Worldplay Services Pty Ltd v Australian Competition & Consumer Commission [2005] FCAFC 70 (6 May 2005)

Last Updated: 6 May 2005

FEDERAL COURT OF AUSTRALIA

Worldplay Services Pty Ltd v Australian Competition & Consumer Commission [2005] FCAFC 70

TRADE PRACTICES - pyramid selling scheme - territorial issue - scheme related to global internet gambling business operating outside territorial boundaries of Australia - whether the Trade Practices Act 1974 (Cth) extends to such a scheme - no territorial connection of scheme to Australia required

STATUTES

Acts Interpretation Act 1901 (Cth) s 21(1)(b)

Trade Practices Act 1974 (Cth) ss 65AAC, 65AAB, 65AAD, 5(1), 2

CASES

American Banana Co v United Fruit Co 213 US 347 (1909) Cited

Australian Competition and Consumer Commission v Chen [2003] FCA 897; (2003) 132 FCR 309 Cons

Australian Competition and Consumer Commission v Worldplay Services Pty Ltd [2004] FCA 1138; (2004) 210 ALR 562 Affd

Bray v F Hoffman - La Roche Ltd [2002] FCA 243; (2002) 118 FCR 1 Foll

Meyer Heine Pty Ltd v China Navigation Co Ltd [1966] HCA 11; (1966) 115 CLR 10 Foll; Cons

Re Maritime Union of Australia; Ex Parte CSL Pacific Shipping Inc [2003] HCA 43; (2003) 214 CLR 397 Foll

Trade Practices Commission v Australian Iron & Steel Pty Ltd (1989) 22 FCR 395 App

Wanganui-Rangitikei Electric Power Board v Australian Mutual Provident Society [1934] HCA 3; (1934) 50 CLR 581 Foll; Refd to

Wells v John R Lewis (International) Pty Ltd (1975) 25 FLR 194 Cited





WORLDPLAY SERVICES PTY LTD, GREG JAMES KENNEDY v AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
QUD 178 of 2004




RYAN, TAMBERLIN, AND KIEFEL JJ
6 MAY 2005
BRISBANE

IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY	QUD 178 OF 2004

ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA

BETWEEN:	WORLDPLAY SERVICES PTY LTD (ACN 100 713 086) FIRST APPELLANT GREG JAMES KENNEDY SECOND APPELLANT
AND:	AUSTRALIAN COMPETITION AND CONSUMER COMMISSION RESPONDENT
JUDGES:	RYAN, TAMBERLIN AND KIEFEL JJ
DATE OF ORDER:	6 MAY 2005
WHERE MADE:	BRISBANE

THE COURT ORDERS THAT:

1. The appeal be dismissed with costs.








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

IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY	QUD 178 OF 2004

ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA

BETWEEN:	WORLDPLAY SERVICES PTY LTD (ACN 100 713 086) FIRST APPELLANT GREG JAMES KENNEDY SECOND APPELLANT
AND:	AUSTRALIAN COMPETITION AND CONSUMER COMMISSION RESPONDENT

JUDGES:	RYAN, TAMBERLIN AND KIEFEL JJ
DATE:	6 MAY 2005
PLACE:	BRISBANE

REASONS FOR JUDGMENT

RYAN and KIEFEL JJ:

1 At issue before his Honour the primary Judge, Finn J, were whether Worldplay Services Pty Ltd (‘WPS’) was participating in a pyramid selling scheme in contravention of s 65AAC(1) of the Trade Practices Act 1974 (Cth) (‘the Act’) and whether the second appellant, Mr Kennedy, was knowingly concerned in the contraventions of that provision by WPS and by Worldgame IP Holdings Pty Ltd (‘WGIPH’). His Honour held the contraventions to be established and Mr Kennedy liable as an accessory and granted injunctive relief: Australian Competition and Consumer Commission v Worldplay Services Pty Ltd [2004] FCA 1138; 210 ALR 562. The case raised a question of whether the Act extended to a scheme which operated outside the territorial boundaries of Australia. His Honour held that WPS and WGIPH were participants in the scheme and that their conduct in that connexion was within Australia. Nothing further was required. It is his Honour’s determination of that issue which is the subject of this appeal. The appeal does not concern other findings of his Honour as to the nature of the scheme and the appellants’ participation in it.

