Ali v Australian Competition and Consumer Commission

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FEDERAL COURT OF AUSTRALIA

Ali v Australian Competition and Consumer Commission [2020] FCA 860

Appeal from:

Australian Competition and Consumer Commission v Geowash Pty Ltd (Subject to a Deed of Company Arrangement) (No 4) [2020] FCA 23

Australian Competition and Consumer Commission v Geowash (Subject to a Deed Of Company Arrangement) (No 5) [2020] FCA 440
File number: WAD 35 of 2020
Judge: MCKERRACHER J
Date of judgment: 19 June 2020
Catchwords: PRACTICE AND PROCEDURE – appeal – orders made at first instance – penalty and costs orders – application for stay of orders – test in Powerflex Services Pty Ltd v Data Access Corp (1996) 67 FCR 65 applied – whether orders would render appellants financially incapable of continuing the appeal – whether there is sufficient evidence to make out the ‘reason’ for a stay
Legislation:

Australian Consumer Law ss 3(3), 239, 243

Competition and Consumer Act 2010 (Cth) ss 83, 137H

Federal Court Rules 2011 (Cth) rr 36.08, 36.08(2)
Cases cited:

Alexander v Cambridge Credit Corporation Ltd (1985) 2 NSWLR 685

Australian Competition and Consumer Commission v BMW (Australia) Limited (No 2) [2003] FCA 864

Australian Competition and Consumer Commission v Geowash (Subject to a Deed Of Company Arrangement) (No 3) [2019] FCA 72

Australian Competition and Consumer Commission v Geowash (Subject to a Deed Of Company Arrangement) (No 4) [2020] FCA 23

Australian Competition and Consumer Commission v Geowash (Subject to a Deed Of Company Arrangement) (No 5) [2020] FCA 440

Australian Securities and Investments Commission v Kobelt [2019] HCA 18

Henderson v Amadio Pty Ltd (No 3) (1996) 65 FCR 66

Maher v Commonwealth Bank of Australia [2008] VSCA 122

Powerflex Services Pty Ltd v Data Access Corp (1996) 67 FCR 65

Date of hearing: 12 June 2020
Registry: Western Australia
Division: General Division
National Practice Area: Commercial and Corporations
Sub-area: Regulator and Consumer Protection
Category: Catchwords
Number of paragraphs: 36
Counsel for the Appellants: Ms KC Morgan SC with Mr M Rennie
Solicitor for the Appellants: Roderick Storie Solicitors
Counsel for the Respondent: Mr SM Davies SC with Mr AJC Mossop
Solicitor for the Respondent: Norton Rose Fulbright

ORDERS

WAD 35 of 2020
BETWEEN:

SANAM ALI

First Appellant

CHARLES CAMERON

Second Appellant
AND:

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION

Respondent

JUDGE:

MCKERRACHER J

DATE OF ORDER:

19 JUNE 2020

THE COURT ORDERS THAT:

1.Within seven days, the parties are to file an agreed minute, or competing minutes of proposed orders reflecting the outcome of these reasons.

2.The matter be listed for a case management hearing by telephone at 10.30 am (AWST) on Wednesday 1 July 2020.

Note:   Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.


REASONS FOR JUDGMENT

MCKERRACHER J:

INTRODUCTION

  1. The appellants have filed two applications in relation to the conduct of the appeal to the Full Court in this matter.  I am appointed to manage the appeal, including to consider these two applications:

    (a)an interlocutory application filed on 13 March 2020 seeking, relevantly:

    (i)a stay of…

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Details
Case
[2020] FCA 860
Decision Date

CaseChat Overview and Summary

In Ali v Australian Competition and Consumer Commission, the appellants, Ms Ali and Mr Cameron, sought a stay of the penalty and costs orders made against them in the Federal Court. These orders arose from findings that they had engaged in conduct that was misleading, unconscionable and in breach of good faith obligations under the Competition and Consumer Act 2010. The appellants contended that if the penalty and costs orders were enforced, they would be financially incapable of continuing their appeal against the findings of liability, penalty and costs. They argued that the enforcement of these orders would render them unable to fund their appeal, thereby losing the opportunity to have the questions raised by the appeal determined.

The legal issue before the court was whether the appellants had established a sufficient reason for a stay of the penalty and costs orders. The court applied the test set out in Powerflex Services Pty Ltd v Data Access Corp, which requires the court to consider whether the orders would render the appellants financially incapable of continuing the appeal. The court noted that the appellants did not need to establish special circumstances or a special reason to justify the grant of a stay, as the orders were interlocutory in nature. The court also considered that the respondent, the Australian Competition and Consumer Commission, had not identified any prejudice in a stay and had not objected to the admission of the appellants' affidavits without cross-examination.

The court found that the appellants had established a sufficient reason for a stay of the penalty and costs orders. The court accepted the appellants' evidence that they did not have the financial capacity to meet the demands of the orders and that, without a stay, it was highly likely that they would not be able to continue their appeal. The court also noted that the redress orders, which constituted about $1 million, would be allocated to consumers while an appeal of the matter was pending, and that the Australian Competition and Consumer Commission had not provided a clear or apparently binding undertaking as to how those funds would be managed in the event the Court found there was no power for such an order or that the form was inappropriate. The court concluded that the appellants had established a sufficient reason for a stay of the penalty and costs orders, and that the enforcement of those orders would render them financially incapable of continuing their appeal.

The court made orders that the parties were to file an agreed minute, or competing minutes of proposed orders reflecting the outcome of these reasons within seven days, and that the matter be listed for a case management hearing by telephone at 10.30 am (AWST) on Wednesday 1 July 2020. Entry of orders was dealt with in Rule 39.32 of the Federal Court Rules 2011.

