Australian Competition and Consumer Commission v Unique International College (No 1)
[2016] FCA 427
•26 April 2016
FEDERAL COURT OF AUSTRALIA
Australian Competition and Consumer Commission v Unique International College (No 1) [2016] FCA 427
File number: NSD 1277 of 2015 Judge: PERRAM J Date of judgment: 26 April 2016 Legislation: Competition and Consumer Act 2010 (Cth) Sch 2
Federal Court Rules 2011 (Cth)
Cases cited: Tamaya Resources Limited (in liq) v Deloitte Touche Tohmatsu (A Firm) [2016] FCAFC 2 Date of hearing: 13 April 2016 Registry: New South Wales Division: General Division National Practice Area: Commercial and Corporations Sub-area: Regulator and Consumer Protection Category: No Catchwords Number of paragraphs: 40 Counsel for the Applicant: Dr S Pritchard SC and Mr D Tynan Solicitor for the Applicant: Australian Government Solicitor Counsel for the Respondent: Mr D Pritchard SC and Mr R Davies Solicitor for the Respondent: Minter Ellison ORDERS
NSD 1277 of 2015 BETWEEN: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
Applicant
AND: UNIQUE INTERNATIONAL COLLEGE
Respondent
JUDGE:
PERRAM J
DATE OF ORDER:
20 APRIL 2016
THE COURT ORDERS THAT:
1.The applicants' interlocutory application of 24 March 2016 be dismissed.
2.The applicants give discovery of categories 1-3 and 5-6 set out in annexure A to the respondent's interlocutory application dated 24 March 2016 in a manner agreed between the parties or, failing that, determined by the Court.
3.The respondent's interlocutory application be otherwise dismissed.
4.No order as to costs on either application.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
PERRAM J:
A. Issues for Determination
There are three applications before the Court: first, an application by the applicants to amend their case by seeking leave to file a proposed amended originating application and a proposed amended statement of claim; secondly, another application by the applicants for further discovery if the pleadings be expanded in the manner sought in their first application; and, thirdly, an application by the respondent for discovery in relation to a narrow issue referred to as ‘Category 4’.
For the reasons which follow, all three applications will be dismissed.
B. The Amendment Application
As the case is presently configured, the applicants allege that between July 2014 and September 2015 the respondent engaged in various activities which they characterise as unconscionable within the meaning of s 21 of the Australian Consumer Law (‘ACL’), which is contained in Schedule 2 to the Competition and Consumer Act 2010 (Cth). Other related allegations of a similar kind are also made. The amendments now proposed by the applicants would expand the period of time over which these allegations extend from the range July 2014 – September 2015 to the range 1 January 2014 – 30 November 2015.
The matter is shortly to be heard and is listed for a two week trial commencing on Monday 6 June 2016. On or around 3 March 2016, the applicants served on the respondent additional evidence upon which they will rely to make good their case based upon this expanded period. It consists of the evidence of eight witnesses. With one minor exception, this evidence is not said to relate to the case as it is currently pleaded.
The solicitor for the respondent, Ms Groshinski, has sworn an affidavit dated 4 April 2016. In this affidavit, she explains that as currently pleaded, the conduct case with which the respondent has been faced has consisted in the main of allegations made about its conduct towards six identified consumers on three separate occasions. If the period is to be expanded then the respondent will be required, according to Ms Groshinski, to meet now a case involving a further eight consumers in respect of an additional seven incidents. Ms Groshinski then gives evidence of the steps which would need to be taken to meet this new material. There is no need to set these steps out in any detail but they include familiar matters such as the interviewing of further witnesses and the inspection of relevant documents and files.
Ms Groshinski then identifies certain ways in which the resources of the respondent are presently being diverted. These are the necessity of responding to a related case pending before the Administrative Appeals Tribunal, an audit by the Department of Education and Training of the respondent’s enrolment procedures, and a dispute with the Australian Council for Private Education and Training about the respondent’s membership of that organisation.
