Cousins v Scully (Ruling No 1)
[2010] VSC 149
•28 April 2010
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL & EQUITY DIVISION
S CI 2007 10029
| DAVID COUSINS, DIRECTOR OF CONSUMER AFFAIRS VICTORIA | Plaintiff |
| - and - | |
| PETER GERARD SCULLY & ORS (according to the Schedule attached) | Defendants |
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JUDGE: | WILLIAMS J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 15 February 2010 | |
DATE OF JUDGMENT: | 28 April 2010 | |
CASE MAY BE CITED AS: | Cousins v Scully & Ors (Ruling No 1) | |
MEDIUM NEUTRAL CITATION: | [2010] VSC 149 | |
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PRACTICE AND PROCEDURE – Application for stay under r 23.01 Supreme Court (General Civil Procedure) Rules 2005 – Alleged breaches of Fair Trading Act 1999 – Whether question to be tried – Application refused.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr D Williams QC with Mr S Bhojani | Lisa Tickell, Solicitor, Director of Consumer Affairs Victoria |
| For the Second Defendant | Mr M D Wyles SC with Mr B Murphy | Voitin Lawyers |
HER HONOUR:
By an originating motion filed on 17 December 2007, the plaintiff (‘the Director’) seeks declaratory, injunctive and other relief against defendants including the second defendant (‘Mr Gilfillan’) for alleged breaches of the Fair Trading Act 1999 (‘the Act’).
The originating motion, together with particulars of its contents, are treated as setting out the allegations against Mr Gilfillan for the purposes of this application.
The Director in effect alleges that Mr Gilfillan engaged in unconscionable conduct in breach of s 8 of the Act, misleading or deceptive conduct in breach of s 9 and made representations without reasonable grounds or, alternatively, when they were false, contravening ss 9, 11 and 12(b), (e), (j) and (n) by his involvement in a program known as the ‘Future Owner Program’ (‘the Program’).
Under the Program, people otherwise unable to fund the purchase of residential property would enter into terms contracts for the purchase of properties from ‘investors’ sourced by Mr Gilfillan or companies associated with him. They would also sell their furniture to the investors and hire it back. In addition, they would hand over the management of their financial affairs and pay fees for the services provided.
Mr Gilfillan now seeks an order staying the proceeding under r 23.01(1)(a) of the Supreme Court (General Civil Procedure) Rules 2005. He maintains that the affidavit material fails to disclose a cause of action against him. The Director responds that there is ample evidence of the alleged contraventions and that the application is misconceived.
I agree with the Director that the application should be dismissed. There is sufficient evidence in the affidavit material before the Court to support the allegations made against Mr Gilfillan. Mr Gilfillan has not satisfied me that the Director could not prove his case by that evidence at trial, even if the Briginshaw[1] standard were to be applied. There are real questions to be tried.
[1]See Briginshaw v Briginshaw (1938) 60 CLR 336.
I will now refer to the allegations and the relevant evidence.
The allegations
In paragraph 2 of the originating motion, the Director in effect alleges that, between February 2002 and April 2005, Mr Gilfillan engaged in unconscionable conduct contravening s 8 of the Act when dealing with three individuals, Mrs Lesley Stevenson, Ms Michelle Olech (who was to become Mrs Michelle Butcher) and Mr Rodney Butcher. Mr Gilfillan is alleged to have engaged in that conduct through his co-defendants, Active Property Solutions Pty Ltd (now Terms Contract Solutions Pty Ltd) (‘Active Property Solutions’) and Spendworks Pty Ltd (‘Spendworks’), and ‘other corporate entities’. The ‘other corporate entities’ are described in the Further and Better Particulars dated 6 July 2009 as Active Group Pty Ltd (in liquidation) and one or more of the deregistered APS Bond Pty Ltd and Active Management Solutions Pty Ltd (then known as Kiernan & Ettershank Pty Ltd).
In the further particulars, the Director in effect alleges that the ‘Active Group’ was the provider of relevant services under the Program. The ‘Active Group’ is particularised as including one or more of the seventh defendant, Australian Property and Financial Coaching Pty Ltd (‘APFC’), the eighth defendant, Active Property Solutions, the deregistered corporation APS Bond Pty Ltd, Active Management Solutions Pty Ltd, Active Group Pty Ltd (in liquidation) and the deregistered ninth defendant, Spendworks.
