Le v Resultsmart Group Pty Ltd
[2016] FCCA 2246
•6 September 2016
FEDERAL CIRCUIT COURT OF AUSTRALIA
| LE V RESULTSMART GROUP PTY LTD & ANOR | [2016] FCCA 2246 |
| Catchwords: INDUSTRIAL LAW – Claim for contravention of s.323 of the Fair Work Act 2009 (Cth) (FW Act) – whether there was an agreement or term of an employment contract that, in addition to the remuneration stipulated in the employment contract, the employee would be entitled to a share of fees employee earned for his employer for work done on weekend – whether director of employer company was involved in employer company’s failure to pay money earned by the employee as a result of such term or agreement – whether at time of termination of employment contract employee had earned accrued annual leave or whether annual leave had in effect been taken – whether director of the employer company was involved in employer company’s failure to make superannuation contributions. RESTITUTION – Claim for the recovery of franchise fees paid under franchise agreement – whether franchisor represented that fees would be refunded if franchisee would not take up the business provided for in the franchise agreement – whether in any event money paid to franchisor would be recoverable from respondents who were not the franchisor. |
| Legislation: Australian Consumer Law, ss.2, 4, 4(1), 4(2), 4(3), 18(1), 236, 236(1), 237, 237(1), 243 Trade Practices Act 1974 (Cth), ss.76, 76(3), 76(4) Trade Practices Amendment (Australian Consumer Law) Act (No. 2) 2010 (Cth) |
| Cases cited: Arktos Pty Ltd v Idyllic Nominees Pty Ltd [2004] FCAFC 119 Yousef v Taxsmart Group Pty Ltd & Anor [2013] FCCA 2089 |
| Applicant: | VICTOR VIET LE |
| First Respondent: | RESULTSMART GROUP PTY LTD ACN 125 894 322 |
| Second Respondent: | SCOTT RICHARD ANDREWS |
| File Number: | SYG 2753 of 2014 |
| Judgment of: | Judge Manousaridis |
| Hearing date: | 26 November 2014, 10 and 11 September 2015 |
| Delivered at: | Sydney |
| Delivered on: | 6 September 2016 |
REPRESENTATION
| Counsel for the Applicant: | Mr D Stretton |
| Solicitors for the Applicant: | Hunter Flood Lawyers |
The second respondent appeared in person, with leave to represent the first respondent
ORDERS
Pursuant to s.236 of Schedule 2 to the Competition and Consumer Act 2010 (Cth) there be judgment against the first and second respondents in the sum of $86,244.15.
The claims for relief made under the Fair Work Act 2009 (Cth) and for restitution are dismissed.
The first and second respondents pay on an indemnity basis the applicant’s costs of and incidental to the application to strike out paragraphs 2, 3, 4, and 5 of the response.
Subject to order 5, the first and second respondents otherwise pay the applicant’s costs.
By no later than 27 September 2016 the parties have liberty to apply on notice for an order to vary or discharge order 4.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT SYDNEY |
SYG 2753 of 2014
| VICTOR VIET LE |
Applicant
And
| RESULTSMART GROUP PTY LTD ACN 125 894 322 |
First Respondent
| SCOTT RICHARD ANDREWS |
Second Respondent
REASONS FOR JUDGMENT
Introduction
This proceeding has its origins in two agreements the applicant, Mr Le, entered into in April 2011. The first was a franchise agreement with Taxsmart Franchising Pty Ltd (Taxsmart Franchising); and the second was an employment contract with Taxsmart Group Pty Ltd (Taxsmart Group). These two companies, together with the first respondent (Resultsmart), were managed and controlled by the second respondent, Mr Andrews.[1]
[1] At the time this proceeding was initiated, Taxsmart Group was named as the first respondent. On 5 December 2014 Taxsmart Group went into liquidation. An amended application was subsequently filed on 19 December 2014 in which Taxsmart Group was not a party and Resultsmart and Mr Andrews were named first and second respondents respectively.
Under the franchise agreement, Taxsmart Franchising granted to Mr Le the right to conduct a tax agent business using the name “TaxSmart”. Mr Le’s ability to conduct the tax agent business contemplated by the franchise agreement, however, depended on his first becoming qualified to be registered as a tax agent under the Tax Agent Services Act 2009 (Cth) (Tax Agent Act). A person who wished to be so registered was required to demonstrate, among other things, that he or she had at least 12 months of full-time “relevant experience” in the preceding five years. (I explain later the meaning of “relevant experience”). It is part of Mr Le’s case that it was the common intention of Mr Le and Mr Andrews that Mr Le would acquire the “relevant experience” necessary to entitle him to become registered as a tax agent, and, hence, enable him to commence the business of a tax agent under the franchise agreement, by first entering into, and performing his obligations, under the employment contract.
Mr Le makes three claims. First, he alleges he was induced to enter into the franchise agreement, and into the employment contract, by a representation made by Mr Andrews on behalf of Taxsmart Franchising, Taxsmart Group, and Resultsmart (collectively Taxsmart) that these companies offered a programme that would enable an accounting graduate with no previous experience in tax accounting to satisfy the legal requirements for registration as a tax agent under the Tax Agent Act. Mr Le claims the representation was misleading or deceptive because it related to a future matter, and Taxsmart had no reasonable grounds for making it. For these reasons, Mr Le alleges, Taxsmart contravened s.18(1) of the Australian Consumer Law (ACL), being Schedule 2 to the Competition and Consumer Act 2010 (Cth) (CCA), which prohibits a person, in trade or commerce, from engaging in conduct that is misleading or deceptive, or which is likely to mislead or deceive. Mr Le also alleges that Mr Andrews was “involved”, as that word is defined in s.2 of the ACL, in Taxsmart’s contravention of s.18(1) of the ACL. Mr Le, therefore, claims damages against Resultsmart and Mr Andrews under s.236 and, in the alternative, s.237 of the ACL.
Mr Le’s second claim, or, rather, set of claims, arises out of his being an employee of Taxsmart Group. Mr Le claims Taxsmart Group contravened provisions of the Fair Work Act 2009 (Cth) (FW Act) by failing to pay to Mr Le various amounts to which he is entitled, and that Mr Andrews was involved in each of those contraventions. Mr Le also claims he undertook work on the weekends in reliance on a representation that he would be paid additional amounts for that work, but for which he has not received any payment.
Mr Le’s third claim relates to a representation he alleges lawyers acting on behalf of Taxsmart made in a letter they sent to Mr Le under cover of which they provided a draft of the franchise agreement and disclosure document. Mr Le claims the lawyers represented that Mr Le would be entitled to a refund of the franchise fees he would pay under the franchise agreement if Mr Le were not to open a Taxsmart franchise. Mr Le claims it would be unconscionable to permit Taxsmart to resile from the representation because, contrary to the representations on which he relied in deciding to enter into the franchise agreement and the employment contract, Mr Le’s employment had been terminated, and Mr Le did not acquire the “relevant experience”.
Before I consider Mr Le’s claims, it will be necessary to set out in narrative form the facts as revealed by the evidence. Unless I state otherwise, the statements of fact are to be taken to reflect my findings of fact.
Facts
In 2008 Mr Le was awarded a Bachelor of Business, majoring in accounting.[2] While undertaking that degree, Mr Le worked part-time as an accounts assistant and bookkeeper at Delivery Mate Pty Ltd;[3] and from 1 September 2008 until 31 March 2009 he undertook a six-month internship with Grosvenor Business Advisers Pty Ltd.[4] In March 2009 Mr Le commenced employment as an accounts manager with a cosmetic surgery business conducted by Energise Pty Ltd.[5]
[2] Affidavit of V V Le, 8.05.2015, (First Le Affidavit), [4]
[3] First Le Affidavit, [8]
[4] First Le Affidavit, [9]
[5] First Le Affidavit, [10]
By around September 2009 Mr Le had developed an interest in becoming a registered tax agent.[6] The provision of tax agent services was then, and continues to be, regulated by the Tax Agent Act.
[6] First Le Affidavit, [13]
Section 2-10 of the Tax Agent Act provides that a person needs to be registered under the Tax Agent Act to provide “tax agent services”. The expression “tax agent service” is defined in s.90-5(1) of the Tax Agent Act to mean any service:
(a) that relates to:
(i) ascertaining liabilities, obligations or entitlements of an entity that arise, or could arise, under a *taxation law; or
(ii) advising an entity about liabilities, obligations or entitlements of the entity or another entity that arise, or could arise, under a taxation law; or
(iii) representing an entity in their dealings with the Commissioner; and
(b) that is provided in circumstances where the entity can reasonably be expected to rely on the service for either or both of the following purposes:
(i) to satisfy liabilities or obligations that arise, or could arise, under a taxation law;
(ii) to claim entitlements that arise, or could arise, under a taxation law.
Under s.20-5(1) of the Tax Agent Act, an individual is eligible to be registered as a tax agent under the Tax Agent Act, if the Tax Practitioners Board (Board), being the body established by s.60-5 of the Tax Agent Act, is satisfied, among other things, that the individual is a fit and proper person, and the person meets the requirements prescribed by regulations made under the Tax Agent Act. The Tax Agent Services Regulations 2009 (Cth) (Tax AgentRegulations) have been prescribed for the purposes of the Tax Agent Act.
One of the requirements for registration prescribed by the Tax Agent Regulations is that the individual has completed one of a number of specified courses, and that the individual “has been engaged in the equivalent of 12 months of full-time, relevant experience in the preceding 5 years”.[7] The expression “relevant experience” is defined in reg.207 of the Tax Agent Regulations as work by an individual:
[7] Tax Agent Regulations, Schedule 2, reg.201
(a) as a tax agent registered under the Act; or
(b) as a tax agent registered under Part VIIA of the Income Tax Assessment Act 1936; or
(c) under the supervision or control of a tax agent registered under the Act; or
(d) under the supervision or control of a tax agent registered under the previous regulatory regime contained in Part VIIA of the Income Tax Assessment Act 1936; or
(e) as an Australian legal practitioner; or
(f) of another kind approved by the Board;
in the course of which the individual’s work has included substantial involvement in 1 or more of the types of tax services described in section 90-5 of the Act, or substantial involvement in a particular area of taxation law to which 1 or more of those of those tax agent services relate.
In September 2009 Mr Le made an inquiry of the Australian Taxation Office (ATO) about the experience requirements for becoming a registered tax agent.[8] In particular, Mr Le asked questions about whether his internship with Grosvenor Business Advisers Pty Ltd could count as “relevant experience”. In early 2010 Mr Le made a similar enquiry of the Board.[9] As a result of the responses he received from the ATO and the Board, Mr Le believed that none of his previous work experience could count as “relevant experience” for the purpose of his becoming eligible to register as a tax agent under the Tax Agent Act.[10]
[8] First Le Affidavit, [14]
[9] First Le Affidavit, [15]
[10] First Le Affidavit, [16]
On 10 February 2011 Mr Le read the following advertisement on the website (Advertisement):[11]
[11] First Le Affidavit, [18]; Exhibit “VVL-1”, Vol 1, tab 11 (emphasis in original)
Graduate Accountants – TAXSMART
Graduate positions available – tax accountants
·Fast Track your career
·Sydney CBD
·$50,000 annual salary plus bonus
·6 weeks paid annual holidays
·No experience necessary
·Must purchase franchise
·Training to apply for Tax Agent Licence
·Intensive on the job training
·One on one mentoring
·Respected accounting firm
Education & Qualifications
- Business or Commerce Degree
Successful applicants will be required to purchase a franchise prior to commencing employment
Interested persons should email
[email protected]Please include resume and brief introduction
Mr Andrews drafted the Advertisement, and it was he who arranged for it to be published on At that time, Mr Andrews, through Resultsmart, conducted a tax accounting business under the name “TaxSmart”. Mr Andrews commenced that business in 1999, either in his own right or though another company. In 2007 Mr Andrews incorporated Resultsmart to operate an office in Cairns, following his relocation there from Brisbane.[13] In 2009 Mr Andrews arranged to open additional Taxsmart offices in Townsville and Earlville in Queensland.[14]
[12] T95.45 (10 September 2015)
[13] T87.40 (10 September 2015)
[14] T88.5 (10 September 2015)
In late 2010 Mr Andrews decided to expand Taxsmart’s operations by offering up to approximately 20 franchises to accounting graduates each year on the following terms:[15]
a)the graduates would each pay an upfront franchise fee;
b)the graduates would be employed for a period of 12 months commencing approximately in April of each year;
c)the graduates would be located at new offices or shopping centre kiosks in Melbourne, Sydney, and Brisbane;
d)during their 12 month employment, the graduates would be provided with training, supervision, and experience sufficient to enable them to obtain registration as a tax agent; and
e)at the conclusion of their 12 months employment, the graduates, having obtained registration as tax agents, would cease employment and commence operating a Taxsmart accountancy franchise to provide tax agent services.
