Australian Competition and Consumer Commission v Henry Kaye and National Investment Institute Pty Ltd - [2004] FCA 1363

FEDERAL COURT OF AUSTRALIA
Australian Competition and Consumer Commission v Henry Kaye and National Investment Institute Pty Ltd [2004] FCA 1363
TRADE PRACTICES – misleading and deceptive conduct – radio, internet and newspaper advertisements for attendance at a free public seminar discussing property investment strategies – where individual represented that he could make ordinary Australians “property millionaires” – where fine print qualifier appeared in advertisements – s 6(3) of Trade Practices Act 1974 (Cth) ‑ whether alleged representations made out – whether mere puffery – whether representations as to future matters – application of s 51A – whether reasonable grounds demonstrated – whether absence of reasonable grounds shown – whether individual “has aided, abetted, counselled or procured the contravention” breach of s 52 – application of s 75B – whether representations made on behalf of and with implied actual authority ‑ whether representations made “in trade or commerce” – remedies – injunctive and declaratory relief – whether corrective advertising ought to be ordered
EVIDENCE – whether inference can be drawn from failure to give evidence where no evidence adduced at trial concerning the witness’ state of mind
WORDS AND PHRASES “in trade or commerce” “property millionaire”
Trade Practices Act 1974 (Cth) ss 6, 52, 51A, 75B, 80, 84, 86C
Corporations Act 2001 (Cth) s 440D
Federal Court of Australia Act 1978 (Cth) ss 21, 23
Australian Competition and Consumer Commission v Chen (2003) 201 ALR 40 referred to
Australian Competition and Consumer Commission v Hughes (2002) ATPR 41-863 referred to
Matheson Engineers Pty Ltd v El Raghy (1992) 37 FCR 6 cited
Australian Competition and Consumer Commission v Universal Sports Challenge Ltd [2002] FCA 1276 referred to
Parkdale Custom Built Furniture Pty v Puxu Pty Ltd (1982) 149 CLR 191 applied
Tobacco Institute of Australia Limited v Australian Federation of Consumer Organisations Inc (1992) 38 FCR 1 applied
Taco Company of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 177 referred to
Campomar Sociedad, Limitada v Nike International Limited (2000) 202 CLR 45 cited
National Exchange Pty Ltd v Australian Securities and Investment Commission [2004] FCAFC 90 referred to
Medical Benefits Fund of Australia Limited v Cassidy [2003] FCAFC 289 referred to
Cassidyv Medical Benefits Fund of Australia (No 2) [2002] FCA 1097; 205 ALR 402 referred to
Telstra Corporation Limited v Optus Communications Pty Limited (1997) ATPR 41-541 referred to
General Newspapers Pty Ltd v Telstra Corporation (1993) 45 FCR 164 referred to
Pappas v Soulac (1983) 50 ALR 231 referred to
Sanders v Glev Franchises Pty Ltd [2002] FCA 1332 referred to
Ting v Blanche (1993) 118 ALR 543 cited
Miba Pty Ltd v Nescor Industries Group Pty Ltd (1996) 141 ALR 525 cited
Sykes v Reserve Bank of Australia (1998) 88 FCR 511 cited
Phoenix Court Pty Ltd v Melbourne Central Pty Ltd (1997) ATPR (Digest) 46-179 referred to
Australian Competition and Consumer Commission v Danoz Direct Pty Ltd [2003] FCA 881 referred to
Australian Competition and Consumer Commission v Oceana Commercial Pty Ltd [2003] FCA 1516 referred to
Wheeler Grace and Pierucci Pty Ltd v Wright (1989) ATPR 40 –940 referred to
Cummings v Lewis (1993) ATPR (Digest) 46 – 103 referred to
Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd (1978) 140 CLR 216 referred to
NMFM Property Pty Ltd v Citibank Ltd (No 10) (2001) 186 ALR 442 referred to
Re Duomatic Ltd [1969] 2 Ch 365 referred to
Brick and Pipe Industries Ltd v Occidental Life Nominees Pty Ltd [1992] 2 VR 279 referred to
Equiticorp Finance Ltd (in liq) v Bank of New Zealand (1993) 32 NSWLR 50 referred to
Yorke v Lucas (1985) 158 CLR 661 cited
Australian Competition and Consumer Commission v IMB Group Pty Ltd [2003] FCAFC 17 referred to
Fernandez v Glev [2000] FCA 1859 referred to
ChanCuong Su t/as Ausviet Travel v Direct Flights International Pty Limited (No 2) (1999) ATPR 41–677 referred to
King v GIO Australia Holdings Ltd (2001) 184 ALR 89 referred to
Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594 followed
Meadow Gem Pty Ltd v ANZ Executors & Trustee Co Ltd [1994] ATPR (Digest) 46-130 referred to
Glorie v WA Chip and Pulp Co Pty Ltd (1981) 55 FLR 310 referred to
Australian Federation of Consumer Organisations Inc v Tobacco Institute of Australia Ltd (1991) 27 FCR 149 referred to
Forster v Jododex Pty Ltd (1972) 127 CLR 421 referred to
Ainsworth v Criminal Justice Commission (1992) 175 CLR 564 applied
World Series Cricket Pty Ltd v Parish (1977) 16 ALR 181 cited
Australian Competition and Consumer Commission v IMB Group Pty Ltd [1999] FCA 313; (1999) ATPR 41‑688 referred to
Australian Competition and Consumer Commission v IMB Group Pty Ltd [2003] FCAFC 17
Australian Competition and Consumer Commission v Chen (2003) 201 ALR 40 referred to
Australian Competition and Consumer Commission v Goldy Motors Pty Ltd [2001] ATPR 41-801 referred to
Australian Competition and Consumer Commission v Target Australia Pty Ltd [2001] ATPR 41-840 referred to
AUSTRALIAN COMPETITION AND CONSUMER COMMISSION v HENRY KAYE AND NATIONAL INVESTMENT INSTITUTE PTY LTD (ACN 098 189 863)
KENNY J
22 OCTOBER 2004
MELBOURNE

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY

V 921 OF 2003

BETWEEN:

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
APPLICANT

AND:

HENRY KAYE
FIRST RESPONDENT

NATIONAL INVESTMENT INSTITUTE PTY LTD
(ACN 098 189 863)
SECOND RESPONDENT

JUDGE:

KENNY J

DATE OF ORDER:

22 OCTOBER 2004

WHERE MADE:

MELBOURNE

THE COURT ORDERS THAT:
1.On or before 4.00 pm on 5 November 2004, the applicant file and serve a minute of proposed orders to give effect to the reasons for judgment delivered today.
2.On or before 4.00 pm on 8 November 2004, the parties file and serve short submissions as to costs.

3. The matter be adjourned to a date to be fixed.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY

V 921 OF 2003

BETWEEN:

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
APPLICANT

AND:

HENRY KAYE
FIRST RESPONDENT

NATIONAL INVESTMENT INSTITUTE PTY LTD
(ACN 098 189 863)
SECOND RESPONDENT

JUDGE:

KENNY J

DATE:

22 OCTOBER 2004

PLACE:

