Australian Competition and Consumer Commission v Cornerstone Investment Aust Pty Ltd (in liq) (No 4)
[2018] FCA 1408
•19 September 2018
FEDERAL COURT OF AUSTRALIA
Australian Competition and Consumer Commission v Cornerstone Investment Aust Pty Ltd (in liq) (No 4) [2018] FCA 1408
File number: NSD 1610 of 2015 Judge: GLEESON J Date of judgment: 19 September 2018 Catchwords: CONSUMER LAW – alleged contraventions of ss 18 and 29 of the Australian Consumer Law – misleading or deceptive conduct in trade or commerce – false or misleading representations about goods or services – where respondent provided online vocational education services, engaging recruiters to market its services direct to consumers – whether recruiters made misleading or deceptive representations to specific consumers, including by silence – various representations that respondent’s courses and laptops given as inducements to enrol were free, or that no liability was incurred until a consumer’s income exceeded a threshold, or that respondent’s courses were specifically for Aboriginals in contravention of ss 18 and 29 – attribution of recruiters’ conduct to respondent
CONSUMER LAW – alleged contraventions of ss 74, 76, 78 and 79 of the Australian Consumer Law – whether respondent, and respondent by its recruiters, contravened unsolicited consumer agreement provisions regarding specific consumers – disclosing purpose and identity – requirement to leave premises upon request – requirement to inform consumer of termination period – requirement to give documentation of agreement to consumer – contraventions found
CONSUMER LAW – alleged contraventions of s 21 of the Australian Consumer Law – unconscionable conduct in trade or commerce in connection with supply of goods or services – whether respondent’s marketing and enrolment system unconscionable – marketing and enrolment system unconscionable where insufficient training given to recruiters, consumers induced to enrol, unsolicited consumer agreements made without safeguards, minimal verification of consumers’ literacy and numeracy, and targeted at disadvantaged consumers – whether recruiters acted unconscionably regarding specific consumers – recruiters acted unconscionably where they variously contravened ss 18 and 29 and the unsolicited consumer agreement provisions, manipulated or pressured consumers to enrol and assist in the enrolment of others within their communities, forged documents, enrolled consumers in multiple courses, and/or failed to assess consumers’ suitability to enrol – attribution of recruiters’ conduct to respondent
Legislation: Australian Consumer Law (contained in Sch 2 to the Competition and Consumer Act 2010 (Cth)) ss 18, 21, 22, 29, 69, 70, 74, 75, 76, 78, 79, 82
Australian Securities and Investments Act 2001 (Cth) ss 12CC, 12CA
Competition and Consumer Act 2010 (Cth) ss 84, 139B, 155
Competition and Consumer Legislation Amendment Bill 2011 (Cth)
Competition and Consumer Regulations 2010 (Cth) rr 81, 82, 85, 86
Corporations Act 2001 (Cth) s 500
Evidence Act 1995 (Cth) s 140
Higher Education Support Act 2003 (Cth) ss 137-18, 154-1, Sch 1A cll 6, 43, 55, 67, 99
Trade Practices Act 1974 (Cth) ss 51AC, 51AB
Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010 (Cth)
Cases cited: Australian Competition and Consumer Commission v ACN 099 814 749 Pty Ltd [2016] FCA 403
Australian Competition and Consumer Commissionv AGL Sales Pty Ltd [2013] FCA 1030
Australian Competition and Consumer Commission v Coles Supermarkets Pty Ltd [2014] FCA 634; (2014) 317 ALR 73
Australian Competition and Consumer Commission v Coles Supermarkets Australia Pty Ltd [2014] FCA 1405
Australian Competition and Consumer Commission v Dukemaster Pty Ltd [2009] FCA 682; (2009) APTR 42-290
Australian Competition and Consumer Commission v LG Electronics Australia Pty Ltd [2017] FCA 1047
Australian Competition and Consumer Commission v Lux Distributors Pty Ltd [2013] FCAFC 90; (2013) ATPR 42-447
Australian Competition and Consumer Commission v Origin Energy Electricity Ltd [2015] FCA 278; (2015) ATPR 42-495
Australian Competition and Consumer Commission v Titan Marketing Pty Ltd [2014] FCA 913
Australian Securities & Investments Commission v National Exchange Pty Ltd [2005] FCAFC 226; (2005) 148 FCR 132
Demagogue Pty Ltd v Ramensky [1992] FCA 851; (1992) 39 FCR 31
Director of Consumer Affairs Victoria v Scully [2013] VSCA 292; (2013) 303 ALR 168
Fraser v NRMA Holdings Ltd (1995) 55 FCR 452
Google Inc v Australian Competition and Consumer Commission [2013] HCA 1; (2013) 249 CLR 435
Havyn Pty Ltd v Webster [2005] NSWCA 182; (2005) ATPR (Digest) 46-266
Jenyns v Public Curator (Qld) [1953] HCA 2; (1953) 90 CLR 113
Kobelt v Australian Securities and Investments Commission [2018] FCAFC 18; (2018) 352 ALR 689
Nationwide News Pty Ltd v Australian Competition and Consumer Commission (1996) 71 FCR 215
NRM Corporation Pty Ltd v Australian Competition and Consumer Commission [2016] FCAFC 98
Paciocco v Australia and New Zealand Banking Group Limited [2015] FCAFC 50; (2015) 236 FCR 199
Paciocco v Australian and New Zealand Banking Group Ltd [2016] HCA 28; (2016) 258 CLR 525
Rafferty v Madgwicks [2012] FCAFC 37; (2012) 203 FCR 1
Taco Co of Australia v Taco Bell Pty Ltd [1982] FCA 170; (1982) 42 ALR 177
TPC v Optus Communications Pty Ltd (1996) 64 FCR 326
Bowstead and Reynolds on Agency (19th ed, Street & Maxwell, 2010)
Dal Pont, Law of Agency (3rd ed, LexisNexis, 2014)
The Macquarie Dictionary (7th ed, Macmillan, 2017)
VET Guidelines 2013
VET Guidelines 2015
Date of hearing: 1 and 2 August 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: 797 Counsel for the Applicants: Mr N O’Bryan SC with Mr D Tynan and Ms S Patterson Solicitor for the Applicants: Australian Government Solicitor Counsel for the Respondent: Mr S Paterson Solicitor for the Respondent: HWL Ebsworth Lawyers
Table of Corrections 12 August 2019 In cases cited and in para [728], the citation “ Kobert v Australian Securities and Investments Commission [2018] FCAFC 18; (2018) 352 ALR 689” has been amended to “Kobelt v Australian Securities and Investments Commission [2018] FCAFC 18; (2018) 352 ALR 689” ORDERS
NSD 1610 of 2015 BETWEEN: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
First Applicant
COMMONWEALTH OF AUSTRALIA
Second Applicant
AND: CORNERSTONE INVESTMENTS AUST PTY LTD (IN LIQ) ACN 082 383 640
Respondent
JUDGE:
GLEESON J
DATE OF ORDER:
19 September 2018
THE COURT ORDERS THAT:
1.Within 14 days of the date of these orders, the parties file and serve short minutes of order to give effect to the reasons for judgment handed down on 19 September 2018 and for the further conduct of the matter.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
INDEX
OUTLINE OF APPLICANT’S CASE AGAINST EMPOWER
[6]
Attribution of recruiters’ conduct to Empower
[10]
SUMMARY OF FINDINGS
[11]
VET FEE-HELP
[17]
EMPOWER’S BUSINESS
[22]
EMPOWER’S ENROLMENTS
[30]
EMPOWER’S RECEIPTS UNDER VET FEE-HELP
[39]
EMPOWER’S MARKETING AND ENROLMENT SYSTEM
[43]
Inducements to enrol
[55]
Commissions paid to employees to recruit students
[70]
Contracts with marketers
[79]
Agency relationship
[91]
Marketing obligations
[93]
Commissions paid to marketers
[96]
Marketers use of brokers
[102]
Marketing and training materials
[104]
No Australian Consumer Law training
[115]
No monitoring of marketing and recruitment practices
[118]
No processes to prevent enrolment of incapable students
[127]
Summary of findings concerning Empower’s marketing and enrolment system
[148]
Purpose and effect of Empower’s marketing and enrolment system
[149]
Methods used to recruit students
[151]
Method 1: Targeting of particular locations and use of face-to-face marketing
[156]
Targeting pockets of disadvantage
[156]
Face-to-face marketing by calling on consumers at their homes
[169]
Approaching consumers at Centrelink offices
[172]
“Group sign-ups”
[173]
Method 2: Use of Indigenous people to recruit Indigenous students
[175]
Method 3: Offers of cash and computers
[180]
Method 4: Misrepresentations
[182]
Complaints Register Evidence
[184]
Consumer Evidence
[188]
Method 5: Not explaining VET FEE-HELP
[198]
Method 6: Not informing consumers about nature and content of courses
[202]
Method 7: Recruitment of consumers with stated intention not to undertake course
[211]
Method 8: Not taking steps to ensure that students were capable of undertaking or completing courses
[213]
Method 9: Enrolling consumers in Empower courses without their knowledge or consent
[215]
EMPOWER’S KNOWLEDGE CONCERNING ITS ENROLMENTS AND THE CONDUCT OF MARKETERS
[220]
Matter 1: Preparation and provision of training materials, policy documents and forms to recruiters in relation to marketing and recruitment
[229]
Matter 2: Complaints from students and regulatory agencies
[230]
Matter 3: Marketers’ contractual obligations
[256]
Matter 4: Empower’s online portal
[259]
Matter 5: Low completion rate and low levels of student participation
[262]
CONCLUSIONS ABOUT EMPOWER’S MARKETING AND ENROLMENT SYSTEM DURING THE RELEVANT PERIOD
[268]
EMPOWER’S RELATIONSHIP WITH ITS RECRUITERS
[278]
“Agent”
[282]
Other persons acting at the direction of a director, employee or agent of Empower or with their consent or agreement (whether express or implied)
[296]
Conduct engaged in “on behalf of” Empower
[298]
Within the scope of agents’ actual or apparent authority
[302]
CONSUMER EVIDENCE
[309]
Consumer A
[314]
Consumer B
[327]
Consumer D
[341]
Consumer E
[362]
Consumer F
[387]
Consumer G
[411]
Consumer I
[435]
Consumer J
[451]
Consumer K
[465]
Consumer L
[481]
Consumer M
[502]
Consumer N
[517]
Consumer O
[525]
Consumer P
[529]
Consumer Q
[541]
FALSE, MISLEADING AND DECEPTIVE CONDUCT
[552]
Legal framework
[554]
Alleged contraventions
[566]
Consumer A
[566]
Consumer B
[575]
Consumer D
[582]
Consumer E
[589]
Consumer F
[595]
Consumer G
[603]
Consumer I
[610]
Consumer J
[619]
Consumer K
[625]
Consumer L
[631]
Consumer M
[638]
Consumer N
[646]
Consumer O
[653]
Consumer P
[661]
Consumer Q
[669]
UNSOLICITED CONSUMER AGREEMENTS
[676]
Alleged unsolicited consumer agreements
[697]
Alleged contraventions and findings
[701]
UNCONSCIONABLE CONDUCT
[708]
Legal framework
[709]
System of conduct or pattern of behaviour
[726]
Did Empower’s marketing and enrolment process constitute unconscionable conduct?
[740]
Unconscionable conduct in relation to Consumers
[752]
Consumer A
[752]
Consumer B
[755]
Consumer D
[758]
Consumer E
[761]
Consumer F
[764]
Consumer G
[767]
Consumer I
[770]
Consumer J
[773]
Consumer K
[776]
Consumer L
[779]
Consumer M
[782]
Consumer N
[785]
Consumer O
[788]
Consumer P
[791]
Consumer Q
[794]
CONCLUSION
[797]
GLEESON J:
This case concerns abuse of the VET FEE-HELP Assistance Scheme (“VET FEE-HELP”). VET FEE-HELP was a program provided under the Higher Education Support Act 2003 (Cth) (“HES Act”) by which loans were made available to students enrolled in vocational education and training courses.
The applicants are the Australian Competition and Consumer Commission (“ACCC”) and the Commonwealth of Australia.
The respondent, which formerly traded as Empower Institute (“Empower”), is now in liquidation. In October 2011, Empower was approved by the Commonwealth as “VET provider” in accordance with cl 6 of Sch 1A of the HES Act. Its sole director and shareholder throughout the relevant period was Jim Yang. From November 2014 to the end of the relevant period, the chief executive officer of Empower was Dr Joo-Gim Heaney. No claim was made in the proceeding against either Mr Yang or Dr Heaney, or any other senior executive of Empower.
