Australian Competition and Consumer Commission v Productivity Partners Pty Ltd (trading as Captain Cook College) (No 3)
[2021] FCA 737
•2 July 2021
FEDERAL COURT OF AUSTRALIA
Australian Competition and Consumer Commission v Productivity Partners Pty Ltd (trading as Captain Cook College) (No 3) [2021] FCA 737
File number: NSD 2059 of 2018 Judge: STEWART J Date of judgment: 2 July 2021 Catchwords: CONSUMER LAW – unconscionable conduct – statutory unconscionability under s 21 of the Australian Consumer Law – systemic unconscionability – meaning of unconscionability – unconscionable in all the circumstances – where a system weakened safeguards to consumers in order to increase enrolments at a vocational education and training (VET) college – where the system was compared to the system that existed prior to its implementation – where the college did not cancel the enrolment of consumers in online VET courses it had not had any contact with before the census date which triggered the payment of fees by the Commonwealth and a debt by the consumer to the Commonwealth – where numbers and revenue increased dramatically – where significant numbers and proportion of students had no contact with the college and gained no value from enrolment but incurred substantial debts
CONSUMER LAW – misleading and deceptive conduct and representations under s 18 and 28 of the Australian Consumer Law – misleading or deceptive conduct in trade or commerce – false or misleading representations about goods or services – where college provided online VET courses and engaged recruiters to market its courses direct to consumers – whether recruiters made misleading or deceptive representations to specific consumers – where free laptops offered as inducement to enrol – where true cost of enrolling misrepresented
CONSUMER LAW – unsolicited consumer agreements under ss 69, 78-79 of the Australian Consumer Law – whether enrolment of consumers in online VET courses was by way of “unsolicited consumer agreements” – whether consent was given by consumers – threshold for consent to receive documentation – unsolicited consumer agreements and certain requirements regarding the agreement and its contents – formation of unsolicited consumer agreement
CONSUMER LAW – “knowingly concerned” under s 224 of the Australian Consumer Law – requirements with regard to knowledge and participation – where the fourth respondent was COO of the second respondent, which owned all the shares in the first respondent, was also acting CEO of the first respondent – whether the fourth respondent was knowingly concerned in the conduct of the first respondent
CONSUMER LAW – conduct “on behalf of” a body corporate under s 139B of the Competition and Consumer Act 2010 (Cth) – whether knowledge and conduct of the fourth respondent to do with the first respondent, the college, including as its acting CEO is attributed to the second respondent of which he was COO – attribution of conduct of an officer or employee of a subsidiary to a parent company – whether conduct of external recruiters is attributed to the VET college – conduct of an authorised class
Legislation: Australian Securities and Investments Commission Act 2001 (Cth) ss 12CA, 12CB, 12CC
Competition and Consumer Act 2010 (Cth) ss 84(1), 84(2), 139B, Sch 2 (Australian Consumer Law) ss 18(1), 21, 29, 69, 78, 79, 224
Evidence Act 1995 (Cth) s 50
Higher Education Support Act 2003 (Cth) ss 104-20, 137-18, Sch 1 cl 1, Sch 1A cll 43, 46, 51, 55, 64, 67, 91, 99 National Vocational Education and Training Regulator Act 2011 (Cth) ss 185(1), 186(1)
Competition and Consumer Regulations 2010 (Cth) reg 85
Explanatory Memorandum, HES Amendment (Streamlining and other measures) Bill 2012 (Cth)
Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010 (Cth)
Cases cited: ACCC v Acquire Learning & Careers Pty Ltd [2017] FCA 602
ACCC v Australian Institute of Professional Education Pty Ltd (in liq) (No 3) [2019] FCA 1982
ACCC v Cornerstone Investment Aust Pty Ltd (in liq) (No 4) [2018] FCA 1408
ACCC v Geowash Pty Ltd (subject to a deed of company arrangement) (No 3) [2019] FCA 72; 368 ALR 441
ACCC v Get Qualified Australia Pty Ltd (in liq) (No 2) [2017] FCA 709; [2017] ATPR 42-548
ACCC v Quantum Housing Group Pty Ltd [2021] FCAFC 40; 388 ALR 577
ACCC v TPG Internet Pty Ltd [2013] HCA 54; 250 CLR 640
ACCC v Unique International College Pty Ltd [2017] FCA 727
Adams v Director of the Fair Work Building Industry Inspectorate [2017] FCAFC 228; 258 FCR 257
Adler v ASIC; Williams v ASIC [2003] NSWCA 131; 46 ACSR
Ali v ACCC [2021] FCAFC 109
Allergan Australia Pty Ltd v Self Care IP Holdings Pty Ltd [2020] FCA 1530
APRA v Kelaher [2019] FCA 1521; 138 ACSR 459
Ashbury v Reid [1961] WAR 49
ASIC v ActiveSuper Pty Ltd (in liq) [2015] FCA 342; 235 FCR 181
ASIC v Australia and New Zealand Banking Group Ltd [2019] FCA 1284; 139 ACSR 52
ASIC v Australian Investors Forum Pty Ltd (No 2) [2005] NSWSC 267; 53 ACSR 305
ASIC v Geary [2016] VSC 779; 342 ALR 1
ACCC v Coles Supermarkets Australia Pty Ltd [2014] FCA 634; 317 ALR 73
ACCC v IMB Group Pty Ltd [2003] FCAFC 17
ACCC v Lux Distributors Pty Ltd [2013] FCAFC 90; ATPR 42-447
ACCC v TPG Internet Pty Ltd [2020] FCAFC 130; 381 ALR 507
ASIC v Kobelt [2019] HCA 18; 267 CLR 1
Blomley v Ryan [1956] HCA 81; 99 CLR 362
Burt v Australia & New Zealand Banking Group Ltd (1994) ATPR (Digest) 46‑123
Butcher v Lachlan Elder Realty Pty Ltd [2004] HCA 60; 218 CLR 592
Campomar Sociedad Limitada v Nike International [2000] HCA 12; 202 CLR 45
Commercial Bank of Australia Ltd v Amadio [1983] HCA 14; 151 CLR 447
Consolo Ltd v Bennett [2012] FCAFC 120; 207 FCR 127
Director of Consumer Affairs Victoria v Scully [2013] VSCA 292; 303 ALR 168
Fair Work Ombudsman v Priority Matters Pty Ltd [2017] FCA 833
Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd [1984] FCA 167; 2 FCR 82
Google Inc v ACCC [2013] HCA 1; 249 CLR 435
Jenyns v Public Curator (Qld) [1953] HCA 2; 90 CLR 113
Jones v Dunkel [1959] HCA 8; 101 CLR 298
The Juliana (1822) 2 Dods 504
Kakavas v Crown Melbourne Ltd [2013] HCA 25; 250 CLR 392
Kraft Foods Group Brands LLC v Bega Cheese Ltd [2020] FCAFC 65; 377 ALR 387
Leighton Contractors Pty Ltd v CFMEU [2006] WASC 144; 154 IR 228
Lisciandro v Official Trustee In Bankruptcy [1995] FCA 1527; ATPR ¶41-436
Lloyd v Belconnen Lakeview Pty Ltd [2019] FCA 2177; 377 ALR 234
Louth v Diprose [1992] HCA 61; 175 CLR 621
Meridian Global Funds Management Asia Ltd v Securities Commission [1995] 2 AC 500
NMFM v Property Pty Ltd v Citibank Ltd (No 10) [2000] FCA 1558; 107 FCR 270
NRM Corporation Pty Ltd v ACCC [2016] FCAFC 98
Paciacco v Australia & New Zealand Banking Group Ltd [2015] FCAFC 50; 236 FCR 199
Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd [1982] HCA 44; 149 CLR 191
Pereira v Director of Public Prosecutions [1988] HCA 57; 82 ALR 217
Perre v Apand Pty Ltd [1999] HCA 36; 198 CLR 180
Pioneer Mortgage Services Pty Ltd v Columbus Capital Pty Ltd [2016] FCAFC 78; 250 FCR 136
Pittmore Pty Ltd v Chan [2020] NSWCA 344
Qantas Airways Ltd v TWUA [2011] FCA 470; 280 ALR 503
R v Tannous (1988) 10 NSWLR 303
Rafferty v Madgwicks [2012] FCAFC 37; 203 FCR 1
Stefanovski v Digital Central Australia (Assets) Pty Ltd [2018] FCAFC 31; 368 ALR 607
Termite Resources NL (in liq) v Meadows [2019] FCA 354; 370 ALR 191
Tesco Supermarkets Ltd v Nattrass [1972] AC 153
Thorne v Kennedy [2017] HCA 49; 263 CLR 85
Trade Practices Commission v Australia Meat Holdings Pty Ltd [1988] FCA 338; 83 ALR 299
Trade Practices Commission v Tubemakers of Australia Ltd [1983] FCA 99; 47 ALR 719
Unique International College Pty Ltd v ACCC [2018] FCAFC 155; 266 FCR 631
Walplan Pty Ltd v Wallace [1985] FCA 479; 8 FCR 27
Westralian Farmers Ltd v Commonwealth Agricultural Service Engineers Ltd [1936] HCA 6; 54 CLR 361
Yorke v Lucas [1985] HCA 65; 158 CLR 661
Young Investments Group Pty Ltd v Mann [2012] FCAFC 107; 293 ALR 537
Dal Pont G, The Law of Agency (3rd ed., LexisNexis, 2013)
Date of hearing: 9-12, 15-19, 22-24 and 30 June, 1-2 July 2020 Registry: New South Wales Division: General Division National Practice Area: Commercial and Corporations Sub-area: Regulator and Consumer Protection Number of paragraphs: 770 Counsel for the Applicant: K Stern SC, O Bigos SC and S Patterson Solicitor for the Applicant: Johnson Winter & Slattery Counsel for the First and Second Respondents: J Giles SC and R Davies Solicitor for the First and Second Respondents: MinterEllison Counsel for the Fourth Respondent: M Hodge QC and C Schneider Solicitor for the Fourth Respondent: HWL Ebsworth Lawyers ORDERS
NSD 2059 of 2018 BETWEEN: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
Applicant
AND: PRODUCTIVITY PARTNERS PTY LTD (TRADING AS CAPTAIN COOK COLLEGE) ACN 085 570 547
First Respondent
SITE GROUP INTERNATIONAL LTD ACN 003 201 910
Second Respondent
BLAKE WILLS
Fourth Respondent
JUDGE:
STEWART J
DATE OF ORDER:
2 JULY 2021
THE COURT ORDERS THAT:
1.Within 14 days of these orders the parties bring in agreed or competing orders reflecting the Court’s findings, and on costs and the further conduct of the proceeding.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
A. INTRODUCTION
[1]
B. THE VET FEE-HELP SCHEME
[9]
C. THE ACCC’S SYSTEMIC UNCONSCIONABILITY CASE
[27]
D. APPLICABLE LEGAL PRINCIPLES
[46]
D.1 Statutory unconscionability: s 21 of the ACL
[46]
D.1(a) Statutory unconscionability per se
[47]
D.1(b) Systemic unconscionability
[71]
D.2 False, misleading or deceptive conduct and representations: ss 18 and 29 of the ACL
[78]
D.3 Unsolicited consumer agreements: ss 69, 78-79 of the ACL
[89]
D.4 Knowingly concerned: s 224 of the ACL
[96]
D.5 Conduct on behalf of a body corporate: s 139B, of the Competition and Consumer Act
[109]
E. THE KEY PEOPLE
[116]
F. THE WITNESSES
[137]
G. BACKGROUND TO THE COLLEGE
[145]
H. RECRUITMENT BY COURSE ADVISORS
[148]
I. THE EARLIER PERIOD: ENROLMENT AND WITHDRAWAL PROCESSES
[152]
I.1 Enrolment process
[152]
I.2 Campus driven withdrawals
[164]
J. THE EARLIER PERIOD: RELEVANT EVENTS
[178]
J.1 Sero campus health check
[178]
J.2 Course advisor misconduct
[189]
J.3 Unsuitable enrolment risk
[205]
J.4 Low conversion rates due to uncontactable students
[221]
J.5 Concern about the college’s poor financial performance and its causes
[224]
K. THE CATALYSTS FOR CHANGES TO THE ENROLMENT PROCESS
[236]
K.1 Papers for the Management Meeting on 19 August 2015
[236]
K.2 Emails between Mr Cook and Ms Edwards on 18 August 2015
[244]
K.3 Management Meeting, 19 August 2015 at 8.00 am
[249]
K.4 Enrolment/Admissions process meeting, 19 August 2015 at 10.00 am
[261]
K.5 Distance Campus Management & Leadership Team Meeting, 19 August 2015 at 1.00 pm
[276]
K.6 Mr Cook’s report of 20 August 2015
[278]
L. SUMMARY OF POSITION AT THE END OF THE EARLIER PERIOD
[281]
M. THE RELEVANT PERIOD: ENROLMENT AND WITHDRAWAL PROCESSES
[285]
M.1 Inbound QA call
[287]
M.2 Abolition of the campus driven withdrawal process
[314]
N. THE RELEVANT PERIOD: CONSEQUENCES OF THE PROCESS CHANGES
[324]
N.1 September 2015
[324]
N.2 October 2015
[343]
N.3 November 2015
[356]
N.4 Candice Stevens
[374]
N.5 Jo Solly
[391]
N.6 December 2015
[394]
N.7 Summary of increased income and EBITDA, July – December 2015
[403]
N.8 January – March 2016
[407]
N.9 April 2016 and thereafter
[413]
O. COMPLAINTS HANDLING AND CA MONITORING
[417]
O.1 Looma investigation
[424]
O.2 Umair Butt investigation
[427]
O.3 Adil Ganchi investigation
[432]
O.4 Ramesh Gaire investigation
[439]
O.5 Walgett investigation
[443]
O.6 Harpreet Kaur (or ‘puppet art’) investigation
[452]
P. LOGIN AND COMMUNICATION DATA
[461]
P.1 Mr O’Donnell’s analysis of communication with students
[461]
P.2 Ms Thompson’s analysis of enrolments, fees and engagement
[472]
P.3 Summary of findings on login and communication data
[487]
Q. CONCLUSIONS ON THE SYSTEM CASE AGAINST THE COLLEGE
[493]
