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Federal Court of Australia |
Last Updated: 16 June 2004
FEDERAL COURT OF AUSTRALIA
Australian Competition & Consumer Commission v Black on White Pty Ltd
& Ors [2001] FCA 187
TRADE PRACTICES – misleading and deceptive conduct
– consumer protection – liability of persons party to a
contravention by corporation
– whether person liable as accessory where
actions of person are identical actions of corporation – accessorial
liability
of person where corporation deregistered – meaning of "knowingly
concerned" – unconscionable conduct
Federal Court of
Australia Act 1976 (Cth), ss 21, 23
Trade Practices Act 1974
(Cth), ss 51AB, 52, 53(aa), (c), (g), 55A, 75B, 80, 80A, 82, 83, 87,
Corporations Law, s 509
Vocational Education Training and Employment
Act 1991 (Qld)
Yorke v Lucas (1984 – 1985) [1985] HCA 65; 158 CLR
661, cited
Mallan v Lee [1949] HCA 48; (1949) 80 CLR 198,
distinguished
Hamilton v Whitehead [1988] HCA 65; (1988) 166 CLR 121,
followed
Wright v Wheeler Grace and Pierucci Pty Ltd (1988) ATPR
40-865, not followed
Wheeler Grace and Pierucci Pty Ltd v Wheeler
(1989) ATPR 40-940, followed
Morton v Mitchell Products (1996) FCA
828, referred to
United Service Insurance Co Ltd (in liq.) v Lang
(1935) 35 SR (NSW) 487, cited
Banque Internationale de Commerce de
Petrograd v Goukassow [1923] 2 KB 682, cited
Ainsworth v Criminal
Justice Commission [1992] HCA 10; (1992) 175 CLR 564, cited
London Passenger
Transport Board v Moscrop [1942] AC 332, cited
Richardson & Wrench
(Holdings) Pty Ltd v Ligon No 174 Pty Ltd (1994) 123 ALR 681, referred
to
Matheson Engineers Pty Ltd v El Raghy (1992) 37 FCR 6, referred
to
ACCC v ASIC (2000) NSW SC 316, cited
Pioneer Concrete
Services v Galley (1985) VR 675, referred to
Ashbury v Reed (1961)
WAR 49, referred to
TPC v Australian Meat Holdings Pty Ltd (1988) 83
ALR 299, cited
Hurley v MacDonalds Australia Ltd [2000] ATPR 41-741,
cited
Qantas Airways Ltd v Cameron (1996) 66 FCR 246, referred
to
AUSTRALIAN COMPETITION AND CONSUMER COMMISSION v BLACK ON WHITE
PTY LTD (ACN 061 507 248) trading as Australian Early Childhood College
&
Ors
QG 110 OF 1997
SPENDER J
BRISBANE
6 MARCH 2001
|
AUSTRALIAN COMPETITION AND CONSUMER
COMMISSION
APPLICANT |
|
|
AND:
|
BLACK ON WHITE PTY LTD (ACN 061 507 248) trading as Australian Early
Childhood College
FIRST RESPONDENT NICKI POTERI SECOND RESPONDENT JAMES NICHOLAS POTERI THIRD RESPONDENT NICHOLAS JAMES POTERI FOURTH RESPONDENT |
|
DATE OF ORDER:
|
|
|
WHERE MADE:
|
THE COURT DIRECTS THAT:
1. The applicant prepare short minutes of orders to give effect to these reasons.
2. The matter be listed for mention on Wednesday 28 March 2001 at 10.15 am.
Note: Settlement
and entry of orders is dealt with in Order 36 of the Federal Court
Rules.
|
AND:
|
REASONS FOR JUDGMENT
1 These proceedings arise out of the conduct by Black on White Pty Ltd since 1995 of the business of a private college of childhood education under the styles "Australian College of Nannies" and "Australian Early Childhood College" at premises in Queensland, New South Wales and Victoria.
2 The Australian Competition and Consumer Commission (the ACCC) initiated proceedings by an application filed on 1 August 1997. Accompanying that application was a statement of claim against the first three respondents, and the application as filed was directed at those three respondents as respondents. On 23 October 1997, an amended application was filed with the fourth respondent, Nicholas James Poteri added as the fourth respondent, and an Amended Statement of Claim was filed on 5 December 1997, which pleading concerned allegations against all four respondents.
3 The ACCC, on the grounds appearing in that Amended Statement of Claim, sought declarations pursuant to s 21 of the Federal Court of Australia Act that Black on White had engaged in conduct in contravention of ss 52, 53(aa), 53(c), 53(g) and 55A and 51AB of the Trade Practices Act 1974 (the Act) in the manner alleged in that Amended Statement of Claim, and that the second, third and fourth respondents had aided, abetted, counselled or procured, or had been knowingly concerned in, or party to, that conduct, in contravention of the Act. The amended application sought injunctions pursuant to s 80, restraining the first respondent from engaging in that conduct, and the second, third, fourth respondents from being parties to that conduct. It also sought injunctions pursuant to s 80 of the Act, restraining Black on White from taking any step for the recovery of outstanding tuition fees from any person against whom Black on White was found to have engaged in conduct in contravention of the Act. In addition it also sought further orders in respect of notices of disclosure in respect of future enrolments; an order pursuant to s 80A of the Act requiring Black on White to disclose the respects in which each of the four respondents had been found to contravene the Act, to all current or past students against whom a demand had been made for the payment of outstanding tuition fees; an order for corrective advertising; an order under s 80A of the Act requiring the publishing of advertisements of the respects in which the four respondents had been found to have contravened the Act and orders pursuant to s 87(1)B of the Act for compensation to be paid by each of the four respondents to such nominated persons as have suffered or are likely to suffer loss or damage by the conduct of Black on White found by the Court to be in contravention of the Act; and findings of fact for the purposes of s 83 of the Act, as well as costs.
4 The original application sought relief against the first three named respondents, but the application was amended, as was the statement of claim, to include the seeking of relief against the fourth respondent.
5 At the trial of these proceedings Black on White, which had been in liquidation, was deregistered. The company was placed in voluntary administration on 12 October 1997, and deregistered pursuant to the Corporations Law on 30 December 1998. It is accepted by the ACCC that there is no basis on which the proceedings could continue to be maintained against it. The deregistration of Black on White is submitted by the fourth respondent, very forcefully, to be a threshold basis why no relief can or should be ordered against the fourth respondent. It will be necessary to deal with this issue in some detail later.
6 The second and third respondents, being Mr James Nicholas Poteri and his wife, Nicki Poteri, did not appear and, notwithstanding a defence had been filed by them on 1 September 1997, no notice of appearance has been filed and they have taken no part to defend the proceedings brought by ACCC against any of the respondents. The evidence against them is therefore unchallenged.
7 The fourth respondent, Nicholas James Poteri, is the son of the second and third respondents. His defence was filed on 12 May 1998.
8 The trial proceeded on the basis that the ACCC was seeking relief, essentially declaratory and injunctive relief, against the last three respondents on the basis that they were knowingly involved, pursuant to s 75B of the Act, in the contraventions of Part V of the Act which the ACCC asserted had been committed by the first respondent. The focus of those proceedings was whether, as the ACCC alleged, the fourth respondent was knowingly concerned in any of the contraventions which the ACCC submitted the evidence established that Black on White had committed.
9 On the question of compensation under s 87(1B) of the Act, it was submitted by the ACCC that causes of action under that subsection would not fall for determination until the threshold question of liability was established. It is not correct to say, as was submitted on behalf of the fourth respondent that the claims for compensation against him had been abandoned by the applicant. While these proceedings were, at trial, directed to what contraventions the ACCC had established by the evidence, the substantial question is the extent, if at all, it had been established that the fourth respondent was a party within s 75B of the Act to such contraventions as were established.
10 Section 75B of the Act, in Part VI – Enforcement and Remedies, relevantly provides:
"(1) A reference in this Part to a person involved in a contravention of a provision of Part IV, IVA, IVB or V, ... shall be read as a reference to a person who:
(a) has aided, abetted, counselled or procured the contravention;
...
(c) has been in any way, directly or indirectly, knowingly concerned in, or party to, the contravention;
...
11 Section 80 – Injunctions, relevantly provides:
"(1) Subject to subsections (1A), (1AAA) and (1B), where, on the application of the Commission or any other person, the Court is satisfied that a person has engaged, or is proposing to engage, in conduct that constitutes or would constitute:
(a) a contravention of a provision of Part IV, IVA or V;
(b) attempting to contravene such a provision;
(c) aiding, abetting, counselling or procuring a person to contravene such a provision;
(d) inducing, or attempting to induce, whether by threats, promises or otherwise, a person to contravene such a provision;
(e) being in any way, directly or indirectly, knowingly concerned in, or party to, the contravention by a person of such a provision; or
(f) conspiring with others to contravene such a provision;
the Court may grant an injunction in such terms as the Court determines to be appropriate.