On 30 May 2017, I granted leave to the applicants to proceed against Empower pursuant to s 500(2) of the Corporations Act 2001 (Cth): Australian Competition and Consumer Commission v Cornerstone Investment Aust Pty Ltd (in liq) (No 3) [2017] FCA 749.
On 1 and 2 August 2017 there was a hearing on liability only. The hearing was conducted on an undefended basis. The precise relief ultimately to be sought by the applicants will depend upon the findings on liability but may include declaratory relief, orders for pecuniary penalties and orders for non-party consumer redress. As Beach J noted in Australian Competition and Consumer Commission v Get Qualified Australia Pty Ltd (in liquidation) (No 2) [2017] FCA 709 (“Get Qualified”) at [5], s 140(2) of the Evidence Act 1995 (Cth) applies in a case of this nature, which involves allegations of a serious nature and potential claims for pecuniary penalties. It was therefore necessary for the ACCC to establish its allegations by clear and cogent proof of the necessary elements.
OUTLINE OF APPLICANT’S CASE AGAINST EMPOWER
The applicants seek relief arising from Empower’s alleged contraventions of ss 18, 21 and 29(1)(g) and (i) of the Australian Consumer Law (“ACL”), contained in Sch 2 to the Competition and Consumer Act 2010 (Cth) (“Act”). Sections 18 and 29 respectively prohibit misleading or deceptive conduct and false or misleading representations about goods and services, while s 21 prohibits unconscionable conduct. The applicants also seek relief arising from Empower’s alleged contraventions of ss 74, 75, 76, 78 and 79 of the ACL – the unsolicited consumer agreements provisions.
The case concerns Empower’s conduct during the period 1 March 2014 to 30 June 2015 (“relevant period”). According to Empower’s records, 53 of the 8,425 students enrolled during this period completed their course. This represents a completion rate of less than 1% for those students who incurred VET FEE-HELP debts following their enrolments (some 6,548 students in the relevant period). For this outcome, Empower received a total of $64,188,285.90 in VET FEE-HELP payments for the relevant period. These figures are one indicator of the shocking waste of government funds illustrated by this case; waste which occurred by the imposition of millions of dollars in VET FEE-HELP debts on consumers who apparently did not achieve the educational outcomes that should have accompanied those debts. The waste occurred because the Commonwealth made massive payments to Empower on the basis of its enrolments.
On the ACCC’s case, it was predictable at the time of enrolment that Empower’s students were highly unlikely to complete their courses because they were not suitable candidates, being both unlikely to be capable of completing them and unlikely to be able to take advantage of the skills taught by the courses in the future.
The applicants’ case includes the following allegations:
(1)Empower’s marketing and enrolment process involved a system of conduct or pattern of behaviour that was, in all of the circumstances, unconscionable in contravention of s 21 of the ACL. By that process, Empower enabled and encouraged its recruiters and employees to maximise the number of consumers they recruited for Empower’s courses so as to maximise the financial benefit derived by Empower in relation to students enrolled in its courses.
(2)The purpose and effect of Empower’s marketing and enrolment process was to maximise the number of students enrolled in its courses in respect of whom Empower received VET FEE-HELP payments from the Commonwealth and the revenue it derived from those students.
(3)Empower engaged third party “marketers” (who in turn engaged numerous “brokers”) (together, the “recruiters”) to market its courses and recruit students on its behalf. In the course of these activities, Empower’s recruiters made false and misleading representations to prospective students including that Empower’s courses were “free” and that students would receive a “free” laptop for signing up to a course. Empower’s recruiters also gave prospective students cash to sign up to a course. The courses were not free and anyone who signed up to a course with Empower incurred a debt to the Commonwealth of around $15,000 for the cost of the course. Empower’s recruiters failed to explain this adequately (or at all) to the students who they were signing up.
(4)Empower incentivised its recruiters to sign up as many students as possible by paying them commissions, in some cases up to $4,395.60 per student. Empower’s recruiters achieved Empower’s objective. In the relevant period, there were 8,425 student enrolments in the three diploma level courses Empower offered – the Diploma of the Business, the Diploma of Management and the Diploma of Early Childhood Education and Care. VET FEE-HELP debts were incurred in respect of 6,548 of these enrolments and Empower received at least $64.4 million from the Commonwealth for these enrolments.
(5)The completion rate at Empower was so low as to call into question the “real nature” of Empower’s business.
(6)The statistical evidence indicates that persons from areas of social disadvantage and Indigenous students were particular targets of Empower’s marketing and enrolment system.
(7)Empower’s recruiters targeted people living in public housing and in remote Aboriginal communities and Aboriginal missions. Empower conducted group sign-ups in people’s homes and in public bars, amongst other places.
(8)Empower provided no ACL training to its employees or to the recruiters signing up students on its behalf, and after around May 2014, it conducted no language, literacy and numeracy (“LLN”) testing or any other screening to ensure only suitable and engaged students were enrolled. Empower enrolled students who were unlikely to be able, or inclined, to undertake and complete the diploma level courses.
(9)Empower permitted the marketing and enrolment system to continue to operate notwithstanding knowledge by its senior staff of the low engagement rates and the unsuitability of the students it enrolled, and in the face of numerous complaints Empower received about the conduct of its recruiters. These matters demonstrate that Empower was principally motivated by the significant financial rewards it stood to gain by endorsing and permitting to continue a marketing and enrolment system with the features described above.
(10)Empower, and its senior employees, stood to make (and did make) extraordinary sums of money from the operation of this system, and those financial rewards provided a motive for Empower to encourage and permit a marketing and enrolment system with these features to develop and continue.
(11)Empower contravened ss 18, 21 and 29 of the ACL and the unsolicited consumer agreements provisions of the ACL in respect of 15 particular individuals, referred to as Consumers A, B, D to G and I to Q (“Consumers”). Empower’s conduct in respect of the Consumers also exemplifies the operation of Empower’s unconscionable marketing and enrolment system.
Attribution of recruiters’ conduct to Empower
The applicants contended that each of the recruiters marketed Empower’s courses and recruited students as an agent of Empower, such that their conduct is taken to have been engaged in by Empower pursuant to s 139B(2)(a) or (b) of the Act.
SUMMARY OF FINDINGS
The consumer evidence demonstrates multiple contraventions of the ACL by Empower, including misleading and deceptive and unconscionable conduct provisions, and the unsolicited consumer agreements provisions.
In particular, the consumer evidence demonstrates multiple instances of vulnerable consumers who were duped into applying to enrol in Empower’s courses, unconscious that they would incur substantial liabilities to the Commonwealth by doing so, by promises of “free” laptops and cash payments.
Empower targeted areas with significant populations of persons of low socio-economic status to recruit its students.
At least in the period June to mid-December 2014, Empower conducted a system or engaged in a pattern of behaviour comprising: (a) using recruiters who were practically untrained, who received no ACL training and who were remunerated on a commission basis for securing enrolments; (b) offering inducements to enrol, particularly Google Chromebooks; and (c) making unsolicited consumer agreements with no process for ensuring compliance with the relevant provisions of the ACL. The system was directed to enrolling students from a disadvantaged sector of the community.
These features of Empower’s system, when coupled with cursory verification of students’ bona fides by telephone and no LLN testing, meant that it was essentially a matter of luck whether a consumer would enrol with an adequate understanding of the services acquired and the debts that would be incurred. The system incorporated no adequate safeguards for ensuring that Empower’s courses were suitable for consumers who enrolled and who thereby incurred a VET FEE-HELP debt. Further, it incorporated no adequate safeguards for ensuring that Empower’s recruiters complied with the ACL and did not dupe consumers into enrolling in an online course and thereby incurring a VET FEE-HELP debt. The system was used by Empower to derive significant income from government funding, while consumers incurred significant liabilities to the Commonwealth.
In those circumstances, by its operation of that system, Empower engaged in conduct that was, in all of the circumstances, unconscionable in contravention of s 21 of the ACL.
VET FEE-HELP
In Australian Competition and Consumer Commission v Unique International College [2017] FCA 727 at [5] (“Unique”), Perram J considered the operation of VET FEE-HELP during the period 1 July 2014 to 30 September 2015 and identified the following pertinent features of the scheme, features which were also applicable during the relevant period in this case:
Ÿit was available to Australian citizens or holders of a permanent humanitarian visa who were resident in Australia, provided that they were enrolled in a full fee paying course approved for VET FEE-HELP …;
Ÿthe Commonwealth would pay in full whatever the tuition fee was for each unit of the approved course and would treat the combined amounts as a loan to the student;
Ÿthe loan would be repayable through the tax system once the student began to earn more than the ‘minimum repayment income’ ($53,345 for the period 1 July 2014 to 30 June 2015; $54,126 for the period 1 July 2015 to 30 June 2016) on the income above that amount at a sliding scale of between 4% to 8%. The highest rate became applicable at $99,070 during the relevant period;
Ÿeach person had a maximum lifetime amount which could be borrowed through this and other related schemes (such as HECS). This amount was indexed and was $97,728 for the 2015 financial year. The amount which the student had at any time borrowed was specified in an account maintained by the Commonwealth called the FEE-HELP balance;
Ÿthere was a 20% loan fee on top of the tuition fee which was also payable to the Commonwealth and which was debited to the student’s FEE-HELP balance; and
Ÿthe amount of the student’s FEE-HELP balance was indexed to the consumer Price Index (‘CPI’).
The decision in Unique, which has numerous factual and legal similarities to the present case, is presently under appeal. However, I do not understand the findings set out above to be contentious.
A student who enrolled in one of Empower’s courses and satisfied the criteria in Schedule 1A of the HES Act was entitled to a loan under VET FEE-HELP for each unit of study: HES Act Sch 1A cl 43. Where a student was entitled to an amount of “VET FEE-HELP assistance, the Commonwealth was obliged to lend the relevant amount to the student and pay the amount lent to the VET provider (here, Empower) in discharge of the student’s liability to pay the tuition cost for each unit of study: HES Act Sch 1A cl 55.
Empower was required to identify a date (“census date”) for each unit of study after which a student enrolled in the unit of study, and who was entitled to VET FEE-HELP, incurred a debt to the Commonwealth: HES Act Sch 1A cl 67; see also VET Guidelines 2013 Ch 7 and VET Guidelines 2015 Pt 7, both made under Sch 1A cl 99(1) of the HES Act. The debt amounted to 120% of the loan (s 137-18(2) of the HES Act), and was incurred regardless of whether the student completed the unit of study in which they were enrolled (although it was subject to remission in limited circumstances).
A student’s liability to pay amounts to the Commonwealth in reduction of the student’s debt, when their income exceeded the “minimum repayment income” threshold, arose under s 154‑1 of the HES Act. For the 2013-2014 financial year, the minimum repayment income threshold was $51,309. Perram J identified the thresholds for later years in the passage set out above.
EMPOWER’S BUSINESS
In about July 2013, Mr Yang approved a strategy called “Project Empower” for the establishment of a vocational education college targeted to disengaged members of society of all age groups. A slide pack explaining the strategy identified the target demographic as “disengaged members of society (predominately [sic] long term unemployed) of all age groups and backgrounds who are eligible for VFH funding”.
A staff induction handbook described Empower’s learning method as follows:
Flexible Learning
EI offers flexible learning and online study options using our state of the art eZone online delivery platform. eZone is the engine of EI’s course flexibility. It is a cloud based learning management system that you can access via the internet which allows you the flexibility to study where and when you want.
Thus, it was necessary to have internet access and a degree of computer literacy in order to complete the courses successfully because the courses were designed to be studied online.
As initially conceived by Andrew Hartland, Empower’s “Director” (a title, not referable to any formal appointment) until April 2014, Empower would provide “blended learning”, that is, mostly online education that students could supplement by coming to the college. Students were not required to attend the college as part of their course requirements.
The courses offered by Empower were called a Diploma of Management, a Diploma of Business and a Diploma of Early Childhood Education and Care.
In its response to a notice issued by the ACCC under s 155 of the Act, dated 24 June 2015 (“s 155 response”), Empower briefly described the course content for each of the courses as follows:
(1)The Diploma of Business was “designed to give students the confidence to succeed by providing the foundation knowledge and skills required to start, manage or work in a business environment”.
(2)The Diploma of Management was “designed to provide individuals with the core leadership skills required by contemporary managers. Students learn how to manage teams and projects, operational planning and performance to become a successful leader”.