R. WAS MR WILLS ‘KNOWINGLY CONCERNED’ IN THE IMPUGNED CONDUCT?
[539]
R.1 The case against Mr Wills
[539]
R.2 Mr Wills’s overall role
[542]
R.3 Mr Wills’s knowledge and involvement
[548]
R.4 Conclusion on Mr Wills being knowingly concerned
[555]
S. SITE’S KNOWING INVOLVEMENT
[577]
T. INDIVIDUAL CONSUMER COMPLAINTS
[586]
T.1 Consumer A
[593]
T.1(a) Facts
[593]
T.1(b) Consideration
[617]
T.2 Consumer B
[630]
T.2(a) Facts
[630]
T.2(b) Consideration
[655]
T.3 Consumer C
[670]
T.3(a) Facts
[670]
T.3(b) Consideration
[691]
T.4 Consumer D
[700]
T.4(a) Facts
[700]
T.4(b) Consideration
[721]
T.5 Consumer E
[732]
T.5(a) Facts
[732]
T.5(b) Consideration
[752]
U. CONCLUSION
[761]
A. INTRODUCTION
This case principally concerns the statutory proscription of unconscionable conduct in s 21 of the Australian Consumer Law (ACL) in the context of the Commonwealth’s VET FEE-HELP scheme. That is a scheme to assist students fund their enrolment in vocational education and training (VET) courses.
The ACCC alleges that the first respondent, Productivity Partners Pty Ltd trading as Captain Cook College (also referred to as the college), engaged in a system of conduct, or a pattern of behaviour, that was, in all the circumstances, unconscionable in contravention of the statutory prohibition. It alleges that the second respondent, Site Group International Ltd, and the fourth respondent, Blake Wills, were directly or indirectly knowingly concerned in, or a party to, the college’s contravention. I will generally refer to Blake Wills as Mr Wills unless the context requires otherwise.
Productivity Partners was a wholly owned subsidiary of Site. Mr Wills was, relevantly, Site’s Chief Operating Officer. He was also the acting Chief Executive Officer of the college in November 2015 to January 2016. The ACCC also alleges the knowing concern of the third respondent, Ian Cook, in the college’s alleged contravention but Mr Cook settled the case against him with the ACCC. Mr Cook was the CEO of the college.
In addition to its case of systemic unconscionable conduct contrary to s 21 of the ACL, the ACCC asserts a case specifically in reliance on the evidence of five consumer witnesses who are referred to as consumer A through to consumer E. The ACCC alleges that the conduct of course advisors (referred to as CAs or agents) in recruiting each of the individual consumers, which conduct is admitted by the college to be unconscionable in contravention of s 21 of the ACL and misleading or deceptive, or likely to mislead or deceive, in contravention of s 18(1) of the ACL, and/or included false or misleading representations in contravention of s 29(1)(i) or (m) of the ACL, is to be attributed to the college such that the college is taken to have contravened ss 18, 21 and 29 of the ACL.
The ACCC also alleges that the agreements by which the individual consumers were enrolled in the college constituted unsolicited consumer agreements within the meaning of s 69(1) of the ACL and as such contravened s 79 of the ACL on the basis that each agreement did not contain a notice that conspicuously and prominently informed the consumer of their right to terminate the agreement or a notice which they could use to terminate the agreement. There are also allegations that the unsolicited consumer agreements were negotiated by telephone and, in contravention of s 78(2) of the ACL, they were provided to the consumers electronically without consumer consent.
The conduct of which the ACCC complains occurred in the second half of 2015 and in early 2016. That is accordingly the applicable period for the purposes of identifying the relevant statutory and regulatory context.
There are a number of other cases that have adjudicated allegations of unconscionable conduct by colleges or their sales agents in enrolling students under the scheme. These include Unique International College Pty Ltd v ACCC [2018] FCAFC 155; 266 FCR 631 (an appeal from ACCC v Unique International College Pty Ltd [2017] FCA 727), ACCC v Cornerstone Investment Aust Pty Ltd (in liq) (No 4) [2018] FCA 1408 (Empower) and ACCC v Australian Institute of Professional Education Pty Ltd (in liq) (No 3) [2019] FCA 1982 (AIPE), to which further reference will be made. The other cases are ACCC v Get Qualified Australia Pty Ltd (in liq) (No 2) [2017] FCA 709; [2017] ATPR 42-548 and ACCC v Acquire Learning & Careers Pty Ltd [2017] FCA 602.
Given the volume of evidence in this case, and contrary to my usual practice, I have decided to include in these reasons for judgment references to the evidence, both documentary (court book volumes A to G) and oral (transcript references – T). Those references are intended as an aide memoire to assist anyone who might find that they need to refer to the evidence. The references do not purport to be complete or exhaustive; they should not be taken as a complete record of everything that I have had regard to in stating the findings in respect of which the references are given. In that sense, they do not form part of my reasons for judgment.
B. THE VET FEE-HELP SCHEME
The nature of the VET FEE-HELP (VFH) scheme – the Vocational Education and Training Fee Higher Education Loan Program – is helpfully summarised by the Full Court in Unique (at [5]-[9]). Drawing heavily on that summary, the following key aspects of the scheme can be identified.
The Higher Education Support Act 2003 (Cth) (HES Act) established the Higher Education Loan Program (HELP), which consisted of five income contingent loan schemes through which the Commonwealth provided financial assistance to students by providing loans so that the students did not have to meet the cost of study upfront.
The Commonwealth introduced the VFH scheme in 2007. The scheme has been amended from time to time. From 2009, the scheme provided for the Commonwealth to pay, in full, tuition fees for any approved course, on the basis that the amounts paid would be treated as a loan to the student, such loan to be repayable through the taxation system once a student earned above a specified income threshold. In the applicable period, that threshold was approximately $54,000. Approved course providers needed to have arrangements with an institution that offered a “higher education award” (such as a degree). The scheme was designed at that time to be a pathway into further higher education.
In early 2012, the Commonwealth foreshadowed substantial reforms to the scheme. Those reforms were then implemented through legislation enacted in the second half of 2012. The Explanatory Memorandum to the HES Amendment (Streamlining and other measures) Bill 2012 (Cth) explained that the intention was to broaden the demographic of students who qualified for assistance through the scheme. The liberalisation of the scheme was for the express purpose of addressing low participation rates from identified demographic groups including Indigenous Australians, people from non-English speaking backgrounds, with disability, from regional and remote areas, from low socio-economic backgrounds, and people not currently engaged in employment.
One of the changes made by the 2012 legislation was to remove the need for a course to count towards a course at a higher education institution. This was consistent with the rationale for the changes expressed in the Explanatory Memorandum. Participation in vocational training was seen as an end in itself, and not only a pathway to higher education.
The conditions for a student’s entitlement to VFH assistance were set out in cl 43 of Sch 1A to the HES Act. Generally speaking, the eligibility criteria for a person to be entitled to VFH assistance were that the person:
(1)was an Australian citizen or the holder of a permanent humanitarian visa;
(2)had not exhausted their lifetime FEE-HELP loan limit;
(3)was enrolled in a VET unit of study, and remained enrolled at the end of the relevant census date;
(4)met the tax file number (TFN) requirements in cl 80 (which required the person to have notified the VET provider of their TFN, or to have certified that they had applied to the Commissioner of Taxation for a TFN); and
(5)on or before the census date, had completed a request for Commonwealth assistance form.
Section 104-20 of the Act provided that the FEE-HELP life-time limit for a student (other than for medicine, dentistry and veterinary science in respect of which a higher limit applied) was $80,000 in total. That limit was indexed with the result that in the 2015 financial year it was $97,728.
Clause 55 of Sch 1A relevantly provided that the Commonwealth must lend to the student the amount of the VFH assistance and pay the amount lent to the provider in discharge of the student’s liability to pay their VET tuition fee for the unit of study. Under s 137-18 of the HES Act, if the Commonwealth made a payment pursuant to cl 55 of Sch 1A, the amount of the student’s VFH debt was 120% of the loan, i.e., there was a 20% “loan fee”. The VFH debt was incurred immediately after the census date for the unit.
The “census date” for a VET unit of study means the date determined under cl 67 of Sch 1A: Sch 1, cl 1. Clause 67 of Sch 1A provided that a VET provider must for each VET unit of study it provides or proposes to provide, determine a particular date to be the census date for the unit. That date was to be determined in accordance with the VET Guidelines. By cl 99 of Sch 1A, the Minister could by legislative instrument make VET Guidelines.
Clause 7.4.1 of the VET Guidelines that applied from time to time provided that the date determined to be the census date must not occur less than 20% of the way between the VET unit of study commencement date and the completion date. For a 28-week unit of study, the first census date could therefore be less than six weeks after the commencement date, and for a 52-week unit of study it could be less than 11 weeks after the commencement date.
A VET provider was required to repay any VET tuition fees paid by a student in respect of a VET unit of study if the student withdrew on or before the census date: cl 8.4 of the VET Guidelines. It follows that a consumer could withdraw from a VET unit of study on or before the census date without incurring any financial liability to the VET provider or to the Commonwealth.
Clause 64 of Sch 1A to the HES Act provided that a VET provider must give such notices as are required by the VET Guidelines to a person who is enrolled with the provider for a VET unit of study and who is seeking Commonwealth assistance. Such a notice was referred to in the Guidelines from time to time as a Commonwealth Assistance Notice, or CAN. By chapter 9 of the Guidelines, a CAN was required to include, amongst other things, the census date(s) of the VET unit(s) of study, the VET tuition fee amount(s) of the units(s) of study and the amount(s) of the VFH loan fee. It was required to be given within 28 days of the census date indicated in the notice.
Typically, the college would send a student a Confirmation of Enrolment (COE) letter at the same time that it sent the CAN, which was after the first census date to confirm that the student was enrolled with the college and had incurred the first part of their VFH debt. [D15, D79] Thus, COE and CAN are at times used interchangeably and are often expressed in the documents as “COE/CAN” or “COECAN”.
The scheme gave rise to an obvious risk, being the risk of unsuitable or otherwise insufficiently interested or committed consumers being too easily or casually, or unconscionably or deceptively, signed up as students, progressing through their census dates thereby incurring debts to the Commonwealth and the VET provider being paid its tuition fees, and the students not otherwise engaging with the course in any meaningful way or receiving any meaningful benefit. As Bromwich J explained in AIPE:
[72] … If a person who had been approved for a VET FEE-HELP debt was enrolled as a student with a VET provider as at the census date, but did not in fact ever partake in the course, that provider would get the revenue benefit of the course fees from the Commonwealth, but would not have to incur the variable costs of providing the course to that person, including any related support. That would happen irrespective of whether the person who was enrolled was a bona fide or genuine student or not.