[15] Applicant’s Amended Application, 22.12.2014 (Statement of claim), [11]; Response to Applicant’s Amended Application, 11.02.2015 (Response), [6.1]
This statement of the terms does not identify the entity to which the franchise fees were to be paid, or the entity that would employ the graduates. In his statement of claim, Mr Le alleges that the franchise fee was to be paid to “Taxsmart”, that is, to Taxsmart Franchising, Taxsmart Group, and Resultsmart, and that “Taxsmart” was to employ the graduates. I find that at the time Mr Andrews conceived of his plan, he intended to incorporate at least two separate companies, one that would grant the franchise, and one that would employ the graduates. I base that finding on the fact that Taxsmart Franchising and Taxsmart Group were both registered on 17 March 2011,[16] and that Mr Le entered into separate agreements with those companies – a franchise agreement with Taxsmart Franchising,[17] and an employment contract with Taxsmart Group.[18] Nothing, however, turns on this finding.
[16] Exhibit VVL-1, Vol 1, tabs 2-3
[17] Exhibit VVL-1, Vol 1, tab 28
[18] Exhibit VVL-1, Vol 1, tab 29
In late 2010 or early 2011 Mr Andrews designed a program the graduates would follow during the 12 months of their employment (12 Month Plan). That program required the graduates to undertake initial training from their homes during April, May, and June 2011; from around 1 July 2011 to around 31 October 2011, to prepare tax returns at small temporary shopping centre kiosks or at new offices in the central business districts of Sydney, Melbourne, or Brisbane; for six weeks to be involved in business related work; for six weeks to take annual leave; and, for two months, to undertake final training and reviews.[19]
[19] Statement of claim, [12]; Response, [7]
To give effect to his planned program, Mr Andrews prepared and placed the Advertisement with One of the meanings Mr Andrews wished to convey through the Advertisement was that the graduate positions would enable graduates with no prior experience in tax accounting to satisfy the requirements for tax agent registration.[20] On 17 March 2011 Mr Andrews also incorporated Taxsmart Franchising to hold and licence the “TaxSmart” brand and intellectual property,[21] and Taxsmart Group to employ the graduates.[22]
[20] T96.30 (10 September 2015)
[21] T92.15 (10 September 2015)
[22] T92.25 (10 September 2015)
Mr Le was attracted to the Advertisement. What particularly attracted him were the statements “no previous experience necessary”, that there would be “intensive on the job training”, and “one to one mentoring”.[23] Mr Le took these statements, and the Advertisement as a whole, to mean that Taxsmart was offering a graduate program for accounting graduates that would enable those graduates to satisfy the legal requirements for registration as a tax agent, even if they had no previous work experience in tax accounting.[24]
[23] First Le Affidavit, [19]
[24] First Le Affidavit, [19]
On 10 February 2011, after he read the Advertisement, Mr Le sent an email to the email address specified in the Advertisement. Mr Le said he wished “to explore more information about the position advertised”.[25] Mr Le further said:
[25] First Le affidavit, [20]; Exhibit “VVL-1”, Vol 1, tab 12
I have been working in [the] Accounting field for over 3 years which includes 6 months in Public Practice Accounting firm and 2.5 years in commercial firm. Despite not working public practice area any more, I still carry on a little business in book-keeping and tax return for over the years. I am pursuing in CPA at the moment and expecting to complete in 2012. I am really keen on getting back into public practice before advance to CPA status. The advertising seems to be perfect for me as I am really interested in Taxation and Business services; and my end goal is to have little practice for myself eventually.
I have a few questions regarding training, purchasing franchise from Smart Tax, and more. . .
Mr Andrews responded by email on the same day, attaching a pro-forma reply:[26]
[26] First Le affidavit, [21]; Exhibit “VVL-1”, Vol 1, tab 12 (emphasis in original)
Thank you for your enquiry.
Please note, this position requires the successful applicant to purchase a TaxSmart® Franchise Licence prior to beginning the role.
The one off franchise fee is between $45,000 - $80,000 + gst (depending upon whether you are currently a Registered Tax Agent and annual salary to be paid)
Demand for the positions/franchises has been overwhelming, and we are now short listing interested parties who would qualify. Based on the details you have provided you would be eligible to progress to the next stage. Granting of a franchise licence guarantees Graduate position, salary, training and one-on-one mentoring, and as such is in very high demand.
The training and mentoring provided under our franchise model has been designed to fast track an individuals’ [sic] career by many years. We have received hundreds of applications and the following is a list of positions available in 2011:
Melbourne CBD – 6 persons
Brisbane CBD – 6 persons
Sydney CBD – 6 persons
The following is a summary of the opportunity we are currently offering to successful applicants:
- Granting of TaxSmart® Franchise Licence
- Formal structured training and experience to allow franchisees to apply for Tax Agent Licence after minimum 12 month period
- 12 months on the job training with myself or one of our experienced Tax Agents as your direct supervisor and mentor
- $50,000 annual salary (plus bonuses) and 6 weeks paid annual leave
- Full support, documentation, manuals, training etc to establish your own business if you choose to (as a TaxSmart® Accountants franchisee)
- Marketing subsidies to establish your new business within the first 18 months,
. . .
If you have the energy and vision to be part of the TaxSmart® network and you have a keen interest in obtaining a Tax Agents Licence and running your own business, please reply briefly outlining why you feel you would be suited to this opportunity.
Mr Le deposes that he understood the pro-forma reply attached to Mr Andrews’ email to have offered a graduate program for accounting graduates that would enable them to satisfy the legal requirements for registration as tax agents, even if they had no previous work experience in tax accounting.[27] Mr Le further deposes that had he thought the Taxsmart graduate position would not allow him to achieve registration as a tax agent, he would not have been interested in it.[28]
[27] First Le Affidavit, [22]
[28] First Le Affidavit, [23]
In response to Mr Andrews’ request, on 14 February 2011 Mr Le sent to Mr Andrews’ email address his resume.[29] In his resume, Mr Le stated that his objective was to be employed as assistant accountant in a public practice accounting firm, “bringing my related experience from public practice and commercial accounting”. Among his key strengths Mr Le listed his preparing income tax returns for individuals, partnerships, companies, trusts and self-managed super funds, “Capital Gains Tax”, and “BAS/IAS/GST”.
[29] First Le Affidavit, [24]; Exhibit “VVL-1”, Vol 1, tab 13
On 5 March 2011 Mr Le completed and submitted a “Franchise Application Form”.[30] Mr Le paid an application fee of $1,100.[31] Mr Le says that by that time he had applied to the Commonwealth Bank of Australia for a business loan of $50,000. [32] Mr Le referred to this loan in the “Franchise Application Form” next to the printed question: “How do you intend to fund the purchase of a TAXSMART franchise?”
[30] Exhibit “VVL-1”, Vol 1, tab 14
[31] First Le Affidavit, [26(c)]. Mr Le paid the application fee on 4 March 2011 by credit card.
[32] First Le Affidavit, [25]; [27]
According to Mr Le, on 9 March 2011 he met with Mr Andrews. After going through Mr Le’s resume and discussing Mr Le’s work experience, Mr Andrews said he would like to offer Mr Le 12 months employment with Taxsmart Group on condition Mr Le pays the franchise fee of $50,000. Mr Andrews does not dispute this part of Mr Le’s evidence, and I find that a conversation to the effect deposed by Mr Le took place. Mr Andrews also said, according to Mr Le, that “[y]our TaxSmart franchise won’t commence until 14 days after you become a registered tax agent”.[33] Mr Andrews denies he said words to that effect.[34] I prefer Mr Le’s evidence. As I show below, the draft franchising agreement provided that the franchisee had to commence the operation of the franchise “[w]ithin fourteen (14) days from the Franchisee becoming a Tax Agent”.[35] Given that the substance of what Mr Le says Mr Andrews said on 9 March 2011 found its way in the franchise agreement, it is more likely than not that Mr Andrews made a statement to the effect Mr Le says Mr Andrews made.
[33] First Le affidavit, [28(b)]
[34] Affidavit of S R Andrews, 28.08.2015, [23]
[35] Exhibit “VVL-1”, Vol 1, tab 28; cl.3.1(b); item 22
On 21 March 2011 Ms Andrews, the wife of Mr Andrews,[36] sent an email to Mr Le.[37] Ms Andrews said “we would like to officially offer you a position” and, to that end, attached a confidentiality agreement. The email stated that on Mr Le confirming he had read, signed, and returned the confidentiality agreement, lawyers would be instructed “to supply you with all the necessary documentation for your review, including Employment Contract and Franchise Agreement”. Mr Le responded by email on the same day in which he said he had a few “queries” which he was keen to discuss with Ms or Mr Andrews in person. These included the “training location for me in Sydney”, and the “training outline during the first year until I obtain the Tax Agent License”.[38] Mr Andrews responded on 21 March 2011 by email which included the following statements:[39]
1. We are relocating our family to Sydney from Queensland, we are moving into a new office within the next 3-4 weeks in the Sydney CBD,
2. Your training will be a combination of CPA/NTAA training seminars, seminars by legal/leadership/business/financing etc seminars provided in-house by external specialists (I’ll forward an example in a few moments – let me know what you think). Also I will be providing tax training throughout the year, one on one and in small groups. The most important part of the training to obtain your licence is on the job training – practical experience.
[36] T92.45 (10 September 2015)
[37] Exhibit “VVL-1”, Vol 1, tab 17
[38] Exhibit “VVL-1”, Vol 1, tab 17
[39] Exhibit “VVL-1”, Vol 1, tab 17
According to Mr Le, on 23 March 2011 he met Mr Andrews at the offices of DC Strategy Services Pty Ltd (DCS Lawyers).[40] Mr Andrews said Mr Le would effectively be employed by TaxSmart Group as soon as the franchise fee is paid, that Mr Le would receive 12 months of one-to-one coaching and on-the-job training with direct supervision by Mr Andrews, and that when Mr Le were to complete his 12 months employment, Mr Andrews would give him a written reference to confirm that he has the necessary experience to be registered as a tax agent. Also according to Mr Le, during the meeting Mr Le said that he would like to start on 1 July 2011 because he would not be entitled to obtain a bonus with Energise Pty Ltd unless he worked there until the end of the financial year, and he did not want to put Energise Pty Ltd into a difficult position. Mr Andrews said that Mr Le’s full-time employment with TaxSmart Group would commence as soon as the franchise fee is paid. Mr Andrews also said that TaxSmart was in the process of relocating from Cairns to Sydney but, in the meantime, Mr Le would be required to undertake his “own self-paced training by reading CPA . . . tax training manuals” in his own time for 38 hours a week and would have to keep a diary of his “self-paced training as evidence to provide to the TPB in case they ever ask for it”.[41] Mr Andrews said that “technically” Mr Le would be able to continue working with Energise Pty Ltd until 30 June 2011, as Mr Le would not be required to attend the Taxsmart office during the self-paced training period.[42]
[40] First Le Affidavit, [31]
[41] First Le Affidavit, [33]
[42] First Le Affidavit, [33]
Mr Andrews does not in his affidavit dispute that a conversation to this effect took place. Under cross-examination Mr Andrews accepted he met Mr Le on 23 March 2011 and that he in effect said Mr Le would “receive twelve months of one-on-one coaching and on-the-job training with direct supervision by” Mr Andrews.[43] Mr Andrews, however, did not accept he said to Mr Le that, when Mr Le were to complete the 12 months employment Mr Andrews would give Mr Le a written reference to confirm he has the necessary experience to be registered as a tax agent, although he accepted Mr Le may have asked whether Mr Andrews would give him a reference when he needed it.[44] I accept Mr Le’s evidence. Given that one of the matters Mr Andrews accepts was discussed at the meeting was the nature of the 12 months of training Mr Le would receive, which included Mr Andrews directly supervising Mr Le in his work as a tax agent, it is more likely than not there would have been some discussion about Mr Le being in a position where he would need to be able to demonstrate he was supervised in his carrying out the work of a tax agent.
[43] T101.40 (10 September 2015)
[44] T102.5 (10 September 2015)
On 23 March 2011, after his meeting with Mr Andrews, Mr Le sent an email stating he would choose the $55,000 model franchise fee and $30,000 salary, and requested he be sent the employment contract and necessary paperwork.[45] Mr Le also said he was glad he was able to start his training “while doing my full time job until 30/06/2011 due to my bonus scheme at the current work”.
