Australian Competition & Consumer Commission v Australian Business Reports Pty Ltd
[1997] FCA 894
•20 Aug 1997
IN THE FEDERAL COURT OF AUSTRALIA )
) AUSTRALIAN CAPITAL TERRITORY ) ACT G75 of 1996 ) DISTRICT REGISTRY ) ) GENERAL DIVISION )
BETWEEN: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
ApplicantAND: AUSTRALIAN BUSINESS REPORTS PTY LIMITED (ACN 074 812 856)
First RespondentGARY JOHN SOLAH
Second Respondent
JUDGE: FINN J PLACE: CANBERRA DATED: 20 AUGUST 1997
MINUTES OF ORDER
THE COURT ORDERS THAT:
IN THE FEDERAL COURT OF AUSTRALIA ) ) AUSTRALIAN CAPITAL TERRITORY ) ACT G75 of 1996 ) DISTRICT REGISTRY ) ) GENERAL DIVISION )
BETWEEN: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
ApplicantAND: AUSTRALIAN BUSINESS REPORTS PTY LIMITED (ACN 074 812 856)
First RespondentGARY JOHN SOLAH
Second Respondent
JUDGE: FINN J PLACE: CANBERRA DATED: 20 AUGUST 1997
EX TEMPORE REASONS FOR JUDGMENT
The Australian Competition and Consumer Commission (“the ACCC”) seeks declaratory, injunctive and other relief in these proceedings in respect of alleged contraventions by Australian Business Reports Pty Ltd (“ABR”) and Mr Solah (ABR’s sole director) of s52 and s64(2A) of the Trade Practices Act 1974 (Cth) (“the Act”). The principal, but not the only, allegations made against ABR and Mr Solah are that, in the documentation used to solicit small businesses to enter their names in what is styled the “Consumers Business Register” (“the Register”), it was represented that:
(i)ABR (or its predecessor business) was a government office or was affiliated with government;
(ii)addressees of the letters of solicitation were required by law to register with ABR for inclusion in the Register; and
(iii) the Register existed as a publication.
These representations are alleged to be misleading or deceptive or likely to mislead or deceive.
The claims against Mr Solah encompass both allegations that, in the use of postal services, he engaged in conduct in contravention of s52: see the Act, s6(3); and that, directly or indirectly, he was knowingly concerned in, or party to, ABR’s contraventions of the Act: see the Act, s75B.
Before detailing the factual setting I would note at the outset that while the respondents contested interlocutory proceedings in this matter including a motion charging contempt of orders I made on 19 December 1996, they have not appeared to defend this application. Early in the course of the hearing of the application, but after I had indicated that I would proceed notwithstanding their non-appearance, a letter was received from Mr Solah stating that for reasons of cost the respondents were unable to appear to defend the application. This letter did not seek any deferment of the hearing, though such would have been unlikely to have been granted given the history of this matter which I need not outline here.
The Factual Setting
This is a matter in which all of the impugned representations are contained in letters and forms sent to small businesses. For reasons which will become apparent these fall into three relatively discrete temporal groupings. As there are differences in the representations made as between the three, they will be outlined separately. In so doing I should note that the evidence to which I will refer is drawn in the main from the affidavits of four owners or managers of businesses who, between 9 July 1996 and 11 August 1997, received postal communications concerning the Register.
June to July 1996: the CBR letter and forms
In his defence filed in this proceeding Mr Solah has admitted that he personally sent mail to companies and businesses concerning the Register. This mail, apparently, was sent by him on his own account, albeit he was trading under an unregistered business name. ABR was not incorporated until 11 July 1996.
The documentation so sent by Mr Solah that has been put in evidence comprised a letter and an accompanying “Register Entry Verification”. I will for convenience call these the “CBR letter and form”. They were in the following forms.
First the letter. It bore a distinctive letterhead. To the left was a large box enclosing the letters “CBR” (again in large character) and underneath were the words “Consumers Business Register”. The centre of the letterhead contained a Canberra post box address, street address and phone number. The body of the letter which was signed by Mr Solah was as follows:
“The Consumers Business Register is currently compiling a listing of Suppliers, Traders, Manufacturers, Retailers, Licensed Building Traders etc., currently conducting a business. The increase in unlicensed and unregistered businesses is being displayed by the decrease in your business volume and profit margins. The register is aimed at singling out those unregistered operators. (YOU ARE REQUIRED UNDER SECTION 5 OF THE BUSINESS NAMES ACT 1963 SECTION 7(1) and (8) TO REGISTER ANY TRADING NAME THAT IS NOT YOUR OWN NAME) Quote Office of Consumer and Business Affairs Ministry of Fair Trading Aug ‘95.
