Australian Competition and Consumer Commission v Ultra Tune Australia Pty Ltd (No 3)
[2024] FCA 156
•1 March 2024
FEDERAL COURT OF AUSTRALIA
Australian Competition and Consumer Commission v Ultra Tune Australia Pty Ltd (No 3) [2024] FCA 156
File number: NSD 750 of 2017 Judgment of: BROMWICH J Date of judgment: 1 March 2024 Catchwords: CONTEMPT OF COURT – where company has breached court orders to comply with Franchising Code and to ensure compliance officer reports to board or senior management – where company has plead guilty to four contempt of court charges – whether company used best endeavours to comply with orders – appropriate scaling up of fines for what would otherwise have been civil penalties – total fines imposed of $1.5 million Legislation: Competition and Consumer Act 2010 (Cth) Sch 2 (being the Australian Consumer Law)
Crimes Act 1914 (Cth) s 4AA
Competition and Consumer (Industry Codes – Franchising) Regulation 2014 (Cth) Schedule 1
Federal Court Rules 1979 (Cth) Ords 37, 37 r 2, 37 r 2(1), 37 r2(2), 37 r2(3), 37 r2(5), 37 r2(6), 40
Federal Court Rules 2011 (Cth) rr 1.34, 41.06, 41.07, 41.07(1), 41.07(2), 41.08, 41.08(1), 41.08(1)(a), 41.08(1)(b), 41.08(2)(a), 41.08(3), Chs 5 Pt 41, 5 Pt 41 Div 41.1, 6 and 6 Pt 42
Franchising Code of Conduct found in Schedule 1 to the Competition and Consumer (Industry Codes – Franchising) Regulation 2014 cls 8(6), 15(1) and 15(1)(b)
Enforcement, endorsement and contempt practice note (GFN-ENF)
Cases cited: Australasian Meat Industry Employees Union v Mudginberri Station Pty Ltd (1986) 161 CLR 98
Australian Building and Construction Commissioner v Pattinson [2022] HCA 13; 96 ALJR 426
Australian Competition and Consumer Commission v ACN 117 372 915 Pty Ltd (in liq) (formerly Advanced Medical Institute Pty Ltd) [2016] FCA 1437
Australian Competition and Consumer Commission v Reckitt Benckiser (Australia) Pty Ltd [2016] FCAFC 181; 340 ALR 25
Australian Competition and Consumer Commission v Ultra Tune Australia Pty Ltd [2019] FCA 12
Construction, Forestry, Mining and Energy Union v Grocon Constructors (Victoria) Pty Ltd [2014] VSCA 261; 47 VR 527
Hili v The Queen [2010] HCA 45; 242 CLR 520
Kazal v Thunder Studios Inc (California) [2017] FCAFC 111; 256 FCR 90
Mason v MWREDC Ltd [2012] FCA 1083
Mensink v Parbery [2018] FCAFC 101; 264 FCR 265
Re Modern Woodcraft Pty Ltd (In Liquidation) (1997) 75 FCR 245
Siminton v Australian Prudential Regulation Authority [2006] FCAFC 118; 152 FCR 129
Ultra Tune Australia Pty Ltd v Australian Competition and Consumer Commission [2019] FCAFC 164
Division: General Division Registry: New South Wales National Practice Area: Commercial and Corporations Sub-area: Regulator and Consumer Protection Number of paragraphs: 197 Dates of hearing: 31 May 2023; 2 August 2023 Counsel for the Applicant: Ms N Sharp SC and Mr J Clark Solicitor for the Applicant: Webb Henderson Counsel for the Respondent: Mr M Hodge KC and Mr D Preston Solicitor for the Respondent: Tisher Liner FC Law ORDERS
NSD 750 of 2017 BETWEEN: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
Applicant
AND: ULTRA TUNE AUSTRALIA PTY LTD ACN 065 214 708
Respondent
ORDER MADE BY:
BROMWICH J
DATE OF ORDER:
1 MARCH 2024
THE COURT DECLARES THAT:
1.The respondent, Ultra Tune Australia Pty Ltd (ACN 065 214 708), is guilty of contempt of this Court for breaching order 2 of the orders made by the Honourable Justice Bromwich on 4 March 2019 (Orders) by engaging in the conduct referred to in charge 1 of the amended statement of charge filed on 29 August 2022 (Statement of Charge) namely failing to update its disclosure document within 4 months after the end of the 2019-2020 financial year, thereby contravening cl 8(6) of the Franchising Code of Conduct found in Schedule 1 to the Competition and Consumer (Industry Codes – Franchising) Regulation 2014.
2.The respondent, Ultra Tune Australia Pty Ltd (ACN 065 214 708), is guilty of contempt of this Court for breaching order 2 of the Orders by engaging in the conduct referred to in charge 2 of the Statement of Charge, namely failing to prepare an annual financial statement detailing all of the respondent’s marketing fund receipts and expenses for the 2018-2019 financial year within 4 months after the end of that financial year, thereby contravening cl 15(1) of the Franchising Code.
3.The respondent, Ultra Tune Australia Pty Ltd (ACN 065 214 708), is guilty of contempt of this Court for breaching order 2 of the Orders by engaging in the Conduct referred to in charge 3 of the Statement of Charge, namely failing to prepare an annual financial statement detailing all of the respondent’s marketing fund receipts and expenses for the 2019-2020 financial year within 4 months after the end of that financial year, thereby contravening cl 15(1) of the Franchising Code.
4.The respondent, Ultra Tune Australia Pty Ltd (ACN 065 214 708), is guilty of contempt of this Court for breaching order 6 of the Orders by engaging in the conduct referred to in charge 4 of the Statement of Charge, namely failing to ensure its compliance officer reported to its board and/or senior management on a quarterly basis on the continuing effectiveness of its compliance program between April 2021 and December 2021 as required by paragraph 15 of Annexure B to the Orders.
THE COURT ORDERS THAT:
5.The respondent, Ultra Tune Australia Pty Ltd (ACN 065 214 708), be convicted on all four charges of contempt in the amended statement of charge filed on 29 August 2022.
6.The respondent pay a fine in the sum of $1,500,000, comprising:
(a)$240,000 for charge 1;
(b)$300,000 for charge 2;
(c)$600,000 for charge 3; and
(d)$360,000 for charge 4,
to be paid into the Consolidated Revenue Fund within 60 days.
7.The respondent, Ultra Tune Australia Pty Ltd (ACN 065 214 708), pay the applicant’s costs of and incidental to the interlocutory application dated 28 June 2022 on an indemnity basis, as agreed or assessed.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
BROMWICH J:
Introduction
The respondent, Ultra Tune Australia Pty Ltd, has pleaded guilty to four charges of contempt of court, arising from a failure to comply with certain compliance orders made on 4 March 2019. Those orders were designed to, but failed to, prevent further contraventions of a kind that had been established after a partially contested trial on liability and made the subject of substantial pecuniary penalties: Australian Competition and Consumer Commission v Ultra Tune Australia Pty Ltd [2019] FCA 12 (primary judgment or PJ). The contraventions arose from failure to comply with obligations imposed by the code of conduct legislated for franchise arrangements in Schedule 1 to the Competition and Consumer (Industry Codes – Franchising) Regulation 2014 (Cth) (Franchising Code).
