Australian Competition and Consumer Commission v StoresOnline International, Inc.

Case •

[2007] FCA 1597

•

19 October 2007

FEDERAL COURT OF AUSTRALIA

Australian Competition and Consumer Commission v StoresOnline International, Inc. [2007] FCA 1597

TRADE PRACTICES – application for enforcement of undertaking under s 87B of the Trade Practices Act 1974 (Cth) – jurisdiction of the Court invoked – breach of undertaking established – injunctive relief granted to ensure compliance with undertaking – balance of convenience mandates injunctions granted until further order.

Federal Court of Australia Act 1976 (Cth) s 23
Trade Practices Act 1974 (Cth) ss 80, 87B
Trade Practices Legislation Amendment Act 1992 (Cth) s 13

ACCC v Signature Security Group Pty Ltd (2003) ATPR 41-908 cited
Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia (1998) 195 CLR 1 considered
Thomson Australian Holdings Pty Ltd v Trade Practices Commission (1981) 148 CLR 150 considered
Trade Practices Commission v Santos Ltd (1992) 38 FCR 382 cited

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION v STORESONLINE INTERNATIONAL, INC. AND STORESONLINE, INC.
NSD 1991 OF 2007

TAMBERLIN J
19 OCTOBER 2007
SYDNEY


IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

NSD 1991 OF 2007

BETWEEN:

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
Applicant

AND:

STORESONLINE INTERNATIONAL, INC.
First Respondent

STORESONLINE, INC.
Second Respondent

JUDGE:

TAMBERLIN J

DATE OF ORDER:

19 OCTOBER 2007

WHERE MADE:

SYDNEY

THE COURT DIRECTS THAT:

1.The parties agree Short Minutes of Order giving effect to these reasons, and provide them to the associate to Tamberlin J no later than 5.00 pm on Friday 26 October 2007.

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


IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

NSD 1991 OF 2007

BETWEEN:

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
Applicant

AND:

STORESONLINE INTERNATIONAL, INC.
First Respondent

STORESONLINE, INC.
Second Respondent

JUDGE:

TAMBERLIN J

DATE OF ORDER:

19 OCTOBER 2007

WHERE MADE:

SYDNEY

REASONS FOR JUDGMENT

  1. This is an application by the Australian Competition and Consumer Commission (“ACCC”) for declaratory, injunctive and other relief against the respondents (“StoresOnline”). In particular, the ACCC seeks declarations that StoresOnline has breached certain terms of the undertaking given by it on 24 April 2006 under s 87B of the Trade Practices Act 1974 (Cth) (“TPA”), and it seeks injunctions preventing it from committing any further breaches in relation to matters such as giving presentations about computer software packages which it offers from time to time for sale in Australia unless it notifies the ACCC and records the presentations, representing that their products are easy and profitable to use, using testimonials of past clients in a way that is misleading, and informing purchasers of its packages that they can avail themselves of a “cooling-off” period.

  2. StoresOnline are two companies incorporated in the United States of America, carrying on the business of conducting seminars and workshops in Australia at which they promote and offer for sale to the Australian public a computer software package for setting up and operating online stores.  In 2005, the ACCC commenced proceedings in this Court alleging, inter alia, that the StoresOnline had engaged in misleading and deceptive conduct in breach of the TPA. The matter was settled between the parties on the basis that StoresOnline gave an undertaking pursuant to s 87B of the TPA to the ACCC, in which StoresOnline agreed not to conduct the seminars and workshops in Australia unless they abided by certain restrictions imposed by the ACCC consistent with the purpose of protecting the Australian public from what the ACCC considered to be further misleading and deceptive practices.

  3. Section 87B of the TPA provides:

    ‘87B    Enforcement of undertakings

    (1)The Commission may accept a written undertaking given by a person for the purposes of this section in connection with a matter in relation to which the Commission has a power or function under this Act ….

    …

    (3)If the Commission considers that the person who gave the undertaking has breached any of its terms, the Commission may apply to the Court for an order under subsection (4).

