Australian Competition and Consumer Commission v HJR Financial Services Pty Ltd

[1998] FCA 817

FEDERAL COURT OF AUSTRALIA

TRADE PRACTICES - deceptive and misleading conduct - interlocutory injunction - restraining publication of advertisements and payment of monies 

Trade Practices Act 1974 (Cth) S 87A

Australian Competition and Consumer Commission v HJR Financial Services Pty Ltd, Electronic Funds Transfer Portable Offsite Pty Ltd, Rowland William Thomas, Helen Elizabeth Lewis and Telads (NSW) Pty Ltd
QG66 of 1998

Kiefel J
Brisbane
10 July 1998

IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY	QG 66 of 1998

BETWEEN:	AUSTRALIAN COMPETITION AND CONSUMER COMMISSION APPLICANT
AND:	HJR FINANCIAL SERVICES PTY LTD FIRST RESPONDENT
AND:	ELECTRONIC FUNDS TRANSFER PORTABLE OFFSITE PTY LTD SECOND RESPONDENT
AND:	ROWLAND WILLIAM THOMAS THIRD RESPONDENT
AND:	HELEN ELIZABETH LEWIS FOURTH RESPONDENT
AND:	TELADS (NSW) PTY LTD FIFTH RESPONDENT

JUDGE(S):	KIEFEL J
DATE OF ORDER:	10 JULY 1998
WHERE MADE:	BRISBANE

THE COURT ORDERS THAT:

1. That the first respondent by itself, its directors, the third and fourth respondents, its servants or agents or otherwise be restrained until the determination of the proceedings or earlier order from:

   (a)advertising its business in the form of the advertisements appearing in annexure G to the affidavit of Helen Elizabeth Lewis filed in these proceedings and sworn on 9 July 1998;

   (b)inducing consumers to call any one 1900 premium rate telephone service or similar service by newspaper advertisements referred to in (a) hereof;

   (c)representing that it provides loans to consumers itself or as agent for another;

   (d)representing that it accepts applications for loans without credit checks;

   (e)placing any newspaper advertisement or other advertisement of its business without including in that advertisement a disclaimer stating or stating to the effect that it does not itself grant loans, but acts as an advisory service for the obtaining of loans only.  In the case where advertisements have been placed before the making of this order, to take steps forthwith from the time of the pronouncement of this order to procure the removal  of any such advertisements.

THE COURT DIRECTS:

1. The first respondent to provide to the applicant Commission, 48 hours prior to their dispatch to advertisers, the terms of any proposed further advertisement.

THE COURT FURTHER ORDERS THAT:

1. The fifth respondent be restrained until the determination of these proceedings or earlier order including any order for variation, from making any payment of any funds including any funds representing bad debt retention monies received from Telstra Corporation Limited which are sums payable to the first, second, third, or fourth respondents in connection with any 1900 telephone service operated by the first respondent in the period up to 17 July 1998, save and except presently for the sum of $68,733.16.

THE COURT FURTHER DIRECTS:

(a)that the applicant deliver a statement of claim in respect of any contravention of the Trade Practices Act 1974 by 24 July 1998.

(b)that the first to fourth respondents deliver any defence in respect of such issue by 14 August 1998.

(c)that the applicant and each of the first to fourth respondents deliver a list of documents by 28 August 1998.

(d)that those parties conduct inspection of documents by 11 September 1998.

(e)that the matter be listed for further directions on a date after 11 September 1998 to be advised by the Deputy Registrar.

THE COURT FURTHER ORDERS THAT:

1. Costs be reserved.

Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY	QG 66 of 1998

BETWEEN:	AUSTRALIAN COMPETITION AND CONSUMER COMMISSION APPLICANT
AND:	HJR FINANCIAL SERVICES PTY LTD FIRST RESPONDENT
AND:	ELECTRONIC FUNDS TRANSFER PORTABLE OFFSITE PTY LTD SECOND RESPONDENT
AND:	ROWLAND WILLIAM THOMAS THIRD RESPONDENT
AND:	HELEN ELIZABETH LEWIS FOURTH RESPONDENT
AND:	TELADS (NSW) PTY LTD FIFTH RESPONDENT

