Australian Competition and Consumer Commission v Swishette Pty Ltd
[2018] FCA 55
•9 February 2018
FEDERAL COURT OF AUSTRALIA
Australian Competition and Consumer Commission v Swishette Pty Ltd [2018] FCA 55
File number: VID 313 of 2017 Judge: MOSHINSKY J Date of judgment: 9 February 2018 Catchwords: ESTOPPEL – issue estoppel – Anshun estoppel – abuse of process – where in an earlier proceeding it was alleged that a company had contravened the misleading or deceptive conduct provisions and the unconscionable conduct provisions of the Australian Consumer Law – where in a later proceeding it was alleged that the respondents were persons “involved” in the contraventions – whether it was unreasonable not to have included these claims in the earlier proceeding
CONSUMER LAW – misleading or deceptive conduct – unconscionable conduct – person “involved” in contravention – whether respondents were knowingly concerned in, or party to, contraventions of the Australian Consumer Law – where contravener and respondents had same director – where conceded that knowledge of director is to be imputed to the respondents – where one respondent used its credit card to pay relevant expenses for the contravener – where one respondent provided a guarantee and mortgage to support the contravener’s overdraft
TRUSTS AND TRUSTEES – trustee’s right of indemnity or exoneration – where trustee found to have been involved in contraventions of the misleading or deceptive conduct and unconscionable conduct provisions of the Australian Consumer Law – whether trustee would have a right of indemnity or exoneration in respect of the liability that would arise if a consumer redress order were made under s 239 of the Australian Consumer Law
Legislation: Competition and Consumer Act 2010 (Cth) s 137H, 155, Sch 2, Australian Consumer Law, ss 2, 18, 21, 29, 31, 232, 239, 240, 248
Evidence Act 1995 (Cth), s 87, 191
Trade Practices Act 1974 (Cth), s 52
Federal Court Rules 2011, r 22.02
Penalty Interest Rates Act 1983 (Vic), s 2
Trustee Act 1958 (Vic), s 36
Cases cited: Adsett v Berlouis (1992) 37 FCR 201
Australian Competition and Consumer Commission v Clinica Internationale Pty Ltd [2015] FCA 1006
Australian Competition and Consumer Commission v Clinica Internationale Pty Ltd (No 2) [2016] FCA 62
Australian Competition and Consumer Commission v Clinica Internationale Pty Ltd (In Liquidation) (No 3) [2016] FCA 284
Australian Competition and Consumer Commission v Clinica Internationale Pty Ltd (In Liquidation) (No 4) [2016] FCA 286
Australian Competition and Consumer Commission v Clinica Internationale Pty Ltd (In Liquidation) (No 5) [2016] FCA 811
Australian Securities and Investments Commission v ActiveSuper Pty Ltd (in liq) (2015) 235 FCR 181
Australian Securities and Investments Commission v Letten (No 17) (2011) 286 ALR 346
Carl Zeiss Stiftung v Rayner & Keeler Ltd (No 2) [1967] 1 AC 853
CGU Insurance Ltd v Blakeley (2016) 259 CLR 339
Ekes v Commonwealth Bank of Australia (2014) 313 ALR 665
Gatsios Holdings v Kritharas Holdings (in liq) [2002] ATPR 41-864
Hardoon v Belilios [1901] AC 118
Henderson v Henderson (1843) 3 Hare 100; 67 ER 313
Hoy Mobile Pty Ltd v Allphones Retail Pty Ltd (2008) 167 FCR 314
In re Beddoe [1893] 1 Ch 547
Jones v Dunkel (1959) 101 CLR 298
JW Broomhead (Vic) Pty Ltd (in liq) v JW Broomhead Pty Ltd [1985] VR 891
Kuligowski v Metrobus (2004) 220 CLR 363
Lam v R (1990) 46 A Crim R 402
Leighton Contractors Pty Ltd v Construction, Forestry, Mining and Energy Union (2006) 154 IR 228
Nolan v Collie (2003) 7 VR 287
Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589
R v Tannous (1987) 10 NSWLR 303
Ramsay v Pigram (1968) 118 CLR 271
RWG Management Ltd v Commissioner for Corporate Affairs [1985] VR 385
Sent v Jet Corporation of Australia Pty Ltd (1984) 2 FCR 201
Solak v Registrar of Titles (2011) 33 VR 40
Swishette Pty Ltd v Australian Competition and Consumer Commission (2017) 249 FCR 483
Timbercorp Finance Pty Ltd (in liq) v Collins (2016) 259 CLR 212
Tomlinson v Ramsey Food Processing Pty Ltd (2015) 256 CLR 507
Walton v Gardiner (1993) 177 CLR 378
Yorke v Lucas (1983) 49 ALR 672
Yorke v Lucas (1985) 158 CLR 661
Heydon JD, Cross on Evidence (11th Aust ed, LexisNexis Butterworths, 2017)
Heydon JD and Leeming MJ, Jacobs’ Law of Trusts in Australia (8th ed, LexisNexis Butterworths, 2016)
Ford HAJ and Lee WA (eds), Principles of the Law of Trusts (Thomson Reuters, subscription service)
Date of hearing: 18, 19 and 20 September 2017 Date of last submissions: 26 September 2017 Registry: Victoria Division: General Division National Practice Area: Commercial and Corporations Sub-area: Regulator and Consumer Protection Category: Catchwords Number of paragraphs: 220 Counsel for the Applicant: Dr O Bigos Solicitor for the Applicant: Thomson Geer Counsel for the First and Second Respondents: Mr A Muller Solicitor for the First and Second Respondents: Franzese & Associates Counsel for the Third Respondent: The third respondent appeared in person Counsel for the Fourth Respondent: The fourth respondent appeared in person ORDERS
VID 313 of 2017 BETWEEN: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
Applicant
AND: SWISHETTE PTY LTD
First Respondent
LETORE PTY LTD
Second Respondent
TANIA LASKI (and another named in the Schedule)
Third Respondent
JUDGE:
MOSHINSKY J
DATE OF ORDER:
9 FEBRUARY 2018
THE COURT DECLARES THAT:
1.Each of the first respondent (Swishette) and the second respondent (Letore) was directly or indirectly knowingly concerned in, or party to, the contraventions by Clinica Internationale Pty Ltd (in liquidation) (Clinica) of ss 18, 21, 29(1)(g) and 31 of the Australian Consumer Law, being Sch 2 to the Competition and Consumer Act 2010 (Cth), referred to in paragraphs 1 and 2 of the declarations of the Court dated 23 March 2016 in Australian Competition and Consumer Commission v Clinica Internationale Pty Ltd (in liquidation) & Ors (VID 252 of 2015).