An appeal to the Full Court against some of the disclosure breaches succeeded in relation to a number of contraventions created by cl 15(1) of the Franchising Code and in relation to the quantum of the penalty imposed for the content aspect of those disclosure contraventions: Ultra Tune Australia Pty Ltd v Australian Competition and Consumer Commission [2019] FCAFC 164. Those contraventions were found by the Full Court to be the product of “egregious inadvertence” rather than being a stubborn approach to compliance in relation to the information provided. That characterisation as to state of mind did not apply to the timing aspect of the disclosure contraventions, since repeated, resulting in them being made the subject of this contempt proceeding.
Background
The opening paragraphs of the primary judgment provide a summary history and context for these reasons, the defined terms of which are adopted:
[1] The respondent, Ultra Tune Australia Pty Ltd is a franchisor for motor vehicle engine repair and maintenance services provided by a national network of approximately 200 franchises operating in New South Wales (divided into metropolitan and country), Queensland, Victoria and Western Australia.
[2] This case is about Ultra Tune’s failure to comply with minimum franchisor obligations, including a number of more serious breaches, and the fabrication of business records in a failed attempt to conceal its wrongdoing. Ultra Tune’s stance at trial and in closing submissions has required detailed and comprehensive reasons to be given to explain why most of its evidence and submissions cannot be accepted.
[3] The applicant, the Australian Competition and Consumer Commission (ACCC), is Australia’s national franchise regulator. The ACCC is therefore concerned to ensure that all manner of franchisors and franchisees comply with their legal obligations. That is especially so in relation to compliance by franchisors with laws designed to protect the interests of franchisees. The ACCC is concerned to ensure that any case it brings in relation to non-compliance with those laws contributes to future compliance by both the respondent to such a proceeding, and by others engaged in franchise activities.
[4] Ultra Tune’s compliance with its minimum legal obligations as a franchisor are central to the proper conduct of its business. In this proceeding, the ACCC alleges that Ultra Tune has contravened mandatory industry codes that regulate the conduct of a franchisor towards its franchisees and prospective franchisees. The applicable codes are:
(1)for conduct by Ultra Tune in the period from 1 July 2011 to 31 December 2014, the “old” Franchising Code of Conduct in the Schedule to the Trade Practices (Industry Codes – Franchising) Regulations 1998 (Cth) (Pre-2015 Code); and
(2)for conduct by Ultra Tune in the period from 1 January 2015 onwards, the “new” Franchising Code of Conduct found in Schedule 1 to the Competition and Consumer (Industry Codes – Franchising) Regulation 2014 (Cth) (Franchising Code).
[5] Each code had force for its respective period by virtue of Part IVB of the Competition and Consumer Act 2010 (Cth) (CCA). Broadly speaking, the codes prescribe minimum standards in franchise agreements and require franchisors to disclose certain information to franchisees and prospective franchisees. Both franchisors and franchisees also have a statutory duty to act in good faith, with civil penalty sanctions for failing to do so.
[6] The codes may be seen to facilitate the better working of market forces within the various industries that use franchises as a business model. They encourage the practical advancement of the economist’s ideal of better – if not perfect – information by which to make rational decisions.
[7] The ACCC seeks pecuniary penalties in respect of breaches of the Franchising Code and breaches of s 29(1) of the Australian Consumer Law (ACL). The ACL is contained in Schedule 2 to the CCA. Civil penalties are not provided for under the Pre-2015 Code.
[8] The ACCC also seeks declarations, injunctions, publication orders and compliance orders, as well as certain specific relief by way of a refund for the prospective franchisee who brought the complaint to the ACCC, which led to the investigation and this proceeding.
The case at trial giving rise to the primary judgment concerned breaches of the Franchising Code, by way of failure to comply with a range of disclosure obligations both as to timing and as to content, and the illegal treatment of a prospective franchisee, each of which was found to have taken place. The non-disclosure contraventions were largely admitted, except insofar as Ultra Tune disputed the number of contraventions that had taken place as a question of statutory construction of cl 15(1) of the Franchising Code, the allegations of insufficiency of detail provided in certain of the disclosures that took place, and the state of mind accompanying the conduct.
The orders made at the time of the publication of the primary judgment on 18 January 2019 were as follows, with the penalty in order 1 being later reduced on appeal, as detailed below at [9], were as follows:
1.The respondent pay to the applicant a pecuniary penalty of $2,604,000 [reduced on appeal to $2,014,000] within 60 days of this judgment.
2.The respondent pay to the applicant $33,000 plus interest within 14 days for the redress of Mr Nakash Ahmed.
3.The applicant pay the sum referred to in order 2 to Mr Nakash Ahmed within 14 days of receipt of the sum from the respondent.
4.The respondent pay the applicant’s costs on an indemnity basis.
5.The parties furnish agreed or competing draft orders and declarations to reflect these reasons within 28 days.
After the parties furnished agreed draft orders in accordance with order 5 above, declarations and compliance orders were made on 4 March 2019. The declarations component of the 4 March 2019 orders was as follows (emphasis added):
[1]The Respondent (Ultra Tune Australia [Pty Ltd]), in its dealings with a prospective franchisee, Mr Nakash Ahmed:
(a)failed to act in good faith in contravention of clause 6(1) of the Competition and Consumer (Industry Codes – Franchising) Regulation 2014 (Franchising Code) and section 51ACB of the Competition and Consumer Act 2010 (Cth) (CCA);
(b)did not provide Mr Ahmed a copy of the Franchising Code, the disclosure document or a proposed franchise agreement in the form in which it was to be executed at least 14 days prior to receiving a non-refundable payment from Mr Ahmed in connection with the proposed franchise agreement in contravention of clause 9(1) of the Franchising Code;
(c)in connection with the supply or the possible supply of services:
(i)made a false or misleading representation that services were of a particular quality in contravention of section 29(1)(b) of the Australian Consumer Law (ACL) which is schedule 2 to the CCA, by representing that the Parramatta franchise had been open “about 6 months”;
(ii)made false or misleading representations with respect to the price of services in contravention of section 29(1)(i) of the ACL, by representing that the rent for the Parramatta franchise was $45,000 plus GST per annum and that the full purchase price of the Parramatta franchise was $163,000;
(iii)made a false or misleading representation concerning the existence or effect of a condition in contravention of section 29(1)(m) of the ACL by representing that the deposit paid by Mr Ahmed in respect of the Parramatta franchise was refundable (without condition);
(d)by reason of the conduct described at (c)(i), (c)(ii) and (c)(iii), engaged in conduct that was misleading or deceptive, or was likely to mislead or deceive, in contravention of section 18 of the ACL.
