FEDERAL COURT OF AUSTRALIA Australian Competition & Consumer Commission v Jayco Pty Ltd [2003] FCA 94 AUSTRALIAN COMPETITION AND CONSUMER COMMISSION v JAYCO PTY LTD (ACN 057 480 556), DAVID FRANCIS and MICHAEL JOSEPH CARMODY VG 567 of 1997 RYAN J MELBOURNE 17 FEBRUARY 2003 IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY VG 567 of 1997 BETWEEN: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION Applicant AND: JAYCO PTY LTD (ACN 057 480 556) First Respondent DAVID FRANCIS Second Respondent MICHAEL JOSEPH CARMODY Third Respondent JUDGE: RYAN J DATE OF ORDER: 17 FEBRUARY 2003 WHERE MADE: MELBOURNE THE COURT ORDERS THAT: 1. A fine of $9,000 be imposed on the second respondent for his contempt of Court constituted by breaches between April and December 2001 of orders of the Court made on 3 November 1997; 2. The second respondent pay the applicant's costs to be taxed as between solicitor and client if not agreed; 3. There be a stay of 60 days from this day for payment of the said fine; 4. There be a stay of 60 days from the date on which the costs are taxed or agreed for payment of the said costs; 5. Liberty be reserved to the applicant and the second respondent to apply on not less than 48 hours notice to the other party. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY VG 567 of 1997 BETWEEN: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION Applicant AND: JAYCO PTY LTD (ACN 057 480 556) First Respondent DAVID FRANCIS Second Respondent MICHAEL JOSEPH CARMODY Third Respondent JUDGE: RYAN J DATE: 17 FEBRUARY 2003 PLACE: MELBOURNE REASONS FOR JUDGMENT 1 On 3 November 1997 Goldberg J in this Court made orders by consent in these proceedings which had been initiated by the applicant, the Australian Competition and Consumer Commission ("the ACCC"). Those consent orders recited amongst other things; "That the second respondent be restrained by himself, his employees or agents or howsoever otherwise from representing in relation to the following products: (a) a wafer biscuit known as "ThermoSlim" ("ThermoSlim"); … … … (e) a moulded plastic ear device known as Acu-Stop 500 ("Acu-Stop"); (f) a booklet containing a program of weight loss known as Negative Calories ("Negative Calories"); (g) any other product promoted as a method of, or aid to, slimming. … … … (g) In relation to any product promoted as a method of or aid to slimming (i) any endorsements or testimonials concerning the weight loss that could be achieved by use of the product or method are true and supported by adequate scientific substantiation unless this is the case; (ii) any endorsements or testimonials concerning the weight loss that could be achieved by use of the product or method represented the typical or ordinary experience of users unless this is the case." 2 There have been conceded breaches of those orders in relation to the promotion of three products; the first, a device, "Acu-Slim 2000", the second, a booklet entitled "Foods That Cause Weight Loss" and the third, a type of biscuit or wafer called "ThermoSlim". Those products were substantially identical to three of those which had prompted the ACCC to institute these proceedings and obtain the consent orders of 3 November 1997. They were promoted by the use of purported testimonials and expressions of what was said to be expert opinion. If there were no mitigating circumstances the second respondent's promotional activities in 2001 would attract the severest censure and the imposition of a suitably condign punishment for what can only be regarded as flagrant contempt of this Court. 3 However, there is evidence that the second respondent has suffered from severe personality disorders which apparently can be traced to his having been institutionalised at Larundel Psychiatric Hospital at the age of 14. The Court has received a written report from a psychologist, Dr Brian Jacka. That report indicates that the second respondent continues to suffer from what has been called an "impulse control disorder" and from depression for which he has taken, and is continuing to take, a variety of medication. The second respondent has extended a significant measure of cooperation to the ACCC by discontinuing the offending promotional activities. As well, somewhat belatedly, he has elected not to contest the present motion that he be punished for contempt. 4 There is some evidence that refunds were made to those who were persuaded to purchase the Acu-Slim 2000. As well, I infer that the numbers of persons who were deceived into purchasing the offending products were not large and I accept that the second respondent actually lost money from his ill-advised and contumacious promotion of those products. 5 There is also evidence, although it is not as effectively documented as it might be, that the second respondent is in parlous financial circumstances. He has indicated in a summary way that his weekly income of $800 is entirely subsumed by his weekly living expenses and his liabilities, largely by way of debts and loans due to relatives, exceed his assets by something of the order of $80,000. I have been pressed by Mr O'Bryan of Counsel for the ACCC to order that the second respondent pay the ACCC's costs to be taxed on an indemnity or solicitor-client basis and that, in addition, he be fined a sum of the order of $20,000. 6 In other circumstances those penalties would not be unduly harsh. I do consider it an appropriate order to require the second respondent to pay the ACCC's costs, taxed as between solicitor and client. The authorities suggest that such an order is usual after a successful prosecution for contempt; see eg Concrete Constructions Pty Ltd v Plumbers and Gasfitters Employees Union (No 2) (1987) 15 FCR 64, at 86. However, that requirement, of itself, will place a further and very considerable financial strain on the second respondent. I consider that, in the circumstances, that strain and the concomitant deterrent effect that it should have both on the second respondent and anyone else who might be minded to engage in similarly crude promotions in contravention of orders made pursuant to the Trade Practices Act 1974 (Cth), operate to reduce what would otherwise, as I indicated, be regarded as a fine in the appropriate range. 7 In the circumstances I shall order that, in addition to the payment of the ACCC's costs as between solicitor and client, the second respondent should pay a fine of $9000. There shall be a stay of 60 days from this day for payment of the fine of $9,000 and a stay of 60 days from the day on which the said costs are taxed or agreed for payment of those costs. 8 I shall reserve liberty to either party to apply on not less than 48 hours notice in writing to the other party, so that if some arrangement cannot be worked out in relation to payment of the fine and costs ordered today after account has been taken of what happens to the related proceedings, the matter can be further considered by the Court. I certify that the preceding eight (8) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Ryan. Associate: Dated: 17 February 2003 Counsel for the Applicant: Mr M O'Bryan Solicitor for the Applicant: Australian Government Solicitor Counsel for the Second Respondent: Mr W Alstergren Solicitor for the Second Respondent: Coadys Date of Hearing: 17 February 2003 Date of Judgment: 17 February 2003