FEDERAL COURT OF AUSTRALIA Australian Competition & Consumer Commission v Murray (No. 2) [2003] FCA 47 TRADE PRACTICES – penalty – sale of licences or franchises to conduct will writing business – express or implied representations that business could be carried on lawfully – business contravened State legislation prohibiting legal practice by persons other than legal practitioners – impact on complainants substantial and lasting – lack of contrition and of full and frank disclosure as to financial situation on part of defendants – compensation to persons affected – whether order should be made where disputed issues Trade Practices Act 1974 (Cth) s 87(1) Crimes Act 1914 (Cth) s 16 A Australian Competition and Consumer Commission v Dimmeys Stores Pty Ltd [1999] FCA 1175 at [8] to [11] followed Trade Practices Commission v J & R Enterprises Pty Ltd (1991) ATPR 41-133 at 52,951 followed Australian Prudential Regulation Authority v Holloway [2000] FCA 1245 at [28]-[30] followed AUSTRALIAN COMPETITION AND CONSUMER COMMISSION v SIDNEY JAMES MURRAY NO T29 OF 2001 AUSTRALIAN COMPETITION AND CONSUMER COMMISSION v WILL WRITERS GUILD PTY LTD NO T30 OF 2001 HEEREY J 7 FEBRUARY 2003 MELBOURNE IN THE FEDERAL COURT OF AUSTRALIA TASMANIA DISTRICT REGISTRY T29 and T30 of 2001 BETWEEN: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION PROSECUTOR AND: SIDNEY JAMES MURRAY AND WILL WRITERS GUILD PTY LTD DEFENDANTS JUDGE: HEEREY J DATE OF ORDER: 7 FEBRUARY 2003 WHERE MADE: MELBOURNE THE COURT ORDERS THAT: 1. In proceeding T29 of 2001 the defendant Sidney James Murray is convicted on all counts and fined $15,000 on each of counts 1 and 2 and $10,000 on each of counts 3,4,5 and 6. 2. In proceeding T30 of 2001 the defendant Will Writers Guild Pty Ltd is convicted on all counts and fined $7,500 on each of counts 1 and 2 and $5,000 on each of counts 3,4,5 and 6. 3. Both defendants pay the following respective amounts to Dockstar Pty Ltd $41,575 Robert Owen Greene $16,685 Ronald CharlesPage $65,000 John Martin Boylon $57,093 Jakym Pty Ltd $49,417 4. The defendants are restrained by themselves, their servants or agents or howsoever otherwise, from inviting, whether by advertisement or otherwise, any person to engage or participate in a business activity concerning the sale of will kits or the preparation of wills without, at the same time, clearly and prominently stating that it is unlawful for any person to provide legal advice in connection with the preparation of a will unless that person is a legal practitioner qualified to practise under the legislation relating to legal practitioners in the relevant State or Territory. 5. The defendants pay the prosecutor's cost, including reserved costs. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA TASMANIA DISTRICT REGISTRY T29 and T30 OF 2001 BETWEEN: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION PROSECUTOR AND: SIDNEY JAMES MURRAY AND WILL WRITERS GUILD PTY LTD DEFENDANTS JUDGE: HEEREY J DATE: 7 FEBRUARY 2003 PLACE: MELBOURNE REASONS FOR JUDGMENT 1 On 11 October 2002 I found proved against the defendants Sidney James Murray and his company Will Writers Guild Pty Ltd (WWG) six charges involving contravention of s 59(2) of the Trade Practices Act 1974 (Cth) (the Act): Australian Competition and Consumer Commission v Murray [2002] FCA 1252. 2 The circumstances giving rise to the offences are set out in my earlier judgment. In substance they involved the sale of licences or franchises to conduct a will writing business in Western Australia, South Australia (and the Northern Territory), Victoria, Tasmania and New South Wales (and the Australian Capital Territory). The sale of each licence or franchise was made with a representation, express or implied, that the business could be conducted lawfully. In fact the business infringed the provisions of State legislation prohibiting the carrying on of legal practice by persons not admitted as legal practitioners. 3 Since the offences are federal offences the provisions of s 16A of the Crimes Act 1914 (Cth) are applicable. That section provides in part: "(1) In determining the sentence to be passed, or the order to be made, in respect of any person for a federal offence, a court must impose a sentence or make an order that is of a severity appropriate in all the circumstances of the offence. (2) In addition to any other matters, the court must take into account such of the following matters as are relevant and known to the court: (a) the nature and circumstances of the offence; (b) other offences (if any) that are required or permitted to be taken into account; (c) if the offence forms part of a course of conduct consisting of a series of criminal acts of the same or a similar character—that course of conduct; (d) the personal circumstances of any victim of the offence; (e) any injury, loss or damage resulting from the offence; (f) the degree to which the person has shown contrition for the offence; (i) by taking action to make reparation for any injury, loss or damage resulting from the offence; or (ii) in any other manner; (g) if the person has pleaded guilty to the charge in respect of the offence- that fact; (h) the degree to which the person has co-operated with law enforcement agencies in the investigation of the offence or of other offences; (j) the deterrent effect that any sentence or order under consideration may have on the person; (k) the need to ensure that the person is adequately punished for the offence; (m) the character, antecedents, cultural background, age, means and physical or mental condition of the person; (n) the prospect of rehabilitation of the person; (p) the probable effect that any sentence or order under consideration would have on any of the person's family or dependants. 