2 His Honour’s findings relevant to this appeal were as follows. The scheme operated in connexion with a global internet online business which provided gaming services in over fifty countries, though principally in Scandinavia. The business traded under the name ‘World Games Inc’ (‘WGI’) and appeared to be owned by a company, Pacific Delta Investments Ltd, which was incorporated in the British Virgin Islands. The WGI website uses the domain name ‘worldgamesinc.com’ which is registered to WPS. The relationship of various businesses and corporations in the scheme was not entirely clear, but the ACCC’s case in any event focused upon WPS’s and WGIPH’s participation in the scheme.

3 His Honour found that the scheme came within the definition of a pyramid selling scheme. In particular, a person could only become a member by being introduced by an existing member and paying a participation fee. Members’ participation payments were substantially induced by the prospect held out to them that they would be entitled to benefits in consequence of their introduction to the scheme of new participants.

4 WPS and WGIPH were corporations registered in Australia, having offices at the Gold Coast in Queensland from which they carried on business. Mr Kennedy was the sole director of both of them.

5 The factors relevant to WPS’s participation in the scheme as found by his Honour may be stated shortly. WPS either owned or had a significant degree of control over the WGI website, had designed it and facilitated the use of it by the WGI business. WPS was part of a federation of corporations connected with the realisation of WGI’s business and Mr Kennedy provided the link as director between companies concerned in the business. He was a central figure in the business, and personally promoted it. He had condoned a representation that WPS’s Gold Coast offices were the headquarters of WPS. WPS managed the strategic direction and operations of the WGI business and provided management services. WPS’s income was reliant upon the business.

6 His Honour was unable to conclude that the scheme which was the business of WGI was accessible to members of the Australian public. The website used by WGI could not be accessed using an internet connection provided by an Australian internet service provider and steps had been taken to prevent the continued membership of Australian residents in WGI.

7 Nevertheless his Honour held the relevant conduct, the participation by the appellants in the scheme, had taken place in Australia. No more was required to be shown in connexion with a contravention of s 65AAC(1) of the Act in the present case.

THE STATUTORY PROVISIONS

8 Section 65AAC of the Act provides:

‘(1) A corporation must not participate in a pyramid selling scheme.

(2) A corporation must not induce, or attempt to induce, a person to participate in a pyramid selling scheme.’

9 ‘Participate’ is defined by s 65AAB to mean to:

‘(a) establish or promote the scheme (whether alone or together with another person); or
(b) take part in the scheme in any capacity (whether or not as an employee or agent of a person who establishes or promotes the scheme, or otherwise takes part in the scheme).’

A ‘participant’ in a pyramid selling scheme is defined as ‘a person who participates in the scheme.’

10 Section 65AAD ‘What is a pyramid selling scheme?’ provides as follows:

‘(1) In this Act:

pyramid selling scheme means a scheme with both the following characteristics:

(a) to take part in the scheme, some or all new participants must make a payment (a participation payment) to another participant or participants in the scheme;
(b) the participation payments are entirely or substantially induced by the prospect held out to new participants that they will be entitled to a payment (a recruitment payment) in relation to the introduction to the scheme of further new participants.

(2) A scheme may be a pyramid selling scheme:

(a) no matter who holds out to new participants the prospect of entitlement to recruitment payments; and
(b) no matter who is to make recruitment payments to new participants; and
(c) no matter who is to make introductions to the scheme of further new participants.

(3) A scheme may be a pyramid selling scheme even if it has any or all of the following characteristics:

(a) the participation payments may (or must) be made after the new participants begin to take part in the scheme;
(b) making a participation payment is not the only requirement for taking part in the scheme;
(c) the holding out of the prospect of entitlement to recruitment payments does not give any new participant a legally enforceable right
(d) arrangements for the scheme are not recorded in writing (whether entirely or partly);
(e) the scheme involves the marketing of goods or services (or both).’

11 Section 5(1) of the Act provides:

‘(1) Part IV, Part IVA, Part V (other than Division 1AA), Part VB and Part VC extend to the engaging in conduct outside Australia by bodies corporate incorporated or carrying on business within Australia or by Australian citizens or persons ordinarily resident within Australia.’