At paragraph 26 of her affidavit Ms Groshinski then swears:
‘If the Applicants’ are allowed to amend their particulars relied on for Part 2, I do not consider that the Respondent will be in a position to properly prepare its evidence within a reasonable time prior to the fixed hearing date especially having regard to the need to complete all other preparation for trial.’
Ms Groshinski was not cross-examined about this, although this may not take matters very far in circumstances where there was no right to cross-examine her. The applicants did, however, advance in their submissions reasons why I ought perhaps not to accept the paragraph.
These submissions were four in number. First, it was said that the processes of interviewing witnesses, inspecting files and so on which Ms Groshinski said would have to be undertaken to meet the evidence of the eight fresh witnesses were ‘hardly unusual steps in preparing a case’. But I do not think Ms Groshinski was suggesting otherwise; her point was that these steps could not be properly done ‘within a reasonable time prior to the fixed hearing date’. Although there is perhaps some ambiguity about what that expression literally means, I read it as suggesting that the necessary and proper preparations could not be completed prior to the trial’s commencement. Certainly it was not submitted that I should read the statement any other way. In that circumstance, it does not appear to me of any significance that the steps contemplated by Ms Groshinski were, in some ways, routine ones for a litigator.
The second submission was that the respondent had known the identities of the six consumers upon which the applicants rely in the current version of the pleadings since 1 December 2015, and had had at least four months to prepare its response to that evidence. This submission is good as far as it goes, but it does not seem to me to go very far. As I read Ms Groshinski’s evidence, her complaint was not about those six witnesses in respect of whom she said the respondent had been preparing, but rather in respect of the eight new witnesses brought forward to support the case based on the expanded period. It is not to the point, so it seems to me, that the respondent has had an adequate opportunity to meet the evidence about the six current six consumers when the argument under consideration is that the respondent cannot meet the evidence of the eight new consumers in the time available.
The third submission was that the respondent has been aware of the identities of the eight new consumers since 3 March 2016. Although the evidence was a little unclear about this, both parties’ written submissions proceeded on the assumption that the respondent had received lay evidence on that day disclosing at least those matters: see the applicants’ submissions at paragraph [15] (‘The Applicants’ consumer evidence was served on 3 March 2016 in accordance with the Court’s timetable’); respondent’s submissions at paragraph [5] (‘…lay evidence filed and served by the Applicants on 3 March 2016 … appears to incorporate eight new incidents…’); cf. the applicants’ solicitor’s affidavit of 24 March 2016 which does not say when the fresh material was served and Ms Groshinski’s affidavit of 4 April 2016 at paragraphs [18] and [19], which says that the applicants’ lay evidence was served on 3 March 2016 and 31 March 2016, but does not say upon which of these dates the evidence of the eight new witnesses was served.
However, the mere fact that the evidence was served on 3 March 2016 (assuming that was when it was served) did not cast upon the respondent any obligation to respond to it, because this material lay outside the applicants’ pleaded case. I do not regard the respondent as being obliged to take steps to respond to material outside the pleaded case until such time as the pleadings are amended to expand the period. The question, therefore, is not how long the respondent has had the new material; it is when was it was first obliged to deal with it? That time has not yet arrived.
The fourth submission was that the respondent was not, in any event, justified in limiting the scope of its preparations to the six consumers mentioned in the current form of the pleading. This was said to be because a significant part of the applicants’ case was concerned not with the position of individual consumers but, instead, with establishing the existence within the respondent of ‘a system of conduct or pattern of behaviour’ which was unconscionable. This part of the case, it was submitted, was not concerned with particular consumers, although it is likely that evidence about particular consumers might be probative of the existence of the suggested system or pattern. The next step in the argument was to observe that the eight fresh witnesses were relevant to this general case which had already been pleaded but they were not relevant to the case of six particular consumers identified in the current pleading. Although this was not expressly articulated, the final step in the argument was to observe that the respondent could hardly complain that it had to deal with additional consumers beyond the six identified in the current pleadings, because the possibility that it would have to do so had always been open on the pleading of the general case.