...
(4) The power of the Court to grant an injunction restraining a person from engaging in conduct may be exercised:
(a) whether or not it appears to the Court that the person intends to engage again, or to continue to engage, in conduct of that kind;
(b) whether or not the person has previously engaged in conduct of that kind; and
(c) whether or not there is an imminent danger of substantial damage to any person if the first-mentioned person engages in conduct of that kind.
(5) The power of the Court to grant an injunction requiring a person to do an act or thing may be exercised:
(a) whether or not it appears to the Court that the person intends to refuse or fail again, or to continue to refuse or fail, to do that act or thing;
(b) whether or not the person has previously refused or failed to do that act or thing; and
(c) whether or not there is an imminent danger of substantial damage to any person if the first-mentioned person refuses or fails to do that act or thing.
..."
12 Section 82 - Actions for damages, provides:
"(1) A person who suffers loss or damage by conduct of another person that was done in contravention of a provision of Part IV or V may recover the amount of the loss or damage by action against that other person or against any person involved in the contravention.
(2) An action under subsection (1) may be commenced at any time within 3 years after the date on which the cause of action accrued."
13 Section 87 – Other orders, relevantly provides:
"(1) Without limiting the generality of section 80, where, in a proceeding instituted under, or for an offence against, this Part, the Court finds that a person who is a party to the proceeding has suffered, or is likely to suffer, loss or damage by conduct of another person that was engaged in (whether before or after the commencement of this subsection) in contravention of a provision of Part IV, IVA or V, the Court may, whether or not it grants an injunction under section 80 or makes an order under section 80A or 82, make such order or orders as it thinks appropriate against the person who engaged in the conduct or a person who was involved in the contravention (including all or any of the orders mentioned in subsection (2) of this section) if the Court considers that the order or orders concerned will compensate the first-mentioned person in whole or in part for the loss or damage or will prevent or reduce the loss or damage.
(1A) Without limiting the generality of section 80, the Court may, on the application of a person who has suffered, or is likely to suffer, loss or damage by conduct of another person that was engaged in (whether before or after the commencement of this subsection) in contravention of a provision of Part IVA or V or on the application of the Commission in accordance with subsection (1B) on behalf of such a person or 2 or more such persons, make such order or orders as the Court thinks appropriate against the person who engaged in the conduct or a person who was involved in the contravention (including all or any of the orders mentioned in subsection (2)) if the Court considers that the order or orders concerned will compensate the person who made the application, or the person or any of the persons on whose behalf the application was made, in whole or in part for the loss or damage, or will prevent or reduce the loss or damage suffered, or likely to be suffered, by such a person.
(1B) Where, in a proceeding instituted for an offence against section 79 or instituted by the Commission or the Minister under section 80, a person is found to have engaged (whether before or after the commencement of this subsection) in conduct in contravention of a provision of Part IVA or V, the Commission may make an application under subsection (1A) on behalf of one or more persons identified in the application who have suffered, or are likely to suffer, loss or damage by the conduct, but the Commission shall not make such an application except with the consent in writing given before the application is made by the person, or by each of the persons, on whose behalf the application is made.
..."
14 Section 23 of the Federal Court of Australia Act 1976 – Making of orders and issue of writs, relevantly provides:
"The Court has power, in relation to matters in which it has jurisdiction, to make orders of such kinds, including interlocutory orders, and to issue, or direct the issue of, writs of such kinds, as the Court thinks appropriate."
15 In Yorke v Lucas [1985] HCA 65; (1984-1985) 158 CLR 661 Mason ACJ, Wilson, Deane and Dawson JJ stated at 667:
"To form the requisite intent he must have knowledge of the essential matters which go to make up the offence whether or not he knows that those matters amount to a crime. So much was affirmed recently in Georgianni v The Queen [1985] HCA 29; (1985) 156 CLR 473 where the relevant authorities were examined.
Their Honours said at 670:
"There can be no question that a person cannot be knowingly concerned in a contravention unless he has knowledge of the essential facts constituting the contravention."
And later:
"In our view, the proper construction of par. (c) [of s 75B(1)] requires a party to a contravention to be an intentional participant, the necessary intent being based upon knowledge of the essential elements of the contravention."
16 Mr Lucas, the respondent in the High Court, was the managing director of Ross Lucas Pty Ltd. The primary judge, Fisher J, had found that Mr Lucas was insufficiently aware of the relevant facts for him to be involved in the contravention, within ss 75B and 82. Against that background their Honours said, at 670-671 that:
"...upon the facts as found, Lucas was not a person involved in the contravention of s. 52 constituted by the false representations and that he was, therefore, not liable in damages under s. 82. We would only add, lest it be thought that it has escaped our attention, that the appellants may, even if knowledge were not necessary to involvement under par. (a) or under par. (c) as ‘party to’, have encountered difficulty in establishing that Lucas was involved within the meaning of s. 75B in the contravention constituted by the making of the false representations, having regard to the fact that the representations, albeit made on behalf of the Lucas company, were made by Lucas himself. As Dixon J. observed in Mallan v. Lee [1949] HCA 48; (1949) 80 CLR 198, at p. 216:
‘It would be an inversion of the conceptions on which the degrees of offending are founded to make the person actually committing the forbidden acts an accessory to the offence consisting in the vicarious responsibility for his acts.’
It is, however, unnecessary to pursue this aspect of the matter further."
17 This last observation has no relevance in relation to liability under s 75B of Nicholas Poteri, the fourth respondent, but it may have a relevance in respect of the claim which the ACCC advances against James Poteri. However the High Court in Hamilton v Whitehead [1988] HCA 65; (1988) 166 CLR 121 stated with reference to that passage:
"It would seem to us, with respect, that this reservation, made no doubt out of an abundance of caution, was unnecessary. The provisions of the Trade Practices Act...were such that the alleged accessory was indeed a true accessory since the offence committed by the company was not the consequence of a vicarious liability for the actions of its servants carried out on its behalf. It was the consequence of actions undertaken directly by it, that is to say by a person who was the embodiment of the company."
18 French J, in Wright v Wheeler Grace and Pierucci Pty Ltd (1988) ATPR 40-865 said at 49, 376 and 49, 377:
"... But where the conduct upon which liability is founded is the only relevant conduct, it is difficult to see how it can also bear that accessorial character. ... In the end the problem reduces to one of construction, and, as a matter of language, the conduct contemplated by the words of subsec. 75B(1) is conduct distinct from that which constitutes the contravention. There is no evidence of any relevant distinct conduct on the part of Collins and none is set up in the pleading. The conduct constituting the contravention being the only basis for the case against him, that case must fail."
19 When that case was decided, French J did not have the benefit of the High Court’s decision in Hamilton v Whitehead. When Wright came before the Full Court on appeal, Neaves and Burchett JJ stated:
"The dismissal by the trial judge of the claim by the respondents against Mr Collins occurred prior to the decision of the High Court in Hamilton v Whitehead (1989) ATPR par 40-923; 1988 63 ALJR 80. In the light of what the High Court there said, and having regard to the role which the trial judge found that Mr Collins played, vis-à-vis the appellant in making the statements on which the respondents relied, the respondent’s cross-appeal must succeed." [50,246]
In Hamilton v Whitehead, the High Court distinguished the position previously taken in Mallan v Lee [1949] HCA 48; (1949) 80 CLR 198. The Court, constituted by Mason CJ, Wilson and Toohey JJ, stated in Hamilton at 127-8:
"In contrast to the statutory provision under consideration in Mallan v Lee, section 169 of the code speaks directly to the company. It is not a case of a company being made liable for an act performed by a servant of the company on its behalf. The liability imposed is direct, not vicarious. The distinction was drawn by Viscount Haldane LC in Lennards Carrying Co Ltd v Asiatic Petroleum Co Ltd [1915] AC 705 at 713. Its significance is explained by Lord Reid in Tesco Supermarkets Ltd v Nattrass [1971] UKHL 1; [1972] AC 153 at 170:
‘I must start by considering the nature of the personality which by a fiction the law attributes to a corporation. A living person has a mind which can have knowledge or intention or be negligent and he has hands to carry out his intentions. A corporation has none of these: it must act through living persons, though not always one or the same person. Then the person who acts is not speaking or acting for the company. He is acting as the company and his mind which directs his acts is the mind of the company. There is no question of the company being vicariously liable. He is not acting as a servant, representative, agent or delegate. He is an embodiment of the company or, one could say, he hears and speaks through the persona of the company, within his appropriate sphere, and his mind is the mind of the company. If it is a guilty mind, then that guilt is the guilt of the company. It must be a question of law whether, once the facts have been ascertained, a person in doing particular things is to be regarded as the company or merely as the company’s servant or agent. In that case any liability of the company can only be a statutory or vicarious liability.’