MELBOURNE

REASONS FOR JUDGMENT
introduction

The applicant, the Australian Competition and Consumer Commission (“the Commission”) seeks declaratory, injunctive and other relief against the first respondent, Henry Kaye, in respect of statements made on the radio, the Internet and in newspapers in September 2003. By an amended statement of claim, the Commission alleges that these statements were misleading or deceptive, or likely to mislead or deceive, in contravention of s 52 of the Trade Practices Act1974 (Cth) (“the TPA”). The proceeding against the second respondent, National Investment Institute Pty Ltd (“NII”) was stayed following the appointment of an administrator to NII on 25 November 2003: see Corporations Act 2001 (Cth) s 440D(1). The Commission alleges that Mr Kaye made a number of misrepresentations, which are detailed below, including that he would make five ordinary Australians property millionaires in just six months using no money down, no debt and no equity. He also claimed, so the Commission alleges, that he would turn a 1,000 ordinary people into property millionaires within 12 months.
The Commission relied on numerous affidavits. These were the affidavits of Robert Bruce Fowler sworn on 18 November 2003; Michael Oblan Azize sworn on 17 November 2003; Rosamond Stronach sworn on 13 November 2003 and 10 March 2004; Samantha Bourke sworn on 14 November 2003; Stephen Humphrey sworn on 14 November 2003; Neil Leahy sworn on 14 November 2003; Karen Jane Brown sworn on 14 November 2003 and 29 January 2004; Jacques Patrick Crouche sworn on 17 November 2003; Lisa Moore sworn on 18 November 2003; and Thomas Scott Keck sworn on 18 November 2003, 21 January 2004 and 24 February 2004; and the exhibits accompanying each of these affidavits. Mr Fowler and Mr Keck were subject to cross-examination.
Neither Mr Kaye nor Mr Nicholas Stewart Porritt (at the relevant time, also a director of NII) gave evidence at trial. Instead, Mr Kaye relied on the affidavits of Brian Dudakov sworn on 12 February 2004; and Brian Raymond Barnard sworn on 11 February 2004. Mr Kaye also relied on the affidavit of a gentleman who described himself as “a self-employed professional property investor”. This affidavit was sworn on 3 March 2004. In her affidavit of 10 March 2004, Mr Kaye’s then solicitor, Ms Michelle Dixon, gave an explanation for the delay in filing it. This gentleman and Messrs Dudakov and Barnard were subject to cross-examination.
the background facts
The advertisements
It was common ground that, until 25 November 2003, NII conducted business as a provider of property investment courses or programs. The primary program that it sold was a course entitled the “Investment Mastery Program” (“IM Program”). The IM Program was a 12 month program that purported to teach property investment strategies through workshops, seminars and written materials. The enrolment fee for the IM Program was $15,000.
At all material times, Mr Kaye was a director of NII. He was the sole director of NII from 19 April 2002 to 14 July 2003; and again from 13 October 2003. He was also the founder of NII and devised the strategies set out in the IM Program. After 14 July 2003, however, there were two other directors of NII. They were Brian Raymond Barnard (until 13 October 2003) and Nicholas Stewart Porritt (also until 13 October 2003). NII was wholly owned by NII Group Holdings Pty Ltd, which was wholly owned by NII Group Pty Ltd. NII Group Pty Ltd was wholly owned by Provident Group Pty Ltd, the sole shareholder of which was Mr Kaye.
During September 2003, Mr Kaye announced the “Henry Kaye” or “$1 million” Challenge (“the Challenge”), which was to consist of five free seminars conducted in Sydney, Melbourne, Perth, Adelaide and Brisbane (“the free seminars”). Mr Kaye proposed that one person should be chosen from the attendees at each seminar and that he would “teach [them] to become property millionaires, in just 6 months”. These five people were to be representative of the ordinary Australian. As it turned out, only two of the free seminars were conducted, namely, in Melbourne on 15 September 2003 and in Sydney on 18 September 2003. The balance of the seminars were cancelled after the commencement of this proceeding. As the Internet and newspaper advertisements for the Challenge (set out below) demonstrate, there was also a second aspect to the Challenge, because Mr Kaye also claimed that he would turn 1,000 ordinary Australians into property millionaires within 12 months.
The Challenge, and the free seminars, were advertised by radio advertisements broadcast from 10 September 2003 to 18 September 2003 on Fox FM in Melbourne and 2 Day FM in Sydney. These advertisements were in the following form:
The critics say Henry Kaye can’t turn ordinary Australians into millionaires (PAUSE)
Well, be there when he proves them wrong!
He’ll teach five volunteers to become property millionaires, in just 6 months … without using their own money, or taking on the risk of debt.
And if he fails, he’ll give a MILLION DOLLARS to charity.
He’s that confident.
Call 1300 304 805 to attend this information evening, this Thursday night at The State Theatre.
Be there and you could be the next millionaire!
Call 1300 304 805 now.
Terms and conditions available on the night.
By his defence, Mr Kaye admitted that he caused these radio advertisements to be broadcast.
The script of a “LIVE READ” advertisement differed slightly from this, but the meaning was essentially the same. It was as follows:
Henry Kaye, high profile property investor, says it’s time to silence his critics.
How?
He’ll turn 5 volunteers into Property Millionaires in just 6 months – using no money down, no debt and no equity.
And if he doesn’t, he’ll donate one million dollars to charity.
Want to be one of the lucky 5?
Then don’t miss Henry’s seminar on Thursday, September 18 at the State Theatre in Market Street.
To register, call 1300 304 805.
That’s 1300 304 805.
Terms and conditions available on the night.
The uncontroverted affidavits of Ms Brown established that Nicholas Porritt, who was a director of NII, arranged the radio advertisements in both forms. Having regard to Ms Brown’s second affidavit, I am satisfied that, on the balance of probabilities, the live broadcast was made in accordance with the words set out above. In her affidavits, Ms Brown, who was an Account Executive with a radio broadcasting network, deposed to the placing of advertisements with Fox FM (Melbourne) and 2 Day FM (Sydney) in the form of the scripts set out above. She specifically deposed to a conversation in early September 2003 with a Nicholas Porritt, who stated that he was from the National Investment Institute and that he wanted to arrange some advertising concerning “this free seminar we’re doing in Sydney and Melbourne”. She deposed that most of the advertisements were billed to the credit trading account of NII, although initial advertisements were paid by credit card in the name of Leonard N McDowall, who was NII’s Chief Executive Officer. She further deposed that Mr Porritt initially requested that the radio advertisement scripts were to be based on the advertisements in The Sunday Telegraph (see below). Mr Porritt’s name appears on the advertising schedules, which showed NII as the client; and that a Mr Porritt arranged for a credit account to be set up in the name of NII. The emailed instructions confirming the text of the advertisements were sent by a Mr Porritt as “General Manager Operations National Investment Institute”.
It was also common ground that Mr Kaye published, or caused to be published, certain advertisements that appeared on an Internet site located at These advertisements were lengthier than those on radio. In substance, after referring to some adverse publicity, these advertisements stated that it was Mr Kaye’s intention to “silence” his critics “once and for all”, by conducting a public event called “the $1 million Challenge”, to demonstrate that his property investment strategies worked. The advertisements stated that it was Kaye’s intention that one person be chosen from each of the free seminars and, under public scrutiny, he would “make ALL 5 of them into ‘property millionaires’ in 6 months”, “using no money down, no debt and no equity”; and that he would “write a cheque for one million dollars and give it to charity” if he failed. Under the heading, “Five Reasons Why You Should Be At The $1 million Challenge”, the advertisement indicated that Kaye said:
1.I will prove once and for all that I can teach anyone (and I mean anyone) to acquire a million dollar plus portfolio in 6 months.
2.I will prove to you that you can invest in property virtually risk free with zero debt and price protection using a proven system.
3.If you’re one of the 5 chosen attendees, you will be personally taught by me to build your million dollar property portfolio in 6 months using no money down, no equity and no debt.
4.I’ll be announcing how ALL attendees can become a part of our 1000 “Enlightened Property Millionaires” who’ll take part in a unique program that ‘guarantees you results or I pay you $50,000 in cash’.
5.By attending this event, you’ll be a part of history in the making … so be VERY quick as the event WILL book out.
Elsewhere in the Internet advertisements, Kaye was reported as saying:
I will prove once and for all that I can teach anyone to acquire a million dollar plus portfolio … with:
·    NO money down
·    NO equity
·    NO debt and a
·    Price Protection GUARANTEE
(Which means, even if the market were to go down, you wouldn’t lose money.) … .
If you ARE chosen to be one of the 5, you’ll discover why you don’t need any money to secure a million dollar property portfolio. You don’t need any equity. You don’t need to take on any debt. … Look, my methods ARE innovative. They produce extreme wealth rapidly. But they’re strategies based on safety, caution, due diligence and security! I’ll teach you all that and more. … .
Under the heading “1,000 more enlightened ‘Property Millionaires’ in 12 months”, Kaye was reported as saying:
I’m also seeking 1,000 ‘ordinary’ people to help me make world history. I’ll turn them all into ‘property millionaires’ with these very same strategies. Those who choose to come on board in the 1,000 WILL be paying clients. But I’ll absolutely guarantee that they’ll get a result too. That if you follow the steps, and it doesn’t give you AT LEAST $50,000 in profits by the end of the program, I’ll refund the cost of your program, AND give you $50,000 on top .… .
At the foot of the advertisement, there appeared the following notation:
‘Property Millionaire’ means someone who secures $1million of property, either in their own right, in a joint venture, or in a syndicate.
Terms, conditions and criteria will be available on the night.
The Internet advertisements also reported Kaye as saying:
I learned the hard way how to find investment strategies that produce real results, and I learned what mistakes to avoid. I’ve proven that anyone, starting with almost nothing, even a non-english speaking migrant, CAN become very wealthy in this country.
…
… The biggest irony is that certain people say my wealth strategies are ‘high risk’. That’s a joke. The absolute opposite is true. … And anyone who’s studied my courses will tell you I teach extreme safety, and extreme due diligence in all my programs. … .
…
At this series of public events, totally free to the public, I’ll explain to the expected thousands of interested Australians exactly how I have built my wealth.
Mr Kaye also admitted that advertisements were published during September 2003 in The Australian Financial Review (“AFR”), The Sydney Morning Herald (“SMH”), The Sunday Telegraph, The Age and The Herald Sun newspapers, publicising and promoting the Challenge and the free seminars. He contended, however, that the newspaper advertisements were not published for, or on behalf of, NII; and that they were not done in the course of NII’s business affairs or activities. In these circumstances, they were not, so he submitted, published by him “on behalf” of NII within the meaning of s 84(2) of the TPA.
The differences between the newspaper advertisements were immaterial. An advertisement, which apparently appeared in The Age on 6 September 2003, contained the following statements:
At an event you must NOT miss, HENRY KAYE will silence his CRITICS once and for all:
“To prove to my critics (and you) that what I teach WORKS,
I’ll make 5 ‘ordinary’ Australians into ‘Property Millionaires’ in just 6 months
… using no money down, no debt and no equity…
And if I fail, I’ll sign this cheque for $1 million to charity.
… I learned the hard way how to find investment strategies that produce real results, and I learned what mistakes to avoid. I’ve proven that anyone, starting with almost nothing, even a non-english speaking migrant, CAN become very wealthy in this country.
…
Shouldn’t it be every Australian’s right to make their OWN decisions about learning to build wealth the way I did? The biggest irony is that certain people say my wealth strategies are ‘high risk’. … Based on my life experiences, I’d have to be one of THE most risk averse persons you’ll meet. … And anyone whose studied my courses will tell you I teach extreme safety, and extreme due diligence in all my programs.
…
I will prove once and for all that I can teach anyone to acquire a million dollar plus portfolio – with:
·NO money down.
·NO equity
·NO debt and a
·Price Protection GUARANTEE
(Which means, even if the market were to go down, you wouldn’t lose money.)
Let me just reiterate that. If you ARE chosen to be one of the 5, you’ll discover why you don’t need any money to secure a million dollar property portfolio. You don’t need any equity. You don’t need to take on any debt. And I’ll even be teaching you how to protect the value of your properties.
Look, my methods ARE innovative. They produce extreme wealth rapidly. But they’re strategies based on safety, caution, due diligence and security! I’ll teach you all that and more. All I’ll ask of those I’ll teach, is that they follow the exact steps, just as thousands of my enlightened clients have before.
1,000 more enlightened “Property Millionaires” in 12 months
I’m also seeking 1,000 “ordinary” people to help me make world history. I’ll turn them all into “property millionaires” with these very same strategies. Those who choose to come on board in the 1,000 WILL be paying clients. But I’ll absolutely guarantee that they’ll get a result too. That if you follow the steps, and it doesn’t give you AT LEAST $50,000 in profits by the end of the program, I’ll refund the cost of your program, AND give you $50,000 on top . I’ll announce the 1,000 “property millionaires” challenge on the night.
At its foot, this advertisement also said:
‘Property Millionaire’ means someone who has secured $1million of property, either in their own right, in a joint venture, or in a syndicate.
Terms conditions and criteria will be available on the night.