Parts of this submission should be accepted but overall I do not accept it. The applicants have pursued two quite distinct cases in the current form of the pleadings; one concerned with establishing an unconscionable pattern of behaviour or system of conduct, the other with establishing that the respondent behaved unconscionably towards the six nominated consumers.
The first case is found in Part 2 of the statement of claim and is entitled ‘Part 2: Unique’s Marketing and Enrolment Process’. It runs from paragraph 21 to paragraph 30, in which it culminates. Paragraph 30 alleges:
‘30.By reason of the matters pleaded in paragraphs 21 to 27 and 29 above, Unique, in the relevant period, has, in trade or commerce, in connection with the supply or possible supply of Unique courses to consumers, engaged in a system of conduct that is, in all the circumstances, unconscionable, within the meaning of, and in contravention of, s 21 of the ACL.’
This allegation needs to be read alongside parts of s 21 of the ACL. The relevant parts are as follows:
‘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.
…..
(4) It is the intention of the Parliament that:
…..
(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;
….’
It will be seen that s 21(4)(b) expressly contemplates the pursuit of a case of unconscionability which transcends the positions of individuals. It is tolerably clear that this is the kind of case being pursued in paragraph 30 of the statement of claim.
Any doubt that this was, indeed, what the applicants had in mind must have been dispelled as a result of an exchange of correspondence between the parties’ solicitors in relation to particulars. I will return to that exchange in a moment, but to set the scene it is useful to know that paragraphs 21 to 27 and 29 of the statement of claim make generic allegations about the way in which the respondent behaved towards unidentified consumers. For example, paragraph 21 and one of its subparagraphs, 21.1, allege that:
’21.During the relevant period, Unique had a process for marketing Unique courses, and enrolling consumers in Unique courses, which consisted of the following:
21.1Unique targeted particular locations, including rural and remote towns and indigenous communities and areas with significant populations of low socio-economic status for marketing and enrolling consumers in its courses (the locations);’
The respondent’s solicitors wrote to the applicants’ solicitors on 18 November 2015 seeking a number of further and better particulars. Some of these related to the identification of the consumers referred to in some of the paragraphs in Part 2 of the statement of claim. That question belied an erroneous assumption that Part 2 was about individual consumers. In their response of 1 December 2015, the applicants’ solicitors pointed this out. Because I think it is of some importance, I will set out paragraphs 3 to 5 of this letter as they provide useful context in explaining some of the confusion which has arisen. They read:
‘3.Paragraphs 21 to 29 are located in Part 2 of the SOC. That Part is entitled “Unique’s Marketing and Enrolment Process.” In summary, the Applicants contend that:
3.1Unique adopted a process for marketing Unique courses and enrolling consumers in Unique courses;
3.2the process consisted of a number of steps taken by Unique, including at particular locations (SOC paragraph 21);
3.3the process involved Unique failing to take other steps (SOC paragraph 22);
3.4as a consequence of that process, Unique enrolled in its courses consumers who were likely to include and did include consumers with certain characteristics (SOC paragraph 23);
3.5in adopting and implementing that process, Unique engaged in unconscionable conduct within the meaning of s 21 of the Australian Consumer Law (ACL).
4.The focus of the Applicants’ case in Part 2 of the SOC is on a process pursuant to which consumers were enrolled and payments were made in the numbers and amounts pleaded in paragraphs 16 to 20 of the SOC. Those numbers and payments, as well as the locations at which consumers were enrolled are matters for evidence. The focus in Part 2 of the SOC is not on conduct in relation to six specific individual consumers. As paragraph 27 of the SOC indicates, the conduct in relation to specific individual consumers in Part 3 of the SOC is pleaded as examples of the implementation of the process pleaded at paragraphs 21 to 26 (as well as grounding the further and different contraventions of the ACL pleaded in Part 3 of the SOC).
5.Accordingly, most of Unique’s requests for particulars in relation to Part 2 of the SOC are not proper requests for particulars of the allegations in paragraph 30 of the SOC of unconscionable conduct by reason of the marketing and enrolment process pleaded in paragraphs 21 to 27 and 29.’
