Australian Competition and Consumer Commission v Dynacast (Int) Pty Ltd (formerly Phoneflasher.com Pty Ltd) ACN 061 234 642

• Jurisdiction: Australia Federal only
• Court: Federal Court
• Judgment Date: 26 March 2007
• Neutral Citation: [2007] FCA 429

FEDERAL COURT OF AUSTRALIA

Australian Competition and Consumer Commission v Dynacast (Int) Pty Ltd (formerly Phoneflasher.com Pty Ltd) ACN 061 234 642 [2007] FCA 429

CONTEMPT – alleged non-compliance with consent orders – company indifferent to the obligations imposed by the orders

CONTEMPT – penalty – need for party to be made aware of the seriousness of contempt – purposes of penal power in cases on civil contempt

CONTEMPT – director’s liability for company’s non-compliance – must be shown to have aided or abetted the breach by the company or have acted so as to have subverted the effect of the order to be guilty of contempt – consent orders – consented to by director in the knowledge that neither the company nor the director had the power or capacity to comply with the order – whether liability proved

COMPANY LAW – shadow director – acted as the company’s mind and will – exercised the powers of the company in relation to court proceedings with the acquiescence of, and not subject to the supervision of, the company’s director

Trade Practices Act 1974 (Cth) s 52, s 53(c)

Corporations Act 2001 (Cth) s 9

Federal Court Rules O 9 r 1(3), O 4 r 14(2)

Termi-Mesh Australia Pty Ltd v Josu Manufacturing Pty Ltd [1999] FCA 1241 cited

Australian Consolidated Press Ltd v Morgan (1965) 112 CLR 483 cited

Witham v Holloway (1995) 183 CLR 525 cited

Universal Music Australia Pty Ltd v Sharman Networks Ltd (2006) 150 FCR 110 cited

Secretary of State of Trade and Industry v Deverell [2001] Ch 340 cited

Australian Securities Commission v A S Nominees Ltd (1995) 133 ALR 1 cited

Ho v Akai Pty Ltd (in liq) (2006) 24 ACLC 1, 526 cited

Deputy Commissioner of Taxation v Austin (1998) 28 ACSR 565 cited

Australian Competition and Consumer Commission v World Netsafe Pty Ltd (No 3) (2003) 127 FCR 542 cited

LED Builders Pty Ltd v Eagle Homes Pty Ltd [1999] FCA 1213 cited

Australian Meat Industry Employees’ Union v Mudginberri Station Pty Ltd (1986) 161 CLR 98 cited

Australian Competition and Consumer Commission v Info4PC.com Pty Ltd (2002) 121 FCR 24 cited

Smith v The Queen (1991) 25 NSWLR 1 cited

Australian Competition and Consumer Commission v Contact Plus Group Pty Ltd (in liq) (No 2) [2006] FCA 695 cited

Truth About Motorways Pty Ltd v Macquarie Infrastructure Investment Management Ltd (1999) 200 CLR 591cited

Australian Competition and Consumer Commission v Australian Business Reports Pty Ltd (1997) 19 ATPR 41-577 cited

Australian Competition and Consumer Commission v Globex Systems Pty Ltd (2005) 27 ATPR 42-069 cited

Arlidge, Eady & Smith on Contempt (3^rd ed, 2005)

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION v DYNACAST (INT) PTY LTD (FORMERLY PHONEFLASHER.COM PTY LTD) ACN 061 234 642, ALAN BRADLEY JORGENSEN, PATRICE KERVILLE AND RUI LI

No SAD 248 of 2005

FINN J

26 MARCH 2007

ADELAIDE

IN THE FEDERAL COURT OF AUSTRALIA
SOUTH AUSTRALIA DISTRICT REGISTRY	SAD 248 OF 2005

BETWEEN:	AUSTRALIAN COMPETITION AND CONSUMER COMMISSION Applicant
AND:	DYNACAST (INT) PTY LTD (FORMERLY PHONEFLASHER.COM PTY LTD) ACN 061 234 642 First Respondent ALAN BRADLEY JORGENSEN Second Respondent PATRICE KERVILLE Third Respondent RUI LI Fourth Respondent

JUDGE:	FINN J
DATE OF ORDER:	26 MARCH 2007
WHERE MADE:	ADELAIDE

THE COURT DECLARES THAT:

1. The first respondent is guilty of contempts by reason of its breaches of Orders 3 and 4 of the consent orders made on 2 November 2004.

2. The first respondent is guilty of contempt by reason of its breach of Order 6 of the consent orders made on 2 November 2004.