Orders

Orders of the court

1. Within seven days, the parties are to file an agreed minute, or competing minutes of proposed orders reflecting the outcome of these reasons.

2. The matter be listed for a case management hearing by telephone at 10.30 am (AWST) on Wednesday 1 July 2020.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

The relevant judgments arising for consideration now are :(a)Australian Competition and Consumer Commission v Geowash (Subject to a Deed Of Company Arrangement) (No 3) [2019] FCA 72 (the Liability Judgment);(b)Australian Competition and Consumer Commission v Geowash (Subject to a Deed Of Company Arrangement) (No 4) [2020] FCA 23 (the Penalty Judgment); and(c)the Costs Judgment.In the Liability Judgment, the primary judge found that Ms Ali and the second appellant, Mr Charles Cameron, as sole director and national franchising manager respectively of Geowash (a hand car wash and detailing franchisor), had engaged variously in conduct that was misleading, unconscionable and in breach of good faith obligations under the Competition and Consumer Act 2010 (Cth) (CCA). In the Penalty Judgment, Ms Ali was ordered to pay $1,045,000 in pecuniary penalties and $500,000 in non-party consumer redress orders while Mr Cameron was ordered to pay $656,000 in pecuniary penalties and $500,000 in non-party consumer redress orders. As will be seen below, the appellants seek a stay of the Penalty Judgment and the Costs Judgment pending their appeal of all three decisions primarily on the ground that, if the penalty and costs orders are enforced, they will be financially incapable of pursuing the appeal. In her March affidavit Ms Ali deposes (at paras 35-40):35.Both [Mr] Cameron and I gave evidence as to our respective financial positions for the purposes of the penalty hearing in the proceedings below.36.Annexed to this affidavit and marked “SA-D” is a copy of my affidavit of 1 August 2019.37.Annexed to this affidavit and marked “SA-E” is a copy of [Mr] Cameron's affidavit of 8 July 2019.38.Based on those affidavits and my own knowledge of my financial circumstances and discussions with [Mr] Cameron I believe that neither [Mr] Cameron nor I have the financial capacity to meet the demands of the orders as to pecuniary penalties, consumer redress or costs in the proceedings below.39.That also means that, unless there is a stay of those orders, it is highly likely that we will not be able to continue the appeal. This would mean that we both lose the chance to have the questions raised by the appeal determined.40.I believe that would be a loss that neither [Mr] Cameron nor I could recover from. In the 2019 affidavits so annexed, the appellants disclosed, with little detail, no income, tax liabilities or likely income. Funds held in bank accounts were trivial. Each had incurred at that point $180,000 in legal costs in defending the first instance litigation and each had depended on others for undisclosed financial assistance, presumably also for the payment of legal fees. It would be fair to say that there was not an elaborate exposure of the appellants’ financial circumstances, a point stressed by the respondent to these applications and the appeals, the Australian Competition and Consumer Commission (the ACCC).Stay of the orders below, including the Costs Judgment

Ratio Decidendi

Legal Principle Established

The ACCC also suggests that the costs order stay can be dealt with by the ACCC undertaking not to enforce any costs order until determination of the appeal without giving 14 days’ prior notice of an intention to do so.CONSIDERATION For reasons set out (at [9]-[11] above), the appellants do not need to establish special circumstances or a special reason to justify the grant of a stay. The ACCC does not identify prejudice in a stay. It does emphasize the inadequacy of the financial information and that the appellants still bear the onus of justifying any reason for a stay with sufficient evidence. It does so when the affidavits of the appellants through Ms Ali were admitted without objection and the deponents were not required for cross-examination on the current affidavits or their July and August 2019 affidavits. It is true that the ACCC’s point was made in the correspondence as to the alleged inadequacy of the information. It is also the case that the ACCC commendably as senior counsel notes, did not over complicate a fairly simple interlocutory application with objections and cross examination. Nonetheless, the submissions made were more in the nature of a credit attack on Ms Ali without Ms Ali having an opportunity to respond to the complaints. Of course this is against a background where Ms Ali’s credit was very much under attack by the ACCC at trial. It is of concern that the redress orders constitute about $1 million and that, absent a stay, will be allocated, potentially, to consumers while an appeal of the matter is pending. No concrete suggestion was raised by the ACCC as to how that would be managed in the event the Court finds there is no power for such an order or that the form was inappropriate. Senior counsel did postulate a theory that the ACCC might hold those funds pending resolution of the appeal but no clear or apparently binding undertaking was given at the hearing and certainly not in advance of this application. In the meantime the ACCC is protected by the asset undertaking. Given the combined effect of the penalties imposed by orders 7, 8, and 11 is approximately $2.6 million, the question of who will fund the litigation is not a powerful factor relevant to granting or refusing a stay in light of the evidence in paras 35-40 of Ms Ali's Affidavit of 13 March 2020 (see [6] above). Having regard to the content of the July and August 2019 affidavits, if payment of those amounts and substantial costs (which will undoubtedly run well into six figures) were not stayed, it would clearly be ‘highly unlikely’ as a matter of common sense that the appeals could proceed. The appellants are proceeding with their appeals with appropriate diligence. The contrary has not been suggested. Nor has it been suggested that the appeals are unarguable. Nor has there been any suggestion of delay in pursuing the stay. Almost all of the ACCC’s focus has been on the inadequacy of the financial information supporting the assertion that absent a stay, the appeals would be unlikely to proceed. The ACCC says that given there are no accessible assets, others must be funding the litigation which is something that should be explained if the appellants contend that absent a stay it is unlikely the appeals will proceed.