Penalties and Declaratory Relief under the Spam Act 2003 (Cth)

by Peter Black

Earlier this year, the Federal Court held in Australian Communications and Media Authority v Clarity1 Pty Ltd [2006] FCA 410 that Clarity1 and its Managing Director, Mr Wayne Mansfield, had breached the Spam Act 2003(Cth).

The ACMA had alleged that from 10 April 2004 Clarity1, an Australian company, periodically sent unsolicited commercial electronic messages (CEMs) to electronic addresses it had harvested from the internet using address-harvesting software or had purchased from organisations or persons selling electronic lists of electronic addresses harvested from the internet. In all, ACMA alleged that Clarity1 sent 270 305 474 CEMs (of which 74 996 560 were successfully sent) to 7 956 457 unique electronic addresses. The CEMs sent by Clarity1 contained an unsubscribe facility and the evidence was that some 166 000 requests to be removed from the lists were made, all of which were acted upon. Over the same time period only 79 complaints were made concerning CEMs from Clarity1 were made to ACMA.

I summarised the reasons for judgment for The Business of Law from FindLaw in June. However, at that stage, Justice Nicholson held over the making of any orders relating to the civil penalty and declaratory relief pending further submissions.

Last month, in Australian Communications and Media Authority v Clarity1 Pty Ltd [2006] FCA 1399, Justice Nicholson delivered further reasons containing orders and declaratory relief.

The ACMA had submitted that the appropriate pecuniary penalties under s 24 of the Spam Act were with respect to Clarity1, $9.9 million and with respect to Mr Mansfield, $1.98 million. At the other extreme, the respondents contended that with respect to Clarity1, $10 000 and with respect to Mr Mansfield, $2000. Justice Nicholson noted at [3] that the ACMA acknowledged that the amount of penalty being sought against each respondent was substantial. However, the ACMA contended that the amounts are low in the context of the very high maximum penalty that the Court could impose under the Spam Act (the ACMA's amounts being only 10% of the possible maximum), and that the very high maximum penalties provided for by Parliament reflect the seriousness with which Parliament regards contraventions of the Spam Act.

In order to determine the relevant pecuniary penalties, Justice Nicholson looked at the relevant matters under ss 24 and 25 of the Spam Act:

  • the nature and extent of the contraventions (at [19]-[28])
  • the nature of loss or damage resulting from the contraventions (at [29]-[31]);
  • the circumstances in which the contraventions took place (at [32]-[33]);
  • the financial position of the respondents and their capacity to pay (at [39]-[45]);
  • the totality principle requiring the consideration of the appropriateness of the pecuniary penalty having regard to the totality of the conduct rather than simply by the addition of each individual contravention (at [45]-[49]);
  • the specific deterrence of the respondents (see [59]); and
  • the commercial realism of the particular circumstances of the matter (at [55]).

One difficulty Justice Nicholson noted was that the maximum penalties provided for in the Spam Act gave rise to "an unrealistically large penalty". At [56]:

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 lessor pecuniary penalty in value will derive its quality of general deterrence from its magnitude in relation to that capacity.

Feeling that the amounts put forward by the ACMA were "disproportionate to the commercial realities", "overly weighted in favour of general deterrence", and did "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", Justice Nicholson awarded a pecuniary penalty of $4.5 million against Clarity1 Pty Ltd and $1 million against Mr Mansfield.



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