Erectile Dysfunction Merchant Guilty of Contempt of Court

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I don’t want to be premature but a well planned blog is a lot like erecting a tent; annoying as hell but better than having a dysfunctional tent that collapses too early leaving everyone disappointed. As such I have considered the values imposed by the Canberra Commercial Law editorial team and have agreed not to make any lewd puns when reporting this case. Disclaimer fulfilled.

Australian Competition and Consumer Commission -v- ACN 117 372 915 Pty Ltd (in liq) (formerly Advanced Medical Institute Pty Ltd) [2015] FCA 1441 dealt with an application by the ACCC asking the Federal Court to make findings of contempt against the Advanced Medical Institute over its continued advertising despite court orders.

I think deep down we all knew it was coming. Erectile dysfunction ads have always skirted that fine line between paying $8 for popped salt-air at the cinemas and literally selling snake-oil…you choose which one of those is less ethical. Preying on male insecurity seems to have paid the bills for a number of years, but the guardians of consumer justice have finally caught up AMI.

In April 2015, North J made orders restraining the Australian Medical Institute and a number of associated individuals and entities (AMI) from advertising their erectile dysfunction and premature ejaculation products as effective. At hearing the ACCC accused the AMI of unconscionable conduct in it’s marketing and that this constituted a breach of (as then) s51AB of the Trade Practices Act 1974 (Cth). As part of the orders, the AMI was still allowed to advertise but was not allowed to make claims as to the efficacy of their products to any prospective patients.

Civil Contempt

The ACCC brought proceedings seeking a finding of civil contempt following a number of advertisements from the AMI on radio, television and publications on their website despite the orders.

To satisfy the test of civil contempt ACCC was required to show that the orders were clear enough not to be ambiguous and that AMI was capable of complying with them. In terms of an injunction this test is somewhat lightened by the circumstances alone as the test now becomes essentially the question of: were the orders clear and could the AMI have stopped itself from publishing the ads? This test has developed over a number of cases and is articulated clearly in Advan Investments Pty Ltd v Dean Gleeson Motor Sales Pty Ltd [31]. The test seems simpler when put in terms of a negative and the Court barely hesitated on the point even noting that Senior Counsel did not contend the point that the advertisements were deliberate. [54]

AMI based its argument primarily on the definition of “prospective patients” contending that the term “prospective patient” is not clear and unambiguous and alternatively that a “prospective patient” is only someone that expresses an interest rather then the public at large therefore rendering the ads not in breach.

In the views of Moshinsky J, a “prospective patient” extended beyond people who contacted AMI and included those members of the general public suffering from sexual dysfunction. Therefore the advertisements being broadcast to the general public were capable of reaching “prospective patients”.

Given the Court’s findings that the previous orders were clear, unambiguous and capable of compliance, Mohinsky J accordingly made declarations of contempt and listed the matter for a hearing on costs and damages.

BONUS: schedule 1 of the judgment contains transcripts from 20 premature ejaculation ads…it’s grim stuff but still better than watching any of the Star Wars prequels…shots fired.

When Are Your Pleadings Embarrassing?

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If a Judge or practitioner ever refers to your pleadings as embarrassing don’t necessarily take it personally. Embarrassing pleadings is a defined term and refers more to the intention of the pleading instead of the skill of the person drafting it.

Embarrassing Pleadings

A pleading is embarrassing where it is “unintelligible, ambiguous, vague or too general, so as to embarrass the opposite party who does not know what is alleged against him” Meckiff v Simpson [1968] VR 62 at 70.

In Shelton v National Roads & Motorists Association Limited [2004] FCA 1393 at [18], Tamberlin J explained the concept of “embarrassment” with respect to pleadings:

“Embarrassment in this context refers to a pleading that is susceptible to various meanings, or contains inconsistent allegations, or in which alternatives are confusingly intermixed, or in which irrelevant allegations are made that tend to increase expense. This is not an exhaustive list of situations in which a pleading may be embarrassing: see Bartlett v Swan Television & Radio Broadcasters Pty Ltd (1995) ATPR 41-434.”