There was also evidence that showed that Mr Porritt placed the newspaper advertisements in the newspapers referred to at [14] above. I interpolate here that, as set out at [170] to [173] below, I have found that these advertisements were made “on behalf of NII”.
The free seminars
By agreement between the Commission and Mr Kaye, a transcript of the seminar held in Melbourne on 15 September 2003 was admitted into evidence. The transcript showed, and I find, that, during the seminar that day, Mr Kaye promoted the IM Program in part by inviting the members of the public in attendance to participate in the 1,000 “Property Millionaires” program. In order to participate in the 1,000 Property Millionaires program, a person was required to pay for and enrol in the IM Program, for which, the fee was, as already noted $15,000. No-one suggested that the seminar in Sydney on 18 September 2003 was different in any relevant respect.
The transcript also showed, and I find, that the promotional campaign, of which the radio, Internet and newspaper advertisements were part, was calculated (amongst other things) to promote and market the IM Program. The affidavits of Mr Crouche and Mr Azize confirmed that this was the case. The affidavit evidence of Mr Crouche, which was unchallenged, established that a video promoting NII and its courses was shown at the free seminar in Melbourne on 15 September 2003. The affidavit evidence of Mr Azize, which was also unchallenged, established that there were a number of tables outside the seminar theatre in Sydney on the 18 September 2003, and that there were leaflets on the tables advertising the IM Program and the Challenge, including the 1,000 “Property Millionaires” program. The evidence of Messrs Azize and Crouche established that officers of NII obtained contact details, which they used to arrange private consultations with persons who had attended the free seminars to market the IM Program, when interested persons registered on the website for the seminars, or completed registration forms at the seminars. Further, having regard to the evidence of Messrs Crouche and Azize, the transcript of the seminar in Melbourne on 15 September 2003 and the matters referred to at [171] and following, I am satisfied that this seminar, and the free seminar in Sydney on 18 September 2003, were conducted by NII or on its behalf.
the commission’s case
The Commission’s case concerns the statements made in the advertisements for the Challenge. The Commission alleged that, by the radio advertisements, Kaye had represented that:
(a)he would teach 5 volunteers (who are ordinary Australians) to become property millionaires (meaning having net wealth in property investments exceeding one million dollars) in six months without using their own money or taking on the risk of debt.
(b)he could turn ordinary Australians into property millionaires.
I refer to these representations below as the “radio representations”. The Commission alleged that the radio representation in paragraph (a) was with respect to a future matter within s 51A of the TPA and was misleading by operation of this provision. The Commission further alleged that the radio representation referred to in paragraph (b) was misleading or deceptive, or likely to mislead or deceive, “in that contrary to the representation, Kaye could not turn ordinary Australians into millionaires”. In its case against Mr Kaye, the Commission submitted that ordinary members of the public would take the expression “property millionaire” to mean an individual who held a portfolio of property worth a million dollars. The Commission also submitted that none of the representations made by the radio, on the Internet or in the newspapers were qualified in the way alleged by Mr Kaye: see below.
By the advertisements published on the “Henry Kaye” Internet site located at, and associated with, the domain name the Commission claimed that Kaye had further represented:
(a)Anyone, by following Kaye’s property investment strategies, can acquire a million dollars plus property portfolio with no money down, no equity, no debt and a price protection guarantee (meaning that if the market were to go down, they would not lose money);
(b)Kaye would make five ordinary Australians into property millionaires (meaning having net wealth in property investments exceeding one million dollars) in just six months using no money down, no debt and no equity;
(c)Those five people to be selected to become property millionaires would be representative of the ordinary Australian;
(d)Kaye would turn 1,000 ordinary people into property millionaires (meaning having net wealth in property investments exceeding one million dollars) within 12 months;
(e)At the free seminars it would be proved that Henry Kaye could teach anyone to acquire a million dollar plus property portfolio within 6 months;
(f)Kaye would teach five volunteers to build a million dollar property portfolio in six months using no money down, no equity and no debt;
(g)Alternatively to (b), Kaye would make five ordinary Australians into property millionaires (meaning someone who has secured a million dollars of property, either in their own right or in a joint venture or in a syndicate) in just six months using no money down, no debt and no equity;
(h)Alternatively to (d), Kaye would turn a thousand ordinary people into property millionaires (meaning someone who has secured a million dollars of property, either in their own right or in a joint venture or in a syndicate) within 12 months.
I refer to these representations below as the “Internet representations”.
The Commission alleged that the Internet representation in [20] (a) above was misleading or deceptive, or likely to mislead or deceive, in that Kaye’s property investment strategies (as set out in the index to the module and modules 1 to 10 of the IM Program) did not enable anyone to acquire a million dollar plus property portfolio with no money down, no equity, no debt and without the risk that if the market were to go down they would lose their money. The Commission specifically identified these strategies in Annexure D and their deficiencies in Annexures E and F to its amended statement of claim. The modules of the NII’s IM Program were in evidence.
The Commission alleged that the balance of the Internet representations were representations as to future matters, in respect of which neither Kaye nor NII had reasonable grounds. In consequence, these representations were misleading by virtue of s 51A. In the alternative, the Commission alleged that the Internet representation referred to in [20](c) above was misleading or deceptive, or likely to mislead or deceive, in that contrary to the representation, the five people to be selected to become property millionaires would not be representative of the ordinary Australian, but would have to meet rigorous selection criteria. The Commission further alleged that the Internet representation referred to in [20](e) above was misleading or deceptive, or likely to mislead or deceive, in that contrary to the representation, it was not proved at the free seminar that Henry Kaye could teach anyone to acquire a million dollar plus property within six months.
The Commission alleged that Mr Kaye made the same representations by the advertisements in the newspapers promoting and marketing the Challenge and the free seminars (“the newspaper representations”), as he did by the Internet, save that the newspaper representations did not include a representation to the effect of [20](e) above. The Commission impugned the newspaper representations in the same way as it did the Internet representations.
The Commission submitted that the representation were made in trade or commerce, because, for the purposes of the TPA, conduct in trade or commerce includes promotional activities in relation to, or for the purposes of, the supply of goods or services to actual or potential customers.
As already noted, Mr Kaye admitted that he prepared the newspaper advertisements and caused them to be published. The Commission’s case was that, since Kaye was a director of NII and he engaged in this conduct on its behalf and within the scope of his actual or apparent authority, then this conduct was, by virtue of s 84(2) of the TPA, deemed to be engaged in by NII. In relation to the newspaper representations, the Commission also pleaded that, at all relevant times, Mr Kaye knew that the newspaper representations were false and misleading and that, in the circumstances, he aided, abetted, counselled, procured, or was directly or indirectly concerned in, or party to, NII’s contraventions of s 52 of the TPA and therefore, pursuant to s 75B, he was liable as an accessory to any breach by NII of s 52 of the TPA. Mr Kaye denied this.
mr kaye’s defence
Shortly after the commencement of this proceeding, Mr Kaye informed the Court through his counsel that he did not intend to continue with the Challenge. At the hearing of the matter, his counsel stated that he would submit to permanent injunctions of the kind sought by the Commission in paragraphs A(3), (6), (10) and (11) of the Amended Application.
Mr Kaye denied the advertisement mentioned above contained the radio representations, the Internet representations and the newspaper representations. Further or alternatively, in relation to the radio representations, he pleaded that:
(a)the radio advertisements contained a qualified statement that he could teach five volunteers to become property millionaires in six months without using their own money or taking on the risk of debt, the qualification or risk of non-fulfilment being clearly disclosed by the words “And if he fails, he’ll give a MILLION DOLLARS to charity”;
(b)the radio advertisements merely invited listeners to register to attend a seminar at which information would be given and be available and the advertisements were not capable of being acted on or relied on without further inquiry;
(c)the radio advertisements did not invite a listener to do or not to do anything in trade or commerce; and
(d)if (which is denied) the radio advertisements contained the alleged representations or any of them, the representation was made by him and not by NII.
Mr Kaye denied that the radio representation set out in [19](b) was misleading or deceptive, or likely to mislead or deceive. He said, further or alternatively, that:
If (which is denied) the radio advertisements contained the alleged representation, the alleged representation was not misleading or deceptive to listeners, or likely to mislead or deceive listeners, because the statements alleged to give rise to the representation were qualified or the risk of non-fulfilment disclosed by the words “And if he fails, he’ll give a MILLION DOLLARS to charity”. Further the alleged representation was not capable of being relied or acted on without further inquiry.
Mr Kaye made similar pleas in respect of the Internet and newspaper representations. He also denied that these Internet and newspaper representations related to future matters and said, in the alternative, that he and/or NII had reasonable grounds for making them. These grounds were the same grounds that he asserted in connection with one of the radio representations, as set out in the next paragraph.
Mr Kaye claimed that he had reasonable grounds for the radio representation set out in [19](a) above. In particulars to paragraph 11 of his Defence, his reasonable grounds were said to consist of the following:
He has approximately five years [sic] experience investing in the property market. This experience includes the purchase and sale of commercial and residential properties via put and call options and joint ventures, property financing and property development.
Over the approximately five year period, he has secured approximately 1,100 properties (either personally, via a joint venture vehicle or via a company (in which he was a sole shareholder and director or a majority shareholder)) to the approximate value of $430 million.
He estimates that in relation to all of the properties referred to … which were on-sold or settled, the joint venture or company in which he was involved earned a gross profit of approximately 5% of the value of those properties.
He was capable of teaching, and intended to teach, participants in the $1 million challenge the strategies developed by him and taught in NII’s IM Program, concentrating on the following strategies:
(a)the development of a system of property research and conducting due diligence in order to identify target areas for investment and particular investment opportunities;
(b)how to select the best areas in which to purchase property and to identify the best property in those areas;
(c)how to select the best times to negotiate good terms for the purchase of property and to take advantage of the commercial pressures faced by vendors and developers;
(d)how to syndicate property successfully with potential joint venture partners; and
(e)how to use renounceable contracts to minimise risks by protecting the purchase price.
He has instructed in wealth creation courses run by NII for approximately 3 years including the IM Program, the Business Mastery Course and the Platinum and Goldplus Affiliated Program, and was aware of the success of students in property investment following the successful completion of the courses.
Based on the foregoing, he was confident that his strategies worked and had a genuine belief that he could teach members of the Australian public to secure property to the value of $1 million, either in their own right, in a joint venture or as part of a syndicate.
In Further and Better Particulars delivered shortly before trial, these reasonable grounds were augmented to include:
Further, on the basis that “property millionaire” has the definition referred to … it was likely, and/or there was a reasonable chance, that the following strategies as taught in the [IM Program] would enable a person to become a property millionaire in six months using no money down, no debt and no equity
(a)the development of a system of property research and conducting due diligence in order to identify target areas for investment and particular investment opportunities being the strategies referred to in Module 1, pp 16-20 (due diligence) Module 2 pp 5-41 (Property Acquisition System) of the [IM Program];
(b)how to select the best areas in which to purchase property and to identify the best property in those areas being the strategy referred to in Module 2 of the [IM Program];
(c)how to select the best times to negotiate good terms for the purchase of a property and to take advantage of the commercial pressures faced by vendors and developers being the strategies referred to in Module 1 and Module 2 pp 37 to 41 of the [IM Program];
(d)how to syndicate property successfully with potential joint venture partners being the strategies referred to in Module 3, pp 5 to 21 and Module 6, pp 73 to 100 of the [IM Program]; and
(f)how to use renounceable contracts to minimise risks by protecting the purchase price being the strategy referred to in Module 7 of the [IM Program].
In a written outline filed before the hearing, Mr Kaye observed that the Commission’s case was not that the advertisements in terms contained the pleaded representations, but that an ordinary member of the public would infer the representations from the advertisements. He contended that the advertisements, read as a whole, did not support these inferences; and that the alleged representations “have been taken from select words in the advertisements and that words which qualify or explain the selected words have been entirely disregarded”.
Amongst other things, Mr Kaye submitted that:
(1)When the advertisements were considered as a whole, they clearly conveyed that he was making a bet or challenge to teach five ordinary Australians to become property millionaires, but that he could fail, and that, if he failed, he would give $1 million to charity. The clear message of the advertisements was, so he said, that he was confident of meeting the challenge, but he did not guarantee that he could do so.
(2)The expression “property millionaire” was “so vague as to be virtually meaningless without an explanation”. He submitted that there was no basis for the Commission’s allegation that the public understood the expression to mean net equity in property of $1 million, and not property to the value of $1 million, as he contended. He further submitted that “secure” meant “lay hold of, put a deposit on”, and not “purchase”.
(3)The advertisements did not say that he would turn any Australian into a property millionaire. Rather, they said that he would teach five Australians over six months how to become property millionaires.
(4)The advertisements did not say that anyone could become a property millionaire. Rather, they said that only five people would be selected and that they would have to meet certain criteria.
Mr Kaye also contended that, whilst the advertisements were made in relation to trade and commerce, they were not in trade or commerce. He submitted that nothing in the advertisements promoted NII’s courses. The Challenge was, so he said, his own challenge, not that of NII. In opening, counsel for Mr Kaye said, “the highest you can put these representations is that they may have some relation to NII’s trading activities”.
Counsel for Mr Kaye submitted that, if any of the pleaded representations were made and contained a “futuristic element”, then they were properly characterised as statements of present intention, or belief, and not representations as to the future. She also submitted that the pleaded representations were inherently incapable of misleading the public about anything, because the advertisements did nothing more than invite the public to register for a seminar.
jurisdiction
It is convenient to note at the outset that it was common ground that, because of s 6(3) of the TPA, the Court had jurisdiction over Mr Kaye with respect to the claims against him as a principal contravenor in respect of the alleged radio and Internet representations. This provision extends the operation of the Act to individuals where the impugned conduct involves the use of postal, telegraphic or telephonic services or takes place in a radio or television broadcast: see also Australian Competition and Consumer Commission v Chen (2003) 201 ALR 40 (“Chen”) at 47 per Sackville J and Australian Competition and Consumer Commission v Hughes (2002) ATPR 41-863 at 44,792 per Allsop J. It was not disputed that the Internet relies on the use of telephonic services.
The only basis of liability against Mr Kaye in respect of the newspaper representations was as an accessory under s 75B of the TPA. In order to make out its claim against him, it was necessary for the Commission first to establish that NII had contravened s 52. It was common ground that it was open to the Commission to proceed against Mr Kaye as an accessory notwithstanding that the claim against NII was stayed. As French J said in Matheson Engineers Pty Ltd v El Raghy (1992) 37 FCR 6 at 9:
Section 82 of the Trade Practices Act creates a cause of action for loss or damage suffered by a person by conduct of another in contravention of a provision of Pt IV or Pt V which the person who has suffered the loss or damage may recover “by action against that other person or against any person involved in the contravention”. The words of the section in this respect are clear and do not impose as a condition of accessorial liability a requirement that the primary contravenor be a party to the action. It may be that in many cases a primary corporate contravenor should be joined as a respondent so that the entire dispute may be determined. In other cases the primary contravenor may be a company in liquidation or just insolvent. There may be no point to the joinder of that company in those circumstances which may require leave of the court under the Corporations Law in any event.
It was not disputed that, as the Commission was not proceeding with its claim against NII, it was not open to it to rely on s 51A of the TPA in the claims against Mr Kaye for liability as an accessory: see Australian Competition and Consumer Commission v Universal Sports Challenge Ltd [2002] FCA 1276 (“Universal Sports Challenge”) at [45] per Emmett J. This was significant in relation to the newspaper representations where the only basis for liability was as an accessory under s 75B of the TPA.
the evidence about the im program
Witnesses called by the Commission
Mr R B Fowler

