Australian Competition and Consumer Commission v Imagine Essential Services Limited [2008] FCA 349 (4 March 2008)

Last Updated: 18 March 2008

FEDERAL COURT OF AUSTRALIA

Australian Competition and Consumer Commission
v Imagine Essential Services Limited [2008] FCA 349

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION v IMAGINE ESSENTIAL SERVICES LIMITED (ACN 104 433 098), RICHARD EVANS AND THE TRIUMPHANT GROUP PTY LTD (ACN 101 493 403)
VID 578 OF 2007

GORDON J
4 MARCH 2008
MELBOURNE

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	VID 578 OF 2007

BETWEEN:	AUSTRALIAN COMPETITION AND CONSUMER COMMISSION Applicant
AND:	IMAGINE ESSENTIAL SERVICES LIMITED (ACN 104 433 098) First Respondent RICHARD EVANS Second Respondent THE TRIUMPHANT GROUP PTY LTD (ACN 101 493 403) Third Respondent

JUDGE:	GORDON J
DATE OF ORDER:	4 MARCH 2008
WHERE MADE:	MELBOURNE

UPON the First Respondent ("Imagine"), by its counsel, UNDERTAKING to the Court that it will implement an alternative dispute resolution program ("the Alternative Dispute Resolution Program") in relation to all persons who acquired or otherwise held a licence (including a group licence) at any time during the period November 2004 to June 2006 ("the Relevant Licensees") and who wish to make complaints concerning Imagine arising from the subject matter of paragraphs 6 to 9 of this Order, the Alternative Dispute Resolution Program to be as follows:

1. Within 14 days of the date of this Order Imagine, at its own expense, is to send to all Relevant Licensees a notice in the terms set out in Annexure 1 to this Order setting out the details of the Alternative Dispute Resolution Program, such material to be provided by email (to the last known email address of each Relevant Licensee) and by mail (to the last known postal address of each Relevant Licensee).

2. Within 14 days of the date of this Order Imagine, at its own expense, publish:

2.1 at www.imagine.com.au; and

2.2 on the homepage of any other website owned or controlled by Imagine,

a notice in the terms set out in Annexure 1 to this Order setting out the details of the Alternative Dispute Resolution Program, such notice to remain conspicuously and continuously in place for a period of 60 days.

3. The Alternative Dispute Resolution Program will consist of mediations conducted by a legally qualified and accredited mediator and be held between Imagine and any Relevant Licensee who provides notice in writing seeking to institute such a mediation and setting out the details of such complaint to Imagine by 1 May 2008.

4. The mediator will be a person mutually agreed but whose fees will be paid by Imagine.

5. Such mediations are to be:

5.1 attended by a representative of Imagine;

5.2 held at a venue agreed to by Imagine and the Relevant Licensee, and any fees payable in relation to the use of any venue are to be paid by Imagine;

5.3 held at times and on dates to be agreed by Imagine and the Relevant Licensee. Unless Imagine and the Relevant Licensee agree otherwise, all such mediations are to be held within 180 days of the notice in writing referred to above.

THE COURT DECLARES THAT:

Earnings Representations

6. By making each of the following representations in the period November 2004 to June 2006 ("the relevant period"):

6.1 that the Imagine licensing system would enable a licensee to develop a $10,000 per month passive income within 2-3 years of becoming a licensee;

6.2 that within 2 years of part time effort, a trailing income of over $100,000 per annum would realistically be achievable by a licensee;

where, during the relevant period, there were no reasonable grounds for making the representations, Imagine in trade and commerce engaged in conduct that was misleading and deceptive (or likely to mislead and deceive) in contravention of s 52 of the Trade Practices Act 1974 (Cth) ("the Act") and made representations with respect to the profitability, risk and a material aspect of the Imagine licensing system which was misleading in a material particular, in contravention of s 59(2) of the Act.