[2]Ultra Tune Australia failed to:
(a)prepare the financial year (FY) 2014-15 marketing fund statement (MFS) for each of the five geographical regions in which Ultra Tune Australia operates, namely NSW Metro, NSW Regional (including ACT), QLD, VIC and WA (UTA Regions) within four months of 30 June 2015;
(b)ensure that each relevant MFS for FY 2014-15 and FY 2015-16 included sufficient detail of the fund’s receipts and expenses so as to give meaningful information about income and expenditure, including with respect to advertising and marketing;
(c)have the MFS for FY 2014-15 for each UTA Region audited by a registered company auditor within four months of 30 June 2015;
(d)provide to Ultra Tune Australia franchisees copies of the MFS and auditor’s report for FY 2014-15 within 30 days of preparing the MFS and receiving the auditor’s report;
and thereby contravened clause 15(1) of the Franchising Code and section 51ACB of the CCA.
[3]Ultra Tune Australia failed to:
(a)prepare the relevant MFS for FY 2011-12 and FY 2012-13 for each UTA Region within four months after the end of each FY respectively;
(b)have the MFS for FY 2011-12 and FY 2012-13 for each UTA Region audited by a registered company auditor within four months after the end of FY respectively; and
(c)provide to Ultra Tune Australia franchisees copies of the relevant MFS and auditor’s report for FY 2011-12, FY 2012-13 and FY 2013-14 within 30 days of preparing the relevant MFS and receiving the relevant auditor’s reports;
and thereby contravened clause 17(1) of the Trade Practices (Industry Codes – Franchising) Regulations 1998 (Pre-2015 Code) and section 51AD of the Trade Practices Act 1974 (Cth) (TPA).
[4]Ultra Tune Australia failed to update its disclosure document for FY 2015-16 within four months after 30 June 2015 and thereby contravened clause 8(6) of the Franchising Code and section 51ACB of the CCA.
[5]Ultra Tune Australia failed to update its disclosure document for FY 2014-15 within four months after 30 June 2014 and thereby contravened clause 6(1) of the Pre-2015 Code and contravened section 51AD of the TPA.
[6]Ultra Tune Australia failed to provide a franchisee with a disclosure document within 14 days of receiving a written request and thereby contravened clause 16(1) of the Franchising Code and section 51ACB of the CCA.
The contempt charges detailed below reflect further contraventions of the kind referred to in the declarations marked in bold above, namely declarations 2(a) and 4, which were the subject of compliance orders made immediately after the declarations, designed to prevent repetition. The compliance orders component of the 4 March 2019 orders were as follows (emphasis added to identify the orders that are the subject of this contempt proceeding):
[1]Ultra Tune Australia, for a period of three years from the date of this order, whether by itself, its servants or agents, be Restrained from receiving a non-refundable payment from a prospective franchisee in connection with a proposed franchise agreement, without at least 14 days in advance providing the prospective franchisee:
(a) a copy of the Franchising Code;
(b) a copy of the disclosure document; and
(c)a copy of the franchise agreement in the form in which it is to be executed.
[2]Ultra Tune Australia, for a period of three years from the date of this order, whether by itself, its servants or agents, be restrained from contravening clauses 8(6), 15(1) and 16(1) of the Franchising Code.
[3]Ultra Tune Australia, for a period of three years from the date of this order, whether by itself, its servants or agents, be restrained from engaging in conduct that is misleading or deceptive, or likely to mislead or deceive, or making false or misleading representations in any dealings with current or prospective franchisees when making representations regarding any new or existing Ultra Tune franchises regarding:
(a) the age of the franchise;
(b) the rent payable for the franchise;
(c) the price payable for the franchise; and
(d)the refundability of any payment made in connection with the franchise.
[4][Detailed orders for the publication of a corrective notice by newspaper advertisements, the Ultra Tune website and to franchisees]
[5]Ultra Tune Australia, file and serve on the ACCC an affidavit verifying its compliance with orders 10(a), 10(b) and 10(c) above within 30 days of the date of this order.
[6]Ultra Tune Australia establish, administer and comply with a program at its own expense, which has the purpose of ensuring compliance by Ultra Tune Australia’s employees and agents with the Franchising Code, the CCA and the ACL, and particularly clauses 6(1), 8(6), 9(1) and 15(1) of the Franchising Code and sections 18 and 29(1) of the ACL, in the form of Annexure B to this Order.
The key successful ground of appeal in the Full Court involved, as described in the appeal judgment catchwords, a “narrow question of construction”. The Full Court found that a breach of all or any of the multiple requirements in cl 15(1) of the Franchising Code when there is a marketing or other cooperative fund (that is, preparing annual financial statements detailing receipts and expenses, ensuring sufficient detail of the sources of income and items of expenditure, having the statement audited, and providing a copy to franchisees) constitutes a single contravention, rather than a separate contravention for each requirement as had been erroneously found in the primary judgment.
The overall seriousness of the contraventions was also affected by Ultra Tune’s state of mind in relation to the contraventions arising from an unsuccessful appeal ground concerning the content aspect of the disclosures that were made. The Full Court found that while there was no error in finding these contraventions had been proven, rejecting an appeal ground to that effect, the insufficiency of detail was found by the Full Court to be due to egregious inadvertence by Ultra Tune, rather than a stubborn approach to compliance in this regard as had been found in the primary judgment. This and the characterisation of the cl 15(1) requirements as a single contravention affected the assessment of overall seriousness. That resulted in the overall penalty ordered to be paid of $2,604,000 being reduced by the Full Court by $590,000 to $2,014,000.
The Full Court decision only affected the compliance orders that had been made on 4 March 2019, following the primary judgment, in a very limited way as to the wording of a part of a corrective notice ordered to be published. Neither the corrective notice, nor its terms, are in issue in this contempt proceeding.
The contempt charges
The four contempt charges to which Ultra Tune has pleaded guilty relate to breaches of orders 2 and 6 made on 4 March 2019, expressed in a summary way and without repeating the particulars:
Charge 1: breaching order 2 by contravening cl 8(6) of the Franchising Code in not updating the disclosure document following the financial year ending 30 June 2020 until 10 November 2020, being 10 days after it was required to be updated.
Charge 2: breaching order 2 by contravening cl 15(1) of the Franchising Code in not preparing an annual financial statement detailing all of the marketing fund’s expenses for the financial year ending 30 June 2019 until 17 December 2019, being 7 weeks after it was required to be prepared.
Charge 3: breaching order 2 by contravening cl 15(1) of the Franchising Code in not preparing a marketing fund statement for the financial year ending 30 June 2020 until 28 June 2021, being approximately 8 months after it was required to be prepared.