4 The basic principles applicable are not in dispute and are usefully summarised by Weinberg J in Australian Competition and Consumer Commission v Dimmeys Stores Pty Ltd [1999] FCA 1175 at [8] to [11]. 5 At the time the offences were committed the relevant maximum penalties were $200,000 for a company and $40,000 for an individual. 6 There are features of this case which indicate that substantial penalties are called for. 7 The offences involved large amounts of money both in total ($329,000) and in terms of their impact on each complainant. 8 The offences were committed on six separate occasions over a period of nine months in the five States. 9 The impact on complainants has been substantial and lasting. Their involvement with the defendants has resulted in some of them having to mortgage or dispose of substantial family assets. There have been feelings of depression and lack of self-confidence which often comes when people realise they have been duped. In some instances there have been strains on marriages and other personal relationships. 10 Mr Murray was quite reckless as to whether or not the business he was promoting could be lawfully carried on by non-lawyers. The first sale he made was in March 1999 to Mr and Mrs Ferguson of Perth. In early May 1999 a solicitor friend of Mr Ferguson suggested he obtain an opinion from a barrister as the friend thought the business might be in breach of the Western Australian Legal Practitioners Act 1893 (WA). Mr Ferguson obtained a written opinion dated 29 May 1999 from Mr C P Shanahan of counsel. In essence Mr Shanahan was of the opinion that there was a contravention of the Legal Practitioners Act and that the Fergusons should discontinue the business. Mr Ferguson immediately contacted Mr Murray who said that the lawyer giving advice must be a "fucking idiot" and that he had Queen's Counsel's advice to the contrary and would supply a copy. He asked Mr Ferguson to fax a copy of the opinion, which Mr Ferguson did. However, Mr Murray never forwarded a copy of the Queen's Counsel's opinion that he claimed he had. 11 A few days later Mr Murray telephoned Mr Ferguson and said that he had given the solicitor the wrong instructions. He said that the concept was not to write the wills out for the client but only to watch and assist the client with the completion of the will form that was in the kit. Mr Ferguson told him that that was nowhere near the concept that Mr Murray had previously described and that no one was going to pay another person $100 to have them sit down and watch them complete a "two bob will form". Mr Ferguson asked what the computer programs were for (Mr Murray had told the Fergusons that computer programs would be provided). Mr Murray again swore at him and hung up. 12 Mr Murray obtained advice from a Queensland barrister Mr Gary J Radcliff in the circumstances described at [105] to [108] of my earlier judgment. 13 At best Mr Radcliff's advice was equivocal. Mr Shanahan's advice was clearly negative. Yet this did not deter Mr Murray from subsequently making sales to Mr Vessigner of Hobart and Messrs Fisher and Mansfield of Sydney. 14 Mr Murray was not frank with his legal advisors and in particular with Mr Chalmers, his Queensland solicitor. Mr Chalmers was not aware that the tape was to be played to prospective customers and had never heard the tape or read a transcript of it. As to the subsequent advice of Mr Radcliff, it seems likely that he did not hear the tape or read a transcript of it but relied on the description of it by Mr Murray. 15 At the penalty hearing it was submitted on behalf of Mr Murray that these inadequate instructions were really his legal advisors' fault for not asking him the right questions. I do not accept this. The tape was a central part of the modus operandi of this business, both for the recruiting of licensees and for the licensees in turn to obtain customers. I think Mr Murray did not make it available to his legal advisors because he well knew that the tape was a clear holding out that unqualified people were able to perform the functions of a solicitor. 16 The defendants relied on alleged impecuniosity. As to WWG, it ceased trading in about October 1999 pending the outcome of these proceedings and a civil proceeding brought by the Commission and has not resumed trading. Its only activity was the will writing business which, in the light of the findings in the present proceeding, is now worthless. Its only asset is a 1999 Mercedes Benz C200 motor car under a hire purchase agreement. The vehicle was purchased for $65,000 in early 2000 and $35,500 was owing as at 20 December 2002. 