Federal Court winds up Dynacast (INT) Pty Ltd

The Federal Court yesterday made an order winding up Dynacast (INT) Pty Ltd, formerly known as Phoneflasher.com Pty Ltd, in insolvency under the provisions of the Corporations Act 2001 following an application by the Australian Competition and Consumer Commission.

The ACCC lodged an application to wind up Dynacast following its failure to pay costs awarded to the ACCC during earlier proceedings against the company for breaches of the Trade Practices Act 1974.

"Companies should be aware that the ACCC takes orders made by the court seriously, both in terms of ensuring compliance with the orders and pursuing costs awarded to the ACCC," ACCC Chairman, Mr Graeme Samuel, said.

Background

In June 2004, the ACCC instituted proceedings against Dynacast, its then majority shareholder, Mr Alan Jorgensen and one of its then directors, Ms Jimeale Jorgensen, alleging breaches of sections 52 and 53 of the Trade Practices Act 1974 by making representations concerning the performance characteristics of its Phoneflasher mobile phone accessory on packaging, displays, in promotional material and on its website. Dynacast had represented that the product 'reduces radiation' as well as making a claim on its website that the product has 'significant health benefits'. The ACCC alleged the representations were false and misleading because the product does not work as claimed and Dynacast had no reasonable basis for making the representations.

On 2 November 2004, the Federal Court declared, by consent, that Dynacast had breached the Act by making misleading or deceptive representations about the performance characteristics of its Phoneflasher mobile phone accessory. The court also declared that Mr Alan Jorgensen and Ms Jimeale Jorgensen were knowingly concerned in the conduct. The court made a variety of orders, including declarations, injunctions and orders for corrective advertisements and the implementation of a trade practices compliance program.

Under those orders Dynacast was required to:

• write to each retail outlet it supplied with the Phoneflasher mobile phone accessory to advise them of the Federal Court's orders and requesting that they display a consumer notice in a prominent location near where the Phoneflasher is displayed for sale
• write to the ACCC within 35 days of the orders advising of the names and addresses of retailers it provided with the abovementioned letter and consumer notice
• place a similar notice on the Internet website, www.phoneflasher.com, and any other website being used by Phoneflasher.com to promote the Phoneflasher, in the form of an automatically generated active pop-up window or message box for a period of six months, and
• to use its best endeavours to undertake compliance training.

In October 2005 the ACCC filed proceedings for contempt which alleged that Dynacast had not complied with court orders.  On 26 March 2007, the Federal Court found that Dynacast committed contempt of court by not complying with the court's orders by:

• failing to write to each retail outlet it supplied with the Phoneflasher mobile phone accessory to advise them of the Federal Court's orders and requesting that they display a consumer notice in a prominent location near where the Phoneflasher is displayed for sale
• failing to write to the ACCC within 35 days of the orders advising of the names and addresses of retailers it provided with the abovementioned letter and consumer notice, and
• failing to place a corrective advertisement on the www.phoneflasher.com website, in the form of an automatically generated active pop-up window or message box for a period of six months.

The ACCC had also alleged Mr Jorgensen acted in contempt of court by aiding, abetting, counselling or procuring Dynacast's failure to place a corrective advertisement on the website. The Federal Court found, however, that Mr Alan Jorgensen had not acted in contempt of court.

The Federal Court ordered that Dynacast be fined a total of $7,000 and pay the ACCC's costs.