Each of the sections set out above appears in Part V of the Act.

12 The object section, s 2, provides:

‘The object of this Act is to enhance the welfare of Australians through the promotion of competition and fair trading and provision for consumer protection.’

13 It is also necessary, for the purpose of argument presented on the appeal, to refer to s 21(1)(b) of the Acts Interpretation Act 1901 (Cth):

‘21. In any Act unless the contrary intention appears:

...

(b) references to localities jurisdictions and other matters and things shall be construed as references to such localities, jurisdictions and other matters and things, in and of the Commonwealth.’

HIS HONOUR’S REASONS ON ‘THE TERRITORIAL ISSUE’

14 The respondent did not seek to rely upon any conduct, on the part of the appellants, which took place in connexion with the scheme, but overseas. Section 5(1) therefore assumed no relevance before his Honour. Nevertheless it was submitted by the appellants that for the purposes of s 65AAC(1) of the Act, the scheme must operate within Australia. His Honour considered the matter in this way:

‘[79] Section 5 of the TP Act insofar as presently relevant extends the provisions of Part V (which include the pyramid selling provisions) "to the engaging in conduct outside Australia by bodies corporate incorporated or carrying on business within Australia".

[80] There is nothing in the language of the pyramid selling provisions which expressly requires that the scheme operate within Australia’s territorial boundaries or that it otherwise have some nexus with Australia. Nonetheless, the respondents contend that in construing s 65AAC and s 65AAD I should apply the territorial presumption of construction prescribed by s 21(1)(b) of the Acts Interpretation Act 1901 (Cth) and rule that the scheme itself must operate "in ... the Commonwealth". That presumption, I would note, is displaced where "the contrary intention appears". The respondents contend that, as s 65AAC has "an objective of protecting the public": Sherman v Australian Competition and Consumer Commission (2003) 47 ACSR 505 at [14]; and as the object of the Act is to enhance the welfare of Australians through "provision for consumer protection": s 2; parliament must be taken as having intended in s 65AAC to protect the Australian public and so to be limited in its territorial operation.

[81] Interesting though this question might be, it does not require address in this matter. If WPS and WGIPH are, relevantly, participants in a pyramid selling scheme, the conduct they are engaging in to that end is engaged in within Australia at their Gold Coast offices, albeit the scheme itself operates outside the territorial boundary of Australia. No question in consequence arises as to the extraterritorial operation of the TP Act or as to how s 5 and s 65AAC interact: see Bray v F Hoffman-La Roche Ltd [2002] FCA 243; (2002) 118 FCR 1 at [45] ff. The case is one involving the application of the TP Act to Australian registered companies engaging in conduct within Australia.

[82] I should add that I do not consider that the pyramid selling provisions should be read down so as to apply only to the protection of Australian consumers: cf Wells v John R Lewis (International) Pty Ltd (1975) 25 FLR 194 at 208 ff. Provided the conduct proscribed by s 65AAC is engaged in within Australia, it is immaterial that the persons who make participation payments to take part in the scheme: cf s 65AAD(1)(a); are not within Australia. The Commonwealth has an obvious interest in the conduct of corporations that occurs within Australia.’

THE APPEAL

15 The appellants submitted that, putting s 5(1) aside, the reference to conduct referred to in s 65AAC(1) of the Act is to conduct which takes place in Australia. The conduct there referred to, participation in a scheme, is not just participation in any activity but in a defined activity, namely a pyramid scheme. It is necessary then to consider whether there is any territorial limitation to be applied to the definition provided by s 65AAD(1). In particular, regard must be had to the requirement in par (b), that the participation payments be entirely or substantially induced by the prospect of entitlement to further payments in the event that further new participants are introduced. This is the central characteristic of a pyramid selling scheme. It is submitted that application of the common law rule of construction concerning acts and things occurring in a foreign jurisdiction, or of s 21(1)(b) of the Acts Interpretation Act 1901 (Cth), to the definition of a pyramid selling scheme has the result that the holding out or inducement is to occur in Australia. This is supported by reference to the objects of the Act, which refer to the protection of Australian consumers, not foreign consumers.

