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Federal Court of Australia |
Last Updated: 18 February 2008
FEDERAL COURT OF
AUSTRALIA
Australian Competition and Consumer
Commission v EDirect Pty Ltd
[2008] FCA 65
TRADE PRACTICES – misleading and deceptive conduct
– consent declarations, injunctions and compliance programs – scope
of Court’s
power – Trade Practices Act 1974 (Cth) ss 80 and
86C, Federal Court of Australia Act 1976 (Cth) s
21
Federal Court of Australia Act 1976 (Cth) s
21
Trade Practices Act 1974 (Cth) ss 52, 58, 80, 86C, 87B,
Telecommunications Act 1997(Cth)
ICI v Trade Practices
Commission (1992) 38 FCR 248
Foster v ACCC [2006] FCAFC
21
BMW Australia Ltd v ACCC [2005] FCAFC 167
Forster v Jododex
Australia Pty Ltd [1972] HCA 61; (1972) 127 CLR 421
Ainsworth v Criminal Justice
Commission [1992] HCA 10; (1992) 175 CLR 564
ACCC v Real Estate Institute Industry of
Western Australia Inc [1999] FCA 18 and 1387; [1999] FCA 1387; (1999) 161 ALR 79; (1999) 95
FCR 114
ACCC v Virgin Mobile Australia Pty Ltd (No. 2) [2002] FCA
1548
ACCC v Info4PC.com Pty Ltd (deregistered) [2006] FCA 1534
ACCC v Goldy Motors Pty Ltd [2000] FCA 1885
Tobacco Institute
of Australia Ltd v Australian Federation of Consumer Organisations Inc (No.2)
(1993) 41 FCR 89
ACCC v Midland Brick Co Pty Ltd [2004] FCA 693,
(2004) 207 ALR 392
Bank of Kuwait and the Middle East v Ship MV Mawashi Al
Gasseem (No.2) [2007] FCA 815
ACCC v Dataline.Net.Au Pty
Ltd [2006] FCA 1427; (2006) 236 ALR 665
ACCC v Francis [2004] FCA
487
World Series Cricket Pty Ltd v Parish (1977) 16 ALR
181
Geocanna Nominees Pty Ltd v Thirsty Point Pty Ltd [2006] FCA
1268
Hornsby Building Information Centre Pty Ltd v Sydney Building
Information Centre Ltd (1978) 10 CLR 216
Parkdale Custom Built
Furniture Pty Ltd v Puxu Pty Ltd [1982] HCA 44; (1982) 149 CLR 191
Barton v Westpac
Banking Corporation (1983) 76 FLR 101; (1983) 150 ALR 397
Swann v
Downes (1978) 34 FLR 36
ACCC v Commercial and General Publications Pty
Ltd [2002] FCA 900
ACCC v Target Australia Pty Ltd [2001] FCA
1326
ACCC v Econovite Pty Ltd [2003] FCA 964
ACCC v Z-Tek
Computer Pty Ltd (1997) 148 ALR
339
THE AUSTRALIAN COMPETITION AND
CONSUMER COMMISSION v EDIRECT PTY LTD & VISHAL GUPTA & MANAN
CHOPRA
NTD 13 OF 2007
REEVES J
12
FEBRUARY 2008
DARWIN
|
AND:
|
1. Between February 2006 and March 2007, by making representations to each of the customers listed at Appendix A to this Order that mobile telecommunications services offered and provided by EDirect pursuant to various service plans were available or accessible at and around those customers’ home addresses and within their local communities, in circumstances where those services were not available or accessible in those areas, EDirect engaged in conduct that was misleading or deceptive, or likely to mislead or deceive, in contravention of section 52 of the Trade Practices Act 1974 (Cth)(the Act).2. From at least November 2006 to March 2007, by making representations on its website at http://www.viptel.com.au (the VIPtel website) that network coverage and mobile telecommunications services offered and provided by EDirect were available and accessible Australia-wide, in circumstances where that coverage and those services were not available Australia-wide, EDirect engaged in conduct that was misleading or deceptive, or likely to mislead or deceive, in contravention of section 52 of the Act.
3. In the period August 2006 to April 2007, by making representations to each of the customers listed at Appendix B to this Order that if they purchased a mobile phone service plan from EDirect they would pay fixed monthly fees, in circumstances where pursuant to the terms of service plans between EDirect and each of the customers the monthly fees payable by each of the customers to EDirect was not fixed, EDirect engaged in conduct that was misleading or deceptive, or likely to mislead or deceive, in contravention of section 52 of the Act.
4. In the period August 2006 to April 2007, by making representations to each of the customers listed at Appendix C to this Order that if they purchased a mobile phone service plan from EDirect they could use the mobile phone provided to them by EDirect pursuant to their service plan to send pictures and/or access the internet without incurring additional charges, in circumstances where pursuant to the terms of service plans between EDirect and each of the customers sending pictures and accessing the internet incurred additional charges, EDirect engaged in conduct that was misleading or deceptive, or likely to mislead or deceive, in contravention of section 52 of the Act.
5. In or about April 2007, by making representations to the customers identified as customers 33856, 33710, 33913, 33764 and 33719 that if they purchased a mobile phone service plan from EDirect they would be able to make a call to any mobile or landline number within Australia for the cost of an untimed local call, in circumstances where pursuant to the terms of service plans between EDirect and each of the customers all calls made from the mobile phone supplied by EDirect were charged at a timed rate, EDirect engaged in conduct that was misleading or deceptive, or likely to mislead or deceive, in contravention of section 52 of the Act.