Fair trading laws are based on the principle of equity, fairness and honesty. They aim to create a fair and informed market place and therefore the Consumers Business Register will help alleviate underpricing and unfair trading of goods and services by compiling a register of businesses who are licensed and conforming to consumer regulation. The Register will be available for public scrutiny for the purposes of cross trading. By entering your business in the Register you will be recognised by Federal and State Contractors and for reference by your suppliers who by law must commission Licensed Suppliers. The aim of Consumers Business Register is to publish a register of Licensed Traders only.
As a member of the business community you will appreciate the necessity for maintaining an up-to-date register at all times and while it is not a substitute for your Business Registration with the Office of Consumer and Business Affairs nor with the Ministry of Fair Trading, the onus is on you to verify all details for your Consumers Business Register entry application enclosed.
Sign and return your application together with the relevant fee of $165.00
within the lodgement date of 14 days.”
The CBR form for its part bore a like letterhead to the letter. Below it was the name and address of the business to which it was sent. To the right was a box entitled “Office Use Only” containing the symbols “Chd:” with a number beneath it and below that “Ref No:” with an assigned number. Towards the centre of the form in larger bold letters were the words “Register Entry Verification”. Beside this to the right was a bar-code which, as I will indicate, was “decorative” not functional. To the left was a small box containing the inscription “Fee: $165.00”. Below these were a sequence of boxes, each with its own designation soliciting particular information about the business to which the form was addressed. That information encompassed (inter alia) the “Business Name”, “Nature of Business”, “Principal Place of Business”, “Postal Address”, and “Tel”, “Mobile” and “Fax” numbers. Below the space for signature the following appeared in small print:
“Please verify all details are true and correct. Sign and return your application.”
On 4 July 1996, an officer of the ACT Consumer Affairs Bureau had a telephone conversation with Mr Solah in which Mr Solah is said to have indicated that an edition of the Register had not then been published and that he had no definite publication plans as he was still getting quotes from printers. He, further, is said to have indicated that he intended at the time only to have a “pilot program by phone” conducted so as “to get a feel for the market”.
On or around 9 July 1996 a Mr Blackwell received the letter and form set out above. He was the manager of the recipient business. In his affidavit he has sworn (inter alia) that:
“6.When I read the CBR letter and the CBR form, I initially believed that CBR was asking for some sort of government charge, and that the $165 fee was compulsory and that I had to pay the fee.
...
8.I formed this belief after reading the CBR letter and the CBR form the first time. I formed this belief because of the way the documents were written. In particular, the use of the quote in the CBR letter that read:
“YOU ARE REQUIRED UNDER SECTION 5 OF THE BUSINESS NAMES ACT 1963 SECTION 7(1) AND (8) TO REGISTER ANY TRADING NAME THAT IS NOT YOUR OWN NAME) Quote Office of Consumer and Business Affairs/Ministry of Fair Trading Aug/95.”
made me believe that CBR was a government body and that I had to pay the $165 fee. Similarly the Canberra address used on the CBR letterhead gave me the impression that CBR was a government body.
9.Because of the sentence used on the bottom of the CBR letter that read:
“Sign and return your application together with the relevant fee of $165.00 within the lodgement date of 14 days.”
I believed that the CBR letter was a demand for payment rather than a request.
10.After reading the CBR letter and the CBR form about three times, I began to have doubts that CBR was a government body. I remember reading the sentence in the CBR letter that reads:
“The Aim of the Customers Business Register is to publish a register of Licensed Traders Only”
After reading this sentence a number of times I thought it was unusual that a government body would say what “their aim” was rather than what they were going to do.”
July 1996 to (circa) January 1997
As noted, ABR was incorporated in July 1996. Thereafter the letters and forms relating to the Register were on ABR letterhead. This was not the only change from the documentation set out above.
Two versions of the letter covering this period have been put in evidence. The letterhead apart, they both vary from the CBR letter in the following respects:
(a)in the small print at the foot of the letter the words underlined have been omitted:
“Sign and return your application together with the relevant fee of $165.00 within the lodgement date of 14 days”; and
(b)the first sentence of the first paragraph and last sentence of the second paragraph of the CBR have been replaced in turn with:
“The Consumers Business Register is a compilation of Suppliers [Etc] ... currently conducting a business”; and
“The Consumers Business Register is a publication of Licensed Registered Traders and Suppliers only”: emphasis added.