[45] Exhibit “VVL-1”, Vol 1, tab 18
By email sent to Mr Le on 24 March 2011, Ms Andrews noted that the franchise fee of $60,500 (inclusive of GST) was payable together with legal costs of $550, and identified the bank account into which the money should be paid.[46] Ms Andrews noted the documents would be available “today” or the following day, and that Mr Le would begin his employment the following Monday (28 March 2011). Mr Le responded by email on 28 March 2011.[47] He said the bank required a tax invoice before it would advance the money Mr Le needed to pay for the franchise fee. Mr Le said that in the initial business plan he had submitted to the bank in support of his application for a loan, Mr Le represented he had to pay a franchise fee of $80,000 exclusive of GST. To “make it easy with the bank”, Mr Le requested Ms Andrews issue an “invoice for $80,000 plus GST to show them”. On 28 March 2011 Mr Andrews sent to Mr Le an invoice issued by Taxsmart Franchising for $61,050.[48] Of that amount, $16,500 was for “Franchisee Training Fee”, and $44,000 was for “Franchise Licence Fee”.
[46] Exhibit “VVL-1”, Vol 1, tab 18
[47] Exhibit “VVL-1”, Vol 1, tab 18
[48] Exhibit “VVL-1”, Vol 1, tab 20
On or about 1 April 2011, Mr Le received a letter dated 29 March 2011 from DCS Lawyers, the lawyers for Taxsmart Franchising.[49] The letter enclosed a disclosure document,[50] which included a copy of the Franchise Code of Conduct and a draft franchise agreement,[51] together with a draft employment contract.[52] The letter stated, among other things, that the “commencement of your franchise is conditional on you being appointed by the Australian Taxation Office as a tax agent”.
[49] Exhibit “VVL-1”, Vol 1, tab 21
[50] Exhibit “VVL-1”, Vol 1, tab 28
[51] Exhibit “VVL-1”, Vol 1, tab 28
[52] Exhibit “VVL-1”, Vol 1, tab 29
The essential subject matter of the franchise was the “TaxSmart Franchise”. That expression was defined to mean:[53]
[53] Exhibit “VVL-1”, Vol 1, tab 28; cl.1.1(emphasis in original)
the “full-format” TaxSmart franchise business where the Franchisee has the ability to operate both:
(a) from a fixed/permanent Premises under the “Taxsmart” Trade Mark; and
(b) a TaxSmart Express Franchise.
The expression “TaxSmart Express Franchise” was defined to mean:[54]
[54] Exhibit “VVL-1”, Vol 1, tab 28, cl.1.1
the TaxSmart Express franchise business where the Franchisee may operate:
(a) on a mobile basis (with the use of a Vehicle if applicable); and/or
(b) at Express Sites; and/or
(c) from the Franchisee’s place of residence,
in each case solely under the “TaxSmart Express” Trade Mark.
Clause 2.1 of the draft franchise agreement provided that, where the franchisee purchases a “TaxSmart Franchise”, the franchisor grants to the franchisee the right to establish and operate one “TaxSmart Franchise” from the “Premises” and up to three “TaxSmart Express Franchises” from the “Express Sites”.
Clause 3.1(a) of the draft franchise agreement provided that its term was for five years commencing on “the date of this Agreement”. Clause 3.1(b) provided that the franchisee had to “commence operation of the Franchise within the period referred to in Item 22”. That item provided “[w]ithin fourteen (14) days from the Franchisee becoming a Tax Agent”. The draft franchise agreement also obliged the franchisee to make certain payments to the franchisor, including royalty fees. These fees, however, were payable only “during the operation of the Franchise”,[55] which necessarily meant after the “commencement date”. That expression was defined to mean the date “determined in accordance with Item 6”, namely, a “date mutually agreed between the parties, such date to be within fourteen (14) days from the date that the Franchisee becomes a Tax Agent”.
[55] Exhibit “VVL-1”, Vol 1, tab 28; cl.6.3
On 5 April 2011 Ms Andrews sent an email to Mr Andrews and to Mr Le and other franchisee applicants in which she said she wanted to “clarify a few things regarding the employment contract”.[56] Ms Andrews said:
1. You salary is negotiable depending on the bonus limits that you wish to agree to. What does that mean? In short, if you wish to receive a guaranteed salary of $50,000 p.a this will be acceptable if your eligibility for bonus is changed (ie. the bonus will kick in on annual fees earned in excess of $180,000, instead of $120,000).
2. This is something we were saving until your employment had begun, but in addition to salary & other bonus, you’ll also receive 50% of any fees you earn whilst working on the weekend (for tax returns, not business as this should all be done under direct supervision during the normal Mon-Fri period). This can be for tax returns completed in either one of our offices or alternatively at one of the TaxSmart Express centres which will be running for generally 18wks of the year (July-Oct) 7 days a week.
We understand people would prefer the certainty of a higher salary instead of relying on bonuses, therefore if you wish to have your employment contract changed please advise.
[56] Exhibit “VVL-1”, Vol 1, tab 22 (emphasis in original)
Mr Le responded by email on 5 April 2011, noting that the draft employment contract that had been provided to him by DCS Lawyers did not mention the entitlement to 50% of fees earned on the weekends relating to tax returns. He asked for clarification.[57] Ms Andrews responded by email on 5 April 2011 that the weekend work was not compulsory.[58] She said “[w]e need the sites staffed and some franchisees want as much work as they can get”, the arrangement is “between the group” and the franchisee and that, therefore, “it doesn’t form any part of the employment as such”.[59]
[57] Exhibit “VVL-1”, Vol 1, tab 23
[58] Exhibit “VVL-1”, Vol 1, tab 23
[59] Exhibit “VVL-1”, Vol 1, tab 23
On 14 April 2011 Mr Le received an updated draft employment contract from DCS Lawyers.[60] The draft employment contract was intended to be between Mr Le and Taxsmart Group. It provided that from the “Commencement Date”, Mr Le would be appointed “in the Position in order to fulfil the role as specified in the Job Description”.[61] The “Position” is that specified in Item 2, namely, “Senior Accountant”, and the “Job Description” is that specified in annexure A, namely:
Provides services in the accounting and tax areas of the practice to the professional standard required by the firm. Must be able to collaborate with other staff with regard to the preparation of financial accounts, tax returns and document reports. Should also have adequate knowledge of the firms [sic] operational processes and procedures.
[60] First Le Affidavit, [43]; Exhibit “VVL-1”, Vol 1, tab 29
[61] Exhibit “VVL-1”, Vol 1, tab 29, cl.2.1
The employment contract provided Mr Le would be paid an annual salary of $50,000 together with 9% superannuation. It did not refer to any weekend work.
On 14 and 15 April 2011 Mr Le drew down $50,000 on the loan the Commonwealth Bank of Australia had agreed to grant him and, together with $11,050 of his own money, paid the invoice Taxsmart Franchising had issued. Mr Le also signed the franchise agreement and updated employment contract he received on 14 April 2011.[62] Mr Le deposes he would not have taken these steps had he not believed that the Taxsmart graduate program would have enabled him to satisfy the eligibility requirements for becoming registered as a tax agent.[63] On 21 April 2011 Taxsmart Franchising signed the franchise agreement, and Taxsmart Group signed the employment contract.[64]
[62] First Le Affidavit, [44]
[63] First Le Affidavit, [45]
[64] First Le Affidavit, [49]
Mr Le says he commenced employment with Taxsmart Group on 21 April 2011, even though he was then working full-time, and continued until 30 June 2011 to work full-time with Energise Pty Ltd.[65] Until 30 June 2011 Mr Le did his own “self-paced training for TaxSmart by reading CPA training manuals”.[66] From 1 July 2011 until 14 September 2011 Mr Le worked full-time at the Taxsmart site in Penrith Westfield Shopping Centre and from 15 September 2011 until 18 November 2011 he worked full-time at the Taxsmart Sydney office.[67] Mr Le also worked on the weekends preparing tax returns at Taxsmart sites located in shopping centres in Penrith, Liverpool and Chatswood, billing $8,126 (inclusive of GST) of which he was entitled to 50%.[68] Between 24 April 2011 and 18 November 2011 Mr Le attended a two-day tax training course provided by the National Tax & Accountants Association Ltd. Mr Le received no other formal training.[69]
[65] First Le Affidavit, [50]
[66] First Le Affidavit, [50]
[67] First Le Affidavit, [50]
[68] First Le Affidavit, [54]
[69] First Le Affidavit, [52]
On 10 November 2011 Mr Weston, the “National Operations Manager” of Taxsmart sent an email to Mr Le and others stating that Mr Andrews had “asked that because of the current unexpected problems with our gaining new client [sic], that everybody take a week’s Annual Leave from tomorrow”.[70] Mr Le took the leave. When he returned, however, Mr Le received a letter dated 11 November 2011 from Mr Andrews on behalf of Taxsmart Group in which Mr Andrews said, among other things:[71]
As a result of a change in operational requirements of Taxsmart Group Pty Ltd and closing of the Penrith site, the position you are employed under is no longer needed. Regrettably this means your employment will terminate. This decision is not a reflection on your performance.
Based on your length of service, your notice period is one week. Therefore your employment will end on 18th November 2011.
You will also be paid your accrued entitlements and any outstanding pay, including superannuation, up to and including your last day of employment.
[70] First Le Affidavit, [56]; Exhibit “VVL-1”, Vol 1, tab 32
[71] Exhibit “VVL-1”, Vol 2, tab 33
Claims under the ACL
As I have noted at the beginning of these reasons, Mr Le claims Taxsmart engaged in misleading or deceptive conduct that induced Mr Le to enter into the franchise agreement and into the employment contract. Before I consider Mr Le’s claims, and the respondents’ response to those claims, it would be useful to identify the relevant provisions and set out some of the more important principles by reference to which I must assess Mr Le’s claims.
The relevant provisions and jurisdiction
The expression “Australian Consumer Law” is defined in s.130 of the CCA to mean Schedule 2 to the CCA as applied under Subdivision A of Division 2 of Part XI of the CCA. Subsection 131(1) of the CCA provides that the ACL “applies as a law of the Commonwealth to the conduct of corporations, and in relation to contraventions of Chapter 2, 3 or 4 of Schedule 2 by corporations”.
Chapter 2 of the ACL contains s.18(1), which provides that a “person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive”. That subsection substantially reproduces s.52(1) of the Trade Practices Act 1974 (Cth) (TPA) which s.18(1) of the ACL replaced on 1 January 2011.[72] The substantial body of case law that has considered and applied s.52(1) of the TPA, therefore, remains directly relevant to the application of s.18(1) of the ACL.
[72] Trade Practices Amendment (Australian Consumer Law) Act (No. 2) 2010 (Cth)
Subsection 18(1) of the ACL “does not purport to create liability, nor does it vest in any party any cause of action in the ordinary sense of that term”; rather, it “establishes a norm of conduct, and failure, by the corporations and individuals to whom it is addressed in its various operations, to observe that norm has consequences provided for elsewhere in the” ACL.[73] Relevant to Mr Le’s claim is s.236(1) and s.237(1) of the ACL. Subsection 236(1) of the ACL provides:
[73] Re Tobacco Institute of Australia Limited v Australian Federation of Consumer Organisations Inc [1988] FCA 373; (1988) 19 FCR 469 at [20]
If:
(a) a person (the claimant) suffers loss or damage because of the conduct of another person; and
(b) the conduct contravened a provision of Chapter 2 or 3;
the claimant may recover the amount of the loss or damage by action against that other person or against any person involved in the contravention.
The word “involved” is defined in s.2 of the ACL as follows:
a person is involved in a contravention of a provision of this Schedule or in conduct that constitutes such a contravention, if the person:
(a) has aided, abetted, counselled or procured the contravention; or
(b) has induced, whether by threats or promises or otherwise, the contravention; or
(c) has been in any way, directly or indirectly, knowingly concerned in, or party to, the contravention; or
(d) has conspired with other to effect the contravention.
Subsection 237(1) of the ACL provides that, on the application of a person who has suffered, or who is likely to suffer, loss or damage because of, among other things, the conduct of another person that was engaged in a contravention of a provision of Chapter 2, 3, or 4, the court may make such order or orders as the court considers appropriate against the person who engaged in that conduct, or a “person involved in that conduct”. The orders a court may make are specified in s.243 of the ACL, one of which is an order directing the respondent to pay the injured person the amount of the loss or damage.
Subsections 236(1), 237(1), s.243 of the ACL, and the definition in s.2 of “involved”, substantially reproduce s.82(1), s.87, and s.75B of the CCA respectively which continue to apply to contraventions of provisions of the CCA other than provisions of the ACL. Cases that have considered and applied s.82(1), s.87, and s.75B of the CCA, therefore, remain relevant to the operation of s.236(1), s.237(1), s.243 of the ACL, and the definition of “involved” in s.2 of the ACL.
