Australian Competition & Consumer Commission v Black on White Pty Ltd trading as Australian Early Childhood College [1998] FCA 1569 (26 October 1998)

Last Updated: 11 December 1998

CATEGORY: NO QUESTION OF PRINCIPLE

FEDERAL COURT OF AUSTRALIA

IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY	QG 110 of 1997

BETWEEN:	AUSTRALIAN COMPETITION AND CONSUMER COMMISSION APPLICANT
AND:	BLACK ON WHITE PTY LTD TRADING AS AUSTRALIAN EARLY CHILDHOOD COLLEGE RESPONDENT
JUDGE(S):	SPENDER J
DATE OF ORDER:	26/10/98
WHERE MADE:	BRISBANE

THE COURT ORDERS THAT:

1. The motion be refused;

2. The costs of the motion be the Commission's costs in the principal proceedings against the fourth respondent.

THE COURT DIRECTS THAT:

1. The applicant file and serve all affidavit material or which it wishes to rely against Respondents 2, 3 and 4 by 4.00 pm on 15 January 1999;

2. The fourth respondent file and serve all statements of witnesses by Friday 25 January 1999.

3. All statements in reply to be filed and served by the applicant by 19 February 1999.

4. The costs of directions to be costs in the proceedings.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY	QG 110 of 1997

BETWEEN:	AUSTRALIAN COMPETITION AND CONSUMER COMMISSION APPLICANT
AND:	BLACK ON WHITE PTY LTD TRADING AS AUSTRALIAN EARLY CHILDHOOD COLLEGE RESPONDENT

JUDGE(S):	SPENDER J
DATE:	26/10/98
PLACE:	BRISBANE

REASONS FOR JUDGMENT

Nicholas James Poteri, the fourth respondent in proceedings QG 110 of 1997, by notice of motion filed 14 August 1998, has applied to the Court for orders that certain questions be determined separately from the trial of the principal proceeding. Order 29 r 2(a) of the Federal Court Rules confers power on the Court to make orders for:

"the decision of any question separately from any other question, whether before, at or after any trial or further trial in the proceedings;"

Order 29 r 1 of the Rules defines "question" as including:

"any question or issue in any proceeding, whether of fact or law or partly of fact and partly of law, and whether raised by pleadings, agreement of parties or otherwise."

At the outset I should record that the question of ordering separate trials of separate issues is a matter to be approached with great caution. My experience of the trial of separate questions has been almost unanimously unhappy, and the laudable objectives of saving time and cost almost always has been the reverse. Be that as it may, as a matter of principle it seems to me that this application ought be refused. In so refusing, I should say I have a degree of sympathy for the position of the fourth respondent in these proceedings.

The Australian Competition and Consumer Commission has brought proceedings against Black on White Pty Ltd in respect of contraventions alleged against it as to accreditation of courses and concerning representations and conduct regarding student tuition fee contracts. The applicant says, further, that the second respondent, Nicki Poteri, and the third respondent, James Nicholas Poteri, and the fourth respondent, Nicholas James Poteri, were knowingly concerned in, or aided, abetted, counselled or procured the contraventions of the Trade Practices Act 1974 by the first respondent.

The reason for my sympathy for the position of the fourth respondent is that the first respondent is in liquidation and the proceedings against it are, by virtue of the Corporations Law, stayed; and the second and third respondents are bankrupt, although the dates of the bankruptcy and the relationship of the bankruptcies of the second and third respondent to the relief claimed against those respondents is not clear at the moment on the material presently before me. However, it is in that context that the fourth respondent in his motion sought an order that:

"1. That this Honourable Court order that the following questions be decided separately before the trial of this action pursuant to Order 29 Rule 2 of the Federal Court Rules:-

(a) Whether the Fourth Respondent has aided, abetted, counselled or procured the contravention of the Trade Practices Act 1974 by the First Respondent as alleged in the Amended Statement of Claim;

(b) Whether the Fourth Respondent has been directly or indirectly knowingly concerned in or party to the conduct of the First Respondent alleged by the Applicant in the Amended Statement of Claim to be in contravention of the Trade Practices Act 1974.

..."

This morning, Mr English, counsel who appeared for the fourth respondent on the fourth respondent's motion, indicated that what was proposed was that the Court embark on an exercise to decide the preliminary question of whether, assuming the contraventions alleged by the Australian Competition and Consumer Commission against the first respondents were established, the fourth respondent had aided, abetted, counselled or procured those contraventions or had been directly, or indirectly knowingly concerned in or party to that conduct in contravention of the Trade Practices Act.

This is not, therefore, a case where what the Court is being asked to do is to consider a question of law which, if answered one way, would have a significant impact on the litigation or substantially narrow the field of controversy. The questions as framed in the motion are directed to the whole of the proceedings against the fourth respondent. The questions as framed, and what the Court is being asked to do on the hearing of the motion by Mr English, are quite radically different.

