our other dealers who are complaining to us now'. 18 Also on 3 July 2003, the second respondent on behalf of the first respondent placed on the first respondent's website the following statement: 'SPECIAL WARNING ON SKY PARAGLIDERS! Beware of persons saying they are the Importers of Sky Paragliders, offering cheap deals. You must be warned that these gliders offer NO WARRANTY and have not been through the test flight phase nor the quality control

As we are the Australian representatives of Sky Paragliders, we are the only ones that carry the Warranty for Sky gliders. The importer is responsible for warranty. If you buy from a Black importer you receive absolutely no warranty of factory assistance.

If you feel you have bought one recently from an unauthorised dealer just send us the serial number and we will see if you can get your money back'. 19 On 4 July 2003, the second respondent on behalf of the first respondent sent an email to Walkerjet, with a copy to Sky Paragliders, which included the following statements: · the second respondent was under the understanding that he was the sole importer of Sky Paragliders; · he felt that Sky Paragliders had not dealt honestly with him as he had asked them who was selling their gliders in Australia and they said they were looking into it; · the trouble of promoting Sky Paragliders, and sponsoring pilots on them, was a waste of time for him; · if Sky Paragliders did not give him a response by that night, Walkerjet would be the sole importer, because he would not deal with companies that set up other dealers without notifying their current importers and pretend they do not know who else would sell their gliders when they were obviously well aware of the arrangements they had with Walkerjet; · he would cease preparing to sponsor the Australian Paragliding champion on Sky Paragliders; · Australia was not big enough for two importers that could not maintain sustainable prices; and · in his experience, a brand was made saleable not by low prices, but by service and well- established schools.

20 On 4 July 2003, Walkerjet sent an email to Sky Paragliders, complaining about the second respondent's pricing and conduct. On 5 July 2003, the second respondent on behalf of the first respondent sent an email to Walkerjet, making the following points: · the second respondent had been under the impression that he had been the sole importer and had spent a lot of money sponsoring Sky Paragliders products; · it was embarrassing to have Walkerjet's advertisement in the same magazine, with their prices being $800 cheaper; · the second respondent had received phone calls from customers who had recently bought Sky Paragliders from him; · dealers were fuming about the low price Walkerjet had offered, and believing the second respondent had misled them; · Sky Paragliders must have one importer; and · the second respondent would cancel six months' worth of advertising in the following week. 21 Walkerjet responded with an email about one of their customers, threatening to cancel his order, in response to the 'fake Sky Paraglider' story on the first respondent's website. Walkerjet threatened legal action. On 8 July 2003, the second respondent on behalf of the first respondent forwarded this email to Sky Paragliders, requesting that they stop Walkerjet, as they were selling to students of the second respondent and others. The second respondent expressed anger over the situation that Sky Paragliders had put him in and threatened to cease dealing with them if they did not remedy the situation. This prompted Sky Paragliders to send an email to Walkerjet on 9 July 2003, informing Walkerjet that Sky Paragliders proposed to make the second respondent its exclusive wholesaler on the Australian market. They proposed a condition that the second respondent should cooperate with Walkerjet so that Walkerjet could still sell paramotors with Sky Paragliders' gliders on certain conditions, more restrictive than the previous arrangements between Sky Paragliders and Walkerjet. 22 On 12 July 2003, the second respondent on behalf of the first respondent sent an email to Walkerjet, with a copy to Sky Paragliders, entitled 'Dealer's [sic] Price List for 2003 Season.' Attached to the email was a price list, specifying 'Retail Price in AUD' and terms for the supply of Sky Paragliders products. The terms were in the following form: 'Terms for Dealers without school or Instructor Qualifications