[73] To the extent that the outcome of enrolling consumers who were not bona fide or genuine students was able to be maximised across a large enough pool of individuals, the VET provider would obtain revenue for those consumers without needing to employ staff to provide the services that were needed for bona fide or genuine students who did partake of study. This feature therefore created a significant, and reasonably obvious, windfall profit opportunity to a VET provider who wished to exploit it, or was even prepared to let it occur without correction.
[74] There was nothing in the express terms of the VET FEE-HELP scheme that prohibited a VET provider from engineering such a windfall profit outcome, and a corresponding debt being incurred by someone who was never a bona fide or genuine student.
Schedule 1A of the HES Act also governed the re-crediting of a student’s VFH balance. Clause 51 provided for the re-crediting of a student’s VFH balance for a unit of study if the VET provider ceased to provide the course of which the unit formed a part. That clause has no present relevance, save that cl 46(1) provided that save where cl 51 applied, cl 46 would apply. It then provided as follows:
(2) A *VET provider must, on the *Secretary’s behalf, re‑credit a person’s *FEE-HELP balance with an amount equal to the amounts of *VET FEE‑HELP assistance that the person received for a *VET unit of study if:
(a) the person has been enrolled in the unit with the provider; and
(b) the person has not completed the requirements for the unit during the period during which the person undertook, or was to undertake, the unit; and
(c) the provider is satisfied that special circumstances apply to the person (see clause 48); and
(d) the person applies in writing to the provider for re‑crediting of the HELP balance; and
(e) either:
(i) the application is made before the end of the application period under clause 49; or
(ii) the provider waives the requirement that the application be made before the end of that period, on the ground that it would not be, or was not, possible for the application to be made before the end of that period.
Note:A VET FEE‑HELP debt relating to a VET unit of study will be remitted if the HELP balance in relation to the unit is re‑credited: see section 137‑18.
That provision has some bearing on the question of campus driven withdrawals which is dealt with in detail later in these reasons. For present purposes the following observations can be made. First, the provision sets out when a VET provider “must” withdraw a student and re-credit them; that is to say, it sets minimum standards for withdrawal and re-crediting and does not prevent a VET provider from having a withdrawal policy that is more protective of or generous to students. Secondly, it applies only to withdrawals after census. That follows from it being with respect to re-crediting a student; no re-crediting of a student can arise if they have not yet progressed through census and incurred the debt.
Clause 4.3.1 of the VET Guidelines made a VET provider subject to the Standards for NVR Registered Training Organisations. The relevant such standards were the Standards for Registered Training Organisations (RTOs) 2015 (Cth) dated 20 October 2014 made as a legislative instrument under ss 185(1) and 186(1) of the National Vocational Education and Training Regulator Act 2011 (Cth).
Clause 4.8 of the VET Guidelines set out quality and accountability requirements with regard to barriers to withdrawal. Clause 4.8.1 provided that the purpose of those requirements was to allow students to withdraw from a VET unit of study on or before the census date. Clause 4.8.2 provided that a VET provider “must not have financial, administrative or other barriers that would result in a student not being able to withdraw from a VET unit of study on or before the census date” (emphasis added). One such barrier might be considered to be if the student did not know that they were to incur a VFH debt and the VET provider was unable to contact them to tell them, and to confirm that they really did want to pursue the course and incur the debt.
C. THE ACCC’S SYSTEMIC UNCONSCIONABILITY CASE
The ACCC’s case is that the college changed its enrolment and withdrawal processes when it knew, or ought to have known, that the changes would significantly reduce protections for consumers and would lead to a materially increased risk of both unsuitable consumers being enrolled in its online courses and of misconduct by its sales agents (the CAs) and would materially diminish the prospect of this being identified. It says that the changes were calculated to increase the college’s profits by increasing the number and proportion of consumers enrolled by the college and who passed a census date. It says that as a consequence of the changes, the college claimed and retained very significant increased revenue from the Commonwealth, and that the vast majority of consumers did not receive any vocational benefit despite incurring a substantial debt.
The ACCC’s case is that the changes to the enrolment and withdrawal processes amounted to a system of conduct or pattern of behaviour as referred to in s 21(4)(b) of the ACL, and was thus systemic unconscionable conduct proscribed by s 21(1).
Since the ACCC’s case relies on the effects brought about by changes to enrolment and withdrawal processes, and the college’s knowledge of the likelihood of those effects, it is necessary to identify what those processes were prior to the changes in question. The period in respect of which the prior processes operated was the period 1 November 2014 to 6 September 2015, which is referred to as the earlier period.
The case concerning the systemic conduct relates to consumers who became enrolled in an online course at the college in the period 7 September to 18 December 2015, which is described as the relevant period. This is the period from when the college commenced the implementation of the process changes to when the college ceased taking new enrolments because of a cap imposed on it by the Commonwealth Government as to the VFH fees it could charge in the 2016 calendar year.
During both the earlier period and the relevant period, the college contracted third parties, referred to as course advisors (CAs), to undertake marketing of its courses (including online courses) to consumers, and to recruit consumers for enrolment into its courses as students. The CAs were remunerated by way of a commission in respect of each consumer recruited if that consumer passed a census date in respect of a unit of study in a course for which the consumer was enrolled.
During the relevant period the college offered the following qualifications: Diploma of Business, Diploma of Project Management, Diploma of Information Technology and Diploma of Human Resources Management. The last-mentioned diploma, namely the Diploma of Human Resources Management, was new in the relevant period having not been offered in the earlier period. There were two diplomas offered in the earlier period that were not offered in the relevant period, namely the Diploma of Management and the Advanced Diploma of Management.
There are three different elements to the conduct of the college that the ACCC says were unconscionable, namely changes to the enrolment process, changes to the withdrawal process (in particular, abolishing something referred to as campus driven withdrawals, to which I will return), and the college claiming and/or retaining the vastly increased VFH revenue which was generated by the college’s implementation of the process changes.
The ACCC’s case is that the changes to the enrolment process increased the risk of enrolling unsuitable consumers and also the risk of misconduct by course advisors towards the consumers that they were enrolling, and the risk that this would not be identified prior to enrolment. It is said that this was or ought to have been known to the college, or it was reasonably foreseeable.
The ACCC’s case with regard to abolishing the campus driven withdrawals is that it increased the risk of unsuitable consumers, or consumers who had been subjected to CA misconduct in the enrolment process, remaining enrolled in a course. It is said that this was or ought to have been known to the college, or it was reasonably foreseeable.
The ACCC’s case with regard to claiming and/or retaining the increased revenue which was generated by the process changes is that the process changes were motivated by the college’s desire to increase the number of consumer enrolments, and therefore its revenue and profit, and that those consequences occurred. It is said that thousands of consumers were enrolled, many of whom were not engaged at all with their courses and who should never have been enrolled in the first place. It is said that it was improper for the college to have claimed revenue for those consumers, or to have retained revenue paid by the Commonwealth for them. It is said that one of the most egregious aspects of the college’s conduct, given its developing knowledge over time of the results of the process changes and what it knew about the low level of engagement by consumers with their courses in the first unit of study, was that the college claimed additional revenue as consumers who became enrolled during the relevant period progressed through their second and any applicable subsequent census dates.
It is necessary to identify in more detail certain aspects of the pleaded case.
The second further amended statement of claim, which for ease of reference I will refer to simply as the statement of claim or SOC, (at [112]) identifies the college’s profit maximising purpose of the process changes. In that regard, it is pleaded that the college’s substantial purpose in implementing the process changes was to increase the number of CAs that referred consumers to the college for enrolment, and the number of consumers that those CAs referred to the college; to increase the number of consumers who became enrolled in online courses and remained enrolled past their census dates; and thereby to increase the revenue the college earned from tuition fees paid by the Commonwealth, which in turn made VFH loans to such consumers.
The statement of claim (at [114]) identifies CA misconduct in the course of engaging with consumers while conducting marketing and recruitment activities as including the following kinds of conduct:
(1)making false and misleading statements to consumers to the effect that the online courses were free;
(2)failing to properly inform consumers that they would incur VFH debts if they enrolled in online courses and/or the circumstances in which the debts would have to be repaid;
(3)pressuring consumers to enrol in an online course;
(4)offering consumers inducements, such as free laptops, to enrol in an online course;
(5)completing consumers’ enrolment documents, including the pre-enrolment questionnaire, for them; and
(6)coaching consumers during the course of the inbound quality assurance call, i.e., a telephone call between a college employee and the consumer immediately after the consumer’s enrolment documents were electronically submitted to the college by the CA for the purpose of checking whether the consumer was “genuine” and understood the commitment they were making.
The statement of claim (at [114]) then pleads that if the college did not have in place processes by which it could detect CA misconduct there was a risk that consumers who had been subjected to CA misconduct would become enrolled in an online course and remain enrolled past the census date or dates in the course, and thereby incur a VFH debt. That risk is referred to as CA misconduct risk.
The statement of claim (at [116]) pleads that there was a real risk that course advisors would recruit for enrolment in the online courses consumers who would not be contactable by the college, and/or who would have no or minimal engagement with their online course, and/or who did not in fact wish to enrol in an online course, and/or who are otherwise not suitable for enrolment including by reason of lacking sufficient language, literacy and numeracy (LLN) skills. That risk is referred to as unsuitable enrolment risk. It is pleaded that if the college did not have in place processes to ensure consumers of the kinds referred to were either not enrolled in an online course, or were withdrawn prior to passing a census date, such consumers would become enrolled in an online course and remain enrolled past the census date or dates in the course, and thereby incur a significant VFH debt.
The statement of claim (at [118]-[119]) pleads that elements of the enrolment and withdrawal processes in the earlier period, namely an outbound quality assurance call and campus driven withdrawals, provided means by which the college could mitigate the CA misconduct risk and the unsuitable enrolment risk and thereby protect unsuitable consumers from incurring VFH debts. It was then pleaded (at [120]) that the process changes materially reduced the college’s ability to mitigate the CA misconduct risk and the unsuitable enrolment risk.
The statement of claim (at [122]) pleads that primarily as a result of the process changes, when compared to the earlier period, as regards consumers who became enrolled in the relevant period there were the following process changes results:
(1)a substantial increase in the number of consumers who became enrolled in an online course;
(2)a substantial increase in the number and proportion of consumers who passed at least one census date in their online course;
(3)a substantial increase in the number and proportion of consumers who incurred a VFH debt but who did not complete any unit of competency or the online course as a whole;
(4)a substantial increase in the number and proportion of consumers who incurred a VFH debt but who did not engage in their online course or were not contactable;
(5)a substantial increase in the VFH revenue claimed by the college; and
(6)an increase in the proportion of consumers who made a complaint to the college, or on whose behalf complaints were made to the college, in respect of the conduct of course advisors.
The above elements were brought together in the pleading (at [124]) of the college’s unconscionable conduct as follows (the quotation being in certain respects paraphrased or the terminology made consistent with terminology otherwise employed in these reasons for judgment):
By its conduct in (i) implementing the process changes in respect of consumers who became enrolled in courses during the relevant period (which implementation, for some consumers extended beyond the relevant period), and (ii) in the period up to and including September 2016 (when the last census date for a consumer who became enrolled during the relevant period was processed by the college) claiming (which for the avoidance of doubt includes making an ongoing claim to entitlement to) the VFH revenue in respect over 90% of the consumers who became enrolled in an online course during the relevant period and passed one or more census dates and/or retaining such VFH revenue as was paid by the Commonwealth, in circumstances where:
(a) the college had the profit maximising purpose;
(b) the college was aware, or ought to have been aware, of:(i) the CA misconduct risk;
(ii) the unsuitable enrolment risk; and
(iii)the fact that the process changes would reduce its ability to mitigate the CA misconduct risk and the unsuitable enrolment risk, when compared to its prior processes being the outbound QA call and the campus driven withdrawals,
and/or each of those matters was reasonably foreseeable at the commencement of, and/or during, the period when the process changes were implemented;
(c)the implementation of the process changes resulted in the process changes results;
(d)the college knew, or alternatively ought to have known, of the process changes results;
(e)further or alternatively, at the commencement of and/or during the period when the process changes were implemented, the college knew or ought to have known that the process changes would likely lead to the process changes results or results of the type of the process changes results and/or the process changes results were reasonably foreseeable,
the college engaged in a system of conduct, or a pattern of behaviour that was, in all the circumstances, unconscionable in contravention of s 21 of the ACL.