Amongst other things the IM Program taught certain finance strategies, which were the subject of Mr Fowler’s evidence. Included in these strategies were:
(a)obtaining 100% finance, by purchasing properties, particularly “off the plan”, with long settlement periods, in the expectation that they would increase in value sufficiently prior to settlement to enable the whole of the contract price to be borrowed.
(b)purchasing property without using the purchaser’s own money for a deposit, by acquiring deposit bonds from deposit bond companies. The purchaser paid a fee (calculated by reference to the amount of the bond, the date of its provision and settlement) to a deposit bond company in return for a guaranteed payment of the amount of the deposit to the vendor.
(c)making renounceable contracts, pursuant to which the one property was sold to two purchasers. If the first purchaser of the property did settle, a renounceable contract gave the vendor the option to renounce the second contract, naming a lower purchase price.
Mr Fowler, who was a finance broker, gave evidence that, between February 2001 and May 2002, he was engaged as a finance consultant, mostly advising people referred by Kaye and NII. His duties included interviewing people regarding their suitability for a loan or deposit bond and processing their applications. He estimated that, during this period, he interviewed about 200 people for this purpose and that virtually all of them had attended one of Mr Kaye’s property courses. Based on this experience, he deposed that:
Most of the clients who consulted me after attending one of the Henry Kaye property courses were unable to be provided with any assistance to obtain finance loans or other means of acquiring investment properties. That is because they were unable to qualify for loans, and were not in a position to satisfy financiers [sic] requirements for products such as deposit bonds. Clients who did not have a reliable income sufficient to service a loan and assets which could be provided as security to a lender did not satisfy the requirements of lenders.
Mr Fowler’s evidence was that renounceable contracts were not available through financiers. He did say, however, that some lenders would lend 100% of the purchase price, but only if the contract price represented no more than 80% of a valuation made shortly prior to a loan application. He deposed that “lenders would only lend on this basis if there was a justification for the difference between the contract price and valuation, such as an increase in the value over the term of a contract”. He added that, if there was mortgage insurance, lenders might provide up to 90% of the contract price.
Mr Fowler deposed that some financiers would provide deposit bonds, providing the purchaser satisfied the deposit bond company’s requirements. He said that, generally, the applicant for the bond needed equity in the property asset equivalent to five times the amount of the bond and an income that would qualify for the loan sufficient to meet the purchase contract. A deposit bond might also be available if a suitable guarantor was prepared to guarantee the bond applicant’s obligations. In cross-examination, he said that, for many people, it was easier to qualify for a deposit bond than a bank guarantee, because they did not have “the necessary assets to put up the security” for a bank guarantee.
In his affidavit, Mr Fowler expressed the opinion that the finance strategies taught in the IM Program did not take account of the fact that borrowers had to demonstrate the capacity to service a loan and to provide adequate security before they would obtain finance approval.
In cross-examination, Mr Fowler agreed that a major concept taught in the IM Program (which he had attended) was securing property without using the purchaser’s own equity or cash; and that the IM Program dealt “in some parts” with what was required by the banks before they would agree to finance a property purchase. He ultimately conceded that the course materials (especially in module 6) gave comprehensive instruction on this topic, but he maintained that, based on his interviews with the course participants, this information “didn’t get through to the clients”. He maintained that Mr Kaye’s clients did not recognise the limitations imposed by the need to demonstrate the capacity to service any loan.
I found Mr Fowler to be a credible witness, but, for reasons that appear below, little, if anything, turned on his evidence.
Mr T S Keck
At the instance of the Commission, Mr Keck, who had extensive experience in the Australian property market and was the managing director of a property consultancy, prepared a report providing his opinions on two matters:
(a)whether the property investment strategies referred to in the [IM Program] course materials would be capable of being implemented by ordinary Australians in the Australian property market;
(b)whether the property investment strategies referred to in the [IM Program] course materials provided a basis for the representations alleged in … the statement of claim.
His report of 10 November 2003 was exhibited to his first affidavit. It commenced with the following observations:
Whilst much of the Kaye/NII material is non-controversial, commonsense or standard investment due diligence and to this extent informative and helpful to non-seasoned or first time/novice property investors, there is embedded within the material, specific strategies and a strong recommendation for a level of due diligence or audit which is, in practical terms, virtually impossible to achieve. On the one hand, many people would benefit from some of the advice and recommendations within the material, but ultimately the Kaye/NII absolute guarantees and claims are made subject to and are conditional upon a specific level of exacting attendance and due diligence which ordinary Australians, even experienced property professionals, either could not undertake, or would recognise the need not to fulfil to the compliance level sought by the Kaye/NII requirements.
Further to the general material the strategic approaches promoted by Kaye and detailed in the NII institutional program [are] that wealth from real estate can be created, not only nor primarily by capital growth, but specifically and more assuredly by buying below market value and to then promote, manage and present the same property at a significantly higher value to the acceptance of valuers and financiers to firstly create an equity margin as a preliminary step to wealth creation and to assist with 100% financing and then ultimately and secondly to sell at a profit.
…
My response to and opinion about the likelihood of being able to negotiate prices below market value is that it is extremely difficult, and appears to totally underestimate or even ignore the reality of vendor sale price maximisation techniques including the auction process, astute agency representation on the vendor’s behalf, agency negotiation skills, vendor anticipation particularly on a strong market, depth of demand (many willing purchasers), and the reluctance of vendors to respond to negotiation tactics or strategies designed to lower price negotiation points.
Mr Keck reiterated this in cross-examination, saying:
I acknowledge that a lot of what is in this course is commonsense and for an uninitiated property investor it would represent a lot of learning assistance. But, yes, my criticism of the course is that embedded within that - and I did use the word “embedded” - were key or core strategies, some of which we’ve discussed and, yes, my belief is that the course suggests that they are just too easily implemented. It suggests that, yes, it’s easy to befriend a valuer. Yes, he will listen to you. Yes, the bank will lend you the extra money. If you want to take somebody’s equity into a proposal without using your own and you’re not using your family or your closest friends, this course suggests that you can walk out of the institute and onto the footpath, stop somebody and if the proposal is good enough they will come in with you. I mean, we know that that is not the case.
Whilst Mr Keck accepted that a course participant might acquire a level of expertise from the course, it was his view that:
Whether it’s 12 months or 24 months, if they start the course as an ordinary Australian I think they end up the course as an ordinary Australian still, with a little bit of knowledge about real estate, perhaps some with a higher degree, and, amongst them, varying degrees of false anticipation.
Referring to what the course materials said about dealings with valuers, Mr Keck observed in his report of 10 November 2003 that:
These various strategies suggesting that valuers can be ‘persuaded’ to higher values, simply do not work in practice. The valuation profession adopts high standards of independence, analysis and responsible reporting and so far as evidence is concerned, relies upon sales rather than ‘asking prices’ for comparable properties. The Kaye material I believe, very wrongly suggests that the valuation process can easily be effectively manipulated and influenced to a beneficial outcome.
As to the suggestion that, “by enlisting the participation of co-investors who may bring equity and debt servicing ability”, property purchasers could “avoid the need for personal equity and even reduce or minimise the need for personal cashflow”, Mr Keck said:
As simple as it sounds and for that reason plausible and perhaps readily accepted by Kaye course participants, the reality is that co-opting third party friends or acquaintances as co-investors is an extremely difficult task. Theoretically possible but in practice rarely used.
As already noted, one strategy taught in the IM Program was to focus on “off the plan” purchases of unbuilt properties in order to obtain discounts from developers for bulk purchases and longer settlement periods whilst the properties were built. The Program suggested that this could lead to the creation of equity without personal funds being employed or fully settled. As to this Mr Keck said in his 10 November 2003 report:
Generally, developers are much more ‘hard nosed’ than the Kaye commentary encourages course participants to believe, apart from which they are usually represented by very experienced agents and other forms of marketing network, it being in my opinion a rarity rather than usual practice that significant discounts for bulk purchases can be arranged. For most projects, pre sales are sought ‘off the plan’ prior to full commitment of the project and unless sufficient number of sales are made at sufficient margin of profit, the project would be abandoned. Developers either get their pricing or do not proceed and thus the opportunity for significant discounts is extremely limited.
Whilst the Kaye strategies can be employed, they are generally well beyond the nuance and application of ordinary Australians, even experienced and knowledgeable real estate investors. My experience is that to buy cheaply is a rare and unusual occurrence, particularly in the recent strong market and that to achieve upward re-valuations higher than recent purchase price is unusual, and often, in any event, to no avail as most lending institutions have a policy of providing settlement funds on the basis of purchase price or valuation, which ever of the two is the lower. The soliciting of other parties as co-investors to provide either equity or debt servicing capacity may happen between family members and very close friends, but in my experience is a much rarer event between just good friends or acquaintances and is more likely to occur in the circumstances of a significant commercial property where the key proponent is very experienced in matters of investment, financing and real estate as opposed to the ordinary Australian or Kaye/NII student being an ordinary or average Australian with little experience, having only recently completed a seminar course and looking to acquire in all likelihood, just a standard residential property or apartment.
Technically, the theories and strategies promoted in the material are understandable and are not without precedent in the property markets but I do not believe that an ordinary Australian or inexperienced property investor, having completed the Kaye/NII course would then be in a position to apply the theories to practical advantage in the real marketplace. I believe that the material incorrectly encourages the belief that below market and discount outcomes are easily negotiated, that beneficial relationships can be quickly formed with real estate agents, valuers and financiers, but which in any event would rarely work, particularly at the level at which the Kaye/NII course participants enter the market, and that other people’s equity and debt servicing ability as co-investors is easily achieved when in fact it is difficult. I believe that the material strongly suggests that there is wide scope for advantageous although not necessarily unscrupulous manipulation within the property markets, but that this conveys a wrong impression as it ignores the generally adequate levels of due diligence which govern the decisions of vendors and developers and the professional standards, scrutiny and due diligence, particularly of valuers, financiers and other market consultants including estate agents.
After carefully setting out a model to test the ability of the “ordinary Australian” to become a millionaire, Mr Keck concluded:
In my opinion a typical Australian earning a higher than average income of $80,000 p.a., with no particular property expertise other than to have progressed through the Kaye/NII course, would have no prospects whatsoever of accumulating wealth sufficient to qualify for the term millionaire simply by applying the knowledge learnt from the course and over an ensuing period of a year or two following the course. Even if joining with a few co-investors, they would not have had the financial horsepower to position themselves for such an outcome, nor would market growth in any of the property categories, whether residential, commercial, industrial or retail have been sufficient to have attained such wealth.
Mr Keck also considered that it would “be an impossibility that five people, no matter how carefully chosen or well advised and personally assisted by Kaye, could become millionaires within the time frame of even 12-15 months”. He noted that “[t]he limiting factor [was] the commercial anticipation that whatever funds may be made available through contacts of Kaye, that such funds would only be provided on commercial terms. That is, at commercial interest rates, secured in the conventional manner, by first or second mortgage, and as to the extent of funds available, limited by the capacity of the five candidates to service the associated interest liability”. He also expressed the view that the claim that Mr Kaye could turn 1,000 ordinary people into property millionaires through their participation in the IM Program was “ludicrous”.
In relation to renounceable contracts or put option contracts, Mr Keck said, in his 10 November 2003 report, that, in his experience, contracts of this kind had occasionally been “employed in sophisticated dealings usually involving commercial property”. He added:
I have never been aware of them being used in the general residential markets, and rarely, in the residential sub apartment market as is the example referred to in the Kaye/NII material.
…
Scrutinising the suggested strategy, the only way in which any form of price or value protection could possibly be arranged is only through resale at a higher figure (whether one or more purchasers using renounceable contracts) at a time of an otherwise falling market. If an investor had not arranged a resale there could be no possibility of assuring the value as the “guarantee terminology” suggests. There is therefore nothing unusual or startling in what the material suggests and it offers no strategy leading to a price guarantee other than fundamentally having resold to a purchaser who satisfies their contract, notwithstanding an adverse change in market conditions.
In cross-examination, Mr Keck agreed that renounceable contracts can operate in some circumstances to hedge the risk of an investment, but he said:
My experience specifically … is that they are rare in the markets generally. On the few occasions that I’ve heard of them, it has been in commercial circumstances, and I’ve never heard of them in residential circumstances - other than in theory.
Finally, amongst other things, Mr Keck observed:
The claim that ‘most investors can commence investing with minimal personal outlay and purchase property below market value’ is unreasonable, and unsubstantiated by the [IM Program] materials
A second report dated 15 January 2004 was exhibited to Mr Keck’s second affidavit. It reiterated and, in some instances, expanded on his earlier report. In it, Mr Keck concluded:
In again reviewing the connection between the strategies … my opinion is that they do not provide a reliable or dependable basis for the Representations made.
A third report dated 23 February 2004 was exhibited to his third affidavit. This report was principally directed to a consideration of the affidavits of Mr Dudakov of 12 February 2004 and Mr Barnard of 11 February 2004. Although Mr Keck took issue with parts of Mr Barnard’s affidavit, it is unnecessary to set out the details of this disagreement. They will sufficiently appear from this discussion of Mr Keck’s evidence and of Mr Barnard’s evidence, which appears below.
In relation to the affidavit of Mr Dudakov (who gave expert evidence for Mr Kaye), Mr Keck maintained that, having considered all the IM Program material, he was of the opinion that it was fair to focus on the matters that he had specifically addressed, since they were, in his estimation, the core strategies. He also maintained his view that, during the relevant period, it was extremely difficult to buy at below market value. On the matter of valuations, Mr Keck said:
I don’t believe that Mr Dudakov and I are really in disagreement over the matter of obtaining valuations at higher amounts than purchase price. We agree that if a property can be demonstrated as having been purchased below market value, then a valuation at a higher fair market value should be expected. I disagree with Mr Dudakov, however, that the Kaye Module reasonably and rightly notes that if fully conversant with an area, a valuer (for mortgage purposes) will respect an investor’s opinion, listen to what an investor has to say and take such matters into account. The many valuers that I employ, and my own experience personally, allow me to state forthrightly that generally, valuers have little contact with purchasers or borrowers and may only rarely consider representations made by such parties. Perhaps in the operation of his practice and experience generally, Mr Dudakov has not operated as widely in the field of valuations for mortgage purposes as has been my experience and that of my staff.
In cross-examination, Mr Keck reiterated that, if an investor could obtain a higher valuation than the purchase price, then some institutions would lend on the higher valuation.
Mr Keck disagreed with Mr Dudakov that it was generally accepted industry practice for bulk purchasers to obtain a discount. He said:
During 1999, 2000 and 2001, a sustained period of market activity over three years, discounts for bulk were certainly not the ‘general acceptance’ of major developers, as there were sufficient purchasers at full or near asking list price for many projects … . … . Over the last four years, my own experience and that of my practice staff, having been involved with many projects in Melbourne, is that discounts for bulk were by far the rarity than the norm.