See also the statement of Denning LJ in H.L. Bolton (Engineering) Co Ltd v T.J. Graham & Sons Ltd [1957] 1 QB 159 at 172. ...It is against this background that the liability of the respondent falls to be considered. ... Since the respondent was the actor in the conduct constituting the offences and had knowledge of all the material circumstances, it must follow, according to the applicant, that the respondent was ‘knowingly concerned’ in the commission of the offences committed by the company.
In our opinion, the submission is plainly right. Counsel for the respondent sought to gain some comfort from the words of Dixon J in Mallan v Lee [1949] HCA 48; (1949) 80 CLR 198. But, as we have sought to explain, the inversion of which his Honour spoke has no application here. The company is not vicariously liable for the actions of the respondent. The company is the principal offender and the respondent is charged as an accessory. Franklyn J thought that it was ‘wrong and oppressive’ to prosecute the respondent for the identical acts and decisions as were relied on as the acts of the company. There is nothing conceptually wrong in such a course since ‘it is a logical consequence of the decision in Salomon’s Case [1897] AC 22 that one person may function in dual capacities’: Lee v Lee’s Air Farming Ltd [1961] AC 12 at 26. In Reg. v Goodall (1975) 11 SASR 94 at 100 Bray CJ discussed what his Honour described as: ‘some sort of metaphysical bifurcation or duplication of one act by one man so that it is in law both the act of the company and the separate act of himself as an individual’ and expressed his conclusion as follows:
‘my view is that the logical consequence of Salomon’s Case ...is that the company, being a legal entity apart from its members, is also a legal person apart from the legal personality of the individual controller of the company, and that he in his personal capacity can aid and abet what the company speaking through his mouth or acting through his hand may have done.’
We agree with this view." (emphasis added)
20 It is necessary to set out, in at least broad terms, the case which the ACCC brings.
21 It is accepted by the fourth respondent and proved, in any event, that Black on White was a company which at all relevant times operated a college for educating nannies and carers of children. It operated under the name The Australian College of Nannies until about late 1996, when it operated under the name of The Australian Early Childhood College. The company operated principally out of Brisbane, but it also conducted some courses in Sydney and Melbourne.
22 The allegations that the ACCC make are in three broad categories. The first category concerns the accreditation of the curriculum and courses which Black on White offered for the 1997 year. The fourth respondent admits, and it is proved, that Black on White had advertised to members of the public by the use of booklets, brochures and leaflets the child care training courses offered by it through the college during 1997. The documents (which are described in para 7 of the Amended Statement of Claim) were the course guide brochure, the college handbook, a leaflet entitled "Need Financial Assistance", a leaflet advertising national accreditation of college courses, a leaflet entitled "Commonly Asked Questions and Answers", a brochure entitled "Your Career in Child Care" and a brochure regarding studying by correspondence.
23 It is accepted, and I find proved, that the courses advertised in that material for Black on White were:
"Course Code Name of Course
CNADS Advanced Diploma of Early Childhood Education and Science
CNDEC Diploma of Early Childhood Education
CNECE Certificate IV in Early Childhood Education
CNECT Certificate IV in Early Childhood Development Traineeship
CNECD Certificate IV in Early Childhood Development
CNECP Certificate IV in Early Childhood Practices
CNECS Certificate III in Early Childhood Skills"
24 It is admitted, and I find established, that those documents establish that Black on White represented:
"(a) each of the courses offered through the College during 1997 were accredited with the Vocational Education, Training and Employment Commission of Queensland pursuant to the Vocational Education, Training and Employment Act 1991 (Qld) (‘VETEC Accreditation’);
(b) each of the said courses were accredited nationally pursuant to the National framework for the recognition of training agreement, being an agreement between the Commonwealth and the various State and Territory governments (‘National Accreditation’); and
(c) the College qualified for the use of the trade marks or logos relating to VETEC Accreditation and National Accreditation in relation to each of the courses offered during 1997."
25 The ACCC alleges that each of those three representations was false, misleading and deceptive, or likely to mislead or deceive, because none of the courses had VETEC accreditation; none of them had national accreditation; and the college was not qualified to use the trademarks or logos relating to VETEC accreditation and national accreditation in relation to those courses.
26 The allegation of the ACCC is that in those circumstances, Black on White had engaged in conduct that was misleading or deceptive contrary to s 52 of the Act; made false representations that services were of a particular standard or quality contrary to s 53(aa) of the Act; made false representations that services had a sponsorship or approval or uses or benefits contrary to s 53(c) of the Act; and had engaged in conduct liable to mislead the public as to the nature, the characteristics or the suitability for the purposes of services contrary to s 55A of the Act.
27 The second category of complaint by the ACCC concerns "other representations and conduct". The allegations concerning this head of complaint runs from par 12 to par 287 of the 44-page Amended Statement of Claim. Ten specific instances are alleged and particularised, which allege misrepresentations about matters other than accreditation.
28 The first general collection of misrepresentations in this category are misrepresentations as to the terms on which the college would take enrolment forms from prospective students, and the basis on which students were entitled to cancel their enrolment, particularly as to their entitlement to refund of fees paid, and their liability with respect to the fees which would otherwise be incurred for the tuition to be provided. The second broad category of "other representations" concerns what are said to be representations concerning the deferred payment plan of tuition fees by students, it being alleged that Black on White had a plan for permitting the deferral of payment of tuition fees. There is a sub-set of this broad category, in that in respect of two students, it is alleged that there was a failure by the college to draw attention to the provision in the enrolment form signed by the student, which provision disentitled the student to a refund in the circumstances in which she found herself. The third broad category of the "other representation" group conduct consists of allegations of breaches of s 51AB of the Act: the essential allegation here seems to be that the conduct which includes the conduct that is said to be a breach of s 52, is also unconscionable conduct within s 51AB of the Act.
29 Mr and Mrs Poteri, the second and third respondents, are husband and wife. Mrs Poteri was primarily responsible for matters relating to teaching, formulation of curricula, the direction of teachers, the content of courses, and similar matters. Mr Poteri was the day-to-day manager of the college.
30 The claim by the ACCC against the fourth respondent, Mr Nicholas Poteri, the son of the second and third respondents, was that he was directly involved in some aspects of the administration of the college.
31 It is said by the ACCC that he prepared the document called "A Course Handbook", enrolment forms, leaflets which contained representations as to both the accreditation of the courses and also as to the availability of financial arrangements of the deferred payment plan. The case for the ACCC is said to be that Nicholas Poteri, in respect of the accreditation issue, knew that the courses were not accredited at the time at which they were being advertised through material disseminated by the college to the effect that they were accredited, and that his involvement was such as to attract liability by virtue of the operation of s 75B of the Act. The case by the ACCC against Nicholas Poteri (as particularised) is much wider than the case as pleaded. The case as particularised seems really to be that Nicholas Poteri caused the material which was disseminated to students to be typed up in circumstances when he knew of its intended publication and of its falsity. That case raises the question of whether it is sufficient to establish accessorial liability under s 75B of the Act.
32 The case against Nicholas Poteri as pleaded is to be found only in pars 3, 288, 289 and 290 of the Amended Statement of Claim as follows:
"3. The Second, Third and Fourth Respondents at all material times:
(a) were employed by the First Respondent and remain so employed;
(b) acted in the respects pleaded herein on behalf of the First Respondent as servants or agents within the scope of their actual or apparent authority.
...
288. The Second, Third and Fourth Respondents were at all material times the persons responsible for the day to day control of the affairs and conduct of the First Respondent.
289. The Second, Third and Fourth Respondents are parties that have:
(a) Aided, abetted, counselled or procured the contraventions of the Act by the First Respondent; or
(b) Been directly or indirectly knowingly concerned in or party to the conduct of the First Respondent in contravention of the Act.
290. The First, Second, Third and Fourth Respondents intend to repeat such conduct unless restrained."
33 The defence of the fourth respondent admits that the conduct of Black on White in each of the ten particularised instances of conduct with named students or prospective students, was conduct in connection with the supply or possible supply of services to a person, and were of a kind ordinarily acquired for personal, domestic or household use or consumption. The ACCC alleges that relevant representations were made by one Pamela Preston who was employed by the first respondent as an administrative officer, or by Gaye Veenstra who was also employed by Black on White. Nicholas Poteri admitted that the enrolment form used by Black on White included a term that in some circumstances a student would be required to pay the full amount of tuition fees on the cancellation of a course. He further admitted that the 1997 college handbook, the 1997 course guide, the leaflet entitled "Tuition Fee Financial Assistance" and the 1997 enrolment form represented that Black on White provided financial assistance to students unable to pay tuition fees in advance by a deferred payment plan for tertiary students.
34 Nicholas Poteri also admitted that the 1996 college handbook, the 1996 course guide brochure, a leaflet entitled "Tuition Fees Financial Assistance" and the 1996 enrolment form, in those documents Black on White represented that students unable to pay tuition fees in advance could agree to pay fees by instalments.
