Australian Competition and Consumer Commission v ACM Group Ltd (No 2)
[2018] FCA 1115
•30 July 2018
FEDERAL COURT OF AUSTRALIA
Australian Competition and Consumer Commission v ACM Group Limited (No 2) [2018] FCA 1115
File number: NSD 851 of 2016 Judge: GRIFFITHS J Date of judgment: 30 July 2018 Catchwords: CONSUMER LAW – misleading or deceptive conduct – application by Australian Competition and Consumer Commission and Australian Securities and Investments Commission alleging misleading or deceptive conduct by a debt collecting agency – allegation that agency misled particular debtors by making written and/or oral representations concerning, inter alia the likelihood, imminence and possible ramifications of the agency commencing court proceedings to recover the relevant debts if they were not paid – whether misleading or deceptive conduct established.
CONSUMER LAW – allegation that debt collection agency used undue harassment and coercion by, inter alia, threatening legal proceedings and threatening other consequences – whether unduly harassing or coercive conduct established.
CONSUMER LAW – allegation of unconscionable conduct by debt collection agency – whether unconscionable conduct established.
CONSUMER LAW – whether alleged contraventions by debt collection agency fell to be determined by relevant consumer protection provisions in the Australian Consumer Law or in the Australian Securities and Investments Commission Act 2001 (Cth) – whether agency provides “a financial service” as defined in the latter Act.
Words & phrases “undue harassment or coercion” – consideration of the meaning to be given to the word “undue” in the context of debt collection – whether “undue” qualifies both “harassment” and “coercion” in s 50 of the Australian Consumer Law – consideration of the meaning of the word “unconscionable” in the context of debt collection. Legislation: Australian Consumer Law, being Sch 2 to the Competition and Consumer Act 2010 (Cth), ss 4, 18, 21, 51(1)(a), 51(1)(b),
Australian Securities and Investments Commission Act 2001 (Cth), ss 5(1), 12BA, 12BAA, 12BAB, 12CB(1)(a), 12DA(1), 12DJ(1), 12GH
Competition and Consumer Act 2010 (Cth), s 139B(2)
Corporations Act 2001 (Cth), s 769B
Evidence Act 1995 (Cth), s 140(2)
Privacy Act 1998 (Cth), s 20W
Cases cited: Australian Competition and Consumer Commission v ACM Group Limited (No 1) [2017] FCA 799
Australian Competition and Consumer Commission v Dell Computers Pty Ltd [2002] FCA 847
Australian Competition and Consumer Commission v Jones (No 5) [2011] FCA 49
Australian Competition and Consumer Commission v Lux Distributors Pty Ltd [2013] FCAFC 90
Australian Competition and Consumer Commission v McCaskey [2000] FCA 1037; 104 FCR 8
Australian Competition and Consumer Commission v Telstra Corporation Limited [2004] FCA 987; 208 ALR 459
Australian Competition and Consumer Commission v The Maritime Union of Australia [2001] FCA 1549; 114 FCR 472
Australian Securities and Investments Commission v Accounts Control Management Services Pty Ltd [2012] FCA 1164
Australian Securities and Investments Commission v Westpac Banking Corporation (No 2) [2018] FCA 751
Briginshaw v Briginshaw (1938) 60 CLR 336
Campbell v Backoffice Investments Pty Ltd [2009] HCA 25; 238 CLR 304
Cummings v Lewis (1993) 41 FCR 559
George v Rockett (1990) 170 CLR 104
Global Sportsman Pty Ltd v Mirror Newspapers Ltd (1984) 2 FCR 82
Kobelt v Australian Securities and Investments Commission [2018] FCAFC 18; 352 ALR 689
NRM Corporation Pty Limited v Australian Competition and Consumer Commission [2016] FCAFC 98
Paciocco v Australia and New Zealand Banking Group Ltd [2015] FCAFC 50; 236 FCR 199
Paciocco v Australia and New Zealand Banking Group Ltd [2016] HCA 28; 258 CLR 525
Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd [1982] HCA 44; 149 CLR 191
Sykes v Reserve Bank of Australia (1999) 88 FCR 511
Taco Co of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 177
Tonto Home Loans Australia Pty Ltd v Tavares [2011] NSWCA 389; 15 BPR 29,699
UnitingCare NSW.ACT v Hancock [2014] FCA 391
Watson v Foxman (1995) 49 NSWLR 315
Date of hearing: 26-28 July 2017 and 6 October 2017 Registry: New South Wales Division: General Division National Practice Area: Commercial and Corporations Sub-area: Regulator and Consumer Protection Category: Catchwords Number of paragraphs: 285 Counsel for the Applicant: Dr K Stern SC with Ms V Brigden Solicitor for the Applicant: Corrs Chambers Westgarth Counsel for the Respondent: Mr A Zahra Solicitor for the Respondent: DLA Piper Australia and Sparke Helmore Lawyers ORDERS
NSD 851 of 2016 BETWEEN: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
First Applicant
SCOTT GREGSON
Second Applicant
AND: ACM GROUP LIMITED
Respondent
JUDGE:
GRIFFITHS J
DATE OF ORDER:
30 JULY 2018
THE COURT ORDERS THAT:
1.Within 21 days the parties should seek to agree orders which give effect to these reasons for judgment, including as to costs. If they are unable to agree, within that time each should file a proposed set of orders and brief submissions in support (not exceeding 5 pages). The party should indicate whether it is content for the orders to be settled on the papers without a further oral hearing.
2.The parties should propose, within 21 days, draft directions for the further conduct of the proceeding relating to relief, preferably by consent.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
GRIFFITHS J:
INTRODUCTION [1] OUTLINE OF THE APPLICANTS’ CASE [4] (a) Debtor CT [6] (b) Debtor JR [18] AGREED FACTS [27] THE APPLICANTS’ WITNESSES [67] (a) JR [67] (b) CT [79] (c) Dr Penny Knowlden [89] (d) Mr Richard Fleming [92] ACM’S WITNESSES [96] (a) Mr Paul Brabazon [96] (b) Mr Ryan Clarke [133] (d) Mr Rolf Francisco [149] (d) Mr Bruce Brew [163] SOME RELEVANT LEGAL PRINCIPLES [167] The Briginshaw standard [168] Misleading or deceptive conduct [169] Undue harassment or coercion [178] Unconscionability [186] DETERMINATION OF AGREED STATEMENT OF ISSUES [196] (a) Whether the Seven Day Demand Letters from ACM to CT made representations that ACM intended shortly to commence legal proceedings against CT to recover the CT Debt if it was not paid within seven days. [197] (b) If a representation in the terms of (a) was made by ACM, whether ACM intended, at the time the representation was made, shortly to commence legal proceedings against CT to recover the CT Debt if it was not paid within seven days and/ or whether ACM had reasonable grounds for so stating to CT. [210] (c) Whether the 48 Hour Demand Letters from ACM to CT made representations that ACM intended shortly to commence legal proceedings against CT to recover its debt if it was not paid within 48 hours. [214] (d) If a representation in the terms of (c) was made by ACM, whether ACM intended, at the time the representation was made, shortly to commence legal proceedings against CT to recover the CT Debt if it was not paid within 48 hours and/ or whether ACM had reasonable grounds for so stating to CT. [216] (e) Whether ACM engaged in conduct that was misleading or deceptive or likely to mislead or deceive in contravention of s 18 of the Australian Consumer Law or s 12DA(1) of the ASIC Act by making any of the above representations to CT in the Seven Day Demand and 48 Hour Demand Letters. [217] (f) Whether the Seven Day Demand and 48 Hour Demand Letters: (i) demanded payment; (ii) threatened legal proceedings against CT. [230] (g) Whether CT had suffered from a stroke as a result of which, he was unable to work and was expected to remain living in a care facility for the rest of his life. [231] (h) Whether CT was unable to pay (or make arrangements for the payment of) the CT Debt. [232] (i) Whether ACM was told that CT had suffered a stroke, had difficulty speaking, was living in a care facility, received a government disability support pension and could not afford to pay the CT Debt. [233] (j) Whether any or all of the matters set out in (i) above were in fact true. [234] (k) Whether ACM’s conduct as pleaded in the Concise Statement was in connection with the supply of services or payment for those services to CT and JR such that the relevant provisions relating to misleading or deceptive conduct, undue harassment, coercion and unconscionable conduct are those contained in the Australian Consumer Law. [235] (l) Whether ACM’s representatives’ conduct in sending the Seven Day Demand and the 48 Hour Demand Letters to CT and making the telephone calls, as pleaded and particularised, used undue harassment in connection with the supply of services or the payment for those services in contravention of s 50(1)(a) and/or s 50(1)(b) of the Australian Consumer Law. [236] (m) Whether the following statement made by Mr Francisco to JR: “Well frankly, they're they’re already preparing the documents that would be used for potential legal action against you” was a representation from ACM to JR that ACM had commenced preparing the documents that would be used for potential legal action against JR. [254] (n) If a representation in the terms of (m) was made, whether it was untrue and/or whether ACM did not have reasonable grounds for making it. [255] (o) Whether the following statement made by Mr Francisco to JR: “Any time soon what management is planning is for a summons to be drawn, issued and served against you so that we can recover the debt in full” was a representation from ACM to JR that ACM was planning for a summons to be drawn, issued and served upon JR to recover the debt in full. [259] (p) If a representation in the terms of (o) was made, whether it was untrue and/or whether ACM did not have reasonable grounds for making it. [260] (q) Whether the following statement made by Mr Francisco to JR: “Were [a default to be listed on JR’s credit file] you wouldn't be able to obtain credit for the next five to seven years” was a representation from ACM to JR that if a default were listed on JR’s credit file, she would not be able to obtain credit for the next five to seven years. [261] (r) If a representation in the terms of (q) was made, whether ACM had reasonable grounds for making the representation. [262] (s) Whether ACM engaged in conduct that was misleading or deceptive or likely to mislead or deceive in contravention of s 18 of the Australian Consumer Law by making the pleaded representations to JR on 3 September 2014. [264] (t) Whether ACM engaged in coercion in making the pleaded representations to JR on 3 September 2014 in connection with the supply or possible supply of services, or the payment for those services, in contravention of s 50(1)(a) and/ or s 50(1)(b) of the Australian Consumer Law. [266] (u) Whether ACM, by reason of the conduct as pleaded in the Concise Statement, engaged in conduct that was in all the circumstances unconscionable in connection with the supply or possible supply of services in contravention of s 21(1)(a) of the Australian Consumer Law. [273] (i) Was ACM’s relevant conduct towards CT unconscionable? [275] (ii) Was ACM’s relevant conduct towards JR unconscionable? [280] CONCLUSION [284] INTRODUCTION
The respondent company (ACM) is a debt collector which purchases debts from other entities. ACM’s representatives are engaged in recovering these acquired debts. This is usually done by telephone calls being made to the debtor by ACM’s representatives, who generally operate from a call centre, in this case one located in the Philippines. ACM also sends various different types of letters to debtors, demanding payment of the acquired debts.
The applicants (the Australian Competition and Consumer Commission (ACCC) and the Australian Securities and Investments Commission (ASIC)) allege that, in respect of two debtors, ACM’s representatives engaged in conduct which is misleading or deceptive, unconscionable, or constituted undue harassment or coercion in contravention of relevant provisions of either the Australian Consumer Law (ACL) (see Sch 2 to the Competition and Consumer Act 2010 (Cth) (the CCA)) or the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act).
As noted above, both the ACCC and ASIC are applicants in the proceeding. One of the issues which requires determination is whether or not ACM’s conduct was in relation to financial services or in connection with the supply, or possible supply, of services which are financial services, in which case the relevant provisions of the ASIC Act apply. If not, it is common ground that the allegations against ACM fall to be determined by reference to the ACL. This matter is considered under issue (e) of the agreed statement of issues (see [217] ff below, where I explain why I consider that it is the ACL which applies.