Before turning to the evidence, it is convenient to identify the relevant legal principles.
D. APPLICABLE LEGAL PRINCIPLES
D.1 Statutory unconscionability: s 21 of the ACL
Relevant provisions of the ACL are the following:
21 Unconscionable conduct in connection with goods or services
(1) A person must not, in trade or commerce, in connection with:
(a)the supply or possible supply of goods or services to a person (other than a listed public company); or
(b)the acquisition or possible acquisition of goods or services from a person (other than a listed public company);
engage in conduct that is, in all the circumstances, unconscionable.
(2)This section does not apply to conduct that is engaged in only because the person engaging in the conduct:
(a)institutes legal proceedings in relation to the supply or possible supply, or in relation to the acquisition or possible acquisition; or
(b)refers to arbitration a dispute or claim in relation to the supply or possible supply, or in relation to the acquisition or possible acquisition.
(3)For the purpose of determining whether a person has contravened subsection (1):
(a)the court must not have regard to any circumstances that were not reasonably foreseeable at the time of the alleged contravention; and
(b)the court may have regard to conduct engaged in, or circumstances existing, before the commencement of this section.
(4) It is the intention of the Parliament that:
(a)this section is not limited by the unwritten law relating to unconscionable conduct; and
(b)this section is capable of applying to a system of conduct or pattern of behaviour, whether or not a particular individual is identified as having been disadvantaged by the conduct or behaviour; and
(c)in considering whether conduct to which a contract relates is unconscionable, a court’s consideration of the contract may include consideration of:
(i)the terms of the contract; and
(ii)the manner in which and the extent to which the contract is carried out;
and is not limited to consideration of the circumstances relating to formation of the contract.
22 Matters the court may have regard to for the purposes of section 21
(1)Without limiting the matters to which the court may have regard for the purpose of determining whether a person (the supplier) has contravened section 21 in connection with the supply or possible supply of goods or services to a person (the customer), the court may have regard to:
(a)the relative strengths of the bargaining positions of the supplier and the customer; and
(b)whether, as a result of conduct engaged in by the supplier, the customer was required to comply with conditions that were not reasonably necessary for the protection of the legitimate interests of the supplier; and
(c)whether the customer was able to understand any documents relating to the supply or possible supply of the goods or services; and
(d)whether any undue influence or pressure was exerted on, or any unfair tactics were used against, the customer or a person acting on behalf of the customer by the supplier or a person acting on behalf of the supplier in relation to the supply or possible supply of the goods or services; and
(e)the amount for which, and the circumstances under which, the customer could have acquired identical or equivalent goods or services from a person other than the supplier; and
(f)the extent to which the supplier’s conduct towards the customer was consistent with the supplier’s conduct in similar transactions between the supplier and other like customers; and
(g)the requirements of any applicable industry code; and
(h)the requirements of any other industry code, if the customer acted on the reasonable belief that the supplier would comply with that code; and
(i)the extent to which the supplier unreasonably failed to disclose to the customer:
(i)any intended conduct of the supplier that might affect the interests of the customer; and
(ii)any risks to the customer arising from the supplier’s intended conduct (being risks that the supplier should have foreseen would not be apparent to the customer); and
(j)if there is a contract between the supplier and the customer for the supply of the goods or services:
(i)the extent to which the supplier was willing to negotiate the terms and conditions of the contract with the customer; and
(ii)the terms and conditions of the contract; and
(iii)the conduct of the supplier and the customer in complying with the terms and conditions of the contract; and
(iv)any conduct that the supplier or the customer engaged in, in connection with their commercial relationship, after they entered into the contract; and
(k)without limiting paragraph (j), whether the supplier has a contractual right to vary unilaterally a term or condition of a contract between the supplier and the customer for the supply of the goods or services; and
(l)the extent to which the supplier and the customer acted in good faith.
D.1(a) Statutory unconscionability per se
It is to be noted that s 21(4)(a) draws a distinction between the notion of unconscionable conduct proscribed by the section and that which is proscribed by “the unwritten law”. The latter is clearly enough a reference to the notion of unconscionability in equity which is proscribed by s 20 of the ACL. It is because of this distinction that when referring to the statutory proscription in s 21, I will refer to statutory unconscionability.
The ACCC’s case draws particular attention to s 21(4)(b), i.e., that the prohibition against unconscionable conduct in s 21 “is capable of applying to a system of conduct or pattern of behaviour”. This is what the ACCC refers to as systemic unconscionability. As will be seen, the ACCC alleges that the college applied a particular system of enrolment of consumers as students which was unconscionable contrary to the statutory proscription.
In ASIC v Kobelt [2019] HCA 18; 267 CLR 1 the High Court considered statutory unconscionability in the context of s 12CB of the Australian Securities and Investments Commission Act 2001 (Cth) (the ASIC Act). Sections 12CB and 12CC of the ASIC Act are materially the same as ss 21 and 22 of the ACL. It was accepted that the High Court’s treatment of statutory unconscionability in the context of the ASIC Act is equally applicable to the ACL. See also Kobelt at [87] per Gageler J in that regard.
The result in Kobelt was that the appeal from the Full Court was dismissed. Kiefel CJ and Bell, Gageler and Keane JJ joined in that result in a joint judgment by Kiefel CJ and Bell J and separate judgments by Gageler J and Keane J. Nettle, Gordon and Edelman JJ were in dissent.
Kiefel CJ and Bell J said (at [14]) that “unconscionable” in s 12CB(1) is to be understood as bearing its ordinary meaning. It was said that the proscription is of conduct that objectively answers the description of being against conscience. It was said that the values that inform the relevant standard of conscience “include” those identified by Allsop CJ in Paciacco v Australia & New Zealand Banking Group Ltd [2015] FCAFC 50; 236 FCR 199 at [296], namely: certainty in commercial transactions, honesty, the absence of trickery or sharp practice, fairness when dealing with customers, the faithful performance of bargains and promises freely made, and the protection of those whose vulnerability as to the protection of their own interests places them in a position that calls for a just legal system to respond for their protection, especially from those who would victimise, predate or take advantage. Their Honours identified (at [15]) that the appeal was concerned with the application of the last mentioned value, namely the protection of those in a vulnerable position from predation by others.
Kiefel CJ and Bell J (at [15]) and Keane J (at [118]), in both instances with reference to Kakavas v Crown Melbourne Ltd [2013] HCA 25; 250 CLR 392 at [124] and [161] respectively and Thorne v Kennedy [2017] HCA 49; 263 CLR 85 at [38], identified that a conclusion of unconscionable conduct requires not only that the innocent party be subject to special disadvantage, but that the other party must also unconscientiously take advantage of that special disadvantage. This has variously been described as requiring “victimisation”, “unconscientious conduct”, or “exploitation”: Thorne v Kennedy at [38]. Kiefel CJ and Bell J also explained (at [47]) that the conclusion that someone has engaged in conduct that contravenes the statutory norm of conscience is an evaluative judgment.
Kiefel CJ and Bell J (at [48]) said that the appeal in that case “does not provide the occasion to consider any suggestion that statutory unconscionability no longer requires consideration of (i) special disadvantage, or (ii) any taking advantage of that special disadvantage” (emphasis added).
It was a necessary part of Kiefel CJ and Bell J’s process of reasoning (at [79]) to the conclusion that the appeal should be dismissed that no feature of Mr Kobelt’s conduct in the supply of book-up credit (being the system of conduct in question) to his Anangu customers exploited or otherwise took advantage of the customers’ lack of education and financial acumen, i.e., their vulnerability or special disadvantage.
Gageler J (at [82]-[83]) explained that s 12CB of the ASIC Act does something more than s 12CA, i.e., also s 21 of the ACL does something more than s 20. The section’s prohibition against engaging in conduct “that is, in all the circumstances unconscionable” is expressed to be “not limited by the unwritten law … relating to unconscionable conduct”. His Honour reasoned that those words make it clear that the statutory conception of unconscionable conduct is unconfined to conduct that is remediable on that basis by a court exercising jurisdiction in equity.
Endorsing the view adopted by the Full Court in ACCC v Lux Distributors Pty Ltd [2013] FCAFC 90; ATPR 42-447 at [23] and [41], Gageler J (at [87]) reasoned that the correct perspective is that s 12CB (i.e., also s 21 of the ACL) operates to prescribe a normative standard of conduct. The function of a court is to recognise and administer that normative standard of conduct. That must be done in the totality of the circumstances taking account of each of the considerations identified in s 12CC (i.e., also s 22 of the ACL) if and to the extent that those considerations are applicable in the circumstances.
With regard to the content of the normative standard, Gageler J (at [88]) reasoned that the appropriation in statutory unconscionability of the terminology of courts administering equity serves to signify the gravity of the conduct necessary to be found by a court in order to be satisfied of a breach of that standard. In that regard, unconscionability “is not a slight matter, and behaviour is only unconscionable where there is some real and substantial ground based on conscience for preventing a person from relying on what are, in terms of the general law, that person’s legal rights” (quoting from Burt v Australia & New Zealand Banking Group Ltd (1994) ATPR (Digest) 46‑123 at 53,598 per Bryson J in the Supreme Court of NSW).
Gageler J (at [89]) reasoned that Parliament’s appropriation of the terminology of “unconscionable conduct” from equity but shorn of the constraints of the unwritten law is indicative of an intention that conduct of the requisite gravity need not be found only in a fact-pattern which fits within the equitable paradigm of a stronger party to a transaction exploiting some special disadvantage which operates to impair the ability of a weaker party to form a judgement as to his or her best interests. Nevertheless, his Honour reasoned (at [90]) that the normative standard of statutory unconscionability does not dilute the gravity of the equitable conception of unconscionable conduct so as to produce a form of “equity-lite”. Further, “[t]he appropriation of the terminology of equity does not allow a court to adopt a process of reasoning which starts with the equitable conception of unconscionable conduct, involving exploitation of a special advantage, and then uses considerations identified in s 12CC [i.e., also s 22 of the ACL] to water down the court’s assessment of what amounts to a special disadvantage or to allow the court to arrive more easily at an assessment that conduct amounts to exploitation.”
Gageler J (at [92]) went on to say that conduct proscribed by the section as unconscionable is conduct that is so far outside societal norms of acceptable commercial behaviour as to warrant condemnation as conduct that is offensive to conscience. Also (at [93]), the notion of offensive to conscience is informed by a sense of what is right and proper according to values which can be recognised by the court to prevail within the contemporary Australian society. Those values are not entirely confined to, or entirely removed from, values which historically informed courts administering equity in the development of the unwritten law of unconscionable conduct. Those values include respect for the dignity and autonomy and equality of individuals.
It was a central component of Gageler J’s reasoning (at [111]) to the conclusion that the appeal should be dismissed that Mr Kobelt’s provision of his book-up system to his Anangu customers could not be characterised as involving exploitation of those customers’ vulnerability.
Similarly, Keane J (at [115]) concluded that the appeal should be dismissed for the reason that it had not been established that Mr Kobelt exploited his customers’ socio-economic vulnerability in order to extract financial advantage from them.
Keane J (at [117]) made the important point that the purpose of the proscription against statutory unconscionability is to regulate commerce, and that the pursuit by those engaged in commerce for their own advantage is an omnipresent feature of legitimate commerce. Thus, to say that Mr Kobelt was pursuing his own commercial interests with a view to profit is to state the obvious, but also to say very little as to whether he engaged in unconscionable conduct.
As already indicated, Keane J (at [118]) held that a finding of unconscionable conduct requires the unconscientious taking advantage of a special disadvantage, which was also described as victimisation or exploitation. His Honour (at [119]) reasoned that exploitation or victimisation is a characteristic of statutory unconscionability. This is consistent with his Honour’s reasoning (at [115]) that the appeal should be dismissed because it had not been established that Mr Kobelt exploited his customers’ socio-economic vulnerability in order to extract financial advantage from them.
