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Contempt of Court – Lessons from Ultratune’s $1.5 million fine for contempt

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In an previous article discussing the ACCC’s enforcement priorities for 2024-25, we identified that the Australian Competition and Consumer Commission (ACCC) has continued to monitor and seek to enforce strict compliance with small business codes of conduct, including the Franchising Code of Conduct (Franchising Code).

The ACCC had pursued UltraTune, a national automechanic franchisor against whom the ACCC successfully obtained $1.5 million in penalties, for contempt of Court when Ultratune failed to comply with orders made by the court. Those orders requiring Ultratune to take specific actions, including to update disclosure documents within the time frames specified by the Franchising Code and to implement a compliance program.

On 28 January 2025, UltraTune’s appeal was dismissed by the Full Federal Court, meaning the $1.5 million in fines for contempt remain enforceable against UltraTune.

UltraTune’s story serves as an important reminder to franchisors to ensure they are actively monitoring their business’ compliance with all their obligations including those imposed on them by the law or court order and those that they might voluntarily agree to undertake.

What were UltraTune’s initial contraventions?

In 2019, the Court found that UltraTune had failed to provide sufficient information to its franchisees concerning how the franchisor was spending its marketing fund, including missing statutory deadlines to publish reports as well as using overly vague language.

This was held to be a breach of clause 15(1)(b) of the Franchising Code, which requires franchisors to regularly report to franchisees on marketing expenditure including ‘meaningful information’ about how, when, and on what the funds were spent.

The Court also found that UltraTune had made false or misleading representations to prospective franchisees about the price of the franchise, ongoing rent costs, the age of the franchise, and the refundability of deposits.

In defending the initial case, the Court noted that UltraTune attempted to ‘cover up’ their conduct, which factored into the imposition of $2.6 million in penalties as a deterrent to Australian franchisors.

The Court also ordered UltraTune to implement a compliance program and take steps to ensure they do not contravene the ACL or the Franchising Code in the future.

Why was UltraTune held in contempt of Court?

In June 2022, three years after the initial trial, the ACCC commenced further proceedings against UltraTune alleging that they had not complied with the court orders as Ultratune had not updated its disclosure documents within the timeframes required, nor effectively implemented a compliance program to prevent further breaches of the ACL and Franchising Code.

As UltraTune had been formally ordered to do so by the Court, the failure to implement the court orders resulted in Ultratune being held in contempt of Court – for disobeying the Court’s Orders.

UltraTune was fined $1.5 million for contempt of Court.

What happened in the appeal?

UltraTune appealed the contempt finding arguing that:

  1. the Court could not impose a fine for contempt of Court where the Court did not warn UltraTune of the consequences of failing to comply with the original Orders; and

  2. the fines were calculated incorrectly and were too large.

The Full Federal Court dismissed these arguments, and held that the fines are not ‘manifestly expensive’ given that UltraTune’s is a ‘serious matter’.

Lessons from UltraTune:

To avoid becoming subject to regulatory enforcement action by the ACCC franchisors need to:

  • ensure that they comply with their disclosure obligations and the requirements upon them under the Franchising Code of Conduct (keeping in mind the changes intended to come into effect in April 2025);

  • where a franchise system has a compliance program franchisors’ need to ensure that it is given effect to and implemented and not just treated as a policy document that is prepared and then put in the drawer and ignored; 

  • promote a business culture that encourages compliance with the ACL and Franchising Code, and transparency with franchisees; 

  • if a franchisor indicates to a regulator such as the ACCC that it will do something, such as implement a compliance program, then it should ensure it does so and expect the regulator may follow up to see if what was said will be done is actually completed.

The ACCC is able to and may take action to enforce the law and orders made by the Courts to protect the public. Significant penalties can be imposed for non-compliance (contempt) of court orders.

For more information please contact:

Alicia Hill
Principal
T: +61 3 9611 0180 | M: +61 484 313 865
E: ahill@sladen.com.au

Millie Swan
Law Clerk
E: mswan@sladen.com.au

Alicia Hill