Charge 4: breaching order 6 by failing to comply with the compliance program in Annexure B to the orders by not ensuring that Ultra Tune’s compliance officer reported to the Board and/or senior management on the continuing effectiveness of that program in respect of the June, September and December quarters of 2021.
Ultra Tune contends that it is not liable for any punishment for contempt because the compliance orders did not have an endorsement of the kind required by r 41.06 of the Federal Court Rules 2011 (Cth). For the reasons given in detail below, I reject that contention.
A key issue from the trial leading to the primary judgment that is relevant to this contempt proceeding concerned the obligations imposed upon Ultra Tune to provide to each franchisee an updated disclosure document and a copy of financial statements, each year within four months of the end of the financial year on 30 June. Repetition of this conduct is reflected in contempt charges 1 to 3.
The aspect of the financial statements in issue, being the subject of contempt charges 2 and 3, concerned a marketing fund statement for each of the regions in which Ultra Tune had franchisees. The marketing fund statement is required to disclose information about the receipt and expenditure of funds contributed by franchisees for that purpose.
Each of the disclosure obligations that were contravened in the past and sanctioned by the primary judgment and by the Full Court, and which have been contravened again in breach of the compliance orders, were described in the primary judgment (which was extensively quoted in the Full Court judgment) as follows:
(a)In relation to the disclosure document obligation under the Franchising Code, to which charge 1 relates:
(i)at [37]:
The codes impose an obligation on a franchisor to maintain a disclosure document. The stated purpose of a disclosure document is the same under both codes: see cl 6A of the Pre-2015 Code and cl 8(2) of the Franchising Code. That purpose is to give a prospective franchisee (or a current franchisee who is considering renewal, variation or extension of an agreement) information that is material to the running of the business and information to help a franchisee or prospective franchisee make a reasonably informed decision about the franchise.
(ii)at [42]:
The franchise design implemented by Ultra Tune operated on a State-based franchise model with four separate disclosure documents. As outlined above at [15], Ultra Tune increased its number of franchisees in the relevant years overall, but not in all years in respect of all States. No increase in franchise numbers for a given State, or only an increase of one franchise for a given State, in a given year would trigger the first limb of the cl 8(7) exception to the cl 8(6) obligation to update a disclosure document for the following year: see [40] above. However, there was no evidence of any absence of intention on the part of Ultra Tune to enter into another franchise agreement for any of the years in question either across all of the States, or in respect of any individual State, so as to trigger the second limb of the cl 8(7) exception. The cl 8(7) is therefore not relevant to the current proceeding.
(iii)at [76]:
Ultra Tune admits that, contrary to cl 8(6) of the Franchising Code, it did not update its [four] disclosure documents for the 2015-16 financial year within four months after the end of the 2014-15 financial year, being 31 October 2015. Those documents were not completed until 26 February 2016, so were almost four months late, taking almost twice as long as required.
(b)In relation to the financial statements obligation under the Franchising Code, and in particular the aspect addressing the required marketing fund statement to which charges 2 and 3 relate:
(i)at [55]:
The codes contain obligations on the part of franchisors to provide copies of certain financial statements to franchisees if they have been required to pay money to a marketing or other cooperative fund. Ultra Tune required all of its franchisees to pay money to a marketing fund, with separate funds for each State-based franchise region, except NSW which has a separate fund for metropolitan NSW and regional NSW, making a total of five marketing funds. The following provisions required financial statements to be prepared within four months of the end of each financial year and for the statements to be audited, unless (not applicable on the evidence in this case) 75% of franchisees contributing to the fund voted not to require auditing within three months after the end of the financial year. The financial statements were then to be provided, along with the auditor’s report (if applicable), to each franchisee within 30 days of preparation. There is no evidence of any such agreement by the Ultra Tune franchisees.
(ii)at [74]:
Ultra Tune admits that, contrary to cl 15(1)(a) of the Franchising Code, it failed to prepare marketing fund statements within four months after the end of the last financial year for the 2014-15 financial year (that document having been completed on 24 December 2015 instead of by 31 October 2015).
(iii)at [324]:
The conduct in relation to the disclosure contraventions was deliberate in the sense that the failure to comply was a consequence of deliberate actions or omissions, rather than inadvertence. Those contraventions took place over a substantial period of time. They involved conduct on the part of the most senior levels of management, including Mr Chong who was company secretary and in-house counsel. There was no suggestion of responsibility on the part of lower level staff, but rather that priority was evidently not given at the highest levels in the company to even informing itself as to what was required to comply with its obligations, let alone to ensuring compliance took place. The evidence was limited as to corporate culture, but it was not established, as a matter of mitigation, that Ultra Tune has a corporate culture conducive to compliance with the Franchising Code or the ACL. There was passing reference to compliance training, but limited evidence as to content, delivery, or response to this case. The corrective response, to the extent it was shown at all, was, at best, leisurely. There was no evidence of active obstruction in relation to the non-disclosure contraventions, but little to suggest an active approach to remedying the defects as a matter of urgency or priority.
The characterisation of the conduct as to the inadequate content of the marketing fund statements for the 2014-2015 and 2015-2016 financial years being due to stubbornness rather than inadvertence was displaced by the Full Court. The obligation was that the statements contain sufficient detail of the marketing funds receipts and expenses so as to give meaningful information about sources of income and items of expenditure, particularly with respect to advertising and marketing, as required by cl 15(1)(b) of the Franchising Code. The reason why those contraventions were found by the Full Court not to be stubborn was that the relevant person at Ultra Tune did not know about the obligation in cl 15(1)(b), such that the contraventions as to content were found by the Full Court to be egregious but nonetheless inadvertent. That ignorance was not a defence, but it was a mitigation, which ordinarily cannot be advanced a second time, but that ignorance is not relevant to the contempt charges.
For the first three contempt charges, the conduct concerns only timing in relation to disclosure obligations. The content aspect of the marketing funds statement is not part of the contempt allegation in charges 2 and 3. On the topic of timing in relation to both the disclosure documents, and the marketing fund statements aspect of the financial statements, the Full Court relevantly observed:
(a)as part of [66] that:
Ultra Tune’s reference to delay by external service providers does not provide an adequate explanation for these delays. In any event, it is Ultra Tune’s obligation as franchisor to ensure that it complies with the requirements. As a major franchisor operating in four states, Ultra Tune should have taken its obligations more seriously.
(b)at [67] that:
We otherwise agree with the primary judge that the contraventions were objectively serious by reason of the length of the delay in the ultimate provision of the required documents to franchisees the effect of which was largely to undermine the statutory purposes of transparency and accountability of Ultra Tune’s expenditure, the fact that the overall [four-month] delay in 2014-2015 is not explained by the conduct of the external service providers, Ultra Tune’s history of non-compliance with the applicable provisions in circumstances where it is ultimately Ultra Tune’s responsibility alone to ensure compliance, and the large number of franchisees adversely affected by Ultra Tune’s contraventions.
