Australian Competition and Consumer Commission v Refund Home Loans Pty Ltd ACN 106 212 300 (No 2)
[2010] FCA 237
•12 March 2010
FEDERAL COURT OF AUSTRALIA
Australian Competition & Consumer Commission v Refund Home Loans Pty Ltd ACN 106 212 300 (No 2) [2010] FCA 237
Citation: Australian Competition & Consumer Commission v Refund Home Loans Pty Ltd ACN 106 212 300 (No 2) [2010] FCA 237 Parties: AUSTRALIAN COMPETITION & CONSUMER COMMISSION v REFUND HOME LOANS PTY LTD ACN 106 212 300 and WAYNE RODNEY ORMOND File number: QUD 249 of 2009 Judge: LOGAN J Date of judgment: 12 March 2010 Catchwords: TRADE PRACTICES - Misleading or deceptive conduct - Where matter referred to mediation - Whether Court has power to make orders with respect to corrective advertising - Held the Court has the power to make such orders pursuant to the Federal Court of Australia Act 1976 (Cth) and the Trade Practices Act 1974 (Cth), ss 80 and 86C.
PRACTICE AND PROCEDURE - Where matter referred to mediation - Whether relief proposed at mediation ought to be granted - Relief in the form of declarations - Declarations ought not be awarded where framed in terms of a broad contravention of a statute - Held declarations proposed appropriately specific and in the public interest to make them
Legislation: Federal Court of Australia Act 1976 (Cth)
Trade Practices Act 1974 (Cth) ss 52, 53, 80Date of hearing: 12 March 2010 Place: Brisbane Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 9 Counsel for the Applicant: Mr P O'Shea SC Solicitor for the Applicant: Corrs Chambers Westgarth Counsel for the Respondents: Mr P Morrison QC Solicitor for the Respondents: DLA Phillips Fox
IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION
QUD 249 of 2009
BETWEEN: AUSTRALIAN COMPETITION & CONSUMER COMMISSION
ApplicantAND: REFUND HOME LOANS PTY LTD ACN 106 212 300
First RespondentWAYNE RODNEY ORMOND
Second Respondent
JUDGE:
LOGAN J
DATE OF ORDER:
12 MARCH 2010
WHERE MADE:
BRISBANE
THE COURT DECLARES THAT:
Declarations against the First and Second Respondents
1.The First Respondent (RHL) and the Second Respondent (Mr Ormond), by Mr Ormond making the following statements:
(a)To all RHL franchisees as at 31 July 2007: “This year we have had issues from franchisees on the conference as well as fees; before we do anything we get advice, not just Janice but also ACCC. I sat down with the Director of the ACCC last week – I have a very good relationship with the ACCC. Don’t be foolish to think that I just make snap decisions; I speak with Janice, I get a second solicitors opinion and then speak with the ACCC. Any litigation against RHL won’t work – it will lose. All it means is that we waste money on replying to legal matters about ancillary issues and this is very frustrating. It is foolish and a waste of money. You all have a vested interest in this, if you hear any of it, please let me know so I can act on it” (the Meeting Statement);
(b)To Rachel Neilson: “Now I’ve spoken to the ACCC. I’ve done everything in accordance with the law and the document. Whatever advice you’re getting I don’t think it’s particularly good advice” (the Neilson Statement);
(c)To Frederick Harbord: “We’ve heard about all the implied legal actions and blah blah blah. Mate, I’ve had meetings with Graeme Samuel himself. I have nothing to worry about” (the Harbord Statement),
thereby represented by each such statement that RHL and Mr Ormond had a relationship with the Australian Competition and Consumer Commission (ACCC) pursuant to which they had obtained the approval of the ACCC in relation to conduct of RHL towards its franchisees (the Approval Representation), when in fact the Approval Representation was false and misleading or deceptive or likely to mislead or deceive because at all material times RHL and Mr Ormond had not obtained the approval of the ACCC in relation to conduct of RHL towards its franchisees, and had thereby in trade or commence:
(d)engaged in conduct that was misleading or deceptive or likely to mislead or deceive in contravention of section 52 of the Trade Practices Act 1974 (the Act);
(e)in connexion with the supply or possible supply of services or in connexion with the promotion of the supply of services, represented that the services provided by RHL as franchisor had a sponsorship or approval they did not have, in contravention of section 53(c) of the Act;
(f)in connexion with the supply or possible supply of services or in connexion with the promotion of the supply of services, represented that RHL had a sponsorship, approval or affiliation it did not have, in contravention of section 53(d) of the Act.
