In ongoing Federal Court proceedings brought by the ACCC for misleading or deceptive conduct, issues have arisen as to the power of the Court to make declarations by consent.  With an appeal set down for hearing at the end of October, the Full Court’s judgment will provide clarification in respect of this important tool of deterrence.

The ACCC commenced proceedings against MSY Technology Pty Ltd and related companies in the Fast Track of the Federal Court in October 2010.  MSY quickly admitted the conduct alleged, agreed to the relief sought by the ACCC and cooperated to bring the matter to an early resolution. 

Justice Perram was content to make the bulk of the orders sought - the introduction of a trade practices compliance program, corrective advertising, and costs - by consent, on the basis that they had no “public” element to them.

However, Justice Perram emphasised that the Court has an obligation to satisfy itself that the pecuniary penalties and declarations proposed by the parties were appropriate.  This is because such orders may affect others not before the Court: declarations, by affecting or stating the law; and penalties by deterring similar conduct by others.

Based on the contents of a statement of agreed facts prepared by the parties and tendered under section 191 of the Evidence Act 1995 (Cth), His Honour formed the view that the levels of penalty sought against the MSY companies were appropriate in the circumstances.  Consistent with previous authority, Justice Perram emphasised:

  • the importance of the Court being satisfied that an agreed statement of facts is accurate and complete, and not fabricated solely in the interest of finalising a matter; and
  • that a Court need not necessarily accept a fact if there are ambiguities, contradictions or deficiencies in the statement.  

However, His Honour was not satisfied that the Court had the power to make declarations of contravention by consent, even with the statement of agreed facts.  After reviewing previous decisions said to be in support of the principle that declarations should not be made on submissions but only on evidence, Justice Perram concluded that in fact there was no such principle in Australian law.  In his opinion, any such rule, even if it did exist, was overcome by section 191 of the Evidence Act. 

Rather, his Honour considered the relevant principle to be that a declaration by consent of the parties may not be made in the absence of a ‘contradictor’, being a person whose interests are opposed to the declaration sought.  Justice Perram held that current authority required him to conclude that consenting proper defendants did not constitute proper contradictors for the purposes of this principle.  In his judgment, His Honour provides a pithy elucidation of the current law on the topic, while expressing his dissatisfaction with the result produced by precedent.

Indeed, it is the result of the case that is of most practical interest.  The ACCC succeeded in having civil penalties totalling $203,500 imposed, generating specific deterrence for the companies in question.  However, the objective of general deterrence will not be well served unless others who may be contemplating similar conduct are informed of the precise basis on which it has been found that the contraventions occurred.  Similarly, those seeking to institute follow-on damages actions will be left without any specification by the Court as to exactly what about the conduct was so egregious.  While the decision related to conduct now falling under the ambit of the Australian Consumer Law, it clearly has implications for competition law cases more generally.

The ACCC’s appeal of the decision is set down for hearing from 31 October 2011, and it is hoped that this important issue is resolved before the first criminal prosecution under the cartel provisions or the Australian Consumer Law is commenced.