16 It was submitted by the appellants that, if participation in a scheme operating anywhere could contravene the Act, foreign corporations carrying on unrelated businesses in Australia could be rendered subject to penalties by participating in a pyramid selling scheme operating entirely outside Australia and being one in which Australians could not participate. This could not be seen as intended by the Act. It was further submitted that the view, expressed by his Honour the primary judge, that the pyramid selling provisions should not be read down so as to apply only to Australian consumers relies upon the decision in Wells v John R Lewis (International) Pty Ltd (1975) 25 FLR 194 (‘Wells’). This decision should not be followed, in particular because s 2 was not then in its present form and contained no reference to Australian consumers.

17 We do not understand there to be any dispute concerning the operation of the common law rule. It is to be understood and implied that the Australian Parliament does not intend to deal with persons or matters over which, according to the comity of nations, jurisdiction belongs to some other sovereign or state: Meyer Heine Pty Ltd v China Navigation Co Ltd [1966] HCA 11; (1966) 115 CLR 10 at 31, 23 (‘Meyer Heine’); Wanganui-Rangitikei Electric Power Board v Australian Mutual Provident Society [1934] HCA 3; (1934) 50 CLR 581 at 600-601; Re Maritime Union of Australia; Ex Parte CSL Pacific Shipping Inc [2003] HCA 43; (2003) 214 CLR 397 at 416. The rule is one of construction and may be displaced by appropriate provisions in an Australian statute otherwise within power: Trade Practices Commission v Australian Iron & Steel Pty Ltd (1989) 22 FCR 305 at 319 (‘Australian Iron and Steel’).

18 In the context of conduct which is made an offence under an Australian Act, the presumption is that it refers only to conduct in Australia: Meyer Heine at 9. Provisions such as s 5(1) may be taken to be framed upon that assumption: Meyer Heine at 9; Bray v F Hoffman - La Roche Ltd [2002] FCA 243; (2002) 118 FCR 1 at 16. The result here is that the conduct proscribed by Part V will be taken to be conduct within Australia unless s 5(1) applies.

19 Central to the appellant’s submission is that his Honour left out of account that the definition of a pyramid scheme is itself part of the proscription. One cannot identify the conduct proscribed without importing into s 65AAC(1) definitions of both ‘participate’ and ‘a pyramid scheme’. The definition of ‘participate’ is not the only integer of the proscription, it was submitted.

20 So stated, the appellant’s argument would appear to accept that participation in a scheme, as defined by s 65AAB, does not require a holding out to be shown, as referred to in s 65AAD(1). That is undoubtedly correct. The conduct which is prohibited by s 65AAC(1) is participation in a scheme which is widely defined to mean establishing, promoting or taking part in it. Section 65AAC(1) does not require a holding out to be shown to establish a contravention.

21 It seems to us that the identification of the conduct to which s 65AAC(1) refers largely disposes of the appellant’s argument on the appeal. It is the participation in the scheme as broadly defined which is required to be undertaken in Australia, given that s 5(1) does not apply. A corporation could participate in Australia, by promotion or otherwise, of a scheme regardless of where it is being carried into effect. The conduct identified by s 65AAC(1) says nothing about where the conduct constituting participation in the scheme itself is to occur. No territorial connexion of the scheme to Australia is required. The subsection does not require that the corporation’s conduct be that taking place in the carrying out of the scheme, including holding out to prospective members. Clearly this may be undertaken by a person or corporation unconnected with the corporation alleged to contravene the subsection by participation in the scheme.

22 So far as concerns the scheme itself, s 65AAC(1) requires that the existence of the scheme be established. No territorial connexion to Australia can be seen to arise from such a requirement. As the respondent pointed out in submissions, not every defined term contained in a statutory prohibition will be required to have that connexion. Here only the conduct which is proscribed is to be taken as required to be done in Australia.

23 A similar point arose in Australian Iron and Steel. There, Lockhart J was dealing with s 50 of the Act which prohibited the acquisition by a corporation of shares or assets of a body corporate if, as a result of the acquisition, the corporation would be in a position to dominate the market. The ‘market’ affected was defined to be the Australia market, but there was no definition of the body corporate whose assets or shares were sought to be acquired and no territorial reference to it. His Honour said (at 319-320):

‘The conduct prohibited by s 50(1) is the acquisition by a corporation of shares in the capital or assets of a body corporate which has the effect of market dominance mentioned in the subsection. If the corporation which engages in that conduct is incorporated or carries on business within Australia the section applies to such conduct wherever it occurs provided that there ensues the adverse affects upon competition in Australia constituted by dominance in an Australian market (the definition of "market" being an Australian market (s 4E): cf Australian Meat Holdings, per Wilcox J with respect to s 81(1A).