JUDGE(S):	KIEFEL J
DATE:	10 JULY 1998
PLACE:	BRISBANE

REASONS FOR JUDGMENT
EX TEMPORE

In this matter the first respondent has published newspaper advertisements since about February 1998 offering loans to the public.  The series, amended somewhat since the applicant Commission first contacted the first respondent in May, appears as Annexure G to the affidavit of Ms Lewis, the fourth respondent and a director of the first respondent.  Putting to one side, for present purposes, a recent form of advertisement, the earlier advertisements in my view were in such terms that not only has there been shown a serious question to be tried, as to whether they were capable of misleading and deceiving a reader of them, a strong case has been made out.  In my view a reader could well have believed that they were telephoning a person or entity who was itself able to provide monies   by way of loan and that that person or entity would have been more likely to grant or to deal favourably with persons who normally would encounter difficulty in the provision of finance such as pensioners, bankrupts or those who had a poor credit history.  In that connection the advertisements also said, in their early form, that credit checks would not be necessary.  They were drawn in terms of considerable encouragement and a substantial part of the vice of them was in the groups to which they were targeted, those more likely to be in need of funds and yet unable to obtain them.

The Commission’s case principally is that the first respondent does not and never has provided loans itself.  That fact is admitted by it.  The balance of convenience, which would have regard to further advertisements to the public generally, need hardly be gone into. 

The more recent advertisement at least acknowledges some of the problems for it now adds the words “advisory service” but in such a way that in my view, they do not detract from what is conveyed by what appears in bold type (“LOANS”).  The words which later follow, “advisory service available” suggest only something in addition to the lending, which is the principal focus of the advertisement.  The form of advertisement still contains the sentence “all applications accepted for consideration” which clearly enough conveys that applications, which can only be for monies   by way of loan, will be considered by the advertiser who then must necessarily be in a position to deal with them. 

I propose therefore to make orders generally in terms of the draft submitted by the applicant Commission save with respect to the draft paragraph (2).  With respect to that paragraph, the Commission had sought a further order restraining the first respondent from placing any advertisements without giving it three days notice.  I propose not to make an order in terms of an injunction but simply to direct, as a matter of expedition in these proceedings, that the first respondent provide the Commission, forty-eight hours prior to the dispatch to advertisers, the form of new advertisements.  Such a step might help to overcome any unnecessary applications to the Court.

A more difficult matter arises in connection with the order sought restraining the payment of monies   due to the first respondent from the fifth respondent, Telads, which abides the order of the Court.  They amount to some $230,000 and represent the first respondent’s profit from telephone calls from advertisements for the months of May and June 1998.  The first respondent says that it needs the funds to pay for the advertisements, some $68,000;  to pay for wages and legal fees and to enable the third and fourth respondents to meet their mortgage payments.  I shall deal with the quality of the evidence in relation to those matters latterly.

The system employed to date involved respondents to the advertisements ringing a 1900 number, for which they were charged over $4 per minute.  Whilst the advertisements point out this cost, the caller was then put in a position where they were detained on the line whilst details necessary for a loan application were taken from them.  The average amount spent, by way of rough guide, appears in the affidavit of the fourth respondent.  Applying the number of callers to the $750,000 of revenue generated by this system, a caller might be expected to have paid something in the order of $54.65.  The first respondent does not receive all of that revenue.  From it is deducted Telstra’s charges, the fifth respondent’s charges, and an amount for retention of bad debts.  The Commission however says that in representative proceedings, which it will bring, it will seek an order for damages for the whole sum, and orders for the repayment of those sums to the individual callers.

This case has the unusual feature that there is no other possible source of income for the monies   the subject of the further injunction.  The first respondent has no assets.  It does have, according to some correspondence in the material, another aspect to its business, where it deals with applications made by persons at its office, but no real detail of this is given.  There is no satisfactory evidence of the funds which are generated by this, although I must assume that there are some.  In these circumstances, and subject to what follows, I am able to be satisfied that the sums to be paid by the fifth respondent are the only sums which might be made available by the first respondent to meet a judgment for damages against it.

That brings me, however, to the offer and undertaking made by the third and fourth respondents.  The fourth respondent, who is said to be the sole proprietor of a house property at Annandale, has undertaken to the Court to make that property available and to permit it to be charged with any damages or other monies   ordered to be paid by HRJ Financial Services Proprietary Limited, and by herself or Mr Thomas.  Mr Thomas joins in that undertaking so far as it is necessary.  It is also said that the fourth respondent, Ms Lewis, will consent to registration of a caveat over the property and, in the meantime, has undertaken through her counsel not to deal with the property in any way.  That undertaking is offered in lieu of the orders sought by the Commission against the sums which are due to be paid by the fifth respondent.

Section 87A Trade Practices Act requires me to be satisfied, in relation to the making of any orders such as are sought by the Commission, that there be no other persons whose rights and interests would be unduly prejudiced.  I put to one side for the moment the position of American Express, which has paid some $68,733.16 on account of the advertising charges, and the amounts which the first respondent may be obliged to pay by way of wages and tax.