2.Mr Ormond was, at all material times, directly knowingly concerned in, or party to, RHL’s conduct in contravention of sections 52, 53(c) and 53(d) of the Act referred to in paragraph 1 above.
THE COURT ORDERS THAT:
Injunctions3.RHL, whether by itself, its servants, agents or otherwise howsoever in trade or commerce, in connexion with the supply or possible supply of, or the promotion by any means of the supply of, the RHL franchise services be restrained from making representations to the effect that RHL has obtained the approval of the ACCC in relation to conduct of RHL towards its franchisees, when in fact RHL and its employees, officers and agents have not obtained the approval of the ACCC in relation to conduct of RHL towards its franchisees.
4.Mr Ormond, whether by himself, his servants, agents or otherwise howsoever in trade or commerce, in connexion with the supply or possible supply of, or the promotion by any means of the supply of, the RHL franchise services be restrained from making representations to the effect that RHL has obtained the approval of the ACCC in relation to conduct of RHL towards its franchisees, when in fact RHL and its employees, officers and agents have not obtained the approval of the ACCC in relation to conduct of RHL towards its franchisees.
5.Mr Ormond be restrained from being directly or indirectly knowingly concerned in, or party to, conduct by RHL, or any other corporation offering a franchise system, whether by himself, his servants, agents or otherwise consisting of making any representation that RHL or such other corporation offering a franchise system has obtained the approval of the ACCC in relation to conduct of the corporation towards its franchisees, when in fact RHL or such other corporation and the employees, officers and agents of RHL or such other corporation have not obtained the approval of the ACCC in relation to conduct of RHL or such other corporation towards its franchisees.
Corrective Publication Orders
6.RHL, at its own expense, publish a notice in the form of Annexure 1 within 21 days from the date of this order, such notice to appear to all persons logging onto the RHL intranet website for a period of three months and:
(a)to cover approximately 40% of the screen without the need to scroll down the screen;
(b)to have a font of no less than 12 points; and
(c)not appear as a pop up notification,
provided that Franchisees may, after sighting the notice at least once, opt not to receive the notice again by clicking an option box that appears following the notice.
7.RHL, at its own expense within 21 days of the date of this order:
(a)send a letter in the form of Annexure 2 to all current franchisees; and
(b)shall use its best endeavours to send a letter in the form of Annexure 2 to persons and corporations who have been franchisees at any time since 10 July 2007, but who are no longer franchisees.
8.RHL file and serve on the ACCC within 4 months of the date of these orders an affidavit verifying that it has carried out its obligations under paragraphs 6 and 7 above and detailing what it has done, including:
(a)providing details of the names and addresses of the persons or corporations to whom the letters were addressed; and
(b)providing details of any letters returned to RHL.