(3)The Diploma of Early Childhood Education and Care was said to “give students the qualification needed to work in all areas of children’s services including pre-schools, occasional day care centres and family day care centres. Students learn how to manage staff who look after children, how to create a safe working environment and how to promote inclusive policies and coordinate the workplace. With theory and practical work placements, students gain the skills and knowledge needed to become great teachers in the childcare sector. On the work placement, students learn skills in a child care environment under the guidance of a child care professional”.
The Diploma of Management and the Diploma of Business each cost $14,800.00. The cost of the Diploma of Early Childhood Education and Care was $15,000.
A document entitled “Revised Verification Call Script” on Empower letterhead gives some indication of the skills required to undertake the courses. They are modest and comprise:
(1)computer literacy, sufficient to do an online course; and
(2)LLN proficiency, including sufficient understanding of written and spoken English to undertake a course conducted in English.
EMPOWER’S ENROLMENTS
Empower’s first students commenced in March 2014.
An ACCC senior investigator, Andrew Francis, determined from a spreadsheet provided by the Australian Skills Quality Authority (“ASQA”), and apparently provided to ASQA by Empower (“Empower master spreadsheet”), that during the relevant period, Empower had 8,425 enrolments. The following chart shows Empower’s enrolments during the relevant period, by month:
Mr Francis determined that, of these 8,425 enrolments, there were 1,877 enrolments for which the relevant consumers were not charged for any census date, and incurred no debt. Accordingly, there were 6,548 enrolments for which the relevant consumers were charged a fee by Empower for a census date. This figure includes enrolments where the relevant consumer was charged a fee by Empower but the resulting debt was remitted after it was incurred.
Data obtained from the Department of Education and Training (“DET”) lists 6,412 enrolments with a first census date falling within the relevant period, that being 136 less enrolments than recorded in the ASQA data.
Mr Francis’s evidence was that this discrepancy was most likely because the ASQA data identifies enrolments by enrolment date, whereas the DET student data identifies enrolments by census date, and as the DET student data does not include enrolments where a debt was incurred but remitted before 22 March 2016.
Students were enrolled across Australia, although mainly in New South Wales. The data analysed by Professor Tony Vinson, an expert engaged by the ACCC, showed that New South Wales accounted for 87.7% of enrolments.
The Empower master spreadsheet identifies the persons who recruited the consumers to the various Empower courses. Mr Francis’s evidence was that six organisations are identified on the spreadsheet as responsible for the recruitment of 6,465 (77%) of the 8,425 enrolments, namely:
(1)Active Group International;
(2)Amity Administrative Services Pty Ltd (“Amity”) (including brokers);
(3)RK Holdings Australia Pty Ltd trading as Inwork Recruitment (“Inwork”) (including brokers);
(4)SR (Aust) Pty Ltd known as Sam’s Education Services (“SR Aust”);
(5)Fundamental Education Pty Ltd (“Fundamental Education”); and
(6)Qualify Me Pty Ltd (“Qualify Me”).
As noted below, the applicants’ evidence referred to five occasions, which the applicants referred to as “group sign-ups”, when multiple individuals were enrolled to Empower’s courses.
Without additional evidence, particularly evidence that these dates reflect the date on which the recruiter dealt with the relevant consumers, I am not satisfied that I should infer that there were “group sign-ups”, apart from those about which there is evidence. However, I do accept that the volumes of enrolments indicate a very concerted effort on the part of Empower’s marketers to maximise enrolments in the second half of 2014. I also infer that the marketers were strongly incentivised to procure enrolments for Empower by the commissions which Empower offered, as identified below.
EMPOWER’S RECEIPTS UNDER VET FEE-HELP
Empower has admitted that, in respect of consumers enrolled in Empower courses during the period 1 March 2014 to 31 October 2015, it received $94,459,228 from the Commonwealth.
Kathryn Woodall, a public servant within the DET, gave evidence that a total of $64,188,285.90 in VET FEE-HELP payments was made to Empower for the relevant period.
In Unique, Perram J found (at [11] and [13]) that in 2015 Unique International College enrolled 4,677 students in its courses and received $56,183,632 in revenue, apparently all – or substantially all – of which comprised payments received from the Commonwealth under VET FEE-HELP. At [616], his Honour said that “the sums of money involved here are so very large that they may be seen as providing a motive for Unique to engage in exploitative practices”, while at [717] his Honour stated that “[t]he sums of money which Unique was making, therefore, are capable of being evidence that Unique had a real motive to engage in the kind of targeted conduct alleged”.
I accept the applicants’ submission that the sums of money involved in this proceeding can also be seen as providing a motive for Empower to engage in exploitative practices, or to condone or turn a blind eye to such practices by its recruiters.
EMPOWER’S MARKETING AND ENROLMENT SYSTEM
The enrolment process involved the completion of a form by the consumer entitled “Student Enrolment Form (VET FEE-HELP), apparently created by Empower (“enrolment form”). The form sought information about the proposed student and their course selection, including their language, qualifications and employment. The form set out the terms and conditions of the agreement between Empower and the consumer for the provision of the relevant course, and a declaration to be made by the consumer.
In addition, the consumer was required to complete an Australian Government form entitled “Request for VET FEE-HELP assistance” which prominently states: “You MUST read the VET FEE-HELP information booklet before completing this form”.
There was a third form entitled “VET FEE-Help Disclaimer FORM”. It is not clear whether this form was completed by some or all enrolees during the relevant period. The form was required to be signed by both student and agent and it contained the following statements:
6)The consultant has explained to me that the VET FEE-Help is ‘study now pay later’ loan funded by the government
7)Any study tools provided, are directly supplied by the institute for the purpose of completing the course.
8)I understand that the compulsory repayment threshold for the 2014-15 income year is $53,345 i.e. repayment start [sic] once I start earning more than $53,345 per year.
9)I understand the course I am enrolling in is delivered online via e-learning portal.
A witness who was a former employee of Empower, Monique Chan, prepared a flow chart of the enrolment process as at early November 2014 (and a flow chart for a proposed new process). Ms Chan described the existing process as follows:
Ms Chan proposed a different process, in which the VET FEE-HELP form would be sent to the consumer after their interaction with the agent. This change was intended by Ms Chan to address complaints, about which Ms Chan had heard, that agents were pressuring students to enrol or not explaining the enrolment process correctly.
At a meeting on 5 November 2014, Empower decided to adopt the process proposed by Ms Chan. The minutes of the meeting record that there was discussion “regarding how to manage and minimize agent interference in enrolment process”. Concerning the enrolment process, the minutes state “new process established to improve accountability of agents and ensure students are fully informed”.
Ms Chan summarised the new enrolment process in the following flow chart:
Ms Chan prepared a student declaration form for the new process, but never saw that it was used. Ms Chan said that her proposed process was “never properly implemented” but her evidence did not give details to explain this.
At the 5 November 2014 meeting, there was also discussion of a service called “DocuSign”, which enabled student signatures to be securely incorporated into forms. Ms Chan’s evidence was that “DocuSign” was not introduced while she was at Empower. Ms Chan left Empower in mid-December 2014.
In the s 155 response, Empower provided a different flow chart which purported to describe its enrolment process. This flow chart described three steps, named:
(1)offer status;
(2)enrolled status; and
(3)current status.
The flow chart does not provide a complete picture of the enrolment process, because it refers to an “enrolment checklist” used “to go through the application” and a step described as:
6.Verification team to call applicant for verification of details and disseminate vital information as per verification script.
In their third further amended concise statement (“concise statement”), the applicants alleged that the marketing and enrolment process involved the elements considered below.
Inducements to enrol
The applicants contend that, in the period from 1 March 2014 to 31 March 2015 (that is, the majority of the relevant period), Empower offered inducements to consumers to enrol in a course, including cash payments, “iPads” and laptop computers. The applicants also contend that, in the same period, Empower offered inducements to consumers in the form of a $100 gift voucher for referring a friend to enrol in an Empower course.
In its s 155 response, Empower stated that it offered the following inducements to enrol in each of the three Diploma courses until 31 March 2015: “Free lap top [sic]” and “$100 for referring a friend”.
In its response to the applicants’ second further amended concise statement (“concise response”), Empower admitted that between March 2014 and 31 March 2015, it offered $100 gift vouchers to students for referring a friend. The evidence included a brochure published by Empower, which includes the words:
If you have a friend that you think could benefit from an Empower Institute transformation let us know and be rewarded*.
When your friend enrols and passes the first census date for Stage 1 of their Empower Institute course we will reward you with a $100 gift voucher.
Empower also admitted that, during this period, it provided Chromebook computers to students enrolled in its courses “in accordance with its Chromebook Policy”.
The majority of the applicants’ witnesses gave evidence that he or she was offered a “free” laptop for enrolling in a course. Consumer Q’s evidence was that he was told by a salesman that he would get a free computer when he finished the course. Consumer J’s evidence was that she was told by a friend that “[t]here’s a mob giving out laptops for signing up”. She also received a brochure which referred to Empower institute, and a Diploma of Business course. At the top of the brochure are the words:
FREE GOOGLE CHROMEBOOK LAPTOP*
Terms and Conditions apply Visit empower.edu.au for details
Consumer F’s evidence included a copy of the same brochure.
A document entitled “MKT Complaints Register” provided by Empower to the ACCC as part of its s 155 response (“Empower’s Complaints Register”), includes records of the following complaints:
(1)from a consumer, received on 18 November 2014, that “she was encouraged to just sign up to get a ‘free lap top [sic]’”; and
(2)from two persons, received on 25 March 2015, that “a an [sic] signed up an autistic [sic] without any parental supervision and by luring him to get a free laptop”.
In each of these cases, Empower’s Complaints Register records action taken in response to the complaint.
An untitled document which appears to be a business record of Empower appears to list cancellations of enrolments and includes the following reasons for cancellations (errors in original):
(1)ID 9051: “…agent said government is giving free laptop”.
(2)ID 11156: “…the sales man who came over to my house to promote the course gave us false and misleading information. There was at no stage he mentioned anything about any fees or cost involvle, infact [sic] these were his words: Australian Government is offering a wonderful promotion for ALL Australian citizenship to receive free laptop and have the opportunity to do a free course online…”.
(3)ID 9074: “he said one indian guy came to his house yesterday and he told him sign up and he get a free laptop; wasn’t told anything about laptop”.
Five of the Consumers (Consumers A, E, J, M and Q) gave evidence that they were paid $50 cash for signing up to a course. In each case, these witnesses gave evidence that they enrolled in a course with Empower at an occasion where multiple individuals were also enrolled. These occasions are the “group sign-ups”, referred to at [173] below.
Based on the evidence of the five Consumers, I find that all or substantially all of the people who were enrolled in Empower’s courses at these “group sign-ups” received $50 as a cash incentive for their enrolment.
The applicants did not point to evidence about the source of the cash payments.
Based on the evidence set out above, I find that in the period from 1 March 2014 to 31 March 2015, Empower offered laptop computers, namely Google Chromebooks, as an inducement to consumers to enrol in their courses. I am not satisfied that Empower ever offered iPads, an Apple brand product, to consumers to enrol in its courses. As appears below, two of the Consumers (Consumers K and L) give evidence that they were offered an “iPad” as an inducement to enrol. However, in my view, the use of the word “iPad” by the relevant recruiters is not sufficient to demonstrate that it was a part of Empower’s marketing and enrolment system to offer iPads as an inducement, where that word may be used (mistakenly) as a generic description of a tablet computer.
I also find that, in the same period, Empower offered incentives, in the form of $100 gift vouchers, to persons who referred a consumer to enrol in Empower’s courses.
Having regard to the seriousness of the allegation that Empower offered cash payments as an inducement to enrol in its course, I am not satisfied that Empower itself made those payments where there is no evidence about the flow of funds and it is plausible that salesmen who enrolled the students may have been sufficiently incentivised to make those payments from their own resources.
Commissions paid to employees to recruit students
The applicants contend that, in the period from March 2014 to April 2015, Empower authorised a number of its employees to market and recruit students for its courses and paid those employees a commission of $65 for each student they recruited.
There are two relevant employees: Benga Ohunayo and Greg Devine. They were each appointed to the role of “Business Development Manager” by letters of appointment dated 20 February 2014. The role is not described in detail. The letters of appointment refer to an “Empower Sales Bonus Scheme” which “closely focuses behaviour on wealth creation for the business”. This scheme does not appear to correspond with the commission arrangement that appears to have existed between August and December 2014.
