Commissioner for Consumer Affairs v Goros (No 2)
[2023] SASC 1
•18 January 2023
Supreme Court of South Australia
(Civil)
COMMISSIONER FOR CONSUMER AFFAIRS v GOROS & ANOR (No 2)
[2023] SASC 1
Judgment of the Honourable Chief Justice Kourakis
TRADE AND COMMERCE - COMPETITION, FAIR TRADING AND CONSUMER PROTECTION LEGISLATION - CONSUMER PROTECTION
TRADE AND COMMERCE - COMPETITION, FAIR TRADING AND CONSUMER PROTECTION LEGISLATION - ENFORCEMENT AND REMEDIES - PENALTY
TRADE AND COMMERCE - COMPETITION, FAIR TRADING AND CONSUMER PROTECTION LEGISLATION - ENFORCEMENT AND REMEDIES - PENALTY - PECUNIARY PENALTIES: QUANTUM AND LIKE MATTERS
CORPORATIONS - MANAGEMENT AND ADMINISTRATION - DUTIES AND LIABILITIES OF OFFICERS OF CORPORATION - DISQUALIFICATION FROM MANAGEMENT OF CORPORATION - BY COURT ORDER
TRADE AND COMMERCE - COMPETITION, FAIR TRADING AND CONSUMER PROTECTION LEGISLATION - ENFORCEMENT AND REMEDIES - INJUNCTIONS
TRADE AND COMMERCE - COMPETITION, FAIR TRADING AND CONSUMER PROTECTION LEGISLATION - CONSUMER PROTECTION - MISLEADING OR DECEPTIVE CONDUCT OR FALSE REPRESENTATIONS
The first respondent is the sole director, secretary and shareholder of the second respondent, a company which provided demolition and waste removal services. Throughout 2016, the respondents coerced consumers into paying additional fees to remove and dispose of asbestos contaminated material in circumstances where there was no, or in one demolition, an unsubstantial amount, of asbestos on site.
On 23 September 2022, this Court made declarations that each of the respondents had contravened the Australian Consumer Law (ACL) by, inter alia, making false and misleading representations, wrongly accepting payment, and engaging in unconscionable conduct contrary to sections 29(1), 36(1) and 21(1) of the ACL, respectively.
Subsequently, the applicant made submissions on penalties and costs. There was no appearance for the respondents.
Held:
1.The Court makes compensatory orders in respect of each of the consumers who made payments in accordance with Appendix A.
2.The Court imposes, pursuant to s 224 of the ACL, pecuniary penalties on the first respondent of $20,000, $20,000, $25,000, $20,000, $40,000, $25,000, $40,000 and $25,000 in respect of his contraventions of the provisions of the ACL against each of the consumers Mr Berry, the Cvorkovs, Ms Ho, Mr Ji, Mr Penna, Mr Masters, Dr Ahmed and Mr and Mrs Nazari, respectively.
3.The Court imposes, pursuant to s 224 of the ACL, pecuniary penalties on the second respondent of $40,000, $40,000, $50,000, $40,000, $80,000, $50,000, $80,000 and $50,000 in respect of its contraventions of the provisions of the ACL against each of the consumers Mr Berry, the Cvorkovs, Ms Ho, Mr Ji, Mr Penna, Mr Masters, Dr Ahmed and Mr and Mrs Nazari, respectively.
4.The first respondent is disqualified from managing a corporation for a period of 10 years commencing on this day pursuant to s 248 of the ACL.
5.The first respondent is restrained from making a representation, in the course of providing demolition or waste removal or storage services, that a building, or buildings or other waste, does, or may, contain hazardous material pursuant to s 232 of the ACL.
6.The first respondent is restrained from claiming or receiving any payment for the purported supply of demolition or waste removal or storage services in respect of hazardous material pursuant to s 232 of the ACL.
7. The respondents are to pay the applicant’s costs on a lump sum basis in the amount of $50,000.
Australian Consumer Law ss 21(1), 29(1), 36(1), 224, 224(4), 232, 232(5), 248; Australian Competition and Consumer Act 2010 (Cth) Sch 2; Fair Trading Act 1987 (SA), referred to.