Compliance Program
9.RHL:
(a)will within one month of the date of this order, establish an education, training and trade practices compliance program (the Compliance Program) for RHL’s directors, employees, and other persons involved in RHL’s business (excluding RHL’s franchisees) which:
(i)is designed to ensure an awareness of the responsibilities and obligations imposed by Part V of the Act, including in relation to the contravening conduct referred to in paragraphs 1 and 2 above;
(ii)requires RHL’s directors and employees to report any concerns about compliance with the provisions of the Act by RHL, its directors and employees to the Compliance Officer;
(iii)is designed to guarantee that persons making a complaint or report concerning the Act to the Compliance Officer will not be victimized or disadvantaged in any way by reason of their complaint or report and that their complaint or report will be kept confidential and secure; and
(iv)requires any director and employee involved in a contravention, or attempted breach of Part V of the Act to undertake further compliance training as directed by the Compliance Officer;
(b)having, as the parties acknowledge, engaged Mr David Johnson, being a suitably qualified person with experience in trade practices law, to advise RHL as to the content of the Compliance Program, will implement the recommendations of Mr David Johnson;
(c)will within one month of the date of this order, appoint and provide all reasonable assistance (including training) to a Director or a Senior Manager, other than the Second Respondent, to be responsible for the Compliance Program (the Compliance Officer);
(d)will implement and administer the Compliance Program for a period of three years from the date it is established;
(e)will take all reasonable steps that are necessary to ensure that annual reviews of the Compliance Program are carried out by a suitably qualified, independent compliance professional from Watchdog Compliance Pty Ltd with expertise in trade practices law, excluding Mr David Johnson, and including providing the reviewer with access to all materials and information held by the Compliance Officer;
(f)will provide written reports to the ACCC on the review of the Compliance Program required by paragraph 9(e) above, at the conclusion of each period of 12 months;
(g)will within two months of the date of this order, provide a written report by Mr David Johnson to the ACCC on the content, implementation and administration of the Compliance Program;
(h)will within two months of the date of this order, establish, maintain and administer a trade practices complaints handling system, being a system for handling complaints concerning trade practices compliance issues;
(i)will take all reasonable steps that are necessary to ensure that the trade practices complaints handling system is in accordance with AS/ISO 10002:2006 Customer satisfaction - Guidelines for complaints handling in organizations, though tailored to its own circumstances; and
(j)will within three months of the date of this order, provide to the ACCC documents evidencing the content, implementation and administration of the complaints handling system.
(k)will provide to the ACCC documents evidencing the provision of training, including all materials used in the training, and a summary of each complaint made to the Compliance Officer identifying the subject matter or nature of the complaint and the action take in response in relation to compliance with the provisions of the Act (see paragraphs 9(a)(ii) – (iv)), at the conclusion of each period of 12 months;
10.Mr Ormond, within four months of the date of this order:
(a)participate in the Compliance Program; and
(b)attend trade practices training on Part V of the Act and on the responsibilities and obligations in relation to the conduct in contravention of sections 52, 53(c) and 53(d) of the Act described above, or any similar or related conduct.
Other orders
11.RHL and Mr Ormond pay the ACCC’s costs of and incidental to the proceeding on a party and party basis, to be taxed if not agreed.
12.Otherwise, the application is dismissed.
Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using Federal Law Search on the Court’s website.
ANNEXURE 1
REFUND HOME LOANS
False and misleading or deceptive representations
Following civil proceedings instituted by the Australian Competition and Consumer Commission (the ACCC), Refund Home Loans and its principal Wayne Ormond have consented to declarations that they made false and misleading or deceptive representations, breaching the Trade Practices Act 1974. The proceedings have now been finalised.
The representations were to the effect that Refund Home Loans and Wayne Ormond had obtained the approval of the ACCC in relation to their conduct towards franchisees.
The representations were untrue and Refund Home Loans and Wayne Ormond have undertaken not to make these representations, or similar statements in future.
Refund Home Loans agreed to the Court making an order that it publish this notice to alert current franchisees about those false, misleading or deceptive representations.
For more information on misleading or deceptive conduct and your rights under the Franchising Code of Conduct and the Trade Practices Act 1974 generally, you can visit the ACCC website at align="center">ANNEXURE 2
LETTER TO FRANCHISEES
[TO BE PLACED ON RHL LETTERHEAD]Dear Franchisee, (or Dear Former Franchisee)
False and misleading or deceptive representations by Refund Home Loans
Following civil proceedings instituted by the Australian Competition and Consumer Commission (the ACCC), Refund Home Loans and I, Wayne Ormond, have consented to declarations that we made false and misleading or deceptive representations to former and current franchisees, breaching the Trade Practices Act 1974. The proceedings have now been finalised.