Subsection 138A(1) of the CCA confers jurisdiction on this Court “in relation to any matter under” Part XI “or the Australian Consumer Law in respect of which a civil proceeding is instituted by a person other than the Commonwealth Minister”. Subsection 138A(2) provides this Court does not have jurisdiction to award an amount for loss and damage that exceeds $750,000 or any other amount that may be specified in the regulations.
Elements of a cause of action under s.236(1) of ACL against contravener
In order to succeed on a cause of action for damages under s.236(1) of the ACL based on a contravention of s.18(1) of the ACL, therefore, an applicant must establish that:
a)the respondent engaged in conduct in trade or commerce;
b)the conduct was misleading or deceptive, or likely to mislead or deceive; and
c)the applicant suffered loss or damage “because of” such conduct.
For conduct to occur “in trade or commerce”, it must be “an aspect or element of activities or transactions which, of their nature, bear a trading or commercial character”.[74] And to be misleading or deceptive, the conduct must convey a meaning which is inconsistent with the truth,[75] or be liable to cause a person to err.[76]
[74] Concrete Constructions (NSW) Pty Ltd v Nelson [1990] HCA 17; (1990) 169 CLR 594 at [7]
[75] World Series Cricket Pty Limited v Parish (1977) 16 ALR 181 at 201 (Brennan J)
[76] Henjo Investments Pty Limited & Ors v Collins Marrickville Pty Limited [1988] FCA 40; (1988) 79 ALR 83 at [29] (Lockhart J)
The separation of the second and third elements recognises that “whether conduct is misleading or deceptive or likely to mislead or deceive within the meaning of” of s.18(1) of the ACL “is logically anterior to the question whether a person has suffered loss or damage thereby for the purposes of” s.236 of the ACL, and that the “distinction between characterisation of the conduct and determination of the causation of the claimed loss said to result from it must be maintained”.[77] Here, “characterisation” is “a task that generally requires consideration of whether the impugned conduct viewed as a whole has a tendency to lead a person into error”.[78]
[77] Campbell v Backoffice Investments Pty Ltd [2009] HCA 25; (2009) 238 CLR 304 at [24] (French CJ)
[78] Campbell v Backoffice Investments Pty Ltd [2009] HCA 25; (2009) 238 CLR 304 at [25] (French CJ)
Misleading or deceptive conduct generally consists of representations, express or implied, but it need not so consist.[79] Whether or not conduct amounts to a misrepresentation “is a question of fact to be decided by considering what is said and done against the background of all surrounding circumstances”.[80] An important circumstance when assessing whether conduct is misleading or deceptive is “when the public is involved, on the one hand, and where the conduct occurs in dealings between individuals on the other”.[81] Where the conduct is not directed to any particular individual, whether or not such conduct is misleading or deceptive must be assessed by reference to that section of the public to whom the conduct is directed, and “to isolate by some criterion a representative member of that class”.[82] Where, on the other hand, the conduct is alleged to be constituted by a particular representation directed to a particular individual, “it is necessary to consider the character of the particular conduct of the particular [alleged contravener] in relation to the particular [persons claiming to have been misled], bearing in mind what matters of fact each knew about the other as a result of the nature of their dealings and the conversations between them, or which each may be taken to have known”.[83]
[79] Henjo Investments Pty Limited & Ors v Collins Marrickville Pty Limited [1988] FCA 40; (1988) 79 ALR 83 at [31] (Lockhart J)
[80] Taco Company of Australia Inc & Anor v Taco Bell Pty Ltd & Ors [1982] FCA 136; (1982) 42 ALR 177 at 202
[81] Campbell v Backoffice Investments Pty Ltd [2009] HCA 25; (2009) 238 CLR 304 at [26] (French CJ)
[82] Campomar Sociedad Limited v Nike International Limited [2000] HCA 12; (2000) 202 CLR 45 at [101]
[83] Butcher v Lachlan Elder Realty Pty Ltd [2005] HCA 60; (2004) 218 CLR 592 at [37] (Gleeson CJ, Hayne and Heydon JJ)
There is one class of conduct that is singled out for particular treatment; and that is representations “with respect to a future matter”. Subsection 4(1) of the ACL provides that:
If:
(a) a person makes a representation with respect to a future matter (including the doing of, or the refusing to do, any act); and
(b) the person does not have any reasonable grounds for making the representation;
the representation is taken, for the purposes of this Schedule, to be misleading.
This must be read together with s.4(2) and s.4(3) of the ACL. Subsection 4(2) provides:
For the purposes of applying subsection (1) in relation to a proceeding concerning a representation made with respect to a future matter by:
(a) a party to the proceeding; or
(b) any other person;
the party or other person is taken not to have had reasonable grounds for making the representation, unless evidence is adduced to the contrary.
Subsection 4(3) provides:
To avoid doubt, subsection (2) does not:
(a) have the effect that, merely because such evidence to the contrary is adduced, the person who made the representation is taken to have had reasonable grounds for making the representation; or
(b) have the effect of placing on any person an onus of proving that the person who made the representation had reasonable grounds for making the representation.
The final element of a cause of action for damages under s.236(1) of the ACL is that the applicant suffered loss or damage, and that the applicant suffered such loss or damage “because” of the contravention of s.18(1). Section 82(1) of the CCA, as it currently stands, and as it applied to claims based on contraventions of Part V of the TPA that occurred before 1 January 2011, uses the word “by”, whereas s.236(1) of the ACL uses the word “because”. The word “by” “clearly expresses the notion of causation without defining or elucidating it”,[84] and that the relevant notion of causation that had to be established is the “common law practical or common-sense concept of causation”.[85] It has been held that the words “because of” that appears in s.236(1) of the ACL, like the word “by” that appears in s.82(1) of the CCA, “should be understood to import the traditional notion of causation as a question of fact to be determined by reference to common sense and experience into which policy considerations and value judgments necessarily enter”.[86]
[84] Wardley Australia Ltd v Western Australia [1992] HCA 55; (1992) 175 CLR 514 at [11]
[85] Wardley Australia Ltd v Western Australia [1992] HCA 55; (1992) 175 CLR 514 at [11]. The common law notion of causation is that identified in March v Stramare (E & MH) Pty Ltd [1991] HCA 12; (1991) 171 CLR 506.
[86] Norcast S.ár.L v Bradken Limited (No 2) [2013] FCA 235 at [326] (Gordon J). I became aware of this authority as a result of my consulting Colin Lockhart The Law of Misleading or Deceptive Conduct (LexisNexis Butterworths, 4th ed, 2015) at [10.1].
As I have discussed elsewhere,[87] the usual way in which a causal connection is established between misleading or deceptive conduct that is constituted by a misrepresentation, and loss or damage suffered by the representee, is by the representee proving he or she relied on such conduct. In that “situation, as at common law, acts done by the representee in reliance upon the misrepresentation constitute a sufficient connection to satisfy the concept of causation”. [88] Reliance implies the applicant was misled by the misrepresentation. That, in turn, implies “the representee accepted the representation and believed it to be true”, and that “the representee made a decision or undertook a course of action on the basis of that belief”.[89]
[87] Patdith Services Pty Ltd & Anor v Mitronics Corporation Pty Ltd & Anor [2016] FCCA 1611 at [53]
[88] Wardley Australia Ltd v Western Australia [1992] HCA 55; (1992) 175 CLR 514 at [12]
[89] Peter Macdonald Eggers, Deceit: The Lie of the Law (Informa Law, 2009) at 168 citing Neil MacCormick, “What is Wrong with Deceit?” (1983) 10 Sydney Law Review 5, at 9-10
This formulation of reliance is readily comprehensible where the representation is one of present or past fact. The formulation is not so comprehensible, however, where the representation relates to a future matter. Representations about future matters are not usually assessed, at least when they are made, by reference to whether they are true or not. As s.4(1) of the ACL itself recognises, representations as to future matters are usually assessed by reference to the grounds on which they are made; and s.4(1) deems representations as to future matters to be misleading if they are not made on reasonable grounds. In these circumstances, therefore, it would be inappropriate to require the representee prove that he or she believed the representation was true and made a decision on, or partly on, the basis of that belief. Nor would it be appropriate to require the representee to prove he or she believed the representation was made on reasonable grounds. The state of mind the representee should be required to have in order to establish reliance on a representation as to a future matter must relate to that to which such representations are directed, namely, future matters.
In my opinion, the relevant state of mind a representee will ordinarily need to have to establish reliance on a representation as to a future matter is a belief or expectation that the future matter will or might come to pass. Thus, to prove reliance on a representation with respect to a future matter, it would usually be sufficient if the representee proves he or she believed the future matter will or might come to pass, and the representee made a decision or undertook a course of action on, or substantially on, the basis of that belief.
Claims for damages against persons involved in contravention
Subsection 236(1) of the ACL confers a right of action, not only against the person who contravened a provision of Chapter 2 or 3 of the ACL, but also against “any person involved” in the contravention (alleged accessory). A common starting point for identifying the principles that must be applied when considering whether a person is involved in a contravention of a provision of the ACL is Yorke v Lucas.[90] The question in that case was whether a director of a company that contravened s.52(1) of the TPA “aided, abetted, counselled or procured” the company to contravene that section within the meaning of s.75B(a) of the TPA, or was “party to” the contravention within the meaning of s.75B(c) of the TPA. The plurality held that s.75B(a) of the TPA took the words “aided, abetted, counselled or procured” from the criminal law “where they were used to designate participation in a crime as a principal in the second degree or an accessory before the fact”.[91] The plurality continued:[92]
Both in the case of felonies where the principal offender and the secondary participant commit separate offences, and in the case of misdemeanours where no distinction is drawn between the two, a person will be guilty of the offences of aiding and abetting or counselling and procuring the commission of an offence only if he intentionally participates in it. To form the requisite intent he must have knowledge of the essential matters which go to make up the offence whether or not he knows that those matters amount to a crime.
[90] [1985] HCA 65; (1985) 158 CLR 661
[91] Yorke v Lucas [1985] HCA 65; (1985) 158 CLR 661 at [9] (Mason CJ, Wilson, Deane and Dawson JJ)
[92] Yorke v Lucas [1985] HCA 65; (1985) 158 CLR 661 at [9]
The plurality also held that the proper construction of s.75B(c) of the TPA “requires a party to a contravention to be an intentional participant, the necessary intent being based upon knowledge of the essential elements of the contravention”.[93]
[93] Yorke v Lucas [1985] HCA 65; (1985) 158 CLR 661 at [17]
The principle that arises out of the plurality’s analysis in Yorke v Lucas, therefore, is that an alleged accessory will be involved in another person’s contravention of s.18(1) of the ACL if he or she intentionally participates in the contravention; and that proof of such intentional participation requires proof that the alleged accessory has knowledge of the essential matters which constitute a contravention of s.18(1). Where the misleading or deceptive conduct consists of the making of false representations, the alleged accessory must be shown to have had “knowledge of their falsity”.[94]
[94] Yorke v Lucas [1985] HCA 65; (1985) 158 CLR 661 at [10]
There has been discussion in the cases about the matters of which an alleged accessory must have knowledge where the contravention consists in the making of misrepresentations. In particular, a distinction has been drawn between knowledge that the representation is false, and knowledge of “the matters that enabled the representations to be characterised in that way”.[95] The view favoured in the cases is that all that need be established to prove an alleged accessory’s knowledge of the falsity of a representation is that he or she was “aware of the fact that made the representations misleading, and not to demonstrate that he was aware that they were misleading”.[96]
[95] Medical Benefits Fund of Australia Limited v Cassidy; John Bevins Pty Limited v Cassidy [2003] FCAFC 289 at [15] (Moore J)
[96] Kovan Engineering (Aust) Pty Ltd v Gold Peg International Pty Ltd [2006] FCAFC 117 at [114] (Heerey and Weinberg JJ)
With respect, it is doubtful that proof that an alleged accessory had knowledge of matters that render the representation false necessarily means the alleged accessory knew the representation was false. Knowledge that a statement is false is a distinct mental state. At the very least it includes an awareness that the representation is not true. That requires knowledge of the making of the representation and a belief, when the representation is made, of the truth of matters that are contrary to or inconsistent with the representation. It may perhaps also include an absence of a belief in the truth of the representation when made. That an alleged accessory had knowledge of matters that would render a representation false may be a basis, and often will be a determinative basis, for inferring that the person knew the representation was false. It does not follow, however, that an alleged accessory’s having knowledge of matters that render a representation false will necessarily mean the alleged accessory had knowledge of the falsity of the representation. That would particularly be so where it is the combined effect of the truth of two or more matters that render a representation false but where the alleged accessory may not have connected those matters in his or her mind.