The Director alleges that, through the Active Group, Mr Gilfillan engaged in the unconscionable conduct between February 2002 and April 2005. He targeted Mrs Stevenson, Ms Olech and Mr Butcher who were vulnerable or disadvantaged and eager to buy a home but in financial difficulties. He took control of their financial affairs. He dissuaded them from obtaining legal or financial advice about their involvement in the Program. He allowed and encouraged them to become attached to properties before assessing the affordability of those properties or entering any agreements. He provided them with unaffordable services under the agreements brokered with them. He allowed them to be deprived of money for basic living expenses as a result of their inability to meet their obligations under the agreements. He then threatened them and made demands on the basis that they owed money to Spendworks, when there had been no assignment of their contractual obligations to that company.
In paragraph 11 of the originating motion, the Director alleges in effect that, between March 2002 and April 2005, Mr Gilfillan also breached s 9 of the Act by engaging in misleading or deceptive conduct by making a number of representations to customers or potential customers of the Active Group about the nature and consequences of the Program.
Mr Gilfillan is said to have represented, without reasonable grounds, that by acquiring the services under the Program, they would be buying their own homes and would have emotional security, reduced financial stress and fewer arguments. In fact, the customers or potential customers would be entering vendor terms contracts and would not have less financial stress or fewer arguments. Mr Gilfillan is also alleged to have failed to tell them that they would be selling their furniture to investors and hiring it back and that some of the monies from the investors would be used to pay part of the corporations’ fees and could not be used at the customers’ discretion. He also made representations that a ‘budget planner’ tool enabled a reliable prediction to be made as to the current value of an affordable home, by reference to a nominated future ‘refinance price’ and customers’ future living expenses or financial circumstances.
In paragraph 21 of the originating motion, the Director goes on in effect to allege that Mr Gilfillan breached ss 9, 11, 12(b), 12(e), 12(j) and 12(n) of the Act by representing, without reasonable grounds or, alternatively, when it was not the case, that the services provided under the Program were appropriate, reliable and affordable and were provided by suitably qualified, experienced or skilled people.
The Director seeks declarations that Mr Gilfillan contravened the Act. He also seeks injunctions which will restrain him from providing services under the Program to vulnerable, disadvantaged people, unless certain conditions are satisfied, and will prevent him from making any further such representations. Finally, he seeks orders that Mr Gilfillan pay compensation and refund monies to individuals including Mrs Stevenson, Ms Olech and Mr Butcher.
The further particulars
The Director provided particulars of the alleged promotion and supply of services. He alleged that the services were advertised in outer metropolitan or regional newspapers in areas with greater numbers of people from lower socio-economic backgrounds. They were to be provided to those who had already been rejected by mainstream lenders. They had no deposit and few assets, consumer debts, were or had been bankrupt and had credit problems or a history of financial defaults. They had a minimal understanding of money management.
The Director also gave detailed particulars of the respective financial situations of Mrs Stevenson, Mrs Butcher and Mr Butcher.[2]
[2]Plaintiff’s Further and Better Particulars In Response to the Request by the Second Defendant, dated 6 July 2009, sub-paragraphs 3(a) and (b).
The Director particularised the mechanics of taking control of the individuals’ finances. He alleged that it was a condition of entry to the Program that total control and management of the participant’s financial affairs be handed over. The Butchers and Mrs Stevenson were required to open AMP or ANZ bank accounts into which their income would be paid and give access to the accounts to the Active Group. They were not to withdraw from that account. It was also a condition that the contracting member of the Active Group be permitted to make discretionary one-off payments to them.
In response to a request for particulars of his allegation that Mrs Stevenson and Mr and Mrs Butcher were prevented from obtaining legal or financial advice, the Director described the services to be provided by the Active Group as complex. He alleged that they were explained in presentations and meetings on an on-going basis which did not readily allow the consumer to obtain independent advice. Mr Gilfillan and Mr Scully knew that the targeted individuals would have difficulty understanding the materials provided and lacked the financial resources to obtain advice. They would rely upon and trust those providing the information.
The Director gave particulars of the ‘formal’ or written and the ‘informal’ or oral agreements made between future owners and the Active Group. The formal written agreements included:
(a) a money management agreement between the Active Group and future owners;
(b) a vendor terms contract between the investor and the future owners;
(c) ‘a fixed amount start-up loan (“secured” by a future owner’s goods)’ or an agreement to purchase the future owner’s goods and hire them back;
(d) a guarantee between the Active Group and the future owner; and
(e) a guarantee between the Active Group and the investor.
The informal oral agreements included one between the Active Group and the future owner to the effect that:
(a) payment of the future owner’s agreed bills and living expenses would be arranged by the Active Group;
(b) extra money required would need to be requested from the Active Group;
(c) the future owner could select a home and sign a contract note for its purchase on instructions from the Active Group, as agent for the investor; and
(f) where appropriate, the Active Group would assist the future owner to obtain a First Home Owners’ Grant.