Australian Securities and Investments Commission v Adler (2002) 42 ACSR 80; Australian Competition and Consumer Commission v ABG Pages Pty Ltd [2018] FCA 764; Commissioner for Consumer Affairs v Goros & Anor [2022] SASC 107; Commissioner for Consumer Affairs v Koutropoulos [2018] SASC 79; Commissioner for Consumer Affairs v Lukeleo [2017] SASC 168; Director of Consumer Affairs Victoria v Gibson (No 3) [2017] FCA 1148, considered.
COMMISSIONER FOR CONSUMER AFFAIRS v GOROS & ANOR
(No 2)
[2023] SASC 1Civil
KOURAKIS CJ:
On 23 September 2022 I found that John Goros and Demolition Experts Pty Ltd (DE) breached a number of provisions of the Australian Consumer Law (SA) (ACL) enacted in South Australia by the Fair Trading Act 1987 (SA) which adopts Schedule 2 of the Competition and Consumer Act 2010 (Cth).
The breaches were in connection with the provision of services to demolish residential buildings, and clear away and dump the waste, to allow the building of new homes for the consumers of those services. The consumers are set out in paragraph 18 of the primary judgment.[1] In summary, Mr Goros represented to the consumers that the rubble from the demolitions was contaminated by asbestos and that additional charges were payable for the cartage and dumping of the waste. In truth there was no asbestos in the demolition rubble taken from the properties of each of the consumers, save, perhaps, in the case of Mr Penna. I was not able to exclude the possibility that some asbestos had been used to box up the foundations of his house and that therefore there may have been some insignificant contamination of the demolition rubble by that asbestos boxing.
[1] Commissioner for Consumer Affairs v Goros & Anor [2022] SASC 107.
I found that Mr Goros and DE made:
(a) false and misleading representations as to the need to remove asbestos and asbestos contaminated material from each of the consumers’ properties contrary to s 29(1)(l) of the ACL;
(b)consequential false and misleading representations as to the price of the demolition and removal services contrary to s 29(1)(i) of the ACL; and
(c)false and misleading representations as to the standard, quality and grade of construction and demolition waste removal, transport and disposal services provided contrary to s 29(1)(b) of the ACL.
I also found that Mr Goros and DE wrongly accepted payment from each of the consumers, other than the Nazaris, for the removal, transport and disposal of asbestos contaminated material when they had no intention to provide such services, knowing that the material was not contaminated or substantially so, in contravention of s 36(1) of the ACL.
Finally, I found that Mr Goros and DE had engaged in unconscionable conduct in respect of each of the consumers in contravention of s 21(1) of the ACL in that they exploited their position and bargaining power, used undue pressure and did not act in good faith.
The additional costs charged by Mr Goros and DE varied between $5,000 and $31,600 in respect of each consumer. A total of $123,437 was dishonestly claimed. All consumers paid the amounts demanded save for Mr and Mrs Nazari, who were charged, but never paid, $11,517.89. I make compensatory orders in respect of each of the consumers who made payments in accordance with Appendix A.
Section 224 of the ACL provides that if a court is satisfied that there has been a breach of a provision of Part 2.2 of the ACL (unconscionable conduct), or a provision of Part 3.1 (unfair practices which include a breach of s 29 and s 36 of the ACL) the court may order the person to pay the Commonwealth, State or Territory, as the case may be, such pecuniary penalty in respect of each act or omission by that person to which that section applies as the court determines appropriate. The maximum applicable pecuniary penalties at the time of the breaches were $1.1 million in respect of DE, and $220,000 in respect of Mr Goros.
The Court must have regard to all relevant matters including the nature and extent of the act or omission, the resulting loss or damage, the surrounding circumstances, and any similar conduct in which the respondent has engaged.
Section 224(4) of the ACL provides that if conduct constitutes a contravention of two or more provisions rendering the person liable to pecuniary penalty, a person is not liable to more than one pecuniary penalty in respect of the same conduct.
The conduct necessary and sufficient to breach any one provision will seldom be necessary and sufficient to breach another provision. Moreover, in such a case the defence of autrefois convict is likely to be available. It follows that s 224(4) of the ACL refers to a broader concept of conduct than the elements of the contravention itself. It must refer to the matrix of interconnected facts and circumstances in which two or more provisions of the ACL were breached. In this case these circumstances are the representations, communications, transactions and work done in respect of the provision of demolition, and waste removal, services provided to each consumer. Accordingly, I will impose one pecuniary penalty for the several breaches of s 29, the breach of s 36 and the breach of s 21 of the ACL in respect of each consumer.