OUTLINE OF THE APPLICANTS’ CASE
By way of introduction and drawing on the Originating Application and the Concise Statement (both dated 1 June 2016), the claims made by the ACCC/ASIC against ACM may be summarised as follows.
At all relevant times, ACM carried on the business, in trade or commerce, of purchasing debts owed by consumers to corporations, including Telstra, and then attempting to recover part or all of the debt amount, including by developing workable repayment solutions by providing payment plans or financial accommodation by way of additional time for payment of a debt. The proceeding relates to conduct engaged in by ACM with respect to two debtors, who are referred to by the pseudonyms CT and JR.
(a) Debtor CT
On or around 25 June 2010, Telstra assigned to ACM a debt of $5,768.53 (CT Debt) owed to Telstra by CT in respect of the provision of telecommunications services, in exchange for payment to Telstra of $334.57 by ACM.
On 1 October 2007, CT suffered three strokes over a period of a few hours. Since that time, he has been unable to continue his work as a contractor for a courier company and no longer works. He has been living at a care facility since early 2008 and is expected to remain living in a care facility for the rest of his life. He has had difficulty communicating verbally as a result of the strokes, and is able only to express one or two words at a time. His sole source of income is a government disability support pension.
The applicants claim that ACM was at all material times aware that CT had suffered a stroke, had difficulty speaking, was living in a care facility, received a government disability support pension, and could not afford to pay the CT Debt. ACM was repeatedly informed of these facts during 2011 to 2014 in telephone conversations between ACM representatives and members of CT’s family, and staff of the care facility in which CT lived. ACM recorded these conversations in its “Ledger Card Report” for CT. During April 2012, an ACM representative noted CT’s circumstances and added entries to the Ledger Card Report stating “DONT CALL NUMBER ON FILE” and “READ NOTES – LOOK AT FILES”. Less than one month later, a different ACM representative resumed ACM’s attempts to contact CT as set out below.
ACM representatives telephoned the care facility in which CT lived on numerous occasions during 2011 to 2014, on each occasion asking to speak to CT. On at least 40 occasions in that period, ACM representatives spoke to staff of the care facility and asked to speak to CT, and on six of those occasions, ACM representatives spoke to CT on the telephone.
On each of those six occasions that an ACM representative spoke to CT, he was asked to verify his identity but, because of his disability, he was not able to verify his identity nor to speak in full sentences. Instead, he said a few words on each occasion, such as “stroke”, “no”, “nursing home” and “speech” in order to convey that he could not speak because he had had a stroke and lived in a nursing home.
In addition, between 29 April 2011 and 12 June 2015, ACM sent at least 20 letters to CT demanding repayment of the CT Debt. These comprised two categories of letters which the applicants contend contained misleading or deceptive representations to CT.
Letters in the first category (Seven Day Demand Letters) were headed “Final Notice” (sent on at least three occasions), “Notice of Intention to Commence Legal Proceedings” (sent on at least seven occasions) or “Urgent Notice” (sent on at least four occasions). They included statements that unless the balance of $5,768.53 was paid within seven days of the date of the letter, legal proceedings involving court costs to CT may commence without further notice, and that failing receipt of payment (or, in the case of some letters, a phone call regarding a satisfactory arrangement), ACM may forward CT’s account to its solicitors without further notice. At least 14 Seven Day Demand Letters were sent to CT between 29 April 2011 and 12 June 2015.
Letters in the second category (48 Hour Demand Letters) were headed “48 Hour Demand” and included a statement that ACM recommended that CT make immediate payment of $5,768.53 to avoid legal proceedings which may commence 48 hours from the date of the notice. There was a further statement in bold and capital typeface that unless payment was received within 48 hours, legal proceedings through ACM’s solicitors may be commenced without further notice and that CT may incur resultant costs. 48 Hour Demand Letters were sent to CT on at least six occasions between 29 April 2011 and 12 June 2015.
The applicants claim that at the relevant times CT’s circumstances did not meet ACM’s internal requirements as to when a decision would be made, or instructions given, to commence legal proceedings.
The applicants contend that the Seven Day Demand Letters and the 48 Hour Demand Letters contained the following representations respectively, which were not true and/or that ACM did not have reasonable grounds for making them to a debtor:
(a)that ACM intended shortly to commence legal proceedings against CT to recover its debt if it was not paid within 48 hours, when it did not intend to do so and/or did not have reasonable grounds for so stating; and
(b)that ACM intended shortly to commence legal proceedings against CT to recover its debt if it was not paid within seven days, when it did not intend to do so and/or did not have reasonable grounds for so stating.
These phone calls and letters were in connection with the Telstra services which gave rise to the CT Debt and/or in connection with the possible supply of a payment plan and/or financial accommodation by ACM by way of an extension of time to pay off the CT Debt fully.
In respect of CT, the applicants contend as follows:
(a)during the period 3 May 2011 to 3 February 2015, ACM engaged in specified conduct that was, in all the circumstances, unconscionable, in connection with the supply or possible supply of services to CT by Telstra, in contravention of s 21(1)(a) of the ACL;
(b)further or in the alternative to paragraph (a), during the period 3 May 2011 to 3 February 2015, ACM engaged in conduct that was, in all the circumstances, unconscionable, in connection with the supply or possible supply of financial services to CT by ACM (being a payment plan and/or financial accommodation by way of an extension of time to fully pay off the CT Debt) in contravention of s 12CB(1)(a) of the ASIC Act;
(c)as a result of specified representations made by ACM, ACM engaged in conduct (on each occasion that a letter was sent) during the period 29 April 2011 to 12 June 2015 that was misleading or deceptive, or likely to mislead or deceive, in contravention of s 18 of the ACL, or in the alternative, s 12DA(1) of the ASIC Act;
(d)by reason of its conduct, during the period 29 April 2011 to 12 June 2015, ACM used undue harassment in connection with the supply of services by Telstra to CT in contravention of s 50(1)(a) of the ACL, or in connection with the payment for those services, in contravention of s 50(1)(b) of the ACL; and/or
(e)further or in the alternative to paragraph (d), by reason of that same conduct, during the period 29 April 2011 to 12 June 2015, ACM used undue harassment in connection with the supply or possible supply of financial services to CT by ACM (being a payment plan and/or financial accommodation by way of an extension of time to fully pay off the CT Debt), in contravention of s 12DJ(1) of the ASIC Act.
(b) Debtor JR
On or around 27 June 2014, Telstra assigned to ACM a debt of $3,149.51 owed to Telstra by JR (JR Debt) in respect of the provision of telecommunications services. The applicants’ claims are as follows.
As at 3 September 2014, JR was employed part-time as a secretary, was a single mother of three children, received Centrelink benefits and could not afford to pay the JR Debt to ACM. ACM was aware of each of these matters from that date because JR provided that information to ACM’s representative, Mr Rolf Francisco during a telephone call on 3 September 2014.
On 3 September 2014, Mr Francisco telephoned JR while she was in a carpark with her daughter. This phone call was in connection with the Telstra services which gave rise to the JR Debt and/or in connection with the possible supply of a payment plan and/or financial accommodation by ACM by way of an extension of time to pay off the JR Debt fully. Mr Francisco advised JR that ACM had commenced preparing the documents that would be used for legal action against JR, that ACM management was planning for a summons to be drawn, issued and served upon JR soon so that ACM could recover the debt in full, and that if a default was listed on her credit file, JR would not be able to obtain credit for the next five to seven years. Mr Francisco said words to the effect of “And I know with three kids, credit is very important to you, right?”
The terms of the representations which the applicants claim were made by Mr Francisco (and therefore ACM) to JR are as follows:
(a)that ACM had commenced preparing the documents that would be used for potential legal action against her, when it had not;
(b)that ACM was planning for a summons to be drawn, issued and served upon JR soon to recover the debt in full, when it was not planning to do so and/or did not have reasonable grounds for so stating; and
(c)that if a default was listed upon JR’s credit file, JR would not be able to obtain credit for the next five to seven years, when ACM did not have reasonable grounds for so stating.
The applicants contend that these representations were not true and/or that ACM did not have reasonable grounds for making them.
JR was stunned, felt threatened and was greatly concerned by the matters said by Mr Francisco. She felt flustered and railroaded into agreeing to payment on the basis that if she did not, service of a summons was imminent. JR offered to pay ACM $1000 in an attempt to stop the threatened court proceedings. This amount represented the total of her pay and Centrelink benefits for a fortnight and, if JR made this payment, she knew she would not have enough to cover rent for that fortnight. She provided her debit card number to Mr Francisco, but ultimately this payment was not made following suspension of the debt as a result of a complaint to the Telecommunications Industry Ombudsman (TIO).
In respect of JR, the applicants contend as follows:
(a)ACM engaged in specified conduct that was, in all the circumstances, unconscionable, in connection with the supply or possible supply of services to JR by Telstra, in contravention of s 21 of the ACL;
(b)further or in the alternative to paragraph (a), ACM engaged in conduct that was, in all the circumstances, unconscionable in connection with the supply or possible supply of financial services to JR by ACM in contravention of s 12CB(1)(a) of the ASIC Act;
(c)as a result of the specified representations made by ACM, ACM engaged in conduct that was misleading or deceptive, or likely to mislead or deceive, in contravention of s 18 of the ACL, or in the alternative s 12DA(1) of the ASIC Act;
(d)by reason of the conduct outlined in [20] to [22] above, on or about 3 September 2014, ACM used coercion in connection with the supply of services by Telstra to JR in contravention of s 50(1)(a) of the ACL, or the payment for those services, in contravention of s 50(1)(b) of the ACL; and/or
(e)further or in the alternative to paragraph (d), by reason of that conduct, ACM used coercion in connection with the supply or possible supply of financial services to JR by ACM (being a payment plan and/or financial accommodation by way of an extension of time to fully pay off the JR Debt), in contravention of s 12DJ(1) of the ASIC Act.
The applicants contend that the conduct of each of the ACM representatives in respect of both CT and JR was in trade or commerce and was engaged in on behalf of ACM within the scope of its representatives’ actual or apparent authority, and thus was also engaged in by ACM, by reason of s 139B(2) of the CCA and/or s 12GH of the ASIC Act and s 769B of the Corporations Act 2001 (Cth).
On 23 September 2016, ACM filed a response to the Concise Statement. It is unnecessary to summarise that response because it is reflected in both the summary of ACM’s submissions and my consideration and determination of the relevant issues later in these reasons for judgment. In brief, however, ACM denied that it had contravened any law or that the applicants were entitled to any of the relief sought by them.
On 4 July 2016, the Court ordered that the issue of whether ACM had contravened the law as alleged in the Concise Statement be tried separately from, and in advance of, the determination of what relief should be granted (including penalty).
AGREED FACTS
Many, but not all, of the facts alleged by the applicants in their Concise Statement were agreed by ACM. As will shortly emerge, however, other important facts were disputed. It is convenient to first set out the facts as agreed by the parties before addressing the evidence.
ACM carried on the business, in trade or commerce, of purchasing debts owed by consumers to corporations, including Telstra, and then attempting to recover part of or the entire debt amount, including by developing workable repayment solutions by providing payment plans or financial accommodation by way of additional time for payment of a debt.
On or around 25 June 2010, Telstra assigned to ACM the CT Debt in the amount of $5,768.53 owed to Telstra by CT in respect of the provision of telecommunications services, in exchange for payment of $334.57 by ACM.
CT suffered from a stroke on or around 1 October 2007. He has been a resident of a care facility since January 2008. As at 2011, CT was 54 years old.
At all material times since about October 2008, CT’s former spouse (LH) held a power of attorney over CT's financial affairs and she has managed CT's finances since then.
During telephone conversations and letters between representatives of ACM and other persons between about 25 June 2010 and 2014, ACM was given information about CT’s health, condition, location, financial position and welfare payments, as recorded in the ACM Ledger Card Report for CT (CT Notes).