The Director alleged that Mr Gilfillan, Active Property Solutions and the Active Group had conflicts of interest. They were providing services both to investors as the vendors of properties to future owners and the purchasers and hirers of their furniture, as well as to the future owners themselves who were buying those properties and hiring that furniture from the investors. The Active Group also guaranteed the future owners’ performance under their agreements with the investors and yet it had control of the same future owners’ bank accounts.
The Director also gave particulars of a number of the allegations by reference to Mr Gilfillan’s role in the design and implementation of the Program. He alleged that the explanations given to future owners by officers of the Active Group did not readily disclose the financial commitments and obligations they were required to undertake. It would have been known that the target group would be unlikely to understand the information relating to their financial commitments. It would also be unlikely that they could afford independent financial advice.
The affidavit material
In a letter dated 31 January 2010, the Director advised Mr Gilfillan’s solicitors that, of the 26 folders of evidence, there were 12 relevant to the allegations against Mr Gilfillan and there might be more relevant material in another seven.[3]
[3]Exhibit ‘LAT -5’ to the Affidavit of Lisa Anne Tickell, sworn 1 February 2010.
The material relied upon by the Director includes affidavits of:
· Mrs Stevenson, Ms Olech and Mr Butcher;
· other alleged victims of the alleged contraventions, Andrew David Graue and Kerry Anne Graue;
· a real estate agent, Seka Mladenka Powell, who claims to have dealt with Ms Olech and Mr Butcher;
· a real estate agent, Christine Allison, who claims to have dealt with Mrs Stevenson;
· a solicitor, David Lindsay, who also claims to have dealt with Mrs Stevenson;
· the Director’s solicitor, Lisa Tickell, exhibiting company records, transcript of Mr Gilfillan’s examination by the Director under s 106I(1)(c) of the Act and other documents relating to the Program;
· consultants; and
· expert witnesses.
Under examination before the Director, Mr Gilfillan himself gave a detailed account of how he and Mr Scully developed the business concept. I note that Mr Gilfillan was examined over three days. I have only referred to a small part of the detailed account he gave of the operations of the Active Group in implementing the Program. I note at the outset that I was not persuaded by the written submission from counsel for Mr Gilfillan that the evidence from the examination, exhibited to Ms Tickell’s affidavit, is misleading and confusing as a result of the form of questioning. I do not agree with their argument that court time would be wasted by attempting to extract admissible and rationally probative evidence from the transcript of that evidence.
The business concept developed by Mr Scully and Mr Gilfillan involved them finding future owners, assessing their financial situations and the proposed transaction and having the future owners participate in the Program for six weeks before they were in effect matched with an investor and instructed to find a house for a specified maximum price.[4] They took professional advice and set up a ‘multi-company sort of structure’ on advice from their accountants.[5]
[4]Mr Gilfillan gave the description on 8 December 2006 under examination by the Director under s 106I of the Act. See Transcript of Proceedings, Examination of Robert Gilfillan (Consumer Affairs Victoria, 8 December 2006), T 21, line 2 - T 22, line 29.
[5]Transcript of Proceedings, Examination of Robert Gilfillan (Consumer Affairs Victoria, 21 January 2007), T 178, line 12 - T 179 line 2.
Mr Gilfillan agreed that those targeted as future owners were people who could not obtain a bank loan, but had sufficient income to service one and had had or were having financial difficulties.[6] Frequently, they had all sorts of credit problems.[7] It was because such people were not good at looking after their own financial affairs that the money management system was set up.[8]
[6]Transcript of Proceedings, Examination of Robert Gilfillan (Consumer Affairs Victoria, 8 December 2006), T 102, lines 15-21.
[7]Ibid, T 104, line 24 – T 105, line 2.
[8]Ibid, T 103, lines 14-21.
Mr Gilfillan said that he was involved in preparing the presentations for future owners.[9] He agreed that there were incorrect references in the presentation materials to matters such as future owners being provided with the emotional security of owning their own homes.[10]
[9]Ibid, T 108, lines 11-19.
[10]Ibid, T 116, lines 25-28.
Mrs Stevenson, Ms Olech and Mr Butcher each gave a detailed account of their involvement with the Active Group. They were initially attracted by advertisements in the Geelong Advertiser newspaper in 2003. Mrs Stevenson saw one published on 29 March 2003 in the following terms:
WHY ARE YOU PAYING RENT?
$750pw net combined or single income gets you your own home at competitive rates.
No deposit
Consumer Debts – Bankruptcy – Credit Problems
ARE NOT PROBLEMS TO US!