(emphasis in original)
Whatever doubts might have existed about the operation of paragraph 30 before this letter were, I think, dispelled by it (and that so notwithstanding the absence of any explicit reference to paragraph 30).
I accept, therefore, the first step in the applicants’ argument, namely, that their pleading contained allegations which were broader than merely the allegations concerning the six consumers. And I accept part of the second step in the applicants’ argument too: the allegations about these additional eight consumers could, but for one important matter, be relevant to the applicants’ system of conduct case under s 21 of the ACL, in the sense that individual instances with particular consumers might well reveal a system or pattern of conduct. The important matter is that the case pleaded in Part 2 is a case concerned with the limited period of 1 July 2014 to 30 September 2014, whereas the new witnesses (with one minor exception) do not relate to this period.
That matter means, however, that the argument fails. What the respondent was on notice of was a case about a pattern or system based on one time period; what these witnesses go to is a pattern or conduct case based on another. Assuming everything in the applicants’ favour in terms of what preparatory steps the respondent should have taken, those steps could not have included foresight about these new witnesses.
The argument also fails because whilst it may be true (as the applicants submit) that evidence about any consumer in the period could be relevant to the allegation in paragraph 30, in the sense that if it were led a relevance objection would fail, this does not entail that fair or reasonable notice of it has been given. It is unclear on the face of paragraph 30 how the system case is to be proved and it is perhaps unfortunate that the respondent has not sought to inquire how the applicants propose to prove the pattern or system by requesting particulars of it. But even so, it is not credible to suggest that simply by contemplation of Part 2 the respondent should have foreseen the possibility of these witnesses.
For those reasons, I reject the proposition that Part 2 of the pleading meant that it was the respondent’s fault if it could not meet the case in time.
Further, I accept Ms Groshinski’s evidence that if the amendments be permitted, the trial will not be able to be fairly conducted with the current hearing dates.
One has the situation, therefore, that the respondent is unable to meet the proposed new case by the trial date and that its inability to do so does not spring from any unreasonable behaviour on its part.
What, then, should happen? One solution would be to allow the amendments but to postpone the trial. There are, however, difficulties with this approach. One is that as my list currently stands, I would not be able to hear this case until May next year, although there is some chance I could hear it in September. The severity of that proposition is reduced by the likelihood that cases presently listed for hearing for the balance of the year may settle. But this is by no means certain, and it is still less certain that all parties would necessarily be available even if such dates came into view.
Against that it may be said that there is a certain public interest in ensuring that the full circumstances of the applicants’ case come before the Court. Although the allegations are untested, a considerable amount of public money may be involved and I accept, at least for the purposes of the present argument, the public interest in an appropriate case of the ACCC enforcing its legislation.
There are, however, countervailing matters. Over objection this case was given an early hearing date at the request of the respondent. The evidence before me demonstrates that the respondent has not been able to enrol any students since 4 December 2015 as a result of administrative action, including orders made by the Administrative Appeals Tribunal, relating to some of the matters the subject of these proceedings. Further, its Commonwealth funding has also been cut. The degree to which these elements of administrative action are intertwined with this case is not entirely clear to me but I have no particular difficulty in accepting that the outcome of these proceedings is likely to affect the resolution of these issues. It was for that reason that I originally granted the case some priority over the other cases which are pending. It continues to be a legitimate concern.
There are some other discretionary matters which should be mentioned. The first of these concerns the importance of the proposed amendments. Whilst I do not think that issue should be dispositive at this stage there does, on its face, appear to be something of a forensic lacuna in the applicants’ case under Part 2. The eight consumers are to be brought forward (in addition to the initial six) to prove the existence of a pattern or system of conduct. The applicants have alleged in paragraph 16 that in the period from 1 July 2014 to 30 June 2015, the respondent enrolled approximately 3,600 students. To conclude from the 14 students which the applicants have now selected that a system or pattern generally existed it will be necessary to explain why that particular 14 (or 6 or 8) are representative of the 3,600 – for unless they can be said to be representative it will not be possible, or at the least it may be difficult, to demonstrate that the pattern or system exists. Although I do not regard this as a factor which should of itself determine the present application, it does seem to me that it may suggest that the amendments may not be of the highest value. Nevertheless, I proceed upon the basis that the proposed amendments are not frivolous.