35 Nicholas Poteri worked as a part-time accreditation liaison officer for Black on White for the period October 1996 to August 1997. In that capacity, he had dealings and communication with a number of Commonwealth and State Government departments and agencies. He admits that he had a general knowledge of the contents of the documents described in paragraph 7 of the applicant’s Amended Statement of Claim, and had a general knowledge of the contents of Black on White’s enrolment forms.
36 Mr Nicholas Poteri was the beneficial owner of one of the shares in Black on White, which share was held on trust for his benefit by one Phillip Arnold Davis. He directed Davis to transfer the share into his name on 13 October 1997, became a director of Black on White on that date, and the company appointed voluntary administrators on that day. He says that he was a full-time student at Bond University from February 1995 to August 1995 and only worked for Black on White in May 1995 at the Brisbane Careers Market and in August 1995 at the Tertiary Studies Expo; that he was not paid for working at those two events. He says that he worked for the First Respondent on a part-time basis from September 1995 to January 1996 as a computer systems analyst for what he describes as "nominal remuneration". He says that he continued as a full-time student at Bond University in February 1996 and resided on the campus of that university at the Gold Coast from February 1996 to August 1996. He did not work for Black on White during that period except for assisting at the Brisbane Careers Market in May 1996 on a voluntary basis.
37 Importantly, Nicholas Poteri says that during the period that he worked from October 1996 to September 1997 he did not communicate with students at the college operated by Black on White concerning course accreditation, nor at any time did he communicate with other students concerning course accreditation. He denies the assertion by the ACCC that he was, in a sense, the co-author of the documents referred to in paragraph 7 of the Amended Statement of Claim, and that he had no involvement in the drafting of those documents. On the question of accreditation, Nicholas Poteri executed detailed correspondence to departmental bodies concerning the accreditation process. On 2 May 1997, 20 May 1997, 13 June 1997 and 4 July 1997, as "Curriculum Accreditation Liaison Officer" or "Course Accreditation Liaison Officer" on behalf of the first respondent. That correspondence, and his involvement generally in the accreditation process, is strong evidence relevant to whether he was knowingly concerned in the accreditation misrepresentations.
38 An important issue between the ACCC and Nicholas Poteri is the assertion by him that the representations concerning accreditation were not misleading or deceptive or likely to mislead in the circumstances that Black on White had proposed for accreditation the courses offered by the college, that those colleges were endorsed for accreditation by the Curriculum Advisory Committee which was duly constituted according to the requirements of the VETEC accreditation process; that the courses offered by Black on White were subject to accreditation by the Accreditation Council of VETEC; and that according to VETEC’s advertising guidelines all courses subject to accreditation could be advertised using the stylisation prescribed under the Vocational Education Training and Employment Act 1991 (Qld).
39 In particular, Nicholas Poteri says that Black on White included an addendum in the student information packages, which addendum contained the necessary wording of disclaimers required by the Vocational Education Training and Employment Act 1991 (Qld). The assertion by Nicholas Poteri is that the use of the trademarks and logos was therefore permitted in accordance with the VETEC advertising guidelines.
40 Before dealing in detail with the allegations by the ACCC, it is convenient to deal first with the submissions on behalf of the fourth respondent about the effect of the dissolution of the first respondent.
41 Black on White was deregistered pursuant to s 509 of the Corporations Law on 30 December 1998 and, pursuant to s 509(5) of the Corporations Law was dissolved on that date. The effect of that dissolution is that Black on White ceased to be a legal person on 30 December 1998. In Morton v Mitchell Products (1996) FCA 828, an unreported judgment of Sackville J of 18 September 1996, the Court found, at 42, that upon dissolution the company ceases to be a legal person: it becomes a "non-existent person". Reference was made to the judgment of Jordan CJ in United Service Insurance Co Ltd (in liq.) v Lang (1935) 35 SR (NSW) 487 at 495 where his Honour said:
"If a company incorporated in Victoria has been dissolved in Victoria it must be treated as dissolved everywhere ..."
Jordan CJ referred to the comment in Banque Internationale de Commerce de Petrograd v Goukassow [1923] 2 KB 682 at 691: "A non-existent person cannot sue."
42 Here the submission on behalf of the fourth respondent is that, having regard to the fact that Black on White ceased to exist on 30 December 1998, the grant of an injunction or orders requiring it to do anything or refrain from doing anything would be futile. It cannot comply with any mandatory orders sought against it pursuant to ss 80 and 80A of the Act, and there is no possibility that it will engage in contravening conduct such as to justify the grant of a permanent injunction pursuant to s 80 of the Act.
43 All of this may be accepted.
44 It was then submitted that in a practical sense, the only live relief sought by the applicant against the first respondent was a declaration pursuant to s 21 of the Federal Court of Australia Act 1976.
45 The grant of a binding declaration of right pursuant to s 21(1) of the Federal Court of Australia Act 1976 is discretionary. In Ainsworth v Criminal Justice Commission [1992] HCA 10; (1992) 175 CLR 564, the High Court held that the power of a court to grant a declaration was: "... confined by considerations which mark out the boundaries of judicial power ..." The Court said at
"...It is now accepted that superior courts have inherent power to grant declaratory relief. It is a discretionary power which ‘(i)t is neither possible nor desirable to fetter ...by laying down rules as to the manner of its exercise.’ (Forster v Jododex Aust. Pty Ltd [1972] HCA 61; (1972) 127 CLR 421, at p 437 per Gibbs J.). However, it is confined by the considerations which mark out the boundaries of judicial power. Hence, declaratory relief must be directed to the determination of legal controversies and not to answering abstract or hypothetical questions. (See In re Judiciary and Navigation Acts [1921] HCA 20; (1921) 29 CLR 257). The person seeking relief must have ‘a real interest’ (Forster (1972) 127 CLR, at p 437 per Gibbs J.; Russian Commercial and Industrial Bank v British Bank for Foreign Trade, Ltd [1921] 2 AC 438, at p 448 per Lord Dunedin) and relief will not be granted if the question ‘is purely hypothetical’, if relief is ‘claimed in relation to circumstances that [have] not occurred and might never happen’ (University of New South Wales v Moorhouse [1975] HCA 26; (1975) 133 CLR 1, at p 10 per Gibbs J.) or if ‘the Court’s declaration will produce no foreseeable consequences for the parties’ (Gardner v Dairy Industry Authority (NSW) (1977) 52 ALJR 180, at p 188 per Mason J.; see also at p 189 per Aickin J.; 18 ALR 55 at pp 69, 71 respectively) ..."
46 In the light of these observations, it was submitted on behalf of the fourth respondent that the Court should not exercise its discretion to make a declaration against the first respondent that it had engaged in misleading and deceptive conduct in contravention of s 52 or s 51AB of the Act, for the reasons:
a. the ACCC cannot secure a proper contradictor for the declaration sought against the First Respondent since there is no one in existence who has a true interest to oppose the declaration sought, Black on White having ceased to exist on 30 December 1998;
b. the declaration sought would not be a ‘binding’ declaration of rights between the applicant and the first respondent, since it cannot affect any rights between the applicant and the first respondent, because the first respondent ceased to exist on 30 December 1998.
c. Further, that the declaration sought would have no foreseeable consequences for either the applicant or the non-existent first respondent.
d. That the declaration sought against Black on White would not have any deterrent effect upon the first respondent concerning the conduct engaged in by it, because the first respondent ceased to exist on 30 December 1998.
47 The core submission on this aspect of the matter by the fourth respondent is that a declaration cannot properly be made against the fourth respondent when the first respondent is non-existent, and in circumstances in which the second and third respondents will be indirectly affected by the declaration made against the fourth respondent. The latter aspect of the matter is said to be supported by the judgment of Viscount Maugham in London Passenger Transport Board v Moscrop [1942] AC 332 at 345:
"...It is true that in their absence they were not strictly bound by the declaration, but the courts have always recognized that persons interested are or may be indirectly prejudiced by a declaration made by the court in their absence, and that, except in very special circumstances, all persons interested should be made parties, whether by representation orders or otherwise, before a declaration by its terms affecting their rights is made ..."
The fact of the present matter is that the second and
third respondents have chosen not to appear. That circumstance, in my view,
cannot be the basis for a conclusion that there are therefore no proper
contradictors before the Court, and therefore practical injustice
could or would
result to the second and third respondents if a declaration was made against the
fourth respondent.
48 It is just not correct to say, as the fourth respondent contends, that the declaratory relief sought by the applicant against the fourth respondent presupposes the making of a declaration by the Court that the first respondent has engaged in conduct which is in contravention of ss 52 and 51AB of the Act. A declaration against the fourth respondent would be dependent, in the circumstances of this case, only on a finding that on the basis of evidence proved to the satisfaction of the Court the first respondent had engaged in conduct in contravention of those sections.