The representations were to the effect that Refund Home Loans and I had obtained the approval of the ACCC in relation to our conduct towards franchisees.
These representations were untrue. Refund Home Loans and I did not receive any approvals from the ACCC about our conduct towards franchisees.
Refund Home Loans and I have agreed not to make these representations, or similar statements in the future. The directors of Refund Home Loans and I have also agreed to implement a trade practices compliance programme and undergo training on our obligations under the Trade Practices Act 1974.
Refund Home Loans has agreed to the Court making an order that it publish this letter to alert franchisees about these representations.
For more information on misleading or deceptive conduct and your rights under the Franchising Code of Conduct and the Trade Practices Act 1974 generally, you can visit the ACCC website at sincerelyWayne Ormond
Executive Chairman
Refund Home Loans
IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION
QUD 249 of 2009
BETWEEN: AUSTRALIAN COMPETITION & CONSUMER COMMISSION
ApplicantAND: REFUND HOME LOANS PTY LTD ACN 106 212 300
First RespondentWAYNE RODNEY ORMOND
Second Respondent
JUDGE:
LOGAN J
DATE:
12 MARCH 2010
PLACE:
BRISBANE
REASONS FOR JUDGMENT
The Australian Competition and Consumer Commission (the Commission) instituted proceedings against Refund Home Loans Pty Ltd (Refund Home Loans) and a Mr Wayne Rodney Ormond (Mr Ormond), in respect of what was alleged to be misleading or deceptive conduct, or conduct likely to mislead or deceive, contrary to s 52 of the Trade Practices Act 1974 (Cth) (Trade Practices Act). A related claim made by the Commission was that, in connection with the supply or possible supply of services provided by Refund Home Loans as a franchisor, that that company had a sponsorship approval or affiliation that it did not have in contravention of s 53(c), or, as the case may be, s 53(d) of the Trade Practices Act. In short form, that affiliation, as alleged, was an affiliation with, or approval by, the Commission in respect of particular conduct of Refund Home Loans.
The case is one which, after a referral to mediation, has resulted in the tender this morning of an agreed statement of facts, which is now Exhibit 1. In that, there is related, in some detail and by consent of each of the parties, the conduct which is accepted to have been engaged in by Refund Home Loans. Mr Ormond’s liability arises under the accessorial provisions of the Trade Practices Act in relation to his involvement as a corporate officer in the conduct of Refund Home Loans.
The parties have also proposed, on the strength of the agreed factual position, orders for the Court’s consideration. Those orders are proposed by consent. Consent does not, of course, confer jurisdiction or power where neither exists. I am satisfied though, having regard to the agreed statement of facts, that this is a case in respect of which the jurisdiction of the court, under the Trade Practices Act, is engaged, and engaged in respect of the contraventions alleged. I am further satisfied, having regard to the agreed statement of facts, that those contraventions, as alleged and detailed in that statement, are proved. The best way, in the circumstances, of providing a reader with the detail of the conduct is to annex to these reasons for judgment that statement of agreed facts.
The question then arises whether, having regard to the factual position as agreed and the contraventions as proven, the relief, as proposed, ought to be granted. In the circumstances of this particular case it seems to me that it is appropriate to make declaratory orders of the kind proposed. Declarations are not, of course, there for the asking. Their making involves the exercise of a judicial discretion. Here the declarations proposed are in a very specific and detailed form indeed; specific and detailed in a sense that they descend even to a declaration as to an evidentiary position in respect of particular conduct on the part of Refund Home Loans by Mr Ormond.