1. All gliders will come through our office and test [sic] flown before customers flies [sic] the glider.
2. Prices do not include postage and insurance. 3. Each sale must have a name and HGFA number and or [sic] proof of license [sic]. This is out [sic] duty of care to ensure gliders are not sold to unlicesned, [sic] unqulaified [sic] pilots. 4. You are not to sell to anyone fresh out of school and or [sic] has [sic] just completed a license course. You must contact the school from where the student has learnt and come to an agreement of commission. This will build a long term relationship with Sky Products. 5. You will not sell out of your region being The State of Victoria only [sic] 6. The Importer will advertise gliders at retail costs all Sky Products [sic] and pass specials onto [sic] dealers. Importer will advertise dealers [sic] names and contact details [sic]
3. Dealer can advertise that they sell the products but only with retailprices or specials in the designated time frames and clarify your region for sales and or refer inquiries to dealers in other states.
4. Dealer without school must refer customers for test flights to qualified persons.
5. Dealer takes all responsibility for any misleading information given to importer of Sky Products or customer [sic] 10. Terms for Payment are Cash in Advance or Direct transfer of funds [sic]
6. Orders will be only accepted with a 30% deposit. Failure of Compliance with above terms will result in immediate disqualifications [sic] A formal and binding contract by Solicitor will be sent after you agree to the above terms.' 23 Walkerjet continued to negotiate with Sky Paragliders. In an email dated 20 July 2003, Walkerjet proposed some terms on which it wished to continue to deal direct with Sky Paragliders. It pointed out that it could not, and would not, fix prices with the second respondent 'as this is illegal in Australia'. On 20 August 2003, Sky Paragliders forwarded Walkerjet's proposed conditions to the respondents. By email dated 21 August 2003, the second respondent on behalf of the first respondent replied in the following terms: 'Also regarding Ross's suggestion below, I cannot accept that, he is advertsing [sic] cheap gliders still, from [sic] me to make sure he does not sell to schools etc, I must be able to supply him gliders and control the prices. Ross like I have said many times is not a school and he does not create or make customers he merely steals them from other peoples [sic] hard work. If Ross had a school them [sic] I can see he would create customers. I do not believe he will sell gliders just with his Paramotors. We said he cannot agree to my process as this is illegal. This is not the case, as all distributors sell to my recommended price. I have 3 other dealers that I supply with these prices. The dealer can offer incentives to make the sale due to the profit margin in the sale. The problem is that Ross does not know this industry and is not wiling [sic] to take advice and work in with the market. He said my prices do not make it profitable, that is only because he is advertising gliders $1000 cheaper than everybody else. So it seems he stills [sic] does not see the light at the end of the tunnel. Please tell him he either orders through me and stops advertsing [sic] the low prices or he pays $350 euros on top of my prices and orders directly from you, but I want to see names to the gliders as I have done above. All my dealers give names and ratings so I make sure appropriate gliders are being sold. I do not steal dealers [sic] customers [sic] Please confirm you agree with me'. 24 On the same day, the second respondent on behalf of the first respondent sent a further email to Sky Paragliders, stating: 'Ross does not have a school, he does not create customers My Market is Paramotoring as well, as you see from my order. I sell a lot more Paramotors than Ross ever will as I teach Paramotoring. Ross does not teach anything he [sic] is competing by selling cheaply on the market. Ross must either buy from at [sic] the price I gave him or he buys from you (Sky) direct plus $350 Euro extra for me on each glider purchase. He is not to sell any other accessories such as reserves unless he orders form [sic] me or you add 25% onto each item he orders. This is the only way I will do it. I hope you understand that he does not deserve to have different prices than my dealers with a school that create customers. If the dealers find out Ross is getting a cheaper deal direct it will cause such a problem for me as did Ross's last advertisement. I am now trusting you to help me and in return I will bring you good business. Ross is only a beginner in the sport and does not understand the industry that is why Ross and I cannot communicate on this matter as he Pig [sic] headed and not willing to flow with the industry'. 