Accountant Representations

7. By making each of the following representations in the relevant period:

7.1 that when a licensee acquired a licence, Imagine would guarantee the licensee 300 businesses as members and would actually give those businesses to the licensee;

7.2 that Imagine would guarantee to licensees a business by teaming licensees up with an accounting firm, introducing the licensee to that firm, and then that firm introducing the licensee to its clients and that the accounting firm would have at least 300 clients;

7.3 that there were hundreds of accountants ready to recommend Imagine licensees;

where, during the relevant period:

7.4 Imagine had a limited number of agreements or understandings with accountants relating to the introduction of licensees to members;

7.5 very few individual licensees had been referred by Imagine to an accountant who provided the licensee with 300 members or had 300 clients to whom the licensee was introduced;

7.6 there were otherwise no reasonable grounds for making the representations,

Imagine in trade and commerce engaged in conduct that was misleading and deceptive (or likely to mislead and deceive) in contravention of s 52 of the Act and in connection with the supply of services and in connection with the promotion of the supply of services, represented that Imagine had an affiliation that it did not have, in contravention of s 53(d) of the Act.

Supplier Agreement Representations

8. By making each of the following representations in the relevant period:

8.1 that Imagine had direct agreements in place with the following essential service suppliers in relation to telephone, gas, water and electricity services, which agreements enabled licensees to procure for members substantial savings on the cost of obtaining essential services:

8.1.1 AGL;

8.1.2 Aurora Energy Pty Ltd;

8.1.3 Country Energy;

8.1.4 Energex;

8.1.5 Energy Australia:

8.1.6 Integral Energy;

8.1.7 International Power (Australia) PW Ltd;

8.1.8 M8 Telecom;

8.1.9 Momentum Energy;

8.1.10 Optus;

8.1.11 Origin;

8.1.12 Powerdirect Pty Ltd (formerly Ergon Energy Group);

8.1.13 Primus Telecom;

8.1.14 Red Energy;

8.1.15 Telstra;

8.1.16 TRUenergy (TXU);

8.1.17 Western Power;

8.1.18 Hutchison Telecom or Hutchinson 3;

8.1.19 Vodaphone;

8.2 that Imagine could often procure savings on behalf of members of at least the following percentages in respect of the services described as:

8.2.1 telephone (landlines) – 20%;

8.2.2 telephone (mobile) – 10%;

8.2.3 electricity – 5%;

8.2.4 gas – 5%;

8.2.5 fuel – 2.5c/litre;

8.2.6 internet – 4%

8.3 that Imagine would enable licensees to often save members between 30-40% on their bills for essential services;

8.4 that licensees would, through the Imagine licensing system as a national buying group, bring to small to medium sized businesses access to bulk purchasing power for their essential services, including, for example, telephony, internet, electricity, gas, fuel and technology;

where, during the relevant period:

8.5 Imagine did not have direct agreements in place with the suppliers of essential services referred to in sub-paragraph 8.1 above and any access to their products occurred through agreements or understandings with agents, brokers or intermediaries;

8.6 Imagine did not have the bulk purchasing power that allowed all licensees to access deals that were not normally available to small/medium sized businesses, in that Imagine was not able to procure on behalf of members, substantial savings in the prices of essential services compared with the prices that a consumer or business could normally obtain by their own endeavours, from (at least) the following suppliers of essential services;

8.6.1 Westnet;

8.6.2 NAS Insurance Brokers;

8.6.3 Ezepos;

8.6.4 Vodafone;

8.6.5 Telstra;

8.7 there were otherwise no reasonable grounds to make the representations,

Imagine in trade and commerce engaged in conduct that was misleading and deceptive (or likely to mislead and deceive) in contravention of s 52 of the Act and in connection with the supply of services and in connection with the promotion of the supply of services, represented that the services had approval and benefits that they did not have, in contravention of s 53(c) of the Act and in connection with the supply of services and in connection with the promotion of the supply of services, represented that Imagine had an affiliation that it did not have, in contravention of s 53(d) of the Act.

Association Representations

9. By making all of the following representations in the relevant period:

9.1 that Imagine licensees would become accredited by the Essential Service Advisors Association (ESAA);

9.2 that Imagine licensees would become accredited by the Telecommunications and Technology Industry Advisor Association (TIAA);

where:

9.3 the ESAA or the TIAA had not become operational in the relevant period such as to enable licensees to become members of, or accredited by, the ESAA or the TIAA;

9.4 as the representations referred to above were with respect to a future matter, there were no reasonable grounds to make the representation;

Imagine in trade and commerce engaged in conduct that was misleading and deceptive (or likely to mislead and deceive) in contravention of s 52 of the Act.