17 In submissions on behalf of the defendants it was said that "(c)ogent evidence has been put before this Court to show that neither Mr Murray nor WWG has the means to pay any substantial fines imposed by this Court". In an affidavit sworn 11 December 2002 Mr Murray deposed that he suffered ill health to such an extent that he cannot carry out full-time employment (I shall return to this subsequently), that he does some part-time work for his son on a consultancy basis, that "most of what was earned during 2000 and 2001 was channelled back into the business" and that he does "not own any real estate or stocks or shares. All that I have are personal effects, clothing and the like". The affidavit exhibited personal income tax returns of Mr Murray which showed total income (before deductions) in the following amounts (years to 30 June): 1999 $26,000 2000 $26,704 2001 $22,296 18 The tax return of WWG for 1999 showed gross income of $161,500, which corresponds with the amounts received from the complainants Ferguson, Greene, Page and Boylon. Cost of goods sold consists of "purchases" $14,599.52, which presumably would include the printing costs of the materials, and freight and cartage $561.44. Total expenses were $174,461.49 including: Management fee $105,070.00 Motor vehicle expenses $1,177.95 Rent $394.13 Telephone $3,488.49 Travelling expenses $14,612.92 Wages $10,875.00 19 That pattern is repeated for the WWG tax return for 2000. Total income was $168,451 which was mainly constituted by "other sales of goods and services" $167,500 which corresponds with the payments made by the complainants Vessigner, Fisher and Mansfield. Total expenses were $175,211 made up of: Cost of Sales $19,355.00 Rent $6,687.00 Motor vehicle expenses $5,972.00 Repairs and maintenance $5,042.00 All other expenses $138,155.00 Under the heading "Financial and other information" there was included Purchases and other costs $19,355.00 Total salary and wage expenses $38,425.00 Payments to related entities $38,425.00 20 When cross-examined about the management fee of $105,070 in the 1999 return Mr Murray at first said that he was not sure about it but thought it was a loan. He said he had not received it. It could have gone to another company and he thought it went to "one of the other companies", as did the $138,155 in the 2000 return. He did not know. He said the figures "mean very little". At one stage Mr Murray said that the $138,155 would have "included all, basically, all my expenses relevant to advertising. All sorts of expenses; hotels, printing of product". But counsel for the Commission pointed out the separate figure "cost of sales $19,355" and suggested that covered the provision of the various printed materials. Mr Murray said that he was not an accountant and "it's just figures on a piece of paper to me at this present time". Later he said the money may have gone to First Choice Pty Ltd, a company controlled by his son, for legal expenses and that First Choice may have paid some back. As to the two sums of $38,425 he said that he had not "got a clue". 21 Although it has been (finally) asserted that money derived by WWG went on legal fees, there has been no attempt to adduce evidence as to how much and when and to whom such payments were made. Nor did any evidence come from Mr Murray's son on this or any other matter. There was no explanation as to the absence of evidence from him. 22 The end result, as far as the evidence goes, is that hundred of thousands of dollars passed out of WWG, a company controlled by Mr Murray, to some destination of whose identity Mr Murray must have been aware. I am not satisfied the defendants have made a full and frank disclosure of their financial situation. Mr Murray put before the Court as the primary evidence of the defendants' financial position the tax returns to which I have referred. Yet he professed inability to answer the most obvious questions about them. 23 As O'Loughlin J said in Trade Practices Commission v J & R Enterprises Pty Ltd (1991) ATPR 41-133 at 52,951: "To impose a fine of an amount that the offender could never pay is tantamount to imposing a term of imprisonment – and that offends the spirit of the legislation. Needless to say, a sentencing Court must make careful investigations before extending this leniency to an offender." 24 The investigations a Court can make are of course limited to the material put before it, and particularly material put by a defendant. I am not satisfied that there has been a satisfactory disclosure of the defendants' financial position. The consequence is that there has been no impecuniosity established so as to diminish what would otherwise be an appropriate penalty. 25 The evidence as to Mr Murray's medical condition is as follows. In a report dated 30 July 1999 Professor Lawrence W Hirst, Professor of Ophthalmology in the University of Queensland, noted that visiting professors at the University felt strongly that Mr Murray needed an amniotic membrane graft and patch for his limbal deficiency. Mr Murray had agreed to go ahead. Professor Hirst had earlier in November 1998 noted Mr Murray had a "most unusual eye condition". He had pseudopterygia in both eyes which Professor Hirst believed were a response to a immunologic process in his corneas. Professor Hirst was "mystified" about the exact process taking place but it was certainly "quite alarming and if progressive could result in a significant loss of vision". 