The entries in the CT Notes dated on and prior to 25 June 2010 (6:41:54 PM) record dealings and communications involving representatives of Telstra and other persons prior to the assignment of the CT Debt to ACM.
An entry in the CT Notes dated 25 June 2010, but relating to events prior to that date, records that LH had indicated that she was happy to pay the outstanding debt as soon as possible and would visit the Telstra shop with an authorisation letter from CT/proof of disability for transfer of ownership. The entry also records that LH was satisfied with the resolution. A further entry on 25 June 2010 records that LH had been looking after CT’s accounts while he was in and out of hospital and that CT had been permanently disabled since December. The entry recorded that LH was frustrated because of the massive bills and was requesting to transfer the service to prepaid.
There is no record in the CT Notes that those steps were in fact undertaken by LH or anyone else on behalf of CT.
An entry in the CT Notes dated 25 June 2010, but relating to events prior to that date, records that on an unknown date a representative of Telstra had spoken to CT and CT said that he had lost his wallet and was waiting to get a replacement credit card. The entry records “adv ptp $470.45 via cc” 21 October and “$608.97 via cc” 3 November (where “adv ptp” means “advised promised to pay” and “cc” means “credit card”).
On or about 18 May 2011, ACM received a letter on the letterhead of a person, “ET”, purporting to be CT’s daughter, containing information as to CT’s circumstances.
On 18 May 2011, a representative of ACM telephoned CT’s son, NT. NT informed the ACM representative that there was no one by the name of ET in the family. NT said that his mother was his father’s power of attorney and that she was at work and unreachable.
An entry was made in the CT Notes on 24 April 2012 to the effect that the telephone number listed on file for CT should not be called.
On about 40 occasions during 2011 to 2014, ACM representatives telephoned the care facility where CT resided.
ACM representatives rang and spoke to CT on the telephone on only six occasions between 2011 and 2014, being 13 July 2011, 5 October 2011, 11 January 2012, 19 September 2012, 1 July 2014 and 20 November 2014.
When the ACM representatives rang and spoke to CT in the conversations referred to immediately above, they asked him to verify his identity.
On 31 July 2012, a representative of ACM received a telephone call from CT’s nurse or carer, Ms Joanna Pigram, at the care facility where CT resided informing them that CT was in an aged care hospital and did not know what “this is regarding”, apparently referring to a letter received at the care home addressed to CT from ACM. The representative of ACM spoke with CT and obtained verbal authority to speak with Ms Pigram, and informed Ms Pigram what the bill was regarding. Ms Pigram then is recorded as having told CT who claimed that LH was meant to be looking after the account. On the same day Ms Pigram informed the ACM representative that CT was in no position to pay this debt as he was in an aged care hospital and can't “pif” (i.e. pay anything towards the debt).
On 13 August 2012, a representative of ACM received another telephone call from Ms Pigram at the care facility where CT resided as she had had a telephone message from ACM left at her workplace. Ms Pigram informed the ACM representative that she had been just helping out as CT cannot speak properly but she no longer wished to be involved with the debt and asked to be removed from the account. She said that CT’s ex-partner was supposed to be sorting it out.
On 17 May 2013, a representative of ACM rang and spoke with a woman (Laura) at the care facility where CT resided and asked whether CT was suffering from a medical condition. Laura advised that he had suffered from a stroke. Laura was asked to fax through documents and is noted to have agreed to send them off. There is no record in the CT Notes as to those documents being received by ACM.
On 18 October 2013, a representative of ACM rang and spoke with a woman, Shequel, at the care facility where CT resided. She is recorded in the CT Notes as having informed the ACM representative that CT “cant speak clearly need to visit him if I need to speak with him”.
On 17 January 2014, a representative of ACM rang and spoke with a woman (Rhonda) at the care facility where CT resided who then passed the representative on to Shequel who described herself as CT’s carer. She informed the ACM representative that CT can’t speak clearly on the phone and it would be better if he came to talk to CT personally.
On 23 June 2014, a representative of ACM rang and spoke with a woman at the care facility where CT resided. The representative asked how long CT had been there but the woman said that she could not disclose that information because it was a private issue.
On 24 June 2014, a representative of ACM rang and spoke with a nurse, Jenny, who was assigned to CT, at the care facility where CT resided. Jenny told them that CT was not capable of speaking. She said that ACM should visit CT to talk to him. The CT Notes for that date record that there is no third party authorised person on the account.
On 3 September 2014, a representative of ACM rang and spoke with a woman, Jennie, at the care facility where CT resided. She said that she “told us many times” that “if you want to speak to [CT] [you] must visit him”. The ACM representative asked for a copy of CT’s medical record that he is in a medical condition and the woman is recorded as saying that she would arrange that for him. There is no record in the CT Notes as to those documents being received by ACM. The CT Notes record that on this occasion “verification of customer/contact has been cancelled”.
On 28 October 2014, a representative of ACM rang and spoke with a woman, Vanessa, at the care facility where CT resided. She said that CT did not want to speak to the ACM representative and that it would be much better to call in the morning and someone would assist. The CT Notes record that on this occasion “verification of customer/contact has been cancelled”.
In the period between 29 April 2011 and 12 June 2015, ACM sent 20 letters to CT:
(a)some of the letters were entitled “Final Notice” and stated that if the balance owing was not paid, legal proceedings “could be commenced” and that ACM “may forward your file to [its] solicitors”;
(b)some of the letters were entitled “Notice of Intention to Commence Legal Proceedings” and stated amongst other things that, if the balance owing was not paid, legal proceedings “could be commenced” and ACM “may forward your file to [its] solicitors”;
(c)some of the letters were entitled “Urgent Notice” and stated amongst other things that, if the balance owing was not paid, legal proceedings “may commence” and that ACM “may forward your account to [its] solicitors”; and
(d)some of the letters were entitled “48 Hour Demand” and stated amongst other things that, “We recommend that you make immediate payment to avoid legal proceedings which may commence 48 hours from the date of this notice” and “legal proceedings through our solicitors may be commenced without further notice”.
When CT received letters from ACM, his practice at first was to read them and then put them in a pile and send the pile of letters to his ex-wife, LH, every two or three months. Sometimes, CT did not bother sending the letters on to LH and simply threw them out. He does not know what LH did with them after he sent them to her. After a while, CT stopped reading the letters from ACM beyond the ACM logo and heading.
The CT Debt was in connection with services provided to CT by Telstra.
There is nothing in ACM’s file for CT (prior to proceedings being issued in this case) that records receipt by ACM of any medical reports, medical certificates, doctor’s/hospital’s records or other documents that verified or confirmed CT's condition or his financial circumstances beyond the matters referred to in the CT Notes.
On or around 27 June 2014, Telstra assigned to ACM the JR Debt in the amount of $3,149.41 owed to Telstra by JR in respect of the provision of telecommunications services.
An ACM representative, Mr Rolf Francisco, telephoned JR on 3 September 2014 regarding monies owing by her in connection with services provided to her by Telstra.
Since 2012, Mr Francisco was an employee of Advanced Credit Management (Philippines) Pty Limited and was located in and worked as Relationship Manager at a call centre in the Philippines.
JR informed Mr Francisco on that date that she was employed part-time as a secretary, was a mother of three children and received Centrelink benefits.
In that telephone conversation, Mr Francisco suggested that JR make a payment of about $1,500 towards the JR Debt by that Friday.
During that conversation, Mr Francisco said to JR words to the following effect:
(a)“They’re already preparing the documents that would be used for potential legal action against you”;
(b)“Any time soon what management is planning is for a summons to be drawn, issued and served against you so that we can recover the debt in full”;
(c)“Your name would not be listed as a default with VEDA, Dunn and Bradstreet and Experian, so your credit file will be safe from any default. Because were that to happen, you wouldn’t be able to obtain credit for the next five to seven years”; and
(d)“And I know with three kids, credit is very important to you. Right?”.
During that conversation and after the matters referred to above, JR:
(a) said that she could definitely come up with $1,000 by Friday, 5 September 2014;
(b)said also that “then because my income is limited, the following Friday I get my Centrelink, so I could give you 500 from that”; and
(c)later said, “I can do the thousand even today”.
The transcripts of Mr Francisco’s telephone conversations with JR were agreed by the parties, save that there was a minor disagreement concerning a part of the transcript for the first conversation which occurred on 3 September 2014 (which disagreement has little material significance).
In the first telephone conversation on 3 September 2014, JR provided her debit card details to Mr Francisco to allow a $1,000 payment to be processed, but the debit card details she provided did not allow ACM to process the $1,000 payment.
JR and Mr Francisco had a further two telephone conversations on 3 September 2014 and then another two telephone conversations on 5 September 2014.
The conduct of ACM’s representatives in dealing with CT and JR as set out above was conduct of an employee or agent within the actual or apparent authority of ACM.
THE APPLICANTS’ WITNESSES
(a) JR
JR swore two affidavits dated 4 August 2016 and 7 February 2017 and was cross-examined at some length by ACM.
JR deposed that by about October or November 2013, she had incurred a debt in the sum of $3,149.41 in relation to various telecommunication plans which she had entered into with Telstra, including a plan called the Telstra Entertainer Max Bundle. In or about July 2014, JR complained to Telstra because she could not access some of the services she understood were to be provided under that plan but for which she was being charged. Unsatisfied with Telstra’s response, on 23 July 2014 JR lodged a complaint with the TIO. At the time, she wanted to enter into a payment arrangement with Telstra whereby she repaid $20 per week and to have any credit default withdrawn. Telstra sent a letter to JR on 2 September 2014, in which it stated that it was sorry that it could not reach a mutually agreeable solution but that it had done all it could to resolve the issues raised by JR.
Unbeknown to JR, the Telstra debt was acquired by ACM. JR deposed that, on 3 September 2014, she received three phone calls from Mr Francisco. During the first telephone call, JR said that she had previously offered to pay the debt off in $20 per week instalments. She deposed that she was very concerned when Mr Francisco told her that “any time soon what management is planning is for a summons to be drawn, issued and served against you so that we can recover the debt in full” and that she became more concerned and anxious when he told her that “frankly, they’re already preparing the documents that would be used for potential legal action against you”. JR then deposed that Mr Francisco said that if she made a payment of $1500, ACM would hold off potential legal action against her and her credit file would be safe from any defaults. He said that if any credit defaults were listed in her name, she would not be able to obtain credit for the next five to seven years and that, with three children, a good credit rating was very important to her. At the time of this first telephone call, JR said that she was in her car with her daughter.
JR deposed that she knew the consequences of a bad credit rating after having herself worked for a retail store in debt collection, including that it affects a person’s ability to access credit for utilities, telephone and mortgages and acts as a black mark against a person’s name. She was afraid of the consequences for her and her children.
JR deposed that she realised she could not afford to pay $1500, felt panicked at the prospect of proceedings being commenced against her, and offered to pay $1000 to ACM even though she could not immediately afford it, to prevent ACM from issuing a summons. JR provided her debit card details to Mr Francisco, but asked him to email her verification documents of his identity before processing payment. She said that she felt rattled for days after the phone call. She said that Mr Francisco did not email her the verification documents.
JR gave evidence of two further telephone conversations she had with Mr Francisco on 3 September 2014. In one of those conversations, Mr Francisco asked her for her email address, which she provided to him. She deposed that after the third telephone conversation on 3 September 2014 she googled “ACM” and found a reference to a Court judgment against it and that she read the first 20 pages or so of that judgment.
JR deposed that, on 4 September 2014, she phoned Telstra and asked why ACM was calling in relation to a debt JR said that she owed to Telstra. The Telstra representative told her that Telstra sells their long standing debts to ACM and would review her file and hold the debt until it was “transferred across”. JR understood that to mean that she would have no communications from ACM or any other debt collection company until the matter was clarified.