Evans

10. Evans, in respect of the contraventions of the Act by Imagine referred to in declarations 6 to 9 above:

10.1 aided and abetted Imagine to engage in the conduct; and

10.2 was directly knowingly concerned in and party to Imagine’s conduct,

by reason of:

10.3 his making of the representations in paragraphs 6, 7.1 and 7.2, 9.1 and 9.2;

10.4 his involvement in Imagine:

10.4.1 throughout the relevant period, as Imagine’s Chief Executive Officer;

10.4.2 throughout the relevant period from 31 October 2005, as a director of Imagine;

10.4.3 being in effective control of the business;

10.5 his participation in the 2 hour seminars and 2 day workshops;

10.6 as the representations referred to in declarations 6, 7.1 7.2, 9.1 and 9.2 above were with respect to a future matter, his knowing there were no reasonable grounds for Imagine to make the representations,

and accordingly was a person involved in those contraventions of ss 52, 53(c), 53(d) and 59(2) of the Act within the meaning of s 75B(1)(a) and (c) and s 80(1)(c) and 1(e) of the Act.

THE COURT ORDERS THAT:

Earnings Representations

11. Each of Imagine and Evans be permanently restrained, whether by itself or himself or its officers, employees and/or agents or otherwise howsoever, in trade and commerce in Australia, from making the following representations:

11.1 that the Imagine licensing system will enable a licensee to develop a $10,000 per month passive income within 2-3 years of becoming a licensee;

11.2 that within 2 years of part time effort, a trailing income of over $100,000 per annum is realistically achievable by a licensee;

11.3 any other representations to the same purport or effect as those referred to above;

in circumstances where each of Imagine and Evans has no reasonable grounds for making the representations.

Accountant Representations

12. Each of Imagine and Evans be permanently restrained, whether by itself or himself or its officers, employees and/or agents or otherwise howsoever, in trade and commerce in Australia, from making the following representations:

12.1 that when a licensee acquires a licence, Imagine will guarantee the licensee 300 businesses as members and will actually give those businesses to the licensee;

12.2 that Imagine will guarantee to licensees a business by teaming licensees up with an accounting firm, introducing the licensee to that firm, and then that firm introducing the licensee to its clients and that the accounting firm will have at least 300 clients.

12.3 that there are hundreds of accountants ready to recommend Imagine licensees;

12.4 any other representations to the same purport or effect as those referred to above;

in circumstances where:

12.5 Imagine has a limited number of agreements or understanding with accountants relating to the introduction of licensees to members;

12.6 very few individual licensees have been referred by Imagine to an accountant who provided the licensee with 300 members or had 300 clients to whom the licensee was introduced;

12.7 there are otherwise no reasonable grounds for making the representations.

Supplier Agreement Representations

13. Each of Imagine and Evans be permanently restrained, whether by itself or himself or its officers, employees and/or agents or otherwise howsoever, in trade and commerce in Australia, from making the following representations:

13.1 that Imagine has direct agreements in place with the following essential service suppliers in relation to telephone, gas, water and electricity services, which agreements enable licensees to procure for members substantial savings on the cost of obtaining essential services:

13.1.1 AGL;

13.1.2 Aurora Energy Pty Ltd;

13.1.3 Country Energy;

13.1.4 Energex;

13.1.5 Energy Australia:

13.1.6 Integral Energy;

13.1.7 International Power (Australia) PW Ltd;

13.1.8 M8 Telecom;

13.1.9 Momentum Energy;

13.1.10 Optus;

13.1.11 Origin;

13.1.12 Powerdirect Pty Ltd (formerly Ergon Energy Group);

13.1.13 Primus Telecom;

13.1.14 Red Energy;

13.1.15 Telstra;

13.1.16 TRUenergy (TXU);

13.1.17 Western Power;

13.1.18 Hutchison Telecom or Hutchinson 3; and

13.1.19 Vodaphone,

13.2 that Imagine can often procure savings on behalf of members of at least the following percentages in respect of the services described as:

13.2.1 telephone (landlines) – 20%;

13.2.2 telephone (mobile) – 10%;

13.2.3 electricity – 5%;

13.2.4 gas – 5%;

13.2.5 fuel – 2.5c/litre;

13.2.6 internet – 4%;

13.3 that Imagine will enable licensees to often save members between 30-40% on their bills for essential services;

13.4 that licensees will, through the Imagine licensing system as a national buying group, bring to small to medium sized businesses access to bulk purchasing power for their essential services, including, for example, telephony, internet, electricity, gas, fuel and technology;

13.5 any other representations to the same purport or effect as those referred to above;

in circumstances where:

13.6 Imagine does not have direct agreements in place with the suppliers of essential services referred to in sub-paragraph 13.1 and any access to their products occurs through agreements or understandings with agents, brokers or intermediaries;

13.7 Imagine does not have the bulk purchasing power that allows all licensees to access deals that are not normally available to small/medium sized businesses, in that Imagine is not able to procure, on behalf of members, substantial savings in the prices of essential services compared with the prices that a consumer or business could normally obtain by their own endeavours;

13.8 there are otherwise no reasonable grounds to make the representations.