For those months, Mr Ohunayo and Mr Devine claimed the following commissions based on the following student enrolment numbers:
Month Ohunayo students Ohunayo commission Devine students Devine commission August 2014 256 $16,640 50 $3,250 September 2014 466 $30,290 209 $13,585 October 2014 Not stated $46,930
ex GST
Not stated $17,745
ex GST
November 2014 1227 $79,820
ex GST
375 $24,375 December 2014 1315 $85,475
ex GST
680 $44,200
ex GST
Total $212,225 $103,155
Mr Ohunayo and Mr Devine claimed their commissions by emails accompanied by spreadsheets naming students which apparently supported the commission claims. Mr Ohunayo’s August claim was based on a spreadsheet which listed 256 students, with a student ID and a course name. The spreadsheet included a column headed “AgentName” and a column headed “Comm. Paid”. The following names are listed in the “AgentName” column:
(1)Amity;
(2)SR Aust;
(3)Australian Training Colleges; and
(4)Qualify Me.
For 73 enrolments the “Comm. Paid” includes the amount of $1,210. For the balance, the amount of $0 is recorded.
Mr Devine’s August 2014 claim is accompanied by a spreadsheet in a different format. It includes student names, IDs, nationality, course ID and course names, and a column headed “AgentName”. The following names are listed in that column:
(1)Sierra Marketing;
(2)QF Recruitment Services;
(3)John Abdelmalek;
(4)DanaMondry Independent Course Advisor; and
(5)Career Development & Training.
As the applicants submitted, it is reasonable to infer from the monthly spreadsheets that Mr Ohunayo and Mr Devine were claiming bonuses, not for their personal efforts to recruit individual students, but for their management of third party agents who procured enrolments for Empower. This inference is supported by the 29 August 2014 emails from Mr Ohunayo to Mr Yang and Mina Fakhouri claiming commission “based on agent managed”.
There is no evidence of commissions claimed by or paid to Mr Ohunayo or Mr Devine outside the August to December 2014 period. The applicants submissions did not point to evidence that the commissions were paid by Empower, however, there are two emails from Mr Fakhouri to Mr Yang dated 8 January 2015 in which Mr Fakhouri provided Mr Yang with the commission claims for December 2014 and states, in each case: “[C]ould you please let benga when this will be paid [sic]. Also the outstanding November invoice”.
I infer from these emails that Mr Ohunayo and Mr Devine were paid the commissions they claimed for August, September and October 2014 by Empower.
Contracts with marketers
The applicants contended that, from at least around June 2014, Empower entered into written contracts with 22 entities (“marketers”) during the period to market its courses and recruit students.
The “Project Empower” strategy proposed “initial reliance on 3rd party domestic agents” for student acquisition. Mr Hartland drafted a standard “Sales Representative Agreement”, which is substantially the same as the contracts made with the various marketers.
The evidence included 20 contracts entitled “Company/Sales Representative Agreement”, one contract entitled “Sales Representative Agreement” between Empower and QF Recruitment Services (“QF Recruitment agreement”) dated 15 May 2014 and a “Memorandum of Understanding” between Empower and SR Aust dated 20 June 2014.
Five of the “Company/Sales Representative Agreements” were executed after 31 December 2014. One of the agreements, was signed by the relevant sales representative (Lajos Eross) on 1 July 2015 – that is, after the relevant period – but Empower’s s 155 response nevertheless identified that marketer as an external sales representative from 31 March 2015.
According to Empower’s response to the ACCC’s s 155 request, 16 of the contracts were suspended or terminated in March 2015.
Each of the Company/Sales Representative Agreements contained the following provision (emphasis added):
2.1Empower hereby appoints the Company/Company/Sales Representative as an authorised non-exclusive independent representative to sell and promote all services provided by Empower with no limitations of graphical area, but accepts there will be limitations as to approved and prohibited marketing channels.
2.2The Company/Sales Representative shall devote such time, energy and skill on a regular and consistent basis as is necessary to sell and promote the sale of Company’s services during the term of this Agreement. Company/Sales Representative’s sales and promotional efforts shall be directed toward the following:
a)Generating leads to commence in Empower’s educational courses
b) Promoting the value of the Empower’s educational products
c) Identifying suitable candidates
d)Conform to any lawful directive by Empower as it relates to the sales and promotions of its products.
Clause 3 of the Company/Sales Representative Agreements provided relevantly:
3.1The Company/Sales Representative agrees to comply with all relevant legislation both State and Federal including but not limited to:
…
c) Competition and Consumer Law
…
3.2The Company/Sales Representative agrees to operate in a manner which is not misleading or deceptive and which could be construed to be detrimental.
Each of the Company/Sales Representative Agreements contained the following provision entitled “Sub Contracting”:
7.1The Company/Sales Representative shall not sub-contract any part or parts of its obligations under the Agreement unless it has made prior application in writing to Empower giving full particulars of its obligations, which it wishes to sub-contract and of the proposed subcontractor and has obtained the written approval of Empower.
7.2An approval to sub-contract any part of the work or obligations under this Agreement given by Empower in pursuance of this clause shall not relieve the Company/Sales Representative of any of its liabilities or obligations under this Agreement.
The QF Recruitment agreement contained provisions relevantly similar to the provisions just set out.
The entry into these contracts reflects an obvious aim on the part of Empower to increase its enrolments substantially.
By its concise response, Empower admitted that it did not enforce the requirement for written consent to subcontract under clause 7. Empower also admitted that the marketers engaged approximately 39 entities to recruit students. The applicants’ submissions identified 34 brokers, who were engaged by the marketers.
To the extent set out above, I accept that the contracts authorised the marketers to act for Empower or act at Empower’s direction. To the same extent, I accept that the contract required the marketers to apply to Empower in writing and to obtain its written approval to sub-contract any of their obligations under the contracts.
Agency relationship
The Company/Sales Representative Agreements and the QF Recruitment agreement purported specifically to exclude an agency relationship in the following provisions:
4.1The Company/Sales Representative is not by virtue of this Agreement an agent or representative of Empower.
4.2The Company/Sales Representative shall ensure that it and its representatives conduct themselves at all times in dealings with third parties in such a manner as not to infer that the Company/Sales Representative is an agent or representative of Empower.
…
8.3This Agreement shall not create a partnership, joint venture, agency, employer/employee or similar relationship between Empower and the Company/Sales Representative. The Company/Sales Representative shall be an independent contractor.
If read literally, these clauses would negate the appointment to be Empower’s “authorised non-exclusive independent representative to sell and promote” Empower’s services because that appointment, given with the consent of the agent, itself creates an agency relationship. Accordingly, I do not conclude that these provisions have such an operation.
Marketing obligations
Clause 5 of the Company/Sales Representative Agreements and the QF Recruitment agreement provided relevantly:
5.1The Company/Sales Representative agrees to be bound by the Marketing Compliance Checklist as provided by the Empower and any such related Policies. The Marketing Compliance Checklist is provided as an Appendix to this Agreement.
5.2The Company/Sales Representative will inform Empower of any Sales Channel intended for use and once approved, will ensure that the Company/Sales Representative and any of the Company/Sales Representative’s agents complies with all lawful directives, policies, templates, procedures and prohibitions for marketing via that channel.
In addition to the foregoing, the Company/Sales Representative shall assist Empower and shall perform any and all services required or requested in connection with Empower’s business, including, but not limited to, such services of an advisory nature as may be requested from time to time by Empower.
The Company/Sales Representative shall periodically, or at any time upon Empower’s request, submit appropriate documentation of any and all sales and promotional efforts performed and to be performed by the Company/Sales Representative pursuant to this Agreement.
“Sales Channel” is not defined in the agreements.
The “Marketing Compliance Checklist” sets out seven matters applicable to all marketing material, including ensuring the correct use of the “NRT” (nationally recognised training) logo where featured and, where VET FEE-HELP is mentioned, ensuring the VFH logo is used correctly.
Commissions paid to marketers
The applicants contended that, from at least around June 2014, Empower paid each marketer a commission for each student recruited, in an amount ranging from $1,000 to $4,395.60 per student.
The commissions payable under the written contracts differed, by both course and structure. For example, under the contract between Empower and Active Group International, the commissions were set out in a schedule to the contract, as follows:
Diploma of Business
Diploma of Management
1.0COMMISSION PAYABLE
First Census - $1,320 for each student plus GST
Second Census- $450 for each student plus GST
Third Census- $450 for each student plus GST
…
Diploma of Early Childcare
1.0COMMISSION PAYABLE
First Census- $1,000 for each student plus GST
Second Census- $500 for each student plus GST
Under the contract between Empower and Amity, the commissions were set out in a schedule to the contract, as follows:
Diploma of Business
Diploma of Management
1.0 COMMISSION PAYABLE
First Census - $1,100 for each student + GST
Second Census- $560 for each student + GST
Third Census- $560 for each student + GST
1.1 COMMISSION PAYABLE (once 100+ students have passed 2nd census, Amity commission rate moves to 20% flat rate, see below break down)
First Census- $1,100 for each student + GST
Second Census- $1,100 for each student + GST
Third Census- $760 for each student + GST
The figure of $4,395.60 comes from the Empower master spreadsheet. Mr Francis gave evidence that he identified nine records of payments of commissions in that amount for nine enrolments in Brewarrina, NSW. The spreadsheet contains a column headed “Name of third party”. In each case, the name is “Amity Administrative – R S Admin”.
Fundamental Education’s contract also provided that after 120 students passed the second census, the commission payable for Business and Management enrolments moved to a 15% flat rate.
From the Empower master spreadsheet, Mr Francis calculated that the following organisations received the following total commissions for the enrolments in the relevant period:
(1)Active Group International: $ 251,774.96;
(2)Amity: $5,433.491.93;
(3)Inwork: $2,946,523.37;
(4)SR Aust: $4,003,510.97;
(5)Fundamental Education: $1,009,741.79; and
(6)Qualify Me: $1,608,484.68.
Marketers use of brokers
The applicants contended that marketers themselves paid commissions to “brokers” they engaged in a manner similar to commission payments made by Empower to the marketers.
The applicants’ written submissions referred to eight agreements between Inwork and various brokers, and 25 written agreements between Amity and various brokers. Although the agreements provide for payments of various commissions to the party designated as “Company/Company/Sales Representative”, the applicants did not point to any evidence of payments made pursuant to these agreements.
Marketing and training materials
The applicants contended that, during the relevant period, Empower provided training and instruction and marketing materials to the recruiters and its employees in connection with the marketing and recruitment of students to its courses.
In its s 155 request, the ACCC asked Empower to provide:
… details of all training, assessments, instructions, directions, policies and scripts provided by, or on behalf of Empower Institute to each of the Empower Institute Sales Representative identified in response to Paragraph 3 of Schedule 1 to this notice, which provide instructions or guidance on how to:
(a)contact prospective students for the purpose of marketing VET FEE-HELP course, and
(b) promote, supply or offer for supply, VET FEE-HELP course.
Empower’s answer referred to documents (1) and (2) below (see [108]), and a brochure described as “VET FEE HELP”. The brochure is directed to potential students; it is not expressed to provide instructions or guidance to recruiters.
A similar request was made for documents provided to Empower staff members. Empower’s answer to that request referred to brochures described as “Dip Early Childhood” and “Dip Business” and a document entitled “Verification Call Script”.
The applicants’ submissions referred to the following documents:
(1)A slide pack entitled “Agent Enrollment [sic] Process 2015”. It seems to have been created in about January 2015, but there is no evidence about who received or saw the slide pack. The first slide states:
It is mandatory that the applicant is explained VFH thoroughly. Click below for more information on VFH.
The slide pack identifies acceptable forms of identification and contains pages entitled “Indigenous Documentation” and “Enrolment Process Change”. The final page, entitled “Agent Representation Changes” states:
ŸAgents will no longer be able to wear Empower branded polo shirts while promoting Empower products and must have an ID card of the agency they represent.
Example:
Agent name: John Smith
Agency name: Vet study
Authorised contractor of Empower Institute
ŸAgency must provide Empower with contact details, preferred names and a photo ID for all sales reps promoting Empower products.
ŸEmpower will be conducting random field visits to agency sales representatives
ŸEmpower will no longer provide assistance in the below
1. Financial assistance with booking shopping centres
2. Banners/Point of Sales Stands
3. Reimbursement of proof of citizenship documents
(2)A slide pack entitled “Empower Institute Orientation”. This set of slides is directed to students who have been enrolled, informing them of matters such as how to contact Empower and how to log onto “eZone” (see [23] above) and the student portal.