25 On 25 August 2003, Sky Paragliders sent an email to the respondents, stating that it had concluded that the best way it could operate was to give exclusive dealership in Australia to the second respondent. The email expressed the expectation that the second respondent would be a good supplier to Walkerjet and the opinion that any other fights are undesirable. On the same day, Sky Paragliders informed Walkerjet by email that the second respondent was to be its exclusive dealer in Australia. It repeated the expectation that the second respondent would be a good supplier for Walkerjet. On the same day, the second respondent on behalf of the first respondent sent an email to Sky Paragliders in the following terms: 'Of course I will sell to [Walkerjet] the same as everybody else. It is up to him to comply to the dealership contract sent to him. If he runs a professional business develops skills gets and [sic] advance pilot certificate then we can further negotiate. But we will sell more gliders through schools and professional outlets not merely offering cheap gliders on the market. This is short term thinking in this industry and you only have to look at FreeX paragliders they [sic] tried doing this and now they have no support in Australia and many other countries. Regarding fights, I never started them and this could have all been avoided if Sky was upfront and honest letting me know about [Walkerjet's] presence in the market in Australia. I sell many products and never had such experience as this incident and hope no more in the future.' 26 By reason of these facts, it is agreed that the first respondent engaged in the practice of resale price maintenance in contravention of s 48 of the Trade Practices Act in three ways. First, it contravened s 96(3)(a), by making known to Walkerjet, and to one of its directors, that the first respondent would not supply Sky Paragliders products to Walkerjet unless Walkerjet agreed not to sell or advertise for sale a Sky Paragliders product at a price less than the price specified by the first respondent. Second, the first respondent contravened s 96(3)(c) by offering to enter into an agreement for the supply of Sky Paragliders products by the first respondent to Walkerjet, being an agreement one of the terms of which would be that Walkerjet would not sell or advertise for sale a Sky Paragliders product at a price less than a price that would be specified by the first respondent. Third, the first respondent contravened s 96(3)(f) by using in relation to Sky Paragliders products that may be supplied by the first respondent to Walkerjet a statement of price that was likely to be understood by Walkerjet and one of its directors as a price below which a Sky Paragliders product was not to be sold or advertised for sale. When I pressed counsel for the applicant to identify the precise features of the price list that gave rise to the contravention of s 96(3)(f), he identified the description of the prices as 'Retail Price in AUD' and referred to term number seven of the proposed terms for dealers, up to the word 'frames' and to the inscription 'failure of compliance with above terms will result in immediate disqualifications'. I am by no means certain that term number seven is of any relevance in this regard, because it refers to the possibility of 'specials in the designated time frames', which I assume could mean that Walkerjet would have been entitled to sell at less than the designated retail price, at least for specified periods. My own view is that it is only the inclusion of the inscription 'Retail Price in AUD' in the price list that could bring about a contravention of s 48 by means of an act referred to in s 96(3)(f) of the Trade Practices Act.