Association representations

14. Each of Imagine and Evans be permanently restrained, whether by itself or himself or its officers, employees and/or agents or otherwise howsoever, in trade and commerce in Australia, from making the following representations:

14.1 that Imagine licensees will be become accredited by the Essential Service Advisors Association (ESAA);

14.2 that Imagine licensees will become accredited by the Telecommunications and Technology Industry Advisor Association (TIAA);

in circumstances where:

14.3 the ESAA or the TIAA have not become operational in the relevant period such as to enable licensees to become members of, or accredited by, the ESAA or the TIAA;

14.4 there are no reasonable grounds to make the representation.

Notices

15. Within 14 days of the date of this Order Imagine, at its own expense, send to the Relevant Licensees:

15.1 a copy of the Order and of any reasons for judgment of the Court in respect of the Applicant’s claims in this proceeding; and

15.2 a notice in the terms set out in Annexure A to this Order,

such material to be provided by email (to the last known email address of each Relevant Licensee) and by mail (to the last known postal address of each Relevant Licensee).

16. Within 14 days of the date of this Order Imagine, at its own expense, publish:

16.1 at www.imagine.com.au; and

16.2 on the homepage of any other website owned or controlled by Imagine,

a notice in the terms set out in Annexure A to this Order, such notice to remain conspicuously and continuously in place for a period of 90 days.

17. Within 28 days of the date of this order, Imagine is to file with the Court and serve on the Applicant an affidavit deposing to the steps it has taken to comply with its obligations under Orders 15 and 16.

Compliance program

18. Imagine:

18.1 within three months of the date of this Order, is to establish an education, training and trade practices compliance program ("Compliance Program") for employees or other persons involved in its business:

18.1.1 which is designed to ensure an awareness of a corporation’s responsibilities and obligations under ss 52, 53 and 59 of the Act; and

18.1.2 subject to the Compliance Program being tailored to Imagine’s circumstances, which is consistent with the Australian Standard on Compliance Programs AS3806;

18.2 within one month of the date of this Order, appoint a person with experience in trade practices law to advise Imagine as to the content of the Compliance Program;

18.3 implement and administer the Compliance Program for a period of three years from the date it is established; and

18.4 within three months of the date of this Order, provide a written report to the Applicant on the content of the Compliance Program and provide a further report to the Applicant on the implementation and administration of the Compliance Program at the conclusion of each period of twelve months during which the program is being implemented and administered.

19. Evans attend, at his own expense, a compliance seminar that includes a presentation relating to ss 52, 53 and 59 of the Act in accordance with the terms of Annexure B:

19.1 within three months of the date of this Order; and

19.2 on an annual basis while Evans is in any way concerned with the business of promoting or selling Imagine licences, during the three-year period commencing from the date of the Orders.

Costs

20. That the First and Second Respondents pay the costs of the Applicant fixed in the sum of $50,000 payable in five equal monthly instalments from 1 July 2008.

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

ANNEXURE 1

IMAGINE ESSENTIAL SERVICES LIMITED TO IMPLEMENT ALTERNATIVE DISPUTE RESOLUTION PROGRAM

In the final disposition of the proceedings brought by the Australian Competition and Consumer Commission, Imagine Essential Services Limited ("Imagine") offered and undertook to implement an alternative dispute resolution program ("the Alternative Dispute Resolution Program") for all persons who, between November 2004 and June 2006 ("the relevant period") acquired or otherwise held a licence (including a group licence) at any time during the relevant period ("the Relevant Licensees") and who wish to make complaints concerning Imagine arising from the subject matter of paragraphs 6 to 9 of the Declarations and Orders made by the Federal Court of Australia on 4 March 2008, a copy of which has been sent by mail to all Relevant Licensees and is otherwise available from Imagine on request.