JR deposed that she received two further telephone calls from Mr Francisco on 5 September 2014. She said that she felt that she had no choice but to comply with the demand for payment because of the imminent threat of a summons being issued against her and her being listed as a default with credit reporting agencies. She deposed that she told Mr Francisco that she felt that she had been coerced. On or about that day, JR made a second complaint to the TIO.
JR was cross-examined at some length. It was put to JR that her claims of coercion and harassment were not genuine and were informed by her own research, which had revealed Perram J’s reasons for judgment in Australian Securities and Investments Commission v Accounts Control Management Services Pty Ltd [2012] FCA 1164 (ACM 2012). (The Court found there that ACM and its predecessor entity had engaged in misleading or deceptive conduct, as well as conduct which was unduly harassing and coercive, contrary to relevant provisions of the ASIC Act arising from telephone calls made by outward-bound call centre employees pursuing recalcitrant debtors). JR denied that her reading of ACM 2012 caused her to complain that Mr Francisco had used undue harassment and coercion. I accept her denial.
It was also put to JR that, prior to the fourth telephone conversation, all her previous three telephone conversations with Mr Francisco had been polite and courteous. She agreed but added that, at the time, she felt anxiety about the situation, which emotion was not revealed in the written transcripts. I accept that evidence.
JR impressed me as an honest and truthful witness. I have no reason to doubt the veracity of her evidence. On several occasions, the Court had to remind ACM’s counsel of the need to put questions fairly to JR. This reflected a tendency on Counsel’s part to be highly selective in matters which were put to JR by taking statements from the written transcript of the telephone conversations out of context.
I do not accept ACM’s submission that JR changed her mind about her willingness to pay off the debt by subsequently raising false accusations of coercion and harassment. Having listened to the primary telephone conversation, and the various matters that were put to her by Mr Francisco, I accept that she genuinely felt threatened, coerced and harassed by his conduct. These matters were then reduced to writing by JR in a further complaint to the TIO relatively shortly after the last of her telephone conversations with Mr Francisco. It remains to be determined, however, whether that conduct amounts to “undue harassment or coercion” for the purposes of s 50 of the ACL.
(b) CT
CT swore an affidavit dated 4 August 2016. He was not required for cross-examination.
CT deposed that on 1 October 2007 he suffered three strokes over a period of a few hours. Following the strokes, he underwent a period of rehabilitation and was admitted to a care facility in January 2008.
At the time of swearing his affidavit, CT said that he was unable to use his right arm and was dependent on a walking stick to support his right leg. He said that although his speech had improved since 2008, he could generally only say one or two words at a time and could not type in full sentences. He mostly communicated with gestures and occasionally by writing, or typing single words.
CT deposed that since his strokes, he has been unable to work and his sole source of income is a government disability support pension. He said that he does not own, and has never owned, any real property. His former wife holds a power of attorney over his financial affairs, which she began holding twelve months after he first suffered the strokes.
CT gave evidence that at the time of his strokes, he had a personal mobile phone on a Telstra plan that he used for work purposes. He paid the bills himself and requested reimbursement from his employer for work-related calls.
CT received a letter from ACM on 19 April 2011, which confirmed a debt amount due of $5,768.53, being the CT Debt. The letter included a statement that “we hope the information provided will assist you in finalising this account as a matter of urgency, to prevent any further action”. CT deposed that he could not afford to pay the CT Debt since suffering the strokes. After receiving the letter dated 19 April 2011, CT recalled receiving one or two letters from ACM each month over a period of about four years, which all related to the CT Debt. The letters asked for payment within either 48 hours or seven days and mentioned that legal proceedings may commence without further notice if the debt was not paid within the time period. CT said that after reading at least 10 of these letters, he stopped reading subsequent letters from ACM as he could not afford to pay the CT Debt.
CT deposed that he felt stressed when reading the ACM letters and believed ACM would start proceedings. Some of the letters also referred to a “satisfactory arrangement” being reached with ACM to settle his account which CT said he understood to be a reference to entering into a payment plan with ACM, which CT said he could not afford.
After receiving the letters from ACM in 2011, CT sent a letter to his former wife to ask her to get ACM to stop. He said that he did not know whether she did so or what ACM’s response was.
CT deposed that he also personally received phone calls from ACM. On the six or so occasions he spoke to an ACM representative, CT recalls the ACM representative saying words to the effect “I need to verify your identity. Please state your date of birth”. CT that he responded with words such as “stroke”, “nursing home” and “no” to convey that he could not speak or pay the debt because of the strokes. He said that the phone calls from ACM made him feel angry, frustrated and stressed as he could not communicate with ACM representatives, found their accents hard to understand, and believed ACM would commence legal proceedings against him.
CT deposed that, on at least another six occasions, ACM called the care facility where CT lived. CT instructed two of his regular nurses that he did not want to talk to ACM and the nurses said that they would not let them speak to him. No representative from ACM ever came to visit CT. I accept all of CT’s unchallenged evidence (see [232] below).
(c) Dr Penny Knowlden
Dr Penny Knowlden, a general practitioner (GP), swore an affidavit on 8 February 2017. She was not required for cross-examination. Dr Knowlden deposed that CT has been her patient since at least 1998. Since December 2007, she has been CT’s regular GP and she visits him for a consultation approximately once per month.
Dr Knowlden gave evidence in relation to the physical issues that CT suffers as a result of the stroke, including that he is dysphasic, meaning that he has trouble speaking. He can form sentences but it takes him some time to complete them and he can only speak a few words at a time. Dr Knowlden has not noticed much improvement in his speech over the period she has been treating him since the strokes.
Dr Knowlden deposed that CT’s ability to care for himself is limited, expects that he will live in a care facility for the rest of his life and is unlikely to be able to work again. I accept all of Dr Knowlden’s evidence.
(d) Mr Richard Fleming
Mr Fleming swore an affidavit dated 5 August 2016, exhibiting various documents, and was cross-examined. Mr Fleming was, at that time, General Manager, Enforcement – ACT Branch, Enforcement Division of the ACCC. He was ultimately responsible for supervising ACCC staff who were conducting an investigation into ACM. The documents exhibited to Mr Fleming’s affidavit included notices issued between July and September 2015 by ACCC to ACM to furnish information and produce documents pursuant to s 155(1)(a) and (b) of the CCA which related to matters that may constitute a contravention of ss 18 and 50 of the ACL. Such matters included sending letters to CT containing such representations as “notice of intention to commence legal proceedings” and “48 hour demand” and telephoning CT on a number of occasions between 2011 and 2015 in relation to his debt, as well as JR in relation to her debt in 2014. Mr Fleming also exhibited responses, and documents produced pursuant to those notices, by ACM or its solicitors. Similar s 155 notices sent to Telstra between July and October 2015, and responses and documents produced by Telstra in relation to those notices were also exhibited.
I found Mr Fleming to be a truthful witness. Much of his cross-examination went to irrelevant issues in circumstances where the relevant documents speak for themselves. Some of the documents to which Mr Fleming was taken include Telstra debt collection documents which at first glance appear to contain similar language to that of ACM’s correspondence to CT. For example, a letter titled “Final Demand – Telstra Debt” was sent from Creditech on behalf of Telstra to CT on 19 October 2009. A template letter was provided, that used the language “may refer the debt to a collection agency which may involve legal action” and “we may provide details of your payment default to a credit reporting agency” (emphasis added). Notices on Telstra letterhead dated 23 December 2009, 16 March 2010 and 26 March 2010, also feature the text “SUSPENSION NOTICE” and “ACCOUNT OVERDUE”. It is not clear, however, that these were the letters that were actually received by CT. The letter dated 19 October 2009 was not provided the Court – just the pro forma letter – and the two Telstra notices are addressed to CT at a residential address. As at the date of those letters, CT had already suffered strokes, had been in hospital and was then in a care facility. Further, the CT Debt was assigned to ACM on or around 25 June 2010.
There were five Telstra invoices in evidence issued between 28 November 2009 and 28 May 2010 which indicate that some payments were made in respect of CT’s account during the period late November 2009 to May 2010. The point was made as to whether the ACCC had taken this material into account. The difficulty I have is that it is unclear who paid the amounts. For example, there is an email from LH to a Telstra representative dated 23 August 2009 which suggested that LH paid for her ex-husband’s landline. It is also important to match up the relevant account numbers because it seems that the account numbers on the Telstra invoices do not accord with the account number which is the subject of the debt assigned to ACM.
Mr Fleming was asked questions relating to a document titled “Debt collection guideline: for collectors and creditors” issued by ASIC in October 2005 (then known as Regulatory Guide 96) (2005 Guidelines) and the revised version issued by ASIC and ACCC in July 2014. Emphasis was given to the material relating to “frequency of contact” at page 12 of the 2005 Guidelines, which provided a guideline of no more contact than three times per week or ten times per month (being when contact is actually made rather than attempted contact). As Dr Stern SC pointed out, however, the Guidelines have to be read as a whole, including the material at page 30 of the 2005 Guidelines relating to interactions with debtors at a special disadvantage (see further [243] and [244] below).
ACM’S WITNESSES
(a) Mr Paul Brabazon
Mr Brabazon swore four affidavits dated 31 March 2017, 3 July 2017, 21 July 2017 and 27 July 2017. Mr Brabazon deposed that he had been Chief Operating Officer (COO) of ACM since April 2008 and has worked in the financial services industry since at least 1974.
Mr Brabazon gave evidence in relation to the information that is normally included in a debtor’s consumer credit report. According to Mr Brabazon, all of the defaults or other information relating to an individual during the retention period specified in s 20W of the Privacy Act 1998 (Cth) (being 5 years for a simple default, up to 7 years for a serious credit infringement) can be provided to a credit provider.
Regarding the issues concerning CT, Mr Brabazon deposed that he made enquiries of CT’s account and that all ACM employees (including the last three operators who telephoned CT), had attended ACM’s required training sessions, reviewed policies and manuals and passed relevant examinations. Mr Brabazon gave oral evidence that during the period when the letters were sent to CT from ACM in relation to debt recovery, ACM did in fact commence legal processes against customers who had debts over $3,000 or owned real property. He stated that ACM would not commence legal proceedings if someone was solely on a pension and had no assets. He said that depending on individual circumstances, ACM may not commence legal proceedings against someone if, for example, ACM received a certification from a doctor which suggested the person was actually incapacitated or in hospital for longer periods.
Mr Brabazon deposed that debtors frequently lied to avoid paying debts. For that reason, ACM requested corroborating documentary evidence to support claims made by debtors about health issues or financial inability to pay a debt. Mr Brabazon said that no medical reports, certifications or records verifying or confirming CT’s condition or financial circumstances were provided at any time during ACM’s dealings with CT.
Mr Brabazon also referred to a document titled “Debt collection guideline: for collectors and creditors” issued in February 2016 by the ACCC and ASIC (2016 Guidelines). It contains a recommendation at clause 5(c) that a debtor not be contacted more than 3 times per week or 10 times per month and that unduly frequent contacts may amount to undue harassment or discrimination.
Regarding CT’s debt to Telstra, Mr Brabazon deposed that on 25 June 2010, Telstra assigned CT’s debt of $5,768.53 to ACM. This was one of several thousand debts assigned to ACM by Telstra. Typically, Telstra assigned a debt after failing in its own attempts to collect the debt. When a debt was assigned to ACM, Telstra provided ACM with records containing such information as steps taken by Telstra to collect the debt and whether the debtor owned or rented real property. Mr Brabazon deposed that in his experience, Telstra used the letter “O” to record on its file that a customer owned real property. He said that the inclusion of the letter “O” in the relevant records for CT indicated that he owned real property.