Keane J (at [121]) reasoned that the statement in s 12CB(4)(b) (i.e., also s 21(4)(b) of the ACL) that it is the intention of the Parliament that the section is capable of applying to a system of conduct or pattern of behaviour, whether or not a particular individual is identified as having been disadvantaged by the conduct or behaviour. This does not mean that it is not an essential characteristic of statutory unconscionability within the meaning of the statute that it involve a calculated taking of advantage of a weakness or vulnerability. Subsection (4)(b), in dispensing with the need for proof of disadvantage to any particular individual, allows a system of conduct or pattern of behaviour to be found to be unconscionable within the meaning of the statute even though the extent of the disadvantage cannot be quantified in the case of any individual.
Like Gageler J’s reference to a normative standard, Keane J (at [122]) held that the purpose of s 12CB (i.e., also s 21 of the ACL) is to establish a statutory norm of conduct.
From the above analysis it is apparent that all the judges in the majority regarded statutory unconscionability as setting a normative standard of conduct and that conduct in breach of that standard must be well outside the bounds of what is generally seen to be moral, right or acceptable commercial behaviour; it is not “equity-lite”; it is conduct that on some real and substantial ground is offensive to conscience.
It is not clear, to me at least, whether by “no longer” (at [48], quoted at [53] above), Kiefel CJ and Bell J meant that it was not necessary to decide whether, in contrast to non-statutory unconscionability, statutory unconscionability requires both special disadvantage and the taking advantage of that special disadvantage, or whether, in contrast to what the position was with regard to statutory unconscionability up until then, statutory unconscionability requires both those elements. The question thus remained whether it was only Keane J, or also Kiefel CJ and Bell J and hence a majority, who at least until then regarded the two identified elements as being requirements of statutory unconscionability.
That question has since been answered by the Full Court of this Court in ACCC v Quantum Housing Group Pty Ltd [2021] FCAFC 40; 388 ALR 577 at [93] per Allsop CJ, Besanko and McKerracher JJ: neither general disadvantage in the equitable sense, nor taking advantage or exploitation of some vulnerability, disability or disadvantage of the person or persons to whom the conduct was directed is a necessary aspect of unconscionability within s 21 of the ACL.
In Quantum, the Full Court (at [55]-[56]) agreed with Gageler J (at [87]) that the correct perspective is that s 12CB (and s 21 of the ACL) operates to prescribe a normative standard of conduct which a court exercising jurisdiction in a matter arising under the section is to recognise and administer; the court needs to administer that standard in the totality of the circumstances taking account of each of the considerations identified in s 12CC (i.e., also s 22 of the ACL) if and to the extent that those considerations are applicable in the circumstances. Also, an allegation of unconscionability is a serious allegation; it is sufficient to warrant censure for the purposes of deterrence by the imposition of a civil penalty; and, being penal in character, tends against too loose or diffuse a construction: Quantum at [88].
Assessing statutory unconscionability, like unconscionability in equity, “calls for a precise examination of the particular facts, a scrutiny of the exact relations established between the parties … Such cases do not depend upon legal categories susceptible of clear definition and giving rise to definite issues of fact readily formulated which, when found, automatically determine [the outcome]”: Jenyns v Public Curator (Qld) [1953] HCA 2; 90 CLR 113 at 118-119. As it was said by Lord Stowell in The Juliana (1822) 2 Dods 504 at 522: “A court of law works its way to short issues, and confines its views to them. A court of equity takes a more comprehensive view, and looks to every connected circumstance that ought to influence its determination upon the real justice of the case.” See ASIC v Australia and New Zealand Banking Group Ltd [2019] FCA 1284; 139 ACSR 52 at [2] per Allsop CJ; Ali v ACCC [2021] FCAFC 109 at [10)-[11] per Allsop CJ, Besanko and Perram JJ.
D.1(b) Systemic unconscionability
In Unique, the ACCC sought to establish systemic unconscionability by the Registered Training Organisation (RTO) in question by extrapolating from the experience of six individual consumers, or students, to conclusions with regard to the “system” or “pattern of behaviour” adopted by the RTO. The Full Court (at [84]) characterised the primary judge as having drawn from his Honour’s factual findings in relation to the six individual consumers four features of the ACCC’s factual case that his Honour accepted could constitute a system of conduct or pattern of behaviour, namely:
(a)the strategy of targeting disadvantaged people by reference to indigeneity, remoteness and social disadvantage (whether deliberate in its original conception or not);
(b)the use of gifts of laptops or iPads to students signing (or loan computers after 31 March 2015);
(c)the use of incentives to staff to encourage them to sign up students; and
(d)the holding of sign-up meetings.
His Honour concluded that the system was unconscionable as follows (as quoted by the Full Court at [88]):
The next question is whether this system was unconscionable. I do not think that (b) to (d) by themselves would necessarily be unconscionable. With the correct student cohort and management practices this style of operation may well have been permissible. However, when the practices in (b) to (d) are deployed against a targeted group of disadvantaged persons very different issues arise. In terms of s 22(1), it seems to me relevant to note in an assessment of the system that the targeted cohort consisted of people who were unlikely to understand the documentation involved (s 22(1)(c)) and that the use of the gift of a free (or ‘lent’) computer was apt to confuse this particular cohort into thinking a very bad deal was a good one – in my opinion an unfair tactic within the meaning of s 22(1)(d). The effect of the system in (b) to (d) was to supercharge the exploitation of the disadvantaged group which was being targeted (and also Unique’s remarkable profits). The system was unconscionable within the meaning of s 21.
The appeal against the primary judge’s finding of systemic unconscionability was successful on the basis that there was an error in extrapolating from the experience of six consumers to conclusions with regard to there being a system or pattern of behaviour in the absence of persuasive evidence about how six consumers could be said to be representative of the experience of 3,600 consumers enrolled in the relevant period at 428 different locations: Unique at [111], [161]-[162].
In Unique (at [103]-[104]) the Full Court referred to the extension of s 21 by para (4)(b) to a “system of conduct or pattern of behaviour” which is unconscionable as removing the necessity for revealed disadvantage “to any particular individual”. Although that was said prior to the judgment in Kobelt, there is nothing in the latter that is inconsistent with that statement. The Full Court also explained that a “system” connotes an internal method of working and that a “pattern” connotes the external observation of events. The Court observed as follows (at [104]):
The notion of unconscionability is a fact-specific and context-driven application of relevant values by reference to the concept of conscience …. It is an assessment of human conduct. A system of conduct requires, to a degree, an abstraction of a generalisation as to method or structure of working or of approaching something. If s 21(4)(b) is to be engaged, it is the system that is to be unconscionable. Nevertheless, the concept of unconscionability (even of a system) is a characterisation related to human conduct by reference to conscience, informed by values taken from the statute.
Later (at [150]), after an exhaustive analysis of previous system cases the Full Court explained that whether or not someone has engaged in conduct that reveals a “system” or “pattern of behaviour” will be highly fact-specific, and will rely to a significant extent on the forensic exercise the regulator chooses to undertake to prove the existence of the system, as well as any forensic exercise the respondent undertakes by way of answer. The same is true of the characterisation of conduct as unconscionable.
The present case is materially different from Unique in that the ACCC has expressly not sought to rely on the evidence of consumers A to E as being representative of the experience of consumers more broadly and from that to draw conclusions about the college’s system or pattern of behaviour. Rather, the ACCC relies on direct evidence of the college’s generalised policies and practices as constituting a system or pattern of behaviour which, in the particular circumstances, was, so the ACCC submits, unconscionable.
An assessment or conclusion whether conduct is “unconscionable” with reference to the statutory norm is a conclusion founded upon “all the circumstances”. The result is that it is wrong to approach a system case by seeking to isolate each integer of the system and reach a conclusion whether each is unconscionable in isolation. Clearly, it is the system as a whole as constituted by, potentially, many inter-related integers that is to be assessed. See NRM Corporation Pty Ltd v ACCC [2016] FCAFC 98 at [180]-[185] per Flick, Murphy and Griffiths JJ.
D.2False, misleading or deceptive conduct and representations: ss 18 & 29 of the ACL
Section 18 of the ACL, as is well-known, provides that a person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.
Section 29(1) of the ACL relevantly provides that a person must not, in trade or commerce, in connection with the supply or possible supply of goods or services, make a “false or misleading representation” that goods or services have benefits (s 29(1)(g)) or with respect to the price of goods or services (s 29(1)(i)).
I recently had cause to identify relevant framework principles in Allergan Australia Pty Ltd v Self Care IP Holdings Pty Ltd [2020] FCA 1530 at [417]-[425] from where the following summary is drawn.
Although s 18 takes a different form to s 29, the prohibitions are similar in nature. Section 18 uses the phrase “misleading or deceptive” whereas s 29 uses the phrase “false or misleading”, but there is no material difference between the two expressions: ACCC v Coles Supermarkets Australia Pty Ltd [2014] FCA 634; 317 ALR 73 at [40] per Allsop CJ; ACCC v TPG Internet Pty Ltd [2020] FCAFC 130; 381 ALR 507 (TPG FCAFC) at [21] per Wigney, O’Bryan and Jackson JJ.
For the inquiry under s 18, it is necessary to identify the impugned conduct and then to consider whether that conduct, considered as a whole and in context, is misleading or deceptive or likely to mislead or deceive: Coles at [38], citing Google Inc v ACCC [2013] HCA 1; 249 CLR 435 at [89], [102] and [118] and Campomar Sociedad Limitada v Nike International [2000] HCA 12; 202 CLR 45 at [100]-[101]. The inquiry then shifts to whether that conduct, considered as a whole and in context, is misleading or deceptive or likely to mislead or deceive.
Conduct is misleading or deceptive or likely to mislead or deceive if it has the tendency to lead into error, i.e., that there is a sufficient causal link between the conduct and the likely error on the part of persons exposed to the conduct: Coles at [39], citing ACCC v TPG Internet Pty Ltd [2013] HCA 54; 250 CLR 640 (TPG HCA) at [39]. Conduct causing confusion and wonderment is not necessarily coextensive with misleading or deceptive conduct: Google at [8]; Campomar at [106].
Conduct is likely to mislead or deceive if there is a real and not remote chance or possibility that a person is likely to be misled or deceived: Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd [1984] FCA 167; 2 FCR 82 at 87 per Bowen CJ, Lockhart and Fitzgerald JJ; Butcher v Lachlan Elder Realty Pty Ltd [2004] HCA 60; 218 CLR 592 at [112] per McHugh J; TPG FCAFC at [22(a)].
It is not necessary to prove an intention to mislead or deceive: Yorke v Lucas[1985] HCA 65; 158 CLR 661 at 666 per Mason ACJ, Wilson, Deane and Dawson JJ; Google at [9]. However, where there is an intention to deceive, the court may more readily infer that the intention has been or in all probability will be effective: Campomar at [33].
It is necessary to view the conduct as a whole and in its proper context. This will or may include consideration of the type of market, the manner in which the goods are sold, and the habits and characteristics of purchasers in such a market: Coles at [41]; see generally TPG HCA at [52]; Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd [1982] HCA 44; 149 CLR 191 at 199 per Gibbs CJ.
The court must consider the likely characteristics of the persons who comprise the relevant class of persons to whom the conduct is directed and consider the likely effect of the conduct on ordinary or reasonable members of the class, disregarding reactions that might be regarded as extreme or fanciful: Campomar at [101]-[105]; Kraft Foods Group Brands LLC v Bega Cheese Ltd [2020] FCAFC 65; 377 ALR 387 at [236] per Foster, Moshinsky and O’Bryan JJ. In assessing the effect of conduct on a class of persons such as consumers who may range from the gullible to the astute, the court must consider whether the “ordinary” or “reasonable” members of that class would be misled or deceived: Coles at [43], citing Campomar at [105]. See also Google at [7]; Kraft at [236].
The presence or absence of evidence that someone was actually misled or deceived is relevant to an evaluation of all the circumstances relating to the impugned conduct: Coles at [45]. However, it is unnecessary to prove that the conduct in question actually deceived or misled anyone: Google at [6].
D.3Unsolicited consumer agreements: ss 69, 78-79 of the ACL
Part 3-2 of the ACL governs the “consumer transactions”. Division 2 of that part then deals with “unsolicited consumer agreements” as a subset of consumer transactions and imposes obligations on “dealers” in relation to “unsolicited consumer agreements”.
Section 71 defines a dealer as follows:
A dealer is a person who, in trade or commerce:
(a)enters into negotiations with a consumer with a view to making an agreement for the supply of goods or services to the consumer; or
(b)calls on, or telephones, a consumer for the purpose of entering into such negotiations;
whether or not that person is, or is to be, the supplier of the goods or services.