Phone Eion 0438 619 262
ACTIVE PROPERTY SOLUTIONS
CHANGE YOUR LIFE NOW!
Mr Gilfillan denied dealing with the future owners, stating that Mr Scully had dealt with them.[11] He denied knowledge of the contents of advertisements, but acknowledged his awareness of the content of radio advertising. He said that the consultants who marketed the Program placed their own advertisements.[12]
[11]Ibid, T 85, lines 29-31.
[12]Ibid, T 79, lines 9-11.
Mr Eion Taylor was the man mentioned in the Geelong Advertiser advertisement. He was contacted by Mrs Stevenson, Ms Olech and Mr Butcher. Mr Gilfillan told the Director that he had introduced Mr Taylor to the business.[13]
[13]Ibid, T 100, lines 21-7.
The Stevensons
Mrs Stevenson’s evidence was to the effect that she and her husband had been renting properties for years and were determined to own their own home. They had sought loans but had been constantly rejected because Mr Stevenson had been bankrupted in 2000. Mrs Stevenson informed Mr Taylor that they wanted to own their own home but had not saved a deposit and were unable to borrow from a bank or other sources.
In the course of meetings, Mr Taylor made presentations to the Stevensons. He told them that:
· ‘Active’ assisted people in their situation by linking them with an ‘investor’ who would buy a home for them;
· they would repay the investor over time and live in the house;
· the house would be theirs from the beginning;
· they would simply be borrowing money from the investor;
· Active would also manage their money and make sure it was available for an emergency;
· they would retain control and pay off the house by following the management system;
· they were to choose the house which the investor would buy;
· they could treat the house as their own, it would be their own place;
· there would be a caveat in favour of the investor for five years and that would be removed;
· any increase in the value of the property would be theirs;
· they would not be renting the house;
· ‘the equity’ in the property would be theirs and it would be an investment;
· many others in their position had been helped by the Program to help buy their own homes; and
· it would take three months for them to prove that they were serious and capable of performing under the plan.
Mr Gilfillan said, under examination, that Mr Scully had initially prepared presentations, but that usually it was Mr Gilfillan’s own responsibility to change the slides and wording used in presentations.[14]
[14]Ibid, T 108, lines 11-9.
According to Mrs Stevenson, the Stevensons provided Mr Taylor with details of Mr Stevenson’s salary and their expenses. Mrs Stevenson indicated that she was working part-time. They were told to open two AMP accounts which would be monitored by Carol Duncan, Active’s ‘Money Manager’.[15] All their income would be re-directed into the first AMP account and monitored so that their bills would be paid and they would be able to save money in the second account.
[15]Mr Gilfillan described Ms Duncan as having the role of ‘looking at all the bank accounts’. Ibid, T 40, lines 32-3.
Mr Taylor assured the couple that they would be able to ‘get the best of the best’ and there would be enthusiasm to be the investor connected with their purchase. They could purchase a property for between $300,000 and $400,000.
Mr Taylor told them about a ‘Furniture Package’ which he described as not being a loan, but as resembling one. It would provide the couple with money they could use as they wished. They were told to value their furniture.
Mr Stevenson worked overtime to save money to purchase the house they chose at Lara. The couple paid a set-up fee of approximately $900. They negotiated a purchase price of $277,500. In about May 2003, they were instructed to nominate Theodor Hess (whom they understood to be the investor) as purchaser.
It turned out that the amount allowed to the Stevenson family for living expenses under the agreement was insufficient. Money was very short and they once even had to resort to charity for food. Being unable to afford petrol, Mr Stevenson had to arrange transport to work. Meanwhile, the couple noticed a fee of $250 being taken out of their account. They requested an explanation which was not forthcoming.
Whilst they had completed the furniture schedule, the Stevensons had not signed any contracts when they moved into the property on 22 July 2003. When they did sign, they were advised that they did not need a solicitor because Active had its own solicitor.
Mr Gilfillan told the Director that Mr Scully originally drew up the agreements, but that the men subsequently engaged a solicitor to draft the agreements used by the Active Group.[16]
[16]Ibid, T 148 – 149.
The Stevensons met Mr Bruno Kiernan at Active’s North Melbourne offices on about 30 or 31 July 2003. Mrs Stevenson alleges that they received no explanation of the contents of the documents which he directed them to execute. She claims that she had no opportunity to read the contracts or ask questions about them and that she felt intimidated by the solicitor. Mrs Stevenson alleges that Mr Kiernan informed the couple that, if they did not co-operate, they could lose the house (which Mrs Stevenson says she was desperate not to do). The Agreements were dated 25 July 2003.