Of what must an alleged accessory be found to have knowledge where a person contravenes s.18(1) of the ACL by making a representation as to future matters without reasonable grounds? The position was stated by the Full Federal Court in Quinlivan v Australian Competition & Consumer Commission:[97]
Accordingly, where s 75B or s 80 accessorial liability is in issue in relation to a representation with respect to a future matter, the existence or otherwise of reasonable grounds will be relevant. If reasonable grounds exist, there will have been no contravention and thus no question of accessorial liability will arise. However, as against the accessorial respondent, the onus will be on the applicant to show the respondent had actual knowledge that
· the representation was made and
· it was misleading or
· the corporation had no reasonable grounds for making it
[97] [2004] FCAFC 175 at [15] (Heerey, Sundberg and Dowsett JJ)
By analogy with the approach taken in cases where the misleading or deceptive conduct occurred by the making of a misrepresentation of fact, the alleged accessory will be taken to have knowledge that a representation as to a future matter was made without reasonable grounds if he or she is aware of the essential facts on the basis of which it has been found such representation was not made on reasonable grounds. Thus, if the contravener relied on no grounds in making the representation, it will be necessary to prove the alleged accessory knew the contravener relied on no grounds; and where the contravener did rely on grounds, the alleged accessory must be shown to have had knowledge of the grounds on which the contravener relied in making the representation, and of all other facts and circumstances on the basis of which it has been found the contravener did not have reasonable grounds for making the representation.
There are two final matters to note. First, s.4 of the ACL does not apply to claims against persons involved in another person’s contravention of s.18(1) of the ACL.[98] Second, where the misleading or deceptive conduct has been engaged in by or on behalf of a body corporate by a director, employee or agent within the scope of the actual or apparent authority of the director, employee or agent,[99] the director, employee or agent may himself or herself be liable as a principal for contravening s.18(1) of the ACL as it has been applied by legislation in the States and Territories.[100] In Arktos Pty Ltd v Idyllic Nominees Pty Ltd, the Full Court of the Federal Court said:[101]
The authorities show that a director of a corporation who acts on its behalf in the course of trade or commerce also acts himself or herself in trade or commerce and, if the corporation is liable under a State Fair Trading Act for their conduct, they also attract primary liability under the same statute…That is supported in particular by the provision in s 84(2)of the TPA and s 82(2) of the FTA that conduct engaged in on behalf of a body corporate by a director within the scope of actual or apparent authority is deemed ‘also’ to have been engaged in by the body corporate.
[98] Quinlivan v Australian Competition & Consumer Commission [2004] FCAFC 175 at [11]-[13] (Heerey, Sunberg and Dowsett JJ)
[99] See s.139B of the CCA
[100] For New South Wales, see Fair Trading Act 1987 (NSW), s.28
[101] [2004] FCAFC 119 at [13]
In Houghton v Arms, the High Court held that employees had engaged in misleading or deceptive conduct in contravention of s.9 of the Fair Trading Act 1999 (Vic) notwithstanding that the employees acted in the trade or commerce of the employer corporation and not of themselves.[102]
[102] [2006] HCA 59; (2006) 225 CLR 553
Issues arising on the pleadings
I now turn to Mr Le’s pleaded case on his claims under the ACL, which may be summarised as follows:
a)The Advertisement, the emails Mr Andrews sent to Mr Le on 10 February 2011 and 21 March 2011, the email Ms Andrews sent on 21 March 2011, and the words spoken by Mr Andrews at the meeting of 23 March 2011, conveyed a representation to the effect that Taxsmart was offering a graduate program for accounting graduates with no previous work experience in tax accounting that would enable such graduates to satisfy the legal requirements for registration as a tax agent (Graduate Program Representation).[103]
[103] Statement of claim, [19]; [23]; [30]; [31]
b)The Graduate Program Representation was a representation as to a future matter.[104]
[104] Statement of claim, [20]
c)Taxsmart did not have reasonable grounds for making the Graduate Program Representation.[105] That is so because:
[105] Statement of claim, [20]; [23]; [30]; [31]
i)The 12 Month Plan was not capable of enabling graduates with no previous work experience in tax accounting to satisfy the legal requirements for registration as a tax agent.
ii)Taxsmart had not made proper enquiries or did not adequately consider whether the graduate program offered by Taxsmart would enable graduates with no previous work experience in tax accounting to satisfy the legal requirements for registration as a tax agent.
iii)Taxsmart did not have, and had not undertaken, sufficient market research or other investigations to show it could generate enough clients to provide 18 graduate employees with the equivalent of 12 months full-time substantial involvement in tax agent work.
d)Mr Le was induced by the Graduate Program Representation to do the following things:
i)on 4 March 2011 to pay an application fee $1,100;[106]
[106] Statement of claim, [26(a)]
ii)on 23 March 2011 to accept Taxsmart’s offer of a graduate position;[107]
[107] Statement of claim, [32]
iii)obtain a bank loan of $50,000 which, together with $11,050 of his own money, Mr Le paid to Taxsmart Franchising on account of franchise fees;[108] and
[108] Statement of claim, [24]; [33]; [36]; [43]
iv)to incur, and continue to incur, fees, charges, and interest under the bank loan.[109]
[109] Statement of claim, [44]
e)By making the Graduate Program Representation, Taxsmart engaged in conduct in trade or commerce that was misleading or deceptive or was likely to misleads or deceive, contrary to s.18(1) of the ACL.[110]
f)Mr Andrews:
i)devised the terms of the Taxsmart franchise and the 12 Month Plan;[111]
ii)determined the content and caused the publication of the Advertisement;[112]
iii)wrote and sent the emails of 10 February 2011 and 21 March 2011;[113] and
iv)was the sole attendee for Taxsmart at the meeting of 23 March 2011.[114]
g)Mr Andrews knew the matters I have set out in (c)(i)-(iii) above.[115]
h)Because of (f) and (g), Mr Andrews was involved in Taxsmart’s contravention of s.18(1) of the ACL.[116]
[110] Statement of claim, [62]
[111] Statement of claim, [63(a)]; [63(b)]
[112] Statement of claim, [63(c)]
[113] Statement of claim, [63(c)]
[114] Statement of claim, [63(f)]
[115] Statement of claim, [64]
[116] Statement of claim, [65]
In their reply, Resultsmart and Mr Andrews:
a)say the Advertisement was published by Mr Andrews on behalf of Resultsmart as trustee for SRA Family Trust trading as “TaxSmart”;[117]
[117] Response, [13.5]
b)say it was Resultsmart who sent the emails of 10 February 2011, Taxsmart Group who sent the email of 21 March 2011, and that Mr Andrews represented Taxsmart Group at his meeting with Mr Le on 23 March 2011;[118]
[118] Response, [17]; [23]; [26]
c)say the Advertisement conveyed a representation to the effect alleged in the statement of claim, except that the representation was to the effect that Resultsmart, as trustee for the SRA Family Trust trading as “TaxSmart”, not Taxsmart, was offering a graduate program for accounting graduates with no previous work experience in tax accounting that would enable such graduates to satisfy the legal requirements for registration as a tax agent (Admitted Representation);[119]
[119] Response, [14.1]
d)admit Resultsmart did not have reasonable grounds for making the Admitted Representation in relation to graduates with no previous work experience in tax accounting,[120] and that the Admitted Representation was misleading to such graduates;[121]
[120] Response, [15.1.2]
[121] Response, [15.1.3]
e)deny the Admitted Representation was misleading to graduates with previous work experience in tax accounting;[122]
f)admit the email of 10 February 2011 was misleading to graduates with no previous work experience in tax accounting;[123]
g)do not admit Mr Le was induced by the Admitted Representation to alter his position;[124]
h)admit Mr Andrews:
i)devised the terms of the Taxsmart franchise and the 12 Month Plan;
ii)determined the content and caused the publication of the Advertisement;
iii)wrote and sent the emails of 10 February 2011 and 23 March 2011;
iv)was the sole attendee at the meeting of 23 March 2011;[125] and
v)knew there were requirements for registration as a tax agent under the Tax Agent Act.[126]
[122] Response, [15.1.4]
[123] Response, [18.1]
[124] Response, [21]; [38]
[125] Response, [56]
[126] Response, [57]
From this summary of the allegations made in the statement of claim, and the response, it will be seen that the respondents admit or accept the substance of most of the allegations made in the statement of claim. The matters that arise on the pleadings are:
a)whether, as Mr Le alleges, “Taxsmart” made the Graduate Program Representation or whether, as the respondents allege, Resultsmart made the representation;
b)whether “Taxsmart” or Resultsmart did not have reasonable grounds for making the Graduate Program Representation to graduates with previous work experience in tax accounting;
c)whether Mr Andrews knew “Taxsmart” or Resultsmart did not have reasonable grounds for making the Graduate Program Representation; and
d)whether Mr Le was induced by the Graduate Program Representation to alter his position.
I will consider each of these issues.
Who made the Graduate Program Representation?
Given that Taxsmart Franchising and Taxsmart Group were incorporated on 17 March 2011, that is, after the Advertisement was published, I find that Resultsmart made the Graduate Program Representation, to the extent it was conveyed through the Advertisement. I also find that:
a)Mr Andrews sent the email of 10 February 2011 on behalf of Resultsmart and that it was Resultsmart that conveyed the Graduate Program Representation through that email; and
b)the Graduate Program Representation was conveyed by Mr Andrews’ email of 21 March 2011, and by words spoken by Mr Andrews during his meeting with Mr Le on 23 March 2011; and
c)given that Taxsmart Franchising and Taxsmart Group had been incorporated on 17 March 2011, and the email of 21 March 2011 and the statements Mr Andrews made at the meeting of 23 March 2011 related to Mr Le’s entering into the franchise agreement and employment contract, the Graduate Program Representation, to the extent it was conveyed by Mr Andrews’ email of 21 March 2011 and by words spoken by Mr Andrews during his meeting with Mr Le on 23 March 2011, was made by Resultsmart on behalf of itself and Taxsmart Franchising and Taxsmart Group.
Were there reasonable grounds for making the Graduate Program Representation?
The respondents admit Resultsmart did not have reasonable grounds for making the Graduate Program Representation, yet submit that Resultsmart had reasonable grounds for making the Graduate Program Representation to graduates who had previous work experience in tax accounting. The respondents submit, therefore, that, because Mr Le had such previous work experience, Resultsmart had reasonable grounds for making the Graduate Program Representation to Mr Le.
The respondents rely on what Mr Le represented in communications with Mr Andrews about the work Mr Le had undertaken. In particular, the respondents rely on that work Mr Le represented he had undertaken that constituted or, at least, could reasonably be supposed to have constituted, tax agent services within the meaning or s.90-5(1) of the Tax Agent Act.[127] Thus, in his resume Mr Le provided to Mr Andrews, Mr Le stated that his key strengths included “[p]reparation of Income Tax Returns for Individuals, Partnerships, Companies, Trusts, SMSFs”, and that, during his internship with Grosvenor Business Advisers Pty Ltd Mr Le worked “in close collaboration with clients and directly liaising with the ATO in relation to providing business services and taxation advices, preparing Income Tax Returns and GST compliance issues”;[128] and in his email to Mr Andrews of 10 April 2011 Mr Le said he still carried on “a little business in book-keeping”.[129] Mr Andrews, in his affidavit, deposed he relied on these representations in offering Mr Le the franchise agreement and employment contract.[130] Mr Andrews further deposed that Mr Le had already obtained sufficient experience to satisfy the “relevant experience” requirement under the Tax Agent Regulations.[131]
[127] Affidavit of S R Andrews, 28.08.2015, [4]-[7]
[128] Exhibit “VVL-1”, Vol 1, tab 13
[129] Exhibit “VVL-1”, Vol 1, tab 12
[130] Affidavit of S R Andrews, 28.08.2015, [8]; [9]
[131] Affidavit of S R Andrews, 28.08.2015, [13]
Mr Andrews submitted that Mr Le undertook the work he had represented to Mr Andrews that he had undertaken and, for that reason, it could not be said there were no reasonable grounds for the making of the Graduate Program Representation to Mr Le. That is so because one of the grounds on which Mr Le relies for claiming there were no reasonable grounds for making the Graduate Program Representation is that the 12 Month Plan was not capable of enabling graduates with no previous work experience in tax accounting to meet the requirements for registration as a tax agent; yet Mr Le, having had relevant work experience, did not require 12 months further experience.[132]
[132] T44.15 (11 September 2015)
The difficulty with the respondents’ submissions is they ignore the “distinction between characterisation of the conduct and determination of the causation of the claimed loss said to result from it”.[133] In truth, the respondents’ submissions are relevant, not to whether the Graduate Program Representation was made without reasonable grounds, and hence to whether it was misleading or deceptive, but to whether Mr Le relied on the Graduate Program Representation. Whether or not the Graduate Program Representation was misleading or deceptive is to be determined having regard to the character of the Graduate Program Representation as it was made to Mr Le, bearing in mind what matters of fact Mr Le and Mr Andrews knew of each other as a result of their dealing and the conversations between them.