49 In Richardson & Wrench (Holdings) Pty Ltd v Ligon No 174 Pty Ltd (1994) 123 ALR 681, a claim for damages was made against a corporate respondent and against individuals by way of accessorial liability under s 75B and s 82 of the Act. The corporate applicant had been dissolved by the date of trial, and the action did not proceed against the corporate applicant. Burchett J said at 683:
"...At the hearing, it was accepted by all other parties that the first respondent had been dissolved and the case proceeded against the second and third respondents only. It was not disputed that an action may be maintained against individuals alleged to have been involved in a contravention of s 52, within the meaning of s 75B, although proceedings are not pursued against the corporation which is the principal party to the contravention: Matheson Engineers Pty Ltd v El Raghy (1992) ATPR 41-192 at 40,611; Cooper and Dysart Pty Ltd v Sargon (1991) 4 ACSR 649 at 664, per Walsh J (with whom Pidgeon J agreed) ..."
50 In Matheson Engineers Pty Ltd v El Raghy (1992) 37 FCR 6, French J held that it was open to an applicant in proceedings for contravention of s 52 of the Trade Practices Act 1974 to sue only the natural person said to be involved in the relevant contravention, without joining the primary corporate contravenor.
51 It was submitted on behalf of the fourth respondent that both Richardson and Wrench and Matheson could be distinguished. True it is that in Matheson the primary corporate contravenor was still in existence, and in Richardson and Wrench the claim was a claim for damages pursuant to s 82 for contravention of s 52 of the Act; but there is no reason in principle why the fact that a principal offender or contravenor ceases to exist, extinguishes the liability of a party that was, until that event, liable as a s 75B accessory. If a person aids, abets or is knowingly concerned in the commission by a natural person of a crime, the accessorial liability of that person does not cease on the death of the principal offender.
52 Directly relevant to the fourth respondent’s submission concerning the consequences of the dissolution of the first respondent, Austin J in ACCC v ASIC (2000) NSW SC 316 said at [47]:
"...It is not necessary to join the company in order to obtain relief against its officers by way of pecuniary penalty, injunction or declaration (See section 76(1)(b)-(f) of the Trade Practices Act), since an independent cause of action arises in relation to each person who was relevantly involved in the contravention."
53 I hold that the ceasing to exist of Black on White on its dissolution does not mean that this Court is unable to make the orders sought against any of the second, third and fourth respondents if it is otherwise appropriate to do so. I do not accept, on the basis of what appears above, that the application, so far as it seeks relief against the fourth respondent, should be dismissed.
54 The second general submission of the fourth respondent is that the case as pleaded must fail if it is not established that the fourth respondent was a person responsible for the day-to-day control of the affairs and conduct of the first respondent. However, as I read the Amended Statement of Claim, even if the fourth respondent were not factually a person responsible for the day-to-day control of the affairs and conduct of the first respondent, nonetheless it might be made out that he was a person directly or indirectly knowingly concerned in or a party to conduct of the first respondent in contravention of the Act.
55 In my judgment, the ACCC has failed to establish that "at all material times the (fourth respondent) was a person responsible for the day-to-day control of the affairs and conduct of the first respondent". It is therefore necessary later to consider the particularised ways in which the ACCC asserts that the fourth respondent was knowingly concerned in the various alleged contraventions of the Act by the first respondent. The material times for that allegation are from about early 1995 to in or about 12 October 1997, and the ACCC alleges that the fourth respondent was one of the persons responsible for the representations regarding accreditation, and the "other representations" and conduct.
56 I am not satisfied, on the evidence, that the ACCC has established that the fourth respondent was the creator or author or co-author of the various documents alleged in paragraph 7 of the Amended Statement of Claim. The ACCC relies on the evidence of Mrs Veenstra and Mrs Preston, in particular, and on further evidence from Mrs Eagle. That evidence has been subjected to detailed criticism in the written submissions by the first respondent, which criticisms I accept. I think a more accurate description of Nicholas Poteri’s place in the scheme of things is reflected in the first statement of Mrs Veenstra dated 10 December 1997 which became exhibit 4, in which she said:
"...If Mr Poteri wanted any changes to the information in the College materials, Nicholas would make those changes. Nicholas usually attended the College four days a week. ... I don’t believe Nicholas would have put together anything that was sent out from the College unless Mr Poteri had seen it. Mr Poteri would rarely look at something without making changes to it."
57 In respect of the particular allegation by the ACCC that the fourth respondent was the co-author, with his father, of each of the booklets, brochures and leaflets referred to in paragraph 7 of the Amended Statement of Claim, James Poteri signed the letters of demand referred to in paragraphs 31, 175, 243 and 276. In respect of all of the letters, including the letters of demand referred to in paragraphs 60 and 92, Mr Poteri gave evidence that he had nothing to do with the conduct of Black on White in sending any of those letters. It was not put to him in cross-examination that he was the co-author of any of those letters or that he had type-set or formatted the letters or any precedent of it for use by Black on White.
58 The ACCC has not satisfied me of its claim that the fourth respondent was the co-author of any of the letters of demand.
59 In respect of the deregistration letters, both of which are referred to in paragraphs 182 and 276 of the Amended Statement of Claim, each of those letters was signed by James Poteri. The fourth respondent says that he had nothing to do in sending either of those letters, and he was not cross-examined about his evidence-in-chief concerning either letter. In the light of that evidence, I am not satisfied that the fourth respondent was the co-author of the letters referred to in paragraphs 182 and 276 of the Amended Statement of Claim.
60 The deferred payment plan and student assistance letters which the ACCC alleges were co-authored by the fourth respondent, are referred to in paragraphs 139, 168, 172, 308, 216, 239 and 247 of the Amended Statement of Claim. The fourth respondent denied he was the author of these letters, and said that he type-set the precedent letter, the text of which was given to him by his father. I accept the evidence of Nicholas Poteri in this respect, and I accept that he had been asked to type-set the letter so that Mrs Veenstra and Mrs Preston could access the letter through the database. The fourth respondent gave evidence that the system he programmed would notify Mrs Preston of the recommendation to send a letter of the kind he had type-set, but that Mrs Preston had the opportunity to over-ride the letter, "to choose letters that were not as offensive or – not offensive, but as strict, and she could actually bring it up or take it down a level." None of the letters is signed by Nicholas Poteri. The letters referred to in paragraphs 139, 172, 239 and 247 are unsigned. James Poteri signed the letters referred to in paragraphs 168 and 216.
61 In respect of the enrolment forms of which the ACCC alleges Nicholas Poteri was the co-author, the fourth respondent gave evidence in respect of the enrolment forms (referred to in paragraphs 25, 41, 79, 101, 138, 167, 196, 232 and 267) that he type-set the enrolment form, but he says that apart from that he had nothing to do with the conduct of the first respondent in sending the enrolment forms. He agreed that he made changes to the enrolment form from time to time "as directed". Mrs Preston gave evidence that "enrolments were her domain" and that Nicholas Poteri did not write any of the enrolment letters. On the other hand, the email of 4 June 1996 to Mrs Veenstra from Nicholas Poteri said:
"I’ve also re-done the Course Guide, Enrolment Form, Beware!, and Government Assistance flyers. (I am not sure if you are using this last one yet?) These new Course Guide and Enrolment Form files are needed to match the new Handbook (all are dated 6/9/96)."
62 On the whole of the evidence regarding the documents referred to in paragraph 7 of the Amended Statement of Claim, I am not satisfied that the fourth respondent was the creator, author or co-author of those documents.
63 I am quite satisfied that Mr Poteri was not a person who was responsible for the day-to-day control of Black on White, nor was he responsible for the creation of the contents of the college documents. Mr Davis, a director of Black on White, gave evidence to that effect for the fourth respondent. He is, in a sense, in the camp of the respondents, and in one significant area of his evidence, that dealing with the timing of the addendum document in the distribution of promotional material, I simply do not accept his evidence. Nonetheless, I accept his evidence concerning the role of Nicholas Poteri in the operation of the college, particularly as it accords with my view of the considerable other evidence in the matter. The solicitor’s files of the firm Baker Johnson indicate convincingly that James Poteri was the person concerned giving the instructions concerning all the controversies the subject of those files. I accept that Nicholas Poteri had some connection with many of the documents on which the ACCC relies, in the sense that his role was, I find, as Mrs Veenstra said in paragraphs 27 and 28 of her affidavit on 10 December 1997. In that paragraph, Mrs Veenstra stated:
"27. Nicholas Poteri worked with the computers at the College and up until the time that Mrs Preston and I left he had been putting together a database. He also usually formatted the information in the College materials which were sent out to potential students. If Mr Poteri wanted any changes to the information in the College materials, Nicholas would make those changes. Nicholas usually attended the College four days a week.