Mrs Stevenson alleges that there was no explanation about fees or charges which were being taken out of their account by Active. They were also asked to sign a periodical payment authority at Citibank to facilitate the direct payment to Mr Hess of $514 per week from their AMP account as house payments. Mrs Stevenson felt pressured and confused.
The Stevensons subsequently consulted Mr David Lindsay, a solicitor, who examined the agreements and advised them that the house was not theirs, as they had thought, and that they had transferred ownership of all they had as well as control of their money to Active.
Mr Lindsay swore an affidavit on 22 April 2008, recording Mrs Stevenson’s instructions and his advice to that effect. He stated that he informed Mrs Stevenson of his belief that the couple had been induced into entering into the contract and that there may have been unconscionable conduct involved.
On 13 August 2003, Mr Lindsay advised the Stevensons to leave the premises and to refer anyone from Active to him. He also suggested that they freeze the AMP account to prevent Active having access to the funds in it. That day, Mr Lindsay also advised Active that the Stevensons felt that they had been ‘duped’ into entering into a ‘totally unsuitable’ arrangement and that they would cease payments and move out.
Mr Kiernan responded, refuting the allegations on behalf of Active Property Solutions Pty Ltd. He said that Mr Gilfillan was the Director of Active Property Solutions and he ‘would welcome the opportunity to participate in a without prejudice round table discussion with Mark and Leslie Stevenson and [Mr Lindsay] so that any grievances can be aired and solutions to those grievances entertained.’
By 14 August 2003, however, the Stevensons had discovered that all AMP account monies, totalling more than $21,000, had been withdrawn. Mr Lindsay wrote to Mr Kiernan alleging that the withdrawal had been made by his office.
Mr Gilfillan told the Director, under examination, that he believed that the form signed by the Stevensons allowing third party access to the account permitted the withdrawal of the funds. He said that the couple had ‘done a runner’ and ‘[w]e were concerned that they were going to take that money. We took that money and paid it back to the investor.’[17]
[17]Ibid, T 492, lines 22-27.
Mr Lindsay notified Active that the Stevensons were rescinding their contracts and that they believed that the contracts were unconscionable. The Stevensons vacated the Lara property.
The Stevensons slept in a car for two nights they as they had no money for a hotel. They then lived with friends for the next couple of weeks. They were in fear after leaving the house and found it painful to have to request help from friends. They were obliged to borrow money to fund rental accommodation.
The family was humiliated and upset and Mrs Stevenson claims to have had a breakdown as a result of the dealings with Active.
Ms Olech and Mr Butcher
A similar story is told in the affidavits from Ms Olech and Mr Butcher. Mr Butcher is disabled as a result of a motor vehicle accident in which he suffered an acquired brain injury in 1978. Ms Olech is now his wife and official carer. Mr Butcher was previously married and has four daughters.
According to the Butchers, Mr Taylor also visited them. He explained the scheme under which an investor would lend them money which they would repay over the seven year term of the contract.
Neither Ms Olech nor Mr Butcher was working when they spoke to Mr Taylor. Mr Butcher’s pension was then about $360 and Ms Olech obtained approximately $360 a fortnight by way of a carer’s allowance. Mr Taylor advised that they could afford to borrow about $150,000, but only if at least one of them had some type of employment.
Ms Olech understood that, under the Program, any house payments made over the seven years would reduce the total price of the house, so that they would not have to borrow as much to re-finance.
The couple consulted Ms Seka Powell from ResCom Real Estate in Bannockburn about purchasing a house. (ResCom handled the rental property in which they lived.) Ms Powell deposes to having been concerned that their income was insufficient and that she advised them not to buy whilst on pensions. She arranged for them to see a financial planner who told them that they could not afford a property because they did not have money saved for a deposit.
The couple had hoped that Mr Butcher’s parents would provide them with a deposit, but they were unable to do so. Mr Butcher was going through a divorce and his solicitors told him that he would not receive any money in the settlement.
The couple found a property at Meredith which appealed to them. Then Mr Butcher contacted Active, referring to Mr Taylor’s advice that they could obtain $150,000 for a house and would not need a deposit. He said that he had part-time work and that they had found a house.
At this point, Mr Mike Hansen of the Active Group became involved. Mr Butcher told Mr Hansen that he was making about $112 a week net from his permanent part-time job cleaning toilets. He also expressed the opinion that he might get half of the proceeds of his former matrimonial home, but said that that might not happen until his triplet children turned 18. On about 28 April 2004, Mr Hansen phoned Mr Butcher and told him that they had qualified for funding.