6. In or about April 2007, by making representations to the customer identified as customer 34065 that if she purchased a mobile phone service plan from EDirect she would be able to terminate the plan at any time at no additional charge to her, in circumstances where pursuant to the terms of the service plan between EDirect and that customer if the mobile phone service plan was terminated early there was an additional charge to the customer to be calculated by a formula which included the multiplication of the number of months remaining on the service plan by the fixed monthly plan amount, EDirect engaged in conduct that was misleading or deceptive, or likely to mislead or deceive, in contravention of section 52 of the Act.
7. In or about April 2007, by making representations to the customer identified as customer 33843 that if she purchased a mobile phone service plan from EDirect she would be able to use the mobile phone provided to her by EDirect to access all the services covered by that plan all across Australia, in circumstances where those services were not available Australia-wide, EDirect engaged in conduct that was misleading or deceptive, or likely to mislead or deceive, in contravention of section 52 of the Act.
8. In or about April 2007 by making representations to:
8.1. the customer identified as customer 419184 that if he purchased a mobile phone service plan from EDirect he would save money if he used the mobile phone supplied by EDirect instead of his existing home telephone landline; and
8.2. the customers identified as customers 33949 and 33958 that if they purchased a mobile phone service plan from EDirect they would save money if they used the mobile phone supplied by EDirect instead of their existing mobile phone;
in circumstances where EDirect had no reasonable grounds for making these representations, EDirect engaged in conduct that was misleading or deceptive, or likely to mislead or deceive, in contravention of section 52 of the Act.
9. On each occasion that EDirect accepted payments from each customer as set out in Appendix A to this Order, there were reasonable grounds, of which EDirect was aware or ought to have been reasonably aware, for believing that EDirect would not be able to provide mobile telecommunication services to each of those customers within a reasonable time because EDirect knew, or ought to have reasonably known, that network coverage was not available at the home addresses or local communities of each of those customers, and by so doing EDirect engaged in conduct in contravention of section 58(b) of the Act.
Second and Third Respondents
10. The Second Respondent:
10.1. aided, abetted, counselled or procured EDirect to contravene the Act; and/or
10.2. further or alternatively, was directly or indirectly knowingly concerned in, or party to, the contravention by EDirect described in paragraphs 1, 2 and 9 of this order;
in that
10.3. he was aware of the representations that were being made on behalf of EDirect;
10.4. he was aware of all the facts and circumstances constituting the grounds for the representations;
10.5. he was aware of all the facts and circumstances by reason of which the representations were misleading or deceptive; and
10.6. he refrained (otherwise than inadvertently) from taking any steps to prevent the representations being made on behalf of EDirect.
11. The Third Respondent:
11.1. aided, abetted, counselled or procured EDirect to contravene the Act; and/or
11.2. further or alternatively, was directly or indirectly knowingly concerned in, or party to, the contravention by EDirect described in paragraphs 1, 2 and 9;
in that
11.3. he was aware of the representations that were being made on behalf of EDirect;
11.4. he was aware of all the facts and circumstances constituting the grounds for the representations;
11.5. he was aware of all the facts and circumstances by reason of which the representations were misleading or deceptive; and
11.6. he refrained (otherwise than inadvertently) from taking any steps to prevent the representations being made on behalf of EDirect.
THE COURT ORDERS THAT:
12. For a period of 4 years from the date of this Order, EDirect be restrained by itself, its servants, agents or otherwise howsoever, in connection with the marketing, promoting or selling of mobile phone service plans, from stating, inferring or otherwise representing that if a consumer purchases a mobile phone service plan from EDirect:
12.1. they will pay fixed monthly fees, where pursuant to the terms of the proposed service plan the monthly fees payable by the consumer to EDirect are not to be fixed;
12.2. they will be able to use the mobile phone provided to them by EDirect to send pictures and/or access the internet without incurring additional charges where, pursuant to the terms of the proposed service plan, sending pictures and/or accessing the internet incur additional charges;
12.3. they will be able to make a call to any mobile or landline number within Australia for the cost of an untimed local call where, pursuant to the terms of the proposed service plan, calls made on that service plan are charged at a timed rate;
12.4. they will be able to terminate the plan at any time at no additional charge to them where, pursuant to the terms of the proposed service plan, if a service plan is terminated early there is an additional charge to the consumer;
12.5. they will be able to access services covered by that plan all across Australia where those services are not available Australia-wide; and
12.6. they will save money if they use the mobile phone supplied to them by EDirect instead of their existing home phone or landline phone, in circumstances where EDirect has no reasonable grounds for making that representation.
13. For a period of 6 months from the date of this Order, EDirect be restrained by its servants, agents or otherwise howsoever, in the event that any of the customers listed in Appendix A or Appendix B exercise rights to terminate their service plans with EDirect, from enforcing any clause in the terms and conditions applying to those service plans that provide for early termination charges.14. For a period of 4 years from the date of this Order, the Second and Third Respondents be restrained from;
14.1. aiding, abetting, counselling or procuring; or
14.2. being in anyway directly or indirectly knowingly concerned or party to;
EDirect, or any other corporation, engaging in the conduct referred to in paragraphs 12 and 13.15. EDirect provide, within 30 days of the making of this order, a copy of these orders to each of the customers listed in Appendix A and Appendix B.
