Shouts from the desert

The Federal Court has ordered that Wayne Mansfield, the first spammer to be prosecuted under the Spam Act 2002 (Cth), pay $1million in pecuniary penalties and that his company pay $4.5million in pecuniary penalties.

This prosecution under the Spam Act is of particular interest to me because at the time the law was made I was chairman of the Coalition Against Unsolicited Bulk Email, Australia's leading lobby group on the issue, which remains to date the only anti-spam lobby group around the world to have achieved the same degree of success. The Spam Act, while not perfect - and as I agreed with Senator Tchen in the committee hearing, no legislation is ever perfect - is the world's strongest law against spam and should virtually eradicate the Australian contribution to the spam problem.

A penalty of $4.5million on the company Clarity1 is substantial, and there is no way the $2 company can pay it. Justice Nicholson in imposing that penalty stated that it was actually reduced from the $9.9million requested by the ACMA to take into account the effect of the penalty on Clarity1. Given Clarity1's capacity to pay, the court may as well have imposed the maximum penalty of $66million - Wayne Mansfield always operates through $2 companies that are deliberately set up so as to be unable to pay any judgement. That Mansfield has structured his companies in this way is no reason to reduce the penalties against the company - even a minimal penalty will leave the company so far in the red that it will have to be wound up, so the $4.5million penalty should remain as a warning to other people contemplating spamming.

The penalty imposed on Wayne Mansfield personally is another matter. At $1million it is inadequate. The court acknowledged that Mansfield's spams frequently claimed he "earns a multi-million dollar income", but gave more weight to Mansfield's affidavit in which he claimed a net worth of $58,510. Mansfield claimed to the court that his statement in the emails was a "puff", and the Court agreed. However any first year law student knows after reading the Carbolic Smoke Ball case that a "puff" is a claim that is either so outrageous that nobody seeing the claim would believe it, or is not capable of being objectively measured. Some claims, like a claim that Mansfield is the "greatest Internet marketing genius", may fit into both categories of "puff", but a claim that he earns "a multi-million dollar income" is not so outrageous as to be incapable of being believed, nor is it impossible to objectively determine whether a person's income meets this description.

Since Mansfield's claim to a multi-million dollar income cannot be regarded as a mere puff, it should have been treated by the Court as a prior inconsistent statement affecting the weight to be given to Mansfield's conflicting evidence. Given that his prior inconsistent statement would have been in breach of several laws, including section 52 of the Trade Practices Act 1974 (Cth) and the criminal provisions in sections 75AZC(b) and 75AZC(e) of the same Act, the conclusion that the prior inconsistent statement was untrue is a serious one that should not be entertained lightly by the Court.

The question here is not whether Mansfield is a liar - the conflicting statements are there on the face of the record of the Court as having been admitted to by Mansfield. The question is whether he has engaged in fraud in the course of commerce or has engaged in a fraud against the Court.

The conclusion of the Court that the prior inconsistent statement was a puff is an error on the face of the record that is appealable by the ACMA.

The decision also states that the penalties in this case were reduced to take account of the fact that the case was the first under the new laws and that Mansfield was entitled to test his view in court, however the decision fails to take account of whether Mansfield's view of the law was a reasonably arguable one. The earlier findings of law were that Mansfield's key defence - that he could infer consent by the failure of people to opt out before the Spam Act came into force - was unviable:

First, the mere fact that Clarity1 sent a CEM to an electronic address and did not receive a response from the recipient does not provide a proper foundation for an inference of consent. From that factual foundation, no such inference is logically open. (at [78])

Second, even less so is such inference likely to be open where the entire relationship between Clarity1 and the recipient is constituted in the absence of bilateral communication. There are no circumstances in such a case from which an inference can be drawn... It is compounded where the CEMs have been obtained by Clarity1 without the recipient’s knowledge or participation... (at [79])

Third, the mere presence of the unsubscribe facility does not provide the foundation for any inference. Many inferences are open to speculation and none are logically dictated by the circumstances. There are a variety of methods available to recipients to deal with unwanted CEMs. These include simply deleting the CEM without reading it and so being unaware of the unsubscribe facility; ignoring the CEM and/or reporting it to the applicant; utilising a filtering or blocking technique. The sender, in this case Clarity1, would have no way of knowing whether the CEM has been opened or read; it is equally open to inference that it may not have been so that the unsubscribe facility was unknown to the recipient. (at [80])

Fourth, in the case of electronic addresses obtained by purchasing or leasing from external parties and using address-harvesting software, there is no evidence Clarity1 obtained or intended to obtain the consent of the relevant account-holders when it made the acquisitions. (at [84]

Fifth, the respondents have not explained why so many CEMs were sent. The volume makes it improbable that the respondents could have been aware that consent was in place prior to the sending of the CEMs. It is antithetical to the drawing of the inference sought. (at [85])

The fact that Mansfield's defence was not reasonably arguable should have been considered in determining whether to reduce the penalty on the grounds that this was the first Spam Act prosecution. Justice Nicholson did not consider this, and this is also an error that the ACMA could appeal.

It is unlikely that the ACMA will appeal the penalties on their own, however Mansfield has indicated he may appeal the amount of the penalty. If he does so, the ACMA will almost certainly cross-appeal on both the question of how Mansfield's inconsistent statements of his income should be treated, and on the question of whether there should be any reduction on the grounds that this is the first case under the Spam Act. In my opinion such a cross appeal would almost certainly succeed, resulting in an increased penalty on Mansfield personally.