Mr Brabazon gave evidence of ACM’s DebtSmart system, which automatically puts an account on hold if its status is changed to “Customer Disputes Account”. The hold period is 14 days to allow further information to be provided in respect of the dispute, and would be automatically lifted if no such information was provided. The CT Notes indicated the status of CT’s account had changed to “Customer Disputes Account” on 16 December 2014, and an entry on 31 December 2014 records that further information was not provided within the requisite time period.
In additional oral evidence in chief given with the leave of the Court, Mr Brabazon said that in his experience working in the finance industry, it is very difficult for persons who have delinquencies listed on their consumer credit report, unless very minor, to obtain further credit or finance. He said the circumstances which ACM took into account during the period 2011-2015 as to whether or not to commence legal proceedings against a debtor included whether there were unpaid accounts, as well as other criteria such as whether the amount exceeded $3,000 (it was originally $5,000), any assets owned by the debtor and whether the debtor was in employment and therefore the company could garnishee the remuneration. He said that not all these criteria were inflexible and that in a particular case the $3,000 minimum level of debt might not be applied.
Mr Brabazon was asked in cross-examination why statements from a carer or nurse would not provide sufficient proof of a debtor’s medical condition. His initial answers were non-responsive and designed to advance ACM’s interests. Ultimately, he appeared to accept that persons other than a doctor might be able to give such confirmation. He said that oral statements from nursing staff could be a form of proof, but he then immediately added, self-servingly, why would nurses take the phone over to CT if he was not able to speak. He then added that “nurses aren’t doctors either” . Mr Brabazon said that having listened to the tape he got the impression that CT was able to speak reasonably. He was challenged on this by reference to his lack of professional qualifications to assess stroke victims. I found his evidence also to be self-serving.
Mr Brabazon acknowledged that it was open to ACM to ask CT’s son to obtain a medical report and that ACM could also have written to CT at the nursing home and seek his consent to release his medical records and provide a statement of financial circumstances. Mr Brabazon said that if ACM had CT’s ex-wife’s email address, ACM could have tried to contact her and ask for a medical report.
Mr Brabazon gave evidence about the relationship between ACM and Australia Post. Up until around 2010, ACM processed its own debt correspondence but from that date it entered into a contract with Australia Post (which was not in evidence). He explained that the general practice was for ACM to provide electronic data to Australia Post, usually on a Friday, with a view to Australia Post then generating hardcopy letters and dispatching them within a timeframe stipulated in the contract. He said that the letters were dated in a way which anticipated the likely day the letter would be delivered. Thus, if a letter which was sent out by Australia Post is expected to be received the following Monday, the letter would bear the date of the following Monday.
When asked what monitoring ACM had of the actual date of delivery, Mr Brabazon said that all bulk deliveries included “test letters” sent to ACM staff, including himself, so that the date of receipt could be noted and Australia Post’s performance monitored by ACM. In response to a question from the Court, however, he confirmed that no such tests were done in respect of people who lived out of Sydney.
Mr Brabazon was asked various questions about his experience from 2001 to the present regarding credit defaults. His answers were to the effect that he had only limited direct knowledge and he relied on what he learned from industry contacts and friends. He said that he was involved in 2006 with studying credit card arrangements in Australia when he was working in Poland. Mr Brabazon agreed that any decision whether or not to advance a person credit relied upon a consideration of a number of different factors, of which one might be an adverse credit listing. He also acknowledged that under Australian law, if a debt is settled or paid in full, a notation must be added to the credit listing.
Mr Brabazon was cross-examined on the Privacy Fact Sheet 38 dated May 2014 from the Office of the Australian Information Commissioner. Mr Brabazon agreed that ACM had policies in place throughout 2011 to 2015 applicable to requests for hardship assistance. Further, he agreed that it was inaccurate to say that ACM could list a debt with a credit reporting bureau as a default in the case of someone was in a position of potential financial hardship.
Mr Brabazon was cross-examined at some length on whether there had been compliance with ACM’s policies and procedures in its dealings with both CT and JR. He was taken to that part of the report prepared for ACM in September 2016 by Anteris Consulting titled “Review of Compliance Environment” (Anteris Report) which described changes to ACM’s policy concerning financial hardship and vulnerable customers following Perram J’s judgment in ACM 2012. Mr Brabazon confirmed that, having regard to what JR told Mr Francisco on 3 September 2014 as to her financial circumstances, Mr Francisco was authorised to accept any payment proposal that was offered by JR, no matter how long it would take to repay the debt, pursuant to ACM’s policy as described in the Anteris Report. He also confirmed that having accepted such a payment proposal, legal proceedings would not be commenced.
Mr Brabazon accepted that, having regard to JR’s financial circumstances as disclosed to Mr Francisco on 3 September 2014, she could have been referred to ACM’s hardship team. He reiterated that JR’s offer to pay $20 per week should have been accepted. Later in his cross-examination, however, Mr Brabazon said that while it was inconsistent with ACM’s policy to say that management was demanding a full payment from JR to avoid recovery action, that did not mean that Mr Francisco was not able to ask for full payment. Further, he added that because JR was working, and agreed to pay half the debt, he did not think that she was in hardship.
Mr Brabazon ultimately accepted that Mr Francisco’s statement to JR that management was demanding a full payment was inaccurate and in breach of ACM’s policy as described in the Anteris Report and that the request that JR pay half the amount was contrary to the same policy. But he then said that it all depends upon how the discussion unfolds, and that JR could have had $4 million in a bank account. He said that by asking for a large amount of money that may come forth with a larger amount of money. Mr Brabazon appeared reluctant to make concessions which ought reasonably to have been made. His reluctance may have been attributable to an abiding concern to advance ACM’s interests in the proceeding.
Mr Brabazon was cross-examined about the processes for initiating legal action as described in the Anteris Report. The Report described changes which had been made to ACM’s legal referral process such that only a Relationship Manager could refer a matter to the ACM Legal Processing & Collections Team after complying with specific directions set out in the ACM Legal Process Policy (MSP709-11). The Report stated that, among other things, the Legal Process Policy required the Relationship Manager to undertake a thorough assessment of a customer’s circumstances and mandates completion of the Legal Checklist on DebtSmart. Should the checklist be completed satisfactorily, the Relationship Manager must then gain approval for litigation by completing a Legal Approval Form, which required sign off from the relevant Section Manager. At this point, “the file will be locked down in DebtSmart (via the Legal compliance button” and automatically transferred to the Legal Processing & Collections Team, who would then undertake what was described as a final quality check, including an assessment for hardship or other sensitive issues. Finally, the Report noted that ACM’s Legal Processing & Collections Team would liaise with external solicitors throughout the process and provide instructions where necessary.
The Legal Checklist pro forma in evidence required details to be completed in relation to a range of matters depending upon the nature of the proposed legal action and whether it is a bankruptcy, a garnishee order or an examination.
Mr Brabazon acknowledged that there were various levels of management, at least three, between an ACM Relationship Manager and the Legal Processing & Collections Team. He agreed that either the Relationship Manager, or someone higher in the chain of command, had to carry out a thorough assessment of the customer’s circumstances before referring a matter to the Legal Processing & Collections Team. When he was asked if Mr Francisco was in a position to say anything to JR on 3 September 2014 about whether there was any possibility of the matter being referred to the Legal Processing & Collections Team, he responded by saying that he didn’t know because he wasn’t there. He then said he wasn’t aware of whether Mr Francisco had carried out any assessment of the customer before the telephone conversation. Mr Brabazon then rather stubbornly resisted accepting certain assumptions that were put to him by the applicants’ Senior Counsel about what occurred. Mr Brabazon’s attitude did not assist his credibility.
Mr Brabazon acknowledged that ACM’s Legal Process Policy (MSP709-11), as described in the Anteris Report, required a Legal Checklist to be completed by the Relationship Manager, and that only if the checklist is completed satisfactorily is the Relationship Manager in a position to seek approval for litigation by completing a legal approval form, which then needs to be signed-off by the Section Manager. This was the position throughout 2011 to 2015 to the best of his recollection. He also accepted that ACM’s Legal Processing and Collections Team had a right to reject any recommendation to litigate and it was only when the team decided to proceed that the matter was referred to external solicitors for litigation. Mr Brabazon confirmed that throughout 2011 and 2015, it was only after a matter was referred to external solicitors that any documents for the purposes of legal proceedings would be prepared.
Mr Brabazon was cross-examined on an ACM customer Ledger Card Report with several entries dated 22 August 2012. He avoided directly answering the question that if there was no entry on DebtSmart recording the status of a matter as “Legal – Preparing Documents”, it could be inferred that no decision had been made to prepare legal documents in respect of a debtor. He drew an unconvincing distinction between preparing for litigation and preparing legal documentation.
Mr Brabazon was cross-examined at some length on the issue of the accuracy of the reference to “O” in the Telstra documents generated in the period 2006-2008, which ACM subsequently obtained in respect of the CT Debt. It was put to Mr Brabazon that whether a debtor in fact owned real property would have to be checked as part of the internal legal processes. Mr Brabazon said that this could be done at any time of the internal process and not just by the Relationship Manager. Mr Brabazon ultimately agreed that the issue of home ownership would have to be checked before the file was sent to external solicitors.
Mr Brabazon confirmed that ACM’s policy was that “staff shouldn’t mention any legal situation whatsoever unless they have approval from the Section Manager or Team Leader”. He also said that it would have been inappropriate for a Relationship Manager during the period 2011 to 2015 to refer to legal proceedings in communications with a debtor until a decision had been taken that legal proceedings would commence.
When asked about the propriety of the many letters which ACM sent to CT relating to legal proceedings, Mr Brabazon emphasised the significance of the use of the words “may” and “could”. Mr Brabazon was also cross-examined on the propriety of sending a “NOTICE OF INTENTION TO COMMENCE LEGAL PROCEEDINGS” letter before a decision had been made to commence legal proceedings. He agreed that such a letter would be “entirely inappropriate” under certain circumstances but, again, he emphasised that the letters sent to CT did not use the word “will” and instead used “may”.
Mr Brabazon was taken to various internal ACM policies produced in response to s 155 notices, including a document titled “Legal Approval Flow Chart - Prior to Commencement of Legal Action”. He said that he was not sure if this policy was in place in 2012, but he accepted that it was after then. The document stated that Relationship Managers, Senior Relationship Managers or Team Leaders cannot discuss legal action with a customer unless preapproved by a Section Manager. It also stated that Section Manager approval must be noted on the Note History, or a signed approval uploaded to the relevant customer account. Mr Brabazon confirmed that the system in place between 2012 to 2015 was that, once Section Manager approval had been received, even then a Relationship Manager could not discuss possible enforcement actions. Mr Brabazon agreed that it was probable that until there had been at least a number of attempts to resolve settlement of the customer’s account by ACM, a Relationship Manager should not even get to the stage of preparing a checklist, but added that there could be exceptions.
Mr Brabazon was also cross-examined on an ACM policy titled “General Guide Criteria before processing an account for Legal” (General Guide). Criteria 3 of the General Guide provided that “There needs to be sufficient information to confirm that the customer is a. Receiving an income and is employed full time b. Owns property c. Owns a business”. Mr Brabazon stated the document was only a general guide and there could be exceptions. It was then put to Mr Brabazon that, having regard to the General Guide and JR’s personal circumstances, it was highly unlikely that ACM would ever issue proceedings against her. Mr Brabazon responded by saying that while he did not know about the word “highly”, he agreed that “it could be unlikely, yes”.
When it was put to Mr Brabazon that, based on the General Guide, it was “impossible” that ACM would ever issue proceedings against JR because she was working part-time, did not own property, did not run a business and was on Centrelink benefits, Mr Brabazon said that it would have been “unlikely”.
When similar questions were put to him regarding the unlikelihood of legal proceedings against CT, Mr Brabazon said that it was “unlikely” that any litigation would ever have been brought against CT.