While one of the two versions repeated the sentence indicating that “the Register will be recognised by Federal and State contractors”, the other stated in contrast that “the Register will assist recognition by Federal and State contractors”: emphasis added.
Save for the change in letterhead the forms differed from the CBR form only in the addition at the bottom, of the designation “Form No: Q73”. I will refer to the two versions of the letter and the form as the “ABR letters” and “ABR form”.
In August 1996, Ms Duffy, the owner of a small business in Canberra, received the version of the letter that differed least from the CBR letter and its accompanying form. It is her evidence that:
“4.Upon reading the ABR letter and the ABR form I thought that ABR was the government body in charge of registering businesses. I thought I had to pay the ABR fee of $165.00 to register my business name with the government. When I first read the ABR form, I thought it was an invoice and that I had to pay it.
5.I read the ABR letter and the ABR form a couple of more times and found it unusual that it had a post box address, a Deakin street address and a telephone number which I didn’t think was in Deakin. Because I found this unusual, I called the number (257 5050) and asked the man who answered where ABR operated from. The man told me that ABR operated out of Surfers Paradise.”
The alternate version of the ABR letter (together with a form) was received by another Canberra business in early December 1996. One of its proprietors, Mr Moore, has given like evidence as Ms Duffy. From his reading of the documents he believed that the ABR was a government body and that he had to pay the $165.00 fee. The format and wording of the documents, but especially that part of the ABR letter that referred to the requirement to register under the Business Names Act 1963, induced this belief.
December 1996/January 1997 to Date
On 19 December 1996 I granted interlocutory injunctions against the two respondents restraining them (inter alia) from supplying or offering to supply or promoting the supply of any register (a) represented as provided by, or as affiliated with, government; or (b) where registration was represented as required by law. In consequence of this, as Mr Solah acknowledged in correspondence with his solicitors of 14 January, changes were made both to the ABR letter and to the ABR form. For convenience I will refer to the changed documents as the “ABR2 letter” and the “ABR2 form”.
The letter retained the previous letterhead (save for a changed business address) and was again signed by Mr Solah. The body of the letter was as follows:
“Re: THE CONSUMERS BUSINESS REGISTER
The Consumers Business Register is a compilation of Suppliers, Traders, Manufacturers, Retailers, Licensed Building Traders etc currently conducting a business. The increase in unlicensed and unregistered businesses is being displayed by the decrease in your business volume and profit margins. The register is aimed at singling out those unregistered operators and to return those lost profits to bona-fide registered businesses.
Fair trading laws are based on the principle of equity, fairness and honesty. They aim to create a fair and informed market place and therefore the Consumers Business Register will help alleviate underpricing and unfair trading of goods and services by the register of businesses who are licensed and conforming to consumer regulation. The Register will be available for public scrutiny for the purposes of cross trading. Entering your business in the Register will assist recognition by the general public and also for reference by your suppliers. The Consumers Business Register is a publication of Licensed Registered Traders and Suppliers only.
As a member of the business community you will appreciate the necessity for maintaining an up-to-date register at all times and while it is not a substitute for your Business Registration with the Office of Consumer and Business Affairs nor with the Ministry of Fair Trading, it is in your interest to verify all details for your Consumers Business Register entry application enclosed.
Sign and return your application together with the relevant fee of $165.00.”
The principal variations in this from the previous versions of the ABR letter were the omissions (a) at the end of the first paragraph, of the reference to registration of trading names; (b) in the second paragraph, of the reference to Federal and State Contractors; and (c) in the final paragraph, to the “onus to verify” details.
I would note in passing that this letter provided a basis for the contempt motion to which I earlier referred.
The ABR2 form differed from its predecessors, business address apart, in its omission both of the “decorative bar code” and of the form number “Q73”.
Additionally a new document appears to have been created at this time. It is something of a variant on the ABR2 form, the form part of it being prefaced with the following:
“Re: THE CONSUMERS BUSINESS REGISTER
We wish to advise all clients that the closing date for your bi-annual inclusion in the Consumers Business Register will be June 30th.
Please confirm your entry immediately by completing the details as set out below, sign, and return in the enclosed reply paid envelope with your fee of $165.00.”
Additional Factual Material
First, notwithstanding the reference in the present tense to the Register in all but the original CBR letter, the respondents did not discover a register in this proceeding. At best, all that was produced were several quotations from printers dated 6 February 1997. Likewise there has been no return to a Notice to Produce requiring production of “all documents relating to the printing or publication of the [Register]”.