Pleadings can be embarrassing even when they do contains an adequate cause of action if the facts they rely upon are expressed in such a way as to leave difficulties or doubts about figuring out what they are exactly referring to. This can be through generalities, vagueness or any other framing of the proceedings that prevents the defendant from knowing in advance the case it is required to meet.

Remedy

If the court considers pleadings to be embarrassing then the appropriate remedy is to strike out the pleading rather than to order the provision of particulars. This may seem harsh, but the reality is that it is not the function of particulars to replace the necessary components of a pleading, simply to augment them.

Pleadings are everything. Actions are often commenced with insufficient pleadings with too many lawyers thinking that they can simply amend at a later date if the pleadings are found to be insufficient. Unfortunately, for the client, this will normally be accompanied with a big costs order if the court allows it at all.

Builder Not Entitled to Payment for $400k Work

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If you haven’t followed the building contract then you won’t get paid, regardless of how much work you have performed.

R Developments Pty Ltd -v- Forth & Anor saw a big shift towards stricter operation of the contract as the stating point when determining how a builder should be compensated for a claim for unpaid work.

R Developments (the builder) quoted and agreed to build a property in Yarralumla for $972,000. After the initial $72,900 deposit, the builder was entitled to be paid $100,000 once the property reached the slab stage, with payments set up for the other stages in the usual manner.

The builder no doubt realised his folly when he had completed $380,000 in work without reaching the slab stage. There were also a number of deposits for materials and the builders profit margin which had been incurred but not paid. The builder claimed a number of variation notices for additional work had been submitted to the owner and accepted by virtue of getting no reply.

The builder then alleged that the owner had not shown a capacity to pay for the extra works and purported to terminate on this basis, claiming short of $600,000 in damages.

Strict contract – no right to estoppel

Estoppel can be broadly defined as a group of rules of equity by which the Courts can prevent injustice, including in cases where they would not otherwise be able to, ie. even if a contract doesn’t provide for it.

Part of the builders claim was that the contract was validly terminated under the requirement to prove finance, or in the alternative, as they had performed $380,000 worth of work, they were entitled to be reimbursed for that work to prevent injustice.

David Robens of Kamy Saeedi Law, successfully argued that the owners had fulfilled their requirements under the contract and that the bank had previously shown that finance was guaranteed even in light of the variations.

Under the contract, the builder was entitled to insist on finance but not once works had been commenced as this was enough to show the builder’s acceptance of meeting this requirement. This acceptance included losing the right to terminate for non-compliance of it. Therefore the termination was invalid and the builder was entitled to no compensation for the work performed.

Normally the builder may then experience some relief through equity, but the court was not particularly receptive on this occasion.

As the owner had already received a benefit resulting from the breach of contract ($300k free work) they were only awarded nominal damages and costs in defending the action.

Implications

The implications of such a decision are wide-ranging for construction law in the ACT. The Courts had previously been somewhat reticent to punish builders too harshly for under-quoting. Sure they were required to take a hit, but usually nothing like this.

The fact that the builder walked away from a claim for almost $600,000 worth of work and materials and got nothing with costs awarded against them should serve as a stark warning to builders or indeed any tradesman in the Territory.

Further to this, and excuse the brag, but the Kamy Saeedi Team poked some pretty big holes in the arguments of a well used construction law firm relying on the pro forma contract prepared by another prominent construction law firm and used by builders as a matter of practice. More than a brag, this certainly raises issues about how construction litigation will result in the future given the hard right turn this case indicates.

After a lengthy dispute, the owner now has the benefit of a lot of free work and is able to recommence building their dream home.

If you would like to discuss this matter further, please contact either Tom Barrington-Smith or David Robens from the Kamy Saeedi Law Commercial Team.