In my opinion the body corporate, the shares in or assets of which are sought by the acquiring corporation, need not be only a body corporate incorporated in or carrying on business or otherwise present in Australia. It is the conduct constituted by the acquisition of shares in the capital of or assets of a body corporate that is prohibited by s 50(1). The existence of the body corporate which is the subject of the proposed merger or takeover is an essential component of that prohibited conduct and the extraterritorial operation of s 50 which is achieved by s 5(1) necessarily includes that body corporate wherever it is incorporated or carrying on business. The relevant territorial nexus with Australia is derived from the statutory requirement that the corporation which is the subject of the prohibition imposed by s 50(1) must be incorporated or carrying on business within Australia.'' (s 5(1)) and that the conduct must affect a market in Australia in the manner mentioned in s 50(1).’

24 In our view s 65AAC(1) is to be taken to say that, so long as a scheme exists, wherever it be carried out, and a corporation is doing things in Australia which amount to participation in it, a contravention will be established. It is irrelevant where the scheme is carried out. It follows that even if the scheme is effected in another country, there is no trespass by s 65AAC(1) into the jurisdiction of another country. The conduct proscribed is not that of a corporation in that country. It also follows that an intention to the contrary of any common law or statutory implication that the elements of the scheme be carried out in Australia is established.

25 The objects section should not be taken to limit the operation of s 65AAC(1) to Australian consumers, contrary to the broad operation which that sub-section is clearly intended to have. His Honour the primary Judge held, correctly in our respectful view, that the Commonwealth has an obvious interest in the conduct of corporations in Australia. There would seem to be no reason to restrict it to effects upon Australian consumers. In Wells at 208-209, a Full Court of the Australian Industrial Court expressed the view that there were indications in the Act which might be thought to be ‘out of harmony with the suggestion that the TP Act was not concerned with conduct which may be detrimental to overseas consumers’. The later enactment of the objects section in its current form would not appear to us to have been likely to alter the view their Honours took, having regard to the scheme of the Act and a number of its provisions. And as Sackville J observed in Australian Competition and Consumer Commission v Chen [2003] FCA 897; (2003) 132 FCR 309 at [52], mechanisms have been put in place for international co-operation to protect consumers generally. It is well known that the internet has facilitated conduct adversely affecting consumers in any number of countries. The appellant’s approach would allow an Australian corporation taking part in a pyramid selling scheme to avoid the imposition of a penalty or injunctions by ensuring that the scheme is put into effect elsewhere.

26 It does not seem to us to be of importance that a foreign corporation might contravene s 65AAC(1) by its conduct in Australia. In any event, we take the appellant’s argument to refer to participation in schemes outside Australia by foreign corporations carrying on business in Australia. Such conduct might be caught by s 5(1) but that question does not arise here.

27 The appeal should be dismissed with costs.

I certify that the preceding twenty-seven (27) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Ryan and Kiefel.

Associate:

Dated: 6 May 2005

IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY	QUD 178 OF 2004

ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA

BETWEEN:	WORLDPLAY SERVICES PTY LTD (ACN 100 713 086) FIRST APPELLANT GERG JAMES KENNEDY SECOND APPELLANT
AND:	AUSTRALIAN COMPETITION AND CONSUMER COMMISSION RESPONDENT

JUDGES:	RYAN, TAMBERLIN AND KIEFEL JJ
DATE:	6 MAY 2005
PLACE:	BRISBANE

REASONS FOR JUDGMENT

TAMBERLIN J:

28 I have read the Judgment of Ryan and Kiefel JJ in this matter and agree with their Honours’ reasoning and order that the appeal be dismissed with costs. I will add some brief remarks.

29 The substance of the appellant’s case is that the primary Judge, Finn J, failed to consider the question of whether s 65AAC has any extraterritorial operation and ignored the statutory and common law presumptions as to extraterritoriality.