Secondly, the debtor records of the agency engaged by ABR to recover outstanding fees from persons who had sent the CBR/ABR/ABR2 forms to ABR were tendered. These indicate that some hundreds of businesses were so pursued. They also indicate that some of the debtors in question indicated they believed they were dealing with a government body.
Thirdly, the ACCC has tendered the banking records of the Metway Bank Ltd relating to accounts of both Mr Solah and the ABR. Unexplained, these records are not unequivocal in what they convey that is of relevance to these proceedings. Nonetheless they suggest that thousands of dollars - and possibly many thousands of dollars - referable to the Register have passed through these accounts, or some of them.
Fourthly, the ACCC has tendered a report from a business, Bar Code Data Systems, that has examined the bar codes used on the forms used by ABR. It found that the bar codes could not be read by any of its scanners. It further noted that while there “are various types (symbologies) of bar codes .. [the ABR] markings do not appear to fit any of them”.
The Three Principal Claims Made
It is not open to serious question that such representations as were made in the various letters and forms used variously by Mr Solah and then by ABR were made in trade or commerce or that, in Mr Solah’s, case their making involved the use of postal services: the Act s6(3).
Equally, it is not open to question that, if ABR engaged in contravening conduct, then Mr Solah was “a person involved in” that contravention within the provisions of s75B(1)(c) of the Act: he was the signatory to the ABR’s correspondence; he was the sole director (he was also the secretary) of the company. I am prepared to infer that his was ABR’s mind and will. If there was in fact a “scheme” or a “scam” perpetrated here by ABR, it was one to which Mr Solah was a party.
Turning now to the principal allegations relied upon by the ACCC. These, as I noted at the outset, are three in number. The first two can be dealt with together. All three it should be added are levelled against (i) the CBR letter and its form; (ii) the ABR letters and their form; and (iii) the ABR2 letter and its form. As will be seen, I have arrived at different conclusions in respect of each of these.
Representation 1: The CBR/ABR was a government office or was affiliated with government.
Representation 2: The addressee of CBR/ABR letters was required by law to register with CBR/ABR for inclusion in the Register.
It is convenient to deal first with the CBR letter and its form and ABR letters and their form. There is, in my view, little scope for argument that each of these combinations of letter and form convey the two representations alleged and that in this they were misleading or deceptive. It is, of course, not at all necessary to find that this effect was actually intended. In light of the design of the documentation there are, though, strong grounds for suspecting that such was the respondents’ intention.
Such were their design and content that the impressions (each erroneous) these letters and forms were likely to create in the minds of the section of the public to which they were addressed (ie small business proprietors and managers) - and, I find, this was the targeted group - were that the Register was a government initiative; that the CBR/ABR had, at the least, some affiliation with government; and, perhaps most importantly, that registration was a matter of legal obligation. I would note in passing that, though not decisive of the issue, I have evidence direct and (through the debt collection agency’s records) indirect of businesses being so mislead by these documents.
The combination of factors which lead me to these conclusions are (a) the use of a Canberra address for the CBR/ABR - notwithstanding that the business in fact was Gold Coast based; (b) in the CBR and ABR letters the reference to the requirement to register business names and, in the CBR letter, the designation of a time for lodgment (ie 14 days); (c) in the CBR letter and in one version of the ABR letter, the reference to “will be recognised” by Federal and State contractors; (d) in all versions of the letters, the use of mandatory language (eg “the onus is on you”); (e) in the case of the forms when read with the letters, their general appearance including their having been partially filled out, and their use, I so find, of spurious bar codes and, I am prepared to infer given the change made to the ABR2 form, of spurious “form numbers”; (f) the entitling of the forms not as “Application forms” but as ‘[Register] Entry Verification”; and (g) the general impression the combination of letter and form were calculated to convey given their language and appearance.
The respondents, of course, had no affiliation with government and there was no requirement of law that addressees register with CBR/ABR. There appears to be such contrivance in this documentation as would, without an explanation, justify the use of the description “scheme” to describe the conduct engaged in by ABR and Mr Solah.
I find in consequence that both ABR and Mr Solah have engaged in contraventions of s52 - in Mr Solah’s case, in relation to the CBR letter and form; in the ABR’s case, in relation to both versions of the ABR letter and form.
Turning to the ABR2 letter and form and noting the changes that were made in consequence of the orders I made on 19 December, I am unprepared to find that these contained the representations alleged.
In saying this I should emphasise that the letter and form are to be judged in their own right and not against the backdrop of their predecessors. Considered in the latter light, they could well be said to represent no more than a minimum attempt to avoid both the operation of the injunctions I granted and the prohibition imposed by s52. But that is not the light by which they are to be judged.