The Alternative Dispute Resolution Program will consist of mediations conducted by a legally qualified and accredited mediator and be held between Imagine and any Relevant Licensee who provides notice in writing seeking to institute such a mediation and setting out the details of such complaint to Imagine by 1 May 2008.

The mediator will be a person mutually agreed but whose fees will be paid by Imagine.

Such mediations are to be:

• attended by a representative of Imagine;

• held at a venue agreed to by Imagine and the Relevant Licensee and any fees payable in relation to the use of any venue are to be paid by Imagine;

• held at times and on dates to be agreed by Imagine and the Relevant Licensee but, unless Imagine and the Relevant Licensee agree otherwise, all such mediations are to be held within 180 days of the notice in writing referred to above.

If you:

• acquired or otherwise held a licence (including a group licence) at any time during the relevant period and you wish to make complaints concerning Imagine arising from the subject matter of paragraphs 6 to 9 of the Declarations and Orders made by the Federal Court of Australia on 4 March 2008; and

• wish to participate in the Alternative Dispute Resolution Program please give notice in writing to Imagine by sending a letter to that effect to 431 North Road Ormond, Victoria, 3204 by 1 May 2008.

Please note that if you do not give the requisite notice in writing to Imagine by 1 May 2008, you will not be eligible to participate in the Alternative Dispute Resolution Program. This offer to participate in the Alternative Dispute Resolution Program does not limit any other rights you may have.

ANNEXURE A

IMAGINE ESSENTIAL SERVICES AND RICHARD EVANS FOUND TO HAVE PROVIDED FALSE AND MISLEADINGINFORMATION IN CONNECTION WITH THE SALE OF IMAGINE LICENCES

In June 2007, the Australian Competition and Consumer Commission ("the ACCC") commenced legal action against Imagine Essential Services Limited ("Imagine"), its former CEO, Richard Evans and The Triumphant Group Pty Ltd for alleged contraventions of the Trade Practices Act 1974 (Cth) ("the Act").

Imagine sold licences to operate a system involving agreements which Imagine claimed to have negotiated with essential service suppliers. The ACCC alleged, amongst other things, that Imagine represented these agreements could provide small to medium businesses savings on their bills for their essential services such as electricity, gas, water and telephone. Under Imagine’s system, licensees would approach businesses with a view to having them take the benefit of Imagine’s agreements to obtain the claimed savings (earning commissions when businesses signed up).

The ACCC alleged Imagine and The Triumphant Group Pty Ltd (engaged by Imagine to promote the sale of licences at Imagine’s seminars and workshops) made representations between November 2004 and June 2006 that were false and misleading with regard to:

• The profitability of the Imagine licensing system;

• The existence of agreements between Imagine and suppliers of essential services;

• Agreements that Imagine had with accountants.

The ACCC also alleged that Richard Evans was knowingly concerned in the making of these representations.

Imagine and Richard Evans have agreed to settle the ACCC’s proceeding against them. The Federal Court of Australia ("the Court") has declared that by engaging in the above conduct Imagine contravened the Act and that Richard Evans also contravened the Act by being knowingly concerning in and party to that conduct. The Court made orders restraining Imagine and Richard Evans from engaging in the offending conduct in the future.

ANNEXURE B
TRADE PRACTICES ACT COMPLIANCE SEMINAR ("Seminar")

1. Richard Evans (the Attendee) must attend a Seminar conducted by an independent person with appropriate knowledge of the Trade Practices Act 1974 (Cth) (the Act) within three months of the date of this Order.

2. The Seminar must address the provisions of ss 52, 53 and 59 of the Act.

3. The Attendee must notify the Australian Competition and Consumer Commission ("the ACCC") in writing within one week of attending the Seminar of:

3.1 the title of the Seminar;

3.2 the name of the person(s) who conducted the Seminar; and

3.3 the date(s) of his attendance.

4. The Attendee must further provide the ACCC with a copy of any written materials (such as slides or speaking notes) relating to the Seminar.

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	VID 578 OF 2007

BETWEEN:	AUSTRALIAN COMPETITION AND CONSUMER COMMISSION Applicant
AND:	IMAGINE ESSENTIAL SERVICES LIMITED (ACN 104 433 098) First Respondent RICHARD EVANS Second Respondent THE TRIUMPHANT GROUP PTY LTD (ACN 101 493 403) Third Respondent

JUDGE:	GORDON J
DATE:	4 MARCH 2008
PLACE:	MELBOURNE

REASONS FOR JUDGMENT

INTRODUCTION

1 Imagine Essential Services Limited (ACN 104 433 095) ("Imagine") sold licences to operate a system involving agreements which Imagine claimed to have negotiated with essential service suppliers.