26 In a report dated 25 May 2001 Professor Hirst said that Mr Murray was "relatively stable at the present moment" and was "maintaining reasonably good vision". His disease process "whatever it is, as we have never really understood it", appeared to have stabilised. 27 On 20 December 2001 Professor Hirst reported that Mr Murray's cornea disease has not progressed. He had a very slight amount of conjunctival epithelial overgrowth in both corneas and some blood vessels particularly inferiorly on the left. However, his eyes were "relatively comfortable" and he was off all medications. His vision remained good. Professor Hirst asked to see him in six months although he said he was "(u)nfortunately, … no closer to a real diagnosis". 28 The last report from Professor Hirst is dated 5 December 2002. It is said that Mr Murray is "probably stable for the time being". He does have 360 degrees of conjunctival overgrowth and in the future this is very likely to give him problems". For the time being he should just be watched and should avoid any drops with preservatives. As to the future Professor Hirst is "optimistic that there will be solutions to his problems". 29 The net result of all this appears to be that although Mr Murray has suffered a rather mysterious eye condition it is not as disabling as his own evidence would suggest. 30 Mr Murray has displayed no contrition. 31 I think for Mr Murray an appropriate penalty would be $10,000 for each of the Ferguson, Greene, Page and Boylon charges and $15,000 for each of the Vesinger and Fisher charges, they being aggravated because they were committed after the provision of legal advice. 32 As to WWG, some reduction is due to the fact that it was really the alter ego of Mr Murray: see Australian Prudential Regulation Authority v Holloway [2000] FCA 1245 at [28]-[30]. I accept that it is not trading and has no assets other than the vehicle under hire purchase. The penalties will be $5,000 for each of the first four charges and $7,500 for each of then last two charges. 33 Under s 87(1) of the Act the Court may make such order as it thinks appropriate against a contravenor if it considers that the order will compensate a person who has suffered loss or damage by reason of the contravention. The Commission may make an application on behalf of such a person: s 87(1B). In the present case the Commission has made application on behalf of the complainants seeking an order for payment of the franchise fee and, in most cases, some incidental expenses such as loan interest, printing and stationery costs and the like. With one exception, these orders are not opposed and I think it is appropriate to make them. Since the business for which the franchise or licence was granted could not be carried on lawfully, there was a total failure of consideration. The amounts are as follows (where a complainant used a company to pay the fee and operate the business, the order will be in favour of the company): Dockstar Pty Ltd (Ferguson) $41,575 Greene $16,685 Page $65,000 Boylon $57,093 Jakym Pty Ltd (Vesinger) $49,417 34 The exception referred to is the claim on behalf of Messrs Fisher and Mansfield who through their company Will Power International Pty Ltd paid for the NSW and ACT franchise. They claim $137,696. The defendants allege, however, that Messrs Fisher and Mansfield have copied or adapted WWG materials to run a successful will writing business and have been selling booklets and will kits in the course of this business as recently as December 2002. 35 Messrs Fisher and Mansfield responded to these allegations by an affidavit sworn by Mr Fisher on 20 December 2002. The dispute between Messrs Fisher and Mansfield on the one hand and Mr Murray and WWG on the other raises quite complex evidentiary and legal issues which it is not appropriate to resolve by granting or refusing the discretionary summary remedy conferred by s 87(1). I shall therefore make no order. These complainants and the defendants can pursue such other remedies as they may be advised. 36 There will be an injunction in the following terms, which are not opposed: The defendants are restrained by themselves, their servants or agents or howsoever otherwise, from inviting, whether by advertisement or otherwise, any person to engage or participate in a business activity concerning the sale of will kits or the preparation of wills without, at the same time, clearly and prominently stating that it is unlawful for any person to provide legal advice in connection with the preparation of a will unless that person is a legal practitioner qualified to practise under the legislation relating to legal practitioners in the relevant State or Territory. 37 There will be an order that the defendants pay the Commission's costs, including reserved costs. I certify that the preceding thirty-seven (37) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Heerey. Associate: Dated: 7 February 2003 Counsel for the Prosecutor: G Livermore Solicitor for the Prosecutor: Director of Public Prosecutions (Cth) Counsel for the Defendants: R N Ziukelis Solicitor for the Defendants: Broadbent Radich Sampson Date of Hearing: 16 December 2002 Date of Judgment: 7 February 2003