16. EDirect:
16.1. establish a Trade Practices Compliance Program for the employees or other persons involved in EDirect’s business in accordance with the requirements set out in Appendix D, being a program which is designed to ensure an awareness of the responsibilities and obligations in relation to the conduct declared by the Court in this proceeding to be in contravention of sections 52 and 58(b) of the Act (the contravening conduct) or any similar or related conduct;
16.2. within one month of the date of this Order appoint a person with experience in Australian trade practices law to advise EDirect as to the establishment of the Trade Practices Compliance Program;
16.3. maintain and administer the Trade Practices Compliance Program for a period of three years;
16.4. provide, at its own expense, a copy of any document required by the Applicant in accordance with Appendix D;
16.5. be at liberty to apply to the Court to vary the Trade Practices Compliance Program by reason of changes in the law or otherwise by reason of changes in circumstances.
17. EDirect, within three months of the date of this order, at its own expense, arrange for the broadcast of a community service announcement outlining the key elements of the Applicant’s publication "The Fair Call Advertising Guide", which relate to the telemarketing of mobile telephones, in the form set out at Appendix E to this order, or such other form as the Court determines as appropriate, with such community service announcement to be broadcast:
17.1. on the Indigenous Broadcasting Services set out at Appendix F to this order:
17.2. in English;
17.3. between the times of 9.00am and 9.00pm;
17.4. with a frequency of twice per day for seven consecutive days; and
17.5. for a duration of at least one minute.
and that EDirect, within one month of the conclusion of the broadcasts and not later than four months of the date of this order, provide a written report to the Applicant on the implementation and administration of the broadcasts.
18. The Respondents pay the Applicant’s costs in the amount of $50,000.
Note: Settlement and entry of orders is dealt with in Order 36
of the Federal Court Rules.
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BETWEEN:
|
THE AUSTRALIAN COMPETITION AND CONSUMER
COMMISSION
Applicant |
|
AND:
|
EDIRECT PTY LTD
First Respondent VISHAL GUPTA Second Respondent MANAN CHOPRA Third Respondent |
|
JUDGE:
|
REEVES J
|
|
DATE:
|
12 FEBRUARY 2008
|
|
PLACE:
|
DARWIN
|
REASONS FOR JUDGMENT
INTRODUCTION
1. The Australian Competition and Consumer Commission (‘the ACCC’), being the applicant, and EDirect Pty Ltd (‘EDirect’), the first respondent, and two of its directors, Vishal Gupta and Manan Chopra, the second and third respondents (together the ‘respondents’), have agreed to settle this proceeding. To give effect to that settlement they have applied to the Court for certain final orders by consent.
2. The consent orders involve the Court making orders:
a. For declarations under s 21 of the Federal Court of Australia Act 1976 (Cth) that the respondents have contravened, or been involved in contraventions of, ss 52 and 58 of Trade Practices Act 1974 (Cth) (‘the Act’).b. For injunctions under s 80 of the Act to restrain the respondents from engaging in certain conduct in relation to future customers and from enforcing any early termination charges for the termination of mobile service plans of a specified list of their existing customers.
c. Under s 86C of the Act requiring EDirect to, among other things, implement and maintain a Trade Practices compliance program.
d. That the respondents pay the applicant’s costs fixed in the sum of $50,000.
3. In addition to these consent orders, the respondents have provided the ACCC with a Court enforceable undertaking pursuant to s 87B of the the Act. Pursuant to this undertaking, EDirect will, among other things, offer refunds to certain of its customers together with the opportunity to terminate their mobile service plans without charge or penalty.
MATERIALS RELIED ON
4. In asking the Court to make these consent orders the parties have relied on the following:
a. The statement of claim filed by the ACCC on 24 July 2007. This is a detailed document, extending over 36 pages, which sets out the particulars of EDirect’s various alleged breaches of the Act.b. The defence which EDirect was given leave to file at the hearing on 10 December 2007. This is a very brief document in which EDirect admits all of the breaches alleged in the statement of claim.
c. The affidavit of Gary Clements sworn 30 November 2007. This affidavit establishes the provenance of the voice recordings that are then dealt with in more detail in the affidavit of Ms Vaughan immediately below.
d. The affidavit of Sharyn Maree Vaughan sworn 3 December 2007 with numerous annexures including a compact disc and the transcripts of the voice recordings obtained by Mr Clements from EDirect (see above). These voice recordings are of various telephone conversations between EDirect’s telemarketers and potential customers which are relied upon to establish EDirect’s various breaches of the Act.
e. A copy of EDirect’s ‘Summary of Standard Form of Agreement Terms and Conditions’, in effect between 2 January 2007 and 28 March 2007.
f. The affidavit of Peter Damian Moon sworn 6 December 2007, filed on behalf of EDirect, relating to the proposed community service radio broadcasts included in the consent orders. Mr Moon deposes to his discussions with a Mr Ed Knowles, the General Manager of the National Indigenous Radio Service (NIRS) to the effect that it is "absolutely appropriate’’ in his opinion to broadcast them in English notwithstanding that the consumers to whom these broadcasts are mainly directed are Aboriginal people living in remote communities for whom English is commonly a second language.