Under paragraph (a) of that definition the college was a dealer. It was also a supplier of services. The CAs were also dealers but they were not suppliers of the services for which the consumers contracted. I do not understand those matters to be controversial.
Section 69 relevantly defines an unsolicited consumer agreement as follows:
(1) An agreement is an unsolicited consumer agreement if:
(a) it is for the supply, in trade or commerce, of goods or services to a consumer; and
(b) it is made as a result of negotiations between a dealer and the consumer:
(i) in each other’s presence at a place other than the business or trade premises of the supplier of the goods or services; or
(ii) by telephone;
whether or not they are the only negotiations that precede the making of the agreement; and
(c) the consumer did not invite the dealer to come to that place, or to make a telephone call, for the purposes of entering into negotiations relating to the supply of those goods or services (whether or not the consumer made such an invitation in relation to a different supply); and
(d) the total price paid or payable by the consumer under the agreement:
(i) is not ascertainable at the time the agreement is made; or
(ii) if it is ascertainable at that time—is more than $100 or such other amount prescribed by the regulations.
Section 70(1) provides that in a proceeding relating to a contravention or possible contravention of Div 2 of Pt 3-2 of the ACL, an agreement is presumed to be an unsolicited consumer agreement if a party to the proceeding alleges that the agreement is such an agreement and no other party to the proceeding proves that the agreement is not such an agreement. That is to say, because the ACCC alleges that the enrolment agreements struck with the individual consumers A to E are unsolicited consumer agreements, the onus is on the respondents to prove that they are not unsolicited consumer agreements.
Section 77 deals with the liability of suppliers for contraventions by dealers, i.e., the possible liability of the college for the conduct of the CAs, as follows:
If:
(a) a dealer contravenes a provision of this Subdivision in relation to an unsolicited consumer agreement; and
(b) the dealer is not, or is not to be, the supplier of the goods or services to which the agreement relates;
the supplier of the goods or services is also taken to have contravened that provision in relation to the agreement.
The particular contraventions that the ACCC alleges against the college are of the prohibitions in ss 78(2) and 79(1)(b) and (c) of the ACL. Those provisions are relevantly as follows:
78 Requirement to give document to the consumer
(1) …
(2) If an unsolicited consumer agreement was negotiated by telephone, the dealer who negotiated the agreement must, within 5 business days after the agreement was made or such longer period agreed by the parties, give to the consumer under the agreement:
(a) personally; or
(b) by post; or
(c) with the consumer’s consent—by electronic communication;
a document (the agreement document) evidencing the agreement.
Note: A pecuniary penalty may be imposed for a contravention of this subsection.
(3) An unsolicited consumer agreement was negotiated by telephone if the negotiations that resulted in the making of the agreement took place by telephone (whether or not other negotiations preceded the making of the agreement).
79 Requirements for all unsolicited consumer agreements etc.
The supplier under an unsolicited consumer agreement must ensure that the agreement, or (if the agreement was negotiated by telephone) the agreement document, complies with the following requirements:
(a) …
(b) its front page must include a notice that:
(i) conspicuously and prominently informs the consumer of the consumer’s right to terminate the agreement; and
(ii) conspicuously and prominently sets out any other information prescribed by the regulations; and
(iii) complies with any other requirements prescribed by the regulations;
(c) it must be accompanied by a notice that:
(i) may be used by the consumer to terminate the agreement; and
(ii) complies with any requirements prescribed by the regulations; …
D.4Knowingly concerned: s 224 of the ACL
Section 224 of the ACL deals with pecuniary penalties. Section 224(1)(e) provides that if a court is satisfied that a person has been “in any way, directly or indirectly, knowingly concerned in, or party to, the contravention by a person” of a provision of, relevantly, Pt 2-2 (which is about unconscionable conduct and includes s 21), the court may impose a pecuniary penalty in respect of each act or omission by the person to which the section applies, as the court determines to be appropriate. The ACCC relies on this provision in contending that Mr Wills is liable with the college for any contraventions by it of the proscription against statutory unconscionability in s 21.
The ACCC also refers to para (c) of the definition of “involved” in s 2 of the ACL which provides that a person is involved in a contravention of a provision of the ACL or in conduct that constitutes such a contravention if the person “has been in any way, directly or indirectly, knowingly concerned in, or party to, the contravention”. That wording is the same as the wording in s 224(1)(e) and does not appear to take the matter any further.
There are two requirements that must be established before it can be concluded that a person was knowingly concerned in, or party to, a contravention.
First, the person must have had actual knowledge of all the essential facts constituting the contravention: Yorke v Lucas at 669-670. That is not imputed or constructive knowledge but, rather, actual knowledge: Young Investments Group Pty Ltd v Mann [2012] FCAFC 107; 293 ALR 537 at [11] per Emmett, Bennett and McKerracher JJ. However, it is not necessary that the person knew that those matters constituted a contravention: Rafferty v Madgwicks [2012] FCAFC 37; 203 FCR 1 at [254] per Kenny, Stone and Logan JJ. The requisite actual knowledge must be present at the time of the contravention; a later acquisition of knowledge of the essential matters is not sufficient: ASIC v Australian Investors Forum Pty Ltd (No 2) [2005] NSWSC 267; 53 ACSR 305 at [113]-[118] per Palmer J; ASIC v ActiveSuper Pty Ltd (in liq) [2015] FCA 342; 235 FCR 181 at [405] per White J.
Actual knowledge may be inferred from “a combination of suspicious circumstances and a failure to make an inquiry” – which is sometimes referred to as “wilful blindness”, but “knowledge must be the only rational inference available”: Pereira v Director of Public Prosecutions [1988] HCA 57; 82 ALR 217 at 220 per Mason CJ, Dean, Dawson, Toohey and Gaudron JJ. It has also been said that “actual knowledge may be inferred from ignorance dishonestly and deliberately maintained or wilful blindness”: Lloyd v Belconnen Lakeview Pty Ltd [2019] FCA 2177; 377 ALR 234 at [321] per Lee J.
In a case such as the present which, relevantly, involves a case asserting knowing concern in unconscionable conduct, it is necessary to show that the person said to be knowingly concerned knew of all the circumstances by which the conduct is ultimately found to have been unconscionable in contravention of the statutory norm: Stefanovski v Digital Central Australia (Assets) Pty Ltd [2018] FCAFC 31; 368 ALR 607 at [71] per McKerracher, Robertson and Derrington JJ.
Secondly, the person must have engaged in conduct (by act or omission) which can properly be said to “implicate” them in the contravention or which shows a “practical connection” between them and the contravention: ActiveSuper at [407]-[410]; Ashbury v Reid [1961] WAR 49 at 51; Trade Practices Commission v Australia Meat Holdings Pty Ltd [1988] FCA 338; 83 ALR 299 at 357 per Wilcox J. It is not necessary that the person physically do anything to further the contravention; it is sufficient if the person, by what they said and agreed to do, in fact became associated with and thus involved, in the relevant sense, in the conduct constituting the contravention: R v Tannous (1988) 10 NSWLR 303 at 308 per Lee J, Street CJ and Finlay J agreeing; Leighton Contractors Pty Ltd v CFMEU [2006] WASC 144; 154 IR 228 at [29] per Le Miere J; Qantas Airways Ltd v TWUA [2011] FCA 470; 280 ALR 503 at [324]-[325] per Moore J; Fair Work Ombudsman v Priority Matters Pty Ltd [2017] FCA 833 at [118]-[119] per Flick J; Termite Resources NL (in liq) v Meadows [2019] FCA 354; 370 ALR 191 at [717] per White J.
It is submitted on behalf of Mr Wills that it is necessary for the ACCC to establish that he “participated” in the essential elements constituting the contravention. That is to say, it is not only the requirement of knowledge that must go to the essential elements of the contravention but also the requirement of participation. The submission was based on the following statement in ACCC v Geowash Pty Ltd (subject to a deed of company arrangement) (No 3) [2019] FCA 72; 368 ALR 441 at [766]:
The person must have knowledge of the essential matters which constitute the contravening conduct and have been an intentional participant in the essential elements constituting the contravention: Yorke v Lucas [1985] HCA 65; (1985) 158 CLR 661 at 667. These matters are related because intentional participation is based upon knowledge of the essential elements: Australian Competition and Consumer Commission v IMB Group Pty Ltd [2003] FCAFC 17 at [133].
(Emphasis added.)
It is noted that the decision in Geowash was recently upheld on appeal, although the findings on “knowingly concerned” were not the subject of appeal. That may be because the critical finding that is relevant to the present discussion, namely that one of the individuals in that case, Mr Cameron, was not knowingly concerned in certain conduct because he did not participate in it, was in the appellants’ favour so they had no interest in challenging it (Geowash at [772]-[777]). The result is that the issues raised here were not addressed by the Full Court: Ali v ACCC [2021] FCAFC 109.
It is not clear to me that the proposition that it is a requirement of establishing knowing concern in a contravention that the person participated in each element of the contravention is correct or consistent with the authorities. Such a proposition is not borne out by the authorities cited. In Yorke v Lucas, the Court identified (at 666) that there were two bases on which it was contended that the relevant person, Mr Lucas, was liable for the contravention of s 52 of the Trade Practices Act 1974 (Cth) (i.e., the old misleading and deceptive conduct provision) by the company. The first one was that he had “aided, abetted, counselled or procured” the contravention within the meaning of para (a) of s 75B, and the other was that he was “directly or indirectly, knowingly concerned in, or party to” the contravention within the meaning of para (c) of that section. The latter paragraph has its modern equivalence in s 224(1)(e), being the provision on which the ACCC relies in this case.
The ACCC submits that the CAs’ conduct was unconscionable within the meaning of s 21 of the ACL. The CAs’ conduct was engaged in in circumstances where: (a) one of the CAs had filled out the enrolment documents (including the PEQ), rather than ensuring consumer C filled them out herself; (b) the CAs let consumer C believe she could keep the laptop she was to receive, when offering inducements to enrol was inconsistent with cl 4.4 of the VET Guidelines; and (c) one of the CAs told consumer C the answers she should give to some of the questions in the QA call, such that a procedure which might have protected consumer C’s interests was subverted.
The college admits that the CAs’ conduct was unconscionable but denies it was on behalf of the college or alternatively that it was not unconscionable when assessed in all the circumstances. I reject this submission for the same reasons given above at [625] to [626].
The college admits that an unsolicited consumer agreement was formed between it and consumer C. However, it denies a breach of s 78(2) on the basis that the training plan and letter of offer, which constituted the “agreement document”, were emailed to consumer C on 26 November 2015 following the QA call. Consumer C’s evidence is that she consented to receive communications about the course from the college by email.
In relation to s 79(b), the college says that the letter of offer, emailed to consumer C on 26 November 2015, conspicuously and prominently informed Consumer C of her right to terminate the agreement. For the reasons given at [666] to [668], I do not accept this submission. The letter of offer also does not contain the information as required by Regulation 85. Given these matters, I find that there was a breach of ss 79(b) and (c).