The course of authority counsels that declaratory relief ought not just be in terms of a declaration as to a broad contravention of a statute. The declarations proposed here certainly do not admit of that vice. There is, in my opinion, a public interest in the making of the declarations, particularly having regard to the interests of third parties with whom Refund Home Loans may have dealt, especially franchisees. There is also a public interest arising from the need, as I see it, to make it plain that this particular form of conduct did not have an approval of the Commission. Those same sentiments, inform as to why the injunctive relief proposed ought to go. Yet again, that relief is specific in terms of its focus, rather than merely restraining a breach of statute in broad terms. Ancillary relief is also proposed by way of attendance in a compliance program, the making of corrective publication orders and, further, provision in respect of costs.
The Court has power under the Trade Practices Act to make orders in respect of corrective advertising. I am also satisfied that the compliance program orders proposed are ancillary to and in aid of the injunctive relief. The power to make such an order, in my opinion, arises from a combination of the general injunctive power conferred by s 80 of the Trade Practices Act, by s 86C and by the yet more general power conferred on the Court by the Federal Court of Australia Act 1976 (Cth), in respect of cases in which the court has jurisdiction.
The proposed form of corrective advertising is an annexure to the orders that are proposed. Having read the proposed form of advertising, my opinion is that it is well adapted to the conduct the subject of the declaratory and injunctive relief.
For these reasons then, there will be orders in terms of those proposed, and that includes the order proposed in respect of costs.
It is appropriate to conclude these reasons for judgment by recording the appreciation of the Court for the attitude displayed by each of the parties to the disposal of the case.
I certify that the preceding nine (9) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Logan. Associate:
Dated: 17 March 2010
ANNEXURE
STATEMENT OF AGREED FACTS
Admitted facts
Background1.The applicant (ACCC) is:
(a)a body corporate established by section 6A of the Trade Practices Act 1974 (Cth) (the Act); and
(b)is entitled to sue in its corporate name.
2.The first respondent (RHL) is and was at all material times:
(a)a company incorporated pursuant to the Corporations Act 2001 (Cth);
(b)a trading corporation within the definition of “corporation” in section 4 of the Act;
(c)capable of being sued in its corporate name; and
(d)the franchisor of a franchise system known as “Refund Home Loans”.
3.The second respondent (Mr Ormond) is and was at all material times:
(a)a director and secretary of RHL;
(b)the founder and managing director of RHL; and
(c)the director of RHL who deals with franchisees.
4.RHL carries on, and at all material times has carried on, the business of franchisor of a franchise system known as “Refund Home Loans” (the Franchise Business).
5.The Franchise Business included offering to enter into agreements or entering into agreements:
(a)granting the right to franchisees to carry on business:
(i)under the name of “Refund Home Loans” in specified geographic areas; and
(ii)under a system or marketing plan known as the “Refund Home Loans” Franchise;
(b)under which the operation of the franchisee businesses was substantially or materially associated with the “Refund Home Loans” trade mark, which was owned, used or licensed by RHL; and
(c)under which, before starting the franchisee business, the franchisee was required to pay to RHL fees, including a payment for goods or services.
6.The services offered by franchisees under the “Refund Home Loans” Franchise include:
(a)mortgage broking;
(b)comparing mortgages; and
(c)assisting clients with budgeting, new loans or refinancing of existing loans.
Representations by RHL and Mr Ormond
7.On 11 July 2007, as set out in a document described as “Refund Home Loans Franchisee Advisory Council Meeting” (the Meeting Minutes) Mr Ormond for and on behalf of RHL made the following statement:
“This year we have had issues from franchisees on the conference as well as fees; before we do anything we get advice, not just Janice but also ACCC. I sat down with the Director of the ACCC last week – I have a very good relationship with the ACCC. Don’t be foolish to think that I just make snap decisions; I speak with Janice, I get a second solicitors opinion and then speak with the ACCC. Any litigation against RHL won’t work – it will lose. All it means is that we waste money on replying to legal matters about ancillary issues and this is very frustrating. It is foolish and a waste of money. You all have a vested interest in this, if you hear any of it, please let me know so I can act on it.” (the Meeting Statement)
8.The Meeting Minutes, including the Meeting Statement, were emailed to the then current franchisees by Mr Ormond for and on behalf of RHL on or about 31 July 2007.