The couple informed Ms Powell of the success of their application. Ms Powell arranged for them to see a solicitor, Mr Graeme Trethowan. According to her, he recommended that they not go ahead with the purchase. Ms Powell informed Mr Butcher that Mr Trethowan would not perform the conveyancing work for them.
Ms Powell also contacted Mr Hansen. She maintained that she told him about Mr Butcher’s car accident and of her opinion that he was quite childlike, with poor comprehension skills and unable make independent decisions or really understand complex matters. He would not be capable of understanding the consequences of the contracts, let alone those of buying a house. She indicated that the couple needed independent legal advice.
Mr Hansen reassured Ms Powell that the financial information had been examined and that there would be no problem; Mr Butcher might also be able to get some work which would make it easier. The couple’s pensions, however, would support the loan. He said that Active would not abandon the couple and that it was possible for them to afford the property. He noted that Mr Butcher was eager to enter into the arrangement. Ms Powell organised for him to provide her with documents for independent assessment.
Mr Gilfillan conceded before the Director that he may have told Mr Hansen to ‘go and sign them up’ after the couple had signed a declaration to the effect that they did not want legal advice. [18]
[18]Transcript of Proceedings, Examination of Robert Gilfillan (Consumer Affairs Victoria, 24 January 2007), T 329, lines 7-17.
According to Mr Gilfillan, Mr Scully left the business on 30 June 2004.
On about 29 July 2004, Ms Olech and Mr Butcher signed a contract of sale in relation to the Meredith property, as well as a furniture package agreement and another agreement with the Active Group.
Like the Stevensons, Ms Olech and Mr Butcher became very short of money whilst the arrangement was on foot. They suffered when bills remained unpaid and were obliged to obtain assistance from the Salvation Army and another charitable organisation. They also applied for rental assistance. They were told by Ms Duncan to obtain work. Mr Butcher also had an accident at work and was incapacitated as a result.
The Butchers moved out of their property on 3 April 2005 and have had no subsequent contact with the Active Group, although they received letters of demand for payments to it or to the investor.
Mrs Butcher states that she believed that the couple were to repay $169,000 (plus some interest charges and small fees) to the investor. She also says that she would never have signed the contract if she had known what was going to happen. The couple had paid all their pensions to Active and received nothing back. They trusted Active and believed that it took advantage of them.
Mrs Butcher felt on the edge of a nervous breakdown at the time she swore her affidavit on 6 December 2007. She suffered from anxiety and had extreme mood swings and little physical energy. Mr Butcher also felt at the same time that advantage had been taken of the couple and that he had been treated as though he was stupid.
Mr Gilfillan acknowledged that none of the presenters who dealt with the future owners were qualified as accountants, lawyers, financial planners or other professional people and that future owners would sign a declaration to that effect.[19]
[19]Transcript of Proceedings, Examination of Robert Gilfillan (Consumer Affairs Victoria, 8 December 2006), T 140, lines 10-15.
The budget calculator tool
Mr Gilfillan appeared to acknowledge, under examination, that the budget calculator tool was not actually able to assess whether the future owners could responsibly enter into the Program, at least up until some time after Mr Scully’s departure.[20] He also agreed that he had authorised Mr Hansen to decide who could be a future owner under the Program.[21] Mr Gilfillan acknowledged that, because Mr Hansen had supported him in the context of the split from Mr Scully, he might not have imposed the requisite checks and balances upon him.[22]
[20]Transcript of Proceedings, Examination of Robert Gilfillan (Consumer Affairs Victoria, 24 January 2007), T 235, line 24 - T 236, line 7.
[21]Ibid, T 288, lines 22-29.
[22]Ibid, T 293, lines 26-31.
Mr Gilfillan conceded that Mr Hansen might have spoken to him about Ms Olech and Mr Butcher.[23] He agreed that the couple could not afford to buy the property on the information provided to him whilst under examination.[24] Mr Gilfillan agreed that it was ‘against all conscience’ for Active to have signed the couple up to the Program, knowing that they could not afford to participate, and for the couple to have been deprived of any living expenses.[25] Whilst not admitting personal involvement in the Butchers’ transaction and, in effect, blaming Mr Scully and Mr Hansen for inappropriate transactions, Mr Gilfillan did acknowledge that he did not manage the business as well as he should have.[26]
[23]Ibid, T 289, lines 21-7.
[24]Ibid, T 331, lines 24-30; T 335, lines 12-3.
[25]Ibid, T 331, lines 20-28.
[26]Ibid, T 338, lines 28-9.