Charge 1 in the amended statement of charge related to a failure to comply with cl 8(6), not directly in contravention of that provision, but rather in disregard of a compliance order not to breach that provision. Instead of being provided within four months of the end of the financial year, the updated disclosure document for 2019 was provided 10 days late. An important issue on penalty for this contempt is weighing up the seriousness of not complying with a court order and the seriousness of not complying with a regulatory requirement, against the lesser period of lateness. Further, as noted below, since at least the primary decision delivered on 18 January 2019, Ultra Tune has been made aware of its obligations under the Franchising Code, as reinforced by the Full Court decision delivered on 20 September 2019. The fourth contempt charge concerns the failure of Ultra Tune’s compliance officer to report to the board and/or senior management of Ultra Tune on a quarterly basis as to the continuing effectiveness of the compliance program ordered to be implemented. This can readily be seen as an important mechanism to ensure that the rest of the compliance program was effective. That obligation was not observed for the last three quarters of 2021.
The principles in relation to contempt of court
The ACCC in its submissions regarding the applicable legal principles which apply to contempt for breaching a court order refers to Australian Competition and Consumer Commission v ACN 117 372 915 Pty Ltd (in liq) (formerly Advanced Medical Institute Pty Ltd) [2016] FCA 1437 at [37], in which Moshinsky J stated that contempt through disobedience of a court order “has traditionally been described as ‘civil contempt’” and, referring to Construction, Forestry, Mining and Energy Union v Grocon Constructors (Victoria) Pty Ltd [2014] VSCA 261; 47 VR 527, states that a finding of contempt of this kind can be made where the breach was technical, wilful or contumacious. The ACCC in its submissions also cites Australasian Meat Industry Employees Union v Mudginberri Station Pty Ltd (1986) 161 CLR 98 at 112-113:
lying behind punishment for contempt which involves wilful disobedience to a court order, is the very substantial purpose of disciplining the defendant and vindicating the authority of the court. … It follows that a deliberate commission or omission which is in breach of an injunctive order or undertaking will constitute such wilful disobedience unless it be casual, accidental or unintentional.
The ACCC in its submissions additionally refers to Grocon at 140 (citations omitted):
The public interest requires that any disobedience more than casual, accidental or unintentional must at least be regarded as wilful … Thus, a deliberate act or omission which is in breach of an injunctive order or an undertaking, will ordinarily constitute wilful disobedience unless the alleged contemnor is able to show, by way of exculpation, that the default was casual, accidental or unintentional …
The Full Court in Kazal v Thunder Studios Inc (California) [2017] FCAFC 111; 256 FCR 90 said in relation to criminal and civil contempt of court:
[21] The distinction still maintained between civil and criminal contempt is “in significant respects illusory”: Witham v Holloway (1995) 183 CLR 525 (Witham) at 534. ... Nothing turns on the distinction save as to the issue taken on appeal as to the finding that the appellant’s breaches were contumacious. The distinction was summarised by Brennan, Deane, Toohey and Gaudron JJ in Witham at 530:
In general terms, the distinction between civil and criminal contempt is that a civil contempt involves disobedience to a court order or breach of an undertaking in civil proceedings, whereas a criminal contempt is committed either when there is a contempt in the face of the court or there is an interference with the course of justice. However, disobedience or breach of an undertaking amounts to a criminal contempt if it involves deliberate defiance or, as it is sometimes said, if it is contumacious. As well, in the case of some orders, described in Australasian Meat Industry Employees’ Union v Mudginberri Station Pty Ltd as involving “arbitrary classification”, disobedience constitutes criminal contempt. They are orders forbidding interference with a ward of court, orders for the delivery up of a child and non-molestation orders. And it has been held that breach of a court order by a solicitor or by a liquidator is also a criminal contempt.
(Footnotes omitted.)
[22] It was further observed in Witham at 531-532 (quoting Windeyer J in Australian Consolidated Press Ltd v Morgan (1965) 112 CLR 483 (Morgan) at 498) as to the historic basis for the distinction:
(1) Civil contempt was remedial or coercive, used primarily to compel obedience in support of a private interest of the party in whose favour the order was made, rather than punish for disobedience, in which case the contempt could be purged by apology and reparation. As was pointed out at 532.3, quoting longstanding United States authority, the remedial or coercive approach can be explained by the notion that those in “breach of an order or undertaking ‘carry the keys of their prison in their own pockets’.”
(2) Criminal contempt was in the public interest to vindicate judicial authority or maintain the integrity of the judicial process.
[23] This distinction between civil and criminal contempt was not regarded as being satisfactory in Witham, having regard to such considerations as disobedience not being able to be remedied in all cases, and there being in any event a public interest in court orders being obeyed. There was no easy or bright line between remedial or coercive objectives and punitive objectives. It may be in the public interest for contempt proceedings to continue, even if the opposing parties do not seek it. Nothing was achieved by describing some proceedings as punitive and others remedial or coercive, given that punishment is still punishment whatever the motive for imposing it: see Witham at 533-534. Although not forming part of the reasoning in Witham, it may be seen that for both kinds of contempt, deterrence, both specific and general, is a unifying principle informing the appropriate sanction to be imposed.
[24] A real distinction remains between contempt proceedings being “essentially criminal in nature”, and ordinary criminal proceedings. That is so in many practical respects, especially as to procedure: Witham at 534, quoted with approval by the plurality in Construction, Forestry, Mining and Energy Union v Boral Resources (Vic) Pty Ltd (2015) 256 CLR 375 (Boral) at [43]; see also the discussion in Boral at [44]-[47] as to certain of those enduring important distinctions. That distinction led to the CFMEU as the defendant in Boral being compelled to participate in discovery processes of the Supreme Court of Victoria.
[25] The distinction between civil contempt proceedings, criminal contempt proceedings and criminal proceedings was further explained by Nettle J in Boral at [65]:
A proceeding for punishment for contempt constituted by disobedience of an injunction granted in a civil proceeding is not part of the criminal justice system in the sense essayed in Caltex, X7 or Do Young Lee v The Queen. Although “all proceedings for contempt ‘must [now] realistically be seen as criminal in nature’”, not all contempts are criminal. Failure to obey an injunction is not a criminal offence unless the failure to comply is defiant or contumacious. A proceeding for contempt is not a proceeding for criminal contempt if the proceeding appears clearly to be remedial or coercive in nature as opposed to punitive. A criminal contempt is a common law offence, albeit not part of the ordinary common law. But even a proceeding for criminal contempt is not a criminal proceeding.
(Citations omitted.)
The four charges before the Court are therefore for civil contempt, not criminal contempt, noting that the ACCC does not contend that any of them were defiant or contumacious in nature. In keeping with all contempt charges, the present charges are nonetheless criminal in nature.