(3)A two page document entitled “Company/Sales Representative Monitoring Policy”. This document was created in May 2015, one month before the end of the relevant period. Prior to its creation, Empower did not have a similar document. The stated purpose of the policy is:
… to ensure that all Empower Institute’s sales representatives and sales persons are consistently and periodically monitored by Empower Institute so that Empower Institute’s sales representatives and sales persons are compliant with the law, are ethical and comply with the terms and conditions of the Company/Sales Representative Agreement’s Terms and Conditions.
(4)A five page document entitled “Student Cancellation Policy and Procedure”. This policy appears to have become effective on 1 May 2015. A draft email from Empower to agents advising them of the “change of policy” included the following (errors in original):
The Australian Skills Quality Authority (ASQA) has determined that students should only be charged for subsequent amounts of VET FEE HELP fees (ie pass second censes) if these students demonstrate engagement with their institution through completion of progressive assessment items
.…
Empower Institute endeavors to contact every student a number of times throughout the census periods. However, we ask that you, as the agent, also make every attempt to engage with your students to get them to progress in their studies and to demonstrate that you are an agent who can vouch that these are genuine students who are studying.
(5)A four page document entitled “Academic and Non-Academic Grievance Handling Policy and Procedure”. This document sets out a process for addressing complaints.
I am not satisfied that these documents were provided to marketers, brokers and employees during the relevant period. What emerges from the material identified by the applicants and the s 155 response is that there was practically no training material produced by Empower to guide marketers or brokers. Document (1) provides limited guidance and a link to information about VET FEE-HELP; document (2) does not appear to be directed to marketers and brokers and there is no evidence that it was provided to them; documents (3) and (4) were created in May 2015, at the very end of the relevant period, and in any event there is no evidence that they were ever provided to marketers or brokers; and there is no evidence that document (5) was provided to marketers or brokers.
This conclusion is supported by the affidavit evidence of Ms Chan. Ms Chan was employed as the Quality and Compliance Manager at Empower from about 3 November to mid-December 2014. She was responsible for reviewing the content of Empower’s courses, developing compliance and complaints policies for Empower and investigating and preparing response to regulatory reports of complaints lodged against Empower. At a recruitment interview, Mr Yang proposed that Ms Chan “do quality and compliance” for Empower. When she asked what systems were in place, Mr Yang replied “we don’t have anything in place and that’s why we need you”.
Shortly before she started working at Empower, its operations manager, Suresh Basnet, said to Ms Chan:
Could you start as soon as possible? Empower just received a complaint from the Department of Education and Training and we need to deal with it quickly. We need you to respond to the report and build a strategy to make sure it doesn’t happen again.
The “complaint” from the DET was probably the 30 October 2014 notice referred to at [233] below.
Ms Chan’s evidence was that, when she commenced at Empower, there was no staff or agent training programs in place. Her evidence was that she proposed mandatory training for all Empower staff and agents, including on consumer law, to Dr Heaney. Ms Chan also told Mr Ohunayo that there needed to be a meeting with recruiters to make sure that they were clearly advised on what they could and could not do when enrolling a student. So far as Ms Chan was aware, there was no such meeting while she was at Empower.
On the basis of Ms Chan’s evidence and the material provided in answer to the s 155 notice, I find that prior to 2015, Empower’s recruiters were not provided with any training in relation to the content of the courses conducted by Empower, the requirements to complete a course or the important aspects of VET FEE-HELP for consumers. Based on the “Agent Enrollment [sic] Process 2015”, in 2015, there may have been some training of recruiters.
No Australian Consumer Law training
The applicants contend that, during the relevant period, Empower did not provide any training or instruction to the recruiters or to its employees in relation to compliance with the ACL.
As noted above, Ms Chan’s evidence was that, when she commenced at Empower in November 2014, there was no staff or agent training programs in place.
Based on Ms Chan’s evidence and Empower’s response to the s 155 notice set out above, I make the following findings for the duration of the relevant period:
(1)Empower did not provide any instruction or training to its recruiters on how to market its courses and interact with students in a way that complied with the ACL, beyond the exhortation in the January 2015 slide pack to “explain VFH thoroughly”.
(2)Empower did not instruct its recruiters about their obligations arising pursuant to ss 18, 21 and 29 of the ACL, or the unsolicited consumer agreement provisions in the ACL. Empower did not provide any practical guidance and how to act in accordance with these obligations.
(3)Empower did not provide its recruiters with a marketing script to follow to ensure that what they said to prospective students was not misleading and complied with the stringent requirements of the unsolicited consumer agreement provisions.
No monitoring of marketing and recruitment practices
The applicants contend that, during the relevant period, Empower did not monitor the marketing and recruitment practices of the recruiters or its employees, including in respect of the recruitment of students who were not capable of undertaking or completing the courses in which they were enrolled.
The applicants’ submissions did not identify evidence in support of this contention.
In particular, there was no evidence as to whether or not Empower conducted the “random field visits to agency sales representatives” mentioned in the “Agent Enrollment [sic] Process 2015” slide pack.
Ms Chan and Empower’s s 155 response also identified “verification calls” as being a part of Empower’s enrolment process.
Empower told the ACCC that it provided its employees with the “Verification Call Script”. The document provided by Empower to the ACCC is entitled “Revised Verification Call Script”, however, the evidence also included a document entitled “Verification Call Script for Agents”.
Each script concerns a call to verify details following the receipt of an enrolment application. The evidence of Dr Heaney, at her s 155 examination, was to the effect that the scripts represented what took place from about May 2015, but may also have operated for some period before then. Dr Heaney’s evidence was that prior to this, some students were “verified” by Empower and some by the relevant agent. Ms Evans, who worked at Empower during October 2014, gave evidence that she helped another staff member, Clare Walker, with her job of calling students recruited by agents to determine whether they wanted to undertake their courses.
Both scripts refer to the importance of the “census date” as the last date on which the student can cancel enrolment without incurring a VET FEE-HELP debt for that census period. Both scripts also include questions directed to ascertaining the student’s computer and LLN proficiency. There are also particular questions for a potential student over the age of 60.
Ms Chan also gave evidence that there was a script used by marketers and student services staff when calling students to verify their enrolments. Ms Chan described the script as “fairly basic” and said that it dealt with checking the student’s identification details.
Based on this evidence, I am not satisfied that Empower did not monitor the marketing and recruitment practices of the recruiters or its employees during the relevant period.
No processes to prevent enrolment of incapable students
The applicants contend that, during the relevant period, Empower did not take steps to ensure that it did not enrol students who were not capable of undertaking and completing the courses in which they were enrolled, including by:
(1)not requiring assessment or adequate assessment of the literacy, numeracy or computer skills of consumers (from May 2014);
(2)not determining whether they could use or had access to an internet connection or email, so as to determine whether they were capable of undertaking or completing a course; or
(3)not requiring any minimum formal educational qualifications, or minimum number of years of schooling for students to be eligible to enrol in a course.
In support of this contention, the applicants relied on the evidence of the Consumers as well as evidence from former employees of Empower, namely Caron Bryan, Amanda Evans, Ms Chan and Sanjeev Dheer.
As to (3), the applicants did not suggest that there necessarily should have been any such minimum requirements for enrolment. However, such requirements might have been a way of ensuring that students were not enrolled into a course that was beyond their capacity to complete.
As noted at [29], the pre-requisites for completing a course conducted by Empower successfully were modest, but not non-existent. They comprised:
(1)computer literacy, sufficient to do an online course; and
(2)LLN proficiency, including sufficient understanding of written and spoken English to undertake a course conducted in English.
It follows from the online nature of the courses that a student also needed access to an internet connection and email.
Ms Bryan’s evidence supports the finding that it was necessary to have a degree of literacy and numeracy in order to complete the courses conducted by Empower successfully.
Ms Bryan is a learning designer who was employed by Empower from December 2013 to August 2014. Ms Bryan developed a “Study Skills Survey” (“SSS”) to test whether students were appropriate candidates for an Empower course. The SSS consisted of tests for numeracy and literacy skills, a writing task and an interview with Ms Bryan. From February to April 2014, Ms Bryan administered the SSS to 34 prospective students.
In late April or early May 2014, Mr Hartland was replaced at Empower by Mr Fakhouri. From around that time, Ms Bryan noticed that, when she began to assess the new students, she found that about half of them did not speak English and some could barely write.
From May 2014, Ms Bryan saw that students were being enrolled whom she had marked as unsuccessful in their SSS, or whom she had not assessed at all. Around this time, Ms Bryan was transferred into the role of Academic Manager and her primary responsibility became preparing for an upcoming ASQA audit. She stopped delivering the SSS to students. In about June 2014, Ms Bryan told Suresh Basnet, Empower’s Operations Manager, that she would not assess a batch of students “because too many of them are not the right calibre”. Mr Basnet replied “I’ve spoken with Jim. This is how it is. Caron, you’re going to have to move on if you don’t like it”.
On another occasion, Ms Bryan told Mr Basnet of her opinion that Empower had students “who just want to get the laptop and cannot do the course. We have to do something about it.” On yet another occasion, when Ms Bryan raised her concern with Mr Basnet, he replied “Jim won’t listen to me anymore. He only wants to talk to Mina [Foukhari]”.
At some time after the audit and before she left in August 2014, Ms Bryan stopped seeing the SSS forms in use.
Ms Evans was employed as a Student Engagement Officer at Empower from around 30 September 2014 until her dismissal on 31 October 2014. Ms Evans’ evidence was, relevantly, that there was no literacy and numeracy test for the “business courses”, presumably referring to the Diploma of Business and Diploma of Management courses offered by Empower.
Ms Chan gave evidence of a conversation with Mr Yang, in which she expressed the need for a minimum standard for students enrolling in Empower’s courses. According to Ms Chan, Mr Yang responded by saying “thanks for your concern”.
Ms Chan also advocated for the development of an online LLN test to be developed by a qualified trainer. Her evidence was that Mr Yang said that he did not want to hire someone to fill this role.
Ms Chan’s employment with Empower was terminated by a letter dated 16 December 2014. The letter explained the reason for her termination as follows:
A vital component of your role as Compliance Officer is an effective level of teamwork and communication with other managers and staff; these have not been met.
Mr Dheer was employed by Empower from 1 July 2015 to 27 October 2015, that is, outside the relevant period. His evidence was that he did not see any basic literacy, language or numeracy skills tests administered prior to enrolling students. He gave evidence of a conversation with Sharmila Patel, Empower’s Academic and Operations Manager, in which he raised his concern that almost all the students he dealt with were not capable of doing their courses. Ms Patel responded by saying “I am trying to fix the situation but we need to enrol as many students as possible because the rules will change at the start of next year”.
The applicants also relied on the evidence of the Consumers to support the contention that Empower lacked processes to prevent enrolment of unsuitable students. As set out below, that evidence shows that on several occasions consumers were enrolled without steps being taken to ensure that they were capable of undertaking or completing the relevant courses, whether by reason of insufficient literacy, numeracy or computer skills, or for some other reason such as a disability that made the consumer an unsuitable candidate for one of Empower’s courses.
The verification script and the revised verification script provide for consumers who were called to be asked questions about their computer literacy and the LLN proficiency. They also provide for particular questions about capacity to complete a course in the case of a student over the age of 60. The verification script includes the following:
Consumer Literacy: Could you please tell me what level of computer skills do you have? Do you understand that the course is an online course and that you will need a good level of computer skills and understanding to undertake this course? Do you have anybody who will be assisting you with your computer skills?
LLN Proficiency: Do you consider yourself proficient in the literacy and numeracy skills required to undertake this course? As English is the medium of communication for this course, how would you therefore, rate your skills at understanding written and spoken English?
Disability: Could you advise if you have any known disability or learning difficulty as defined under the Disability Inclusion Act 2014 that could potentially affect you doing this course successfully.
The revised verification script is relevantly similar.
Having regard to the paucity of the marketing and training materials supplied by Empower in its s 155 response, and taking into account the Consumers’ descriptions of the processes by which they were enrolled and the evidence of the former employees of Empower, I find that from about May 2014, Empower had no processes apart from the verification scripts to prevent the enrolment of students were not capable of undertaking or completing the relevant courses, whether by reason of insufficient literacy, numeracy or computer skills or for some other reason such as a disability that would make the consumer an unsuitable candidate for one of Empower’s courses.