28. Mr Poteri gave Nicholas directions to do most things. I don’t believe Nicholas would have put together anything that was sent out from the College unless Mr Poteri had seen it. Mr Poteri would rarely look at something without making changes to it. On one occasion, Mr Poteri asked me to get Nicholas to sign a couple of letters which I believe were sent out under the signature of the College Assessment Panel."
64 There is no suggestion by her there that the fourth respondent occupied any position of authority in the college which permitted him to control the daily affairs and conduct of Black on White. I think that paragraph truly describes what Mr Nicholas Poteri’s role was.
65 It is the fact that Mrs Veenstra, an employee of Black on White, is the person whom the ACCC alleges in fact made the representations alleged in the Amended Statement of Claim that the ACCC asserts were false, misleading or deceptive or likely to mislead or deceive in paragraphs 15, 21, 154, 155, 156, 157, 158, 159, 164, 169, 228, 229, 230, 233 and 235.
66 Mrs Preston, another employee, according to the ACCC had some connection with the contraventions alleged in paragraphs 134, 135, 173, 202, 203, 228, 229, 232 and 233. She, the ACCC alleges, signed the letters from the first respondent referred to in paragraphs 53, 54, 107, 168, 197, 237, 272 and 275, and further attended, according to the ACCC, the relevant meetings referred to in paragraphs 128, 132 and 244. While the fourth respondent had some connection with the matters the subject of the allegations of the ACCC, in the sense that I have earlier described, in my opinion it cannot be said (with the exception of the accreditation misrepresentations) that even if those matters constituted a contravention of the Act by Black on White, Nicholas Poteri was knowingly concerned in any of those contraventions.
67 It is not necessary to deal in any detail with other aspects of representations and conduct particularised in the Statement of Claim, save for the important allegation that the fourth respondent had knowledge of the representations made by the first respondent as to accreditation and of their falsity.
68 At the end of 1996, Nicholas Poteri knew that the courses that the college was offering for 1997 had not then been accredited, although those courses had been endorsed for accreditation by the Curriculum Advisory Committee. The evidence indicates that an addendum was included in student information packages, but there is a serious dispute as to when that addendum was included. On behalf of the fourth respondent, it was submitted that Mr Davis had assembled some two to three thousand information packages in December 1996, which addendum, it was said, contained the necessary wording of disclaimers required by the Vocational Education, Training and Employment Act 1991 (Qld) (the VETEC Act). The contention on behalf of Nicholas Poteri is that the use of the trademarks and logos by Black on White was therefore permitted in accordance with the VETEC advertising guidelines. Whether that be so or not, it must be remembered that the ultimate question is whether, even with the addendum, the conduct of Black on White in sending out the documentation with the addendum, was nonetheless conduct in contravention of s 52 of the Act. The ACCC contends that on the evidence the addendum was not included in the material sent out by the first respondent until towards the middle of 1997.
69 The Vocational Education, Training and Employment Commission (VETEC) is a commission established under the VETEC Act. VETEC operates within the portfolio of the Queensland Department of Training and Industrial Relations, and is the principal provider of advice to the Queensland Government on vocational education, training and employment matters and the distribution of government training funds. It is an offence under s 67 of the VETEC Act for a person to confer, offer to confer, or advertise that the person is authorised to confer awards of a certificate, advanced certificate, associate diploma or diploma, where the person is not legally authorised to confer that award, unless the following disclaimer is included in clear print on the award or in any offer or advertisement made by the person: "The course for which this award is issued has not been accredited under the Vocational Education, Training and Employment Act 1991."
70 The advertising policy of VETEC reflects the statutory provision. Under the heading "Disclaimer", clause 5 of that advertising policy relevantly provides:
"The use of the words certificate, advanced certificate, associate diploma, diploma is not permitted unless the courses have been accredited by the Accreditation Council OR a disclaimer is printed clearly on the document or in the advertising.
(A) The Act prohibits the use of the words Certificate, Advanced Certificate, Associate Diploma or Diploma unless these award courses have been accredited by the Queensland Employment, Vocational Education and Training Board or by the Accreditation Council, or the following disclaimer is included in clear print:
‘The course for which this award is issued has not been accredited under the Vocational Education, Training and Employment Act 1991 (section 3.7)’.
...
(D) Where the course or training program has been submitted to the Recognition Directorate for accreditation or recognition, the following wording may be used in advertising:
‘Subject to accreditation/recognition by the Accreditation Council, VETEC.’
71 The addendum to the college handbook which, for the fourth respondent it is said was inserted from December 1996 in the information packages forwarded to students by the college, and which ACCC says was not included in information supplied to students until approximately the middle of 1997, is in the following terms:
"The following courses are subject to accreditation and registration by the Office of VETEC. The courses for which these awards are issued have not been accredited under the Vocational Education, Training and Employment Act 1991 (Section 3.7). The College is currently finalising the accreditation and registration of these courses.
CNADS Advanced Diploma of Early Childhood Education and Science CNDEC Diploma of Early Childhood Education CNECE Certificate IV in Early Childhood Education CNECD Certificate IV in Early Childhood Development CNECT Certificate IV in Early Childhood Development CNECP Certificate IV in Early Childhood Practices CNECS Certificate III in Early Childhood Skills
In the interim, the College has implemented transitionary arrangements whereby students may commence and undertake studies in available equivalent College courses that are: Nationally Accredited and Recognised; accredited, registered, and recognised by the Office of VETEC; and Austudy/Abstudy approved. Please contact the College for further information.
Addendum to College Handbook, Course Guide, Open Learning and Colour Brochure Dec. 96"
The question of when the addendum was inserted is the most difficult factual issue in these proceedings.
72 For the fourth respondent, it was submitted that I should find that the addendum was included in the material as of, and from, December 1996. Factors inclining to that conclusion were said to be:
1. The uncontested evidence of Mr Davis as to the fact that the Addendum being placed in the student information packages and sent out to students from December 1996.
2. The evidence of the Fourth Respondent as to the creation of the Addendum in December 1996.
3. The evidence of both the Applicant and the Fourth Respondent as to the practice of the College concerning the revision date on College documents and the presence on the Addendum of a date of December 1996.
4. The Applicant’s evidence as to the e-mail from the Fourth Respondent on 23 January 1997 concerning the Austudy temporary conversion and its correspondence to the transitory arrangements referred to in the Addendum itself being strongly probative of the creation of the Addendum in December 1996.
5. The absence of any probative evidence which suggests that the Addendum was not created in December 1996.
73 The issue is particularly important for the credit of Nicholas Poteri, because of the date "Dec. 96" which appears at the foot of the addendum. That date, consistent with the system of noting the date of any changes to any of the college documents, is meant to indicate that the addendum was brought into existence in December 1996. If in fact it was not, it means the insertion of that date was intended by Nicholas Poteri to give credence to a falsehood.
74 These proceedings are civil proceedings. It follows that the onus of proof on the ACCC is the civil standard, although the Briginshaw aspect of that standard has to be borne in mind, having regard to the circumstances just mentioned.
75 Nonetheless, I am satisfied that the addendum was not produced and placed with the information packages as Mr Nicholas Poteri and Mr Davis assert, but that the addendum came into existence much later. I am satisfied that accreditation representations were made without effective correction or qualification.
76 In my opinion, however, when the addendum was included in the information material, it was not only sufficient to comply with the VETEC advertising policy, but was such as to deprive the conduct of using the trademarks and logo of the quality of being misleading or deceptive or likely to mislead or deceive.
77 It was expressly conceded, on behalf of the fourth respondent, that if the addendum was not provided to students with the information packages, the college handbook and the other documents referred to in paragraph 7 of the Statement of Claim, to the extent they constitute a present misrepresentation that the courses described therein are accredited, are misleading.
78 I do not think that the principle in Browne v Dunn (1894) 6 R 67 has any application on the question of when the addendum came into existence or when the addendum was included in the student information packages which were sent by the first respondent to students. The issue concerning those matters was an issue of very real contest. There can be no question that the failure to contest the evidence of Mr Davis as to the existence of the addendum in December 1996 and its inclusion in the student information packages sent out to students at that time, or the failure to challenge the evidence of Nicholas Poteri that he picked up one of the completed packages and saw that everything "seemed to be in the correct order" and that the addendum was present in the package he examined does not, in the circumstances of the trial, constitute an implied acceptance of that evidence.
79 In my opinion, contrary to the submission on behalf of Nicholas Poteri, the email sent on 23 January 1997 from him to Mrs Veenstra and Mrs Preston, is inconsistent with the addendum having been in existence in December 1996. The addendum, in its reference to "transitory arrangements" says that "In the interim" (that is, prior to accreditation) "the College has implemented transitory arrangements ..."