27 It is also agreed that the second respondent had sole responsibility for all dealings on behalf of the first respondent with Sky Paragliders and Walkerjet. The second respondent admits that he was 'directly or indirectly knowingly concerned in, or party to' the first respondent's conduct. He had knowledge of, and directly participated in, the essential facts and matters that gave rise to the first respondent's contraventions of s 48 of the Trade Practices Act. 28 It is noteworthy that Walkerjet did not agree to accept the terms proposed by the respondents. Between mid-July and mid-November 2003, Walkerjet ordered three paragliders from Sky Paragliders directly. It was able to have two of these orders filled by paying EUR200 higher per paraglider than the price listed in the Sky Paragliders dealer price list. The third order was not supplied, because in mid-November 2003 Sky Paragliders informed Walkerjet that any further orders had to be through the first respondent. The only other Sky Paragliders products that Walkerjet has been able to obtain from Sky Paragliders directly since July 2003 are accessories and repair materials for Sky Paragliders products previously supplied to Walkerjet. While some other paragliders may be capable of use with Walkerjet Paramotors, the only paragliders identified in the Walkerjet manual for use in conjunction with Walkerjet Paramotors are Sky Paragliders products. Since mid-November 2003, Walkerjet has ceased selling Sky Paragliders products. Apart from the first respondent, no business in Australia is selling Sky Paragliders products at present. Two other businesses purchased demonstration models from the first respondent in August 2003, but have not subsequently purchased more. 29 Mr Atkin was present in Court during the course of the hearing. I asked him if Walkerjet still wishes to obtain and sell Sky Paragliders products. He indicated that Walkerjet still wishes to be a dealer in Sky Paragliders products. 30 The first respondent is a family company. The second respondent owns 10 shares and his wife one share. For the financial year ended 30 June 2002, its taxable income was $3877. For the financial year ended 30 June 2003, it disclosed a loss for tax purposes of $67. It has a surplus of liabilities over assets as at May 2004 of $1704.04. It is committed to regular monthly expenditure for rent, finance of a vehicle and the provision of broadband internet services in the total sum of $1270. It ceased to provide training courses for hang-gliding and paramotoring because of the difficulty of obtaining professional indemnity insurance. 31 The second respondent is 45 years old, married with four children, who are aged between 14 and five. The family lives in rented accommodation in North Haven in New South Wales. In the financial year ended 30 June 2002, the second respondent received $54 000 by way of wages or salary from the first respondent. After deductions, his income for tax purposes was $23 451. He deducted a loss from an earlier income year, for a taxable income of $6201. In the financial year ended 30 June 2003, the second respondent received $38 565 from the first respondent. This was his taxable income. His wife also receives money from the first respondent for the hire of equipment. This amounted to $17 272.73 in the financial year ended 30 June 2002 and $24 545.46 in the year ended 30 June 2003. The second respondent's personal bank account was overdrawn on 21 October 2004 to the extent of $925.14. On 22 October 2004, he also owed $15 749.64 on his credit card. 32 The respondents cooperated with the applicant by admitting contraventions of the Trade Practices Act, supplying copies of the relevant emails and supplying copies of information as to their financial circumstances, in response to a request by the Commission. In effect, they have pleaded guilty. 33 Counsel for the applicant pressed me to find that the respondents were motivated by nothing other than greed to do what they did. Having examined the emails attached to the agreed statement of facts, and having heard evidence given by the second respondent, I am unable to take this view. The respondents are engaged in an adventure activity carrying a high risk of injury to those participating in it. The second respondent is clearly passionate about the activity, but also deeply concerned that it should be as safe as possible. I am satisfied that at least a major element of his concern about Walkerjet undercutting the first respondent's prices was the difficulty of maintaining safety standards if cheap paragliders were to be available to anyone who wished to purchase them. The second respondent takes seriously what he sees as his obligation to test all the paragliders that he imports. He is anxious that only those who have been trained to a sufficient standard should be able to purchase paragliders. In the second respondent's eyes, if the market price for paragliders were to be lowered too much, as a result of the entry into the market of a competitor who did not have the same concern for safety, either the first respondent would have to abandon its commitment to safety and accept a lower margin of profit on each item sold, or it would lose so many customers that it would go out of business, with a consequent decline in the safety standards in paragliding generally. To this extent, I regard the second respondent's motives as commendable. It is regrettable that his attempts to retain the sole distributorship of Sky Paragliders products, with consequent control over safety issues, led him incidentally to make proposals to Walkerjet that placed the first respondent in contravention of s 48 of the Trade Practices Act.