It is not entirely clear to me why the additional evidence was only forthcoming on 3 March 2016. I was told that it was because the material had only recently become available. However, this does not really tell me anything. The evidence of Mr Garey, the solicitor for the applicants, did not explain when the material became available or why it was not available at the time the proceedings were commenced (save that it became available only after filing). I do not think I can really say therefore why the Court is being asked to exercise the amendment power. Obviously the material is late in arriving but the real question is why is it late? This I do not know. If it was because the eight new consumers had only just come forward this would tend to support the idea that the interests of justice favoured granting the amendments. If it was because the eight statements were taken before the proceedings were commenced but were accidently mislaid this would be a different story. Because the evidence does not allow me to understand why the applicants find themselves having to seek leave to amend a short time before the trial, they thwart the assessment of the interests of justice which the exercise of that power calls for: cf. Tamaya Resources Limited (in liq) v Deloitte Touche Tohmatsu (A Firm) [2016] FCAFC 2 at [209]. This is a matter weighing against the applicants.
In those circumstances I refuse the amendment application. Allowing it would derail the hearing to the prejudice of the respondent and the applicants have not adequately explained the delay in bringing the new witnesses forward.
C. The Applicants’ Discovery Application
The applicants sought further discovery from the respondent relating to the eight new consumers. Since I have not allowed those amendments no issue about this arises. The application for discovery will be refused.
D. The Respondent’s Discovery Application
Part of the applicants’ case against the respondent is that it targeted disadvantaged groups of consumers to sign up under the VET FEE-HELP Scheme. The respondent wishes to demonstrate that one of the purposes for which the Scheme was developed was precisely to encourage the provision of education to such disadvantaged groups. This was said to provide an alternate, and less sinister, explanation of why disadvantaged consumers were being approached.
The respondent, therefore, seeks discovery of ‘Category 4’, which is in these terms:
‘4.Documents that record why the VET FEE-HELP Scheme (Scheme) was established and the purpose of subsequent amendments to the Scheme relating to the scope of courses, providers and students to whom the Scheme applies. This includes documents that relate to the introduction or issues raised in the legislative instruments and reports in Annexure C including documents recording internal analysis, policy recommendations and policy decisions.’
The respondent submits that this category will bring forth material which is directly relevant to an issue in the proceedings within the meaning of r 20.14 of the Federal Court Rules 2011 (Cth). The respondent submits that this is so because of paragraph 21.1 of the statement of claim. That paragraph is set out above at [18].
Relevantly, the allegation is denied at paragraph 21 of the amended defence. The effect of the pleadings, therefore, is that there is an issue between the parties as to whether the respondent did, in fact, target communities with low socio-economic status. That is not the same as an admission that such communities were targeted with the assertion of a traverse that this was because it was government policy under the VET FEE-HELP Scheme that precisely those communities should be targeted.
That issue does not, therefore, arise on the current form of the defence. Accordingly, Category 4 is not directly relevant to an issue under r 20.14. The application for discovery will be dismissed insofar as it relates to Category 4. The applicants consented to discovery in relation to categories 1-3 and 5-6.
E. Disposal
I make the following orders:
1.The applicants’ interlocutory application of 24 March 2016 be dismissed.
2.The applicants give discovery of categories 1-3 and 5-6 set out in annexure A to the respondent’s interlocutory application dated 24 March 2016 in a manner agreed between the parties or, failing that, determined by the Court.
3.The respondent’s interlocutory application be otherwise dismissed.
4.No order as to costs on either application.
Either party may approach my chambers, if necessary, in relation to order 2.
I certify that the preceding forty (40) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Perram. Associate:
Dated: 26 April 2016
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