AND THE COURT ORDERS THAT:
2.Letore pay to clients of Clinica amounts equal to the amounts paid by those clients to Clinica that were paid under, referable to, or otherwise used in relation to the Clinica Program, the Regional Sponsorship Agreements and/or the Cleaning Course (as those terms are defined in the applicant’s amended concise statement dated 19 July 2017), together with interest calculated from the time when the clients made the payments at the rate set out in s 2 of the Penalty Interest Rates Act 1983 (Vic).
3.A copy of the reasons for judgment, with the seal of the Court thereon, be retained by the Court for the purposes of s 137H of the Competition and Consumer Act.
4.Within seven days, the parties file and serve written submissions (of no more than three pages) on the proposed ancillary orders and costs.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
MOSHINSKY J:
Introduction
The applicant (the ACCC) claims that the first respondent, Swishette Pty Ltd (Swishette), as trustee of a discretionary trust known as the Second Rodney Laski Family Trust (the Trust), and the second respondent, Letore Pty Ltd (Letore), were persons “involved” in certain contraventions by Clinica Internationale Pty Ltd (in liquidation) (Clinica) of the Australian Consumer Law, being Sch 2 to the Competition and Consumer Act 2010 (Cth) (the Australian Consumer Law). Specifically, it is alleged that Swishette and Letore were directly or indirectly knowingly concerned in, or party to, Clinica’s contraventions.
In an earlier proceeding in this Court (the Clinica Proceeding), brought by the ACCC against Clinica and its director, Radovan Laski (Mr Laski), the ACCC claimed that Clinica had, among other things, engaged in misleading or deceptive conduct and unconscionable conduct in contravention of provisions of the Australian Consumer Law, and that Mr Laski was liable as a person “involved” in those contraventions. The alleged contraventions arose from representations made, and conduct engaged in, by Clinica between about August 2012 and about July 2013 (the Relevant Period) in relation to the provision of recruitment consulting services to persons who were in Australia on temporary visas, and who sought to obtain permanent residency. In brief summary, it was alleged that Clinica had induced clients to pay fees in the expectation that they would be recruited for jobs that would lead to permanent residency under a government scheme known as the Regional Sponsored Migration Scheme. However, the relevant jobs – in cleaning – were not available and, in any event, working in such jobs would not have qualified the clients for permanent residency status.
Shortly before the trial of the Clinica Proceeding (which took place on 21 and 22 October 2015), Clinica and Mr Laski admitted liability for the contraventions. The hearing proceeded, with the dispute confined to some aspects of the relief sought.
On 9 February 2016, the trial judge in the Clinica Proceeding handed down reasons for judgment on the principal issues in the proceeding: Australian Competition and Consumer Commission v Clinica Internationale Pty Ltd (No 2) [2016] FCA 62 (Clinica (No 2)).
On 23 March 2016, the Court made declarations and orders in the Clinica Proceeding. These included declarations that Clinica had contravened the Australian Consumer Law and that Mr Laski was a person involved in the contraventions. The Court made a ‘consumer redress’ order, pursuant to s 239 of the Australian Consumer Law, requiring Clinica and Mr Laski to pay refunds to clients of Clinica.
Additionally, the Court made an order to the effect that certain funds that were being held in the ACCC’s solicitors’ trust account, pursuant to a ‘freezing order’ made by the Court, be applied to pay the refunds to clients of Clinica. That aspect of the Court’s orders was challenged on appeal and, on 15 March 2017, set aside by the Full Court: Swishette Pty Ltd v Australian Competition and Consumer Commission (2017) 249 FCR 483 (Swishette).
On 30 March 2017, the ACCC commenced the present proceeding, alleging that Swishette and Letore were knowingly concerned in, or party to, Clinica’s contraventions of the Australian Consumer Law, being the contraventions that were the subject of the Clinica Proceeding. It is contended, among other things, that Swishette provided security for Clinica’s overdraft and that Letore paid relevant expenses on behalf of Clinica. During the Relevant Period, the sole director of both Swishette and Letore was Mr Laski. The ACCC contends that his knowledge of Clinica’s contraventions is to be attributed to Swishette and Letore.
The ACCC seeks ‘consumer redress’ orders against Swishette and Letore, requiring them to pay clients of Clinica amounts equal to the relevant payments made by those clients to Clinica. The funds that were held in the ACCC’s solicitors’ trust account during the Clinica Proceeding have remained in that account pursuant to further freezing orders made in this proceeding. The ACCC seeks orders to the effect that these funds be applied towards the payment of amounts to clients of Clinica.
Some further detail needs to be set out regarding the funds in the ACCC’s solicitors’ trust account. For some years before 2015, Swishette, as trustee of the Trust, owned a property situated at 5 Maroona Road, Brighton, Victoria (the Brighton Property). The property was used by Mr Laski as his home. In May 2015, Swishette entered into a contract of sale in relation to the property. In August 2015, before settlement of the sale of the property, the ACCC obtained freezing orders against Clinica, Mr Laski, Swishette and Letore. (Swishette and Letore were not, at least at that time, respondents to the Clinica Proceeding, but they were respondents to the ACCC’s application for freezing orders.) Settlement of the sale of the Brighton Property took place on 8 September 2015. At that time, pursuant to the Court orders, the net proceeds of sale (proceeds of sale) were paid into the ACCC’s solicitors’ trust account. It is now apparent (but was not clear at the time of the trial of the Clinica Proceeding) that, in June 2015, Swishette resolved to distribute the net income of the Trust for the year ended 30 June 2015 to the following beneficiaries in the following proportions: Letore (as to 70%); the third respondent to the present proceeding (Ms Laski) (as to 15%); and the fourth respondent to the present proceeding (Ms Hatch) (as to 15%) (the June 2015 Resolution). (Ms Laski is Mr Laski’s former wife and Ms Hatch is his cousin.) The resolution was not before the Court at the trial of the Clinica Proceeding. It is common ground in this proceeding that the distribution was effective. It is also common ground that the net income of the Trust for the year ended 30 June 2015 included the proceeds of sale of the Brighton Property (on the basis that the contract of sale was entered into during that financial year, even though settlement took place during the following financial year). It follows that, subject to a possible exception and a contention raised in this proceeding, Letore, Ms Laski and Ms Hatch have an interest in the funds in the ACCC’s solicitors’ trust account. The possible exception relates to a claim by a Lauris Fahey in respect of $85,000. The contention raised in this proceeding is a contention of the ACCC that Swishette has a right of indemnity or exoneration from the trust assets or the beneficiaries. The amount in the ACCC’s trust account has been reduced over time by the payment of legal fees and other expenses pursuant to Court orders. At the time of the trial of the present proceeding, the balance was approximately $660,000.