g. The affidavit of Heidi Ann Snell sworn 10 December 2007, filed on behalf of ACCC, relating to the same issue. Ms Snell deposes to the fact that 42 of the customers affected by EDirect’s misrepresentations about coverage live in remote Aboriginal communities – 3 in Western Australia, 16 in Queensland and 23 in the Northern Territory. Ms Snell also deposes to discussions she has had with the Indigenous Consumer Action Network (ICAN), an organisation that deals with consumers in the Cape York Peninsula, to the effect that the community service radio broadcasts "would most likely be made in English". I take that to mean ‘most appropriately’ be made in English. In relation to the 23 Northern Territory customers, Ms Snell deposes to discussions she has had with the Anti Discrimination Commission in the Northern Territory to the effect that there are four key Aboriginal languages spoken in the various communities where those customers live. However, Ms Snell’s affidavit does not go so far as to say that it would be inappropriate for the community service radio broadcasts to be in English, or conversely, that it would be more appropriate for them to be in one or all of the four key Aboriginal languages mentioned. I will return to this issue later in these reasons.
h. The amended form of the consent orders. A number of amendments were made to the consent orders, by the parties, as a result of matters that were raised during the hearing of this matter on 10 December 2007. For example, the disparity between the time periods during which EDirect, the company, on the one hand, and its directors, on the other, were to be restrained by the injunction orders. As originally proposed, EDirect was to be restrained for five years and the two directors were to be restrained for three years. The amended form of consent orders now proposes that the respondents be restrained for four years. A further set of amendments was made to the consent orders after certain concerns I had with the form of some of the orders were raised with the parties on 20 December 2007. The details of these changes are dealt with in some more detail in the section headed ‘Submissions’ below.
5. In addition to the materials listed above, Counsel for the ACCC, Mr Cox, arranged at the hearing on the 5th of December 2007 to play a part of the compact disc (Annexure SV – 6 to Ms Vaughan’s affidavit) of the voice recordings of the sales calls between the telemarketers on behalf of EDirect and two customers, one named "Jacko" and the other named "Kirsty".
SUBMISSIONS
6. Both Mr Cox, for the ACCC, and Mr Ng, for Edirect and its directors, made written and oral submissions at the main hearing of this matter on 5 December 2007. The matter was also mentioned briefly on 10 December 2007 and 5 February 2008 to deal with the appropriate language for the community service radio broadcasts and my concerns about the form of some of the proposed consent orders, respectively. On 5 December 2007, in summary, Mr Cox submitted that the Court had jurisdiction to make the consent orders and it was appropriate that they be made. He submitted that the declarations were in the public interest and that they would, among other things; serve to mark the Court’s disapproval of EDirect’s conduct, to assist the ACCC to carry out its duties, to inform and warn the public of such conduct occurring; and to act as a deterrence against future breaches. As to the injunction orders, he submitted that they were precise in their terms, that there was a real nexus between EDirect’s conduct and the orders sought and that they served to prevent a repetition of conduct that involved repeated breaches over a sustained period, with a reckless disregard for the provisions of the law. At the outset of his submissions, Mr Ng was at pains to make it clear that he did not wish to detract in any way from EDirect’s admissions that it had breached the Act and had therefore consented to the orders. However, he submitted, among other things, that it was not clear that EDirect should have known that the ‘no coverage’ customers could not connect to a network and, that there was no intentional deception involved on EDirect’s part. At the conclusion of the hearing, before reserving my decision, I raised some concerns I had about the community service radio broadcasts and, in particular, whether it was appropriate that they be in English. I have dealt with this issue later in these reasons.7. During the course of preparing these reasons, I had occasion to consider the form of the consent orders more closely. In that process, I became concerned about seven specific aspects of them. As a consequence, on 20 December 2007, I arranged for the District Registrar to send a letter to the solicitors for the parties detailing those seven areas of concern. The parties were then invited to make further submissions in response to those concerns, either in writing, or orally at a resumed hearing of the matter. Ultimately I agreed to resume the hearing of the matter on 5 February 2008 so that they could make any oral submissions they wished to make.
8. In the meantime the parties lodged written submissions. In those written submissions they indicated that after considering the concerns I had raised, they had agreed to amend the consent orders to deal with five of them. Those amendments were as follows:
a. To refer to s 58(b) of the Trade Practices Act(Cth) rather than just s 58 in Orders 9 and 16.1, because there is a significant difference between the evidence necessary to establish a breach of s 58(b), compared with s 58(a);b. To remove the speculation about the possibility of future breaches of ss 53 and 60 of the Trade Practices Act from the last few lines of order 16.1, because neither of those sections is mentioned anywhere else in the proceedings, nor in the statement of claim;
c. To include the word "local" between the words "untimed" and "call" in Order 12.3 to reflect the precise breach pleaded in the statement of claim and admitted in the defence;
d. To include a new paragraph 12.6 in the consent orders to deal with the "future savings misrepresentations" pleaded in paragraphs 128 – 129 of the statement of claim because this breach had apparently been omitted from the consent orders in error; and
e. To delete Order 15.2 from the consent orders and include it in the undertakings, because it was too vague in its terms to be included as a part of an injunction order.
9. That left two matters of concern upon which the parties made further written and oral submissions. In summary, those two matters were as follows:
a. Whether it was necessary to adduce evidence to demonstrate that the injunctions in Order 12 were necessary ie that future contraventions were likely?b. In Order 13, whether it was desirable to treat the "no coverage" customers and the customers that have coverage, but were affected by misrepresentations about the effect of their service plans, differently?
