Australian Competition and Consumer Commission v Imagine Essential Services Limited (No 2) [2008] FCA 446

FEDERAL COURT OF AUSTRALIA

Australian Competition and Consumer Commission v Imagine Essential Services Limited (No 2) [2008] FCA 446

Trade Practices Act 1974 (Cth)

Australian Consumer & Competition Commission v Econovite Pty Ltd [2003] ATPR 41-959 Australian Consumer & Competition Commission v Target Australia Pty Ltd [2001] ATPR 41-840 Australian Securities & Investment Commission v Rich (No 2) (2004) 22 ACLC 1232 BMI Ltd v Federated Clerks Union of Australia (NSW) Branch (1983) 51 ALR 401 Gramophone Co Ltd v Magazine Holder Co (1911) 28 RPC 221 Metzger v Department of Health and Social Security [1977] 3 All ER 444 NW Frozen Foods Pty Ltd v Australian Consumer & Competition Commission (1996) 71 FCR 285 Termijtelen v Van Arkel [1974] 1 NSWLR 525 Wallersteiner v Moir [1974] 3 All ER 217 Williams v Powell [1894] WN (Eng) 141

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION v IMAGINE ESSENTIAL SERVICES LIMITED (ACN 104 433 098), RICHARD EVANS AND THE TRIUMPHANT GROUP PTY LTD (ACN 101 493 403) VID 578 OF 2007

GORDON J

2 APRIL 2008

MELBOURNE

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY VID 578 OF 2007

BETWEEN: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION

Applicant

AND: IMAGINE ESSENTIAL SERVICES LIMITED (ACN 104 433 098)

First Respondent

RICHARD EVANS

Second Respondent

THE TRIUMPHANT GROUP PTY LTD (ACN 101 493 403)

Third Respondent

JUDGE: GORDON J DATE OF ORDER: 2 APRIL 2008

WHERE MADE: MELBOURNE

THE COURT DECLARES THAT:

Earnings Representations 1. By making each of the following representations, as marketing and promotional agent engaged by the First Respondent, in the period November 2004 to January 2006 ("the relevant period"): 1.1 that the Imagine licensing system would enable a licensee to develop a $10,000 per month passive income within 2-3 years of becoming a licensee; 1.2 that within 2 years of part time effort, a trailing income of over $100,000 per annum would realistically be achievable by a licensee, where, during the relevant period, there were no reasonable grounds for making the representations, the Third Respondent in trade and commerce engaged in conduct that was misleading and deceptive (or likely to mislead or deceive) in contravention of s 52 of the Trade Practices Act 1974 (Cth) ("the Act") and made representations with respect to the profitability, risk and a material aspect of the Imagine licensing system which was misleading in a material particular, in contravention of s 59(2) of the Act. Accountant Representations 2. By making each of the following representations, as marketing and promotional agent engaged by the First Respondent, in the relevant period: 2.1 that, for the Imagine licence fee, a licensee received a minimum of 300 members by way of an associate agreement; 2.2 that access to either 300 non-active members or attachment to an associate with a minimum of 300 clients available for membership was included in the Imagine licence fee; and 2.3 that there were hundreds of accountants ready to recommend Imagine licensees; where, during the relevant period: 2.4 the First Respondent had a limited number of agreements or understandings with accountants relating to the introduction of licensees to members; 2.5 very few individual licensees had been referred by the First Respondent to an accountant who provided the licensee with 300 members or had 300 clients to whom the licensee was introduced; and 2.6 there were otherwise no reasonable grounds for making the representations, the Third Respondent in trade and commerce engaged in conduct that was misleading and deceptive (or likely to mislead or deceive) in contravention of s 52 of the Act. Supplier Agreement Representations 3. By making each of the following representations, as marketing and promotional agent engaged by the First Respondent, in the relevant period: 3.1 that the First Respondent had direct agreements in place with the following essential service suppliers in relation to telephone, gas, water and electricity services, agreements that enabled licensees to procure for members substantial savings on the cost of obtaining essential services: 3.1.1 AGL; 3.1.2 Energy Australia; 3.1.3 M8 Telecom; 3.1.4 Optus; 3.1.5 Primus Telecom; 3.1.6 Telstra; 3.1.7 Hutchinson Telecom or Hutchinson 3; 3.1.8 Vodafone; 3.2 that the First Respondent could procure savings on behalf of members of at least the following percentages in respect of the services described as: 3.2.1 telephone (landlines) – 20%; 3.2.2 telephone (mobile) – 10%; 3.2.3 electricity – 5%; 3.2.4 gas – 5%; 3.2.5 fuel – 2.5c/litre; 3.2.6 internet – 4%; 3.3 that the First Respondent would enable licensees to often save members between 30-40% on their bills for essential services; and 3.4 that with a national buying group, the First Respondent was able to offer members additional benefits at cheaper prices than they would otherwise be able to access on their own; where, during the relevant period: 3.5 the First Respondent did not have direct agreements in place with the suppliers of essential services referred to in paragraph 3.1 above and any access to their products occurred through agreements or understandings with agents, brokers or intermediaries; 3.6 the First Respondent did not have the bulk purchasing power that allowed all licensees to access deals that were not normally available to small/medium sized businesses, in that the First Respondent was not able to procure on behalf of members, substantial savings in the prices of essential services compared with the prices that a consumer or business could normally obtain by their own endeavours, from (at least) the following suppliers of essential services: 3.6.1 Westnet; 3.6.2 NAS Insurance Brokers; 3.6.3 Ezepos; 3.6.4 Vodafone; 3.6.5 Telstra; 3.7 there were otherwise no reasonable grounds to make the representations, the Third Respondent in trade and commerce engaged in conduct that was misleading and deceptive (or likely to mislead or deceive) in contravention of s 52 of the Act and in connection with the supply of services and in connection with the promotion of the supply of services, represented that the services had approval and benefits that they did not have, in contravention of s 53(c) of the Act. Association Representations 4. By making each of the following representations, as marketing and promotional agent engaged by the First Respondent, in the relevant period: 4.1 that Imagine licensees would become accredited by the Essential Service Advisors Association (ESAA); 4.2 that Imagine licensees would become accredited by the Telecommunications and Technology Industry Advisor Association (TIAA); where: 4.3 the ESAA or the TIAA had not become operational in the relevant period such as to enable licensees to become members of, or accredited by, the ESAA or the TIAA; 4.4. as the representations referred to in 4.1 and 4.2 above were with respect to a future matter, there were no reasonable grounds to make the representation, the Third Respondent in trade and commerce engaged in conduct that was misleading and deceptive (or likely to mislead or deceive) in contravention of s 52 of the Act. THE COURT ORDERS THAT: Earnings Representations 5. The Third Respondent, whether by itself or its officers, employees and/or agents or otherwise howsoever, be permanently restrained until further order from making the following representations in trade and commerce in Australia: 5.1 that the Imagine licensing system will enable a licensee to develop a $10,000 per month passive income within 2-3 years of becoming a licensee; 5.2 that within 2 