T.4 Consumer D
T.4(a) Facts
In December 2015, consumer D was enrolled in the college’s Diploma of Business. Consumer D was approximately 52 years of age when she was enrolled, is disabled and receives a disability support pension. [C23/6-7, C24/17]
A CA from Innovium Pty Ltd visited consumer D at her home. [C23/8] The college had entered into a sales agreement with Innovium on 4 June 2015 (Innovium Agreement). [D5943]
The Innovium Agreement provided that the college was not obliged to enrol every prospective student who completed an application (cl 2.7) and could reject any application at its sole discretion (cl 2.8). It also included a series of clauses regarding the requirement for Innovium and its representatives to behave ethically, provide only accurate information about the courses, complete mandatory training provided by the college and agent declaration forms, and to comply with regulatory requirements (cll 4, 5, 8). [D5946-7]
The CA asked consumer D if she was interested in doing an online course. She said she would listen and that her daughter might be interested. The CA did not have any ID badge or other attire identifying where the CA worked. The CA said he was “recruiting for Captain Cook”. [C24/14] The CA was Aboriginal so consumer D trusted him, because she is also Aboriginal. [C24/11-17]
The CA said to consumer D that he had signed up a lot of Aboriginal people and that it was a good opportunity for studying. [C24/18] He also said the study was online and a laptop was available for free. [C25/20] The CA said to consumer D that she could cancel at no cost and could keep the laptop. The CA did not tell consumer D how to withdraw from the course but said that the course was “free for you people”, which consumer D took to mean Aboriginal people. [C25/21-23]
Consumer D was interested in undertaking the business course offered by the college. She also liked the idea of a free laptop, because she would not have been able to do the course without one. [C25/24]
Consumer D filled out a two-page application form inserting her personal details. The CA was separately “jotting down details” on a “big touch screen smartphone”. The CA also asked for consumer D’s pension card and TFN and said that “if you have a tax bill you won’t be eligible”. Consumer D thought this statement was strange and confusing because she wondered what that had to do with being eligible for the course. [C26/25-27]
The CA did not ask consumer D about her literacy or numeracy skills or tell her that a certain level of education was needed. She was not told about the support that she could receive while studying. The CA did not say he was working on commission. [C26/28]
The CA then made a call and gave the phone to consumer D and she had a QA call with the college. The CA said to consumer D that any questions about fees did not involve consumer D because the “course is at no cost to you” and “it is just something they will read out”. Further, that “when you are asked any questions you just need to say ‘yes, yes, yes’.” [C26/28-30]
The recording of the QA call shows that the college informed consumer D that: the call was being recorded for quality assurance purposes; the course she was enrolling in was a Diploma of Business; the duration of the course was 28 weeks; the total cost of her course was $15,600; her course had two units of study; the start date of her course was 9 December 2015; the college had received her application for VFH and that she would become liable to repay the VFH loan through the taxation system once she started earning above the income threshold, which was $54,126 at the time; she should pay close attention to the course census date, and that the first census date for her course was 22 December 2015; she could withdraw from her course prior to her first census date without incurring a VFH debt and that it was her responsibility to contact the college by phone or email and lodge the appropriate forms by the census date; the computer was the property of the college and was on loan for the duration of the course; she would be receiving an orientation pack by email, including her letter of offer, training plan and VFH booklet; and an SSO would be in touch on a weekly basis to provide personalised assistance with her studies. As with the other calls, the information was delivered at a rapid pace and is difficult to understand.
While on the QA call with the college admissions officer, consumer D confirmed that: the CA had shown her identification; her postal address was correct, email address and mobile telephone number were correct; she completed the PEQ on her own (a statement which was wrong and induced by the CA); she agreed to enrol in the course described to her; she understood the withdrawal procedure; she had completed the loan equipment form for a loan computer; and any time would do to be contacted by her SSO. As with the other call, this information was prompted by the CA.
Consumer D listened to a recording of the QA call prior to swearing her affidavit. She noted that she did not understand everything the woman was saying because she spoke quickly and was uncomfortable saying “yes”; did not understand what VET FEE-HELP meant and the CA had not mentioned this to her – she only found out what it meant when she received a letter from the college; had not actually filled out the loan application form but said “yes” because the CA was prompting her to do so; and said she filled out a PEQ but had not actually done so. [C26-27/31, D6190]
The CA did not mention how consumer D would receive her course materials. The CA said to consumer D that the college would be in contact by email and that she would receive a laptop in three to four days in the mail. Consumer D never received a laptop. [C27/32-24]
At some point during the visit, the CA offered consumer D cash and an Apple laptop (“instead of the normal one”) for taking him to where she was from – an Aboriginal community in remote south-western Queensland – in order to sign up further people. [C27/35]
Consumer D said that she had never seen her application for enrolment before preparing her affidavit. She identified a number of errors in the answers recorded in the application which indicate that she did not complete it. [C28/39, D6182] With reference to what consumer D said earlier about filling in a two page form, I infer that the CA transferred her personal details from that form to the electronic form and then filled in the remainder of the electronic form himself taking the answers from the conversation that he had with her.
In the case of consumer D, there is no communications log of the communications between the college and the student. It is therefore not possible to determine exactly when documentation from the college was sent to her. The ACCC points to a communication log which it says is in respect of consumer D, but the student number and name used in that log does not match consumer D’s student number and name so it cannot be the correct log. [D6200-6202]
There is an offer of enrolment, dated 8 December 2015, and a training plan, dated 9 December 2015, which were presumably sent to consumer D. [D6187-9] These documents recorded that the course was to start on 9 December 2015, that the first census date was 22 December 2015, that the second census date was 1 March 2016, that the total cost of the course was $15,600 and that “tuition fees will apply if you withdraw after your census date for each unit of study”.
Consumer D says that she was shocked when she received a “bill” (which may have been the offer of enrolment and training plan or a COE and the CAN, the latter two both dated 23 December 2015) in the mail because she thought the course was free. The COE and the CAN relevantly recorded the same information as the offer of enrolment and the training plan as identified above. [D6191-2]
She later contacted the college wanting her debt reversed. The college sent her a form to fill in. Consumer D filled in a complaints form dated 11 March 2016 and returned it. [C29/45-6, D6193-5] She later completed a reversal application form, dated 29 April 2016, and, I infer, returned it to the college. [D6197]
Consumer D was sent a letter from the college dated 19 May 2016 advising that her complaint had been investigated and that “the outcome you wished to have applied has been successful”. It stated that the rationale for the decision was “based on you not receiving all the relevant information to enable you to make a decision about the course by the Course Advisor”. [D6198]
She later received a letter, dated 11 July 2016, advising her that “upon review” the college had elected to reverse the CAN issued on 23 December 2015 meaning that consumer D had not incurred a VFH debt. [C28-29/47-48, D6196, D6199]
T.4(b) Consideration
The ACCC submits that the conduct of the CA, in the course of signing consumer D to a course, was engaged in by the CA “on behalf of” the college as an agent of the college within the scope of the actual or apparent authority of the agent, such that the conduct is attributable to the college under s 139B(2)(a) of the C&C Act.
The ACCC says that under the Innovium Agreement, the college appointed Innovium to promote and market courses offered by college. The Innovium Agreement also included a provision requiring the company to ensure that consumers were informed that it was providing sales services “as an agent” for the college. [D5945-6]
The college submits that, again, the CA’s conduct was not in the college’s interests, undermined the processes the college had in place and that the conduct was contrary to the training provided by the college, and that therefore it was not conduct on behalf of the college. I accept that a number of the statements made by the CA were said without actual authority. However, the key statements were nonetheless made for the purpose of signing up consumer D to a college course (being conduct in an authorised class) and therefore within the CA’s apparent authority.
For the same reasons as set out at [619] above, the conduct is taken to be on behalf of the college.
The ACCC contends that the CA’s conduct in signing up consumer D involved four instances of false, misleading or deceptive conduct and representations. First, the CA told consumer D the course was free, which was false, because in fact it cost $15,600. This was said to be a contravention of s 29(1)(i) and s 18.
Secondly, the CA told consumer D she could cancel her course at any time, which conveyed a representation that she could cancel the course at any time without incurring a debt, which was false in contravention of s 29(1)(i) and s 18. Thirdly, the CA told consumer D she could get a free laptop if she signed up for a course, in contravention of s 29(1)(m) and s 18. Fourthly, by telling consumer D that the course and laptop were free, the CA also conveyed a representation to the effect that any cost of the course consumer D was signing up to in order to obtain a laptop was a good deal in contravention of s 29(1)(i) and s 18.
The college concedes that the first, second and third instances were false or misleading and contraventions of s 29(1)(i) and 29(1)(m). The college made no written submissions on the fourth instance and denies it in its defence. Similar to the other consumers, it is not clear what this instance captures that the others do not. I find there was no independent contravention in respect of the fourth instance. [A141G/221B(b)]
The ACCC submits that the CA’s conduct was unconscionable within the meaning of s 21 of the ACL. The CA’s conduct was engaged in in circumstances where: (a) he had failed to explain key aspect of the VFH scheme to consumer D (such as the need to withdraw before the census date to avoid incurring a VFH debt); (b) he had filled out the enrolment documents (including the PEQ), rather than ensuring consumer D filled them out herself; (c) he let consumer D believe she could keep the laptop he gave her, when offering inducements to enrol was inconsistent with cl 4.4 of the VET Guidelines; and (d) he told consumer D the answers she should give to some of the questions in the QA call, such that a procedure which might have protected consumer D’s interests was subverted.
This is accepted by the college but it is denied that the conduct was on behalf of the college and, alternatively, that it was not in all the circumstances unconscionable. I reject this submission for the same reasons given above at [625] to [626].
The colleges admits that an unsolicited consumer agreement was formed between it and consumer D. However, the college denies a breach of s 78(2) because implied consent to send the “agreement document” by email should be inferred from the circumstances, since the college told consumer D she would be receiving her orientation pack and letter of offer by email, consumer D had provided her email address to the college, and did not object to being sent the relevant material by email on the QA call.
Consumer D’s evidence is that she was interested in undertaking the business course offered by the college and appears to have provided her email for that purpose. While it is unclear when and how consumer D received the letter of offer and training plan, I infer that she received those documents. She did not say that her email was recorded incorrectly in circumstances where she identified a number of other errors in her enrolment documents. As indicated, the evidence does not establish exactly when consumer D was signed up, or when the documentation was sent to her. I therefore find there was no breach of s 78(2). For the same reasons set out at [666] to [668] there was a breach of ss 79(b) and (c).
T.5 Consumer E
T.5(a) Facts
In November 2015, consumer E was enrolled in a Diploma of Human Resources Management.
Consumer E did not complete his year 10 certificate. He went to schools that provide special needs support. Consumer E has difficulties reading and writing because of an acquired brain injury. He was approximately 30 years old at the time he was enrolled. [C41/3-4]
Consumer E said in his affidavit that he can read part of a text message but not all of it. He can navigate his phone but cannot type a text message, instead he sends messages using voice to text. He is unable to read a book but “might have a go at figuring out what a newspaper article is about by recognising some words”. [C41/4]
Consumer E has completed a Certificate III in Warehousing Operations and other certificates in forklift driving, construction, logistics and food handling. These courses were undertaken in a classroom. He has never undertaken a class online. Consumer E has been on a disability support pension from Centrelink since he turned 18. His pension or income is paid to the State Trustee and he receives an allowance to pay for his bills and other things. This has been the case for around 15 years. [C41/5-6]
Sometime in late 2015, two CAs knocked on consumer E’s door. They showed consumer E their ID badges and one of them said they were there to “sign people up to study online”. Consumer E invited them inside. [C42/7-9] His enrolment application indicates that he was enrolled by a CA from Career Developer. [D6209] The college had a sales agreement with Contact Plus Pty Ltd trading as Career Developer entered into on 22 October 2015 (CD Agreement). [D6073]
The CD Agreement provided that the college was not obliged to enrol every prospective student who completed an application (cl 2.7) and could reject any application at its sole discretion (cl 2.8). The CD Agreement also included a series of clauses regarding the requirement for Career Developer and its representatives to behave ethically, provide only accurate information about the courses, complete mandatory training provided by the college and agent declaration forms, and to comply with regulatory requirements (cll 4, 5, 8). [D6076-7]
One of the CAs said that “if you sign up, you can get a free laptop”. Consumer E recalls they may have also offered him a tablet. [C42/9]
The course that was suggested to consumer E was a “Diploma in Business and Logistics or something like that”. However, consumer E said that this would not have been useful because he cannot “really read or write” but he thought the free laptop would be useful. [C42/10]
Consumer E said that the CAs’ English was “very poor” and he had trouble understanding them. At one point in the conversation, consumer E let the CAs know that he could not do an online course with his reading and writing ability and that he had an intellectually disability. A CA responded “just sign up and we’ll be on our way”. Consumer E felt they did not seem to understand or were not listening to him regarding his disability. [C42/11-13]
At another point in the conversation, one of the CAs said to consumer E that “if you want to go places you should do it” and that online assistance would help him. Further on in the conversation, after saying he was not interested, a CA said again “just sign up with us today”. Consumer E said that the CAs were “very forceful” and he felt he had to sign up even though he did not want to. [C42-3/14-16]
One of the CAs then asked for consumer E’s Centrelink and Medicare cards and licence. Consumer E gave the CA what he asked for and he saw the CA write some things down on a piece of paper and then the CA did something on his phone. Consumer E did not fill out anything on the phone himself or do any paper work. [C43/17-18]
The CA then called the college and put consumer E on the phone for the QA call. Before the QA call he said to consumer E to “just say ‘yes’ to everything”. The CA nodded to prompt consumer E on the QA call. [C43/22, D6219]
The CA did not tell consumer E how much the course would cost. When the college told him on the phone the costs he got “a bit of a shock to the system” but he thought that by then he could not pull out. Consumer E had concerns about how he was going to pay. At the time consumer E was working in a bar at night and as a cleaner in the day. [C43/23]
The recording of the QA call shows that during the call the college informed consumer E that: the call was being recorded for quality and assurance purposes; the course he was enrolling in was a Diploma of Human Resources Management; the duration of the course was 28 weeks; the total cost of his course was $15,600; that his course had two units of study; the start date of his course was 11 November 2015; the college had received his application for VFH and that he would become liable to repay the VFH loan through the taxation system once he started earning above the income threshold, which was $54,126 at the time; he should pay close attention to the course census date, and that the first census date for his course was 23 November 2015; he could withdraw from his course prior to his census date without incurring a VFH debt and that it was his responsibility to contact the college by phone or email and lodge the appropriate forms by the census date; he would be receiving an orientation pack by email, including a letter of offer, training plan and VFH booklet; and a college SSO would be in touch with him on a weekly basis to provide him with personalised assistance with his studies. As with the other calls, the information was conveyed very quickly and is difficult to follow.