30 First, the appellant refers to s 21(1)(b) of the Acts Interpretation Act 1901 (Cth) which relevantly provides as follows:

"21(1) In any Act unless the contrary intention appears:

...

(b)	References to localities, jurisdictions and other matters and things shall be construed as references to such localities, jurisdictions and other matters and things in and of the Commonwealth."

31 The appellant submits that the provisions of the Trade Practices Act 1974 (Cth) ("the TPA") should be read as if the words "in and of the Commonwealth" are incorporated by reason of the above provision. It is said that s 65AAD, which defines the characteristics of a pyramid selling scheme, must be read to require that the pyramid selling scheme itself, as opposed to the act of participation in such a scheme referred to in s 65AAC, must have a territorial nexus with Australia, that is, the scheme must involve a payment in Australia or an inducement in Australia or must affect Australian consumers.

32 The appellant seeks to enlist support for his submission from the general objective of the TPA, which is expressed in s 2 to be to "enhance the welfare of Australians through the promotion of competition and fair trading provision for consumer protection." (Emphasis added)

33 This case is not one in which the Australian legislation makes unlawful an activity which may be lawful under the law of another country so as to impact on the sovereignty of that other country in relation to offences committed by Australian citizens: see the remarks of Holmes J in American Banana Co v United Fruit Co 213 US 347 (1909) at 355-356.

34 Next, the appellant refers to the common law presumption concerning extraterritoriality expressed by Dixon J in Wanganui-Rangitikei Electric Power Board v Australian Mutual Provident Society [1934] HCA 3; (1934) 50 CLR 581 at 601:

"But, in the absence of any countervailing consideration, the principle is, I think, that general words should not be understood as extending to cases which, according to the rules of private international law administered in our Courts, are governed by foreign law."

35 The appellant submits that if the provisions concerning pyramid selling were read literally, they would make marketing schemes taking place entirely within foreign jurisdictions unlawful. Therefore, a foreign corporation carrying on an unrelated business in Australia would contravene s 65AAC of the TPA and the penal provision in s 75AZO by participating in a marketing scheme having the defined characteristics of a pyramid selling scheme even though the scheme operated entirely outside the territorial boundaries of the Commonwealth and Australians could not participate in it. It is said that the common law and statutory presumption is against a construction that would produce such a result.

36 In Meyer Heine Pty Ltd v The China Navigation Co Ltd [1966] HCA 11; (1966) 115 CLR 10 at 24 (Meyer Heine), which is referred to by the appellant, Kitto J, with whom Windeyer and McTiernan JJ agreed, drew an inference from s 9(b) of the Australian Industries Preservation Act 1906 (Cth) that the legislation was only intended to apply to territorial offences. The basis for Kitto J’s conclusion was that s 9(b) referred to a purely notional offence, namely, an offence which would have been committed if the act done outside Australia had been done within Australia. The section is clearly framed in reliance on the premise that when conduct is otherwise made an offence it is only such conduct in Australia that is included. Consequently, it was necessary to expand the range of conduct by express provision. For this reason, Meyer Heine turned on a narrow question of construction that has no relevance to the present case.

37 More relevant to the present circumstances is the decision of Lockhart J in Trade Practices Commission v Australian Iron & Steel Pty Ltd (1989) 22 FCR 305 (Australian Iron & Steel). That decision concerned s 50 of the TPA, which prohibited a corporation from acquiring shares in the capital of a body corporate if, as a result of the acquisition, the corporation would be in a position to dominate a market for goods or services in Australia. The circumstances before his Honour concerned the acquisition by a company incorporated in Australia of a target company in New Zealand. The latter company was incorporated in New Zealand and there was no allegation that it had carried on business in Australia or had any other nexus with Australia. The decision proceeded on the basis that the acquisition could have an adverse effect on the market within Australia. For present purposes, the relevant point in this case was the applicant’s contention that the reference in s 50 to a "body corporate" should be limited to mean only an Australian body corporate. At 318-322, his Honour considered the extraterritorial operation of s 50. At 319-320, his Honour said:

"In my opinion the body corporate, the shares in or assets of which are sought by the acquiring corporation, need not be only a body corporate incorporated in or carrying on business or otherwise present in Australia. It is the conduct constituted by the acquisition of shares in the capital of or of assets of a body corporate that is prohibited by s 50(1). The existence of the body corporate which is the subject of the proposed merger or takeover is an essential component of that prohibited conduct and the extraterritorial operation of s 50 which is achieved by s 5(1) necessarily includes that body corporate wherever it is incorporated or carrying on business. The relevant territorial nexus with Australia is derived from the statutory requirement that the corporation which is the subject of the prohibition imposed by s 50(1) must be incorporated or carrying on business within Australia (s 5(1)) and that the conduct must affect a market in Australia in the manner mentioned in s 50(1).

I see no reason to confine the statutory prohibition to shares in the capital of or assets of an Australian body corporate. It would strangle the evident legislative purpose of s 50 if the body corporate which is the subject of the takeover or merger had to be an Australian body corporate; and as I said earlier it is not that body corporate which is the subject of the legislative prohibition but the acquiring corporation which must be incorporated in or carry on business in Australia." (Emphasis added)

38 This decision was referred to by Merkel J in Bray v F Hoffman-La Roche [2002] FCA 243; (2002) 118 FCR 1 at [52].

39 In my view, the analysis of Lockhart J in Australian Iron & Steel is applicable in the present circumstances. Just as, in that case, there was no requirement for the insertion of a requirement that the target body corporate can only be an Australian body corporate, there is no requirement in the present case for the pyramid selling scheme to be established in Australia or for a payment to be made in Australia by a participant in the scheme or for the scheme to affect Australians.

40 The prohibition in s 65AAC applies to the act of participation in a pyramid selling scheme. In the present case, the act of participation which forms the basis of the proceeding has occurred in Australia by reason of the conduct in Australia of Worldplay Services. The fact that this conduct has taken place in Australia is sufficient in itself to establish the necessary territorial nexus with Australia. There is no necessity to incorporate any unexpressed requirement of territorial connection into the definition of a pyramid selling scheme in s 65AAD or to read the expression in a restrictive manner, namely, to mean a scheme established in Australia or to inject a requirement that participants must be in Australia or must make a payment in Australia to another participant in Australia. This would alter the language of the provision without any justification.

41 The gist of the contrary argument for the appellant is that although there is a prohibition on participation in a pyramid selling scheme in Australia, a further restriction is necessarily incorporated into the definition of a pyramid selling scheme in s 65AAD. It is said that the definition of a pyramid selling scheme has an independent in-built territorial limitation. Therefore, one must read down the provision so that if the scheme does not operate in Australia or affect Australian consumers, the prohibition does not apply.

42 In s 5(1) of the TPA, the provisions concerning pyramid selling schemes are extended to the engaging in conduct outside Australia by bodies that are incorporated or carrying on business within Australia. In the present case, the act of participation in fact takes place in Australia so there is no need for any extension to provide a territorial basis for the law. Moreover, there is an additional nexus, namely, that the participating body corporate is incorporated in Australia. There is no evident reason why the Australian Government could not, for example, prohibit a pyramid selling scheme that was created and given effect in the United States but which targeted Australian citizens or corporations. Australia has an interest in regulating the situation where Australians are cheated overseas or where a corporation incorporated within Australia carries out an act in the United States that is contrary to Australian law.

43 Moreover, as counsel for the respondent points out, the protection of consumers outside Australia from the acts of corporations participating in pyramid selling schemes within Australia can be perceived to promote the welfare of Australians by enhancing foreign confidence in Australia’s ability to promote competition and fair trading outside Australia. It would detract from Australia’s reputation and standing in the international business community if Australia were to be seen as a safe haven for the organisation and administration of such schemes.

I certify that the preceding sixteen (16) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Tamberlin.

Associate:

Dated: 6 May 2005

Counsel for the Appellants:	Mr D J Jackson QC and Mr S Couper QC
Solicitor for the Appellants:	Hopgood and Ganim Lawyers
Counsel for the Respondent:	Mr P L O’Shea SC and Mr A Pomerenke
Solicitor for the Respondent:	Corrs Chambers Westgarth
Date of Hearing:	25 February 2005
Date of Judgment:	6 May 2005