2 This proceeding concerns representations made by Imagine in the promotion of the sale of those licences at seminars and workshops conducted by Imagine in the period between November 2004 and June 2006 ("the relevant period"). There were four groups of representations: Earnings Representations, Accountant Representations, Supplier Agreement Representations and Associations Representations ("the Representations").

3 By application dated 29 June 2007, the Australian Competition and Consumer Commission ("the ACCC") alleged that Imagine, by making the Representations, engaged in conduct in contravention of the Trade Practices Act 1974 (Cth) ("the Act"). In particular, the ACCC alleged that Imagine contravened:

(1) ss 52 and 59(2) of the Act in relation to the Earnings Representations;

(2) ss 52 and 53(d) of the Act in relation to the Accountant Representations;

(3) ss 52, 53(c) and (d) of the Act in relation to the Supplier Agreement Representations; and

(4) s 52 of the Act in relation to the Associations Representations.

The ACCC also alleged that Richard Evans, the Second Respondent, ("Evans") aided and abetted and was directly knowingly concerned in and party to Imagine’s conduct.

4 On 29 February 2008, the ACCC, Imagine and Evans agreed to compromise the proceeding and submitted to the Court Declarations and Orders which the parties sought by consent. The proposed Declarations and Orders were submitted by consent on the basis that Imagine also gave certain undertakings to the Court.

5 As a general principle, a court does not make declarations on matters relating to public rights by consent or on admissions, but only if it is satisfied by evidence: Australian Securities & Investment Commission v Rich (No 2) (2004) 22 ACLC 1232 at [10]; Williams v Powell [1894] WN (Eng) 141; Gramophone Co Ltd v Magazine Holder Co (1911) 28 RPC 221 at 225–227; Termijtelen v Van Arkel [1974] 1 NSWLR 525; Wallersteiner v Moir [1974] 3 All ER 217; Metzger v Department of Health and Social Security [1977] 3 All ER 444 at 451; BMI Ltd v Federated Clerks Union of Australia (NSW) Branch (1983) 51 ALR 401; Young P W, Declaratory Orders (2nd ed, 1984) [601].

6 The evidence adduced in support of the resolution of the proceeding on the terms of the proposed Declarations and Orders was as follows:

(1) Earnings Representations – the affidavit of Paul David Marsland affirmed 22 November 2007 ("Marsland Affidavit") and, in particular, Exhibit "PM-1"; the affidavit of Allison Beswick sworn 23 November 2007 ("Beswick Affidavit") and, in particular, Exhibits "AB-2", "AB-3" and "AB-6";

(2) Accountant Representations – Exhibits "AB-2" and "AB-8" to the Beswick Affidavit and the transcript of a seminar conducted by Imagine, Exhibit "SG-19" to an affidavit sworn by an ACCC investigator ("the Grosser Affidavit");

(3) Supplier Agreement Representations – Exhibits "AB-2" and "AB-10" to the Beswick Affidavit; and

(4) Association Representations – Exhibits "SG-18" and "SG-19" to the Grosser Affidavit.

7 These reasons for decision record why, in my view, it is appropriate for the Court to grant declarations and make orders in terms of the proposed consent declarations and orders.

FACTS

8 The facts are not in dispute. The case against Imagine and Evans is documentary. The documents referred to above and relied upon by the ACCC are documents produced by or relied upon by Imagine at the seminars and workshops conducted by Imagine in the relevant period to promote the sale of licences or transcripts of what was said at those seminars.

9 The ACCC submits that during the relevant period Imagine made representations at the seminars and workshops conducted by Imagine. In particular:

(1) Earnings Representations that:

(a) the Imagine licensing system would enable a licensee to develop a $10,000 per month passive income within 2-3 years of becoming a licensee;

(b) with 2 years of part time effort, a trailing income of over $100,000 per annum would realistically be achievable by a licensee;

(2) Accountant Representations that:

(a) when a licensee acquired a licence, Imagine would guarantee the licensee 300 businesses as members and would actually give those businesses to the licensee;

(b) Imagine would guarantee to licensees a business by teaming licensees up with an accounting firm, introducing the licensee to that firm, and then that firm introducing the licensee to its clients and that the accounting firm would have at least 300 clients;