80 The text of the email reads:
"I have created six letters in the DEET folder titled Austudy Temporary Conversion. There is one letter for each of the new course titles. These are the letters which we should send to each student having difficulty with Austudy applications. For each student, use the letter with the new course code in the title that corresponds to the course that the student has enrolled in (Eg CNECD). The text of each letter is slightly different so as to map new course codes to old course codes (Eg CNECD->CNCCC).
Kind regards,
N."
81 This indicates to me that, at least by 23 January 1997, the college had not implemented transitory arrangements, and points rather to the existence of the addendum coming into existence after the difficulties of Austudy funding had become known with the level of student complaint, and at least no earlier than 23 January 1997. Such a conclusion is quite contrary, of course, to the evidence of Mr Davis and Mr Nicholas Poteri.
82 In my opinion, the representations concerning accreditation were not representations as to future matters, but were representations as to existing fact, namely that each of the courses offered by the fourth respondent for 1997 was accredited. The allegations in paragraph 9 of the Amended Statement of Claim were admitted by the fourth respondent.
83 Notwithstanding my rejection of the evidence concerning the addendum in December 1996, I am satisfied that at that time the fourth respondent believed, reasonably, that the courses which the college offered for the 1997 year would receive accreditation. This state of mind, which may also properly be regarded as the state of mind of the college, does not mean that the representations concerning accreditation were not representations in contravention of s 52 of the Act.
84 It seems to me to be extraordinary that if events occurred as Mrs Davis and Mr Poteri say they did concerning the insertion and distribution of the addendum with the promotional material, and while there are a number of persons who say that they did not receive the addendum in the promotional material sent to them, there is not one person out of the two or three thousand people to whom the promotional material in the form which Nicholas Poteri says it was sent, or of the many students who attended the college in 1997, has given evidence to support that version. I accept that criticism might validly be made about the quality of recollections of those witnesses who swear that they did not receive the addendum in the material that was sent to them.
85 Nicholas Poteri corresponded with Mr Moroney of Training Queensland and Ms Marjorie Christiansen of Recognition Directorate in respect of the curriculum of the college (which correspondence was signed by Nicholas Poteri as "Curriculum Accreditation Liaison Officer" or "Course Accreditation Liaison Officer") between May 1997 and August 1997, for the purpose of seeking accreditation of the college’s courses. That correspondence sits oddly, in my view, with the claim that the addendum was part of the operations of the college business from December 1996.
86 I think it is also significant that that Mrs Veenstra said:
"Mr [James] Poteri told Mrs Preston and myself that the Addendums were only to be sent to Queensland enquirers and not to people from interstate. Accordingly, Mrs Preston and I only included the Addendums at page 19 of the Handbook in material we sent to enquirers from Queensland."
87 I am satisfied that the representations concerning accreditation made by the first respondent was conduct in contravention of s 52 of the Act. The conduct was clearly conduct in trade or commerce and, in my view, was conduct that was misleading or deceptive or likely to mislead or deceive. Moreover, I am satisfied that Nicholas Poteri was knowingly concerned in that conduct.
88 The submissions on behalf of the fourth respondent, asserting that the ACCC abandoned all relief for the payment of compensation pursuant to s 87(1A) of the Act, misunderstand the position of the applicant. Mr Gibson QC, on behalf of the ACCC indicated that in respect of a claim for compensation under s 87(1B) of the Act, the ACCC would not be able to proceed at this time, because of its understanding that the cause of action under s 87(1B) does not arise until the threshold question of liability is established.
89 To be knowingly concerned requires intentional participation; Yorke v Lucas at 667.
90 It was submitted on behalf of the ACCC that it was sufficient if, with knowledge of the individual facts, it was shown that the individual "had something to do with" the contravening conduct, relying on Pioneer Concrete Services v Galley (1985) VR 675 at 707. The observations of the Full Court in the Pioneer Concrete Services case have been misrepresented by the ACCC in that submission. The Court said at 707:
"The concept of being ‘concerned in’ a business is even wider, perhaps the most vague of all the expressions, once being described as equivalent to ‘having something to do with ‘a business’: George Hill & Co v Hill (1886) 55 LT 769 at p.771 per Kekewich J."
91 I think the suggested test of "having something to do with" importantly understates what has to be shown. I think the proper approach is reflected in the observations by the Full Court of the Supreme Court of Western Australia in Ashbury v Reed (1961) WAR 49, at 51 which was cited by Wilcox J in TPC v Australian Meat Holdings Pty Ltd (1988) 83 ALR 299 at 357:
"The question which a Court should ask itself ... is whether on the facts it can reasonably be said that an act ...shown to have been done ...by the defendant does in truth implicate or involve him in the offence, whether it does show a practical connection between him and the offence."
92 I ask myself that question.
93 Here at the relevant time, particularly having regard to Mr Nicholas Poteri’s position in the company in relation to accreditation and liaison, his knowledge as to the state at which the accreditation process had reached, his knowledge of the contents of the promotional material, and its distribution, and, I infer, his knowledge of the importance of the question of accreditation, I am satisfied that he was knowingly concerned in the accreditation misrepresentations, in the sense that I indicated immediately above.
94 As well as contravening s 52, the making of the accreditation misrepresentations also contravened s 53(aa) and (c). The representations to the effect that the 1997 courses were accredited by VETEC and recognised under NFROT, were representations to the effect that the services offered by the First Respondent (childcare education services) were of a particular standard, quality or grade; and that they had an approval which they did not have. Further, by representing that its 1997 courses were accredited by the relevant agencies, the first respondent also engaged in conduct that was liable to mislead the public as to the characteristics of the services offered, and as to the suitability for their purpose of those services, contrary to s 55A of the Act. The first respondent expressly recognised in its college handbook revision 12/96 that"...most employers prefer Graduates with qualifications that meet the NFROT standards".
95 Nicholas Poteri was also, in my opinion, knowingly concerned in those contraventions by the first respondent.
96 I turn now to consider what is now, in the light of my earlier findings excluding Nicholas Poteri from culpability in these matters, the case of the ACCC against the second and third respondents. In the case of the Fehlbergs, I am satisfied that they were told by Mrs Veenstra that if they notified the college 60 days prior to the commencement of the course, they would receive a full refund of the deposit; otherwise $100 would be deducted for administration costs. That in late March early April, Mrs Fehlberg was told that the Fehlbergs would not qualify for refund of a deposit. That a letter of demand was sent claiming $9,025 being the full amount for fees less the $175 paid. That proceedings were commenced against both Mrs and Ms Fehlberg in December 1996 to recover those fees. At no time was Mrs Fehlberg told about having to pay the balance of tuition fees, although the enrolment form provided that by executing the document the enrollee "must pay to the College the full amount of the tuition and that this amount will be payable regardless of whether [the enrollee] commence[s] the course or otherwise". The general regulations, however, provided:
"The student may cancel enrolment at any time prior to sixty (60) days of the student’s most preferred course and date (i.e. Preference 1) and receive full refund less $100 administration charge (and less the $75 accommodation booking fee if applicable). A request for cancellation must be in writing and received by the College Administration prior to the above date. Verbal requests for cancellation shall not be valid for any reason. No refund is made in any other situation."
97 I am satisfied that this conduct by the first respondent was in contravention of s 52 and s 53 of the Act and was unconscionable conduct within the meaning of s 51AB of the Act.
98 In respect of the meaning and operation of s 51AB, in Hurley v MacDonalds Australia Ltd [2000] ATPR 41-741, the Court (Heerey, Drummond and Emmett JJ) adopted the views expressed in Qantas Airways Ltd v Cameron (1996) 66 FCR 246, their Honours saying at 40-585:
"For conduct to be regarded as unconscionable, serious misconduct or something clearly unfair or unreasonable, must be demonstrated – Cameron v Qantas Airways Ltd (1995) ATPR 41-417 at 40,633; (1994) 55 FCR 147 at 179. Whatever ‘unconscionable’ means in sections 51AB and 51AC, the term carries the meaning given by the Shorter Oxford English Dictionary, namely actions showing no regard for conscience, or that are irreconcilable with what is right or reasonable – Qantas Airways Ltd v Cameron (1996) ATPR 41-487 at 42,068; (1996) 66 FCR 246 at 262. The various synonyms used in relation to the term ‘unconscionable’ import a pejorative moral judgment – Qantas Airways Ltd v Cameron (1996) ATPR 41-487 at 42,085 and 42,096; (1996) FCR 246 at 283-4 and 298."
99 In the case of Ms Santos, I am satisfied she was told by an employee of the college, in response to her inquiry as to what would happen if she changed her mind about the course, "Then you lose your deposit. If you want to cancel your enrolment you just have to write us a letter". Notwithstanding telephone notification and notification in writing that she was unable to go to the college because "she couldn’t afford to", Ms Santos received a letter from the college demanding arrears of $4,725 within a week, and that legal proceedings would be instituted to recover the amounts owing. Proceedings by plaint and summons were issued against Ms Santos in January 1997. I am satisfied that the first respondent, in this case, engaged in conduct in contravention of ss 52 and 53 of the Act and unconscionable conduct contrary to s 51AB of the Act.