The characterisation of Ultra Tune’s conduct is a central factual dispute to be adjudicated upon, based upon a detailed consideration of the chronology of key events, as set out below. Ultra Tune accepts that the conduct was deliberate and that it was wilful, but disputes the characterisation that the ACCC advances of a cavalier attitude to compliance. Ultra Tune concedes little more than the fact of non-compliance. It is akin to an argument of mitigation by ineptitude, accepting that the conduct and state of mind of its employees and agents was its conduct and state of mind, including as to the attitude taken towards compliance, but somehow leaving the moral culpability with them. I am unable to accept that this approach is permissible.
A related dispute is the need for specific deterrence. There is no dispute that there is a need for general deterrence, but the extent of that need, and the suitability of Ultra Tune being a vehicle for advancing that objective are not agreed. Ultra Tune contends that the need for specific deterrence is minimal, in particular by reason of now having an apparently competent and effective compliance officer, and that the nature of the non-compliance did not give rise to a substantial need for general deterrence.
In Kazal, the Full Court also made further observations pertinent to this contempt proceeding as follows:
[97] The plurality in Boral observed at [41], endorsing the statement of principle by Hayne J in Re Colina; Ex parte Torney (1999) 200 CLR 386 at [12], that the “cardinal feature of the power to punish for contempt” was as an exercise of judicial power to “protect the due administration of justice”. Viewed in that way, contempt proceedings are essentially protective in nature as to the judicial function and the role of the courts, even if they also serve to vindicate private interests and rights. Contempt proceedings are therefore to be viewed as essential in facilitating courts being able to function properly. That includes being, and being seen to be, effectual in adjudicating upon and resolving disputes, and in particular making orders that will ordinarily be obeyed. This means that individual contempt cases have an importance transcending the instant case by supporting and enhancing the integrity of judicial proceedings, both in respect of orders made, and more generally. That view of contempt proceedings can be seen to permeate longstanding sentencing authority in this area.
[101] In Matthews at [129], Tobias JA (with whom Basten and Campbell JJA agreed on this point) quoted with evident approval nine considerations the sentencing judge in that case had considered relevant to the question of determining an appropriate punishment for contempt of court as follows:
(1) the seriousness of the contempt proved;
(2) the contemnor’s culpability;
(3) the reason or motive for the contempt;
(4) whether the contemnor has received, or sought to receive, a benefit or gain from the contempt;
(5) whether there has been any expression of genuine contrition by the contemnor;
(6) the character and antecedents of the contemnor;
(7) the contemnor’s personal circumstances;
(8) the need for deterrence of the contemnor and others of like mind from similar disobedience; and
(9) the need for denunciation of contemptuous conduct.
[103] The burden of the additional authority in this Court is to add weight to the factors listed in Matthews, rather than requiring any change by way of addition, subtraction or variation. The focus remains on the core themes of the objective seriousness of the conduct and, in particular, its effect on the administration of justice, subjective factors such as the contemnor’s culpability, antecedents and attitude, including in particular any apology or other palpable sign of contrition, the capacity to pay a fine, and imprisonment being a last resort. Deterrence remains a dominant theme, both specific and general. Even denunciation and punishment can be seen as bolstering deterrence. That is especially so when the conduct entails contemplation and the opportunity to reflect and desist.
[104] … it is essential to the due administration of justice that contempt of court, and in particular serious contempt of court, remains relatively rare. Vigilance is required to help ensure contempt remains a rare problem. Whenever there is a real need for deterrence, be it specific or general, that will always be a vitally important consideration in determining the appropriate penalty…
[105] State of mind can serve to mitigate or aggravate conduct by a contemnor. In the case of aggravation, this is reflected in the conclusion reached as to whether or not the nature of the contempt, combined with the proven state of mind, may be regarded as contumacious. Evidence of an innocent or inadvertent state of mind may serve to mitigate. It follows that state of mind will almost always be a relevant consideration when it comes to penalty, somewhat analogous to the situation with civil penalty contraventions: cf Australian Competition and Consumer Commission v Reckitt Benckiser (Australia) Pty Ltd (2016) 340 ALR 25 (Reckitt) at [123]-[124].
The absence of a warning endorsement or penal notice In accordance with rule 46.01
Ultra Tune contends that the lack of inclusion of an endorsement to the orders of 4 March 2019 (March Orders) means that this Court cannot impose a penalty on Ultra Tune for its contempts. On 18 January 2019, I delivered the primary judgment, holding that Ultra Tune had failed to comply with the Franchising Code and the Australian Consumer Law contained in Sch 2 of the Competition and Consumer Act 2010 (Cth) (ACL). I also made orders requiring the parties to furnish agreed or competing draft orders and declarations within 28 days. On 15 February 2019, I extended the time for compliance with that order to 20 February 2019.
On 20 February 2019 Webb Henderson, acting for the ACCC, provided draft orders and declarations to my associate by email. That document contained proposed declarations that Ultra Tune failed to comply with the Franchising Code and the ACL. In the same email, Webb Henderson also stated that Ultra Tune had been provided with those draft orders and declarations on 18 February 2019, as well as a substantially similar earlier draft, for which Ultra Tune had provided suggested amendments on 6 February 2019. Mr Tony Truong, internal lawyer for Ultra Tune, emailed the Court and Webb Henderson confirming Ultra Tune’s consent to those draft orders and declarations on 22 February 2019. I made those orders by consent on 28 February 2019. Typographical errors in those orders, arising from typographical errors in the draft orders, were pointed out to my chambers by Webb Henderson on 1 March 2019. On 4 March 2019 I amended the orders made on 28 February 2019 to correct those typographical errors, making the March Orders that were later breached by Ultra Tune and are hence relevant to this contempt proceeding.
There is an important distinction to be drawn between enforcement of orders of the Court which compel things to be done, or not be done, designed to secure compliance at or about the time that the orders are made; and subsequent action taken to bring proceedings for contempt of court, including to punish for such non-compliance and to deter the person bound by the orders, and others in a like position, from failing to comply in the future. That distinction is acknowledged by the Court’s general practice note for enforcement and contempt, Enforcement, endorsement and contempt practice note (GFN-ENF), especially at [2.2] and [7.1].
Chapter 5, Pt 41, Div 41.1 of the Federal Court Rules deals with general matters to do with enforcement, relevantly including compliance, but may also be relevant to contempt at a later stage. Chapter 6 (Disciplinary), Pt 42 (Contempt) deals separately with contempt of court, including a regime for bringing charges, having them heard and the imposition of punishment.
Rules 41.06, 41.07 and 41.08 within Div 41.1 provide as follows:
41.06 Endorsement on order
If an order requires a person to do, or not to do, an act or thing, whether within a certain time or not, and the consequences of failing to comply with the order may be committal, sequestration or punishment for contempt, the order must carry an endorsement that the person to be served with the order will be liable to imprisonment, sequestration of property or punishment for contempt if:
(a)for an order that requires the person to do an act or thing—the person neglects or refuses to do the act or thing within the time specified in the order; or
(b)for an order that requires the person not to do an act or thing—the person disobeys the order.