The orders sought by consent 34 The parties consented to the making of orders in the form of declarations and injunctions. The declarations sought were as follows: '1. The First Respondent, on or about 12 July 2003, engaged in the practice of resale price maintenance in contravention of section 48 of the Trade Practices Act 1974 (the Act) by: (a) engaging in an act referred to in section 96(3)(a) of the Act by making it known to The Pioneering Spirit Pty Ltd trading as Walkerjet (Walkerjet) and a director of Walkerjet, Ross Atkin, that the First Respondent would not supply Sky Paragliders products to Walkerjet unless Walkerjet agreed not to sell or advertise for sale a Sky Paragliders product at a price less than a price specified by the First Respondent; (b) engaging in an act referred to in section 96(3)(c) of the Act by offering to enter into an agreement for the supply of Sky Paragliders products by the First Respondent to Walkerjet, being an agreement one of the terms of which would be that Walkerjet would not sell or advertise for sale a Sky Paragliders product at a price less than a price that would be specified by the First Respondent; and (c) engaging in an act referred to in section 96(3)(f) of the Act by using in relation to Sky Paragliders products that may be supplied by the First Respondent to Walkerjet a statement of price that was likely to be understood by Walkerjet and Ross Atkin as a price below which a Sky Paragliders product was not to be sold or advertised for sale. 2. The Second Respondent, on or about 12 July 2003, was directly or indirectly knowingly concerned in, or party to, the First Respondent's conduct of engaging in the practice of resale price maintenance referred to in paragraphs 1(a), (b) and (c) of these Orders in contravention of section 48 of the Act.' 35 The injunctions sought were in the following form: '3. The First Respondent be and is hereby restrained until the expiration of three years from the date of this order, whether by itself, its servants or agents or otherwise howsoever from: (a) making it known to any person that the First Respondent will not supply or will cease to supply a Sky Paragliders product to that person unless that person agrees not to sell or advertise for sale a Sky Paragliders product at a price less than a price specified by the First Respondent; (b) entering or offering to enter into an agreement with any person for the supply of a Sky Paragliders product by the First Respondent to that person being an agreement one of the terms of which is or would be that the person will not sell or advertise for sale a Sky Paragliders product at a price less than a price specified or that would be specified by the First Respondent; and (c) using in relation to a Sky Paragliders product supplied or that may be supplied by the First Respondent to any person a statement of price that is likely to be understood by that person as a price below which a Sky Paragliders product is not to be sold or advertised for sale. 4. The Second Respondent be and is hereby restrained until the expiration of three years from the date of this order, whether by himself, his servants or agents or otherwise howsoever from being directly or indirectly knowingly concerned in, or party to, conduct by the First Respondent whereby the First Respondent whether by itself, its servants, agents or otherwise howsoever: (a) makes it known to any person that the First Respondent will not supply or will cease to supply a Sky Paragliders product to that person unless that person agrees not to sell or advertise for sale a Sky Paragliders product at a price less than a price specified by the First Respondent; (b) enters or offers to enter into an agreement with any person for the supply of a Sky Paragliders product by the First Respondent to that person being an agreement one of the terms of which is or would be that the person will not sell or advertise for sale a Sky Paragliders product at a price less than a price specified or that would be specified by the First Respondent; and (c) uses in relation to a Sky Paragliders product supplied or that may be supplied by the First Respondent to any person a statement of price that is likely to be understood by that person as a price below which a Sky Paragliders product is not to be sold or advertised for sale.' 36 It is necessary to consider whether these orders are appropriate in the circumstances, because the making of orders is an exercise of the judicial power. Whatever the agreement between the parties, the Court must be satisfied that it is appropriate to make the orders to which consent is given.