(c) there were hundreds of accountants ready to recommend Imagine licensees;

(3) Supplier Agreement Representations that:

(a) Imagine had direct agreements in place with certain named essential service suppliers in relation to telephone, gas, water and electricity services, agreements that enabled licensees to procure for members substantial savings on the cost of essential services;

(b) Imagine could often procure savings on behalf of members of at least the following percentages in respect of the services described:

(i) telephone (landlines) - 20%;

(ii) telephone (mobile) - 10%;

(iii) electricity - 5%;

(iv) gas - 5%;

(v) fuel - 2.5c/litre;

(vi) internet - 4%;

(c) Imagine would enable licensees to often save members between 30-40% on their bills for essential services;

(d) licensees would, through the Imagine licensing system as a national buying group, bring to small to medium businesses access to bulk purchasing power for their essential services including telephony, internet, electricity, gas, fuel and technology;

(4) Association Representations that:

(a) Imagine licensees would become accredited by the Essential Service Advisors Association ("ESAA");

(b) Imagine licensees would become accredited by the Telecommunications and Technology Industry Advisor Association ("TIAA").

10 I have carefully reviewed the documents listed in para [6] above several times and have sought to assess the likely effect of their contents on potential purchasers of the Imagine licensing system. I am satisfied that that the Representations were conveyed in those documents as summarised in the Attachment to these Reasons for Judgment.

11 Next, the ACCC submits that the Representations were false, misleading or deceptive. Falsity was established by the Beswick and Marsland Affidavits. In relation to the Earnings Representations, the ACCC also relied upon an Excel spreadsheet produced by Imagine in response to a notice from the ACCC (exhibit "SG-5" to the Grosser Affidavit) and para 25.1 of the Defence filed by Imagine and Evans which established that no Imagine licensee who had been a licensee for a period of three years preceding 1 July 2005 earned $10,000 per month or $100,000 per annum in the relevant period.

12 Imagine admits that:

(1) by making the Earnings Representations, it engaged in conduct in contravention of ss 52 and 59(2) of the Act;

(2) by making the Accountant Representations, it engaged in conduct in contravention of ss 52 and 53(d) of the Act;

(3) by making the Supplier Agreement Representations, it engaged in conduct in contravention of ss 52, 53(c) and 53(d) of the Act; and

(4) by making the Association Representations, it engaged in conduct in contravention of s 52 of the Act;

ORDERS

13 The proposed order provides for declarations and injunctions in relation to Imagine’s admitted contraventions of ss 52, 53(c), 53(d) and 59(2) of the Act and Evan’s admission that he aided and abetted Imagine to engage in that conduct and was directly knowingly concerned in and party to Imagine’s conduct. The proposed order also provides that a copy of this order and reasons for judgment and a notice be sent to the Relevant Licensees and provides for a publication order. In addition, the proposed order provides for Imagine to establish a Compliance Program and for Imagine to pay the costs of the ACCC fixed in the sum of $50,000. In addition to the proposed matters specified in the order, Imagine offered to give undertakings to the Court to the effect that it would implement an alternative dispute resolution program in relation to all persons who acquired or otherwise held a licence from Imagine at any time during the relevant period and who wish to make complaints concerning Imagine arising from the Representations.

14 In my view, it is appropriate for there to be orders in accordance with the minute of proposed orders. The orders are within power and otherwise appropriate: Australian Consumer & Competition Commission v Target Australia Pty Ltd [2001] ATPR 41-840 at [24] and Australian Consumer & Competition Commission v Econovite Pty Ltd [2003] FCA 964; [2003] ATPR 41-959 at [12]. Moreover, in the circumstances, it is in the public interest that these proceedings between the ACCC and the First and Second Respondents be settled: see Kiefel J in NW Frozen Foods Pty Ltd v Australian Consumer & Competition Commission [1996] FCA 1134; (1996) 71 FCR 285 at 291.

15 In the circumstances, I will make orders in accordance with the minute of proposed orders and accept the undertakings to be given by Imagine to the Court.

I certify that the preceding fifteen (15) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gordon.

