Federal Court finds prima facie case against Mr Peter Foster but has no power to freeze Mr Foster's Assets
Justice Spender today dismissed an interim application sought by the Australian Competition and Consumer Commission against Mr Peter Foster.
In the Federal Court, Brisbane, Justice Spender found "there is a prima facie case of resale price maintenance against Chaste and Foster".
He found that: "I think there is a real risk that Mr Foster will do everything within his power to avoid the payment of any penalties that might be ordered to be paid by him in respect of the alleged contraventions concerning retail (sic) price maintenance and, further, he would do whatever he could, including the concealing and moving of assets, to avoid any obligation he might have concerning any costs order that might be made".
Further, he also believed: “there is a strong chance that Mr Foster will not remain in the jurisdiction, or return to it, to contest the allegations made against him by the ACCC. This is contrary to the intention expressed by him in his letter to Justice Drummond of 9 October 2002".
The ACCC had sought interim orders:
temporarily restraining Mr Foster from dealing with his assets;
that he provide an affidavit identifying those assets; and
preventing Mr Foster leaving Australia until compliance with the previous orders had been achieved.
The ACCC considered these orders were necessary to ensure Mr Foster's compliance with orders for pecuniary penalties that it believes it will obtain in the principal proceedings concerning TRIMit weight loss product distributor Chaste Corporation Pty Ltd.
However, given that the orders sought were in aid of civil penalty proceedings, Justice Spender held: "Notwithstanding my fears about Mr Foster’s future conduct, in my judgment I do not have power, within s23 of the Federal Court Act or otherwise to make the Mareva order sought by the ACCC".
ACCC Chairman, Professor Allan Fels, said today the ACCC had to act to try to hold Mr Foster accountable for his actions.
"In this instance we have been unsuccessful in our attempts to freeze his assets.
"This was a preliminary step in the proceedings. The ACCC’s other substantive allegations are that Mr Foster was knowingly concerned in false representations, misleading and deceptive conduct and unconscionable conduct including:
acting with complete disregard of area manager's reasonable commercial expectations or the long term viability of Chaste;
the genuineness of the business opportunity for Area Managers in the Trimit product;
the potential income for area managers;
a guarantee to buy back distributorships and refund monies to area managers.
"These aspects were not considered in these proceedings as they do not attract a pecuniary penalty. It is important for regulators to act decisively to protect the public interest, and this is what the ACCC sought to do".
In the principal proceedings the ACCC alleges that Chaste Corporation Pty Ltd has engaged in resale price maintenance concerning the sale of TRIMit to its national network of approximately 70 Area Managers. Contraventions of the resale price maintenance provision of the Trade Practices Act can attract pecuniary penalties of up to $10 million for companies and $500,000 for individuals.
The ACCC has also alleged that Chaste Corporation and others have engaged in unconscionable conduct, breach of an industry code and false and misleading representations concerning the sale of Area Manager distributorships, the profitability of the distributorships and the supply of weight loss product, TRIMit.
The next directions hearing for the principal proceedings of ACCC v Chaste Corporation Pty Ltd & Ors has not yet been set down. Mr Foster has not yet filed a defence.