    (4)If the Court is satisfied that the person has breached a term of the undertaking, the Court may make all or any of the following orders:

    (a)an order directing the person to comply with that term of the undertaking;

    (b)an order directing the person to pay to the Commonwealth an amount up to the amount of any financial benefit that the person has obtained directly or indirectly and that is reasonably attributable to the breach;

    (c)any order that the Court considers appropriate directing the person to compensate any other person who has suffered loss or damage as a result of the breach;

    (d)any other order that the Court considers appropriate.’

    (Emphasis added.)

  4. The test whether an undertaking given under s 87B has been breached is objective in the sense that intent of the party who breaches the undertaking is not relevant: see ACCC v Signature Security Group Pty Ltd (2003) 25 ATPR 41-908 at [41].

  5. The ACCC submits that StoresOnline has breached certain terms of the undertaking it gave to the ACCC on 24 April 2006. The present application is said by the ACCC to be urgent because StoresOnline is likely to continue to breach the undertaking when its representatives arrive in Australia next Monday 22 October 2007 to give further presentations relating to the products it offers for sale. It argues that the power of the Court to grant interlocutory relief is grounded in s 23 of the Federal Court of Australia Act 1976 (Cth) (“FCA Act”), which gives the Court “power, in relation to matters in which it has jurisdiction, to make orders of such kinds, including interlocutory orders … as the Court thinks appropriate”. It says that the jurisdiction of the Court to entertain the matter is not limited by the TPA. Finally, it submits that the balance of convenience falls in favour of the Court exercising its power to grant the relief, and thereby protects what it claims is the “very strong public interest” in ensuring StoresOnline complies with the terms of its undertaking.

  6. StoresOnline submits that it has complied with most of the terms of the undertaking it gave to the ACCC, and that any breaches were minor and should not persuade the Court to exercise its discretion to grant the relief sought.  It says that it has taken steps to ensure there are no further breaches.  In addition, StoresOnline says that the Court does not have jurisdiction to grant the relief, citing Thomson Australian Holdings Pty Ltd v Trade Practices Commission (1981) 148 CLR 150 (“Thomson”) and arguing that s 80 of the TPA is an exhaustive statement of the circumstances in which injunctive relief sought under the TPA may be granted, to the exclusion of s 23 of the FCA Act. StoresOnline also submits that the balance of convenience does not favour the ACCC because there has been no material harm or prejudice to the ACCC or its purchasers; reliance on the public interest is not decisive; and the breadth of the ACCC’s Amended Application travels beyond the scope and duration of some of the terms of the original undertaking.

  7. Three issues therefore arise. The first concerns the jurisdiction of the Court to entertain this application and, if it sees fit, its power to grant the relief sought. The second is whether the evidence establishes breaches by StoresOnline of the undertaking necessary to invoke the power of the Court to make orders under s 87B(4) of the TPA. The final issue is whether the balance of convenience weighs in favour of granting or refusing the relief sought.

    JURISDICTION

  8. In Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia (1998) 195 CLR 1 at 29 (“Patrick Stevedores”), Brennan CJ, McHugh, Gummow, Kirby and Hayne JJ said:

    ‘Once the jurisdiction conferred on the Federal Court by the Act is invoked, that Court has power under s 23 of the Federal Court of Australia Act 1976(Cth) … to make “orders of such kinds, including interlocutory orders ... as the Court thinks appropriate”. That power may be exercised in any proceeding in which the Federal Court has jurisdiction unless the jurisdiction invoked is conferred in terms which expressly or impliedly deny the s 23 power to the Court in that class of proceeding. It cannot be invoked to grant an injunction where the Court acquires its jurisdiction under a statute which provides an exhaustive code of the available remedies and that code does not authorise the grant of an injunction.’
    (Emphasis added.)

  9. An Act conferring jurisdiction upon the Federal Court may limit the scope of the Court’s power under s 23 of the FCA Act by providing an exhaustive statement of the orders which the Court may make in relation to breaches of the conferring Act.  The Act which conferred jurisdiction on the Federal Court in Patrick Stevedores was the Workplace Relations Act 1996 (Cth). No “exhaustive code” limiting the range of remedies which the Federal Court could grant was found in that Act by their Honours.

  10. In the present case, s 87B(4) of the TPA gives the Court jurisdiction to make any order it deems appropriate in circumstances where a respondent has breached an undertaking given to the ACCC under s 87B(1). The ACCC has approached the Court for orders compelling compliance with the undertaking. More specifically, the ACCC seeks injunctions to restrain StoresOnline from committing further breaches. There is nothing in the language of s 87B which limits the jurisdiction of the Court to hear the ACCC’s application and, if appropriate on the evidence, make the orders it sees fit.

