ACMA welcomes significant penalties in Red Telecom Federal Court case

The Australian Communications and Media Authority (ACMA) has welcomed the Federal Court penalty judgment in its case against Sydney-based telco Limni Enterprises Pty Ltd (Limni Enterprises), formerly known as Red Telecom Pty Ltd (Red Telecom).

The Federal Court imposed pecuniary penalties of $450,000 against Limni Enterprises and $115,125 against its sole director Nicholas Kontaxis.

In December 2019, the ACMA initiated Federal Court proceedings against Red Telecom and Mr Kontaxis for failing to comply with decisions of the Telecommunications Industry Ombudsman (TIO).

The Federal Court ruling followed investigations by the ACMA into Red Telecom’s compliance with the TIO scheme. Those investigations were in response to referrals from the TIO alleging that Red Telecom had failed to comply with seven binding TIO decisions.

The seven TIO decisions required Red Telecom to pay seven customers various amounts of money. The total amount owed to the seven customers (six small businesses and one individual) under the TIO decisions was over $63,000.

During the proceedings the ACMA secured full admissions to the principal contraventions from Red Telecom and Mr Kontaxis. Affected customers were ultimately paid the amounts they were owed by Red Telecom.

In October 2020, Red Telecom’s customer base was sold. Following the sale, Red Telecom changed its name to Limni Enterprises and went into liquidation. Despite this, the Court accepted that there was a strong public interest in continuing proceedings to impose appropriate penalties on Limni Enterprises and Mr Kontaxis.

ACMA Chair Nerida O’Loughlin said all telcos that supply services to residential and small business customers in Australia must join the TIO scheme and must comply with decisions made by the Ombudsman.

“This judgment serves as a reminder to members of the TIO Scheme that there are serious consequences for failing to comply with the TIO Scheme. It also makes it clear that directors who are responsible for ancillary contraventions may receive tough penalties, even where the company goes into liquidation.

“The Court has sent a clear message that failing to comply with a TIO decision will result in penalties that provide a clear deterrent.”

Justice Perry noted that Red Telecom had a lack of respect for the TIO Scheme and a lack of consideration for the interests of customers, and failed to cooperate with the ACMA until it was too late. Her Honour found that Red Telecom’s delay in paying the TIO decisions caused financial and emotional stress to its customers.

Her Honour also found that “the decisions not to pay the TIO decisions as and when they were due were deliberate decisions by him [Mr Kontaxis] in circumstances where he had control over all payments by Red Telecom and was the governing mind of the corporation”.

Her Honour considered that there was a culture within Red Telecom that was “antithetical to compliance” and accepted the ACMA’s submission that “the conduct must be discouraged in the strongest possible terms”.

The Court found that Mr Kontaxis’ conduct at times demonstrated “disregard for the interests of the relevant customers and the TIO decisions”.

Penalties imposed by the Court

MR 24/2022