Mr Gilfillan did concede that, by at the very latest when Mr Hansen left the business in January 2005, he was aware that there was a problem with regard to the Butchers and that they were not making the payments to the investor.[27] Mr Gilfillan, nevertheless, treated them as continuing their involvement in the Program, advising them by letter dated 4 March 2005 of the effect of an interest rate rise on their repayments.[28]
[27]Transcript of Proceedings, Examination of Robert Gilfillan (Consumer Affairs Victoria, 10 May 2007), T 486, lines 11-26.
[28]Examination of Robert Gilfillan (Consumer Affairs Victoria, 10 May 2007), Exhibit Number 3304, Letter to Rodney Burcher and Michelle Olech from Robert Gilfillan dated 4 March 2005.
Submissions
Mr Gilfillan acknowledges that the applicable principles in this application were stated by Dixon J in Dey v Victorian Railway Commissioners:[29]
The application is really made to the inherent jurisdiction of the Court to stop the abuse of its process when it is employed for groundless claims. The principles upon which that jurisdiction is exercisable are well settled. A case must be very clear indeed to justify the summary intervention of the Court to prevent the plaintiff submitting his case for determination in the appointed manner by the Court with or without a jury. The fact that a transaction is intricate may not disentitle the court to examine a cause of action alleged to have grow out of it, for the purpose of seeing whether the proceeding amounts to an abuse of process or is vexatious. But once it appears there is a real question to be determined whether of fact or law and that the rights of the parties depend upon it, then it is not competent for the court to dismiss the action as frivolous and vexatious and an abuse of process.[30]
[29](1949) 78 CLR 62.
[30]Ibid, 91.
Counsel for Mr Gilfillan contend that there is no ‘rationally probative evidence’ to prove to the requisite standard that he acted unconscionably towards Mr and Mrs Butcher or Mr and Mrs Stevenson or that he engaged in misleading and deceptive conduct by making the representations to the Active Group’s customers or members of the public. The proceeding is futile in their submission.
They seek to distinguish between the evidence as to the companies’ activities and that relating to Mr Gilfillan’s conduct. They rely upon the proposition that the evidence would disclose that Mr Gilfillan did not know the named individuals before they entered into the alleged transactions. They refer to the absence of any allegations that he breached the Act by aiding and abetting any breach by one of the corporate defendants, and note the allegations of personal liability.
Counsel for the Director respond that Mr Gilfillan could breach the Act personally, notwithstanding that he acted as an officer or employee of a corporate defendant, when acting in its trade or commerce.[31] They contend that it is not necessary for the evidence to establish that Mr Gilfillan personally dealt with the Butchers or the Stevensons. He could have made the alleged misrepresentations by designing the system. Counsel argue that the evidence establishes that everything done required his general or express approval.
[31]Citing Houghton v Arms (2006) 225 CLR 553, 566 (Gleeson CJ, Gummow, Hayne, Hayden and Crennan JJ).
According to counsel for the Director, there is sufficient evidence of Mr Gilfillan’s involvement in the design of the Program, the targeting of individuals in financial difficulties and in the approval process for the Director to successfully resist the application. Counsel refer specifically to evidence such as that relating to documents setting out the Active Property Solution’s guarantee which bear Mr Gilfillan’s signature. Counsel for the Director submit that the application cannot possibly succeed.
The Director also relies upon the Act’s focus on the establishment of a statutory norm for business conduct, the breach of which does not necessarily give rise to a private cause of action.[32] Counsel emphasise the point that there is a public interest aspect to the legislation, regardless of Mr Gilfillan’s role in the delivery of the representations.
[32]Citing Lionel Brown & Anor v Jam Factory Pty Ltd & Anor (1981) 35 ALR 79, 86 (Fox J); Tobacco Institute of Australia Ltd v Australian Federation of Consumer Organisations Inc (1988) 19 FCR 469, 473 (Lockhart, Morling and Gummow JJ); Truth About Motorways Pty Ltd v Macquarie Infrastructure Investment Management Ltd (2000) 200 CLR 591, 602, [17] (Gleeson CJ and McHugh J), [35] (Gaudron J), [79] (Gummow J); Cousins v Merringtons Pty Ltd & Anor [2007] VSC 542, [38] (Hansen J).
Counsel for Mr Gilfillan respond that his signature on documents does not indicate personal involvement, maintaining that there was no reference in the affidavit material to his agreement to their contents. In so far as counsel for Mr Gilfillan might be submitting that the transcript of his evidence makes no reference to his involvement with the guarantee,[33] I note that Mr Gilfillan did address the guarantee in his examination by the Director. He stated that he remembered roughly when it was prepared, that it might have been used, that there were lots of versions of it and that the one shown to him was one he thought ‘we’ had prepared and used. He also acknowledged the significance of the guarantee to future owners.[34]
[33]Transcript of Proceedings, David Cousins, Director of Consumer Affairs v Scully & Ors (Supreme Court of Victoria, Williams J, 15 February 2010), T 49 lines, 23 -T 50, line 6.