10. On these two matters, the written submissions filed by the ACCC were to the following effect (in summary):
a. The ACCC relied on s 80(4)(a) of the Trade Practices Act 1974 (Cth) and the decisions in ICI v Trade Practices Commission (1992) 38 FCR 248 at [256], Foster v ACCC [2006] FCAFC 21 at [30] and BMW Australia Ltd v ACCC [2005] FCAFC 167 at [36] to submit that the Court has a wide discretion to make the injunction orders in Order 12 once it is satisfied that contraventions of the Trade Practices Act have occurred, notwithstanding that the ACCC had not adduced direct evidence that future contraventions were likely.b. The ACCC submitted that Order 13 should not be amended because some customers with "no coverage" will probably not wish to terminate their service plans, therefore all customers should simply have an option to terminate. The ACCC assured me that it would ensure the Court’s orders were well publicised and the customers wishing to terminate would be given every assistance.
11. For its part, EDirect only sought to add to the ACCC’s written submissions, in the following respects:
a. S 80(1AA) of the Trade Practices Act(Cth) supports the grant of the injunctive orders; andb. It would not be appropriate to automatically terminate the services of all the customers who do not have coverage, because a number of those customers may have since found a use for their mobile phone e.g. loaned the telephone to family members in an area with coverage.
12. At the resumed hearing on 5 February 2008, Mr Cox for the ACCC made some further submissions upon the question whether direct evidence of the likelihood of future breaches was necessary before the Court could make the injunction orders. In summary he submitted that I should take into account the following additional matters in determining that question:
a. When Mr Chopra, the third respondent, was first contacted in November 2006 by the Northern Territory Commissioner of Consumer Affairs he said EDirect would not be telemarketing in the Northern Territory in the future - yet the evidence shows that telemarketers for EDirect contacted customers in the Northern Territory after that date.b. The likelihood of detecting future breaches in relation to telemarketing is slight, particularly in remote areas, so that when a breach is detected, as occurred in this case, the full force of the law should be brought to bear, to send a clear signal that such conduct will not be tolerated in the future.
Mr Ng for EDirect did not seek to add anything to his written submissions, or to reply to the ACCC’s submissions (above). Notwithstanding Mr Ng’s failure to object, I have some difficulty accepting the first of these submissions because my notes indicate that this information came from Mr Cox at the Bar table rather than by way of evidence from Mr Clements, or someone else. In fact Mr Clements’ affidavit does not appear to mention this matter. Furthermore, it is difficult to ascertain which, if any, of the conversations between EDirect’s telemarketers and various customers occurred after November 2006, because all of the records of telephone conversations annexed to Ms Vaughan’s affidavit are either dated prior to November 2006, or are marked "Unknown Dates". I will deal with the second submission and the written submissions of both parties later in these reasons when I come to consider whether it is appropriate to make orders in the terms proposed.
BACKGROUND
13. Since at least February 2006 EDirect, trading under the name of VIPtel Mobile (VIPtel) has carried on a business in Australia supplying mobile telecommunications services and related equipment to consumers. For that purpose VIPtel entered into an agreement with M2 Telecommunications Pty Ltd to use the Optus general service mobile (GSM) network. The coverage offered by the Optus GSM network at the relevant time is shown on the maps which comprise Appendix A to the statement of claim. Those maps show that the Optus GSM network had an extensive coverage in the more heavily populated areas of Australia but that its coverage was quite limited in the more remote areas of the country. Thus, in Western Australia, the Northern Territory, Western Queensland, Western New South Wales and Central and Northern South Australia, that coverage was limited to the areas immediately surrounding the main cities and towns. This meant, for example, that in the Northern Territory and Western Australia that coverage was limited to a very small proportion of the total land mass and it did not extend to the vast majority of the remote Aboriginal townships or communities in that Territory, and State, respectively.14. To sell its mobile phones and the related service plans, EDirect used a direct telemarketing service which operated from call centres located in India. From there the telemarketers telephoned potential customers throughout Australia. Those calls usually began with the telemarketers congratulating the person answering the phone and explaining that "....within a couple of days you are going to be receiving a brand new LG flip-top, colour screen, camera, mobile phone......". The caller then went on to obtain the necessary personal details so that by the end of the call the customer had often entered into a contract for a mobile phone service plan which, among other things, involved a sum per month being deducted from that customer’s bank account and paid to EDirect. In the ACCC’s written submissions, Counsel aptly described this form of telemarketing in these terms: "Vulnerable consumers have an increased risk of being victims of unscrupulous conduct when it occurs over the telephone. Telemarketing is frequently used in the telecommunications industry to contract new customers by way of voice contracts."
15. In this case, that unscrupulous element particularly affected those customers who lived in the areas of Australia mentioned above, which areas were not covered by the Optus GSM network, because those customers could not use the "brand new" mobile phones they received from EDirect to make telephone calls or to access any of the other services that might otherwise be available by mobile phone. For these customers, the "brand new" mobile phones, and the related service plans they entered into, were as good as useless.
16. These proceedings are mainly, although not totally, concerned with various representations that were expressly or implicitly made during EDirect’s telemarketing campaign. The representations fall into six categories as follows:
a. The coverage representations.b. The fixed monthly payment representations.
c. The included services representations.
d. The future savings representations.
e. The local call pricing representations.
f. The any time termination representations.