  11. StoresOnline disagrees with the proposition that the TPA does not exclusively set out the powers of this Court to make injunctions in respect of relief sought under the TPA. It refers to s 80 of the TPA, which set out circumstances in which injunctions may be granted for contravention or possible contravention of specified provisions in the TPA, and submits that there can be no other source of power for this Court to grant injunctions as relief in applications made under the TPA.

  12. StoresOnline relies on Thomson as authority for the proposition that the Federal Court cannot grant injunctive relief in respect of matters under the TPA unless it does so pursuant to s 80 of the TPA, therefore rendering the ACCC’s application for orders beyond the jurisdiction of this Court. It refers to the reasons of Gibbs CJ, Stephen, Mason and Wilson JJ, where there Honours comment at 162 on s 80 (as it then stood):

    ‘… s. 80 proceeds upon the footing that it constitutes the Federal Court's exclusive charter to grant injunctions restraining, or relating to, contraventions of the Trade Practices Act. In various sub-sections of s. 80 references are made to injunctions granted “under” the section or a particular sub-section and to applications for injunctions “granted” under the section or a sub-section – see sub-ss. (1A), (4) (a) and (b), (5) (a) and (b) and (6). Section 80 makes special provision in several respects for the grant of injunctions under the section – see sub-ss. (4), (5) and (6). It is scarcely to be supposed that the Parliament intended to draw a distinction in these respects between two classes of injunctions, one class of injunctions granted under s. 80 and another class granted under ss. 22 or 23 of the Federal Court of Australia Act.  The inference is irresistible that Parliament looked upon s. 80 as a complete and comprehensive statement of the circumstances in which injunctions might be granted in respect of relief sought under the Trade Practices Act.’
    (Emphasis added.)

  13. There are several reasons why the observations of their Honours do not mandate that this Court dismiss the present application as beyond jurisdiction.  The first is that, when Thomson was decided in 1981, the TPA did not include s 87B which was later inserted by s 13 of the Trade Practices Legislation Amendment Act 1992 (Cth). Counsel for StoresOnline invited me to infer that the insertion by Parliament of s 87B must have been done with the High Court’s decision in Thomson in mind and as a guiding principle. This suggested inference is not supported by the language of the TPA itself or any extrinsic material to which I have been referred. The preferable approach, in my view, proceeds on the basis that Parliament introduced s 87B into the TPA to enhance enforcement by the ACCC by increasing the scope and flexibility of the powers of the Court to provide effective means of dealing with breaches or apprehended breaches of the TPA. The fact that Parliament granted power to the Court in s 87B(4) points to the conclusion that it did not intend the powers in relation to s 80 to be the exclusive expression of the Court’s ability to grant relief of an injunctive nature. It is not correct, in my view, to regard s 87B as limited in its operation to the scope of the powers conferred by s 80.

  14. The second difficulty for OnlineStores is that s 87B of the TPA regulates the particular circumstances in which an undertaking is given directly to the ACCC rather than to the Court. The Court is not involved in that process, and the undertaking is a binding agreement which arises in the context of a statutory regime. The power under s 87B is designed to give effect to and reinforce the undertaking where there has been non-compliance. The Court is given power for the purposes of more effective enforcement if the undertaking is breached. The ordinary and natural meaning of s 87B(4) is to give the Court power to better enforce undertakings by converting them into orders of the Court, and to make other orders in its discretion, if and when it becomes appropriate.

  15. Section 80 is a provision invoked when there has been contravention or possible contravention of specified provisions in the TPA. Section 87B is not one of those provisions. The limitations imposed by s 80 on the ability of the Court to make “any other order … [it] considers appropriate” under s 87B(4)(d) must, on the reasoning advanced by StoresOnline, be found to be implicit in s 80. In my view, there is no basis to imply such a limitation. Section 87B is directed to investing the Court with powers. To limit the Court’s ability to grant injunctions at the request of the ACCC where undertakings given under s 87B have been breached is a non-beneficial and inappropriate interpretation of s 87B.

