Not so nonchalant after fine!

Published On 26/06/2013 | By Martine Phillips | Consumer protection, Enforcement, Litigation

After beginning her reasons for judgment by stating that “[a]t the very least, the Respondent, Nonchalant Pty Ltd (ACN 154 042 903), has behaved as its name suggest – nonchalantly”, Justice Gordon ordered Nonchalant Pty Ltd, better known as “Abel Rent A Car” (Abel) to pay a $30,000 penalty on 18 June 2013 even though Abel had not taken any positive step in the proceedings and was absent at the time of judgment.  The penalty was for false or misleading representations on Abel’s website and in a print advertisement campaign, that certain cars available for hire from Abel would be at a specified daily rate, when in fact some of those cars were not, being subject to additional mandatory fees that increased the true cost of hiring the vehicles.

Following an ACCC investigation into Abel’s conduct, on 4 September 2012 the ACCC issued Abel with two infringement notices, neither of which was paid. Abel went into voluntary liquidation on 14 December 2012 and the case was started by the ACCC on 11 January 2013.

For the most part, the case was largely unremarkable: company publishes misleading advertising; ACCC institutes proceedings; court orders pecuniary penalties.  What is uncommon about this case is that Abel did not appear in court, put on a defence or (apparently) seek to negotiate a settlement with the ACCC.

However, to get its penalty orders, the ACCC had to do some additional work along the way:

  • First, with Abel having gone into liquidation before the filing of the proceeding, the ACCC had to get leave from the court (under the Corporations Act 2001 (Cth)) to commence and continue the proceeding.  Leave was granted and the matter was set down for trial.
  • Following this, Abel’s liquidator made is clear that he did not intend to take part in any of the proceeding – not to participate, not to defend, not even to show up!  Once again, the ACCC had to apply to have the hearing proceed without Abel under r 30.21 or the Federal Court Rules 2011.  This motion was granted, with Justice Gordon stating that “[t]he fact that Abel does not intent to defend, or participate in, the proceeding does not preclude the ACCC applying for an order that the hearing proceed”.

With the case put forward by the ACCC and without a defence put on by Abel, Justice Gordon found that the representations contained in the Online Advertisement and the Print Advertisement contravened the ACL – both the general prohibition on misleading or deceptive conduct and the prohibition on false representations with respect to the price of services – “they were clearly false, misleading and deceptive”.

Justice Gordon emphasised that even though companies in liquidation may not be able to pay the penalty, they are still not immune from pecuniary penalties and the overarching rationale for pecuniary penalties – general deterrence – remains relevant. Gordon J cited Goldberg J in Australian Competition and Consumer Commission v SIP Australia Pty Ltd:

“If general deterrence is to have any meaning, a company in liquidation which has contravened the [Competition and Consumer] Act must be  ordered to pay an appropriate pecuniary penalty as a deterrent to others who might be tempted to engage in similar conduct”.

Justice Gordon found the conduct to be serious and worthy of the orders imposed, saying that, “[t]he declarations and the fine will serve the public interest by deterring the relevant conduct and assisting the ACCC to educate consumers and the induct as to the dangers of this conduct.” Abel was ordered to pay $15,000 for a contravention in respect each type of advertisement ($15,000 for the online advertisement and $15,000 for the print advertisement). However, the Court elected not to make an order as to costs as in these circumstances, it would have been “futile”.

This decision is noteworthy for the emphasis placed on the continuing significance of general deterrence, as well as the ACCC’s willingness to pursue companies verging on insolvency.  Other examples of action against insolvent companies include proceedings against High Adventure for resale price maintenance.  In that judgment, the Full Federal Court (which increased the penalty imposed at first instance from $3,000 to $20,000) stated that:

[T]he Commission was doing no more in this case than fulfilling its statutory function as well as its duty to the court. Deterrence (especially general deterrence) is the primary purpose lying behind the penalty regime…in some cases the penalty may be so high that the offender will become insolvent. That possibility must not prevent the Court from doing its duty for otherwise the important object of general deterrence will be undermined”.

Pecuniary penalties imposed in enforcement of the Competition and Consumer Act 2010 (Cth) and its predecessor legislation have also resulted in companies going into insolvency.  One of the more high profile instances in which this occurred related to the penalty imposed on Leahy Petroleum for price fixing in the Ballarat retail market for petrol. In that instance, the company was put into administration shortly after the penalty was imposed.  The ACCC successfully applied to the Federal Court to have the proposed deed of company arrangement terminated as it did not provide for payment of the penalty to the Commonwealth out of any surplus, after all provable claims were paid in full.  As a result of the orders made by the Court, the ACCC received $900,000 of the $2.5 million penalty.

Peta Stevenson & Martine Phillips

Photo credit: Phil’s 1stPix / / CC BY-NC-SA

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About The Author

is in the Competition team at King & Wood Mallesons, with experience both in the corporate and litigious sides of competition. She loves online shopping and always looks for the fine print!

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