The evidence does not reveal the extent to which students received calls from Empower that conformed to the verification scripts. However, on at least one occasion in January 2015, Empower conducted verification calls in relation to some students and discovered that a student was unable to speak English. Mr Fakhouri proposed to Mr Yang that this student’s enrolment be cancelled. Thus, on that occasion, Empower’s verification call process was effective in identifying a student who would have been incapable of completing a course and enabling that student’s enrolment to be cancelled.
Summary of findings concerning Empower’s marketing and enrolment system
In summary, I find that at various times during the relevant period:
(1)Empower offered Google Chromebook computers to consumers who enrolled in its courses.
(2)Empower offered incentives, in the form of $100 gift vouchers, to persons who referred a consumer to enrol in Empower’s courses.
(3)Empower paid commissions to two of its senior employees for each student recruited through a recruiter during late 2015.
(4)Empower systematically used marketers to market to and to recruit students. Two of the marketers, Amity and Inwork, engaged brokers to market to and recruit students.
(5)Empower paid commissions to marketers for recruiting students.
(6)Empower provided practically no training to its recruiters, including no training on compliance with the ACL.
(7)Empower’s system for ensuring that students were capable of completing its courses was limited to its “verification calls”.
Purpose and effect of Empower’s marketing and enrolment system
The applicants contended that Empower’s marketing and enrolment process enabled, encouraged and incentivised the recruiters and Empower’s employees to maximise the number of students they recruited for Empower’s courses so as to maximise the financial benefit derived by Empower in relation to students enrolled in its courses.
I have no doubt that the substantial commissions paid to Empower’s marketers and apparently paid to Mr Ohunayo and Mr Devine encouraged and incentivised them to maximise the number of students they recruited for Empower’s courses. Their respective and successful efforts to increase Empower’s student population in turn increased the financial benefit derived by Empower from its business of providing vocational education courses. It is reasonable to infer that the payment of commissions was intended to produce that effect.
Methods used to recruit students
The applicants did not contend that the marketing and enrolment process was implemented in a uniform manner by all recruiters and employees of Empower. Rather, they contended that certain “marketing methods” were used to recruit students to Empower’s courses “as part of the implementation of Empower’s marketing and enrolment process”.
Whether certain activities are aptly described as “methods” is relevant to the applicants’ case that Empower engaged in a system of conduct or pattern of behaviour that was unconscionable by the implementation of its marketing and enrolment process. As discussed below, by s 21(4)(b) of the ACL the proscription against engaging in unconscionable conduct may apply to “a system or conduct or pattern of behaviour whether or not a particular individual is identified as having been disadvantaged by the conduct or behaviour”. The Macquarie Dictionary (7th ed, Macmillan, 2017) defines the word “method” as:
noun 1. a mode of procedure, especially an orderly or systematic mode: a method of instruction.
2. a way of doing something, especially in accordance with a definite plan.
3. order or system in doing anything: to work with method.
4. orderly or systematic arrangement.
In the concise statement, the applicants identified the following nine activities or omissions as marketing methods used by the recruiters and Empower’s employees:
(1)Targeting particular locations, including rural and remote towns and Indigenous communities and areas with significant populations of low socio-economic status, and conducting face-to-face marketing.
(2)Paying or offering to pay Aboriginal persons to assist in recruiting Aboriginal students to enrol in Empower’s courses.
(3)Offering cash and “iPads” and laptops to consumers to enrol in Empower’s courses.
(4)Making various false or misleading representations, as set out in para 1.4 of the second further amended originating application, including that the courses and/or the laptops were “free”.
(5)Not explaining or adequately explaining to students VET FEE-HELP, the nature of their obligations if they received assistance under VET FEE-HELP, or that they would have a debt to the Commonwealth after the census date for each unit of a course.
(6)Not informing or not adequately informing consumers about the nature and content of the courses, including that they were delivered via an online learning platform.
(7)Continuing to recruit consumers even after being advised that the consumer could not or did not intend to undertake the course.
(8)Not taking steps to ensure that consumers who enrolled in the courses were capable of undertaking or completing the courses.
(9)Enrolling consumers in Empower courses without their knowledge or consent.
As set out below, the evidence included instances of these activities and omissions in the course of procuring enrolments. However, the applicants did not identify facts, beyond the activities and omissions themselves, by reason of which it was contended that those activities or omissions were a mode of procedure, or occurred in accordance with a definite plan or a system.
Pursuant to s 139B of the Act, the conduct of Empower’s recruiter is taken to be the conduct of Empower. Accordingly, I am satisfied that Empower engaged in unconscionable conduct in contravention of s 21 of the ACL in relation to Consumer B by reason of the conduct of Careerpoint.
Consumer D
The applicants alleged:
In light of [Consumer D]’s personal circumstances outlined above, the circumstances in which he was enrolled in a course by Empower’s recruiters was unconscionable in contravention of s 21 of the ACL. Empower’s recruiter:
(a)repeatedly told [Consumer D] that he was offering free study programs that would help him earn a lot of money;
(b)continued trying to enrol [Consumer D] in an Empower course despite [Consumer D] informing the marketer that his father had just passed away that day;
(c)failed to inform [Consumer D] that he was actually enrolling [consumer D] in courses with Empower that day;
(d)did not explain the VET FEE-HELP scheme or the obligations arising from the VET FEE-HELP scheme if [Consumer D] enrolled in a course, or the significance of cancelling enrolment in a course prior to the census date, including that he would incur a debt;
(e)did not give [Consumer D] information about the content of the course or correct information about the cost;
(f)made false, misleading and deceptive representations (including by silence), in contravention of ss 18 and 29(1)(i) of the ACL;
(g)contravened the unsolicited consumer agreement provisions in the ACL;
(h)did not ascertain whether [Consumer D] was a suitable candidate with the intention of, and capability to, undertake and complete the course in which she was enrolled;
Further, either the recruiter or someone else at Empower, forged [Consumer D]’s signature on the enrolment documentation.
My findings concerning Consumer D are set out at [339] to [359] above. Consumer D was tricked into providing his personal details to the relevant recruiter by representations that Empower’s courses were free, as a result of which his signature was forged on two documents for the purpose of enrolling Consumer D in a course with Empower. As set out above, in dealing with Consumer D, the relevant recruiter contravened various consumer protection laws in the ACL. But for Consumer D’s discovery of the forgeries, Empower stood to receive government funding as a result of Consumer D’s enrolment. I am satisfied that the conduct of Empower’s recruiter involved trickery and contraventions of the ACL and was unconscionable in the circumstances because it exposed Consumer D to a substantial liability in the form of a VET FEE-HELP debt without providing him with information to enable him to make an informed decision about whether to incur that liability for the benefit of Empower.
Pursuant to s 139B of the Act, the conduct of Empower’s recruiter is taken to be the conduct of Empower. Accordingly, I am satisfied that Empower engaged in unconscionable conduct in contravention of s 21 of the ACL in relation to Consumer D by reason of the conduct of Inwork Recruitment – NS Education.
Consumer E
The applicants alleged:
In light of [Consumer E]’s personal circumstances outlined above, the circumstances in which she was enrolled for the first time in a course by Empower’s recruiters was unconscionable in contravention of s 21 of the ACL. Empower’s recruiters:
(a)told [Consumer E] at a group sign up event that they were offering free courses and would give her $50 and free laptop if she signed up to a course. The recruiters in fact paid [Consumer E] and her mother $50 each for signing up to a course;
(b)paid an Aboriginal woman to assist them to recruit people to sign up at the group sign up event. At that sign up event, around fifty people, mostly Aboriginal were signed up by Empower;
(c)failed to explain the forms they asked her to sign and, in fact, completed parts of the enrolment forms for her;
(d)did not give [Consumer E] information about the cost of the course or information about the content of the course;
(e)did not explain the VET FEE-HELP scheme or the obligations arising from the VET FEE-HELP scheme if [Consumer E] enrolled in a course, or the significance of cancelling enrolment in a course prior to the census date, including that she would incur a debt;
(f)made false, misleading and deceptive representations (including by silence), in contravention of ss 18 and 29(1)(i) of the ACL;
(g) contravened the unsolicited consumer agreement provisions in the ACL;
(h)did not ascertain whether [Consumer E] was a suitable candidate with the intention of, and capability to, undertake and complete the course in which she was enrolled, even after [Consumer E] informed recruiters she had not finished high school.
(i)failed to ascertain whether she could do a course including by failing to ask [Consumer E] whether she had an internet connection and whether she was able to send and use email.
My findings concerning Consumer E are set out at [360] to [384] above. Consumer E was duped into applying for two Empower courses on the basis of offers made by recruiters to people attending the Coonamble RSL of a free laptop and $50. She was cynically told that she could apply for a course that she would not have to pay for because she would not be likely to earn sufficient income to be required to pay. As set out above, in dealing with Consumer E, the relevant recruiter contravened various consumer protection laws in the ACL. Empower stood to receive government funding as a result of Consumer E’s enrolment and, unbeknown to her, Consumer E stood to incur a substantial liability of which she was told nothing by the recruiter. I am satisfied that the conduct of Empower’s recruiter involved trickery and contraventions of the ACL and was unconscionable in the circumstances because it exposed Consumer E unknowingly to a substantial liability in the form of a VET FEE-HELP debt for the benefit of Empower.
Pursuant to s 139B of the Act, the conduct of Empower’s recruiter is taken to be the conduct of Empower. Accordingly, I am satisfied that Empower engaged in unconscionable conduct in contravention of s 21 of the ACL in relation to Consumer D by reason of the conduct of Amity Administrative – RS Admin.
Consumer F
The applicants alleged:
In light of [Consumer F]’s personal circumstances outlined above, the circumstances in which he was enrolled in a course by Empower’s recruiters was unconscionable in contravention of s 21 of the ACL. Empower’s recruiters:
(a)did not introduce themselves or tell [Consumer F] who they worked for, they merely informed [Consumer F] that they were enrolling people in free courses and giving out free laptops;
(b)did not give [Consumer F] explain the brochure they gave [Consumer F] about the cost of the course or the content of the course;
(c)misled [Consumer F] by telling him that only Aboriginals could do the course;
(d)misled [Consumer F] by telling him that the free laptop they would provide him with came with free Wi-Fi so that he could do the course online;
(e)did not ascertain whether [Consumer F] was a suitable candidate with the intention of, and capability to, undertake and complete the course in which he was enrolled, including whether he had adequate numeracy and literacy skills to do the course;
(f)did not explain the VET FEE-HELP scheme or the obligations arising from the VET FEE-HELP scheme if [Consumer F] enrolled in a course, or the significance of cancelling enrolment in a course prior to the census date, including that he would incur a debt;
(g)made false, misleading and deceptive representations (including by silence), in contravention of ss 18 and 29(1)(i) of the ACL;
(h) contravened the unsolicited consumer agreement provisions in the ACL.
Empower’s recruiters then used Consumer F to introduce them to other Aboriginal people to sign up to courses. They paid him $200 in cash for helping them sign up people in an Aboriginal mission. During the visits they conducted, the recruiters continued to tell people that Empower’s courses were free and offered free laptops.
My findings concerning Consumer F are set out at [385] to [408] above. Consumer F was tricked into enrolling in an Empower course by the offer of a free laptop, and representations that the recruiters were seeking to help Aboriginal people including the false representation that the courses were available only to Aboriginal people. The recruiter cynically told Consumer F that he could keep or sell the laptop if he did not want to do the course. The recruiter then manipulated Consumer F to locate other Aboriginal people to enrol in Empower’s courses. As set out above, in dealing with Consumer F, the relevant recruiter contravened various consumer protection laws in the ACL. Empower stood to receive government funding as a result of Consumer F’s enrolment and, unbeknown to him, Consumer F (and other consumers located with Consumer F’s assistance) stood to incur a substantial liability of which he was told nothing by the recruiter. I am satisfied that the conduct of Empower’s recruiter involved trickery and contraventions of the ACL and was unconscionable in the circumstances because it exposed Consumer F unknowingly to a substantial liability in the form of a VET FEE-HELP debt for the benefit of Empower.
Pursuant to s 139B of the Act, the conduct of Empower’s recruiter is taken to be the conduct of Empower. Accordingly, I am satisfied that Empower engaged in unconscionable conduct in contravention of s 21 of the ACL in relation to Consumer F by reason of the conduct of Careerpoint.
