Australian Competition and Consumer Commission v South East Melbourne Cleaning Pty Ltd (in liq) (formerly known as Coverall Cleaning Concepts South East Melbourne Pty Ltd) (No 2)

The Federal Court, presided over by Justice Bromberg, was tasked with determining the appropriate penalty for Coverall Cleaning Concepts South East Melbourne Pty Ltd (in liquidation) for its breaches of the Australian Consumer Law (ACL) and the Franchising Code of Conduct. The Australian Competition and Consumer Commission (ACCC) alleged that Coverall had made false and misleading representations and engaged in unconscionable conduct in relation to the sale of two franchise agreements. The ACCC sought a pecuniary penalty for the breaches, as well as an order for the company to pay costs.

The primary legal issue was the appropriate quantum of penalty to be imposed on Coverall for its contraventions of the ACL. The Court had to consider the number and nature of the contraventions, the seriousness of Coverall's conduct, and the principles of deterrence and general deterrence. The Court also had to consider the ACCC's submissions on penalty, while maintaining its own discretion to determine the appropriate penalty.

Justice Bromberg found that Coverall had committed six contraventions of the ACL, comprising four contraventions of the prohibition on false and misleading representations and two contraventions of the prohibition on unconscionable conduct. The Court found that Coverall's conduct was deliberate, extended over many months, and showed a blatant disregard for the franchisees' rights and interests. The Court also found that Coverall was in a significantly stronger bargaining position than the franchisees and took advantage of this position throughout the course of the franchises. The Court concluded that Coverall's contraventions warranted a substantial penalty.

The Court imposed a civil pecuniary penalty of $500,000 on Coverall, comprised of two penalties of $250,000 each for the contraventions relating to Mr Eliaser and Mr Patel. The Court found that the penalty was appropriate having regard to the seriousness of Coverall's conduct and the need for general deterrence. The Court also noted that the penalty would have a significant impact on Coverall, which was in liquidation. The Court ordered that Coverall pay the Commonwealth of Australia the penalty and costs.