So far as the questions as framed in the motion are concerned, it is not right that a question which, in truth, involves the whole subject matter of the action, should be tried as a preliminary question. In Radstock Co-operative and Industrial Society Ltd v Norton-Radstock Urban District Council [1968] 1 Ch 605, in the context where the issue ordered to be tried as a preliminary question was "Whether on the footing that all the allegations of fact contained in the statement of claim in this action (so far as not admitted in the defence) can be proved the plaintiffs can as a matter of law be entitled to [the relief sought]" Harman LJ said at 624:

"At this juncture, I should like to protest against this method of procedure. This is not a preliminary point at all. It deals with the whole subject-matter of the action, and without any evidence, and the court is left in a most unsatisfactory position and has to guess at many things which, on a hearing, would be properly proved in evidence. The procedure proper to this kind of situation is by way of motion to strike out the statement of claim as showing no cause of action."

The procedure envisaged by O 29 has, on occasions, been utilised in circumstances where assumptions are made as to particular facts. But that method of proceeding seems to have been followed in circumstances where a question of law determinative, if answered in a particular way, of much of the proceedings can be considered.

In Yango Pastoral Company Pty Limited v First Chicago Australia Limited [1978] HCA 42; (1978) 139 CLR 410, Mason J at 419 and 420 referred to the judgment of Sheppard J, who, in the interests of expedition on the plaintiff's application, ordered that there be an initial and separate determination of two questions which were essentially questions of law or policy. To enable those questions to be determined the parties, at the direction of Sheppard J, agreed on certain factual assumptions.

In TVW Enterprises Pty Ltd v Duffy (No 3) [1985] FCA 382; (1985) 8 FCR 93, the Full Court was concerned with a question of law that had been isolated by Toohey J for trial as a preliminary issue. Sheppard J said at 99:

"One matter in relation to the course of proceedings which I wish to emphasise ... is that the argument before his Honour and before us proceeded on certain agreed, hypothetical facts. One of these was that there had been no prior consultation by the minister with the existing licence holders, including the appellant. That is not, in fact, the minister's case. If the matter were to be fully heard, he would contend that there had, in fact, been consultation; but the assumption that there had been no consultation was made in order to enable a point of law, over which the parties are in difference, to be determined. Pursuant to order 29 rule 2 of the rules, his Honour ordered that the point be determined as a separate question on certain assumptions of fact (no consultation being one of them) as to which the parties were agreed for the purposes of the argument, but not otherwise; c.f. Yango Pastoral Company Pty v First Chicago Australia Ltd [1978] HCA 42; (1978) 139 CLR 410 419-20."

The criticism made by Mr Toy, who appears for the Commission, is that the course proposed by Mr English, namely, to address the question of the fourth respondent's alleged accessorial liability on the assumption that the contraventions alleged against the first respondent corporation are made out, involves a trial of the actual knowledge by the fourth respondent of presumed facts in the first respondent. It has to be remembered that before a person can be said to have been a party to a contravention within paragraph (c) of s 75B, it must be shown that he intentionally aided, abetted, counselled or procured a contravention, and to form the necessary intent, he must have knowledge of the essential matters which make up the contravention whether or not he knows that those matters amount to a contravention.

So much appears from Yorke v Lucas (1983/84) [1985] HCA 65; 158 CLR 661 at 667 and Giorgianni v R [1985] HCA 29; (1985) 156 CLR 473 at 487-488. Also, before a person can be said to have been a party to a contravention within paragraph (c) of s 75B, he must be an intentional participant, the necessary intent being based upon knowledge of the essential elements of the contravention: Yorke v Lucas (supra) at 670 per Mason ACJ, Wilson, Dean and Dawson JJ. It is, in my opinion, manifestly plain that to embark on a trial of whether the fourth respondent had actual knowledge of facts which, for the purpose of the preliminary inquiry, are presumed to have been engaged in by the first respondent, is to embark on a truly hypothetical inquiry, which does not have much practical or commercial utility.

In essence, the proposal by Mr English to have a trial of the accessorial liability of the fourth respondent on the assumption that the first respondent is guilty, essentially is to seek a trial of one element of a contravention against him, and to have, in essence, a trial of his liability in respect of that aspect of the matter separate from the trial of the accessorial liability of the second and third respondents.

This is not a case where there are such reasons as would persuade the Court to depart from the ordinary rule that all disputes in the matter should be tried together at one hearing involving all proper parties. Here there is not only a fragmentation of parties, but a fragmentation of issues, and moreover a fragmentation of issues which involves an inquiry into whether the fourth respondent had actual knowledge of presumed facts.

It seems to me that the application ought to be refused, but it is obviously in the interests of everybody, in particular the fourth respondent, that the matter proceed as against the second, third and fourth respondents, with expedition and upon the basis of affidavit material which may in fact not be the subject of challenge. But if it is to be the subject of challenge, then let it be done in the ordinary and proper way. I will refuse the motion.

I certify that this and the preceding three (3) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Spender.

Associate:

Dated: 26/10/98

Counsel for the Applicant:	Mr P Toy
Solicitor for the Applicant:	Australian Government Solicitor
Counsel for the Respondent:	Mr S J English
Solicitor for the Respondent:	Lynch & Company
Date of Hearing:	26 October 1998
Date of Judgment:	26 October 1998