The declarations 37 If the Court is to make declarations, merely recording the fact that contraventions of the Trade Practices Act have occurred, it is important that they be in terms sufficiently specific to inform the reader of the precise nature of the contravention. See BMW Australia Ltd v Australian Competition & Consumer Commission [2004] FCAFC 167 (2004) 207 ALR 452 at [35]. 38 Declarations 1(a) and (b) are sufficiently precise to satisfy this criterion. Declaration 1(c) is not. It does not disclose what element of the statement of price it was that made it likely to be understood as containing a price below which the product was not to be sold or advertised for sale. It is not necessarily easy to frame an adequate description of the element of the price list that brought about the contravention. In [26], I have rejected the contention that resort to the accompanying statement of terms supplies the requisite element, because the term numbered seven seems to contemplate that Walkerjet would be able to sell Sky Paragliders products at less than the 'Retail Price in AUD' by way of 'specials' for specified periods. This brings me back to the words 'Retail Price in AUD' themselves. It is not so much the fact that those words appear on the price list as the fact that they are unqualified by any words indicating that the price is not to be regarded as absolute, that causes the problem. Section 97 of the Trade Practices Act sanctions the use of the word 'recommended' in conjunction with 'price', although s 97 in its terms relates only to the act specified in s 96(3)(b), not to the act specified in s 96(3)(f). It does, however, suggest that, if the first respondent had used the words 'recommended Retail Price in AUD' in its price list, it would not have been regarded as contravening s 48 by reference to s 96(3)(f). 39 Accordingly, to make declaration 1(c) sensible, I should insert after the words 'a statement of price that' a comma and the words 'by reason of the presence of the words "Retail Price in AUD", unqualified by any indication that the price was a recommended price only,'. 40 As to the declaration numbered two, it contains alternatives ('directly or indirectly knowingly concerned in, or party to'). In my view, it does not express precisely what finding has been made against the second respondent. The agreed statement of facts discloses that the second respondent was directly knowingly concerned in the first respondent's conduct. Accordingly, the words 'or indirectly', the comma following the word 'in' and the words 'or party to,' should be omitted from this declaration. 41 In the exercise of my discretion, and subject to minor amendments, including punctuation amendments, I am prepared to make declarations in those terms.

The injunctions 42 Similar considerations apply to the form of the injunctions sought. It is even more important in the case of an injunction than in the case of a declaration that the language be precise. A person must know exactly what it is he or she is prohibited from doing, or obliged to do, when the sanction for failing to comply with an injunction is punishment for contempt of court. 43 In addition, as in the present case, there are commonly circumstances dictating that the language of an injunction should be narrow. Section 80 of the Trade Practices Act has modified significantly the principles that would ordinarily be applied in considering whether to grant an injunction. Subsections (4) and (5) make it clear that an injunction can be granted, whether or not the person against whom it is granted threatens and intends to continue the conduct complained of, or to continue to refrain from fulfilling the obligation. In such a case, the Court is empowered to grant an injunction solely on the basis that a person has in the past engaged in some conduct that amounts to a contravention of the Trade Practices Act, or failed to do something that he or she was required to do in order to comply with the Trade Practices Act. When past conduct or default is the sole basis for an injunction, it is that precise past conduct or default that should be enjoined. In the absence of evidence of threatened or intended conduct or default, there is no occasion to broaden the injunction beyond what has occurred in the past, so as to make it cover conduct that the person enjoined has never engaged in, or obligations that in respect of which there has been no default. 44 The present case is one in which there is no suggestion of threatened or intended conduct that would amount to further contraventions of the Trade Practices Act. It is clear that the respondents have been shown the error of their ways by their involvement in this proceeding. Nevertheless, they have agreed to burden themselves with injunctions. The result is that, if they repeat their former conduct, they will be liable for possible punishment for contempt of court, which, in the case of the first respondent, might include a sequestration order and, in the case of the second respondent, might include imprisonment. It is important, therefore, to limit the terms of any injunctions to prevention of the repetition of the precise acts of the respondents which have been found to amount to contraventions of the Trade Practices Act. 45 Injunctions 3(a) and 4(a) appear to be sufficiently restricted. In injunctions 3(b) and 4(b), the words 'entering or' and 'enters or' should be deleted. The respondents have not entered into any agreement of the kind described. All that has been found against them is that they have offered to enter into such an agreement. In relation to the injunctions 3(c) and 4(c), the same words that I have inserted into declaration 1(c) need to be inserted, in order that the injunctions will reflect what has occurred and make it clear to the respondents what they must not do in the future. 46 In addition, the introductory words of injunction 4 suffer from the same vagueness as I found to exist in declaration 2. For the same reasons, in order to reflect the past conduct of the second respondent, the words 'or indirectly', the comma after the word 'in' and the words 'or party to,' must be deleted from injunction 4. 47 In the exercise of my discretion, and subject to minor amendments, including punctuation amendments, I am prepared to grant injunctions in this modified form.