years of part time effort, a trailing income of over $100,000 per annum is realistically achievable by an Imagine licensee; and 5.3 any other representation to the same purport or effect as those referred to above, in circumstances where the Third Respondent has no reasonable grounds for making the representations. Accountant Representations 6. The Third Respondent, whether by itself or its officers, employees and/or agents or otherwise howsoever, be permanently restrained until further order from making the following representations in trade and commerce in Australia: 6.1 that, for the licence fee, an Imagine licensee receives a minimum of 300 members by way of an associate agreement; 6.2 that access to either 300 non-active members or attachment to an associate with a minimum of 300 clients available for membership is included in the Imagine licence fee; 6.3 that there are hundreds of accountants ready to recommend Imagine Licensees; 6.4 any other representation to the same purport or effect as those referred to in para 6.1, 6.2 and 6.3 above, in circumstances where: 6.5 the First Respondent has a limited number of agreements or understandings with accountants relating to the introduction of licensees to members; 6.6 very few individual licensees have been referred by the First Respondent to an accountant who provided the licensee with 300 Members or had 300 clients to whom the licensee was introduced; 6.7 there are otherwise no reasonable grounds for making the representations. Supplier Agreement Representations 7. The Third Respondent, whether by itself or its officers, employees and/or agents or otherwise howsoever, be permanently restrained until further order from making the following representations in trade and commerce in Australia: 7.1 that the First Respondent has direct agreements in place with the following essential service suppliers in relation to telephone, gas, water and electricity services, which agreements enable Imagine licensees to procure for members substantial savings on the cost of obtaining essential services: 7.1.1 AGL; 7.1.2 Energy Australia; 7.1.3 M8 Telecom 7.1.4 Optus; 7.1.5 Primus Telecom; 7.1.6 Telstra; 7.1.7 Hutchinson Telecom or Hutchinson 3; 7.1.8 Vodafone; 7.2 that the First Respondent can procure savings on behalf of members of at least the following percentages in respect of the services described as: 7.2.1 telephone (landlines) – 20%; 7.2.2 telephone (mobile) – 10%; 7.2.3 electricity – 5%; 7.2.4 gas – 5%; 7.2.5 fuel – 2.5c/litre; 7.2.6 internet – 4%. 7.3 that the First Respondent will enable licensees to often save members between 30-40% on their bills for essential services; 7.4 that with a national buying group, the First Respondent is able to offer members additional benefits at cheaper prices than they would otherwise be able to access on their own; 7.5 any other representation to the same purport or effect as those referred to in paras 7.1 to 7.4 above, in circumstances where: 7.6 the First Respondent does not have direct agreements in place with suppliers of essential services referred to in para 7.1 above and any access to their products occurs through agreements or understandings with agents, brokers or intermediaries; 7.7 the First Respondent does not have the bulk purchasing power that allows all licensees to access deals that are not normally available to small/medium sized businesses, in that the First Respondent is not able to procure on behalf of members, substantial savings in the prices of essential services compared with the prices that a consumer or business could normally obtain by their own endeavours; 7.8 there are otherwise no reasonable grounds for making the representations. Association Representations 8. The Third Respondent, whether by itself or its officers, employees and/or agents or otherwise howsoever, be permanently restrained until further order from making the following representations in trade and commerce in Australia: 8.1 that Imagine licensees will become accredited by the ESAA; 8.2 that Imagine licensees will become accredited by the TIAA; in circumstances where: 8.3 the ESAA or the TIAA have not become operational such as to enable licensees to become members of, or accredited by, the ESAA or the TIAA; or 8.4 there are no reasonable grounds to make the representation. Notices 9. Within 14 days of the date of this Order, the Third Respondent, at its own expense, publish: 9.1 at www.triumphantevents.com.au; and 9.2 on the homepage of any other website owned or controlled by Triumphant, a notice in the terms set out in Annexure A to this Order, such notice to remain conspicuously and continuously in place for a period of 90 days. Compliance program 10. If the Third Respondent commences again to conduct business in Australia after the date of this Order then it shall: 10.1 within three months of re-commencing business, establish aCompliance Program for employees or other persons involved in its business: 10.1.1 which is designed to ensure an awareness of a corporation's responsibilities and obligations under ss 52, 53 and 59 of the Act; and 10.1.2 subject to the Compliance Program being tailored to the Third Respondent's circumstances, which is consistent with the Australian Standard on Compliance Programs AS3806; 10.2 within one month of re-commencing business, appoint a person with experience in trade practices law to advise the Third Respondent as to the content of the Compliance Program; 10.3 implement and administer the Compliance Program for a period of three years from the date it re-commences business; and 10.4 within six months of re-commencing business, provide a written report to the Applicant on the content of the Compliance Program, and provide a further report to the Applicant on the implementation and administration of the Compliance Program at the conclusion of each period of twelve months during which the program is being implemented and administered. Costs 11. There be no order as to costs of the proceeding as between the Applicant and the Third Respondent. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.