The respondents to the present proceeding do not challenge the findings or declarations made in Clinica (No 2). Further, the respondents accept that: the knowledge of Mr Laski in the Relevant Period is to be imputed to Swishette and Letore; and Letore was, by reason of the use of its credit card, a person involved in Clinica’s contraventions of the Australian Consumer Law.
However, the respondents contend that the ACCC is precluded from bringing the present claims on the basis of issue estoppel, Anshun estoppel and abuse of process. In summary, the respondents contend that the ACCC is estopped or the proceeding is an abuse of process on the following bases:
(a)The ACCC admitted, in the Full Court, that Swishette and Letore were not involved in the contraventions and is bound by that admission. Further, the judgment of the Full Court included a statement that Swishette and Letore were not involved in the contraventions.
(b)It was unreasonable for the ACCC not to have claimed in the Clinica Proceeding that Swishette and Letore were involved in the contraventions.
Further or in the alternative, the respondents contend that: Swishette was not “involved” in the contraventions; if the Court finds that Swishette was involved in the contraventions, there is no right of indemnity from the trust assets or the beneficiaries; and if Swishette was involved and there is a right of indemnity, the Court should fashion any relief to ensure that Ms Laski and Ms Hatch, as innocent third parties, are not worse off.
In light of the above, the main issues that need to be dealt with may be summarised as follows:
(a)Is the ACCC precluded from bringing its claims that Swishette and Letore were persons “involved” in Clinica’s contraventions of the Australian Consumer Law on the basis of issue estoppel, Anshun estoppel or abuse of process?
(b)If the ACCC is not precluded, were Swishette and Letore persons “involved” in Clinica’s contraventions of the Australian Consumer Law? (In respect of this issue, it is conceded that Letore was a person involved.)
(c)If the issues in (a) and (b) are answered in the ACCC’s favour, should a ‘consumer redress’ order be made under s 239 of the Australian Consumer Law? Further, does Swishette have a right of indemnity or exoneration from the trust assets or the beneficiaries?
For the reasons that follow, my conclusions in relation to these issues are, in summary, as follows:
(a)The ACCC is not precluded from proceeding against Swishette and Letore in this proceeding. Insofar as the respondents rely on the judgment of the Full Court, the appeal did not involve any contested issue as to whether Swishette and Letore were involved in Clinica’s contraventions and the Full Court did not make any determination on the matter. The statements made by the Full Court reflected the position that it had not been alleged that Swishette and Letore were involved in the contraventions. Accordingly, no issue estoppel arises. Insofar as the respondents rely on the Clinica Proceeding at first instance, I deal separately with the position of Letore and Swishette. In relation to Letore, it was not unreasonable for the ACCC not to include in the Clinica Proceeding a claim that Letore was involved in Clinica’s contraventions of the Australian Consumer Law. In particular, at the time of trial, the ACCC did not have a copy of the June 2015 Resolution. Although there were references to loans to beneficiaries in the financial statements of the Trust that were before the Court at the trial of the Clinica Proceeding, it was not clear at the time of the trial that the net income of the Trust for the financial year ended 30 June 2015 (which included the proceeds of sale of the Brighton Property) had been distributed to Letore, Ms Laski and Ms Hatch. In circumstances where it was not clear that Letore had an interest in a portion of the funds held in the ACCC’s solicitors’ trust account, it was not unreasonable not to claim in the Clinica Proceeding that Letore was a person involved in Clinica’s contraventions. In relation to Swishette, I am not satisfied that it was unreasonable for the ACCC not to include in the Clinica Proceeding a claim that that Swishette was involved in the contraventions. Swishette was not a party to the Clinica Proceeding at the time of trial (although it became a party later). While I accept that, by early October 2015, the ACCC had sufficient information to plead a case of involvement against Swishette (and Letore), that is not the same as saying that it was unreasonable of the ACCC not to do so. Accordingly, no Anshun estoppel arises in relation to the claims against Letore and Swishette and the claims are not an abuse of process.
(b)It is conceded that Letore was, by reason of the use of its credit card, a person involved in Clinica’s contraventions of the Australian Consumer Law. In relation to Swishette, I conclude that it was knowingly concerned in, or party to, Clinica’s contraventions of the Australian Consumer Law. Swishette provided a guarantee and a mortgage to support an overdraft provided to Clinica. These securities continued to be provided throughout the Relevant Period. It may be inferred that the continued provision of the guarantee and the mortgage were required by the bank and that Clinica needed the overdraft in order to carry on its operations, including the contravening conduct. In the circumstances, I consider there to be a sufficient practical connection between Swishette’s conduct and Clinica’s contraventions of the Australian Consumer Law. Swishette accepts that the knowledge of Mr Laski in the Relevant Period is to be imputed to Swishette. Thus it may be accepted that Swishette had knowledge of the essential facts constituting Clinica’s contraventions.
(c)In relation to whether (as contended by the ACCC) Swishette has a right of indemnity or exoneration from the trust assets or beneficiaries in relation to the liability that would arise if a consumer redress order were made against Swishette, I conclude that Swishette would not have a right of indemnity or exoneration. In particular, Swishette’s conduct in continuing to provide the guarantee and the mortgage to support the overdraft to Clinica in the circumstances constituted a breach of trust. In relation to whether a ‘consumer redress’ order pursuant to s 239 of the Australian Consumer Law should be made, I do not consider it appropriate to make such an order against Swishette, but do consider it appropriate to make such an order against Letore. Swishette has no assets or income and therefore does not have any funds available to make payments to clients of Clinica. In these circumstances, a consumer redress order against it would lack utility. However, these considerations do not apply to Letore, and I consider it appropriate to make a consumer redress order against that company.
Procedural matters
As noted above, this proceeding was commenced on 30 March 2017. The ACCC subsequently amended its originating application. As set out in the amended originating application, the ACCC seeks declarations or orders to the following effect:
(a)An order that, until further order, the proceeds of sale of the Brighton Property continue to be held in the trust account of the ACCC’s solicitors.
(b)Declarations that each of Swishette and Letore was directly or indirectly knowingly concerned in, or party to, the contraventions by Clinica of ss 18, 21, 29(1)(g) and 31 of the Australian Consumer Law.
(c)Orders under s 239 of the Australian Consumer Law:
(i)directing Swishette and Letore, jointly and severally, to pay to clients of Clinica amounts equal to the amounts paid by those clients to Clinica that were paid under, referrable to, or otherwise used in relation to the Clinica Program, the Regional Sponsorship Agreements and/or the Cleaning Course (as those terms are defined in the ACCC’s amended concise statement), together with interest calculated from the time when the clients made the payments at the rate set out in s 2 of the Penalty Interest Rates Act 1983 (Vic);
(ii)directing that the proceeds of sale of the Brighton Property be applied towards discharging Swishette and Letore’s liability to clients of Clinica; and
(iii)further orders for the orderly ascertainment of claims of, and distribution of funds among, aggrieved Clinica clients.