41.07 Service of order
(1)An order mentioned in rule 41.06 must be served personally on the person who is bound to do, or not to do, the act or thing:
(a)within the time mentioned in the order; or
(b)if no time is mentioned—within a time that would allow the person to comply with the order.
(2) However, if the person:
(a)was present when the judgment was pronounced or the order was made; or
(b)was notified of the terms of the order orally, by telephone or electronically; the person is taken to have been served with the order at the time the person heard or was notified of the order.
41.08 Application where person fails to comply with order
(1)If a person fails to comply with an order that the person is bound to comply with a party may apply to the Court for the following orders:
(a) the committal of the person;
(b) the sequestration of the person’s property.
(2)If the person in default is a corporation or an organisation, a party may apply to the Court for an order:
(a) for the committal of an officer of the corporation or organisation; or
(b) for the sequestration of the property of the corporation or organisation.
(3)However, no application may be made for an order under paragraph (2)(a) unless the officer:
(a)has been served with the order in accordance with rule 41.07(1), and the order carries the endorsement in rule 41.06; or
(b)was present when the order was made or was notified of the order in accordance with rule 41.07(2).
(4) This rule applies if the Court has made:
(a) an injunction; or
(b) an order in the nature of an injunction; or
(c) an order in the nature of mandamus or prohibition.
Note: Contempt is dealt with in Part 42.
It is convenient to refer to the endorsement described in r 41.06 as the warning endorsement, noting that it is also commonly referred to as a penal notice. It is also important to note that the term “committal” in rr 41.06 and 41.08 is a reference to imprisonment as is made clear enough by the use of the word “imprisonment” in the chapeau to r 41.06. The remedies of committal (imprisonment) and sequestration may be seen as principally directed to securing compliance prior to any finding of contempt of court being sought, let alone proven, under Ch 5, Pt 41. This is to be contrasted with punishment for a contempt that has been proven to have taken place following the process in Ch 6, Pt 42. This process may also result in imprisonment of a natural person and sequestration following conviction.
As noted above, the compliance orders that were made on 4 March 2019 did not include a warning endorsement in accordance with r 41.06. Ultra Tune contends that this means it cannot be punished for contempt, and that the Court should not exercise the power in r 1.34 to dispense with compliance with r 41.06 to allow any punishment to be imposed. That is, Ultra Tune contends that the only remedy that is and should be available for its admitted deliberate (but not contumacious or defiant) failure to obey the relevant compliance orders are declarations, on any view a barren remedy given what has transpired. The ACCC submits that the absence of a warning endorsement is not a barrier to punishment, and in the alterative, if that absence would be such an impediment, that the Court should exercise the discretion to dispense with compliance with r 41.06, so as to enable the Court to proceed to punish Ultra Tune for the admitted four charges of contempt of court.
Ultra Tune relies upon past authority arising from, or commenting upon, the former Federal Court Rules 1979 (Cth) (former Rules), which were in operation from 1 August 1979 until they ceased to be in effect on 31 July 2011, due to the commencement of the current Federal Court Rules on 1 August 2011. It is instructive to consider the relevant former Rules, and then some of the authority in relation to them, in order to better understand the meaning and effect of r 41.06, in the context of rr 41.07 and 41.08.
Order 37 of the former Rules was titled “Judgments and orders: enforcement” and was principally, if not wholly, directed to compliance. Order 40 dealt separately with contempt, again with a regime for charging and the process for dealing with it through to punishment.
Order 37 rule 2 of the former Rules provided as follows:
Service before committal or sequestration
(1)Subject to the Rules, an order shall not be enforced by committal or sequestration unless:
(a)the order or a certified or office copy thereof is served personally on the person bound; and
(b)if the order requires the person bound to do an act within a specified time, the order or a certified or office copy thereof is so served before that time expires.
(2)Subject to the Rules, where the person bound by an order is a corporation or organisation the order shall not be enforced by committal of an officer of the person bound or by sequestration of the property of an officer of the person bound unless, in addition to service under sub-rule (1) on the person bound:
(a)the order or a certified or office copy thereof is served personally on the officer; and
(b)if the order requires the person bound to do an act within a specified time, the order or a certified or office copy thereof is so served before that time expires.
(3)An order or a certified or office copy thereof served under this rule must bear a notice (naming the persons concerned) that the person served is liable to imprisonment or to sequestration of property if:
(a)where the order requires the person bound to do an act within a specified time, the person bound refuses or neglects to do the act within that time; or
(b)where the order requires the person bound to abstain from doing an act, the person bound disobeys the order.
(4) Subject to the Rules, where:
(a) an order requires the person bound to do an act; and
(b) another order specifies the time in which the act is required to be done,
each order or a certified or office copy thereof shall be served on the person bound before the expiry of that time as so abridged or extended.
(5)Where a person liable to committal or sequestration of his property by way of enforcement of a judgment or order has notice of the judgment or order:
(a)by being present when the judgment is pronounced or when the order is made; or
(b)by being notified of the terms of the judgment or order whether by telephone, telegram or otherwise,
the judgment or order may be enforced by committal of that person or by sequestration of his property notwithstanding that service has not been effected in accordance with this rule.
(6) The Court may dispense with service under this rule.
It is convenient to refer to the notice described in O 37 r 2(3) as the warning notice, which helps to distinguish it from its replacement warning endorsement in the current r 41.06. It is also important to note again that the term “committal” is a reference to imprisonment, as is made clear enough by the use of the word “imprisonment” in r 2(3): see also Mason v MWREDC Ltd [2012] FCA 1083 at [48]. Again, imprisonment or sequestration was directed to securing compliance rather than imposing punishment for a proven contempt following the processes in Order 40.
The scheme of O 37 r 2, according to its express terms, was that an order of the Court requiring someone to do an act, or not to do an act, could only be enforced by imprisonment or sequestration of property if one of the following circumstances existed:
(a)the person bound by the order was served with a certified or office copy of the order containing the warning notice, provided the order was served before the time for compliance expired: O 37 r 2(1) and (3); or
(b)if the person bound by the order was a corporation or organisation, and enforcement was sought against an officer of that corporation or organisation by imprisonment of that officer or sequestration of the property of that officer, in addition to that corporation or organisation as the person bound being served in accordance with r 2(1) described immediately above, the officer is also served with a certified or office copy of the order containing the warning notice, provided that the order was served before the time for compliance expired: O 37r 2(2) and (3); or
(c)the person liable to imprisonment or sequestration of property was present when the judgment was pronounced or when the order was made, or was notified of the terms of the judgment or order, whether by telephone, telegram or otherwise, notwithstanding that service had not been effected in accordance with r 2: O 37r 2(5); or
(d)the Court dispensed with service under r 2: O 37r 2(6).