THE COURT ORDERS THAT:

1. In respect of the contempts referred to in para 1 above, the first respondent be fined the sum of $5,000.

2. In respect of the contempt referred to in para 2 above, the first respondent be fined the sum of $2,000.

3. The first respondent pay the applicant’s costs of the application on an indemnity basis.

4. The application otherwise be dismissed.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
SOUTH AUSTRALIA DISTRICT REGISTRY	SAD 248 OF 2005

BETWEEN:	AUSTRALIAN COMPETITION AND CONSUMER COMMISSION Applicant
AND:	DYNACAST (INT) PTY LTD (FORMERLY PHONEFLASHER.COM PTY LTD) ACN 061 234 642 First Respondent ALAN BRADLEY JORGENSEN Second Respondent PATRICE KERVILLE Third Respondent RUI LI Fourth Respondent

JUDGE:	FINN J
DATE:	26 MARCH 2007
PLACE:	ADELAIDE

REASONS FOR JUDGMENT

1 This contempt proceeding is now being prosecuted by the Australian Competition and Consumer Commission against two of the four respondents, Dynacast (Int) Pty Ltd (formerly Phoneflasher.com Pty Ltd) and Alan Bradley Jorgensen. I will refer to the first of these as “Phoneflasher Co”, the company so named being the first respondent in the principal proceedings out of which the present matter arises. I have designedly avoided using the abbreviation “Phoneflasher.com” as, on the material before me, it would appear that (i) there may be other companies (not necessarily registered in Australia) having these words in their name; (ii) there are both a domain name and a website so named; and (iii) there is some reason to believe that that description is a trade name used in distribution arrangements. These possible usages of the “Phoneflasher.com” label make confident interpretation of some of the material before me difficult.

The principal proceeding

2 In mid-2004 the ACCC brought proceedings in this Court seeking declaratory and other relief in respect of alleged contraventions of s 52 and s 53(c) of the Trade Practices Act 1974 (Cth). The respondents were the Phoneflasher Co, Mr Jorgensen and his sister, Jimeale Jorgensen, who was a director of the company. The company retailed a mobile phone accessory called the “Phoneflasher”. Put shortly the ACCC alleged that the respondents had falsely represented on the phoneflasher.com website that using the accessory would reduce harmful radiation exposure to the user of the telephone and thus had associated health benefits.

3 Those proceedings proved difficult to prosecute. Mr and Ms Jorgensen were regularly outside the jurisdiction; they made only strategic use of legal advisers; and service and communication were (by my order) by email. Mr Jorgensen early indicated to the ACCC both that he had authority to bind his sister and the company and that he sought settlement of the matter.

4 It would appear that, from email correspondence between Mr Jorgensen and the ACCC, that (i) it was asserted by Mr Jorgensen that the phoneflasher website was an international one and that it was the website of Shanghai Connexion.com Ltd in China; but (ii) the ACCC indicated that the website made no reference to its being owned by that company. The significance of this will become apparent below. I would note that at all relevant times for the purposes of the principal proceeding Mr Jorgensen was the registrant of the domain name “Phoneflasher.com”. The “phoneflasher.com” website was linked to this domain name.

5 In late October 2004 a notice of appearance was filed on behalf of all of the respondents by a firm of solicitors. On 1 November 2004, Mr and Ms Jorgensen purporting also to act on behalf of Phoneflasher Co agreed to settle the action. Consent orders were drawn up with all parties being legally represented. They were signed by the respondents’ solicitors. The orders were made by me on 2 November 2004.

6 The declaration of agreed facts which accompanied the orders acknowledged the facts giving rise to the contraventions of s 52 and s 53(c) of the TP Act including (inter alia) that (i) relevant representations were made “on [Phoneflasher Co’s] website at http://www.phoneflasher.com”; (ii) Ms Jorgensen, as a director of the company, was directly and indirectly knowingly concerned in its contraventions of the Act; and (iii) Mr Jorgensen as the majority shareholder of, and as an agent of, the company was likewise so concerned in the contraventions.

7 Insofar as presently relevant, the consent orders provided:

“3. The First Respondent [the Phoneflasher Co] supply to each retail outlet to which it has distributed the Phoneflasher, as its expense and within 30 days of the date of this order:

3.1 a laminated sign in the size, form and format of Annexure ‘A’ to these orders; and

3.2 a letter, in the format of Annexure B to these orders and on the First Respondent’s letterhead, to each such outlet advising the proprietor of the outlet of the terms of this order and requesting that the sign be displayed in a prominent location near where the Phoneflasher is displayed for sale.

4. The First Respondent, within 35 days of the date of this order, provide the Applicant with a list of the names and addresses of customers to which it provided signs in accordance with the preceding order.

5. Pursuant to section 86C of the Act, the First Respondent, at its expense:

5.1 in the event that the First Respondent is currently trading, within three months of the date of this order, establish a trade practices corporate compliance program for employees and other persons involved in the First Respondent’s business designed to ensure their awareness of their responsibilities and obligations in relation to sections 52 and 53(c) of the Act;

5.2 in the event that the First Respondent is not currently trading:

5.2.1 within seven days of commencing to trade, notify the South Australian Regional Director of the Applicant of that fact; and

5.2.2 within three months of commencing to trade, establish a trade practices corporate compliance program for employees and other persons involved in the First Respondent’s business designed to ensure their awareness of their responsibilities and obligations in relation to sections 52 and 53(c) of the Act; and

5.3 use its best endeavours to ensure that the compliance program established pursuant to order 5.1 or 5.2.2 is...