[133] Campbell v Backoffice Investments Pty Ltd [2009] HCA 25; (2009) 238 CLR 304 at [24] (French CJ)
As substantially admitted by the respondents, the Advertisement did convey the Graduate Program Representation. There is nothing in the Graduate Program Representation that suggests Resultsmart or any other entity that traded under the name of “Taxsmart” was offering a program for graduates who had some relevant experience in tax accounting, or that persons with experience would participate in a program that was different to the program Resultsmart represented would be offered to graduates. Further, there is nothing in the communications between Mr Le and Mr and Ms Andrews that suggests that Mr Le would be provided with a program that was different from that Resultsmart represented it was offering to graduates without previous tax accounting experience. On the contrary, the evidence positively suggests, and I find, that, to the knowledge of Mr Andrews, Mr Le expected that he would participate in the program that was being offered to graduates without previous experience in tax accounting. In his email of 21 March 2011, Mr Le said he had questions about the “training outline during the first year until I obtain the Tax Agent License”.[134] That information was provided by Mr Andrews in his email of 21 March 2011 in which Mr Andrews said he would “be providing tax training throughout the year, one on one and in small groups”, and that the “most important part of the training to obtain your licence is on the job training – practical experience”. [135] During his meeting with Mr Le on 23 March 2011, Mr Andrews said words to the effect that Mr Le would receive 12 months one on one coaching and on the job training with direct supervision by Mr Andrews.[136]
[134] Exhibit “VVL-1”, Vol 1, tab 17
[135] Exhibit “VVL-1”, Vol 1, tab 17
[136] T101.40 (10 September 2015)
Accordingly, I find:
a)by publishing the Advertisement, and by Mr Andrews sending the emails of 10 February 2011 and 21 March 2011, and by words spoken by Mr Andrews during his meeting with Mr Le on 23 March 2011, Resultsmart on each of these occasions made a representation substantially to the effect of the Graduate Program Representation, namely, that Resultsmart was offering a graduate program for accounting graduates with no previous work experience in tax accounting that would enable such graduates to satisfy the legal requirements for registration as a tax agent under the Tax Agent Act;
b)the representation was a representation with respect to a future matter, that future matter being graduates becoming qualified to register as tax agents under the Tax Agent Act as a result of their participation in the program;
c)based on the admissions Resultsmart made that it had no reasonable grounds for making the Graduate Program Representation, and Resultsmart’s not adducing evidence to the contrary, Resultsmart did not have reasonable grounds for making the Graduate Program Representation; and
d)each time Resultsmart made the Graduate Program Representation, Resultsmart, in trade or commerce, engaged in conduct that was misleading or deceptive, contrary to s.18(1) of the ACL.
Did Mr Andrews know Resultsmart had no reasonable grounds for making the Graduate Program Representation?
Mr Andrews does not admit he knew Resultsmart did not have reasonable grounds for making the Graduate Program Representation. He does, however, admit he devised the terms of the Taxsmart franchise and the 12 Month Plan, that he determined the content and caused the publication of the Advertisement, and that he knew there were requirements for registration as a tax agent under the Tax Agent Act.
Further, Mr Andrews gave evidence under cross-examination. He accepted that, under the 12 Month Plan, during the first three months graduates would undertake initial training which, by and large they would undertake at home;[137] that the initial training would consist of giving the graduates examples to work through and textbooks and other materials to prepare them for actually doing tax returns;[138] that after the first three months, graduates would work at Taxsmart centres completing tax returns for people,[139] and they would undertake that work generally from 1 July 2011 to 31 October 2011;[140] that after around 31 October 2011, the program provided for the graduates to be involved in business-related work for six weeks that would consist of completing tax returns and generally correcting people’s accounts;[141] that would then be followed by a six week holiday;[142] that the final part of the 12 Month Plan would consist of two months’ worth of final training and reviews[143] during which there would be discussion about the work the graduates had previously done during part of which the graduates would not be undertaking client work;[144] Mr Andrews was aware there were requirements under the Tax Agent Act and Tax Agent Regulations for tax agent registration;[145] although he did not read the Tax Agent Act and Tax Agent Regulations, he did read a publication issued by the Board, and he provided some training to fellow accountants about the Tax Agent Act and Tax Agent Regulations;[146] and Mr Andrews had a general understanding of the definition of “tax agent services”.[147]
[137] T89.20 (10 September 2015)
[138] T89.35 (10 September 2015)
[139] T89.45 (10 September 2015)
[140] T90.5 (10 September 2015)
[141] T90.15-20 (10 September 2015)
[142] T90.25 (10 September 2015)
[143] T90.40 (10 September 2015)
[144] T91.25-40 (10 September 2015)
[145] T93.35 (10 September 2015)
[146] T93.40 (10 September 2015)
[147] T94.15 (10 September 2015)
On the basis of the admissions Mr Andrews (as distinct from Resultsmart) made in his reply, and the evidence Mr Andrews gave in cross-examination, I find Mr Andrews was the only person who managed the affairs of Resultsmart; Mr Andrews designed the Taxsmart franchise and devised the 12 Month Plan; having devised the 12 Month Plan, Mr Andrews knew its purpose was to enable those who undertook the program to qualify to be registered as a tax agents under the Tax Agent Act; Mr Andrews was aware there were requirements a person had to satisfy before he or she could be registered as a tax agent under the Tax Agent Act; and, given the program Mr Andrews designed was for a period of 12 months, and that, in the email of 10 February 2011 Mr Andrews referred to “direct supervision”, I find Mr Andrews knew that one means of gaining registration under the Tax Agent Act was that the person seeking registration would work for 12 months under the supervision of a person who was a tax agent registered under the Tax Agent Act.
The matters of which Mr Andrews was aware indicate there were no reasonable grounds on which the Graduate Program Representation could have been made; there were no reasonable grounds for believing that the completion of the 12 Month Plan could have resulted in a graduate obtaining “relevant experience”. That is so because, even if the program were implemented as Mr Andrews intended it to be implemented, that would not have resulted in the graduate gaining 12 months relevant experience. The first three months of the program involved, or at least partly involved, self-paced training, not client work under supervision; the last two months consisted of final training and review for at least part of which would not involve work under supervision; and then there was the six week holiday. Being aware of the matters that show Resultsmart had no reasonable grounds for making the Graduate Program Representation, it follows that Mr Andrews had knowledge that Resultsmart did not have reasonable grounds for making the Graduate Program Representation.
There is an additional, and independent ground on which it is available for me to find Mr Andrews had knowledge that Resultsmart did not have reasonable grounds for making the Graduate Program Representation. In proceedings brought against him and other companies by the Australian Competition and Consumer Commission, Mr Andrews agreed to the Federal Court making orders against him on the basis of a statement of agreed facts and contraventions in which Mr Andrews admitted that the Graduate Program Representation was misleading because the 12 Month Plan was not capable of enabling graduates with no previous work experience in tax accounting to satisfy the legal requirements for registration as a tax agent.[148] Mr Andrews agreed that he signed the statement of agreed facts and contraventions to indicate it was true and correct to the best of his knowledge.[149]
[148] Australia Consumer and Competition Commission v Taxsmart Group Pty Ltd & Ors [2014] FCA 487. The statement of agreed facts and contraventions is annexed to the Court’s reasons for judgment. The relevant admission is contained at [26] and [133] of that statement.
[149] T103.15 (10 September 2015)
Did Mr Le rely on the Graduate Program Representation?
As I noted earlier in these reasons, Mr Le has deposed that when he read the Advertisement he understood it to mean that Taxsmart was offering a graduate program for accounting graduates that would enable those graduates to satisfy the legal requirements for registration as a tax agent, even if they had no previous work experience in tax accounting.[150] He also deposed that the contents of Mr Andrews’ email of 10 February 2011,[151] Mr Andrews’ email of 21 March 2011, and the statements Mr Andrews made at their meeting of 23 March 2011, reassured Mr Le that the training he would receive as part of the Taxsmart graduate program would allow him to become registered as a tax agent.[152] Finally, Mr Le deposed that he relied on the Advertisement, the emails of 10 February 2011 and 21 March 2011 from Mr Andrews, and what Mr Andrews said at their meeting on 23 March 2011 in entering into the franchise agreement and the employment contract, and making the payments in relation to the franchise agreement.[153] If accepted, this evidence establishes reliance by Mr Le on the Graduate Program Representation.
[150] First Le affidavit, [19]
[151] First Le affidavit, [22]
[152] First Le affidavit, [30]; [32]
[153] First Le affidavit, [45]
Mr Andrews cross-examined Mr Le. Mr Andrews asked Mr Le questions about the application Mr Le made to the Board after his employment with Taxsmart Group ended. Mr Andrews asked Mr Le questions about Mr Le’s previous work experience, including the bookkeeping business Mr Le conducted, and the work he conducted while employed by Taxsmart Group. Mr Andrews also asked questions about a proposal Taxsmart made after Mr Le was made redundant. Mr Andrews, however, did not cross-examine Mr Le on the matters to which Mr le deposed in his affidavit. In particular, Mr Andrews did not cross-examine Mr Le about the enquiries Mr Le made to the Board about whether his previous work experience qualified as “relevant experience”. Nor did Mr Andrews cross-examine Mr Le about Mr Le’s understanding of the Graduate Program Representation, and Mr Le’s deposing that he relied on Graduate Program Representation when deciding whether to enter into the franchise agreement.
The immediate intended relevance of Mr Andrews’ cross-examination of Mr Le appears to have been to demonstrate that Mr Le had acquired “relevant experience” before be entered into the franchise agreement and employment contract. Mr Andrews, in turn, appears to rely on that conclusion to show that Mr Le did not need to undertake the 12 Month Plan, and that he therefore acted unreasonably in relying on the Graduate Program Representation. These submissions are surprising. There is no evidence Mr Andrews suggested to Mr Le at the time Mr Le expressed his interest in acquiring a franchise that Mr Le already had the “relevant experience”. In any event, there are a number of answers to Mr Andrews’ submissions.
First, even if it is correct that Mr Le had acquired “relevant experience” before he entered into the employment contract with Taxsmart Group and even if, because of the additional work he undertook with Taxsmart Group, Mr Le had in fact acquired “relevant experience”, that would not contradict or undermine Mr Le’s evidence of his understanding of the Graduate Program Representation, and his evidence that he relied on that understanding when he decided to enter into the franchise agreement and pay the money that he was required to pay in connection with his entering into the franchise agreement. In that regard, I find that Mr Le held the understanding he claimed he held, and that he relied on that understanding in deciding to enter into the franchise agreement and employment contract and pay the amounts he paid and incur the liabilities he incurred. The contemporaneous evidence supports Mr Le’s evidence. In his email of 21 March 2011 Mr Le specifically inquired about the “training outline during the first year until I obtain the Tax Agent License”.[154] That confirms that Mr Le believed at the time he entered into the franchise agreement and the employment contract that he required 12 months experience before he could qualify to be registered as a tax agent. More generally, if Mr Le in fact believed he had already acquired “relevant experience”, or that he had already acquired some “relevant experience” but needed less than 12 months worth of additional “relevant experience”, it would have been irrational for him to agree to participate in the 12 Month Plan offered by Taxsmart. That he did enter into these agreements, and that Mr Le was willing to pay a significant amount of money, could only indicate Mr Le believed not only that he did not have “relevant experience”, but that he believed the beneficiary of the payments, namely, the entity or entities that were to administer the 12 Month Plan, would provide Mr Le with the “relevant experience”.
[154] Exhibit “VVL-1”, Vol 1, tab 17
Second, even if Mr Le had acquired the “relevant experience” but he believed he had not acquired it, I find Mr Le acted reasonably in forming the belief he had not acquired “relevant experience”. Of particular relevance is the evidence Mr Le gave, which Mr Andrews did not challenge in cross-examination, and which I accept, that, before he became aware of the Advertisement, Mr Le made inquiries both of the ATO and of the Board, about whether his previous work experience qualified as “relevant experience”.