17. Between February 2006 and March 2007, the coverage representations were made to at least 152 consumers who entered into service plan contracts with EDirect. Those customers, described in the statement of claim as the "no coverage customers", were located in the following States or Territories:
a. 70 customers in the Northern Territory;b. 55 customers in Queensland;
c. 7 customers in Western Australia;
d. 17 customers in New South Wales; and
e. 3 customers in Tasmania.
18. In addition to these coverage representations, between November 2006 and March 2007 EDirect made other representations about coverage by publishing on the VIPtel website various statements and a coverage map (Appendix C to the Statement of Claim). These publications together amounted to representations to the public at large that EDirect’s mobile telephone services were available and accessible Australia-wide. Apart from these two kinds of representations relating to coverage, EDirect, through its telemarketers, variously made some or all of the other five categories of representations to 14 customers (at least) who have been identified in the Statement of Claim by their Christian names and customer ID number. In summary the effect of these five other categories of representations was:
a. The monthly payments on their service plans would be fixed, when in fact they fluctuated depending on usage;b. They would be able to access various internet services with their mobile phones at no extra cost when in fact such access involved extra fees and charges;
c. They would save on their future telephone bills when in fact they would not;
d. They would be able to make untimed calls anywhere in Australia at local call prices when in fact they were charged at a timed rate; and
e. They could terminate their mobile service plans at any time without any extra charge when in fact if they terminated their service plans before their terms expired there were extra charges.
19. In its defence, EDirect has admitted that it made each of the six categories of representations (above) and that it made the representations about coverage that were published on the VIPtel website. EDirect has also admitted that all of these representations were contrary to the true position. For example, contrary to the representations its telemarketers made to the customer named ‘Jacko’, who lives in a remote Aboriginal community, that he could use the brand new mobile telephone he was to receive to make telephone calls and access various other services, in fact he could not do anything of the sort because the Optus GSM network used by EDirect did not cover his home community, nor, indeed, most of the other regional or remote communities in the Northern Territory. EDirect has admitted in its defence that it engaged in misleading or deceptive conduct contrary to s 52 of the Trade Practices Act 1974 (Cth) by making these representations contrary to the true position. Further, by accepting payment for mobile service plans for mobile telecommunication services viz a connection to a network to make telephone calls or access other services, when there were reasonable grounds of which EDirect was aware, or ought reasonably have been aware, for believing that it could not provide those services, because the Optus GSM network did not cover those areas, EDirect has admitted that it engaged in conduct that was in contravention of s 58(b) of the Act.
CONSENT DECLARATIONS
20. In deciding whether to make these consent orders I must consider the content and scope of the Court’s powers to make orders by consent for declarations under s 21 of the Federal Court Act 1976 (Cth), for injunctions under s 80 of the Trade Practices Act 1974 (Cth) and for compliance programs under s 86C of the Trade Practices Act 1974 (Cth). I will now turn to consider each in that order.21. On the first, there is little doubt that the Court has a wide discretionary power to make declarations of right under s 21 of the Federal Court of Australia Act 1976 (Cth): see Forster v Jododex Australia Pty Ltd [1972] HCA 61; (1972) 127 CLR 421 at 437-438 and Ainsworth v Criminal Justice Commission [1992] HCA 10; (1992) 175 CLR 564 at 581-582. When the Court is asked to make declarations of right by consent it is required to scrutinise the orders sought to satisfy itself that it has the power to make those orders and that they are appropriate: see ACCC v Real Estate Institute Industry of Western Australia Inc [1999] FCA 18; (1999) 161 ALR 79 at [1] and [17] and ACCC v Virgin Mobile Australia Pty Ltd (No. 2) [2002] FCA 1548 at [1]. This means that the Court has to ensure that the declaration sought is directed to determining a legal controversy and not to answering abstract or hypothetical questions. Further the Court is required to ensure that the party seeking the declaration has a real interest in seeking that relief. And, finally, the Court has to ensure that there are sufficient consequences flowing from the making of the declaration that it is appropriate for it to exercise its discretion to do so. This later aspect may include the public interest in having such a declaration made to indicate the Court’s disapproval of particular conduct: see ACCC v Info4PC.com Pty Ltd (deregistered) [2006] FCA 1534 at [8], ACCC v Goldy Motors Pty Ltd [2000] FCA 1885 at [30] and [34], Tobacco Institute of Australia Ltd v Australian Federation of Consumer Organisations Inc (No.2) (1993) 41 FCR 89 at 99 - 100 and ACCC v Midland Brick Co Pty Ltd [2004] FCA 693; (2004) 207 ALR 392 at [21].
22. Nonetheless, the Court should not impede settlements by refusing to give effect to the terms of settlements made by the parties where the proposed orders are within the Court’s jurisdiction and appropriate. In other words, the Court should be slow to substitute its own view of the orders or undertakings for those which have been agreed by the parties as part of the terms of settlement: see ACCC Real Estate Institute Western Australia (above) at [22], ACCC v Virgin Mobile Australia Pty Ltd (No. 2) (above) at [2] and ACCC v Info4PC.com (deregistered) (above) at [18].