There is no doubt that the conduct in each case was serious. Mr Goros deliberately and consciously lied to each consumer. His deceit was generally effective because it exploited the high levels of anxiety which the public generally has, and the consumers, in particular, had, about the health risks of asbestos contamination. Building a new home is a major financial, and emotionally intense, undertaking. Mr Goros played on the consumers’ fears of the escalating costs and building delays they would face if they did not immediately submit to his demands. Mr Goros’ predatory scheme was carefully planned and cleverly executed. He applied the same template from one consumer to another. The amounts extracted were substantial in dollar terms, but also represented between 50 per cent and more than 100 per cent of the quoted price for the demolition and waste removal services. The additional charges are likely to have materially increased the overall building costs. Mr Goros pressured all of the consumers to extract the payments. He was at his worst with the Nazaris whom he bullied. Fortunately, they resisted making the exorbitant payment he was demanding.
The contraventions committed against each consumer were separated in time and place. This was not a single continuous course of conduct but a multiplicity of separate incursions against the provisions of the ACL. There is little reason therefore to moderate the pecuniary penalties imposed for the contraventions in respect of each consumer as might be appropriate in a case in which the contravening conduct against multiple consumers overlaps.
I have had regard to the pecuniary penalties involved in the broadly comparable actions set out in the schedule to the Commissioner’s submissions.
The contraventions of Mr Goros and DE are much more serious than the breaches considered in Commissioner for Consumer Affairs v Lukeleo Pty Ltd[2] and Commissioner for Consumer Affairs v Koutropoulos[3] for a number of reasons. First, Mr Goros’ deceit was more blatant. Secondly, Mr Goros unconscionably preyed on the anxieties and vulnerabilities of his consumers to pressure them to make the payments before they had an opportunity to question his claims, and perhaps, discover his lies. Thirdly, Mr Goros extracted significantly greater amounts and he has made no repayments.
[2] [2017] SASC 168.
[3] [2018] SASC 79.
Mr Goros’ conduct was also more serious than the cold-call marketing the subject of the proceedings in Australian Competition and Consumer Commission v ABG Pages Pty Ltd[4].
[4] [2018] FCA 764.
On the other hand, Mr Goros’ conduct does not attract the opprobrium of the conduct of the defendant in Director of Consumer Affairs Victoria v Gibson (No 3)[5] who falsely claimed to have contracted brain cancer and then dishonestly promised that part of the proceeds of the sales of her smart phone-app would be donated to charities.
[5] [2017] FCA 1148.
In determining the appropriate pecuniary penalties, I proceed on the basis that DE was simply the corporate alter-ego of Mr Goros.
I also take into account that Mr Goros’ demolition services provided through the business Hindmarsh Demolition were a substantial enterprise. At least three employees were involved in the undertaking of the work for the consumers. Mr Goros and DE operated a large depot at Rosewater. In 2016 Hindmarsh Demolition deposited in excess of 600 truckloads of waste at Resource Co Facilities alone. Waste was also deposited at other facilities. I accept the Commissioner’s submission that Mr Goros and DE operated a small to medium sized enterprise which would have generated substantial profits. Mr Goros is likely to have sufficient assets from which to pay substantial pecuniary penalties.
Mr Goros has a history of serious criminal offending for dishonesty. Mr Goros was declared bankrupt on 1 September 1997. Between March and May 1997 he committed four offences of obtaining cheques by false pretences as part of a fraudulent scheme to obtain finance for the purchase of a nursing home. The cheques totalled almost $1.2 million. The bank realised assets over which it had taken security for the loans but nonetheless suffered a loss of $741,306. Mr Goros was sentenced to two years, eight months’ imprisonment in the Magistrates Court.
On 31 March 2005 Mr Goros was sentenced to five years’ imprisonment, with a non‑parole period of three years, for offences committed between 1999 and 2000, including an attempt to obtain a cheque in the sum of $5.5 million from the ANZ Bank to fund his purchase of a motel. Other offences committed by him included obtaining finance to purchase a home, and to purchase and refinance a boat.