9.On 2 November 2007, Mr Ormond for and on behalf of RHL made the following statement to Georgina Rachel Neilson (the former nominated manager of the Forest Lake franchise held by Crystalmist Pty Ltd) by leaving a message on the voicemail of Ms Neilson’s mobile telephone:
“Now I’ve spoken to the ACCC. I’ve done everything in accordance with the law and the document. Whatever advice you’re getting I don’t think it’s particularly good advice.” (the Neilson Statement)
10.On 22 February 2008, Mr Ormond for and on behalf of RHL made the following statement to Frederick David John Harbord (the nominated manager of the Campbelltown and Camden franchises in New South Wales) by telephone:
“We’ve heard about all the implied legal actions and blah blah blah. Mate, I’ve had meetings with Graeme Samuel himself. I have nothing to worry about.” (the Harbord Statement)
11.Each of the Meeting Statement, the Neilson Statement and the Harbord Statement was made by RHL and Mr Ormond:
(a)in the course of carrying on the Franchise Business; and
(b)in trade or commerce, as that term is used by the Act.
Correspondence between the ACCC and RHL
12.By sending a letter from Janice Bywaters, then the solicitor for RHL, to the ACCC dated 2 July 2007, RHL sought to know the position of the ACCC on the non-disclosure by RHL of Mr Ormond’s annulled sequestration order.
13.By sending a letter in response from David Sutherland, Assistant Director in the Brisbane Regional Office of the ACCC, to Janice Bywaters dated 1 August 2007, the ACCC did not:
(a)provide advice in relation to any conduct of RHL towards its franchisees; or
(b)approve of any conduct of RHL towards its franchisees.
Contraventions
14.By publishing the Meeting Statement to franchisees, each of RHL and Mr Ormond has made representations to RHL franchisees that RHL and Mr Ormond had a relationship with the ACCC pursuant to which they obtained the approval of the ACCC in relation to conduct of RHL towards its franchisees (the Approval Representation).
15.By making the Neilson Statement, each of RHL and Mr Ormond has made the Approval Representation.
16.Further and in the alternative, by making the Meeting Statement and the Neilson Statement, each of RHL and Mr Ormond has made the Approval Representation.
17.By making the Harbord Statement, each of RHL and Mr Ormond has made the Approval Representation.
18.Further and in the alternative, by making the Meeting Statement and the Harbord Statement, each of RHL and Mr Ormond has made the Approval Representation.
19.The Approval Representation is false and misleading or deceptive, or likely to mislead or deceive, because RHL and Mr Ormond at all material times did not obtain the approval of the ACCC in relation to conduct of RHL towards its franchisees.
Subsequent events
20.In December 2009, RHL engaged David Johnson of Watchdog Compliance Pty Ltd (Watchdog) to provide trade practices compliance training in relation to sections 52 and 53 of the Act.
21.Mr Johnson:
(a)has over 12 years experience in the fields of trade practices and consumer protection (as those fields are regulated by the operation of the Act) as a lawyer, trainer, auditor and compliance professional;
(b)had not been previously retained by RHL or Mr Ormond.
22.On 8 February 2010, Mr Johnson conducted trade practices training at RHL's premises in Bowen Hills, Queensland. Mr Ormond, Najhudin (Jimmy) Malik (a director of RHL), Philip Ezzy and Philip Girgis (who are both managers at RHL) attended that training.
23.On 9 February 2010, RHL engaged Watchdog to:
(a)assist RHL with developing and establishing a trade practices compliance program;
(b)provide a written report to the applicant:
(i)on the content, implementation and administration of the compliance program by 31 March 2010; and
(ii)on the annual reviews of the Compliance Program as required by paragraph 9 of the agreed draft order.
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