23. I interpolate that in my view these considerations do not prevent a court from asking the parties to reconsider certain aspects of a lengthy and complex set of proposed consent orders, as I did in this case. Whether this approach is warranted will obviously depend on the circumstances of each case. If the proposed consent orders are fundamentally defective the court will likely reject them in total and leave the parties to start again. However, if the proposed consent orders are generally appropriate, but they are long and complex and the court has concern about an incidental aspect of them, it would usually be more expedient and in the public interest to ask the parties to reconsider that aspect, rather than rejecting them in total.
24. Finally it should be noted that there is a long held view that a declaration, being a judicial act, should only be made on evidence and not simply on admissions or deemed admissions: see Bank of Kuwait and the Middle East v Ship MV Mawashi Al Gasseem (No.2) (2007) FCA 815 at [10] and the cases referred to therein. Notwithstanding this apparent reservation, Mansfield J proceeded in that case to act on deemed admissions after referring to and considering the observations of Kiefel J in ACCC v Dataline.Net.Au Pty Ltd [2006] FCA 1427, (2006) 236 ALR 665.
25. In this case I believe I have ample reliable evidentiary material before me upon which I can make the declarations. Not only do I have a very detailed statement of claim setting out the facts (plus some evidentiary material) at quite some length and EDirect’s defence which admits all these facts, but I also have a large quantity of evidence including the compact disc and transcripts of the voice recordings of the telemarketing calls during which EDirect’s misleading and deceptive conduct occurred. Finally, I believe it is significant that both parties were represented by counsel at the time that all this material was prepared and during the hearing of the matter when it was placed before me by consent: see ACCC v Francis [2004] FCA 487.
26. Based on this material, some of which I have set out in more detail above, I am satisfied that EDirect made each of the representations to the various consumers identified in the statement of claim. I am also satisfied that each of the representations was misleading or deceptive in the sense that it was inconsistent with the truth: see World Series Cricket Pty Ltd v Parish (1977) 16 ALR 181 at 201. This conclusion applies to each of the categories of representations set out above. Whilst I do not propose to review all of the material relating to all of these misrepresentations, it is perhaps appropriate to observe that the most egregious aspect of EDirect’s conduct was in its selling its mobile phones and service plans to people living in remote areas of Australia, including remote Aboriginal communities, when the slightest enquiry on its behalf would have disclosed that those mobile phones could not connect to the Optus GSM network because that network did not provide coverage to those remote areas of Australia. Similar observations could be made about EDirect’s conduct in publishing statements and maps on the VIPtel website which clearly conveyed the impression that Edirect was able to provide mobile phone coverage to almost all of the Australian land mass. Again, the slightest enquiry would have revealed to Edirect that this representation was quite untrue.
27. This egregious conduct was compounded when EDirect fobbed off complaints from some of its customers living in these remote areas that they could not connect to the Optus GSM network on their new mobile phones provided by EDirect. With one of those customers, after having made two earlier complaints by phone that his new mobile phone was showing "no service" and being told it would be alright in 24 hours, the EDirect person handling his third phone complaint gave him the somewhat disingenuous and fatuous advice that: "...there might be possibility that you might be getting a coverage problem at your home, because there is partial coverage at your place. So you can just go down the street, out of your house, in the street, or maybe in the roof top (my emphasis).You would be getting the network. You would be getting a bar for your mobile phone...".
28. The ACCC has pleaded that EDirect has breached ss 52 and 58 of the Trade Practices Act by engaging in this conduct. To establish a breach of s 52 of the Trade Practices Act it is not necessary for the ACCC to show that EDirect knew that the statements it was making were untrue and that it intended to mislead or deceive : see Geocanna Nominees Pty Ltd v Thirsty Point Pty Ltd [2006] FCA 1268 paragraph [268], referring to Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd (1978) 10 CLR 216 at 228 and to Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd [1982] HCA 44; (1982) 149 CLR 191 at 197. The situation is different under s 58(a) of the Trade Practices Act where intention is a necessary element: see Barton v Westpac Banking Corporation (1983) 76 FLR 101; (1983) 150 ALR 397 at 409 and Swann v Downes (1978) 34 FLR 36 at [46]. However, in this case, the ACCC has specifically relied upon s 58(b) of the Trade Practices Act which does not involve intention, but rather objective standards of reasonableness: see ACCC v Commercial and General Publications Pty Ltd [2002] FCA 900 at [213].
29. In this case, given that it was selling its mobile phone services throughout Australia, including vast remote areas of the country, it was reasonable to expect that EDirect ought to have been aware that the mobile phone services it was supplying could not provide the most fundamental thing required of the mobile phone supplied with the mobile service plan ie an ability to connect to an available network, because the Optus GSM network did not cover the whole of the Australian land mass. The fact that consumers in some parts of Australia could connect to the Optus GSM network using EDirect’s mobile phones obviously does not excuse the fact that some customers in remote areas could not.
30. In summary, based upon the whole of the material available to me I am well satisfied that this court can and should make the consent declarations. In particular, I believe that there is a real controversy between the parties, that these proceedings do not involve an abstract or hypothetical situation and that it is in the public interest that the declarations be made to mark this Court’s disapproval of EDirect’s conduct. Finally, as I have already observed above, I believe there is a firm factual foundation for the declarations that are proposed.