Mr Brabazon was taken to an ACM document dated May 2010 which included information on job descriptions for a collection officer. In particular, he was taken to page 7 of that document and the statement there that a collector “may discuss matters regarding an account only with the account owner, the debtor, (unless you obtain authorisation in the form of a written letter from the debtor to discuss the account with a third party)”. Mr Brabazon said that this was subsequently modified to also allow verbal authorisation to be given upon approval by either the Senior Relationship Manager or Team Leader.
Mr Brabazon was taken in cross-examination to a document titled “ACM Group Ltd Training Booklet – Rules and Regulations” dated July 2010. He confirmed that this document applied to all ACM staff from July 2010. He confirmed that ACM policy during the period 2010 to 2015 was that a minimum arrangement of $20 per fortnight could be accepted if ACM received a Centrelink statement verifying low income. Mr Brabazon acknowledged that JR’s Centrelink statements should have been requested to verify that she was in fact receiving Centrelink payments. When it was put to Mr Brabazon that it was “entirely inappropriate” for Mr Francisco to put pressure of any sort upon JR to reach an arrangement during the 3 September 2014 telephone call, he initially disagreed, saying that this was because JR was working. He ultimately accepted that Mr Francisco should have asked JR to provide the Centrelink information as required by the policy.
Mr Brabazon was cross-examined on a document titled “ACM Group Ltd Staff Compliance” which was updated on 17 October 2013 (Staff Compliance Document). His attention was drawn to a statement in that document that: “ACM Staff Members are never to say to a customer that they are discussing their account or referring their account to in-house Lawyers or Legal Department/Team” but that they “may state that they may discuss potential legal action with their Manager” (emphasis in original). Earlier in cross-examination, Mr Brabazon agreed in respect of a document titled “Legal Process” dated 14 December 2012, that the policy as stated in that document was that collectors could not tell debtors that legal action will be commenced or may be commenced in circumstances where ACM had not started legal action. When it was put to Mr Brabazon that it was entirely inappropriate for Mr Francisco to have said to JR that legal documents were being drawn up, Mr Brabazon said that it would have been appropriate if Mr Francisco had been told by his manager to discuss legal action but that if this had not occurred then it would have been inappropriate. Mr Brabazon confirmed that according to the Staff Compliance Document, it was ACM policy throughout the period 2011 to 2015 that collectors should never talk about legal action to any customer who was receiving welfare payments and where ACM held verification documents. He agreed that that policy also applied where verification had not yet been requested.
Mr Brabazon was taken to a document dated 20 February 2014 and headed “ACM Group Ltd Hardship Training”. His attention was drawn to statements at page 5 of that document that “Some customers will state that they are in Financial Hardship” and “With other customers Relationship Manager (RM) will need to discuss with the customer their financial situation and make a decision as to their suitability for the HARDSHIP PROGRAM contained in this training material” (emphasis in original). Mr Brabazon accepted that throughout the period 2011-2015, the onus was on the Relationship Manager to find out whether or not a customer would be suitable for the Hardship Program, and that was a step all Relationship Managers should have done before requesting any payment from a particular debtor. Mr Brabazon’s attention was drawn to a part of the document which stated:
If the customers (sic) financial situation is obvious and you have supporting documentation e.g.
(a) They are on Centrelink.
(b) They want to make a $20 a fortnight payment ($10 a week).
Accept the arrangement. …
It was then put to Mr Brabazon that JR was one of the “paradigm situations”, in circumstances where she had offered to pay $20 per week and having regard to her financial situation. Mr Brabazon responded by saying that “you could reasonably assume that that could be the case, although she did offer to pay half of the debt, $1,500…”. This is one of several examples when Mr Brabazon resisted accepting that conduct of his staff in relation to both CT and JR was inconsistent with ACM policy in force at the relevant time, where objectively that plainly was the case.
This is further illustrated by Mr Brabazon’s response to the proposition that CT would have been eligible for the Hardship Program and should have been put into it rather than being subjected to four years of telephone calls and correspondence. Mr Brabazon initially accepted that proposition. He then added that ACM had put in place a “sensitive word report” whereby each night the ACM system searches for certain sensitive words in any account which is then referred to a senior representative so that the account is actioned properly and this system was not in place during 2011 to 2015.
When Mr Brabazon was pressed as to whether it was “wholly unreasonable” to keep calling and writing to CT, Mr Brabazon equivocated by saying that he did not know and that there were reasons both positive and negative. Ultimately, and only after he was pressed several times, Mr Brabazon agreed that CT should have been processed as a candidate for hardship.
The applicants did not invite the Court to make an adverse credibility finding regarding Mr Brabazon. I regret to say that Mr Brabazon was not an impressive witness. I do not suggest that his evidence was untruthful but he was often unresponsive to questions and sought to advance ACM’s interests. As the summary of his evidence indicates, he failed to make concessions which ought reasonably to have been made and he was unreasonably defensive in some of his responses in cross-examination. I have approached his evidence with caution even though I make no adverse credibility finding.
(b) Mr Ryan Clarke
Mr Clarke swore an affidavit dated 13 March 2017 and with the leave of the Court he gave his evidence by video link to Manilla. He came across as an honest and reliable witness and I have no hesitation in accepting his evidence. He ceased working with ACM in October 2016, after working with the group for approximately ten years, and now works for a totally unconnected company. He has no reason to advance ACM’s interests. He demonstrated a good familiarity with the relevant policies and guidelines of both ACM and the ACCC which were applicable during the time when he worked with the ACM group. He gave frank answers to the inappropriateness of stating that a repayment arrangement of say, $20 a week, will only be considered if a large upfront payment were made.
In his affidavit, Mr Clarke deposed that he was employed by Advanced Credit Management (Philippines) Pty Limited (ACM Philippines). He was Branch Manager at the ACM Philippines call centre in Manila for approximately 4 years. He previously worked as Section Manager at ACM Group Limited or its predecessor Accounts Control Management Services Pty Ltd in Sydney for approximately 6 years.
Mr Clarke gave evidence about his role at ACM Philippines during September 2014 and the hierarchy of staff. He was the only Branch Manager at ACM Philippines. He deposed that Section Managers reported directly to the Branch Manager. Section Managers were, in turn, responsible for overseeing Team Leaders and Senior Relationship Managers. Team Leaders and Senior Relationship Managers were positioned above call centre operators.
At any one time, Mr Clarke was in charge of approximately 300,000 customer accounts and up to 200 internal staff. He said that it was usual for him to have around 30 to 40 conversations per day with staff in relation to customer accounts.
ACM Philippines did not have an internal legal department during the time that Mr Clarke worked there. Mr Clarke gave evidence as to the process that ACM followed where a customer disputed liability in relation to an outstanding debt. Key aspects of the process included:
(a)The company from whom ACM Group purchased an account debt (initial creditor) would confirm whether a customer was fully, partially or not liable for an outstanding debt.
(b)Information provided by the initial creditor or a customer would be noted on a customer’s ledger on ACM Philippines’ internal computer database (DebtSmart) and the Team Leader or Senior Relationship Manager would automatically be alerted to follow up the account.
(c)The Team Leader or Senior Relationship Manager would review the documentation and instruct a Relationship Manager as to how to proceed, including contacting a customer.
(d)A hardcopy Legal Checklist would be created once inquiries of a customer’s willingness to pay the debt had been made, and if a Team Leader or Senior Relationship Manager thought that an account should be referred to ACM Group’s legal department in Sydney for legal action. Occasionally, the Legal Checklist would be prepared before contacting a customer.
(e)If a Relationship Manager approached Mr Clarke and advised that a customer indicated a willingness to make a payment, he would securely dispose of the Legal Checklist immediately.
Again, after applying the Briginshaw standard, I am comfortably satisfied that all of the matters set out in issue (i) were in fact true. There is no reason to doubt the accuracy of the matters recorded in the CT Notes or the matters to which CT personally deposed in his affidavit and in relation to which there was no cross-examination.
(k) Whether ACM’s conduct as pleaded in the Concise Statement was in connection with the supply of services or payment for those services to CT and JR such that the relevant provisions relating to misleading or deceptive conduct, undue harassment, coercion and unconscionable conduct are those contained in the Australian Consumer Law.
For the reasons given in [217] ff above, the issue should be answered affirmatively.
(l) Whether ACM’s representatives’ conduct in sending the Seven Day Demand and the 48 Hour Demand Letters to CT and making the telephone calls, as pleaded and particularised, used undue harassment in connection with the supply of services or the payment for those services in contravention of s 50(1)(a) and/or s 50(1)(b) of the Australian Consumer Law.
As French J observed in McCaskey at [48] (see [184] above) the question whether or not there is harassment involves an evaluative judgement and the word “undue” adds an extra layer of evaluation. In carrying out that evaluative judgement it is important not to lose sight of what Perram J described in ACM 2012 at [14] as “the confronting business of debt collection”. I accept that this is an environment in which debtors and their allies may provide a debt collector with false information and that, depending upon the circumstances, the debt collector may be entitled to be sceptical of some of the information it receives from such sources. One example of this experience appears to be the fictitious letter written by ET to ACM, noting, however, that that letter was not the subject of any direct evidence and CT was not cross-examined as to the extent, if any, of his knowledge or participation in its preparation. It was in the very context of debt collecting, however, that French J said in McCaskey at [48] that harassment will be undue if the frequency, nature or content of approaches and communications from the debt collector were such that they were “calculated to intimidate or demoralise, tire out or exhaust a debtor rather than convey the demand and an associated legitimate threat of proceedings”.
Although it was common ground that there is no such person as ET, many of the statements made in ET’s letter dated 13 May 2011 are supported by other evidence, namely that CT had suffered a massive stroke and was a full time resident of a care facility, has no assets, no employment and was living solely on his disability pension, that he will remain in the care facility for his entire life and that he has lost the capacity to communicate.
In conducting the evaluative judgment, it is relevant to take into account the principles and factors described above, but also the following matters which arise in this particular case:
(a)the fact that CT, who was the target of ACM’s conduct, was a person who was permanently disabled from a stroke, unable to speak without difficulty and was living in a care facility with no apparent source of income apart from a government disability benefit;
(b)the duration of ACM’s conduct which is the subject of the applicants’ allegation of undue harassment extended over several years and involved ACM representatives telephoning CT’s care facility on approximately 40 occasions during that period and actually speaking to CT on six occasions, as well as sending 20 letters of demand in various forms over that four year period;
(c)those letters contained representations which I have found to be misleading or deceptive. That is not to say that such a finding is an essential step to concluding that conduct constitutes undue harassment, but it is a relevant factor in this proceeding; and
(d)CT has given unchallenged evidence that he found the phone calls and correspondence to be distressing and he said that the phone calls made him feel angry and frustrated. I accept that evidence, as I also accept CT’s evidence that he believed that ACM would commence legal proceedings against him having regard to the phone calls and the correspondence.
I reject ACM’s submission that the relevant conduct does not amount to undue harassment. First, I reject ACM’s contention that the 34 occasions on which ACM called the care facility but failed to speak directly with CT are not relevant. It is evident from the CT Notes that, as could reasonably be expected, CT was aware of at least some of the calls made by ACM to the care facility even though the ACM representative was not put through to him directly. This is evident, for example, from the CT Notes dated 31 July 2012, 15 October 2014 and 28 October 2014. Furthermore, CT gave evidence, which I accept, that on at least six occasions he was told that ACM had phoned for him.
Secondly, I do not accept ACM’s submission that the content, frequency and length of the six telephone conversations with CT directly could not amount to undue harassment. This submission ignores the 34 other occasions during the four year period when ACM tried unsuccessfully to contact CT. It also fails to take into account the fact that the telephone conversations were interspersed with ACM sending 20 letters of demand to CT which, for reasons given above, contained misleading or deceptive representations. These matters supply context.