  16. Given that s 87B is not an exhaustive expression of the power of the Court to make orders in relation to an application pursuant to that section, I consider that the Court has jurisdiction to entertain this application for the relief sought by the ACCC.

    BREACH OF UNDERTAKING

  17. Once it is established that a respondent has breached a term of an undertaking given to the ACCC, the Court may make an order directing the respondent to comply with that term of the undertaking (s 87B(4)(a)) and any other orders it deems appropriate (s 87B(4)(d)).

  18. In this case, breaches of certain terms of the undertaking given by StoresOnline are conceded.  Specifically, these admissions relate to the terms of the undertaking requiring StoresOnline (i) to ensure the testimonials used in the presentations contained certain information (paragraph [17(d)(ii)] of the undertaking) and (ii) to notify the ACCC of the dates and locations of presentations to be made in Australia (paragraph [27] of the undertaking).  Having regards to these failings to comply with the undertaking and all the evidence, I am not persuaded that a regime is in place which will ensure further breaches by StoresOnline do not occur.  A more effective sanction than an inter partes agreement is necessary in this case.

  19. These conceded breaches establish that there has been a failure to comply with the undertaking given by StoresOnline to the ACCC on 24 April 2006. These breaches are sufficient to justify the exercise of the power of the Court in s 87B(4)(a) to make orders directing StoresOnline to comply with paragraphs [17] and [27] of the undertaking.

  20. As for further breaches which the ACCC alleges, and which are denied, I am prepared on the basis of the evidence before me to rule that at least one important additional breach has occurred.  This breach concerns the term in paragraph [14] of the undertaking which requires StoresOnline to make known to purchasers that they have a “cooling-off” period during which they could change their mind about the purchases they made within three business days, return the product and receive a full refund.  I have seen a number of the written “disclaimers” relied on by StoresOnline and in my view some of them are manifestly inadequate on their face.  Several affidavits sworn by purchasers of StoresOnline’s packages were read by counsel for the ACCC.  The evidence adduced in these affidavits, to which objection was not taken and which I accept, was that in some instances StoresOnline either did not notify purchasers of the cooling-off period, or if they did so, it was in a manner which was not readily brought to the purchasers’ attention and not easy to understand, so that it could not be said to have been “made known”, as required.  I accept the evidence that, in some cases, presenters encouraged potential purchasers not to pay attention to the documents recording the cooling-off period.  This conduct breaches the requirement in paragraph [15] of the undertaking that StoresOnline “make the content of the [cooling-off] undertaking in paragraph 14 above known to Purchasers before, and at, the time of purchase”. Accordingly, this breach is sufficient to enliven the jurisdiction of the Court in s 87B(4)(a) to make orders directing StoresOnline to comply with paragraphs [14] and [15] of the undertaking.

  21. With respect to the other terms of the undertaking which the ACCC alleges have been breached, I do not make findings as to whether a breach has in fact occurred. However, in circumstances where StoresOnline has admitted to certain breaches of the undertaking given by it to the ACCC, and has been found to have engaged in other breaches which it denied, it is appropriate to invoke and exercise the discretionary jurisdiction given by s 87B(4)(d) of the TPA to order that StoresOnline comply with the other terms of its undertaking. I make this ruling because there is sufficient basis in the numerous past breaches of certain terms of the undertaking to give rise to a reasonable apprehension that there could well be future breaches of the same or other terms of the undertaking which could be prevented by the granting of the ACCC’s application under s 87B on a quia timet basis.

  22. Insofar as orders made by the Court on the present application go beyond the text and duration of the original understanding given on 24 April 2006, I accept the submission of the ACCC that s 87B(4)(d) is a conferral of broad power which is “additional to the power conferred by s 87B(4)(a), to make any order that the Court considers appropriate”.  This approach is supported when one has regard to the explanatory memorandum to the Trade Practices Legislation Amendment Act 1992 (Cth), which introduced s 87B into the TPA. It states that s 87B(4)(d)

    ‘… is a wide power which would encompass at least orders of the kind mentioned in sections 80, 87(2) and 87A(2) …. It is intended to provide the court with suitable flexibility to deal with the range of circumstances which may arise in the enforcement of undertakings.’
    (Emphasis added.)