Substantial pecuniary penalties must be imposed in these proceedings because of the planned systematic nature of Mr Goros’ deception, and his persistence in obtaining or attempting to obtain the extra payments. Mr Goros, of course, is not to be penalised again for his past offending. However, his past offences of dishonesty highlight the importance of personal deterrence in fixing pecuniary penalties in this action because Mr Goros is a recalcitrant who has no moral compass by which to reform himself.
Mr Goros has not made any submissions or provided any evidentiary material in relation to the penalty proceedings. Having regard to the exorbitant payments he obtained in respect of seven of the consumers, and the extent of his business generally, there is no reason to doubt his financial capacity to pay. There is no reason to reduce the penalties for reasons of totality.
However, I have regard to DE’s status as Mr Goros’ alter ego and the related circumstance that they shared the single source of income generated by the business of Hindmarsh Demolition to moderate the penalty imposed on DE in relation to the higher maximum penalty applicable to corporations. I also observe that the higher maximum applicable to corporations recognises the greater range in the capital assets and turnovers of corporations, relative to individuals, which may require heavier penalties for effective deterrence.
I impose pecuniary penalties on Mr Goros of $20,000 in respect of the breaches of the provisions of the ACL against each of the consumers Mr Berry and the Cvorkovs. They were the first of the breaches and occurred in an overlapping period of time between 20 January 2016 and 10 February 2016. I impose penalties of $40,000 on DE in respect of the contraventions against each of those consumers.
Mr Goros returned to his dishonest conduct in May 2016. In mid-May 2016 he obtained a payment of nearly $17,000, in addition to the originally agreed price of approximately $10,000, from Ms Ho. I impose a penalty of $25,000 on Mr Goros in respect of those contraventions. I impose a penalty of $50,000 on DE.
Mr Goros obtained a payment of $6,000, in addition to the originally agreed price of $9,000, from Mr Ji towards the end of May 2016. In respect of those breaches, I impose a penalty of $20,000 on Mr Goros. I impose a penalty of $40,000 on DE.
In September 2016 Mr Goros obtained a payment from Mr Penna of $30,744 in addition to the originally agreed price of $8,500. That bold conduct manifests extraordinary greed. I fix a pecuniary penalty of $40,000 in respect of Mr Goros. I impose a penalty of $80,000 on DE.
In November 2016 Mr Goros obtained a payment of $10,909, over and above the originally agreed price of $9,900, from Mr Masters. I impose pecuniary penalties of $25,000 on Mr Goros and $50,000 on DE.
In the period from November 2016 to December 2016 Mr Goros obtained an additional payment of $31,599, over and above the agreed price of $8,500, from Dr Ahmed. I impose pecuniary penalties of $40,000 on Mr Goros and $80,000 on DE.
In December 2016 Mr Goros attempted to obtain a payment of $11,517, in addition to the originally agreed price of $9,000, from Mr and Mrs Nazari. Even though the payment was not made, such was the aggressive harassment by Mr Goros in his attempt to do so that, I nonetheless impose a penalty of $25,000 on Mr Goros. I impose a penalty of $50,000 on DE.
The total penalties imposed on Mr Goros are $215,000 and on DE are $430,000.
Disqualification
In Australian Securities and InvestmentsCommission v Adler[6] Santow J identified the purposes of disqualification from managing a corporation to be:[7]
· The protection of the public from the harmful use of corporate structures and their use contrary to proper commercial standards;
· Ensuring the accountability and suitability of directors; and
· Personal deterrence.
[6] (2002) 42 ACSR 80.
[7] (2002) 42 ACSR 80 at [56].
Santow J also observed that:[8]
· Longer periods of disqualification are reserved for serious contraventions including dishonest conduct;
· The Court may have regard to the propensity of the defendant to engage in similar conduct and the likely harm that may be caused to the public;
· It is necessary to balance the protective purposes of disqualification against personal hardship; and
· The prospect that the defendant might reform himself or herself is a mitigating factor.
[8] (2002) 42 ACSR 80 at [56].