The Commission confirmed in submissions, and the material and the application filed makes apparent, that orders will be sought against the third and fourth respondent as officers of the first respondent and because they were knowingly concerned in the conduct of the first respondent.  Whilst no orders are at present sought against their property, as the application filed foreshadowed, the orders for damages or penalty which will be sought may mean that recourse to that property is necessary.  In these circumstances I have discounted the undertakings given.

I propose to make an order restraining the payment by the fifth respondent until trial or further order, save at this point for the sum of $68,733.16.  This will enable the American Express charges to be met.  I remain concerned about the position of any employees to whom wages are due, and any obligation to pay taxation.  The parties to whom those sums may be owed are certainly within the category of “other person” within the meaning of the section.  Were there cogent evidence presently available, which properly and fully disclosed the persons to whom monies are owed and the proper amount of them, I would also make orders excepting those monies   from the restraint.  Similarly, were the respondent’s solicitors to file proper material showing the proper extent of their fees to date, I would have made an order.

The position of the third and fourth respondents is, I consider, rather more difficult.  They do not necessarily fall within the class of persons whom the section requires to be taken into account.  It is not however necessary for me to determine that for the material presently filed is not sufficient to permit payments in any event.  The fact that no sufficient material has been filed does not, however, suggest to me that the order restraining the payment of the monies   ought not be made.  Rather, it places the onus upon the first, third and fourth respondents to bring an application varying the restraint on proper material as soon as they are able to do so.  That ought to have been undertaken now.  At that point, the position of the third and fourth respondents, and whether they fall within the description of “other person” in s 87A, could be considered. I would expect, although I may not necessarily be hearing an application for variation myself, that it would also be necessary for the first, third and fourth respondents to put before the court material disclosing the full income of the first respondent from its other activities, and any income of the third and fourth respondent which might be otherwise available to meet their debts. For the moment, as I have said, I am completely unsatisfied on the material that an order excepting debts other than the American Express debt could be confidently made.

In these circumstances, I make the following orders:

1. That the first respondent by itself, its directors, the third and fourth respondents, its servants or agents or otherwise be restrained until the determination of the proceedings or earlier order from:

   (a)advertising its business in the form of the advertisements appearing in annexure G to the affidavit of Helen Elizabeth Lewis filed in these proceedings and sworn on 9 July 1998;

   (b)inducing consumers to call any one 1900 premium rate telephone service or similar service by newspaper advertisements referred to in (a) hereof;

   (c)representing that it provides loans to consumers itself or as agent for another;

   (d)representing that it accepts applications for loans without credit checks;

   (e)placing any newspaper advertisement or other advertisement of its business without including in that advertisement a disclaimer stating or stating to the effect that it does not itself grant loans, but acts as an advisory service for the obtaining of loans only.  In the case where advertisements have been placed before the making of this order, to take steps forthwith from the time of the pronouncement of this order to procure the removal  of any such advertisements.

2. I direct the first respondent to provide to the applicant Commission, 48 hours prior to their dispatch to advertisers, the terms of any proposed further advertisement.

3. I order that the fifth respondent be restrained until the determination of these proceedings or earlier order including any order for variation, from making any payment of any funds including any funds representing bad debt retention monies   received from Telstra Corporation Limited which are sums payable to the first, second, third, or fourth respondents in connection with any 1900 telephone service operated by the first respondent in the period up to 17 July 1998, save and except presently for the sum of $68,733.16.

I will make these following directions, again following the outline of the draft order:

(a)that the applicant deliver a statement of claim in respect of any contravention of the Trade Practices Act 1974 by 24 July 1998.

(b)that the first to fourth respondents deliver any defence in respect of such issue by 14 August 1998.

(c)that the applicant and each of the first to fourth respondents deliver a list of documents by 28 August 1998.

(d)that those parties conduct inspection of documents by 11 September 1998.

(e)that the matter be listed for further directions on a date after 11 September 1998 to be advised by the Deputy Registrar.

1. I further order that costs be reserved.

I certify that this and the preceding five (5) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Kiefel

Associate:

Dated:            10 July 1998

Counsel for the Applicant:	Mr J Bell QC
Solicitor for the Applicant:	Australian Government Solicitor
Counsel for the First, Second, Third and Fourth Respondents:	Mr J Dupree
Solicitor for the First, Second, Third and Fourth Respondents:	A J Law & Co
Date of Hearing:	10 July 1998
Date of Judgment:	10 July 1998