Third, I am not satisfied that the evidence goes anywhere near establishing, on a balance of probabilities, that Mr Le’s work experience, both before he commenced, and during his employment with Taxsmart Group provided him with the “relevant experience”. Although there is evidence that Mr Le did perform tax agent’s work, the evidence is incapable of showing that the work Mr Le performed amounted to “substantial involvement in 1 or more of the types of tax agent services described in section 90-5 of the Act, or substantial involvement in a particular area of taxation law to which 1 or more of those types of tax agent services relate”.[155]
[155] Tax Agent Regulations, Schedule 2, reg.207
Finally, even if it could be said Mr Le acted unreasonably in believing he did not have “relevant experience”, that by itself would not sever the causal connection between the Graduate Program Representation and the loss and damage Mr Le claims he suffered. It is of course true that “a party is [not] to be fixed with liability under [s.236] for loss or damage suffered by his conduct where the chain of causation has been broken or dislocated, or where the real, essential, substantial, direct, appreciable or effective cause lies elsewhere”.[156]Any unreasonableness in Mr Le’s believing he did not have “relevant experience”, however, could not reasonably be held to be the real or substantial cause of the loss and damage Mr Le says he suffered.
[156] Elders Trustee & Executor Co Ltd v E G Reeves Pty Ltd & Ors (1987) 78 ALR 193 at 243 (Gummow J)
Having accepted the evidence of Mr Le I have identified in paragraph 87 of these reasons, I find, on the basis of that evidence, that Mr Le relied on the Graduate Program Representation.
There is one other matter to note. Mr Andrews asserted Mr Le continued to operate the franchise after his employment was terminated.[157] I do not accept that claim. It is true Mr Le gave evidence that he prepared tax returns for two Taxsmart clients; but that is not evidence that Mr Le operated the franchise. In any event, Mr Le could not operate the business under the franchise agreement until he was registered as a tax agent, a point noted by Mr Le in one of the emails on which Mr Andrews relies for claiming Mr Le continued to operate the franchise.[158]
[157] Affidavit of S R Andrews, 28.08.2015, [36]
[158] Affidavit of S R Andrews, 28.08.2015; Annexure Q. In the email sent on 10 April 2012 to Mr Andrews, Mr Le states: “I do still need to be registered before operating my franchise though. However, if I am not registered by 1 July, what plan do you have in your mind?” (emphasis in original).
Loss and damage
The decisions Mr Le made in reliance on the Graduate Program Representation were as follows:
a)On 4 March 2011 Mr Le paid an application fee of $1,100.
b)On 15 April 2011 Mr Lee paid $61,050 on account of franchise and other fees.
c)Mr Le borrowed $50,000 of the $61,050 he paid on 15 April 2011 and became liable to repay the $50,000 and pay interest and bank charges on that amount. As at 7 September 2015, the past and expected interest and charges totalled $19,490.28.[159]
[159] Affidavit of V V Le, 7.09.2015 (Second Le Affidavit), [11]
The $19,490.28 has been calculated using the method Mr Le describes in paragraph 10 of his affidavit of 7 September 2015. Mr Andrews did not challenge that method. In my opinion, $19,490.28 represents a fair estimate of the interest and charges for which Mr Le became liable as a result of his entering into the loan agreement under the inducement of the Graduate Program Representation.
Mr Le’s payment of the amounts of $1,100 and $61,050, and the interest and fees Mr Le incurred on his loan represent, therefore, the loss and damage he suffered because of Resultsmart’s contravention of s.18(1) of the ACL and Mr Andrews’ involvement in that contravention, and an order for judgment for at least that amount should be made against the respondents. I must, however, take into account s.76(3) of the Federal Circuit Court Act 1999 (Cth) (FCCA Act) which provides that if an application is made for an order under s.76(3) of the FCCA Act, and the Court is not satisfied that good cause has been shown for not making an order for interest under s.76(3) of the FCCA Act, the Court must either:
…
(c) order that there be included in the sum for which judgment is given interest at such rate as the Federal Circuit Court of Australia or the Judge thinks fit on the whole or any part of the money for the whole or any part of the period between:
(i) the date when the cause of action arose; and
(ii) the date as of which judgment is entered; or
(d) without proceeding to calculate interest in accordance with paragraph (c), order that there be included in the sum for which judgment is given a lump sum in lieu of any such interest.
Subsection 76(4) of the FCCA Act provides, however, that the Court may not award interest in relation to a “debt upon which interest is payable as of right, whether by virtue of an agreement or otherwise”.
Mr Le does apply for an order under s.76(3) of the FCCA Act; and Mr Andrews has not submitted I should not order under s.76(3) of the FCCA Act that interest be included in the sum for which judgment may be entered on this part of Mr Le’s claim. I can make an order under s.76(3) of the FCCA Act, however, only in relation to the $1,100 Mr Le paid on 4 March 2011 and $11,050 of the $61,050 Mr Le paid on 15 April 2011. I cannot make an order for interest in relation to the $50,000 Mr Le borrowed because that is a debt on which he is liable to pay interest.
In these circumstances, I propose to order that judgment be entered against the respondents on this part of Mr Le’s claims for an amount that represents the sum of the following:
a)$50,000, being the amount Mr Le borrowed from the Commonwealth Bank of Australia;
b)$1,100 together with interest at the rates specified in Federal Court of Australia Practice Note CM16 from 4 March 2011 up to and including the date on which final orders are made;
c)$11,050 together with interest at the rates specified in Federal Court of Australia Practice Note CM16 from 15 April 2011 up to and including the date on which final orders are made; and
d)$19,490.28, being the past and expected interest and charges Mr Le incurred or will incur in relation to the loan he took out.
I have calculated the amount on the assumption that I will make orders on 6 September 2016 as follows:
Amount
Interest
Amount plus interest
$50,000
-
$50,000
$1,100
$424.85
$1,524.85
$11,050
$4,179.02
$15,229.02
$19,490.28
-
$19,490.28
TOTAL
$4,603.87
$86,244.15
I propose, therefore, to order that judgment be entered against both respondents in the amount of $86,244.15.
Claims arising out of employment
Mr Le makes a number of claims in relation to his employment.
Weekend work
Mr Le alleges it was an express term of the employment contract that, or, in the alternative, a collateral contract arose under which Mr Le would be paid 50% of fees Mr Le would earn by performing work on the weekend relating to tax returns. Mr Le further claims that, in reliance on the express term or, in the alternative, the collateral contract, he undertook work that resulted in Taxsmart Group earning fees totalling $8,126 (inclusive of GST), as a consequence of which Mr Le became entitled to be paid $4,063, being 50% of the fees he earned. Mr Le finally claims that Taxsmart failed to pay any part of this amount and, in so failing, Taxsmart Group contravened s.323 of the FW Act. Mr Le also claims that Mr Andrews was “involved” within the meaning of s.550(2) of the FW Act in Taxsmart Group’s contraventions of s.323 of the FW Act as a consequence of which Mr Andrews is deemed, pursuant to s.550(1), to have contravened s.323 of the FW Act. In support of this claim, Mr Le has deposed[160] that between 1 July 2011 and 30 October 2011 he worked on weekends doing tax returns for Taxsmart clients at Taxsmart centres in Penrith, Liverpool, and Chatswood, and he performed that work in reliance on the email Ms Andrews sent to Mr Le on 5 April 2011.[161]
[160] First Le affidavit, [53]-[55]
[161] Exhibit “VVL-1”, Vol 1, tab 22
The respondents do not admit these claims. In his affidavit, Mr Andrews only says he received no communications about Mr Le’s claims for weekend work and that, if Mr Le believes he has such claims, they should be directed to the liquidator of Taxsmart Group.[162] Under cross-examination, Mr Andrews accepted that the emails Ms Andrews sent on 5 April 2011 reflected discussions he had with her,[163] and he accepted Mr Le undertook the weekend work Mr Le claimed he undertook.[164] Mr Andrews was cross-examined about concerns that Mr Weston had about the possibility of employees having submitted false claims for work performed on the weekend, and that Mr Andrews agreed with a decision Mr Weston made to withhold payment for claims made for weekend work until Mr Weston had checked all claims.[165]
[162] Affidavit of S R Andrews, 28.08.2015, [27]
[163] T15.15 (11 September 2015)
[164] T15.20 (11 September 2015)
[165] T18.15 (11 September 2015)
I am satisfied Mr Le undertook the work he claims he undertook, that his work resulted in Taxsmart Group earning fees totalling $8,126 (inclusive of GST), and that Taxsmart Group has not paid to Mr Le any amount in relation to the weekend work he performed. I am also satisfied that it was a term of the employment contract that, if Mr Le were to undertake weekend work, he would be entitled to be paid 50% of the fees his work would generate. I so find even though the employment contract contains no such term and even though the email from Ms Andrews of 5 April 2011 states that any weekend work would not form part of the employment. Why? Because it was contemplated that during the 12 months of his employment Mr Le would be supervised by persons who were registered tax agents. That necessarily implied that Mr Le would not be working outside the control of his employer, Taxsmart Group, which in turn implies that the work Mr Le was to perform on the weekend would be in the course of his employment by Taxsmart Group. It follows that the amounts payable for weekend work are “amounts payable to the employee in relation to the performance of work” within the meaning of s.323(1) of the FW Act and that, by failing to pay Mr Le any amount in relation to the weekend work, Taxsmart Group contravened s.323(1) of the FW Act.
Mr Le, in his written submissions, submits the party to the arrangement to pay for weekend work is not Taxsmart Group, but Resultsmart. Mr Le relies on estoppel. I do not accept that submission. No such estoppel is pleaded. And in any event, Mr Le must have known, and I find that he did know, because he signed the employment contract, that his employer was Taxsmart Group.
The final question in this part of Mr Le’s claims is whether Mr Andrews was “involved” within the meaning of s.550(2) of the FW Act in Taxsmart Group’s contravention of s.323(1) of the FW Act. “Involved in” is defined in s.550(2) of the FW Act in a manner that repeats the substance of the definition of “involved in” in s.2 of the ACL. Thus, to have been involved in Taxsmart Group’s contravention of s.323 of the FW Act, it must be shown that Mr Andrews participated in, and therefore had knowledge of the essential elements of, Taxsmart Group’s contravention of s.323(1) of the FW Act.
I am satisfied Mr Andrews was aware Ms Andrews had represented to Mr Le that if he undertook weekend work he would be entitled to 50% of the fees his work would generate, in addition to the salary that would be payable under the employment contract. Mr Le submits that Mr Andrews was also aware Mr Le had performed work and that he was not paid 50% of the fees his work earned for Taxsmart. Mr Le relies on Mr Andrews’ being the sole director of Taxsmart Group, that when Mr Le’s employment, together with that of other employees, had been terminated there necessarily would have been unpaid weekend work, that on 14 December 2011 an employee had sent an email to Mr Andrews in which she referred to unpaid weekend work, that Mr Andrews agreed with the decision of Mr Weston, Taxsmart’s National Operations Manager, not to release money on account of claims for weekend work unless he was satisfied the claims were legitimate, and that Mr Andrews did not dispute claims Mr Le made in correspondence in January 2012 that he was owed money for weekend work.
In my opinion, these matters do not establish Mr Andrews participated in the contravention of s.323(1) of the FW Act. There is no evidence that, at the time Mr Le performed the work, or at the time Taxsmart earned fees in relation to Mr Le’s work, Mr Andrews was aware that Mr Le had undertaken that work, or that Mr Le had not been paid for that work. Mr Andrews gave evidence in cross-examination, which I accept, that he had little involvement with the submitting of claims for weekend work, noting that it was Mr Weston who was responsible for keeping records and that Mr Weston had requested that people submit claims to him.[166] It is true that Mr Andrews became aware in January 2012 of Mr Le’s claim that he had undertaken weekend work for which he had not been paid, and that Mr Andrews did not dispute that claim. That does not necessarily mean Mr Andrews was involved in Taxsmart’s contravention. The contravention occurred at the time Mr Le’s entitlement to be paid for the weekend work accrued, and it is at that point in time that Mr Andrews “involvement in” the contravention, and hence knowledge of the contravention, has to be demonstrated. Although there is evidence from which I could infer the time or times on which Mr Le became entitled to be paid for weekend work, I am not prepared to find that the time for payment accrued in January 2012 when Mr Le claimed payment for that work. Nor am I prepared to infer from the fact that Mr Andrews did not dispute Mr Le’s claims that Mr Andrews was involved in Taxsmart Group’s not paying Mr Le for weekend work at the time Mr Le became entitled to such payment.
[166] T21.25 (11 September 2015)
This part of Mr Le’s claims, therefore, fails.