[34]Transcript of Proceedings, Examination of Robert Gilfillan (Consumer Affairs Victoria, 10 May 2007), T 427, line 6 -T 428, line 30.
Counsel for the Director argue further that Mr Gilfillan identifies questions of fact and law that need to be determined in his own submissions. These submissions strike at the basis of his application. According to counsel, Mr Gilfillan seeks to rely upon self-serving statements, the credibility of which will be challenged at trial.
More generally, in so far as Mr Gilfillan might foreshadow a challenge to the admissibility of evidence of his examination before the Director, counsel for the Director argue that sub-ss 106I (4) and (5) of the Act implicitly indicate that evidence from examinations under that section can be used in a civil proceeding.[35]
[35]Citing Lopez v Taylor (1970) 44 ALJR 412, 417 (Menzies J), 421 (Gibbs J).
Counsel for Mr Gilfillan also submit that both parties and the Court need to know what case is to be met at trial. They refer to the delay in identification of evidence by the letter of 31 January 2010 and the requirement that a prosecuting authority must prosecute a legislative contravention with specificity.[36]
[36]Citing Kirk v Industrial Relations Commission of New South Wales [2010] HCA 1 (3 February 2010).
In the circumstances, counsel for Mr Gilfillan submit that the Director is restricted to the terms of the originating motion which, in their submission, allege direct involvement in dealings with the specified customers and Mr Gilfillan. As there is no evidence of that, the case cannot succeed at trial. Taken at its highest, the evidence could not establish the contraventions alleged in the originating motion.
Conclusion
I am satisfied by the evidence that there are real questions of fact and law affecting the rights of the parties to be determined in this case.[37] This is so even without any evidence of direct contact between Mr Gilfillan and Mrs Stevenson, Mrs Butcher or Mr Butcher.
[37]See Dey v Victorian Railways Commissioners (1949) 78 CLR 62, 91 (Dixon J).
Further, it is a purpose of the Act to establish norms for business conduct.[38] Counsel for the Director refers to the relevant authorities.[39] This proceeding is not brought as a private claim for damages by affected individuals and it is only the declaratory relief sought against Mr Gilfillan for contravention of s 8 of the Act which specifies individuals affected. Otherwise, the Director seeks relief expressed in general terms.
[38]Truth About Motorways v Macquarie (2000) 200 CLR 591, 602 [17] (Gleeson CJ and McHugh J).
[39]Above n 32.
Mr Gilfillan himself gave much of the relevant evidence and I have referred to some of it. His evidence was to the effect that he and Mr Scully set up the Program which was to operate through the ‘multi-company’ structure which was put in place. He was also involved in its implementation. Mr Gilfillan acknowledged before the Director that individuals with certain characteristics were targeted. He also gave evidence which would support the argument that he was involved in making some of the alleged misleading or deceptive representations to the customers or future customers who relied upon them. It was the Program put in place by Mr Gilfillan and Mr Scully to achieve the intended objectives with which Mrs Stevenson, Ms Olech and Mr Butcher became involved.
If the trade and commerce were to be regarded as that of the members of the Active Group, there is evidence of Mr Gilfillan acting in that trade or commerce as an officer of the companies involved.[40]
[40]See Houghton v Arms (2006) 225 CLR 553.
The evidence raises triable issues as to Mr Gilfillan engaging in unconscionable and misleading or deceptive conduct and making the alleged representations.
The application should be dismissed.
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IN THE SUPREME COURT OF VICTORIA |
AT MELBOURNE
COMMERCIAL & EQUITY DIVISION
S CI 2007 10029
SCHEDULE OF PARTIES
| DAVID COUSINS, DIRECTOR OF CONSUMER AFFAIRS VICTORIA | Plaintiff |
| - and - | |
| PETER GERARD SCULLY | First Defendant |
| ROBERT JAMES GILFILLAN | Second Defendant |
| MICHAEL JAMES HANSEN | Third Defendant |
| ODETTE PATRICIA OTLEY | Fourth Defendant |
| CAROL LOUISE DUNCAN | Fifth Defendant |
| RANA KHECHEN | Sixth Defendant |
| AUSTRALIAN PROPERTY AND FINANCIAL COACHING PTY LTD (ACN 097 549 687) | Seventh Defendant |
| TERMS CONTRACT SOLUTIONS PTY LTD | Eighth Defendant |
| SPENDWORKS PTY LTD (ACN 113 763 232) | Ninth Defendant |
0
11
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