Associate:

Dated: 4 March 2008

Counsel for the Applicant:	M Moshinsky SC
Solicitor for the Applicant:	Australian Government Solicitor
Counsel for the 1st & 2nd Respondents:	T J North SC H N G Austin
Solicitor for the 1st & 2nd Respondents:	Gadens Lawyers
Date of Hearing:	29 February 2008
Date of Judgment:	4 March 2008

ATTACHMENT

Document	Page or part and content	Representations Conveyed
Ex "PM-1" (flyer)	Page 1 "Together we will take a look at: ... • Our plan for developing a $10k per month passive income in 2-3 years.	Earnings Representations
Ex "PM-4"	Page 7 "The Licensee receives training on each new product. They then educate Members of the features and benefits of imagine and competitors’ products and services, helping them choose the best one to suit their needs. The training involves the Licensee becoming a licensed Member of the Essential Services Advisors Association (ESAA). Becoming a Member of ESAA qualifies a Licensee to operate, and advise Members on technologies, telecommunications and essential services products. Dealing with a qualified ESA reassures Members that they are getting professional advice and the best rates in their essential services."	Association Representation (ESAA)
Ex "AB-2" (Version of slides shown at 2 hour seminar conducted by Imagine and Evans)	Page 4 "A clear plan for you to create a passive income of over $100K in 24-30 months"	Earnings Representations
	Page 37 "Minimum 300 members via associate agreement"	Accountant Representations
	Page 18 Page 26 Example of Saving’s to SME/Homes ... • The average SME spends $540 per month on landline calls alone !!!! • Landline calls -- 20% • Mobile Phones -- 10% • Power* 5% • Gas* 5% • Fuel 2.5c • Internet 4% Many thousands of dollars $$$$$$ * Not available in all states currently, due to staged de-regulation. Page 34	Supplier Agreement Representations
Ex "AB-3" (Flyer handed out to participants at the 2 hour seminar)	Page 3 2 DAY EVENT ... "How you can build a business quickly and enjoyably to create a $100K+ Passive income with month by month projections"	Earnings Representations
Ex "AB-6" (Overview email)	Page 2 "Make no mistake, this is a real opportunity for people looking to tap into a massive market using a system that sets them up with a passive income stream. Our conservative financial estimates show that within 2 years of part time effort, a trailing income of over $100,000 per annum is realistically achievable"	Earnings Representations
Ex "AB-8" (Imagine folder handed out at 2 day seminar)	Page "Overview" "Either 300 non-active Members or attachment to an Associate with a minimum 300 clients available for Membership"	Accountant Representations
Ex "AB-10" (Version of slides shown at 2 hour seminar conducted by Imagine and Evans)	Page 16 Page 37 Eg "Our supplier agreements are setup so there is no incentive for Licensed Advisors to choose any one supplier over another. This allows them to offer an independent analysis of a number of different providers and tailor an offering to the needs of their client. This is because we can advise across multiple industries comprised of multiple suppliers" Page 39 "... With a national buying group, we are able to offer our members additional benefits at cheaper prices, than they would otherwise be able to access on their own."	Supplier Agreement Representations
Ex "SG-18" (Version of slides shown at 2 hour seminar conducted by Imagine and Evans)	Page 18 "Creation of a New Industry ...  Imagine is the first of its kind, therefore, Imagine has created a new industry ... ... The industry of "Essential Services Advisors"  We have founded the Essential Service Advisors Association.  All licensees become accredited by the association Setting ...  ... A New industry benchmark of Professional Advisors"	Association Representations (ESAA)
Ex "SG-19" (Transcript of 2 hour seminar conducted by Imagine and Evans)	Page 16, L40 "Imagine is the first of its kind. Therefore, Imagine has created a new industry of essential service advisers. We have founded the Essential Service Advisers Association, which is a separate independent body, and all of our licensees become accredited by that Association. That then sets a new industry benchmark of professional advisers."	Association Representation (ESAA)
	Page 22, L5 "... at Imagine, when you buy a licence with us, we will guarantee you 300 businesses as members. ..."	Accountant Representations
	Page 27, L40-45 "So what we do at Imagine, we guarantee you a business by teaming you up with an accounting firm, introducing you to them, and then they introduce you to their clients. You see? And we guarantee you that they’ll have at least 300 clients. Great?"	Accountant Representations
	Page 30, L40-45 "MR EVANS: Now – now with these introductions, they cost us a lot of money. The reason we’re doing this, ladies and gentlemen, is we need advisers to service who? Hundreds of accountants that we’re lining up in a taxi rank, to block out – for the market we’ve already blocked out. It is an unbelievable opportunity for you at – free of charge, to spending my money and ..."	Accountant Representations