Pecuniary penalties 48 Counsel for the applicant suggested a penalty in the range of $40 000 - $100 000 in the case of the first respondent and $10 000 - $35 000 in the case of the second respondent. Pointing to the respective maxima fixed by s 76(1A)(b) and (1B) of the Trade Practices Act, he suggested that these were at the lower end of the spectrum. He placed heavy emphasis on the need for the penalties to reflect deterrence, both general and specific, considering that contraventions of s 48 of the Trade Practices Act are necessarily serious conduct. He relied on the fact that the conduct was deliberate, in the sense that it arose from a conscious decision. Counsel for the applicant contended that the conduct had caused damage to Walkerjet. I shall return to this issue. He pointed to the first respondent's market share, to the absence of any prior steps to be educated in relation to the Trade Practices Act, either before or after the contravention. In the submission of counsel for the applicant, penalties in those ranges took account of the fact that the respondents had not engaged in similar conduct in the past, had cooperated with the applicant and are in straitened financial circumstances. He suggested provision for payment by instalments. He referred to various other cases in which penalties had been imposed for similar conduct. 49 As I have said in [33], I have not taken the view, urged on me by counsel for the applicant, that the motive for the respondents' conduct was nothing but greed. Unlike the applicant, I find it necessary to take into account the impact on the market in paragliders of the imposition of the penalties suggested. I have little doubt that, if I were to impose penalties in the amounts suggested by counsel for the applicant, the first respondent would soon have to cease trading and be wound up. The second respondent, if he did not have to suffer the indignity of personal bankruptcy, would be forced to cease his involvement in selling paragliders, and to seek employment elsewhere, in the hope of trying to earn enough to keep himself and his family, in addition to paying the financial penalty. The absence of the respondents from the market in paragliders would be detrimental to the public, as it would remove the concern that they have for safety and leave a gap in the market, to be filled by those who do not necessarily have such concern. 50 In the course of the hearing, I indicated to counsel for the applicant my concern that I did not wish to impose penalties that would ruin the respondents and the second respondent's family. I drew the attention of counsel for the applicant to s 86C of the Trade Practices Act, and raised with him the possibility of a community service order, or a probation order in lieu of a financial penalty. In terms of s 86C(1), such orders can only be made on application by the present applicant. I urged counsel for the applicant to seek instructions to make such an application. On the view I take, an order under s 86C, framed so as to require the second respondent to make such use of his skills and knowledge in relation to paragliding in the promotion of safety in that activity would have been a far more beneficial outcome than the imposition of pecuniary penalties. There would be much merit in forcing the second respondent to give up his time and to perform unpaid work that would enhance the safety of the activity of paragliding. This would have a more powerful deterrent effect, not only on the second respondent himself, but also generally, than the imposition of large pecuniary penalties that were never collected, because the first respondent went into liquidation and the second respondent was forced to become a bankrupt. Counsel for the applicant sought, but was not given, instructions to make an application for an order pursuant to s 86C. I can only conclude that it is the desire of the applicant to ruin the respondents financially. It is not my desire. 51 So far as the question of damage to Walkerjet is concerned, I also take a different view from that advanced by counsel for the applicant. Walkerjet was not induced by the conduct of the respondents to engage in any contravention of s 48 of the Trade Practices Act itself. Mr Atkin seems to have been aware, at least from an early stage of the negotiations, that to do so would be illegal. The damage suffered by Walkerjet in being unable to procure Sky Paragliders products has been the result of the decision of Sky Paragliders to make the second respondent (through the first respondent) its exclusive importer of its products into Australia. It is true that this decision came about as a result of the respondents complaining to Sky Paragliders that Walkerjet was undercutting prices, but it is damage that is in a sense collateral. In its original application, the applicant sought an order that would have the effect of remedying, to some extent, damage suffered by Walkerjet. The order sought was in the following terms: 'An order that the First Respondent offer to appoint Walkerjet for a term of no less than three years as a dealer of Sky Paragliders' paragliders and accessories on terms that are no less advantageous than those offered to the First Respondent's other dealers and that written reasons are to be given to Walkerjet of any purported termination of that appointment.' 