Mr Keck’s third report also noted amendments to the Commission’s pleading. In particular, he said:
I note that the alternative definition of ‘property millionaires’ has been included. On the basis of that alternatively defined definition, meaning ‘someone who has secured $1million worth of property either in their own right or in a joint venture or syndicate’, the strategies identified … could assist some individuals to secure $1million worth of property, but I believe still with very considerable difficulty and uncertainty of success. If the words ‘no money down, no debt and no equity’ mean that the typical Kaye ‘ordinary Australian’ is to pursue the strategy of becoming a millionaire, but from the outset without cash (money down), equity (other assets for security) or debt (no borrowing capacity), they would in one sense be commercially frozen, lacking credibility, and unable to make a commitment. In another sense, it is very difficult to imagine or contemplate the commercial circumstances where an ordinary Australian could be involved with a joint venture or syndicate, no matter how minor their interest, yet not in some manner be liable at least in part pro rata for the debt that such a joint venture or syndicate may carry.
In cross-examination, Mr Keck said of the IM Program:
As I’ve said in all of this material, it would be an extremely difficult thing to do. I’ve got to say, in 30 years of experience, I do not know anybody - including any of my clients - who have [sic] achieved this sort of status using these sorts of strategies in this time frame. I’ve never come across it.
He did not deny the possibility that someone might achieve millionaire status in the relevant time frame by pursuing the IM Program strategies: his point was that, in all his many years’ experience, he had not seen it happen. In the course of cross-examination, Mr Keck made it clear that he understood the word “secure” as used in the promotional and other IM Program material to mean “to hold equity in the purchase of property”. He said:
In my whole involvement as an expert in this matter, I’ve always understood or been under the impression that the term “secure” meant to be an equity partner in the purchase of or the establishment of.
In cross-examination, Mr Keck was taken to the written course materials or “modules” of the IM Program. His evidence was, in substance, that there were practical obstacles to successfully pursuing the strategies (e.g., “Property Angels – Debt/Equity Partnerships”) mentioned in the materials. Drawing on his personal experience of option contracts, he said:
They’re not a feature of the market, if ‘feature’ is meant to mean a prominent everyday methodology. They are used mainly in the amalgamation, for example, of commercial sites by experienced developers wanting to secure a right to purchase a property without putting the money down, depending on the ultimate gathering of property or planning permits that they may obtain. But it’s really in the domain of experienced and more commercial property that options - land subdividers, for example, take options from farmers on the urban fringe in the hope of exercising them a few years later as the market matures for that type of thing. But it’s my belief that in the context of this course and the people that were attending this course - most of whom would have been focusing, I believe - not entirely but most of whom would have been focusing on residential property, that even equipped with an understanding of how options can work, when they would go into the marketplace, if they were to buy either an individual residential property from a person in the street, or from a developer, they would not find those vendors readily giving of options in that environment.
In cross-examination, Mr Keck drew a clear distinction between professional property syndicates and the private property syndicates contemplated in the IM Program. He said:
The professional property syndicates are simply that. They’re very professional. They are marketed in a way that they have strong appeal to do-it-yourself superannuation firms and other smaller institutions and investors. The manner in which they’re wrapped, if I can use that term - you know, the consultants, the underwriters and so on - portrays, usually for good reason, a high level of due diligence and analysis - prospectus, ASIC guidelines, a very heavy level of corporate governance - all of which engenders in the minds of prospective investors lower risk, greater security and strong commercial governance. These are factors that would not normally characterise the sublevel personal syndicate relationship that the Henry Kaye course speaks of or which [counsel for Mr Kaye] is describing to me, in my opinion.
He agreed, however, that there were no statistics available that might indicate the prevalence of private syndication.
The main difference between Mr Keck and Mr Dudakov concerned the practicalities of buying below market value. Mr Keck agreed that it did sometimes occur. He added:
What actually occurs in the circumstances where somebody has bought below market value, if that is the description - what in fact they do is they - because it’s normally a market transaction of itself and can’t be defined any more than that. What happens is that the property transacts at a price less than people thought it would transact at or less than the opinion of a valuer who may have subsequently valued it for mortgage purposes, or in the opinion of some other analyst.
…
Supply and demand will normally arrive at market value. The normal influences of supply and demand would be the least supportive circumstances for something selling other than at market value.
In cross-examination, Mr Keck reiterated his criticism of a suggested strategy that involved “befriending” a valuer, to obtain a higher valuation in order to support greater borrowing than might otherwise be obtained. He said:
I very much disagree with it. I forget exactly what Mr Dudakov said on that, but there would be more than an apparent difference of agreement between Mr Dudakov and I if he felt that that were a normal practice. In my reports …, I did make the very point - and my practice values … probably 150 properties a day, five days a week doing this; I employ 70 valuers in Melbourne - some of the contracts that we have with the banks specifically prevent us from even discussing this with the mortgage applicant and, whether that were the case or not, it is highly unusual that when you would go to value the property, which hasn’t yet been settled and which is still occupied by the vendor or the vendor’s tenant, that the purchaser is even there. Usually they would be at work, because it’s done during working hours. So the reality of the purchaser, the investor, the NII graduate coming into contact with the mortgagee’s valuer is genuinely very remote to start with, and even in those occasions where it did occur, the governance of most practices like my own is that the valuers are to be polite and pay respect to people but they would be in no way influenced by what the purchaser had to say about the property. So if … Mr Dudakov thinks that’s wrong, well, he and I have a big difference of opinion about that. … .
In cross-examination, Mr Keck reiterated that, in his opinion, it would, generally, be impractical to undertake the property research to the level taught in the IM Program.
Mr Keck had a clear and ample knowledge of the Australian property market, and I found him to be a highly credible witness.
Witnesses called by Mr Kaye
Mr Brian Dudakov
At the instance of Mr Kaye, Mr Dudakov, who also had extensive experience in property valuation and was the director of a property valuation and consultancy business, prepared a report concerning the strategies identified in the written material comprising Modules 1 to 10 of the IM Program, as well as Mr Keck’s first report. Mr Dudakov’s report also addressed the possibilities that a person might, by following the relevant strategies, “acquire a million dollar plus property portfolio” or become a “property millionaire” with no money down, no equity, no debt and a price protection guarantee”.
Mr Dudakov’s report of February 2004 was exhibited to his affidavit. He began by observing that, in his opinion, the Commission’s synopsis of the strategies taught in the IM Program (in Annexure D to the statement of claim) “tends to highlight the more contentious issues whereas the Modules, when read in totality convey a vast array of suggested strategies intended to set investors on a course towards accumulating wealth via property investment”. He went on to say:
Much of what is written in the Modules is just plain common sense. Other recommendations are of questionable benefit. Some would be difficult, if not impossible to achieve. However, when viewed as a whole, the Modules present as an excellent reference source for novices and, indeed, experienced property investors.
…
I consider that investing in real estate was within the realm of “ordinary Australians” and that Kaye’s strategies, when taken as a whole, were capable of being implemented by “ordinary Australians”.
…
As noted earlier, the Modules’ strategies contain a great deal of common sense (along with some material which is not capable of being implemented). As such, as a broad generalisation, I consider that the Modules would assist in enabling “ordinary Australians” to accumulate wealth through property investment.
In cross-examination, Mr Dudakov said:
These modules, to my reading, are basically a commonsense approach that points you in the right direction both for experienced players and inexperienced players as to - there are some very good suggestions in it and, as I admitted, some suggestions which I found to be not practical.
In cross-examination, Mr Dudakov expressed the opinion that “the key … to be successful in investing in real estate is to find the right deal, and the key to finding the right deal is to know how to go about doing it, and the modules in my opinion do provide that basis for which people can understand how to go about purchasing real estate”. He added that this know-how included “how to find investment partners, particularly … how to find investment partners who will bring to the table the money necessary to acquire the real estate”. He added that, “I think that the modules, taken as a whole, are a good document from which to get a good understanding of how to acquire real estate”.
Mr Dudakov stated that he disagreed with Mr Keck’s opinion that it would be extremely difficult to buy property “at below market”. He said:
While there can be no doubt that the purchase price for a property represents the best guide to value, the real estate market is imperfect and there are numerous examples of where property has been bought at below (or above) market. Indeed it is for precisely this reason that financial institutions employ valuers to validate (or otherwise) purchase prices.
…
The Modules quite rightly note that by being fully conversant with an area the valuer will respect the Investor’s opinion and listen to what he has to say and take into account factual material in relation to comparable sales evidence. If the property has been well purchased and this can be legitimately demonstrated and supported by the evidence, then there should be no reason for the valuer not to value a property at above purchase price.
In relation to the co-opting of third parties as co-investors, Mr Dudakov stated:
I do not have any statistical evidence as to the proportion of purchases made by co-investors and therefore my opinion, like that of Keck, must be intuitive and/or anecdotal. In this regard I am aware of … investment groups who source and co-invest in property. Obviously the key criteria for all investors must be that any joint venture or partnership be equitable. Provided that is the case there is no reason why a partnership would not be practicable.
As to focusing on new, yet to be constructed projects, this is merely one of Kaye’s strategies. Further, it is accepted industry practice for bulk purchasers to obtain a discount, the extent of which is dependent on the strength of the market at that time.
Mr Dudakov did not disagree with Mr Keck’s modelling and, as such, that “an ‘ordinary Australian’ could not become a millionaire over the time frame he has adopted if the definition of millionaire he applies is appropriate, namely that to be a millionaire requires having net wealth in property investments exceeding one million dollars”. In cross-examination, he said that his opinion that the IM Program material would enable some investors to become property millionaires using no money down, no debt and no equity was based on the understanding that “property millionaire” meant “someone who owns property, or an interest in property, which is worth $1million”. That is, a person who had a quarter interest in a $1million property would, on his understanding, be a property millionaire.
In cross-examination, Mr Dudakov said that, in performing property valuations, his instructions came from the mortgagees. He added that, generally speaking, “we wouldn’t contact the purchaser” although his firm was “quite often” contacted by property purchasers. He said further:
I think there’s a misunderstanding about the process. In mortgage valuations – and I'm not referring to the bulk type of residential property valuations, I’m talking about investment properties, be they residential or commercial - we are on a number of bank panels for valuers and, generally speaking, the intending borrower will ascertain who is on the accepted panel of valuers of those banks and if they are known to that person then they will certainly make it known that they are putting our name forward as the valuer to act on their behalf for the bank, but our direct responsibility and our ultimate client is the bank.
Asked whether he would be influenced by the opinions of a prospective purchaser, he explained:
Well, there are a myriad of particulars that we may not be aware of that we could be made aware of in relation to particular properties, such as if the property was affected by something that we did not know about - a sale property I’m referring to - and why that sale price was influenced by that effect. There may well have been some other reasons why a particular property sold for a particular price. If that were made known to us, and we could satisfy ourselves that that was accurate, then we would certainly take it into account.
In cross-examination, Mr Dudakov agreed that it was “not the norm” to acquire property portfolios of value other than by investment of personal funds, borrowing or inheritance, although he “wouldn’t rule it out” and “it would be a very low percentage of transactions”. In relation to the formation of property syndicates, he added:
I know we’re talking about a very small percentage of properties here, but the fact is, if someone brings - and it’s not dissimilar, in a sense to the formal syndications that are going on constantly throughout Australia - that is, that these people secure properties and then seek syndicates of people with mortgage funding based on non-recourse lending - ie, the property rises or falls by itself. The syndicated members in the more formal syndicates don’t provide any form of personal guarantees to the property. It’s the property itself that forms the security. That's the way those syndications work. There’s no reason to suggest that it couldn’t happen at this lower level.
He conceded, however, that the syndicator would typically put up his own money, “in the sense of putting up his deposit or an option fee which he may not get back if the deal doesn’t go ahead”. He also conceded, that he had no experience of syndication at a non-professional level and, at best, he could say that it was theoretically possible.
Mr Dudakov did not resile from the proposition that “[I]f the deal is right and it has the hallmarks of having significant capital gains, then I believe that prospective investors could be found”. This was not, he conceded, “the norm”, but he said that “I would not put it at the scale of being exceptional”. Mr Dudakov considered that, for a run of the mill property, it might be possible for an astute investor to identify a property at something less than 20% below market; and that, once negotiations opened, “there would be a crunch time within a very short period of time where you would have to put money down”. He added, there’s no doubt the deal comes before the financiers, but if the deal is good then I believe the financiers can be found”. He acknowledged that the legal advice that Kaye recommended would cost the investor money.
Mr Dudakov’s evidence, in cross-examination, was that, although there was an element of luck about it, it was possible to make very large amounts of money in a very short period of time out of property investment. He said, “I think there are … instances where by all normal criteria properties have been purchased at less than market value”. In his opinion, property investment results of this kind also took “a lot of diligence as well”. He commented:
One of the things I do think is very admirable about the modules is that basically it’s saying, “Do your homework. Get out there and look at properties. Look at everything that's going on in the suburb. Know that suburb backwards so that you know what is a good deal and what is not a good deal.”
…
It takes diligence, it takes a lot of foresight to know or believe that an area is going to take off and become popular. You may be right, you may be wrong, but that doesn’t mean that it’s not possible.
In cross-examination, Mr Dudakov also expressed the view that it would be possible to inspect all the houses on the market in a year in certain areas, saying:
Immediately, you would rule out properties that you are not focusing on, such as the normal three-bedroom brick-veneer, so to speak, in those areas where you may not be looking to invest. Your focus is more narrow than that. As I said, I think it’s daunting, but I don’t think that it’s impossible, because there are certainly - if you narrowed it down, at a guess I would say it probably would entail looking at 15 to 20 properties per week, and I don’t think that’s out of the question.
He agreed, however, that “15 to 20 is a lot of properties”. In re-examination, he said that the IM Program focused on investment apartments in off-the-plan developments (as well as renovation opportunities in spillover suburbs). He said that since there were not a huge number of developments at any one time, this would make the task of inspection possible.
Mr Dudakov conceded that a large part of the IM Program material suggested purchasing property on a very highly-geared basis, adding:
I mean that's very very common in investment property in Australia, I think. There’s been lots of press about negative gearing. The reason for negative gearing is because there’s a high degree of tax leveraging that can be obtained through acquiring property.
…
I mean, negative gearing is a fact of life. It’s extremely commonplace. Generally speaking, most gearings are at the 80 to 90 per cent level - I accept that - but gearing to that additional level just means that there is a greater interest payment required to pay off the loan.
He agreed that, in the Australian residential property market at the relevant time, the rate of rental return was less than the interest rate that applied on borrowings for residential loans. He also agreed that profit in the residential real estate market was dependent on capital growth. He admitted that “[t]he fact is … property is risky. Of course it’s risky - residential property less so than commercial property - but, of course, every investment has an element of risk”.
Mr Dudakov was very experienced in property valuation and a credible witness. As appears below, there was, ultimately, only limited disagreement between him and Mr Keck, which, for the most part, was attributable to differences in definitions, emphasis and approach. As will appear below, for the reasons stated, I found Mr Keck’s evidence of more assistance than that of Mr Dudakov; and I have preferred the evidence of Mr Keck on the occasions where the experts differed on a relevant matter.
Mr B R Barnard