Nor do I accept ACM’s submission that its contact with CT could not amount to undue harassment because of the recommendation concerning contact in the applicants’ publication “Debt collection guideline: for collectors and creditors” (whether reference is made to either the 2005 or 2016 version of this document). ACM emphasised that the Guideline recommended that a debt collector not contact a debtor more than three times per week or ten times per month at most (when contact is actually made). This recommendation cannot be read in isolation from other relevant parts of both versions of the Guideline. The 2005 Guidelines contained the following information at page 11 (similar information is set out at page 13 of the 2016 Guidelines):
Debtors and third parties are entitled to be free from excessive communications from collectors. Communications must always be for a reasonable purpose, and should only occur to the extent necessary: see part 2, section 1 of this guideline. The guidance on frequency of communications that follows (section 4) should be read subject to this general principle.
The recommendation upon which ACM relies is in section 4 of the Guideline and therefore must be read subject to the general principle.
Both the 2005 and 2016 Guidelines also contain information relating specifically to debtors at a special disadvantage (see pages 30 and 52 respectively). It is sufficient to set out the information in the 2005 Guidelines (at 30):
[a]As with other people involved in trade and commerce, collectors must not engage in unconscionable conduct. Collectors are at risk of breaching this prohibition if they take advantage of the disability, weakness or vulnerability of a specially disadvantaged or vulnerable person.
[b]Under the general law, ‘special disadvantage’ means that the consumer has a condition or is in a circumstance that seriously affects their ability to judge what is in their best interest. Factors that may give rise to a special disadvantage include:
…
Ÿinfirmity of body or mind.
…
This information on debtors at a special disadvantage in both the 2005 and 2016 Guidelines is expressly directed to the prohibition of unconscionable conduct, however, I consider that it is also relevant to undue harassment in circumstances where one of the factors to be taken into account in conducting the relevant evaluative judgment is whether the person to whom the conduct relates is a specially disadvantaged or vulnerable person, such as CT given his disability.
Thirdly, I reject ACM’s submission that its conduct should not be viewed as undue harassment because it says that it would not have been unlawful or give rise to undue harassment for a creditor to exercise its legal rights and personally visit a person in the circumstances of CT on multiple occasions for the purposes of personally serving a statement of claim and other legal documents leading up to a sequestration order. That is not what happened here. The focus should be on the events which did occur, not on hypothetical scenarios.
Fourthly, I reject ACM’s submission that the Court cannot be satisfied to the Briginshaw standard that ACM knew that it was true that CT had suffered a stroke, was living in a care facility and was unable to pay the debt. As to the first two of those matters, ACM either knew or ought reasonably to have known that it was true that CT had suffered a stroke and was living in a care facility having regard to the following matters:
(a)information Telstra provided to it when the debt was assigned concerning CT’s health position (see the CT Notes for 25 June 2010);
(b)the numerous times on which staff at the care facility confirmed that CT had suffered a stroke, had difficulty speaking and was living in the care facility;
(c)CT’s own statements to ACM representatives on these matters, as well as those of his son, NT.
As to CT’s inability to pay the debt, the truth of this statement was also either known by ACM or ought reasonably to have been known to it having regard to the fact it was told that CT was on a disability pension, had been living in a care facility for many years and had been told by various staff there that he couldn’t pay.
I accept the applicants’ submission that ACM cannot justify its conduct on the basis that it required verification of information about CT’s medical or financial circumstances when ACM itself did not take reasonable steps to contact people who may have been in a position to provide such verification. Although the CT Notes record that some contact was made with CT’s son, NT, there was no evidence to indicate that ACM asked either NT (or for that matter LH) for a medical report or further confirmatory information regarding CT’s health or financial circumstances. ACM had NT’s mobile number because it is recorded in the CT Notes dated 18 April 2011 and 18 May 2011. It is evident that an ACM representative, Abraham, called and spoke to NT on both occasions. On the first of those occasions, Abraham was told by NT that CT had had a stroke three years ago, can’t talk and is in a care facility. On the second of those occasions, when Abraham asked about ET, the CT Notes record that NT said that there was no one by that name in his family. When asked who was his father’s power of attorney, NT told Abraham that it was his mother who was at work and was unreachable but that he would pass on Abraham’s number to her. These entries do not indicate that NT was being uncooperative or evasive. Somewhat reluctantly, Mr Brabazon ultimately acknowledged in cross-examination that ACM could have called NT and asked for some form of medical report, or written to CT at the care facility and asked him for his consent to disclose his medical records.
There is also an entry in the CT Notes dated 16 December 2014 which records that Telstra advised the ACM representative that it had received an email from CT’s daughter and that the ACM representative passed on to Telstra his email and telephone contact details and that he “advised to let them know to send through power of attorney so can discuss with her”. The subsequent entries in the CT Notes do not reveal what happened in relation to this matter.
It also appears that ACM had an email address for LH because one is recorded in the CT Notes for 25 June 2010. ACM submitted that it was unclear whether or not that email address was correct or remained current after the CT Debt was assigned to it. But there is no evidence that any ACM representative ever attempted to contact LH using that email address. Mr Brabazon acknowledged in cross-examination that if ACM had LH’s email address ACM could have emailed her and asked her to provide a medical report confirming CT’s medical condition.
Fifthly, contrary to Mr Brabazon’s evidence, I do not consider that it was reasonable for ACM to assume that CT owned real property because of the “O” code in Telstra’s records. The CT Notes record that ACM conducted a real property search on 20 January 2011 in respect of the ownership of the address where ACM thought CT lived and it revealed that the property was owned by a third party. The address details for CT were subsequently altered by an ACM representative, Abraham, on 18 April 2011 to a PO Box address. There is no evidence that ACM conducted any other searches or inquiries as to whether CT owned real property. CT’s own evidence, which I accept, is that he never did.
Finally, on the basis of all the evidence before the Court, I am comfortably satisfied that ACM’s multiple telephone calls to the care facility, coupled with the number and content of its correspondence to CT, was calculated to intimidate or demoralise CT or, alternatively, to tire him out or exhaust him. I make this finding notwithstanding that ACM submitted that it was relevant that such an allegation was never put to Mr Brabazon or any other witness in cross-examination. There was no need to do so. Mr Brabazon was not directly involved in any of the conduct which underpins the undue harassment case and none of the ACM representatives who were involved in that conduct was called as a witness. In any event, I accept the applicants’ submission that it was unnecessary for this matter to be put directly to ACM’s witnesses as the matter relates to the effect of conduct which is clearly established on the evidence.
For all these reasons, it is concluded that the relevant conduct by and on behalf of ACM involves undue harassment and was in contravention of s 50(1)(b) of the ACL, which conduct related to CT’s payment for the Telstra services.
(m) Whether the following statement made by Mr Francisco to JR: “Well frankly, they’re already preparing the documents that would be used for potential legal action against you” was a representation from ACM to JR that ACM had commenced preparing the documents that would be used for potential legal action against JR.
ACM conceded in its written outline of opening submissions at [40(a)] that the above representation was made. In any event, I am comfortably satisfied that the representation was made, having regard to the fact that Mr Francisco’s statement was made shortly after he had asked JR to hold the line while he spoke to his manager to see what he could do about stopping further recovery action and shortly after he told her that “management is planning… for a summons to be drawn, issued and served against you so that we can recover the debt in full”.
(n) If a representation in the terms of (m) was made, whether it was untrue and/or whether ACM did not have reasonable grounds for making it.
Applying the Briginshaw standard, I find that the representation was untrue because ACM had no intention as at 3 September 2014 to prepare documents would be used in potential legal proceedings against JR. There is some evidence from both Mr Clarke and Mr Francisco which suggest that an internal Legal Checklist had been prepared in relation to JR as at 3 September 2014. Mr Clarke gave evidence that he reviewed a Legal Checklist in respect of the account the subject of his discussion with Mr Francisco but he did not know who prepared it. He was unable to say whether the Legal Checklist was fully completed but he recalled disposing of it after being told by Mr Francisco that JR was willing to pay $1,500. I accept that evidence, but find that the mere existence of the Legal Checklist did not mean that it was true for Mr Francisco to tell JR that ACM had commenced preparing the documents that would be used for potential legal action against her. The evidence is clear that the mere existence of a Legal Checklist did not mean that legal documents were being prepared for use in litigation. Rather, it was simply the first internal step in a lengthy process which might result in a matter being referred to ACM’s legal department or to external lawyers. The evidence is also clear that the person who completed a Legal Checklist did not make the final decision as to whether proceedings would be commenced. Mr Clarke, as Branch Manager, had authority to decide that legal proceedings would be commenced, but it is clear that he had made no such decision when Mr Francisco was speaking to JR on 3 September 2014.
Mr Francisco confirmed under cross-examination that he knew in 2014 that the Legal Checklist was something different from a summons and that it was no more than an internal document which was designed to ensure that all relevant information was obtained about a debtor.
I do not accept any submission that the Legal Checklist was itself a document that would be used for potential legal action against JR. The evidence is clear that that is not the purpose of the Legal Checklist, which is an internal ACM document. There are other processes which had to take place for court-related documents to be drafted and used in legal proceedings. It is also notable that, in the relevant statements, Mr Francisco referred to ACM having commenced preparing “the documents that would be used for potential legal action against [JR]” (emphasis added). It is clear that he was not referring to any single document (such as a Legal Checklist) but to a series of documents. There were none.
For these reasons, the representation was not true. Alternatively, if the representation is properly characterised as relating to a future matter, I would find that there were no reasonable grounds for making it, for similar reasons to those given immediately above.
(o) Whether the following statement made by Mr Francisco to JR: “Any time soon what management is planning is for a summons to be drawn, issued and served against you so that we can recover the debt in full” was a representation from ACM to JR that ACM was planning for a summons to be drawn, issued and served upon JR to recover the debt in full.
I am comfortably satisfied that the alleged representation was made having regard to the terms used by Mr Francisco.
(p) If a representation in the terms of (o) was made, whether it was untrue and/or whether ACM did not have reasonable grounds for making it.
For the same reasons as those given above in respect of issue (n), I am comfortably satisfied that the representation was untrue and, alternatively, if the representation relates to a future matter, I am comfortably satisfied that ACM did not have reasonable grounds for making it. The representation was not only inconsistent with ACM’s policies which were then in force (see [110]-[112], [116], [119], [121], [127] above), but I have also rejected Mr Francisco’s evidence as to what he was told by Mr Clarke which he claimed informed those statements he made to JR. Mr Francisco had no reasonable grounds for making the representation. To the extent that he misunderstood the significance of the Legal Checklist, this would not provide a reasonable and objective basis for making the representation, not the least because Mr Francisco recognised the difference between the Legal Checklist and the drawing of a summons.
(q) Whether the following statement made by Mr Francisco to JR: “Were [a default to be listed on JR’s credit file] you wouldn't be able to obtain credit for the next five to seven years” was a representation from ACM to JR that if a default were listed on JR’s credit file, she would not be able to obtain credit for the next five to seven years.
I find that this statement did give rise to the pleaded representation, to the effect that if a default were listed on JR’s credit file, she would not be able to obtain credit for the next five to seven years. ACM’s submitted that the statement did not constitute a definitive representation that JR would not be able to obtain credit during that period because the statement was merely that she would have greater difficulty doing so. That submission is rejected. It is flatly inconsistent with the express terms of the statement.
(r) If a representation in the terms of (q) was made, whether ACM had reasonable grounds for making the representation.
It was common ground that the representation is as to a future matter. I am comfortably satisfied that ACM did not have reasonable grounds for making this representation. It was expressed in absolute and unqualified terms. ACM had not, as at 3 September 2014, disclosed any default information to any credit reporting body in respect of the JR Debt. ACM, who carried the evidentiary onus on this matter, pointed to no evidence to support the representation. It is true that Mr Brabazon gave evidence that “if someone’s credit bureau has delinquencies listed, then unless they’re of a very minor nature…then those applicants would more than likely be declined”, but this falls short of providing a basis for Mr Francisco’s absolute and unqualified statement that JR would not be able to obtain credit if there was a default listed with bodies such as Bradstreet. Mr Brabazon accepted in cross-examination that the availability of credit to a person who had a credit default listing against them depended upon several factors, including whether it was recorded that the debt was paid.