    This comment demonstrates that, where it is appropriate to do so, as in this case, the Court is empowered to make orders which extend beyond the ambit of ss 80, 87(2) and 87A(2) in the TPA and, if necessary, beyond the scope of the original undertaking to provide relief against apprehended breaches on a quia timet basis.

    DISCRETION AND BALANCE OF CONVENIENCE

  1. The ACCC submits that the balance of convenience in this case is in favour of granting the relief it seeks because the undertaking given under s 87B of the Act was intended to settle previous proceedings in this Court and for the purpose of protecting Australian consumers and vindicating the public interest. This is a cogent submission in the circumstances of this case. The ACCC says that StoresOnline’s approach to compliance with the terms of the undertaking has been very unsatisfactory, and this is clearly demonstrated, for example, by the minimalist and embedded references made to the “cooling-off” period at the time purchasers bought the packages, and the inaccurate or ineffective “qualifying statements” contained in the scripts used in Australian presentations. StoresOnline’s compliance with its agreement with the State of Texas in the United States of America concerning similar conduct, is said by the ACCC to be insufficient because it does not address all the requirements necessary to ensure compliance with the undertaking given in respect of its conduct in Australia. The ACCC also says that StoresOnline’s dealings with the ACCC are characterised by delay and obfuscation, and that the detriment to the public is immediate, expensive and difficult to rectify.

  2. StoresOnline submits that the interest of the Australian public is not an appropriate consideration in the assessment of the balance of convenience.  Primary emphasis, it says, ought to be given to its claims that breaches of the undertaking have not caused material harm to purchasers of StoresOnline’s packages, have not caused prejudice to the ACCC, are essentially administrative and not deliberate or contemptuous breaches, and have occurred in the context of substantial compliance with other terms of the undertaking and entry into the Texas agreement which outlines a compliance regime albeit in different terms.

  3. In my view, the balance of convenience in this case comes down in favour of granting the relief sought in paragraph [20] of the ACCC’s Amended Application because the relief does not prevent StoresOnline from conducting its scheduled presentations and workshops in Australia, but rather serves to discourage them, with the powerful sanction of contempt, from giving those presentations in a way that breaches its undertaking given to the ACCC.  While the breaches of the undertaking by StoresOnline do not warrant a blanket order restraining StoresOnline from making any presentations in Australia, I am persuaded that the most appropriate course is to make orders requiring StoresOnline to give effect to the undertaking to which it made a commitment on 24 April 2006, until further order.  This position, in my view, provides an appropriate balance between the ACCC’s concern to protect consumers in Australia and StoresOnline’s claimed financial commitments, which are said to involve expenditure thus far of approximately USD450,000 in relation to the scheduled workshops and seminars.

  4. Finally, I reject the submission by StoresOnline that it should have an undertaking as to damages from the ACCC.  The giving of such an undertaking is not a condition of the granting of injunctions: see Trade Practices Commission v Santos Ltd (1992) 38 FCR 382 at 388 (per Davies J). In any event, having refused to grant the blanket injunctions sought by the ACCC in paragraph [19] of its Amended Application, no significant damage should accrue to StoresOnline as it is still entitled to conduct its presentations in Australia, provided it does so within the ambit of the undertaking and the injunctions granted in these reasons.

  5. As to costs, I consider that the respondents should pay the costs of the applicant in this application.

    CONCLUSION

  6. In giving effect to these reasons, I am of the view that it is appropriate to make orders in the form sought by the ACCC in paragraph [20] of its Amended Application, until further order, with the respondents to pay the applicant’s costs.  However, given the unusual circumstances surrounding this application, I direct the parties to agree Short Minutes of Order giving effect to these reasons, and to provide them to my associate no later than 5.00 pm on Friday 26 October 2007.

I certify that the preceding twenty-eight (28) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Tamberlin.

Associate:

Dated:       19 October 2007

Counsel for the Applicant: Mr S. White SC and Mr T. Brennan
Solicitor for the Applicant: Corrs Chambers Westgarth
Counsel for the Respondent: Mr L. Foster SC and Mr E Hyde
Solicitor for the Respondent: Deacons
Date of Hearing: 16 October 2007
Date of Judgment: 19 October 2007
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The Commissioner for Consumer Protection v Armstrong [2012] WASC 206