(d)A declaration that in respect of its liability to clients of Clinica under s 239 of the Australian Consumer Law, Swishette has a right of exoneration or indemnity, as trustee of the Trust: out of any part of the trust fund that it retains; and, to the extent that the trust fund has been distributed among the beneficiaries of the Trust, against Letore, Ms Laski and Ms Hatch personally.
(e)A further order under s 239 of the Australian Consumer Law requiring Swishette to discharge its liability to clients of Clinica out of any entitlement it has to be indemnified (out of the trust fund or by the beneficiaries).
(f)Alternatively, to the extent that the trust fund of the Trust has been distributed to Letore, a further order under s 239 of the Australian Consumer Law requiring Letore to discharge its liability to clients of Clinica out of the amount so distributed to it.
(g)An order that a copy of the reasons for judgment, with the seal of the Court thereon, be retained by the Court for the purposes of s 137H of the Competition and Consumer Act.
It is convenient, at this point, to set out s 239 of the Australian Consumer Law. It provides as follows:
239 Orders to redress etc. loss or damage suffered by non-party consumers
(1)If:
(a)a person:
(i)engaged in conduct (the contravening conduct) in contravention of a provision of Chapter 2, Part 3-1, Division 2, 3 or 4 of Part 3-2 or Chapter 4; or
(ii)is a party to a contract who is advantaged by a term (the declared term) of the contract in relation to which a court has made a declaration under section 250; and
(b)the contravening conduct or declared term caused, or is likely to cause, a class of persons to suffer loss or damage; and
(c)the class includes persons who are non-party consumers in relation to the contravening conduct or declared term;
a court may, on the application of the regulator, make such order or orders (other than an award of damages) as the court thinks appropriate against a person referred to in subsection (2) of this section.
Note 1:For applications for an order or orders under this subsection, see section 242.
Note 2:The orders that the court may make include all or any of the orders set out in section 243.
(2)An order under subsection (1) may be made against:
(a)if subsection (1)(a)(i) applies—the person who engaged in the contravening conduct, or a person involved in that conduct; or
(b)if subsection (1)(a)(ii) applies—a party to the contract who is advantaged by the declared term.
(3)The order must be an order that the court considers will:
(a)redress, in whole or in part, the loss or damage suffered by the non-party consumers in relation to the contravening conduct or declared term; or
(b)prevent or reduce the loss or damage suffered, or likely to be suffered, by the non-party consumers in relation to the contravening conduct or declared term.
(4)An application under subsection (1) may be made at any time within 6 years after the day on which:
(a)if subsection (1)(a)(i) applies—the cause of action that relates to the contravening conduct accrued; or
(b)if subsection (1)(a)(ii) applies—the declaration is made.
The ACCC’s contentions are set out in its amended concise statement. Swishette and Letore filed a concise response to the ACCC’s amended concise statement. Ms Laski and Ms Hatch did not file a response to the amended concise statement. However, at the hearing of the proceeding, Ms Laski and Ms Hatch, who represented themselves, essentially adopted the same position as Swishette and Letore. In particular, they adopted the closing submissions of Swishette and Letore. Thus, ultimately, there was no relevant distinction between the position adopted by Swishette and Letore and the positions of Ms Laski and Ms Hatch.
Paragraphs [3]-[12] of the ACCC’s amended concise statement, which relate to contraventions by Clinica of ss 18, 21, 29 and 31 of the Australian Consumer Law, are admitted by Swishette and Letore in their concise response. Given that Ms Laski and Ms Hatch adopted the same position, these facts and matters may be accepted. Included in this section of the amended concise statement is a description of a program offered by Clinica to clients (the Clinica Program) that consisted of the following elements:
(a)Clinica would arrange for clients to complete a cleaning course called the Certificate III Asset Maintenance (Cleaning Operations) course (the Cleaning Course);
(b)Clinica would find for the client a cleaning job in a regional area of Australia;
(c)Clinica would instruct and liaise with a registered migration agent in relation to a permanent residence visa application and other immigration advice for the client; and
(d)completion of the Cleaning Course and working in the cleaning job would qualify the client for permanent residency under the Subclass 187 visa – Regional Sponsored Migration Scheme (the 187 Visa Scheme).
It is also contended, in this section of the amended concise statement, that approximately 90 clients signed up to the Clinica Program, and in many cases executed an agreement (a Regional Sponsorship Agreement), and that the clients paid, by instalments, fees to Clinica that were paid under, referable to, or otherwise used in relation to the Clinica Program, the Regional Sponsorship Agreements and/or the Cleaning Course (the Fees).
The ACCC contends, in [13] of its amended concise statement, that during the Relevant Period:
(a)each of Swishette and Letore provided, or continued to provide, a guarantee (and, in the case of Swishette, also a mortgage) to secure a $660,000 business line of credit advanced by the Commonwealth Bank of Australia (the CBA) to Clinica, which funds were used for establishing, promoting and operating the Clinica Program;
(b)Letore directly funded certain activities undertaken by Clinica in connection with the Clinica Program;
(c)each of Swishette and Letore benefited from the Fees, as the moneys of Clinica, Swishette and Letore were mixed and used as a pool of funds by Mr Laski;
(d)each of Swishette and Letore directly or indirectly received some of the Fees; and
(e)each of Swishette and Letore knew, by virtue of Mr Laski’s common directorship of each of Clinica, Swishette and Letore: the matters referred to in [6]-[8] of the amended concise statement concerning the false and misleading nature of the representations there set out; that there were no reasonable grounds for the representations in respect of future matters as referred to in [11] of the amended concise statement; and the matters in [8]-[10] of the amended concise statement concerning unconscionable conduct.
In their concise response, Swishette and Letore refer to the Clinica Proceeding and specifically to the Clinica (No 2) judgment. Swishette and Letore state that they do not challenge the findings or declarations made in Clinica (No 2). Swishette and Letore state that the ACCC did not join Swishette or Letore to the Clinica Proceeding and positively resisted doing so, referring to Australian Competition and Consumer Commission v Clinica Internationale Pty Ltd (In Liquidation) (No 3) [2016] FCA 284 (Clinica (No 3)).
At [5]-[14] of the concise response, Swishette and Letore set out contentions in relation to estoppel and abuse of process. As these were developed and refined in the course of opening and closing submissions, I will refer to Swishette and Letore’s contentions later in these reasons.
