The Federal Court has sent a strong message that those responsible for dishonest sales practices can, and will, be individually penalised.
The Court ordered brothers Tuan and Thuan Nguyen to pay a $50,000 penalty each after admitting to being knowingly concerned in breaches of the Australian Consumer Law (ACL). The Court also accepted undertakings that they would not manage or be a director of a corporation for five years.
Tuan was the sole director and Thuan was the sales manager of Artorios Ink (now in liquidation) which sold ink cartridges to small businesses across Australia.
As part of what Justice Mortimer described as a ‘deliberate and calculated’ plan, Artorios employees engaged in misleading and deceptive conduct and made a number of false representations during telemarketing calls to five small businesses, misleading them to believe that:
- they had already placed orders for ink cartridges which simply required confirmation; and/or
- Artorios was their business’ existing cartridge supplier.
Artorios then sent printer cartridges and an invoice to each of them, also asserting a right to payment without reasonable cause in breach of section 40 of the ACL.
Both brothers admitted to being knowingly concerned in the breaches. Both worked in close proximity to the telemarketing staff and were aware of, and actively directed them to engage in, the contravening conduct. Justice Mortimer said that the Nguyens’ conduct ‘involved deceit of these businesses for the financial benefit of Artorios’. Due to their positions as sole shareholders, this benefited them directly.
In accepting the Nguyens’ proposed undertakings, Justice Mortimer said that while none of the businesses suffered any substantial loss, the premeditated nature of the conduct and the targeting of low-level employees warranted the five year undertaking.
Ancillary liability cases of this kind are rare. While this is not the first time pecuniary penalties have been imposed on individuals under the ACL, it appears to be the first time undertakings akin to management disqualifications have been agreed. The case is a reminder that directors and employees of companies risk personal fines and injunctions where they are knowingly concerned in a breach of the ACL by a company.