While on the QA call with the college admissions officer, consumer E confirmed that: the CA had shown him identification; his postal address, email address and mobile telephone number were correct; he completed the PEQ on his own; he agreed to enrol in the course described to him; he understood the withdrawal procedure; he had completed the loan equipment forms for a loan computer; and any time would do to be contacted by an SSO. As has been seen, these answers were prompted by the CA.
The person on the phone from the college did not explain what the course was about and what he was going to be doing. Consumer E did not know what was going on and the CA was nodding at him. After the phone call finished the CA talked more about the course and the support the college could offer. [C43/24-25]
The college’s communications log records that consumer E’s user account was created on 13 November 2015. [D6226] On the same day, the college sent consumer E his username and password to access the LMS. [D6225-6]
On 20 November 2015, the college emailed to consumer E a letter of offer (dated 13 November 2015) and a training plan (dated 11 November 2015). [D6216, D6214, D6225] Those documents recorded that the start date for the course was 11 November 2015, the first census date was 24 November 2015, the cost of the course was $15,600, and that tuition fees would apply if consumer E withdrew after the census date for each of the two units of study.
On 25 November 2015, the college emailed to consumer E a COE and a CAN. [D6217-8, D6223-4] Those documents relevantly recorded the same information as recorded in the letter of offer and the training plan identified above.
On 9 December 2015, an SSO from the college made a call to consumer E. He told the SSO that he could not read or write properly and that he wished to withdraw from the course. [D6222, D6227] The college subsequently received information confirming consumer E’s unsuitability for a diploma-level course. [D6221] The college then re-credited consumer E’s VFH debt. [D6220-1]
T.5(b) Consideration
The ACCC submits that the conduct of the CA, in the course of signing consumer E to a course, was engaged in by the CA “on behalf of” the college as an agent of the college within the scope of the actual or apparent authority of the agent, such that the conduct is attributable to the college under s 139B(2)(a) of the C&C Act.
The college denies that it was conduct on behalf of the college because the CA sought to undermine the processes of the college by, among other things, coaching answers. Further, that the CA’s conduct was in direct opposition to the training provided to the CA. The CD Agreement appointed the company to promote and market courses offered by the college. The CD Agreement also included a provision requiring the company to ensure that consumers were informed that it was providing sales services “as an agent” for the college.
I accept that a number of the statements made by the CA were said without actual authority, such as the provision of a free laptop. However, for the same reasons as set out at [619] above, the conduct is taken to be on behalf of the college.
The ACCC contends that the CAs’ conduct in signing up consumer E involved two instances of false, misleading or deceptive conduct and representations. First, the CAs represented to consumer E that he could get a free laptop if he signed up for a course, but that was a false or misleading representation, in contravention of s 29(1)(m) and s 18. Secondly, by not telling consumer E the cost of the course, the CAs conveyed a representation that the cost of the course was such that signing up to the course in order to get a laptop constituted a good deal. This was said to be breach of both s 29(1)(i) and s 18.
The college accepts that the CAs’ conduct telling consumer E he would get a free laptop if he signed up was misleading within the meaning of s 29(1)(m). It also accepts that the CAs’ failure to disclose to consumer E the cost of the course in which he enrolled was misleading and deceptive with respect to the price of the course in contravention of s 29(1)(i). The college appears to deny that the allegation that the CAs conveyed a representation that the cost of the course was such that signing up to the course in order to get a laptop constituted a good deal. This allegation, like the others made against each of the other consumers does not say anything more than the other breaches so I find no contravention in respect of it. [A141L/ 239(d)]
The ACCC submits that the CAs’ conduct was unconscionable within the meaning of s 21 of the ACL. The CAs’ conduct was engaged in in circumstances where: (a) the CAs’ conduct in offering consumer E a laptop and telling him he could keep it was inconsistent with cl 4.4 of the VET Guidelines; (b) the CAs persisted with their attempts to sign consumer E up even though consumer E had told them he had disabilities which meant he could not do a course, and was not interested; (c) the CAs’ conduct led to consumer E feeling pressured to enrol; and (d) the CAs told consumer E the answers he should give during the QA call, such that a procedure which might have protected consumer E’s interests was subverted.
The college admits that the CAs’ conduct was unconscionable within the meaning of s 21 of the ACL. However, the college denies it was conduct engaged in on behalf of the college or, alternatively, that it was not in all of the circumstances unconscionable. I reject this submission for the same reasons given above at [625] to [626].
The college admits that an unsolicited consumer agreement was formed between it and consumer E, but it says there was no breach of s 78(2) because the training plan and letter of offer arrived within five business days and because consent to send them by email should be implied from the circumstances. Consumer E provided and then confirmed his email address. It was apparently a genuine email address. Unlike, for example, consumer A, consumer E had no interest in doing a course and did not intend to consent to anything. He was pressured and bamboozled. Considered objectively, the provision by him of his email address was not consent to receive the agreement document by email because he had said that he did not want to sign up at all. There was therefore a breach of s 78(2).
For the same reasons given at [666] to [668] above there was a breach of ss 79(b) and (c).
U. CONCLUSION
In summary, I have found that the college engaged in a system of conduct or pattern of behaviour that was unconscionable as proscribed by s 21 of the ACL in relation to consumers who were enrolled in the college during the period 7 September 2015 to 18 December 2015. The conduct in question was the weakening of protections or mechanisms against CA misconduct and unsuitable enrolment risk by changing its enrolment and withdrawal processes by abolishing an outbound QA call process and replacing it with an inbound QA call process and, in particular, abolishing its system of campus driven withdrawals.
A further dimension to the unconscionable conduct was the claiming by the college of VFH revenue from the Commonwealth in respect of consumers enrolled during that period with whom the college was able to make no contact after the initial inbound QA call and who would for that reason have been withdrawn by the college from their enrolment prior to the abolition of the campus driven withdrawal process, and the retaining of such of that revenue as was paid by the Commonwealth. The claiming and retaining of the revenue had the result that the uncontactable students incurred VFH debts to the Commonwealth.
I have also found that Mr Wills was knowingly concerned in the identified unconscionable conduct, and that on account of his knowing concern Site was also knowingly concerned in the conduct.
In respect of the individual consumer complaints I have found that the conduct of the CAs is the conduct of the college with the result that there were the following contraventions.
In respect of consumer A, the college contravened:
(1)section 29(1)(i) of the ACL by failing to disclose to consumer A the cost of the course in which she enrolled;
(2)section 18 of the ACL by failing to explain the withdrawal policy and relevance of census dates;
(3)section 21 of the ACL by failing to explain key aspects of the VFH scheme, filling out the enrolment documents (including the PEQ) rather than ensuring that consumer A filled them out herself, letting consumer A believe she could keep the laptop which constituted a prohibited inducement to enrol, and the unsatisfactory nature of the QA call;
(4)section 79(b) of the ACL by failing to include on the front page of the agreement document a notice that conspicuously and prominently informed consumer A of her right to terminate the agreement; and
(5)section 79(c) of the ACL by failing to attach to the agreement document a form that could be used to terminate the agreement.
In respect of consumer B, the college contravened:
(1)sections 18 and 29(1)(i) of the ACL by telling consumer B that the course was free;
(2)section 29(1)(m) of the ACL by telling consumer B that the laptop he would get was for free;
(3)section 21 of the ACL by enrolling consumer B in circumstances where the CA knew that he suffered from a brain injury which meant that he was not capable of doing the courses and was on a pension and did not want to do a course, pressurising consumer B to enrol, filling after the enrolment documents (including the PEQ) rather than ensuring that consumer B for them out himself, telling consumer B the answers he should give to questions on the QA call and the unsatisfactory nature of the QA call;
(4)section 78(2) of the ACL by not sending the agreement document to consumer B as required;
(5)section 79(b) of the ACL by failing to include on the front page of the agreement document a notice that conspicuously and prominently informed consumer B of his right to terminate the agreement; and
(6)section 79(c) of the ACL by failing to attach to the agreement document a form that could be used to terminate the agreement or containing the text required by the regulations.
In respect of consumer C, the college contravened:
(1)sections 18 and 29(1)(g) of the ACL by in forming consumer C that the course she was being enrolled for would help her become a flight attendant;
(2)sections 18 and 29(1)(i) of the ACL by representing to consumer C that the course was free for people on Centrelink;
(3)sections 18 and 29(1)(m) of the ACL by conveying a misleading representation with respect to the price of the course by telling consumer C that she would get a free laptop;
(4)section 21 of the ACL by enrolling consumer C in circumstances where the CA filled out the enrolment documents (including the PEQ) rather than ensuring that consumer C filled them out herself, letting consumer C believe that she could keep the laptop she was to receive when offering such an inducement was contrary to the guidelines, by telling or prompting consumer C the correct answers during the QA call, and the unsatisfactory nature of the QA call;
(5)section 79(b) of the ACL by failing to include on the front page of the agreement document a notice that conspicuously and prominently informed consumer C of her right to terminate the agreement; and
(6)section 79(c) of the ACL by failing to attach to the agreement document a form that could be used to terminate the agreement or containing the text required by the regulations.
In respect of consumer D, the college contravened:
(1)sections 18 and 29(1)(i) of the ACL by telling consumer D that the course was free;
(2)sections 18 and 29(1)(i) of the ACL by telling consumer D that she could cancel her course at any time;
(3)sections 18 and 29(1)(m) by telling consumer D that she would get a free laptop if she signed up for the course;
(4)section 21 of the ACL by enrolling consumer D without explaining key aspects of the VFH scheme, such as the need to withdraw before the census date to avoid incurring a VFH debt, filling out the enrolment documents (including the PEQ) rather than ensuring that consumer D filled them out herself, letting consumer D believe that she could keep the laptop which was contrary to the prohibition against inducements in the guidelines, telling consumer D the answers she should give to some of the questions in the QA call, and the unsatisfactory nature of the QA call;
(5)section 79(b) of the ACL by failing to include on the front page of the agreement document a notice that conspicuously and prominently informed consumer D of her right to terminate the agreement; and
(6)section 79(c) of the ACL by failing to attach to the agreement document a form that could be used to terminate the agreement or containing the text required by the regulations.
In respect of consumer E, the college contravened:
(1)sections 18, 29(1)(i) and 29(1)(m) by telling consumer E that he would get a free laptop if he signed up for the course;
(2)section 21 of the ACL by enrolling consumer E in circumstances of offering consumer E a laptop and telling him he could keep it contrary to the guidelines, persisting in attempts to sign up consumer E even though he had said he has disabilities which meant he could not do a course and was not interested, pressurising consumer E to enrol, telling consumer E the answers he should give during the QA call, and the unsatisfactory nature of the QA call;
(3)section 78(2) of the ACL by not sending the agreement document to him other than by email for which it did not obtain his consent;
(4)section 79(b) of the ACL by failing to include on the front page of the agreement document a notice that conspicuously and prominently informed consumer E of his right to terminate the agreement; and
(5)section 79(c) of the ACL by failing to attach to the agreement document a form that could be used to terminate the agreement or containing the text required by the regulations.
I will direct the parties to bring in agreed or competing orders reflecting my findings, and on costs and the future conduct of the proceeding.
I certify that the preceding seven hundred and seventy (770) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Stewart. Associate:
Dated: 2 July 2021
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