At [15]-[26] of the concise response, Swishette and Letore set out contentions to the effect that Swishette was not directly or indirectly knowingly concerned in, or party to, the contraventions by Clinica. In this section of the concise response, it is accepted that Swishette provided a guarantee and second mortgage in support of liabilities of Clinica. However, it is contended that, as these securities were provided in 2008, well before any of the contravening conduct occurred, they do not support the ACCC’s allegations of liability against Swishette. It is also contended that: there is no allegation that Swishette took “some positive step of some nature” so as to be involved in the contraventions; mere knowledge by a common director (even the only director) does not amount to a positive step of some nature by Swishette; at the highest it can only be said that Swishette was in knowing receipt of some of the Fees; however, knowing receipt is not sufficient to constitute involvement within the meaning of s 2 of the Australian Consumer Law.
At [27]-[31] of the concise response, Swishette and Letore contend, in the alternative, that if Swishette was directly or indirectly concerned in, or party to, the contraventions, such conduct was not within Swishette’s power as trustee of the Trust. Accordingly, it is contended, creditors of Swishette in respect of the contraventions (if the consumers are appropriately characterised as such) do not have access to the trust assets. Further, it is contended that the orders sought by the ACCC would almost certainly cause a difficulty with the operation of the winding up provisions in the Corporations Act 2001 (Cth).
In a section of the concise response headed “Appropriate relief”, Swishette and Letore make a number of contentions regarding the disposition of the proceeding, including by reference to discretionary considerations.
Before the trial of the proceeding, the ACCC served a notice to admit. Swishette and Letore served a notice of dispute in accordance with r 22.02 of the Federal Court Rules 2011, by which they disputed the facts set out in certain paragraphs of the notice to admit. Ms Laski and Ms Hatch did not serve a notice of dispute and thus, by ordinary operation of the Rules, would be taken to have admitted the truth of each of the facts in the notice to admit.
At the hearing of the proceeding, Swishette and Letore sought leave to withdraw the admissions that they had effectively made in respect of [29], [50] and [53] of the notice to admit. These paragraphs had not been included in the list of disputed paragraphs set out in the notice of dispute. Leave to withdraw the admissions was opposed. The matter was resolved in the following way. In relation to [29] of the notice to admit, an alternative wording was substituted as follows: “In March 2008, Swishette provided a guarantee to the bank and provided a second mortgage to the bank so Clinica would have money to operate. The guarantee and second mortgage continued until September 2015.” On this basis, Swishette and Letore were content to admit this paragraph. In relation to [50] and [53] of the notice to admit, I gave leave to Swishette and Letore to withdraw their admissions. Also at the hearing, Swishette and Letore indicated that they admitted certain paragraphs of the notice to admit that had previously been disputed. The upshot was that Swishette and Letore ultimately disputed the following paragraphs of the notice to admit: [28], [31], [32], [34], [35], [50], [53], [60]-[64], [66] and [67].
In the context of Swishette and Letore’s application for leave to withdraw admissions, I asked Ms Laski and Ms Hatch whether they sought leave to withdraw their admissions in relation to all or any of the facts in the notice to admit. After having some time to consider their positions, Ms Laski and Ms Hatch sought leave to withdraw their admissions in relation to one paragraph, namely [53], of the notice to admit. I gave them leave to do so. Ms Laski and Ms Hatch are taken to have admitted the facts set out in the balance of the notice to admit.
In advance of the hearing, the ACCC, Swishette and Letore prepared a statement of agreed and disputed facts. This document was admitted into evidence at the hearing. Ms Laski and Ms Hatch were not parties to this document. However, as indicated above, they essentially adopted the same position as Swishette and Letore. Ms Laski and Ms Hatch did not challenge any of the facts that Swishette and Letore admitted.
The hearing
At the trial of the proceeding, the ACCC called the following witnesses:
(a)Graham Phillips, a partner of Thomson Geer. Thomson Geer were the solicitors acting for the ACCC in the Clinica Proceeding and are the solicitors for the ACCC in this proceeding. Mr Phillips was the supervising partner in relation to the Clinica Proceeding.
(b)Kimberley Lloyd, a solicitor. Ms Lloyd was a solicitor at Thomson Geer at the time of the Clinica Proceeding. She had the day-to-day conduct of the matter on behalf of the ACCC. At that time, she was a solicitor with 12-15 years’ experience and held the position of “special counsel”.
When the trial of the present proceeding commenced, the ACCC had not proposed to call Ms Lloyd as a witness. However, following an indication by counsel for Swishette and Letore during the course of the trial that he may wish to submit in closing submissions that an adverse inference should be drawn from the ACCC’s failure to call Ms Lloyd, the ACCC decided that it would call her to give evidence. No affidavit of Ms Lloyd was prepared for the purposes of this proceeding. However, Ms Lloyd’s affidavit dated 15 October 2015, prepared for the purposes of the Clinica Proceeding, was relied upon by the ACCC and admitted into evidence.
As stated in [13] of Mr Phillips’s second affidavit, in the present proceeding, the ACCC waived client legal privilege in respect of “the issue surrounding the joinder of Swishette and Letore to the earlier proceeding [ie, the Clinica Proceeding] prior to the trial of the earlier proceeding”. (The issue might also be expressed as: the issue of whether to join Swishette and Letore to the Clinica Proceeding before the trial of that proceeding.) Mr Phillips gave evidence about this issue in his second affidavit. Both Mr Phillips and Ms Lloyd were cross-examined about the issue.
In relation to the evidence of Mr Phillips and Ms Lloyd, I make the following observations. Both gave evidence clearly and honestly and I accept their evidence. Because of the circumstances referred to above, Ms Lloyd did not have as great an opportunity as Mr Phillips to prepare for giving oral evidence. As a result, she was not able to provide as much detail as Mr Phillips in answer to questions. However, I do not consider that this affected the substance of the evidence that she gave.
It is convenient to deal at this point with a submission on behalf of Swishette and Letore that an adverse inference should be drawn from the fact that the ACCC did not call a witness from the ACCC (as distinct from its external solicitors). It may be accepted that an officer of the ACCC could have been called in relation to the ACCC’s consideration of whether to join Swishette and Letore to the Clinica Proceeding. However, the ACCC called Mr Phillips and Ms Lloyd, who gave detailed evidence about the matter. It is not necessary to call cumulative evidence. Further, as noted in Heydon JD, Cross on Evidence (11th Aust ed, LexisNexis Butterworths, 2017) at [1215], the rule in Jones v Dunkel (1959) 101 CLR 298 “entitles the trier of fact the more readily to draw any inference fairly to be drawn from the other evidence by reason of the opponent being able to prove the contrary had the party chosen to give or call evidence. But the rule does not permit an inference that the untendered evidence would in fact have been damaging to the party not tendering it. … The rule cannot be employed to fill gaps in the evidence, or to convert conjecture and suspicion into inference” (footnotes omitted). In the present case, I accept that where the evidence establishes that a relevant document was received by the ACCC in the course of its investigation of Clinica and Mr Laski, or in connection with the Clinica Proceeding, it may be inferred that the document was read by the ACCC, and that an inference to this effect may be more readily drawn in circumstances where the ACCC did not call an officer of the ACCC to give evidence. But beyond this situation, I do not consider that the absence of evidence from an ACCC officer affects the findings to be made.