A number of judgments during the currency of the former Rules dealing with O 37 r 2 need to be read with the full terms of that rule as set out above, to avoid potentially being misled into thinking that the requirement for the warning notice as to the liability for imprisonment, or sequestration of property, for non-compliance with an order of the Court arose from O 37 r 2(3) alone, even though that subrule set out the terms of the warning notice. Rather, the requirement arose from the combined effect of the requirement for personal service of the order (under r 2(1) or the combination of r 2(1) and r 2(2)), and the requirement that the order so served contained the warning notice (r 2(3)). That is important in this case, because there is no relevant provision in the Federal Court Rules accompanying r 41.06, akin to O 37 r 2(1) or (2) accompanying O 37 r 2(3), with the accompanying provision that does exist, r 41.08(3), not extending to anyone other than an officer of an organisation or corporation bound by the order of the Court.
The prohibition on enforcement by imprisonment or sequestration in O 37 r 2 turns on the requirement for personal service if the person was not present when the judgment was pronounced or the order was made, or the person was not notified of the terms of the judgement or order. In that event, the order served must contain the warning notice before any subsequent failure to comply can be enforced by imprisonment or sequestration of property.
Reading O 37 r 2 as a coherent scheme, the requirement for service of the order with the warning notice was evidently and logically designed for a circumstance in which it is likely that the first that the person being served knew about the existence of the order, and therefore of the requirements that had been imposed upon them, was when the order was served. In that way, when the order was served, the person bound by it was to be made aware explicitly by the warning notice as to the consequences of non-compliance. The evident primary purpose of serving a copy of the order with the warning notice was to secure compliance in the first place, because such service must take place before the expiry of the time for compliance and therefore before a contempt for not doing an act has been committed (noting that an injunction restraining conduct may be immediate, but taking effect upon service of the order).
The contraventions on contempt charges 2 and 3 need to be somewhat greater than the Full Court imposed for the 2014-2015 financial year allowing for the increase in maximum penalties since then, and considerably greater than the Full Court imposed for the 2015-2016 financial year for contraventions that equate to those charges. Ultra Tune must be appropriately sanctioned and must not be tempted to let things slip again in the future; and other franchisors must be encouraged to take their legal obligations seriously and consider that it is in their best interests to comply. In all the circumstances, the appropriate penalties had the subject of those charges been proven to be contraventions of the Franchising Code of the same kind:
(a)for charge 2, $200,000; and
(b)for charge 3, $400,000.
Ultra Tune submits that this Court should not have regard to the penalties that could have been imposed had the conduct the subject of the contempt charges instead have been made the subject of a fresh civil penalty contravention proceedings for the breaches of the Franchising Code subject of charges 1-3. I am unable to accept that submission. Plainly the availability of other sanctions for the same conduct, and the potential scale of those alternative sanctions, especially when the alternative can be seen to be less serious, forms part of the matrix of relevant facts and circumstances to which regard may be had in arriving at an appropriate penalty for the present contempt conduct.
Ordinarily, all things otherwise being equal, conduct in defiance of court orders will be more serious than the same conduct in defiance of obligations imposed by statute, and can readily be seen to be more serious, because of the overt and preventative nature of orders made by the Court. Civil penalties and contempt penalties have in common the purpose of deterrence, but the contempt proceedings involving disobedience of court orders have the additional dimension of the need to uphold and reinforce the efficacy of the administration of justice: see Kazal at [97]. In a case such as this involving wilful non-compliance of court orders, although not contumacious, that circumstance calls for a more severe deterrent response. It is a legitimate response to impose a penalty for conduct that amounts to contempt that is greater than would be appropriate for the same conduct that amounts to no more than a civil penalty contravention. Such an increased sanction reflects not just the fact that statutory prevention penalties can legitimately be seen as something in the nature of a yardstick for a contempt sanction when the conduct for each is substantially the same (see Hili v The Queen [2010] HCA 45; 242 CLR 520 at [54]), but also because the maximum penalty for a civil penalty contravention for the same or substantially the same conduct is no more than a useful guide and cannot be a fetter on discretion. If that were not so, at least in a suitable case such as the present, the contempt sanction is at risk of losing the necessary additional deterrent sting.
The further contravention by way of disobedience of a compliance order, and not just the underlying compliance obligation that the order was directed to ensuring compliance with, must be treated more seriously than a bare contravention of cl 8(6) of the Franchising Code. The penalty must be lifted in instances where the actions that would be a contravention of the law also amount to a contempt of a court order. The penalty imposed on a contemnor must necessarily leave the contemnor worse off in an instance where they have breached a Court order requiring their compliance with a legal obligation, than they would have been had they failed to comply with that same legal obligation without being court ordered to do so and were merely the subject of successful civil penalty proceedings. This is particularly so given that a court order in the nature of the March Orders is intended to act as a form of specific deterrence where the company has previously breached the law, in this instance the Franchising Code, as plainly enough the risk of a sanction for contravention of the Franchising Code was not enough to deter Ultra Tune from non-compliance.
In all the circumstances I am of the view that an increase of penalty over that which would be appropriate for corresponding civil penalty contravention of 50% is warranted for charges 1 to 3. These are the reasons for imposing an overall penalty of $240,000 for charge 1, $300,000 for charge 2, $600,000 for charge 3.
Charge 4 is in a different category to the other three charges. Charge 4 is the only charge which is in the nature of a pure contempt, that is the breach of a court order alone not predicated upon a breach of a legislative requirement. Contrary to the submissions made by Ultra Tune, the requirement imposed on Ultra Tune to ensure reporting by the compliance officer was not merely a small portion of the compliance orders, but a mechanism to ensure that its entire compliance program was not just designed and implemented properly, but also that it was effective. Yet Ultra Tune did not ensure that this vital mechanism took place at all for most of 2021. In my view, this charge was more serious than charge 2 and was only saved from being treated as more serious than charge 3 because Ms Corina Vucic was appointed as compliance officer in about December 2021. That reduces, but does not dispense with, the need for specific deterrence, but the need for both punishment and general deterrence remains high. As charge 4 is a little more serious than charge 2, but much less serious than charge 3, I consider that the appropriate penalty must be in between that given for those two charges, but closer to charge 2. With some misgivings, I consider that the appropriate penalty for charge 4 is $240,000.
That produces an overall penalty of $1.5 million comprising the following breakdown according to the different contempt charges, comprising $240,000 for charge 1, $300,000 for charge 2, $600,000 for charge 3 and $360,000 for charge 4.
Ultra Tune must pay the ACCC’s costs of and incidental to this contempt proceeding on an indemnity basis.
I certify that the preceding one hundred and ninety-seven (197) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Bromwich. Associate:
Dated: 1 March 2024
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