I have found that the contraventions are serious and that Mr Goros has little capacity to reform himself. Mr Goros has not put any material before me as to personal hardship which might result from his disqualification. Having regard to the nature of his business in demolition and waste removal, he may be able to operate as a trader in his personal capacity or be employed by another.
Mr Goros was the director of eight other corporations, several of them with names suggestive of an involvement in the provision of demolition and waste services including asbestos waste. Others bore names which were suggestive of involvement in building and development. The name of another of his companies, “Lamborghini”, is calculated to give the impression of wealth and success. I find that Mr Goros used the companies he controlled, as he saw fit, to further his personal business and financial interests. Mr Goros used the business name Hindmarsh Demolition interchangeably with several of his company names. I find that it is part of Mr Goros’ modus operandi to use corporate vehicles to advance his own personal interests and, where he can, to shield himself from the liabilities which may be incurred.
I have been told that Mr Goros may be living interstate and in the Gold Coast. It is likely that Mr Goros will attempt to support himself by engaging in business activities interstate where he is less well-known.
Disqualification from acting as a director is the most effective of the sanctions which can be imposed against Mr Goros both because it is a significant penalty, the consequences of which Mr Goros cannot easily evade, and it is necessary to protect the public. The disqualification can be enforced nationally. A substantial period of disqualification will prevent Mr Goros from using corporate vehicles as his alter-ego in an attempt to engage in unfair business practices. I disqualify Mr Goros from managing a corporation, for a period of 10 years commencing on this day, pursuant to s 248 of the ACL.
Injunctive relief
Section 232 of the ACL provides that a court may grant an injunction in such terms as it considers appropriate if the court is satisfied that a person has engaged in conduct that constitutes a contravention of a provision of Chapter 2 or Chapter 3. Section 232(5) provides that the court may grant an injunction under sub-section 1 restraining a person from carrying on a business or supplying goods or services for a specified period or except on specified terms and conditions.
The order sought in the statement of claim, that Mr Goros not engage in false or misleading conduct in the course of the provision of any demolition or other waste services is of limited utility. I would instead restrain Mr Goros from making a representation, in the course of providing demolition or waste removal or storage services, that a building, or buildings or other waste, does, or may, contain hazardous material. I also make an order restraining Mr Goros from claiming or receiving any payment for the purported supply of demolition or waste removal or storage services in respect of hazardous material.
Costs
The Commissioner seeks an order for costs on a lump sum basis in the amount of $50,000 pursuant to r 194.3(3) of the Uniform Civil Rules 2020 (SA). No bills were rendered for and paid by the Commissioner, whose office falls within the Attorney-General’s Department. The Commissioner’s total costs therefore reflect the costs to the State of the Commissioner’s legal representation.
The costs of the Crown Solicitor’s Office which was engaged by the Commissioner in prosecuting this action are significantly greater than the costs order sought. The total costs were $236,604.11, comprised of $158,281.60 in solicitor fees, $77,792.51 in counsel fees and $530 in disbursements.
Notably, the Crown Solicitor’s Office’s rates for work requiring the special skill and knowledge of a solicitor are considerably lower than the hourly rates prescribed by Schedule 6 of the Uniform Civil Rules 2020 and its predecessor, Schedule 2 to the Supreme Court Civil Supplementary Rules 2014 (SA). Likewise, the fees charged by the Crown Counsel section are at the lower end of the Supreme and District Courts Indicator on Counsel Fees.
The lump sum costs order sought by the Commissioner therefore reflects a substantial reduction on what would be payable if there were an itemised taxation. There is no reason to put the Commissioner to the expense and trouble of such a taxation given that the prospects of any recovery must be doubtful. I order that the respondents pay the Commissioner’s costs on a lump sum basis in the amount of $50,000.
Appendix A
Consumer
Original agreed price
Additional costs
(GST inclusive)Michael Berry
$11,000
$10,120
Aleksander and Adriana Cvorkov
$9,500
$5,000
Lien Ho
$9,000 - $10,000
$16,845.35
Hui Ji
$9,900
$6,600
Neville Penna
$8,500
$30,744.12
Brett Masters
$9,900
$11,010
Sheeper Ahmed
$8,500
$31,599.99
Reza and Shay Nazari
$9,000
Nil.
Total additional costs for all consumers
$111,919.46
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