Swishette and Letore called two witnesses:
(a)Andrew Quayle, an accountant. Mr Quayle has been responsible for the preparation of the financial and taxation accounts for the Trust and Letore since 1996.
(b)Ms Hatch. As noted above, Ms Hatch is Mr Laski’s cousin and a beneficiary of the Trust. In addition, she is currently the sole director of Swishette and Letore.
Each of these witnesses was cross-examined. Mr Quayle’s evidence was of a confined nature. I accept his evidence. Ms Hatch at times appeared evasive in answering questions during cross-examination. Despite being the sole director of Swishette and Letore, she displayed a surprising lack of familiarity with the affairs of the companies. I generally do not accept her evidence unless it is corroborated by objective evidence, such as documentary evidence.
Ms Laski gave evidence on her own behalf and was cross-examined. Her evidence in chief was of a confined nature. The matters dealt with in cross-examination were of limited relevance to the issues to be determined in this proceeding.
Ms Hatch relied in her own case on the evidence she had given as part of the case for Swishette and Letore.
After the hearing, the parties each filed (with leave) written reply submissions to the written submissions handed up by the other side during closing submissions. Attached to the ACCC’s written reply submissions were two documents that had been produced by Ms Laski and Ms Hatch following the completion of the trial (in response to a request during the hearing). The documents were: Ms Laski’s draft tax return for the year of income ended 30 June 2015 and Ms Hatch’s tax return for the same year. The ACCC stated that it tendered these documents. No objection has been received from the respondents. In these circumstances, I will treat these documents as forming part of the evidence.
I will now consider each of the issues identified earlier in these reasons.
Issue 1: Is the ACCC precluded from bringing its claims that Swishette and Letore were persons “involved” in Clinica’s contraventions?
Factual findings
The Clinica Proceeding at first instance
In this section, in addition drawing on the affidavit and oral evidence in this proceeding, I have drawn on the judgments in the Clinica Proceeding in relation to the procedural framework of, and some of the steps taken in, the proceeding. None of the parties to the present proceeding suggested that the judgments in the Clinica Proceeding did not accurately describe such matters, and the hearing proceeded on the basis that the judgments did provide an accurate description of these matters.
On 14 May 2015, the ACCC commenced the Clinica Proceeding. The proceeding, brought under the Competition and Consumer Act, concerned the conduct of Clinica (the first respondent to that proceeding) in providing (what were described as) recruitment consulting services to individuals in Australia on temporary visas who were seeking to obtain permanent residency status. The second respondent was Mr Laski. He had been the managing director of Clinica and was alleged to have been involved in the conduct and liable accordingly. The ACCC sought declarations, injunctions, a disqualification order, non-party redress orders and pecuniary penalties.
Broadly, the ACCC’s allegations in the Clinica Proceeding related to false or misleading representations and unconscionable conduct in relation to the Clinica Program. By the time of trial, it was not disputed by Clinica or Mr Laski that the Cleaning Course and cleaning work offered by Clinica would never have entitled its clients to apply for a Subclass 187 visa. Moreover, by the time of trial, Clinica and Mr Laski admitted that Clinica did not have any cleaning jobs available for clients with sponsoring employers in regional areas and no clients who completed a Cleaning Course with Clinica were placed in such cleaning jobs.
On 23 June 2015, the Clinica Proceeding was set down for trial, on all issues other than relief, with the trial to commence on 21 October 2015, on an estimate of three days.
On 4 August 2015, the ACCC applied, on an ex parte basis, for a ‘freezing order’. The freezing order was granted by Middleton J as duty judge and had effect, initially, until 12 August 2015. The respondents to the freezing order application included Swishette and Letore (in addition to Clinica and Mr Laski). Pursuant to the order, each of the four respondents to the freezing order was prohibited from removing from Australia or disposing of, dealing with or diminishing the value of any of its or his assets in Australia or overseas. The orders also dealt with the proceeds of sale of the Brighton Property. At this time, the property was the subject of a contract of sale, but settlement had not yet taken place. The orders provided that the proceeds of sale be paid into a trust account in the name of the ACCC’s solicitors. The orders also provided, as an exception, that Mr Laski was not prohibited from paying up to $2,000 per week on his ordinary living expenses or from paying $20,000 on his reasonable legal expenses.
On 12 August 2015, the freezing order application returned to the Court, this time on an inter partes basis. Counsel for Clinica and Mr Laski informed Mortimer J that, by reason of Mr Laski’s illness and recent absence from Australia, they were not in a position to contest the freezing order on or near the scheduled return date. In these circumstances, her Honour extended the freezing order to the first day of the trial, while reserving leave for Clinica and Mr Laski to apply at any time prior to trial to vary or discharge the order if they wished to do so.
Subsequently, Clinica and Mr Laski sought variation (but not discharge) of the freezing order. A hearing took place in relation to this application on 9 September 2015. Some of the variations were contested by the ACCC. Mortimer J gave judgment on the requested variations on 10 September 2015: Australian Competition and Consumer Commission v Clinica Internationale Pty Ltd [2015] FCA 1006. A number of variations to the freezing order were made, for example in relation to the payment of legal fees.
The Clinica Proceeding was actively defended until 12 October 2015. On that date, the parties filed a statement of agreed facts containing admissions as to liability.
On 14 October 2015, a pre-trial conference took place. The parties proposed that the proceeding be listed for hearing on all issues (ie, including relief) on the same trial date as had originally been fixed for the hearing of issues other than relief. This was accepted by the Court.
On the same day, the ACCC provided a form of the orders that it would seek at trial, including as to relief. The ACCC’s proposed orders included an order to the effect that Clinica and Mr Laski refund to clients of Clinica any moneys paid by the clients that were paid under, referable to or otherwise used in relation to Regional Sponsorship Agreements, the Clinica Program or the Cleaning Course. Further, the ACCC sought an order to the effect that Mr Laski execute a written direction on behalf of Swishette and Letore that the funds held in the ACCC’s solicitors’ trust account (being the proceeds of sale of the Brighton Property) be applied towards the payment of the refunds. Ancillary orders were also sought by the ACCC to provide a mechanism for the payment of refunds to clients of Clinica. In seeking these orders, the ACCC relied on s 239 of the Australian Consumer Law.