Consumer G
The applicants alleged:
In light of [Consumer G]’s personal circumstances outlined above, the circumstances in which she was enrolled in a course by Empower’s recruiters was unconscionable in contravention of s 21 of the ACL. Empower’s recruiters:
(a)told [Consumer G] they were handing out free laptops from the government if she signed up to a course;
(b)told [Consumer G] she would not have to pay for the course unless she earned over a certain amount;
(c)did not tell [Consumer G] they were from Empower;
(d)did not enquire of [Consumer G]’s educational background;
(e)did not tell [Consumer G] the cost of the course or give her information about the content of the course;
(f)did not ascertain whether [Consumer G] was a suitable candidate with the intention of, and capability to, undertake and complete the course in which she was enrolled, including whether he had adequate numeracy and literacy skills to do the course or whether she knew how to use computers and email;
(g)did not explain the VET FEE-HELP scheme or the obligations arising from the VET FEE-HELP scheme if [Consumer G] enrolled in a course, or the significance of cancelling enrolment in a course prior to the census date, including that she would incur a debt;
(h)instructed her as to how to answer the questions being asked of her during a verification call;
(i)made false, misleading and deceptive representations (including by silence), in contravention of ss 18 and 29(1)(i) of the ACL;
(j) contravened the unsolicited consumer agreement provisions in the ACL.
My findings concerning Consumer G are set out at [409] to [432] above. I am satisfied that the conduct of Empower’s recruiter in dealing with Consumer G was unconscionable in the circumstances, which were relevantly similar to that of Consumer F, because it exposed Consumer G unknowingly to a substantial liability in the form of a VET FEE-HELP debt for the benefit of Empower.
Pursuant to s 139B of the Act, the conduct of Empower’s recruiter is taken to be the conduct of Empower. Accordingly, I am satisfied that Empower engaged in unconscionable conduct in contravention of s 21 of the ACL in relation to Consumer G by reason of the conduct of Careerpoint.
Consumer I
The applicants alleged:
In light of [Consumer I]’s personal circumstances outlined above, the circumstances in which he was enrolled in courses by Empower’s recruiters was unconscionable in contravention of s 21 of the ACL. Empower’s recruiter:
(a)failed to engage with [Consumer I] at all during the sign-up process. The evidence indicates that the recruiter simply allowed [Consumer I’s cousin] to make numerous false representations to [Consumer I], which he did not contradict, in order to get [Consumer I] signed up. These included the offer of a free laptop if he signed up to course the cost of which he would not have to repay unless he earned over $55,000;
(b)did not give him or [his carer] any information about the course. [Consumer I’s carer] informed the recruiter and [Consumer I’s cousin] that “[Consumer I] can’t do business management” and was told that did not matter, he did not have to do the course, and could just keep the laptop. The distinct impression created by these statements was that [Consumer I] could get a free laptop, no strings attached;
(c)made no enquiries as to whether [Consumer I] would be able to do the course. The recruiter did not ascertain whether [Consumer I] had the numeracy and literacy skills to do the course;
(d)did not explain the VET FEE-HELP scheme or the obligations arising from the VET FEE-HELP scheme if [Consumer I] enrolled in a course, or the significance of cancelling enrolment in a course prior to the census date, including that he would incur a debt;
(e)made false, misleading and deceptive representations (including by silence), in contravention of ss 18 and 29(1)(i) of the ACL;
(f) contravened the unsolicited consumer agreement provisions in the ACL.
The circumstances in which [Consumer I] was enrolled a second time in a course by Empower’s marketers was also unconscionable. Empower’s recruiter misled [Consumer I] by asking him to sign another form, purportedly to receive a replacement laptop when, in fact, he was signing [Consumer I] up to another course.
Again, the recruiter did not explain the VET FEE-HELP scheme and the fact that [Consumer I] would incur a debt for signing up. The recruiter did not provide [Consumer I] with critical information about the course or how much it cost. He did not provide [Consumer I] with copies of the enrolment forms. The recruiter contravened the unsolicited consumer agreement provisions in the ACL and made false, misleading and deceptive representations (including by silence).
[Consumer I] should never have been enrolled in a course with Empower.
My findings concerning Consumer I are set out at [433] to [448] above. Consumer I was tricked into enrolling in an Empower course by the offer of a free laptop. In the recruiter’s presence, Consumer I’s cousin told him that he did not have to do the course in order to receive the laptop. The first recruiter must have known that, while literally true, it was a suggestion that Consumer I could exploit VET FEE-HELP for his own benefit in a manner that was incompatible for the education purposes of the scheme, but he did not contradict or correct the cousin’s suggestion. Although Consumer I’s grandmother stated that Consumer I could not do a course in business management, the first recruiter took no steps to check whether Consumer I was a suitable candidate for the course. Consumer I was later tricked into enrolling into a second course to obtain a replacement laptop. As set out above, in dealing with Consumer I, the relevant recruiters contravened various consumer protection laws in the ACL. I am satisfied that the conduct of Empower’s recruiters in dealing with Consumer I was unconscionable in the circumstances because it exposed him unknowingly to a substantial liability in the form of a VET FEE-HELP debt for the benefit of Empower.
Pursuant to s 139B of the Act, the conduct of Empower’s recruiters is taken to be the conduct of Empower. Accordingly, I am satisfied that Empower engaged in unconscionable conduct in contravention of s 21 of the ACL in relation to Consumer I by reason of the conduct of SR Aust and Active Group International.
Consumer J
The applicants alleged:
In light of [Consumer J]’s personal circumstances outlined above, the circumstances in which she was enrolled in a course by Empower’s recruiters was unconscionable in contravention of s 21 of the ACL. Empower’s recruiters:
(a)conducted a group sign up event at a …house. They used Beverly Ryan, an Aboriginal woman, to help recruit students. Beverly Ryan handed out $50 notes to those that signed up. She gave [Consumer J] $50 for signing up;
(b)did not tell [Consumer J] they were from Empower. She only later worked out that they were from Empower because she saw that word on some paperwork that was not explained to her;
(c)told [Consumer J] that she would receive $15,000 to help her with the course and that if her business was successful and she made over $60,000, only then would she have to pay the $15,000 back. This was, of course false;
(d)in response to [Consumer J] telling them that she did not have an email address, they wrote down an email address for her, but did not explain what it was for;
(e)did not enquire of [Consumer J]’s educational background;
(f)did not ascertain whether [Consumer J] was a suitable candidate with the intention of, and capability to, undertake and complete the course in which she was enrolled, including whether he had adequate numeracy and literacy skills to do the course or whether she knew how to use computers and email;
(g)had [Consumer J] sign the enrolment forms, but did not explain them to her. They did not explain the VET FEE-HELP scheme or the obligations arising from the VET FEE-HELP scheme if [Consumer J] enrolled in a course, or the significance of cancelling enrolment in a course prior to the census date, including that she would incur a debt;
(h)did not tell [Consumer J] the cost of the course;
(i)did not answer the questions she had about the course and moved her along quickly so that they could sign-up other people;
(j)made false, misleading and deceptive representations (including by silence), in contravention of ss 18 and 29(1)(i) of the ACL;
(k) contravened the unsolicited consumer agreement provisions in the ACL.
After signing her up, the recruiters paid [Consumer J] to assist them to sign up more people.
My findings concerning Consumer J are set out at [449] to [462] above. Consumer J was tricked into enrolling in a course as a result of statements made by members of her local community to the effect that she would be given a laptop and $50 for “signing up”. She was manipulated to bring another eight people to the house where recruiters were securing enrolments for an extra $50. As set out above, in dealing with Consumer J, the relevant recruiters contravened various consumer protection laws in the ACL. I am satisfied that the conduct of Empower’s recruiters in dealing with Consumer J was unconscionable in the circumstances because it exposed her unknowingly to a substantial liability in the form of a VET FEE-HELP debt for the benefit of Empower and led Consumer J to unwittingly expose other consumers to a similar liability.
Pursuant to s 139B of the Act, the conduct of Empower’s recruiters is taken to be the conduct of Empower. Accordingly, I am satisfied that Empower engaged in unconscionable conduct in contravention of s 21 of the ACL in relation to Consumer J by reason of the conduct of SR Aust.
Consumer K
The applicants alleged:
In light of [Consumer K]’s personal circumstances outlined above, the circumstances in which she was enrolled in a course by an Empower recruiter was unconscionable in contravention of s 21 of the ACL. Empower’s recruiter:
(a)approached [Consumer K] at her home and did not introduce themselves or say who they worked for;
(b)did not tell [Consumer K] anything about the course or what was involved in doing it;
(c)did not tell [Consumer K] the cost of the course;
(d)did not enquire of [Consumer K]’s educational background;
(e)continued to market online courses to [Consumer K] even after she had told the recruiter that she did not know how to use computers;
(f)did not ascertain whether [Consumer K] was a suitable candidate with the intention of, and capability to, undertake and complete the course in which she was enrolled, including whether she had adequate numeracy and literacy skills to do the course;
(g)had [Consumer K] sign the enrolment forms, but did not explain them to her and did not give her a copy of them;
(h)did not explain the VET FEE-HELP scheme or the obligations arising from the VET FEE-HELP scheme if [Consumer K] enrolled in a course, or the significance of cancelling enrolment in a course prior to the census date, including that she would incur a debt;
(i)made false, misleading and deceptive representations (including by silence), in contravention of ss 18 and 29(1)(i) of the ACL;
(j)contravened the unsolicited consumer agreement provisions in the ACL.
The circumstances in which [Consumer K] was signed up a second time to an Empower course by Empower’s marketers was also unconscionable. Again, the recruiter did not say who he worked for. [Consumer K] told the recruiter she needed assistance with the enrolment forms and the recruiter filled in the forms for her. Again, the recruiter did not explain the VET FEE-HELP scheme and the fact that [Consumer K] would incur a debt for signing up. The recruiter did not provide [Consumer K] with critical information about the course or how much it cost. The recruiter contravened the unsolicited consumer agreement provisions in the ACL and made false, misleading and deceptive representations (including by silence).
My findings concerning Consumer K are set out at [463] to [478] above. Consumer K was tricked into enrolling in an Empower course by the offer of a free laptop and iPad. The cost of the course was not disclosed to her. Empower’s recruiter persisted in marketing the online courses to Consumer K despite being told that Consumer K struggled with the use of computers. As set out above, in dealing with Consumer K, the recruiter also contravened various consumer protection laws in the ACL. I am therefore satisfied that the conduct of Empower’s recruiter in dealing with Consumer K was unconscionable, particularly because it exposed Consumer K unknowingly to a substantial liability in the form of a VET FEE-HELP debt for the benefit of Empower.
Pursuant to s 139B of the Act, the conduct of Empower’s recruiters is taken to be the conduct of Empower. Accordingly, I am satisfied that Empower engaged in unconscionable conduct in contravention of s 21 of the ACL in relation to Consumer K by reason of the conduct of Careerpoint.
Consumer L
The applicants alleged:
In light of [Consumer L]’s personal circumstances outlined above, the circumstances in which she was enrolled in a course by an Empower’s recruiters was unconscionable in contravention of s 21 of the ACL. Empower’s recruiters:
(a)approached [Consumer L] at her home despite the fact that she has a Do Not Knock Sticker affixed next to her front door;
(b)did not introduce themselves or say who they worked for;
(c)told [Consumer L] they were offering free courses and free computers and iPads. On this basis [Consumer L] allowed the recruiters into her home. The recruiters made themselves at home and even asked to use her bathroom;
(d)signed [Consumer L] up to a course with another college and offered her a free laptop for that course as well;
(e)did not provide [Consumer L] with any written material about the courses, including their cost or what was involved in completing the courses. They did not leave her with a copy of any paperwork after they signed her up;
(f)accessed and used [Consumer L]’s email account on her mobile phone without her authority;
(g)rushed through the enrolment process and signed her up to two courses in less than 20 minutes. She was distracted by her three children during the sign-up process;
(h)did not explain the VET FEE-HELP scheme or the obligations arising from the VET FEE-HELP scheme if [Consumer L] enrolled in a course, or the significance of cancelling enrolment in a course prior to the census date, including that she would incur a debt;
(i)did not ascertain whether [Consumer L] was a suitable candidate with the intention of, and capability to, undertake and complete the course in which she was enrolled, including whether she had adequate numeracy and literacy skills to do the course;
(j)made false, misleading and deceptive representations (including by silence), in contravention of ss 18 and 29(1)(i) of the ACL;
(k) contravened the unsolicited consumer agreement provisions in the ACL.