Standing alone the letter and form do not convey a sense of a mandatory obligation to register. In this they differ from their predecessors. Furthermore, they are more consistent with a privately operated register of “reputable operators”. And the letter, if extravagant in the claims it makes for the ends it aims to achieve, does not suggest such associations or provenance as would convey an affiliation with, or mandate from, government for the company or the register.
There may well be other vices in representations made in the letter as I will later indicate, but these do not extend to the two allegations made by the ACCC that are under consideration here. I find, then, that the ABR2 letter and form do not make either of the representations alleged.
Representation 3: the Register existed.
I am prepared to infer from the limited evidence before me that the Register does not now exist and has never, in fact, been published. In reaching this conclusion I rely particularly upon the failure of the respondents both to discover the register and to produce the material relating to it required by the applicant’s notice to produce. Mr Granleese’s evidence as also the two printing quotations of February 1997 tend to confirm this inference. It is probable that matters never got beyond the quotation stage even if - and I refrain from expressing a concluded view on this - those quotations were actually obtained with a view to publication.
Turning to the letters, for these alone convey the relevant representations. First, the CBR letter. Despite the ACCC’s invitation to construe this letter otherwise, its language, in my view, looks only to a future publication. This sense is conveyed from the opening sentence (“is currently compiling”) and has its complete expression in the final sentence of the second paragraph (“is to publish a register”).
Accordingly I do not find that the CBR letter makes the allegation alleged. I would emphasise in this that it has not been pleaded that, though the representation is as to a future matter, the ABR had no reasonable grounds for making it: cf the Act s51A.
Secondly, the ABR letters and the ABR2 letter. There is no room for doubt that these letters represent, as they all state, that the “Register is a publication of Licensed Registered Traders only”: emphasis added; and that it “is a compilation of Suppliers” etc; emphasis added. Despite the use of the future tense in the second paragraph of the letters in relation to the uses of and claimed effects for, the Register, the conclusion is inescapable that a representation is being made that there is a Register in existence. That representation is false. It is also reprehensible.
Accordingly I find that in relation to this representation the ABR has engaged in contravening conduct and, in consequence of my previous finding, that Mr Solah was involved in the contravention for the purposes of s75B of the Act.
Other Allegations
The findings I have made are sufficient to dispose of this matter. While the ACCC has alleged in its statement of claim that there are other representations made which contravene s52 directly or by virtue of s51A, I do not consider it necessary to advert to these. They are, in the main, subsumed by my findings as to the first two representations alleged.
There is, though, one specific claim made to which I should refer. It is that, in contravention of s64(2A) of the Act, the respondents have asserted a right to payment for unsolicited services in connection with the Register where they had no reasonable cause to believe that there was a right to payment.
I refrain from making a finding on this, though I would note the following. First, the claim would seem to sit unhappily with the representation I have found to have been made in the CBR and ABR letters that registration - hence payment - was required by law. Secondly, more importantly, if the service in question here was one to be rendered in the future (ie entry of a business in the Register), albeit one for which payment was demanded at the outset, the circumstances seem inappropriate to the language of s64(2A). That sub-section would appear to envisage the assertion of a right to payment for a service already rendered rather than a demand for pre-payment for a service to be rendered.
I have, then, found that Mr Solah (a) has engaged in conduct in contravention of s52 of the Act as confined in its application to a natural person by force of s6(3) of the Act; and (b) has been involved in contraventions of s52 committed by ABR. As to the latter of these, I have made corresponding findings against ABR. I would note, though, that differing contraventions have been found in relation to the CBR letter and its form, the ABR letters and their form, and the ABR2 letter and its form.
As I noted at the outset the respondents have not conducted a defence of this application. Unexplained, their conduct strongly suggests they put into effect a scheme that had as an object the exploitation of those conducting small businesses - a scheme that involved the attempted practice of a studied deception of addressees of their letters and forms. It is only the absence of the respondents, and hence their lack of possible explanation of their conduct, that has induced me not to make findings to the above effect.
The case is one in which it is appropriate to award at least declaratory and injunctive relief. I will order that the applicant bring in short minutes of the orders it proposes should be made in light of the findings made in these reasons.
I certify that this and the preceding ten (10) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Finn
Associate:
Dated: 25 August 1997
Counsel for the Applicant: M Painter Solicitor for the Applicant: Australian Government Solicitor Counsel for the Respondent: No appearance Solicitor for the Respondent: No appearance Dates of Hearing: 18, 19 August 1997
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