On 21 and 22 October 2015, the trial of the Clinica Proceeding took place. Ahead of the hearing, the parties filed a statement of agreed facts pursuant to s 191 of the Evidence Act 1995 (Cth). In addition, there were before the Court a number of affidavits filed by both parties, annexing a range of documents relevant to the proceeding, and various documents tendered by the parties at the hearing. The following witnesses provided affidavits on behalf of the ACCC: Ms Lloyd; Ms Fahey; Lynn McKirdy; Sukhdev Singh Gill; Rajesh Azad; and Sourab Uppal. None of these witnesses was cross-examined. Their evidence is summarised at [23]-[58] of Clinica (No 2).
The witnesses for Clinica and Mr Laski at the trial of the Clinica Proceeding were: Mr Laski; Ms Laski; and Prospero Franzese, a solicitor. Their evidence is summarised at [59]-[88] of Clinica (No 2). Mr Laski was extensively cross-examined as to the dealings that Swishette and Letore had with him and with Clinica. Mr Phillips accepted during cross-examination in the present proceeding that the cross-examination of Mr Laski (in the Clinica Proceeding) was directed at him in his capacity as a director of Swishette and Letore.
As has been noted, by the time of the trial of the Clinica Proceeding, Clinica and Mr Laski had admitted liability for the alleged contraventions. Mortimer J described the conduct constituting the contraventions at [107]-[128] of Clinica (No 2). Her Honour made findings relating to misleading or deceptive conduct at [129]-[138], findings in relation to unconscionable conduct at [139]-[145], and findings in relation to Mr Laski’s involvement at [146]-[149]. At the conclusion of this section of Clinica (No 2), her Honour said at [150]:
This was a scheme aimed at vulnerable people, desperate to gain secure migration status in Australia. It was a scheme promoted, advertised and conducted on the basis that people would secure a permanent residence visa. That is why large sums of money could be charged, and were paid. That is why people such as Messrs Uppal, Azad and Gill begged and borrowed, and worked long hours, to put together the instalment payments. The prize which they had been led to believe awaited them was an Australian permanent residence visa. Conveying the value of that migration status to those in the Australian community fortunate enough never to have had to be concerned about not being able to stay in Australia is not an easy exercise. It is something most people take for granted. To those who do not have it, it is precious. The way Clinica and Mr Laski preyed on the dreams of people about obtaining secure and long term residency and employment in Australia, is one of the features of this scheme most deserving of the Court’s condemnation.
In relation to relief, by the time of the trial of the Clinica Proceeding there was agreement between the parties as to some aspects of the relief sought by the ACCC. The areas of agreement and dispute were, in summary, as follows:
(a)The parties were agreed as to the form of declaratory relief.
(b)Clinica and Mr Laski agreed that injunctions under s 232 of the Australian Consumer Law should be made against both of them, but contested the breadth of the conduct to be covered by the injunctions.
(c)Mr Laski did not contest that he should be disqualified under s 248 of the Australian Consumer Law from managing corporations, but there was a difference between the ACCC and Mr Laski as to the period of disqualification.
(d)Clinica and Mr Laski did not contest orders: declaring each Regional Sponsorship Agreement between Clinica and its clients void ab initio; requiring Clinica and Mr Laski to refund to clients of Clinica any moneys paid under, referable to or otherwise used in relation to those agreements, the Clinica Program or the Cleaning Course; and requiring Clinica to discontinue all proceedings on foot against clients to recover such moneys.
(e)Clinica and Mr Laski contested that funds from the sale of the Brighton Property that were the subject of the freezing orders should be withdrawn and paid to effect refunds to Clinica clients who had made payments in respect of Regional Sponsorship Agreements, and as a consequence opposed any orders setting a mechanism by which the ACCC would establish a process for clients to claim refunds out of the Brighton Property settlement funds held in the trust account of the ACCC’s solicitors.
(f)Clinica and Mr Laski did not contest an order that pecuniary penalties be paid by each of them to the Commonwealth, but in submissions the parties emphasised different factors relevant to the assessment of penalty.
Thus, the main areas of dispute at the trial of the Clinica Proceeding were:
(a)the extent of the penalties that should be imposed on Clinica and Mr Laski;
(b)the breadth of the injunctions;
(c)the length of the disqualification period to be imposed on Mr Laski; and
(d)whether orders should be made that would reach, and preserve access to, the funds from the sale of the Brighton Property, so that they would be available to satisfy other orders made (ie, the non-party redress orders).
In relation to (d) above, Clinica and Mr Laski submitted that the Court did not have power under s 239 to order Mr Laski to give a direction as sought by the ACCC.
The ACCC did not allege at the trial of the Clinica Proceeding that Swishette and Letore were persons “involved” in Clinica’s contraventions of the Australian Consumer Law, and they were not parties to the proceeding at the time of the trial.
On 9 February 2016, Mortimer J handed down reasons for judgment dealing with the principal issues in the proceeding: Clinica (No 2). In relation to the funds held in the ACCC’s solicitors’ trust account, Mortimer J accepted the ACCC’s submission that the Court had power under s 239 of the Australian Consumer Law to order Mr Laski to give a direction as sought by the ACCC. Mortimer J considered that, in exercising a power of the kind conferred by s 239, the Court is able to address “the reality of Mr Laski’s financial circumstances and access to the assets of corporate vehicles he controls” (at [294]). That reality included “the fact that he is in effective control of the proceeds of sale from the Brighton property, through his role as appointor of the Trust and sole director of Swishette” (at [294]). Accordingly, Mortimer J indicated that she would make an order that Mr Laski give a direction regarding the funds in the ACCC’s trust account as sought by the ACCC.
At the time that judgment was handed down in Clinica (No 2), Mortimer J provided a form of proposed orders to the parties. The parties were given an opportunity to file short submissions on the form of the orders on or before 23 February 2016. The ACCC filed such submissions in the time frame provided for in the Court order; Clinica and Mr Laski did not file any submissions.
On 26 February 2016, Swishette and Letore filed an interlocutory application dated 23 February 2016 by which they applied for a series of orders, both interlocutory and permanent. The application was wholly concerned with the funds held in the ACCC’s solicitors’ trust account pursuant to the freezing orders, representing the proceeds of sale of the Brighton Property. The final orders sought by Swishette and Letore included an order to the effect that the ACCC’s application for an order that Mr Laski give a direction regarding the proceeds of sale of the Brighton Property be refused. This was a matter that had already been dealt with in Clinica (No 2). The interlocutory application filed by Swishette and Letore did not seek an order that they be joined as parties to the proceeding, but such an order was sought orally at the hearing of the application (referred to below).