As already noted, Kaye knew that the advertisements were to be and were in fact published. Kaye also knew that the advertisements contained the impugned representations. Since the advertisements were plainly calculated to lead members of the public to believe that they could obtain significant net wealth (at least $1 million) through property investment by adopting the Kaye strategies, I find that Kaye knew that the contents of the advertisements would lead ordinary and reasonable members of the public to believe that they could acquire such wealth by adopting the strategies as taught in the IM Program. Indeed the transcript of the free seminar in Melbourne records that Mr Kaye repeatedly said as much.
Did the evidence establish that Mr Kaye knew that his strategies were not reasonably capable of achieving the represented results or that he knew the representations were misleading or deceptive? For the reasons I am about to give, I do not consider that it did.
In written submissions, the Commission drew attention to Mr Kaye’s concessions concerning the lack of reasonable grounds for some of the radio and Internet representations and to his failure to establish reasonable grounds in relation to other radio and Internet representations. I do not, however, consider that these matters constitute evidence of Mr Kaye’s state of mind at the time the newspaper representations were made.
The Commission also drew attention to some of the circumstances surrounding the publication of the advertisements and submitted that, bearing in mind that Mr Kaye had been present in court for much of the trial, the Court should infer that he knew the representations were misleading or deceptive or were likely to mislead or deceive.
No inference can be drawn from Mr Kaye’s failure to give evidence unless there was evidence adduced at trial concerning his state of mind that required an answer (i.e., evidence that would support an inference adverse to Mr Kaye): compare Jones v Dunkel (1959) 101 CLR 298 at 304 per Dixon J, 308 per Kitto J, 309 per Taylor J, 311 per Menzies J, 322 per Windeyer J. Absent some evidence concerning Mr Kaye’s state of mind, including evidence that he deliberately shut his eyes to what was going on, there is no basis upon which the Court can draw any inference against Mr Kaye concerning his knowledge. There was, however, no evidence of Mr Kaye’s actual state of mind, at the relevant time, other than, perhaps, the transcript of the free seminar in Melbourne (and it did not provide a basis for any inference of the kind the Commission invited me to draw). Wilful blindness is not easily imputed and I would not do so in this case. Accordingly, I reject the Commission’s submission that the Court should draw an inference from Mr Kaye’s failure to give evidence that he knew either that NII’s conduct might lead members of the public to assume a state of affairs which was not true or that the representations were misleading or deceptive or likely to mislead or deceive. I would not therefore conclude that Mr Kaye was liable as an accessory under s 75B of the TPA.
The representations were made in trade and commerce
Referring to Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594 (“Concrete Constructions”) at 603, Yates v Whitlam [1999] NSWSC 976; 32 ACSR 595 and NRMA Limited v Yates (2000) 18 ACLC 45 (“NRMA Limited v Yates”), counsel for Mr Kaye submitted that the publication of the advertisements was not conduct in trade or commerce within the meaning of s 52 of the TPA. Counsel submitted that “[m]edia advertising was not an integral part of NII’s trading activities”; and that “the advertisements did not market NII’s courses”. She referred to NII’s marketing arrangements, which were the subject of Mr Barnard’s evidence, and to the fact that NII’s name did not appear anywhere in the advertisements. She submitted that the purpose of the advertisements was to answer Mr Kaye’s critics, rather than to promote NII and its products.
Referring to Concrete Constructions at 602-603 and 605, Meadow Gem Pty Ltd v ANZ Executors & Trustee Co Ltd (1994) ATPR (Digest) 46-130 (“Meadow Gem”), Fasold v Roberts (1997) 70 FCR 489 (“Fasold v Roberts”) and Glorie v WA Chip and Pulp Co Pty Ltd (1981) 55 FLR 310 (“Glorie v WA Chip and Pulp”), the Commission contended that the advertisements in which the representations were made constituted conduct in trade or commerce, because they were promotional activities in relation to the business of NII.
The meaning of the expression “in trade or commerce” was, as the parties agreed, settled in Concrete Constructions, where Mason CJ, Deane, Dawson and Gaudron JJ said at 604:
What the section is concerned with is the conduct of a corporation towards persons, be they consumers or not, with whom it (or those whose interests it represents or is seeking to promote) has or may have dealings in the course of those activities or transactions which, of their nature, bear a trading or commercial character. Such conduct includes, of course, promotional activities in relation to, or for the purposes of, the supply of goods or services to actual or potential consumers, be they identified persons or merely an unidentifiable section of the public.
In Meadow Gem at 53,631, Hedigan J said, applying Concrete Constructions, that “the conduct in question does not have to be conduct in connection with one’s own business, and that it would be sufficient if the conduct engaged in was for the purpose of promoting the business of some other person or corporation”. As Sackville J said in Fasold v Roberts, at 528:
Promotional activities in relation to the supply of goods and services constitute conduct which usually bears a trading or commercial character.
See also NRMA Limited v Yates at 52. In Glorie v WA Chip and Pulp, Morling J held, at 319-320, that the exhibition of a documentary film on forests was “in trade or commerce”, bearing in mind that the film was produced, in part, to answer criticism of the woodchipping industry. His Honour held, at 320, that a real reason for exhibiting the film was to protect indirectly the commercial interests of the members of a commercial association of companies engaged in the industry. As the primary judge, Morling J took a similar approach in Australian Federation of Consumer Organisations Inc v Tobacco Institute of Australia Ltd (1991) 27 FCR 149, at 157, with which a Full Court, consisting of Sheppard, Foster and Hill JJ, substantially agreed: see Tobacco Institute at 16 per Sheppard J, 25 per Foster J and 44 per Hill J.
As already stated, the advertisements, which were booked on NII’s behalf and for which NII largely paid, were an integral part of the one promotional campaign. Whilst the campaign was, at least according to the advertisements, a response to criticism of the Kaye strategies, it was fundamentally calculated to promote the business of NII. As I have found, the Kaye strategies of property investment were the products of NII’s, which bore his image and identity. It is these products that the Challenge was designed to promote. The evident object of the whole Challenge was to persuade the public that NII’s product was valuable and, in the case of the 1,000 “Property Millionaires” Program, to induce 1,000 people to buy the Program (i.e., to pay the enrolment fee for it). As part of the promotion, NII marketing people telephoned those who had expressed interest, with a view to arranging a consultation concerning NII’s products and NII guaranteed the results of the IM Program to the potential participants in the Program. I reject the submissions made on behalf of Mr Kaye that the campaign was purely a personal attempt to vindicate his strategies.
On the basis of these findings, and having regard to Concrete Constructions and subsequent decisions (some of which are referred to in [193] above), I conclude that the publication of the advertisements was conduct in trade or commerce.
the appropriate remedies
The final matter that falls for determination is the appropriate remedy in light of these reasons. The Commission seeks permanent injunctions, declarations and corrective advertising.
As noted already, Mr Kaye agreed to submit to the permanent injunctions that the Commission seeks. He submits, however, that this is the only appropriate remedy. In support of this, in written submissions, his counsel said:
The advertisements appeared over a few days in September 2003. The public was capable of taking any steps by virtue of them except to attend the public seminars to obtain more details about the two challenges. NII is now in liquidation and has not run the courses since an administrator was appointed in November 2003. It is submitted that there are no grounds for ordering corrective advertising. The power to order corrective advertising is to be used protectively and not punitively. In fact such an advertisement could now only cause confusion as giving the impression that the challenge is proceeding.
Counsel for Mr Kaye also submitted that the Court should not make the declarations sought by the Commission in this case, because:
There is no reason to believe that Kaye or NII would offend again and no-one has suffered loss or damage as a result of the advertisements. Further, as the challenge will not proceed and NII and Kaye no longer run courses, declarations would have no practical effect or benefit.
The Commission submitted that, bearing in mind the policy of the TPA, which is concerned with the public interest, the present was an appropriate case in which to grant declaratory relief in order to mark the Court’s disapproval of the contravening conduct. Moreover, the Commission contended that, where breaches of the TPA consist of media advertisements, corrective advertising, raising the awareness of consumers and competitors as to the type of conduct that breaches the Act, may be particularly appropriate. In written submissions, Counsel for the Commission submitted:
Given the risk of misleading and deceptive conduct by those who promote ‘get rich quick’ schemes, it is appropriate for corrective advertising to be ordered to make consumers aware that they should be alert to the importance of questioning advertising, and to those who engage in the promotion of courses in investment strategies to the type of conduct that contravenes the Act.
Declaratory relief
The law with respect to declaratory relief is not in dispute. The issue is whether the grant of the declarations sought by the Commission would serve any practical purpose. Applying the principles explained in Forster v Jododex Pty Ltd (1972) 127 CLR 421 at 437-438; Ainsworth v Criminal Justice Commission (1992) 175 CLR 564 at 581-582, I consider that:
1.The declarations sought would be directed to the determination of a legal controversy and not to answering abstract or hypothetical questions. Mr Kaye has strongly contested that he committed any breach of s 52 of the TPA. In some cases it might be appropriate simply to make findings of fact including findings that a respondent has contravened a provision of Part V of the Act: see s 83. In this case, however, it seems to me appropriate, that the Commission, having proved its case against Mr Kaye, should be granted a declaration vindicating its claim. I do not consider that the grant of injunctive relief in the terms agreed would adequately serve this purpose.
2.The applicant, as the public body charged with enforcing the Act, has a real interest in seeking the relief.
3.The relief is not purely hypothetical;
4.Mr Kaye is the proper contradictor.
I reject the principal submission made by counsel for Mr Kaye that the injunctions to which Mr Kaye agreed relevantly cover the field of appropriate relief. It has been said, in various contexts, that, “[p]roceedings under the Trade Practices Act have a special character in that the Act deals with the protection of the public interest”: World Series Cricket Pty Ltd v Parish (1977) 16 ALR 181 at 186 per Bowen CJ, cited with approval in Australian Competition and Consumer Commission v IMB Group Pty Ltd [1999] FCA 313;(1999) ATPR 41‑688 (“IMB”) per Drummond J at [14]. This special character has a bearing on remedies. The Commission stands apart from other litigants in that its functions include the furtherance of those interests.
Indeed, this much is recognised by the decision of the Full Court of this Court in Tobacco Institute of Australia Ltd v Australian Federation of Consumer Organisations Inc (No 2) (1993) 41 FCR 89, where Sheppard J held, at 100, that the concern of the TPA with the public interest supported “the view that the court may, in appropriate cases, exercise its power to grant declaratory relief to mark its disapproval of particular conduct engaged in in contravention of the Act”: see also 106 per Foster J and 107 per Hill J; also Chen at 48 per Sackville J; Australian Competition and Consumer Commission v Goldy Motors Pty Ltd [2001] ATPR 41-801 at [34] per Carr J; Australian Competition and Consumer Commission v Target Australia Pty Ltd [2001] ATPR 41-840 at [18] per Lee J; and IMB at 42-803 to 42-804 per Drummond J. Of necessity, the relief that the Court considers appropriate in each case will depend on the circumstances of the case: compare Telstra Corp Ltd v AAPT Ltd [1999] NSWSC 853 (“Telstra”) at [57] per Bryson J.
Whilst I consider it appropriate to grant the injunctions (which are limited in terms) in exercise of the power conferred on the Court by s 80 of the TPA, there are sufficient consequences flowing from the making of the disputed declarations also to warrant their making. They will serve patently to vindicate the Commission’s claim that Mr Kaye has contravened s 52. In the circumstances of the case, this is fitting in the public interest.
Corrective advertising
The principles regarding the exercise of discretion in relation to corrective advertising have developed in the context of orders sought under the TPA. In Medical Benefits Fund, Stone J, with whom Moore and Mansfield JJ agreed on this issue, said, at [48]-[54]:
Those principles have emphasised that the power is to be used protectively and not punitively. …
There are numerous authorities for the proposition that the purpose of ordering corrective advertising under s 80 and/or s 80A of the TPA is to protect the public interest and that punitive considerations should not be entertained. In Australian Competition and Consumer Commission v On Clinic Australia Pty Ltd (1996) 35 IPR 635, Tamberlin J observed, at 640:
‘The purpose of corrective advertising is to protect the public interest. ... Corrective advertising is intended to dispel incorrect or false impressions which may have been created as a result of deceptive or misleading conduct. It is not intended to be punitive. In any matter concerning corrective advertising the timing of such corrective advertising is of course important, ... There is no principle that any particular period is appropriate as a point beyond which corrective advertising is not warranted. In the context of advertising it is necessary to examine the nature, extent and intensity of the advertising and the media in which it has been released with a view to deciding whether there could reasonably be any current misapprehension as a result of the advertisements.’
See also Janssen Pharmaceutical Pty Ltd v Pfizer Pty Ltd (1986) ATPR 40-654, Makita (Australia) Pty Ltd v Black & Decker (Australasia) Pty Ltd (1990) ATPR 41-030 at 51,477; Hospital Contribution Fund Australia Ltd v Switzerland Australia Health Fund Pty Ltd (1988) ATPR 40-846 at 49,117; Australian Competition and Consumer Commission v Hungry Jack's Pty Ltd [1996] FCA 955; Australian Competition and Consumer Commission v Purple Harmony Plates Pty Ltd [2001] FCA 1062 at [33]; and Truth About Motorways Pty Ltd v Macquarie Infrastructure Investment Management Pty Ltd (2000) 34 ACSR 673 at 677. This approach is peculiarly apt in relation to orders made under s 12GLA of the ASIC Act and s 86C of the TPA now that there is specific provision for `punitive orders' in s 12GLB of the ASIC Act and s 86D of the TPA.
Advertising that is directed to dispelling incorrect or false impressions created as a result of deceptive or misleading conduct will generally have, as an ancillary benefit, some public educational effect in relation to the operation of the relevant legislative provisions. In Australian Competition and Consumer Commission v Target Australia Pty Ltd (2001) ATPR 41-840 … Lee J commented, at 43,382, that:
‘The purpose sought to be achieved by corrective advertising is to raise public awareness - for both consumers and competitors - as to the type of conduct that may contravene the Act, and as to the outcome of the particular litigation.’
This benefit had often been recognised including in Australian Competition and Consumer Commission v Real Estate Institute of Western Australia Inc (1999) 95 FCR 114 ... . Although French J was there dealing with breaches of Part IV of the TPA, his comments are equally applicable to the conduct under consideration here. French J accepted that under s 80 of the TPA there was power to make orders to bring the outcome of those proceedings to the attention of the members of the Real Estate Institute of Western Australia and to the public as consumers. Nevertheless his Honour observed that it is important that corrective advertisements do more than merely announce a ‘win’ for the ACCC. In relation to the contraventions of Part IV of the TPA French J held, at 133, that s 80 authorised advertisements ‘directed to informing the relevant markets of the outcome of the litigation so that those in the market have at least a broad understanding of the ways in which the contravenors have had to change their conduct.’ Such advertisements ‘aid in the enforcement of the primary orders and the prevention of the repetition of the contravening conduct.’
His Honour expressed similar views in Australian Competition and Consumer Commission v Virgin Mobile Australia Pty Ltd (No 2) [2002] FCA 1548 … where he was prepared to make consent orders for corrective advertising because the proposed advertisement was ‘consistent with the objectives of consumer protection for which such advertisements should be ordered in respect of contraventions of Pt V’. His Honour noted, at [22], that the advertising would ‘assist in drawing [the contravention] to the attention of consumers generally who may have acquired Virgin Mobile packages or may be contemplating doing so’ and would serve ‘the positive function of alerting consumers to the obligation imposed on Virgin Mobile to disclose those things’, namely the cash price and minimum cost of the phone package.
…
It was submitted for MBF that there must be a nexus between any corrective advertising and the conduct that constituted the statutory breach. In the absence of such nexus it was submitted that the Court has no power to make an order directed to the general education of the public about its statutory rights and their enforcement; see the comments of French J in ACCC v REIWA at 113. As Mr Sackar QC, senior counsel for MBF put it, MBF could not ‘legitimately be ordered to pay for educating consumers generally nor educating the insurance community generally’. I agree with that proposition but do not agree that this was the effect of the primary judge's orders.
On the one hand, corrective advertising can be appropriate when, as here, the breaches of s 52 consist of media advertising. There is also a distinct risk of misleading and deceptive conduct on the part of those who promote “get rich quick” schemes. There is, plainly enough, a public interest in raising the awareness of consumers to this risk, especially in relation to the promotion of courses in investment strategies of the kind discussed in this case. There is also a public interest in raising an awareness in potential promoters of the dangers of this conduct and of the outcome of this particular litigation.