My findings concerning Consumer L are set out at [479] to [499] above. Consumer L was tricked into enrolling in an Empower course by the offer of a free laptop and iPad. She was told the course was free. The recruiters entered her home despite a clearly visible Do Not Knock Sticker being affixed next to it. During the 15 to 20 minutes they spent in Consumer L’s home, the recruiters signed her up to the Empower course as well as a course offered by another vocational education provider. The recruiters gave Consumer L little to no information about the content of the course. As set out above, in dealing with Consumer L, the recruiters contravened various consumer protection laws in the ACL. I am satisfied that the conduct of Empower’s recruiters in dealing with Consumer L was unconscionable in the circumstances because it exposed her unknowingly to a substantial liability in the form of a VET FEE-HELP debt for the benefit of Empower.
Pursuant to s 139B of the Act, the conduct of Empower’s recruiter is taken to be the conduct of Empower. Accordingly, I am satisfied that Empower engaged in unconscionable conduct in contravention of s 21 of the ACL in relation to Consumer L by reason of the conduct of Careerpoint.
Consumer M
The applicants alleged:
In light of [Consumer M]’s personal circumstances outlined above, the circumstances in which she was enrolled in a course by an Empower’s recruiters was unconscionable in contravention of s 21 of the ACL. Empower’s recruiters:
(a)signed up [Consumer M] at a group sign-up event in a hotel in Dubbo;
(b)did not tell [Consumer M] who they worked for;
(c)told [Consumer M] that she would receive $50 and two laptops for signing up to two courses;
(d)told [Consumer M] that she had to sign up to two online courses to get the laptops and money;
(e)told [Consumer M] she would not have to pay anything unless she earned over $53,000;
(f)had [Consumer M] sign forms but did not explain to her what she was signing up for. They did not provide her with copies of the forms or information about the courses they signed her up to;
(g)did not explain the VET FEE-HELP scheme or the obligations arising from the VET FEE-HELP scheme if [Consumer M] enrolled in a course, or the significance of cancelling enrolment in a course prior to the census date, including that she would incur a debt;
(h)did not ascertain whether [Consumer M] was a suitable candidate with the intention of, and capability to, undertake and complete the course in which she was enrolled, including whether she had adequate numeracy and literacy skills to do the course and whether she had the skills to complete on online course;
(i)made false, misleading and deceptive representations (including by silence), in contravention of ss 18 and 29(1)(i) of the ACL;
(j)contravened the unsolicited consumer agreement provisions in the ACL.
My findings concerning Consumer M are set out at [500] to [514] above. I am satisfied that the conduct of Empower’s recruiter in dealing with Consumer M was unconscionable in the circumstances, which were relevantly similar to that of Consumer E, because it exposed Consumer M unknowingly to a substantial liability in the form of a VET FEE-HELP debt for the benefit of Empower.
Pursuant to s 139B of the Act, the conduct of Empower’s recruiter is taken to be the conduct of Empower. Accordingly, I am satisfied that Empower engaged in unconscionable conduct in contravention of s 21 of the ACL in relation to Consumer M by reason of the conduct of SR Aust.
Consumer N
The applicants alleged:
In light of [Consumer N]’s personal circumstances outlined above, the circumstances in which he was enrolled in a course by an Empower recruiter was unconscionable in contravention of s 21 of the ACL. Empower’s recruiter:
(a)approached [Consumer N] at his home despite the fact that he has a Do Not Knock Sticker affixed to his front door. The recruiter did not introduce himself;
(b)told [Consumer N] he could get a free laptop if he signed up for a free course. He repeatedly told [Consumer N] it was a free course;
(c)[Consumer N] has an anxiety disorder and physical and intellectual disabilities. [Consumer N] displayed physical signs of anxiety because there was a stranger at his front door.
(d)While [Consumer N] was located his identification, the recruiter entered his home uninvited. This caused [Consumer N] immense stress;
(e)ignored [Consumer N] when he told him he did not want to sign up to a course;
(f)instructed [Consumer N] to sign a document but did not explain to him what it was. [Consumer N] signed it because he was so anxious and just wanted the recruiter to leave his home;
(g)did not provide [Consumer N] with any information about the course and did not leave [Consumer N] with a copy of any documents including the forms he signed;
(h)did not explain the VET FEE-HELP scheme or the obligations arising from the VET FEE-HELP scheme if [Consumer N] enrolled in a course, or the significance of cancelling enrolment in a course prior to the census date, including that he would incur a debt;
(i)did not ascertain whether [Consumer N] was a suitable candidate with the intention of, and capability to, undertake and complete the course in which he was enrolled, including whether he had adequate numeracy and literacy skills to do the course;
(j)made false, misleading and deceptive representations (including by silence), in contravention of ss 18 and 29(1)(i) of the ACL;
(k)contravened the unsolicited consumer agreement provisions in the ACL.
My findings concerning Consumer N are set out at [515] to [522] above. Consumer N was pressured into enrolling in an Empower course. The recruiter knocked on Consumer N’s door despite a clearly visible Do Not Knock Sticker being affixed to it, and subsequently entered his home without invitation. The recruiter watched over Consumer N as he searched for relevant identity documents, cajoling him when he struggled to locate them. The recruiter ignored Consumer N’s express statement that he did not want to do the course, instead proceeding with the sign up process upon Consumer N’s location of the documents. Ultimately, having falsely reassured Consumer N that the course was free, the recruiter instructed Consumer N to sign the enrolment forms. As set out above, in dealing with Consumer N, the relevant recruiter contravened various consumer protection laws in the ACL. I am satisfied that the conduct of Empower’s recruiter in dealing with Consumer N was unconscionable in the circumstances because it exposed him unknowingly to a substantial liability in the form of a VET FEE-HELP debt for the benefit of Empower.
Pursuant to s 139B of the Act, the conduct of Empower’s recruiters is taken to be the conduct of Empower. Accordingly, I am satisfied that Empower engaged in unconscionable conduct in contravention of s 21 of the ACL in relation to Consumer N by reason of the conduct of Qualify Me.
Consumer O
The applicants alleged:
In light of [Consumer O]’s personal circumstances outline outlined, the circumstances in which she was enrolled in a course by Empower’s recruiters was unconscionable in contravention of s 21 of the ACL. Empower’s recruiters:
(a)approached [Consumer O] in her home and told her she could get a free computer if she signed up for a course that the government pays for;
(b)told [Consumer O] she could get a free laptop whether she did the course or not. They also gave her a brochure that indicated she could get a free laptop;
(c)were aware that [Consumer O] and her partner were on disability pensions and told her that she was not required to pay anything unless she earned over $50,000;
(d)told her the courses were for Aboriginal people;
(e)indicated that she could sign up to another course with AIPE;
(f)did not explain the VET FEE-HELP scheme or the obligations arising from the VET FEE-HELP scheme if [Consumer O] enrolled in a course, or the significance of cancelling enrolment in a course prior to the census date, including that she would incur a debt;
(g)did not tell her anything about the courses and did not leave [Consumer O] with a copy of any documents including the forms he signed;
(h)instructed [Consumer O] and her partner to sign some documents without explaining them. [Consumer O] thought the paperwork was to get the free laptops;
(i)did not ascertain whether [Consumer O] was a suitable candidate with the intention of, and capability to, undertake and complete the course in which she was enrolled, including whether she had adequate numeracy and literacy skills to do the course;
(j)made false, misleading and deceptive representations (including by silence), in contravention of ss 18, 29(1)(g) and 29(1)(i) of the ACL;
(k)contravened the unsolicited consumer agreement provisions in the ACL.
My findings concerning Consumer O are set out at [523] to [526] above. I am satisfied that the conduct of Empower’s recruiter in dealing with Consumer O was unconscionable in the circumstances, which were relevantly similar to that of her partner, Consumer F, because it exposed Consumer O unknowingly to a substantial liability in the form of a VET FEE-HELP debt for the benefit of Empower.
Pursuant to s 139B of the Act, the conduct of Empower’s recruiter is taken to be the conduct of Empower. Accordingly, I am satisfied that Empower engaged in unconscionable conduct in contravention of s 21 of the ACL in relation to Consumer O by reason of the conduct of Careerpoint.
Consumer P
The applicants alleged:
In light of [Consumer P]’s personal circumstances outlined above, the circumstances in which she was enrolled in a course by Empower’s recruiters was unconscionable in contravention of s 21 of the ACL. Empower’s recruiters:
(a)approached [Consumer P]’s home in the presence of her next door neighbour…. She invited them in to her home on the basis that she was told that the recruiters were signing people up for free courses. She then felt flustered when the recruiters were in her home;
(b)told [Consumer P] that because she was on a pension the course was free and she would also get a free laptop;
(c)told [Consumer P] that she had to do two courses, one with Empower and one with AVLC;
(d)did not explain the VET FEE-HELP scheme or the obligations arising from the VET FEE-HELP scheme if [Consumer P] enrolled in a course, or the significance of cancelling enrolment in a course prior to the census date, including that she would incur a debt;
(e)filled out two contracts and had [Consumer P] sign them. The recruiters rushed her through this process and did not explain them to her. She did not read them properly because she felt flustered;
(f)gave her some information sheets, but did not explain them to her;
(g)did not ascertain whether [Consumer P] was a suitable candidate with the intention of, and capability to, undertake and complete the course in which she was enrolled, including whether she had adequate numeracy and literacy skills to do the course;
(h)made false, misleading and deceptive representations (including by silence), in contravention of ss 18 and 29(1)(i) of the ACL;
(i) contravened the unsolicited consumer agreement provisions in the ACL.
[The next door neighbour] was being paid by the recruiters to assist them to sign people up to Empower courses.
My findings concerning Consumer P are set out at [527] to [538] above. I am satisfied that the conduct of Empower’s recruiter in dealing with Consumer P was unconscionable in the circumstances, which were relevantly similar to that of Consumer F, because it exposed Consumer P unknowingly to a substantial liability in the form of a VET FEE-HELP debt for the benefit of Empower.
Pursuant to s 139B of the Act, the conduct of Empower’s recruiter is taken to be the conduct of Empower. Accordingly, I am satisfied that Empower engaged in unconscionable conduct in contravention of s 21 of the ACL in relation to Consumer P by reason of the conduct of Careerpoint.
Consumer Q
The applicants alleged:
In light of [Consumer Q]’s personal circumstances outlined above, the circumstances in which he was enrolled in a course by Empower’s marketers was unconscionable in contravention of s 21 of the ACL. Empower’s recruiters:
(a)signed up [Consumer Q] to an Empower course at a group sign-up event at which there were around 15 other people. The recruiters did not introduce themselves or say who they worked for;
(b)told [Consumer Q] they were offering free courses, paid for by the government, that he would not have to pay back unless he earned around $100,000;
(c)were told by [Consumer Q] that he did not have a computer or access to the internet at home;
(d)told [Consumer Q] he would get a free computer;
(e)did not explain the VET FEE-HELP scheme or the obligations arising from the VET FEE-HELP scheme if [Consumer Q] enrolled in a course, or the significance of cancelling enrolment in a course prior to the census date, including that he would incur a debt;
(f)told him to sign some forms but did not explain them to him;
(g)did not give him any written information about the course or how much it cost;
(h)did not ascertain whether [Consumer Q] was a suitable candidate with the intention of, and capability to, undertake and complete the course in which he was enrolled, including whether he had adequate numeracy and literacy skills to do the course;
(i)made false, misleading and deceptive representations (including by silence), in contravention of ss 18 and 29(1)(i) of the ACL;
(j) contravened the unsolicited consumer agreement provisions in the ACL.
[Consumer Q] was paid $50 for signing up to a course.
My findings concerning Consumer Q are set out at [539] to [549] above. I am satisfied that the conduct of Empower’s recruiter in dealing with Consumer Q was unconscionable in the circumstances, which were relevantly similar to that of Consumers E, because it exposed Consumer Q unknowingly to a substantial liability in the form of a VET FEE-HELP debt for the benefit of Empower.
Pursuant to s 139B of the Act, the conduct of Empower’s recruiter is taken to be the conduct of Empower. Accordingly, I am satisfied that Empower engaged in unconscionable conduct in contravention of s 21 of the ACL in relation to Consumer Q by reason of the conduct of Amity Administrative – RS Admin.
CONCLUSION
I will hear further from the applicants as to the orders to give effect to these reasons and for the further conduct of the matter.
I certify that the preceding seven hundred and ninety-seven (797) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gleeson. Associate:
Dated: 19 September 2018
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