Case: Australian Communications and Media Authority v Clarity1 Pty Ltd [2006] FCA 1399; (2006) 155 FCR 377
Outcome: cited
have now been three judgments of the Court in respect of contraventions of s 16 (among other provisions) of the Spam Act . They are, Australian Communications and Media Authority v Clarity1 Pty Ltd [2006] FCA 1399; (2006) 155 FCR 377 per Nicholson J; Australian Communications and Media Authority v Mobilegate Ltd A Company Incorporated in Hong Kong (No 4) [2009] FCA 1225 ; (2009) 261 ALR 326 per Logan J; and a further ex tempore judgment by Logan J on 16 December 2009 concerning further respondents in the Mobilegate litigation ( Australian Communications and Media Authority v Mobilegate Ltd (No 6) [2009] FCA 1533). The decision of Nicholson J in Clarity1 , involved conduct on the part of the corporation of sending 270,305,474 commercial electronic messages between 10 April 2004 and 13 April 2006. In the majority of these contraventions, Clarity1 had used harvested addresses in contravention of s 22(1) of the Spam Act . Mr Mansfield, the second respondent, was found to have aided, abetted, counselled and procured the contraventions and to have been knowingly concerned in or a party to them. The Court found Mr Mansfield to have been "closely involved" in the contraventions. The proceedings were contested. Nicholson J made findings of fact in a primary judgment and addressed the question of the pecuniary penalty in the judgment cited above. Nicholson J took these matters into account: it was difficult to quantify the loss or damage caused by the conduct and thus the presence of loss or damage was treated as a possible aggravating circumstance; the contraventions involved a "huge volume" of electronic messages described by witnesses as "annoying, time consuming and frustrating" resulting in responses through filtering and blocking software; since the contravening conduct was the first conduct to be prosecuted under the Spam Act and the respondents genuinely believed that their conduct did not involve a contravention, these circumstances amounted to "an important factor in their favour"; the respondents had not been found by the Court to have engaged in previous contraventions; although the conduct of the respondents was deliberate, the deliberateness was an expression of their belief that their understanding of the new law was correct; and, the issue of capacity to pay a pecuniary penalty, although a relevant factor, was of less relevance when balanced against the necessity of imposing a penalty meeting the objective of general deterrence. His Honour applied the totality principle. On the question of cooperation, the applicant acknowledged that the respondents had not attempted to hinder or prevent it from conducting its investigation of the respondent's conduct. The applicant contended that cooperation flowed from the fact that at no time did the respondents entertain the possibility that their conduct might contravene the Spam Act . The respondents vigorously opposed the position asserted by the applicant that they had not shown any cooperation in relevant respects. Nevertheless, one point of distinction between Clarity1 and the present proceeding is that the respondents in Clarity1 contested the proceedings because they believed their conduct did not involve a contravention of the Act. Thus, they simply sought to ventilate their view of the quality of their conduct in the face of new legislative provisions. In these proceedings, Mr Atkinson, in the face of enforcement proceedings, exhibited genuine cooperation with the Authority. In approaching the assessment of the pecuniary penalty, Nicholson J considered that there is a need for "commercial realism in fixing penalties". He also said this: One difficulty which emerges in the application of the pecuniary penalty provisions in the new Act is that the maximum penalties are so high as to give rise to "an unrealistically large penalty". The unrealistic character derives principally from the quantum of penalty viewed in relation to the capacity of either respondent to pay and the need for general as well as specific deterrence. It is not just the total quantum of a pecuniary penalty which can provide the element of general deterrence. That quality derives from a consideration of the penalty in relation to the conduct giving rise to it and the financial capacity of the offenders. Where the financial capacity is not great, a [lesser] pecuniary penalty in value will derive its quality of general deterrence from its magnitude in relation to that capacity. [As to a penalty of $9.9m sought against Clarity1 ] A penalty in the amount of $9.9 million is clearly one beyond the capacity of Clarity1 to pay and so likely to lead to its liquidation. It is quite disproportionate to the commercial realities of Clarity1 . Even as proposed it is in the particular circumstances "an unrealistically large penalty". ... It is overly weighted in favour of general deterrence. Importantly, it does not appear to be constructed on any allowance of the new character of the legislation and the entitlement of the respondents to test their view of the effect of the legislation. Similar views were expressed in relation to the pecuniary penalty sought against the individual, Mr Mansfield. In the end result a pecuniary penalty of $1m was imposed upon Mr Mansfield. The pecuniary penalties imposed in the matter amounted to approximately 5% of the maximum penalties possible. Secondly , I consider that the decisions of the Court in Clarity1 and Mobilegate engage factors which significantly differentiate those cases from the present case. Clarity1 was a fully contested proceeding involving a different class and scale of conduct. There was no cooperation in relation to the proceeding because the respondents took the view that their conduct did not involve a contravention of the relevant provisions especially in circumstances where the legislation had not been tested and no judicial determination was before the respondents which may have aided their analysis of the various integers contained in the sections. The respondents in Clarity1 cooperated in the conduct of the case but not in the sense of accepting the contention that its conduct contravened the Spam Act , so as to avoid the applicant incurring the costs of the proceeding. The decision in Mobilegate involved truly reprehensible predatory conduct of a kind which warranted a penalty directed emphatically towards specific deterrence and transparent general deterrence. The class of conduct the subject of Mobilegate is not evident in these proceedings. Thirdly , however, as to the class of conduct on the part of Mr Atkinson, there is simply no doubt that Australian citizens find large-scale distribution of unsolicited commercial electronic messages promoting the sale of products, in the circumstances of this case, very irritating and annoying. It causes all users of computers to constantly update spam filters and other protective devices to try to deflect the unwanted rain of electrons and digits disseminated by those who wish to do what Mr Atkinson has done. The Parliament has made its intention plain that the unsolicited distribution of electronic emails (spam) is to be discouraged. Notwithstanding these considerations, the Court ought to take into account and attach significant weight to Mr Atkinson's cooperation with the Authority in isolating the extent of the conduct and in seeking to resolve the present claims on the basis of admissions and a joint submission. Fourthly , Mr Atkinson is represented by independent lawyers and he has formed his view as to the various matters the subject of the submission with the assistance of that advice.