Federal Court finds collapsed business duped SMEs into buying workplace safety gear

Small businesses across the country were coerced into purchasing first aid kits and safety wall charts by a company purporting to be a government agency, the Federal Court has ruled.

The Australian Competition and Consumer Commission initiated legal proceedings against Safety Compliance Pty Ltd in 2012, after warning small business operators in 2011 against doing business with the company, which it believes was engaging in misleading or deceptive conduct.

The ACCC accused Safety Compliance, which was subsequently placed in liquidation, of misrepresenting to small businesses that workplace health and safety laws required them to maintain the kind of safety wall charts and first aid kits supplied by Safety Compliance between December 2010 and May 2012.

During the same time frame, Safety Compliance was also accused of falsely representing to customers that it was a state or territory workplace health and safety agency, or was affiliated with one.

And in November 2011, Safety Compliance was found to have contacted a number of Video Ezy franchisees and falsely told the franchisees someone from the Video Ezy head office had agreed to purchase the products.

In a judgment handed down on March 13, Federal Court Justice Farrell ruled in the ACCC’s favour, finding Safety Compliance contravened the Australian Consumer Law and the Competition and Consumer Act by making false or misleading representations and engaging in misleading or deceptive conduct.

Justice Farrell also found three individuals associated with Safety Compliance – Dean King, Shane Black and Fiona Schimmel – were knowingly concerned with the misrepresentations regarding health and safety laws and that Safety Compliance was connected to a government agency.

Orders for relief will be decided by the court at a future date. The ACCC is seeking pecuniary penalties, injunctions, costs from Safety Compliance. In regards to King, Black and Schimmel, the ACCC will seek to have them banned from managing corporations in the future.

The liquidator of Safety Compliance did not participate in the court hearings and SmartCompany was unable to contact the company. Comment from King, Black and Schimmel’s lawyers was not available prior to publication.

Melissa Monks, special counsel at King & Wood Mallesons, told SmartCompany while a majority of the ACCC’s enforcement proceedings related to the Australian Consumer Law appear to be aimed at protecting consumers from harm, “the ACCC does also increasingly use these provisions in the interest of small business”.

“This is particularly so where there will be substantial detriment, there is a blatant disregard for the law and the defendant has a history of previous contraventions of fair trading and consumer protections laws,” Monks says.

Monks points out Dean King was previously involved in another business in 2008, which the Supreme Court found had made misleading representations about billing to small businesses.

“Safety Compliance was also the subject of a warning notice – a ‘naming and shaming’ power the ACCC has – over similar conduct to that which the Federal Court has now found to be misleading,” she says.

“Safety Compliance had forewarning that the ACCC was monitoring but continued with what seems to be deliberate misleading conduct designed to coerce small businesses to buy their products and therefore it is unsurprising that the ACCC took action.”