On the other hand, whilst there must be a nexus between the corrective advertising and the breach, I consider that an order for corrective advertising in the form the Commission seeks would be punitive. The Commission has sought corrective advertising in the form of radio broadcasts and newspaper advertisements and has submitted a template advertisement for publication. I would not make the orders, as proposed. I also doubt the utility of corrective advertising in this particular case, where I propose, in any event, to accord the injunctive and declaratory relief that the Commission seeks. This relief is itself designed to serve the public interest, marking the Court’s disapproval of the impugned conduct. Further, some of the considerations to which counsel for Mr Kaye referred are legitimately kept in mind in considering the nature of the appropriate remedies. The advertisements were broadcast or available over one month only last year. In this case, the Challenge, which was the subject of the contravening advertisements, did not proceed beyond the two free seminars in Sydney and Melbourne to which I have referred. Mr Kaye undertook to cease the campaign after these proceedings were instituted in January 2004 and did so cease.
I consider that the public interest is adequately and appropriately served by the grant of the injunctive and declaratory relief in the form that the Commission has sought. I would direct that the Commission file a minute of order in accordance with these reasons for judgment.
The parties have not addressed me on the question of costs. I would also direct that they file and serve short submissions as to costs.

I certify that the preceding two hundred and seven (207) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Kenny.

Associate:
Dated: 22 October 2004

Counsel for the Applicant:

D G Collins SC with M P Barrett

Solicitor for the Applicant:

Slater & Gordon

Counsel for the Respondent:

C M Kenny

Solicitor for the Respondent:

Maddocks until 22 August 2004

Lewis Allen Janover from 23 August 2004

Date of Hearing:

9-12, 15-16 March 2004

Date of Judgment:

22 October 2004

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	V 921 OF 2003

BETWEEN:	AUSTRALIAN COMPETITION AND CONSUMER COMMISSION APPLICANT
AND:	HENRY KAYE FIRST RESPONDENT NATIONAL INVESTMENT INSTITUTE PTY LTD (ACN 098 189 863) SECOND RESPONDENT
JUDGE:	KENNY J
DATE OF ORDER:	22 OCTOBER 2004
WHERE MADE:	MELBOURNE

JUDGE:	KENNY J
DATE:	22 OCTOBER 2004
PLACE:	MELBOURNE

Counsel for the Applicant:	D G Collins SC with M P Barrett
Solicitor for the Applicant:	Slater & Gordon
Counsel for the Respondent:	C M Kenny
Solicitor for the Respondent:	Maddocks until 22 August 2004
Lewis Allen Janover from 23 August 2004
Date of Hearing:	9-12, 15-16 March 2004
Date of Judgment:	22 October 2004