Mr Francisco gave evidence in cross-examination that he recalled that some customers paid their debts in circumstances where they were not able to get credit because of a credit listing. That evidence does not justify his unequivocal and unqualified statement to JR.
(s) Whether ACM engaged in conduct that was misleading or deceptive or likely to mislead or deceive in contravention of s 18 of the Australian Consumer Law by making the pleaded representations to JR on 3 September 2014.
I find that each of the three pleaded representations constituted misleading or deceptive conduct for the purposes of s 18 of the ACL. In reaching that conclusion, I take into account the relevant findings above, as well as my acceptance of JR’s evidence as to the effect of the representations on her personally, in circumstances where the statements were directed to her and not the public at large. I accept JR’s evidence that when Mr Francisco made the first statement, it reinforced in her own mind that ACM was about to commence proceedings against her and that this shocked her in circumstances where she had offered to pay $20 per week. I accept her evidence that she understood the second statement to mean that legal proceedings would be commenced against her immediately. Finally, as to the third statement, I also accept JR’s evidence that when she heard Mr Francisco make the third statement regarding her access to credit, she felt like she had been “pinned against the wall”. JR explained that she had worked for a retail store in debt collection and had some familiarity with listed defaults. She said that she was afraid of a bad credit rating having regard to her family’s interests and she appreciated that the listing of a default could affect a person’s ability to access credit for utilities, telephone and mortgages.
JR acknowledged under cross-examination that because of her previous retail work she had independent knowledge of the consequence of credit defaults before she spoke with Mr Francisco. It was never put to JR that the evidence in her affidavits as to her reaction when Mr Francisco said that she would not be able to obtain credit for the next five to seven years was untrue. As I have indicated, I accept JR’s evidence.
(t) Whether ACM engaged in coercion in making the pleaded representations to JR on 3 September 2014 in connection with the supply or possible supply of services, or the payment for those services, in contravention of s 50(1)(a) and/or s 50(1)(b) of the Australian Consumer Law.
Although the word “coercion” is not qualified by the adjective “undue”, I proceed on the basis that it is a stronger term than “harassment” and, as Perram J pointed out in ACM 2012 at [16], it connotes some negation of choice or freedom to act. Whether or not particular conduct constitutes coercion also depends on an overall impression or evaluative judgment.
For the following reasons, I find that the three representations do amount to coercion. First, the representations were made in the context of a conversation during which Mr Francisco became aware that JR was employed only part-time, was a single mother of three children, received Centrelink benefits and had made an offer to pay off the debt as a rate of $20 per week. He was also aware that JR had made a complaint to the TIO. Despite these matters, Mr Francisco asserted that ACM’s management “is really demanding for full payment before full recovery action ensues”. He made this statement notwithstanding that, as Mr Clarke acknowledged, he should have accepted the $20 offer having regard to JR’s circumstances.
Secondly, I find that Mr Francisco sought to obtain an unfair advantage in his discussions with JR by stating that ACM’s management was imminently planning to have a summons drawn and served against JR so that the debt could be recovered in full (as opposed to a payment plan as offered by JR). Mr Francisco sought to soften up JR by then saying that he wanted to resolve the issue with her before those legal steps were taken and then, after ascertaining that she was on Centrelink and had three children, he assured her that he was on her side and was her “advocate so that I could represent you with management”.
Thirdly, notwithstanding that Mr Francisco knew that no summons was being drafted and that, at best, a Legal Checklist had been prepared, he told JR that he would go to his manager’s office and see what he could do “so we can put a cease order on this account and stop further recovery action”.
Fourthly, after speaking with Mr Clarke while JR was on hold, Mr Francisco told JR that the documents were already being prepared for use in the potential legal action against her, a statement which was false and untrue for the reasons set out above. He also claimed that his management was asking for half the full amount. This statement was also untrue having regard to Mr Clarke’s evidence of his conversation with Mr Francisco which makes clear that it was Mr Francisco who mentioned that amount, not Mr Clarke.
Fifthly, it was at this stage of the conversation that Mr Francisco set out the three reasons why JR should pay $1,500, one of which reiterated that it would “hold off all potential legal action against you”.
Sixthly, I accept that as a result of what she was told by Mr Francisco, JR felt stunned and physically sick and said that she felt “pinned to the wall”. I also accept her evidence that she felt flustered, anxious and “rail-roaded” into agreeing to pay a substantial amount to avoid legal proceedings. I accept JR’s evidence which is to the effect that she felt that she had no choice but to comply with the demand for an up-front payment of $1,500 or face legal proceedings. In those circumstances, she offered to pay $1,000 within days and then a further $500 the following week when she received her Centrelink payments. Mr Francisco’s representations, when viewed in context, constituted coercion within the meaning of s 50(1)(b) of the ACL.
(u) Whether ACM, by reason of the conduct as pleaded in the Concise Statement, engaged in conduct that was in all the circumstances unconscionable in connection with the supply or possible supply of services in contravention of s 21(1)(a) of the Australian Consumer Law.
It is understood that this issue relates to both CT and JR. That is the way in which the parties conducted the proceedings. ACM did not suggest that the unconscionability allegation was confined to JR and it made submissions as to why the Court should not make a finding of unconscionability in respect of the relevant conduct relating to CT.
It is desirable to set out my findings in respect of CT first, before turning to JR.
(i) Was ACM’s relevant conduct towards CT unconscionable?
Having regard to the general principles summarised above and taking into account inter alia the non-exhaustive matters set out in s 22 of the ACL, I find for the following reasons that ACL’s pleaded conduct was unconscionable within the meaning of s 21 of the ACL.
First, there was a strong disparity in the relevant strengths of the bargaining positions of ACM and CT. CT was in a position of special disadvantage, as ACM well knew. He had had a serious stroke several years ago, was permanently disabled, could hardly speak, and was living in a care facility. ACM’s representatives were told many times by staff at the care facility that CT could not speak and that they should visit him at the facility if they wished to contact him. Despite knowing these things, over a four year period ACM sought to bombard CT by attempting to telephone him on approximately 40 separate occasions and by writing 20 letters of demand. Moreover, there is no evidence that ACM attempted to contact LH notwithstanding that it had an email address for her, nor did it follow up with NT, despite his earlier cooperation.
Secondly, for the reasons given above, the letters ACM sent to CT were misleading or deceptive.
Thirdly, ACM’s conduct was inconsistent with relevant parts of the 2005 Guidelines because:
(a)the letters contain threats of legal action against CT in circumstances where the persons who made those threats did not have instructions or authority to commence legal proceedings (see pp 36-7 of the 2005 Guidelines which says “Do not make misrepresentations about the legal process. For instance, do not: state or imply that you have instructions to start legal proceedings when this is not intended, or you have received no such instructions”);
(b)the Guidelines further state that communications with a debtor must always be for a reasonable purpose and should only occur to the extent necessary (see [241] above). ACM persisted in its attempts to communicate with CT, both in writing and by telephone, notwithstanding that it had contact details for CT’s son who had cooperated with ACM on the two occasions it contacted him or, alternatively, LH, who ACM knew held CT’s power of attorney and in relation to whom ACM had an email address but did not use (see [248] and [250] above). ACM’s representatives persisted in trying to contact CT at the care facility, as well as sending letters of demand, notwithstanding the entries in the CT Notes which are referred to in [8] above;
(c)ACM’s conduct was reprehensible and unreasonable having regard to CT’s severe disability and position of disadvantage, matters which were well known to ACM (see [243] above); and
(d)ACM’s threats also breached that part of the Guidelines which relate to written correspondence being inconsistent with a debt collector’s internal records (see p 23 of the 2005 Guidelines). In particular, having regard to the information ACM obtained from NT as well as several staff at CT’s care facility, it was extremely unlikely that legal proceedings would ever be commenced by ACM against CT. Rather, its hardship policies and procedures would apply to him.
Fourthly, ACM’s conduct contravened its own policies and procedures, including in respect of debtors who were in financial hardship. Mr Brabazon was cross examined on a document headed “ACM Group Limited Hardship Training”. He confirmed that it was a mandatory requirement from 2011 to 2015 that Relationship Managers must review a debtor’s financial circumstances for hardship when contact occurred. He ultimately agreed that “it was wholly unreasonable to do what was done rather than refer [CT] at a very early stage through [the procedure that was in place]”, being a reference to ACM’s hardship program. Moreover, representations made by ACM relating to legal proceedings were inconsistent with ACM’s policies in force at the relevant times which required that a Legal Checklist be prepared by the Relationship Manager and that approval had to be attained from the Section Manager for the matter to go further (see [116] and [121] above). There is no evidence that these steps were taken in respect of CT, nor was there any evidence that the CT Debt had been referred to external solicitors for the preparation of legal documents (see also [116] above).
(ii) Was ACM’s relevant conduct towards JR unconscionable?
Having regard to the general principles outlined above and to the non-exclusive matters set out in s 22 of the ACL, I conclude that ACM’s conduct, as summarised in [19] to [22] above was unconscionable within the meaning of s 21 of the ACL.
First, there was a clear disparity in strength of bargaining positions as between JR and ACM. Mr Francisco knew that JR was a single mother of three children, worked only part-time and was receiving Centrelink benefits and that she was most concerned to protect lines of credit for her own welfare and that of her children.
Secondly, Mr Francisco was aware when he called JR that she had offered to pay $20 a week because it was recorded in ACM notes, as acknowledged by Mr Francisco in his conversation with JR on 3 September 2014. As Mr Clarke confirmed, having regard to JR’s circumstances, including her Centrelink benefits, that $20 offer should have been accepted. The offer was repeated by JR in her conversation with Mr Francisco but instead of accepting it or seeking verification of JR’s Centrelink payments, Mr Francisco embarked upon a course which was designed to pressure JR into making a substantial up-front payment. The three representations, which I have found to be misleading and deceptive, were a central part of that course. The making of those representations was an unfair tactic used by Mr Francisco to extract a large up-front payment because he must have believed that this was in ACM’s interests irrespective of JR’s individual circumstances and her capacity to pay such an amount.
Thirdly, Mr Francisco’s conduct towards JR was inconsistent with ACM’s own policies and procedures, including the following:
(a)Mr Brabazon acknowledged that it was inaccurate to say that ACM could list a debt with a credit reporting bureau as a default in the case of a person in a position of potential financial hardship (see [109] above);
(b)given JR’s financial circumstances, she should have been referred to ACM’s hardship team or her offer should have been accepted in accordance with ACM’s Hardship Training manual (see [128] above);
(c)Mr Francisco should not have talked about legal action to JR given that she was receiving welfare payments and verification documents had not yet been requested (see [127] above);
(d)Mr Francisco’s statement that management was demanding a full payment was not only inaccurate but also in breach of ACM’s policy as described in the Anteris Report, as was the request that she pay half the amount (see [112] above); and
(e)the statements made by Mr Francisco which give rise to the first and second representations were not only untrue, but they were also inconsistent with ACM’s policies concerning the various internal steps which had to be taken before legal proceedings would commence, as described in the Anteris Report (see [113] above).
CONCLUSION
Within 21 days the parties should seek to agree orders which give effect to these reasons for judgment on liability, including as to costs. If they are unable to agree, within that time each should file a proposed set of orders and brief submissions in support (not exceeding 5 pages). The party should indicate whether it is content for the orders to be settled on the papers and without a further oral hearing.
The parties should also propose, within that time, draft directions for the further conduct of the proceeding relating to relief, preferably by consent.
I certify that the preceding two hundred and eighty-five (285) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Griffiths. Associate:
Dated: 30 July 2018
4
1
6