Express law No. 46

16 November 2006

Federal Court awards $5.5 million in pecuniary penalties
in Australia's first Spam Act case

On 27 October 2006, the Federal Court ordered Clarity1
Pty Ltd to pay a $4.5 million pecuniary penalty and its
director, Wayne Mansfield, to pay a $1 million pecuniary
penalty for contravening various provisions of the Spam
Act 2003 (Cth) concluding the first proceedings brought
by the Australian Communications and Media Authority (ACMA)
under the Spam Act.

Earlier findings

ACMA v Clarity1 Pty Ltd [2006] FCA 410

In the court's earlier decision, Nicholson J found
that between 10 April 2004 (the commencement of the Spam
Act) and 13 April 2006 (the date of the decision), Clarity1
contravened section 16(1) of the Spam Act by sending at
least:

  • 213 million commercial electronic messages (41.7 million
    successfully) to over 5.6 million unique electronic addresses,
    and
  • 56.8 million commercial electronic messages (33.1
    million successfully) to over 2.2 million unique electronic
    addresses.

Nicholson J further found that a majority of the unique
electronic addresses referred to above had been obtained
from harvested-address lists or were compiled using address-harvesting
software prior to the commencement of the Spam Act. By
sending commercial electronic messages to electronic addresses
obtained in such ways, Clarity1 contravened section 22(1)
of the Spam Act.

Nicholson J found Mr Mansfield aided and abetted, counselled
and procured, and was directly or indirectly knowingly
concerned in or party to the Clarity1's contraventions
of the Spam Act, thereby contravening sections 16(9) and
22(3) of the Spam Act.

Decision on relief

ACMA v Clarity1 Pty Ltd [2006] FCA 1399

Nicholson J's decision on relief followed his earlier
findings on contravention that Clarity1 and Mr Mansfield
had breached specified sections of the Spam Act by sending
millions of commercial electronic messages without the
recipients' prior consent, many of which had been
obtained by using address-harvesting software or from harvested-address
lists.

The orders

The Federal Court ordered:

  • that Clarity1 pay the Commonwealth a pecuniary penalty
    of $4.5 million
  • that Mr Mansfield pay the Commonwealth a pecuniary
    penalty of $1 million
  • declarations stating how and why Clarity1 and Mr Mansfield
    contravened the Spam Act
  • injunctions restraining Clarity1 and Mr Mansfield
    from engaging in such conduct in the future
  • that Clarity1 and Mr Mansfield pay ACMA's costs.

While the pecuniary penalties imposed are considerable,
the court acknowledged that 'the innovative character
of the legislation, the boundaries of which the respondents
were at liberty to contest on its first application' was
also a factor, suggesting that higher penalties may be
imposed for similar conduct in the future.

Implications for agencies

As the first decision made under the Spam Act, the decision
demonstrates the importance of complying with the Act.
Agencies that are subject to the Spam Act need to ensure
that they have the consent of everyone in their email database
before sending any commercial electronic messages, even
if that email database was compiled prior to the commencement
of the Spam Act. Contraventions of the Act can result in
substantial penalties being imposed.

Text of the decision is available at:
http://www.austlii.edu.au/au/cases/cth/federal_ct/2006/1399.html

Justin Jones of AGS appeared as junior counsel with Stephen
Owen-Conway QC on behalf of the Australian Communications
and Media Authority. Justin is a lawyer in AGS Perth's
commercial and trade practices teams.

For further information please contact:

Justin Jones
Lawyer
T 08 9268 1125 F 08 9268 1771
justin.jones@ags.gov.au

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