52 Given the express desire of Walkerjet, through Mr Atkin, to deal in Sky Paragliders products, this remedial order will be of some advantage. Counsel for the applicant suggested that, if I were minded to impose low financial penalties, it might also be appropriate to make such a remedial order. There is also the possibility that such an order could operate to improve the financial position of the respondents, by increasing sales, and enhance their capacity to pay any penalty and any order for costs. It will enable the second respondent to continue testing all of the products imported, and thereby maintain the desired level of control over safety. For these reasons, I propose to make a remedial order, similar to that sought, but recognising that the first respondent may in any event cease to conduct its business, or be prevented from continuing its arrangement with Sky Paragliders, and that it could not maintain its relationship with Walkerjet in those events. The order will be in the following terms: 'The first respondent forthwith offer to appoint Walkerjet, for a term of no less than three years, or until the first respondent should cease to be the importer of Sky Paragliders products, whichever occurs earlier, as a dealer in Sky Paragliders products on terms no less advantageous than those offered to the first respondent's other dealers and, in the event that the first respondent terminates that appointment, for any reason other than that the first respondent ceases to be an importer of Sky Paragliders products, the first respondent provide Walkerjet with written reasons for the termination.' 53 I turn, then, to the necessary question of the quantum of pecuniary penalties. Having regard to the view I have taken of the facts, and particularly the financial circumstances of the respondents, I am of the view that appropriate penalties will be $3000 for the first respondent and $2000 for the second respondent. I propose to order that the first respondent's penalty be paid by three instalments of $1000, at intervals of six months and that the second respondent's penalty be paid by two instalments of $1000 at intervals of six months. In each case, the first payment will be due six months after the making of orders. I recognise that these amounts are at the extreme low end of the range. Even so, I impose a financial penalty on the second respondent reluctantly. As I have said, in my view, an order under s 86C would have been of far greater value.

Costs 54 Counsel for the applicant sought an order that the respondents pay the applicant's costs. I asked for an estimate of what they might be. The estimate given was that the costs of the proceeding would be taxed on a party-party basis at between $30 000 and $40 000. In my view, this is hyperbole. It cannot be the case that a simple proceeding, involving the filing of a handful of documents (to which I have referred in [3]) could result in such a high level of costs. In the circumstances, I propose to exercise the power found in O 62 r 4(2)(c) of the Federal Court Rules to fix the costs. This will obviate the necessity for a taxation and will quantify now the liability of the respondents. The figure I fix is $15 000. I will therefore order the respondents to pay the applicant's costs, fixed in the sum of $15 000. The order will also make provision for instalments of $1500 every six months, commencing six months after the making of orders, so that the costs will be paid over a period of five years. I recognise that this will impose a heavy financial burden on the respondents, in conjunction with the penalties, in the early stages. At the end of the first six months from the making of this order, they will have to have paid a total of $3500. A similar figure will be required at the end of the second six months, and $2500 at the end of the third six months. Given their financial plight, this will be a substantial burden, but it ought not to be entirely beyond the reach of the respondents. In keeping with my desire not to ruin the respondents financially, I propose to reserve liberty to apply, so that they can approach the Court if there is real difficulty requiring further time to pay. I certify that the preceding fifty-four (54) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gray.

Counsel for the respondents: The second respondent appeared in person and on behalf of the first respondent