On 11 March 2016, an affidavit of Mr Franzese was filed in support of Swishette and Letore’s interlocutory application. This affidavit annexed a copy of the minutes of a meeting of the directors of Swishette dated 11 June 2015. The meeting was attended by Mr Laski as the sole director. Mr Laski was the chairperson and signed the minutes as such. The minutes record a resolution (referred to in these reasons as the “June 2015 Resolution”) that the net income of the Trust for the year ended 2015 be distributed in the following proportions: (a) 15% of the net income to Ms Laski; (b) 15% of the net income to Ms Hatch; and (c) 70% of the net income to Letore. The resolution had not been in evidence during the trial of the Clinica Proceeding. It is an agreed fact in the present proceeding that this (ie, 11 March 2016) was the first time the ACCC received the resolution (T244-245).
On 22 March 2016, a hearing took place in relation to Swishette and Letore’s interlocutory application and an interlocutory application filed by the ACCC in relation to the ‘carve outs’ from the freezing order.
On 23 March 2016, Mortimer J handed down judgment in relation to those interlocutory applications: Clinica (No 3). In relation to Swishette and Letore’s interlocutory application, her Honour made an order that Swishette be joined to the proceeding, but otherwise dismissed the application. Among other things, her Honour decided that it would be an abuse of process to allow Swishette and Letore to re-open the trial, adduce further evidence and make new arguments in circumstances where, her Honour considered, their interests had in substance been represented in the Clinica Proceeding all along and the companies had acquiesced in the manner in which the proceeding had been conducted (see [67]).
On the same day, Mortimer J made declarations and orders, and provided reasons for judgment explaining the final form of the declarations and orders: Australian Competition and Consumer Commission v Clinica Internationale Pty Ltd (In Liquidation) (No 4) [2016] FCA 286.
Paragraph 9 of the orders made on 23 March 2016 was to the effect that Clinica and Mr Laski refund to clients of Clinica any moneys paid by the clients that were paid under, referable to or otherwise used in relation to the Regional Sponsorship Agreements, the Clinica Program or the Cleaning Course, together with interest, calculated from the time when the clients made the payments until the refunds are provided, at the rate set out in s 2 of the Penalty Interest Rates Act.
Paragraph 10 of the orders required Mr Laski to execute a written direction, and was in the following terms:
For the purposes of complying with paragraph 9 of these orders, on or before 5:00pm on the day after the making of these Orders, Mr Radovan Montague Laski must execute and submit to the applicant a written direction in the form of Annexure A to these Orders, on behalf of his companies Swishette Pty Ltd ACN 094 286 085 and Letore Pty Ltd ACN 005 733 013.
Annexure A to the orders made on 23 March 2016 was as follows:
ANNEXURE A
DIRECTION TO BE GIVEN BY RADOVAN MONTAGUE LASKI IN FEDERAL COURT OF AUSTRALIA PROCEEDING VID 252 OF 2015
I, Radovan Montague Laski, hereby direct on behalf of Swishette Pty Ltd ACN 094 286 085 (Swishette) and Letore Pty Ltd ACN 005 733 013 (Letore), that the whole of the funds held in the applicant’s solicitors’ trust account (being the proceeds of sale of the property of Swishette situated at 5 Maroona Road, Brighton, better described in certificate of title Volume 4249 Folio 755) pursuant to the freezing order made on 4 August 2015 (as extended or varied on 12 August 2015, 10 September 2015, 14 October 2015, 22 October 2015 and as consolidated on 9 March 2016) be:
(a) maintained in the applicant’s solicitors’ trust account; and
(b)subject to any further orders of the Court, withdrawn and applied only to effect the refunds referred to in paragraph 9 of the orders of the Court made on 23 March 2016.
Direction on behalf of Swishette Pty Ltd by authority of the director in the presence of: ________________
________________
Witness Radovan Montague Laski
Sole Director and SecretaryDate: Direction on behalf of Latore Pty Ltd by authority of the director in the presence of:
________________ ________________
Witness Radovan Montague Laski
Sole Director and SecretaryDate:
Paragraphs 11 to 17 of the orders contained ancillary orders that provided a mechanism for the payment of refunds to clients of Clinica from the funds held in the ACCC’s solicitors’ trust account.
I note for completeness that a further hearing took place before Mortimer J on 17 May 2016 in relation to whether Ms Laski was secured creditor of Swishette, in respect of loans made by her to Mr Laski in the sum of $215,000 (being an issue reserved for further consideration by paragraph 11 of the 23 March 2016 orders). Her Honour handed down judgment on 15 July 2016: Australian Competition and Consumer Commission v Clinica Internationale Pty Ltd (In Liquidation) (No 5) [2016] FCA 811.
The appeal to the Full Court
Swishette appealed, and Letore sought leave to appeal, from some of the orders made on 23 March 2016. In essence, they contended that the Court did not have power under s 239 of the Australian Consumer Law to order Mr Laski to give a direction as sought by the ACCC and ordered by the Court.
The premise of Swishette and Letore’s submissions was that Swishette and Letore had not contravened the Australian Consumer Law, nor were they persons “involved” in the contraventions by Clinica of the Australian Consumer Law. For example, in [1] of their appeal submissions, Swishette and Letore submitted that neither Swishette nor Letore “was the subject of allegations by the ACCC, nor was either company involved in the contraventions”. In these circumstances, it was contended, an order could not be made under s 239, in effect, against Swishette and Letore.
The ACCC, in its submissions in relation to the appeal, accepted that Swishette and Letore were not persons “involved” in Clinica’s contraventions of the Australian Consumer Law. In particular, at [40] of the ACCC’s appeal submissions, the ACCC stated: “It may be accepted that s 239 does not in terms permit orders directed to third parties not involved in the contravention (as was the position of Swishette or Letore).”
On 15 March 2017, the Full Court allowed the appeal. In brief summary, the Full Court accepted Swishette and Letore’s contention that the Court did not have power under s 239 to make paragraph 10 of the 23 March 2016 orders: Swishette at [16]. In the first part of the Full Court’s reasons, describing the decision below, the Full Court said at [7]:
The combined effect of s 239(1) and (2) is that s 239, in unqualified terms, only empowers the Court to make an order against the person who engaged, or was involved, in the contravening conduct. Whilst neither Swishette nor Letore was involved in the contravening conduct of Clinica and Mr Laski, the primary judge held that Order 9 and Order 10 were consistent with this requirement.
(Emphasis added.)
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