CONSENT INJUNCTIONS
31. Similar principles apply to the grant of consent injunctions under s 80 of the Trade Practices Act as apply to consent declarations under s 21 of the Federal Court of Australia Act, viz the Court must be satisfied that the consent orders are within power and appropriate: see ACCC v Real Estate Institute of Western Australia Inc (1999) 161 ALR 79, ACCC v Target Australia Pty Ltd [2001] FCA 1326, and ACCC v Econovite Pty Ltd [2003] FCA 964. The circumstances in which consent injunctions have been refused in the past are set out in ACCC v Econovite Pty Ltd (above) at [12], viz orders that are not within power, orders that have no relationship to the contravention, injunctive orders that are too imprecise or require court supervision and injunctions and declarations the terms of which overlap and give rise to confusion of obligations: see also ACCC v Real Estate Institute of Western Australia (above) at [18]-[26]. Following the amendment of these consent orders during the course of the hearings in this matter (as detailed above), in my view, none of these circumstances arises in this case.32. In relation to the question whether it is necessary to have evidence indicating that there are likely to be future breaches before the consent injunctions are ordered, I have considered the terms of s 80(4)(a) of the Act and three of the authorities that Mr Cox relied upon: see paragraph 10(a) above. Having done so, I am well satisfied that I have a broad discretion to make the orders sought in the circumstances of this matter. In addition to the relevant matters I have already outlined in the reasons for my decision to grant the declaration orders (above), the other circumstances I have in mind in exercising that discretion include the fact, as Mr Cox has pointed out, that the likelihood of detection of these sorts of breaches is slight, particularly in remote areas of Australia, and for that reason the full force of the law should be brought to bear in circumstances where, as is the case here, the authorities have managed to detect such breaches.
33. On this point, at the hearing on 5 February 2008 I enquired of counsel for the parties whether there was any regulatory regime in place that required telemarketing calls of the kind involved in this case to be recorded, especially where they involve oral contracts. It seems likely to me that future detection would be increased if there were in place some such regulatory regime. To my surprise, my associate was subsequently informed by the solicitors for the ACCC that their research indicated that the only such regulatory measure in force in any jurisdiction in Australia was s 67D of the Fair Trading Act 1999 of Victoria. That section requires the explicit informed consent of a person to a telemarketing agreement and also requires that explicit informed consent to be recorded either in writing, or by means of a recording device.
34. Furthermore, I have been informed that the issue is not currently dealt with in any industry self regulatory code of practice under Pt 6 of the Telecommunications Act 1997 (Cth). However, a new industry self regulatory code called the Telecommunications Consumer Protections: C 628:2007 is soon to come into effect. Whilst this new code does not require a voice recording to be made, it does require a record of a customer’s consent to be provided "where available"; and an associated guideline document suggests that the record "can include..... a voice recording". All of this reinforces Mr Cox’s submission that the likelihood of future detection of the sorts of breaches committed by EDirect in this case, is slight, particularly in remote areas of Australia.
35. By its terms, Order 13 does not discriminate between the "no coverage" customers and those customers with coverage who were affected by the other categories of misrepresentation – all are to be offered the option of terminating their service plans at no extra charge. My concern with this universal approach was that offering the "no coverage" customers the option to terminate may create confusion in their minds because the vast majority of them really have no option but to terminate where their mobile phones cannot connect to a network. However, as counsel for the parties have pointed out, if all the affected customers are offered the option to terminate, the "no coverage" customers will suffer no disadvantage. Furthermore the ACCC’s counsel has given an assurance that the ACCC will use its best endeavours to ensure that the terms of the Court’s orders are well publicised and that the affected customers who wish to terminate are given every assistance to do so. In these circumstances I am prepared to make Order 13 in the terms agreed between the parties.
OTHER CONSENT ORDERS
36. The terms of the community service radio broadcasts are before me. In my view they have been drafted and expressed in relatively clear terms The purpose of these broadcasts is to correct the misrepresentations made by EDirect; they are not intended to punish EDirect: see ACCC v Real Estate Institute of Western Australia Inc at [1999] FCA 1387; (1999) 95 FCR 114 at 133. During the course of the hearings in this matter an issue arose as to whether the broadcasts would be effective if they were spoken in English, rather than the relevant Aboriginal language of the Aboriginal community involved. The consent orders propose that all these community service broadcasts should be spoken in English. The evidence in the affidavits of Mr Moon and Ms Snell discloses that for the community service broadcasts to be broadcast in Queensland, the most appropriate language is English. However, for the community service broadcasts to be broadcast in the Northern Territory, whilst one of the four key Aboriginal languages may be desirable, English is not an inappropriate choice. In the absence of any evidence that it is inappropriate to broadcast these community service broadcasts in English in the Northern Territory, and with some reservations, I will make this order in the terms sought.37. The consent orders also propose that EDirect enter into a compliance program pursuant to s 86C of the Trade Practices Act 1974 (Cth). For such an order to be made there needs to be a connection or relationship between the breaches of the Act and the proposed compliance program: see ACCC v Z-Tek Computer Pty Ltd (1997) 148 ALR 339. In this case the compliance program is directed to ensuring that EDirect and its telemarketers comply with the guidelines for telemarketing prepared by the ACCC. In my view this provides a sufficient connection or relationship to make the orders sought.
CONCLUSION
38. For all these reasons it is my view that the proposed consent orders are within jurisdiction and it is appropriate that they should be made. I will therefore make orders in the terms of the final amended form of consent orders.
Associate:
Dated: 12 February
2008
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Solicitor for the Applicant:
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Counsel for the Respondents:
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Solicitor for the Respondents:
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Date of Hearing:
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Date of Judgment:
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12 February 2008
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