100 In the case of Ms Romero, Ms Romero was a 21-year-old woman whose native language was Spanish. She spoke to an employee of the first respondent about applying for a Nannying course. On Ms Romero telling that employee that "We can’t pay the whole amount now", the woman said "We’ll see what we can do about it. You will be able to pay by instalments". In late January or early February 1996, Ms Romero received a letter setting out the instalment payments to be made. Ms Romero rang the college and spoke to a man and told him the college was too expensive and she was not able to do the course. She sent out later a letter explaining why she was unable to do the course. In mid-December she received a plaint and summons for recovery of $4,725 being the full amount of the tuition fees less the deposit. I am satisfied in all the circumstances that the conduct involving Ms Romero was conduct by the first respondent that was unconscionable within the meaning of s 51AB of the Act.
101 In the case of Ms McPherson, at the time in early January 1996 when she signed the enrolment form, said: "I am awaiting advice from QTAC as to my acceptance into university or TAFE", and was told by a female employee of the college, "That’s OK we will just hold the enrolment form until we get further notification from you". In January Mr McPherson telephoned the college advising of Ms McPherson’s acceptance into university, and was told, "Just write into the College and let us know that she won’t be going ahead with her application", and on 17 January Mr McPherson wrote advising that his daughter had been accepted into QUT. There was notification from the college that the refund was outside the cancellation without liability for total tuition fee payment or refund. After further correspondence, nothing further was heard until a demand on 21 May 1996 for $9,025 being the balance of the full tuition fees. In December 1996 Ms McPherson was served with a plaint and summons issued against both Ms McPherson and Mrs McPherson for recovery of that sum. I am satisfied that the conduct concerning the holding of the enrolment form and further failure to advise her that on signing the enrolment form she would be immediately bound to pay the full tuition fees without a right of cancellation under the enrolment form, constituted conduct in contravention of s 52 and that the conduct in respect of Ms McPherson was unconscionable contrary to s 51AB of the Act.
102 In respect of Ms Kinloch, her mother had conversations with a male representing the college, and was told that acceptance into the course would depend on the college reviewing Ms Kinloch’s application to see if she was suitable. The man also stated they would be notified in writing that the application had been processed. Ms Kinloch filled out an enrolment form, and her mother filled in the guarantee section of the enrolment form, and on or around 20 December 1995, sent the enrolment form with the deposit. On receiving a letter from the University of West Sydney offering her a place in a Bachelor of Teaching course, Ms Kinloch wrote to the college on 29 January 1996 indicating that she was "unable to follow through with" her application. On 7 February 1996, Ms Kinloch received a letter advising that Ms Kinloch’s application for enrolment commencing on 7 February was confirmed. I find that this letter was subsequent to the receipt of Ms Kinloch’s letter written on 29 January 1996. After some correspondence concerning refund, the college by letter on 21 May 1996 demanded "arrears of $9,125". On 21 December 1996 a plaint and summons was served on Mrs Kinloch. In the circumstances of this case I am satisfied that the first respondent’s failure to advise the true position in relation to the obligation to pay full tuition fees was conduct in contravention of s 52 of the Act and further, that the conduct by the first respondent was unconscionable within s 51AB of the Act.
103 In the case of Ms Coombes, the evidence establishes that the first respondent refused to refund the tuition fees for a course in which Ms Coombes had enrolled and which had been cancelled by the college. I am satisfied that the evidence concerning the dealings between Ms Coombes and the first respondent establishes unconscionable conduct contrary to s 51AB of the Act by the first respondent.
104 In the case of Mrs Sandra Robaldo, she was told by the college that a deferred payment plan was going to be introduced in March 1997 and that she could qualify for the plan once it was introduced. When filling out the enrolment form she was given an instalment plan which detailed fortnightly payments. Mrs Robaldo was told by Mrs Preston that the deferred payment plan will come through. After approaches to the ANZ Bank, she was told by the bank, contrary to the statements by the college about the availability of that plan, it would not be possible to arrange an interest only loan for her daughter since it was not possible to show that they would be able to repay the loan. She received a demand for payment of the balance of the tuition fee of $7,240. I am satisfied that in this case there was contravention by the first respondent of ss 52 and 53 of the Act, and the conduct in respect of its dealings with Ms Robaldo was unconscionable contrary to s 51AB.
105 In the case of Ms Emma Cobb, she and her mother travelled from New South Wales in late January or early February 1997. She understood from the material sent to her that the course in which she was interested would "qualify her to be a Nanny" and that such a qualification would be recognised overseas. I am satisfied that Mrs Cobb was told that the deferred payment plan "will commence in March and will operate like the HECS system. It will be available through the college once we approve the student’s application." On commencing in the college, Ms Cobb was informed by letter that she would be paying an amount of $315 per fortnight for a period of a year. In late April, Mrs Cobb approached the ANZ Bank on two occasions, and on each occasion was told the bank knew nothing about the loan scheme. On 27 May Mr Cobb received a letter from Dun & Bradstreet demanding payment of $6,947 (which included the sum of $945 which had already been paid). By letter of 13 June 1997 to both Ms Cobb and Mr Cobb, the college demanded payment of the "amount now due". I am satisfied that the conduct in relation to Emma Cobb contravened ss 52 and 53 of the Act, and the first respondent engaged in unconscionable conduct contrary to s 51AB.
106 Ms Cassells decided to enrol in the college influenced by the fact that the courses offered were accredited and the college offered an instalment payment plan to pay tuition fees. Her boyfriend signed the guarantee section of the enrolment form. By letter on 30 January 1997, Ms Cassells was informed of the instalment payment plan nominating instalments of $2,085 on 15 January 1997, 5 April 1997 and 12 July 1997, and a final payment of $2,070 on 20 September 1997. Ms Cassells commenced her studies and made the first two instalment payments. She then received, on 11 April, a letter advising: "Interest Only Personal Loans, through which payment of the balance of your total College Tuition Fee may be secured, are available from the ANZ Bank." On 22 April, Ms Cassells wrote advising that she was following the payment method agreed between herself and the college. I am satisfied that it was unconscionable conduct, in contravention of s 51AB for the first respondent, contrary to its contractual arrangements, to demand immediate payment of the balance of Ms Cassells’ fees.
107 In the case of Ms Rye, she was told, in answer to her request "Can I pay fortnightly instalments until a plan comes in" that "That’s fine. You will automatically be switched over to the deferred payment plan when it comes in. There are a lot of other students waiting to get on the plan." She asked "How does it work? Is it like HECS?" and she was told "Yes, it will be something like that." She also was sent a letter requiring her to make application to the ANZ Bank for an interest-only personal loan and pay out the outstanding balance of her total college tuition fee. She approached the bank but was told that the bank had no plan referred to in the college’s letter, and the manager had not even heard of the college. Late May 1997, she received two letters from Dun & Bradstreet demanding payment of $2,100 being the balance of the tuition fee payable. I am satisfied that the first respondent contravened ss 52, 53 and 51AB of the Act in respect of its dealings with Ms Rye.
108 As to the orders which should be made in the light of my findings, in my opinion there is absolutely no utility to be served by enjoining of the third or fourth respondents.
109 I am prepared to make findings of fact in terms of paragraphs 1 to 6 of the document Annexure "orders sought" to the applicant’s written submissions. I am prepared to grant a declaration that the fourth respondent was knowingly concerned in or party to the first respondent’s contraventions of the Act referred to in paragraphs 1 to 6 of that document. I will make findings of fact that are described in a shorthand way in paragraph 7 of the orders sought by the applicant. I will grant a declaration that the third respondent was knowingly concerned in or party to the first respondent’s contraventions of the Act referred to in paragraphs 1 to 6 of the document, and in the contraventions comprehended by the facts referred to in paragraphs 7 (b), (d), (e), (g), (i), (j), (k), (l), (m), (n), (o), (p) and (q) of the findings of fact in that document.
110 I am not prepared to make a declaration against the second respondent on the evidence before me.
111 I direct the applicant to bring in short minutes of orders to give effect to my intentions expressed above. I will hear the parties concerning the orders that I should make after that has been done, and I will also hear the parties then on costs.
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I certify that the preceding one hundred and eleven (111) numbered
paragraphs are a true copy of the Reasons for Judgment herein of
the Honourable
Justice Spender.
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Associate:
Date of Judgment: 6 March 2001
Counsel for the Applicant: Mr G. Gibson, and with him Mr S.
Lumb
Solicitor for the Applicant: Australian Government
Solicitor
Counsel for the Respondent: Mr P. Kronberg
Solicitor for
the Respondent: Lynch & Co
Dates of Hearing: 3 – 11 April 2000;
24 August 2000
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