Accrued annual leave
Clause 10.1 of the employment contract provided that Mr Le would progressively accrue 30 days paid annual leave every year.[167] Mr Le has deposed he had taken four days’ annual leave, and that he had accrued 105.5235 hours of untaken leave, which he has calculated to be worth $2,671.41. Mr Le claims he has not been paid that amount.
[167] Exhibit VVL-1, Vol 1, tab 29
The respondents submit Mr Le has been paid all annual leave entitlements. They rely on what purport to be business records of Taxsmart Group, and in particular, a document titled “Entitlement Balance”.[168] That document records Mr Le took annual leave of 40 hours on 24 June 2011 and 1 July 2011. Mr Andrews, in cross-examination, said those hours reflected the time Mr Le spent with his former employer until he commenced work on 1 July 2011.[169] The document also records that Mr Le took 40 hours annual leave on 18 November 2011. Under cross-examination, Mr Andrews assumed that was in relation to the leave Mr Le was required to take on 10 November 2011. There was also 32 hours annual leave recorded on 23 September 2011.
[168] Affidavit of S R Andrews, 28.08.2015; Annexure G
[169] T7.25 (11 September 2015)
The respondents claim Mr Andrews and Mr Le agreed that Mr Le would not accrue annual leave while doing self-paced training. Mr Le denies such agreement. I do not accept there was an express agreement to the effect the respondents allege. There is a question, however, whether the agreement Mr Le and Mr Andrews undeniably made that permitted Mr Le to continue working full-time with Energise Pty Ltd until 30 June 2011 can properly be characterised as an agreement to the effect alleged by the respondents. In my opinion, that agreement should be so characterised.
Under cl.4(a) of the employment contract, Mr Le was required to work a minimum of “forty (40) to fifty (50) hours” a week.[170] There is no evidence that from the date on which he signed the employment contract to 30 June 2011 Mr Le worked 40 to 50 hours a week in undertaking the self-paced study component of the 12 Month Plan. It is most unlikely that he did, given that he was committed to remain in full-time employment with Energise Pty Ltd until 30 June 2011. It follows, therefore, and I find, that at the time Mr Andrews and Mr Le agreed that Mr Le could start work on 21 April 2011, yet earn wages under the contract of employment until that time while being in full-time employment with another employer, that persons in the position of Mr Andrews and Mr Le would have contemplated that, during the period up to 30 June 2011, Mr Le would not be performing anywhere near the 40 to 50 hours minimum of work contemplated by the employment contract. Given that an employee’s right to wages generally depends on service,[171] and there is nothing in the employment contract that provided or could reasonably suggest that Mr Le would be paid wages independently of his serving under the contract, the true effect of the agreement between Mr Andrews and Mr Le is that the time for which Mr Le would not perform work under the employment contract, and yet receive wages, would be on account of annual leave.
[170] Exhibit VVL-1, Vol 1, tab 29
[171] Automatic Fire Sprinklers Pty Ltd v Watson [1946] HCA 25; (1946) 72 CLR 435 at 465-466 (Dixon J)
Mr Le has not provided evidence of the actual hours he performed on self-paced training for the period up to 30 June 2011. It is therefore not possible to make any finding that he did not in fact use the 105.5235 hours he claims as accrued leave as leave. In any event, given the length of the period commencing on the day Mr Le entered into the employment contract and ending on 30 June 2011, it is unlikely that Mr Le spent such amount of time on self-paced training as would have left earned him accrued leave.
This part of Mr Le’s claims, therefore, fails.
Superannuation
There is no issue Mr Le was not paid superannuation in the amount of $1,818.18, and that Taxsmart Group contravened s.323(1) of the FW Act. The principal question is whether Mr Andrews was “involved in” Taxsmart Group’s contravention of s.323(1) of the FW Act.
Mr Le claims Mr Andrews was knowingly involved in the contravention. Mr Le relies on Mr Andrews being the “alter-ego” of Taxsmart Group, and that Mr Andrews became aware that Mr Le had not been paid his superannuation entitlements, and yet those entitlements have not been paid. I am not satisfied the evidence establishes Mr Andrews was involved in Taxsmart Group’s failure to make the superannuation contributions it was required to make. There is no evidence that Mr Andrews himself was responsible for arranging or responsible for paying the superannuation contribution, or that he was aware that the person or persons who were responsible for making those contributions did not do so. That Mr Andrews became aware that the superannuation contributions were not made does not by itself demonstrate Mr Andrews was involved in the contraventions. The contraventions occurred on each occasion the superannuation contributions ought to have been made. To demonstrate that Mr Andrews was involved in the contraventions, it was necessary to show that Mr Andrews was involved in each of the contraventions and that required that Mr Andrews had knowledge at the time of each contravention of the essential element of each contravention. I am not satisfied the evidence proves these matters.
This part of Mr Le’s claims, therefore, also fails.
Claim for not maintaining records
In his statement of claim Mr Le claims Taxsmart Group contravened s.536 of the FW Act, and that Mr Andrews was involved in that contravention. That claim, however, was not pressed by counsel for Mr Le. I will, therefore, not consider it.
Claim for restitution
Mr Le’s claim for restitution is based on the following statement made in the letter dated 29 March 2011 from DCS Lawyers acting for Taxsmart Franchising:[172]
[172] Exhibit “VVL-1”, Vol 1, tab 21
If you decide not to proceed with the franchise, this payment is fully refundable.
Mr Le alleges this conveyed a representation to the effect that the franchise fees would be refunded in full if Mr Le did not open a Taxsmart franchise.
This statement must be read in the context in which it was made. The most important context is the documents that accompanied the letter. These included the disclosure document and the draft franchise agreement. Clause 13.2 of the disclosure document stated that a “partial refund will be available pursuant to clause 14.1 and item 18 of the Franchise Agreement”.[173] These words appear under the heading: “Partial refund if agreement terminated during the “Cooling Off” Period?” The clause in the draft franchising agreement to which this statement was directed provided that the franchisee “may terminate this Agreement within 7 days of the date of entering into this Agreement by the provision of written notice to the Franchisor”.[174]
[173] Exhibit “VVL-1”, Vol 1, tab 28
[174] Exhibit “VVL-1”, Vol 1, tab 28
Mr Le, in his affidavit, does not say he did not read the documents that accompanied the lawyer’s letter. I cannot accept he did not read the documents, or that he did not read and understand this part of the disclosure document and franchise agreement. In those circumstances, I do not accept that Mr Le could reasonably have understood that the reference in the letter to “not to proceed with the franchise” to mean if he decided not to open a Taxsmart franchise. In the context in which it was made, the statement in the lawyer’s letter “If you decide not to proceed with the franchise, this payment is fully refundable” referred to the right of Mr Le to terminate the franchise agreement within seven days of Mr Le’s signing the agreement.
Even if, however, Mr Le understood the statement in the lawyer’s letter to have conveyed that he would be entitled to a refund of the fees he paid if he did not open a Taxsmart franchise, and Mr Le relied on such representation, any action for the recovery of the money paid could only lie against the company to which the money was paid. On the evidence before me, the money appears to have been paid to Taxsmart Franchising. That company, however, is not a party in these proceedings.
This part of Mr Le’s claims, therefore, fails.
Costs
Given that Mr Le has substantially succeeded on his claim, it follows that the respondents should be ordered to pay his costs. On 26 November 2014, however, I ordered that paragraphs 2, 3, 4, and 5 of the response filed by the respondents be struck out. Those paragraphs claimed orders that I dismiss the proceeding because the proceeding was an abuse of process. Mr Le has applied for an order that the respondents pay Mr Le’s costs of the hearing to strike out this part of the response on an indemnity basis.
Parties’ submissions
The ground on which the respondents claimed the proceedings be dismissed is that orders had been made in proceedings that had been brought in the Federal Court of Australia by the Australian Competition and Consumer Commission (ACCC) against a number of respondents, including Taxsmart Group, before it went into liquidation, and the two respondents in these proceedings,[175] and that orders had been made in separate proceedings, namely Yousef v Taxsmart Group Pty Ltd & Anor;[176] and that these proceedings related to alleged contraventions of the ACL in connection with the same franchise business that is the subject of this proceeding.[177]
[175] Australian Competition and Consumer Commission v Taxsmart Group Pty Ltd & Ors [2014] FCA 487
[176] [2013] FCCA 2089
[177] Australian Competition and Consumer Commission v Taxsmart Group Pty Ltd & Ors [2014] FCA 487
In these circumstances, counsel for Mr Le submitted that an order for indemnity costs is justified for the following reasons:[178]
a)The respondents’ allegations of abuse of process had no arguable basis in fact or law because Mr Le was not a party to, and he had no significant involvement in, the two earlier proceedings, and received no benefit from those proceedings. It was beyond argument, therefore, that any estoppel could have arisen against Mr Le.
b)The respondents were on notice that the allegations referred to in (a) were bound to fail because the allegations were substantially similar to the allegations made in earlier proceedings, and which were rejected.
c)On 19 November 2014 Mr Le’s lawyer sent an email to Mr Andrews in which she set out in detail the reasons why the respondents’ application to dismiss the proceeding was bound to fail, and offered to settle the application on the ground that the respondents’ application for dismissal be dismissed, and that the costs of the application be Mr Le’s costs in the cause. The respondents failed to respond to that offer.[179]
d)The respondents ought not to be allowed to escape the consequences of an indemnity costs order due to their failure to appear at the interlocutory hearing or due to their being not legally represented.
[178] Applicant’s submissions on costs of hearing of 26 November 2014, 4.12.2014, [10]-[15]
[179] Affidavit of K L Hunter, 24.11.2014, [4]; Annexure B
The respondents, in their written submissions, submit an order for indemnity costs is not justified for the following reasons:[180]
a)The respondents believed certain fair work and consumer law allegations were disposed of in the ACCC and Yousef proceedings and as a result, the applicant could not argue them in these proceedings.
b)The second respondent did not intentionally fail to appear before the Court on 26 November 2014.
c)The respondents did not make spurious, fraudulent or vexatious allegations against Mr Le.
d)The respondents did not seek to unnecessarily or unreasonably prolong the litigation; they believed the application was an efficient and expeditious way to conclude the litigation.
e)The respondents believed Mr Le could not bring, what are submitted to be, effectively the same proceedings as the ACCC and Yousef proceedings.
f)The respondents were trying to find their way through a system they do not properly understand in an effort to defend the proceedings.
[180] Respondent’s submissions on costs of hearing of 26 November 2014, 11.02.2015, [8]
Principles
The principles relating to the circumstances in which an order for indemnity costs should be made were usefully set out by Lucev FM (as his Honour then was) in Cann v Commonwealth Bank of Australia (No.6) (references omitted):[181]
[181] [2011] FMCA 912 at [13]
In determining whether to award indemnity costs the Court has a very wide discretion, to be exercised judicially. What is an appropriate costs or indemnity costs order depends on the circumstances of the case. The normal practice, not to be lightly departed from, is to provide for costs to be on a party – party basis. There are however certain issues to which the Court will give consideration, and weigh, when determining whether to make an indemnity costs order, and the extent of any such order. The issues must establish special or unusual circumstances warranting an indemnity costs order. Those issues include:
(a) whether a party should have known that there was no prospect of success in the case;
(b) where a party alleges fraud or forgery, knowing the accusation to be false, or irrelevant to the issues;
(c) where a party precipitately punctuates proceedings by resiling from a previously adhered to view;
(d) where a party acts in a high handed manner;
(e) whether the party against whom indemnity costs is sought is a self-represented litigant, and whether the self-represented litigant ought escape the consequences of indemnity costs;
(f) where a party proceeds “vexatiously” that is “without sufficient grounds for the purpose of causing trouble or annoyance”;
(g) where a party proceeds for no good purpose at all due to inertia and carelessness;
(h) where a party persists in the making of allegations which ought not to have been made, or in undue prolongation of groundless contentions;
(i) where a party’s conduct causes loss of time to the Court, and to other parties;
(j) where a party imprudently refuses an offer to compromise;
(k) whether the award of indemnity costs is sought against a contemnor;
(l) having regard to the objects of:
(i) encouraging savings of private costs and avoidance of inherent risks, delays and uncertainties of litigation;
(ii) saving public cost necessarily incurred in litigation which events demonstrate to have been unnecessary; and
(iii) indemnifying one party where the real cause and occasion of the litigation is the attitude adopted by the other party.
Should indemnity costs of the application to summarily dismiss be awarded?
In my opinion, it is appropriate that I should order the respondents pay on an indemnity basis Mr Le’s costs of his application to strike out paragraphs 2, 3, 4, and 5 of the response. The respondents’ claims made in those paragraphs were hopeless. The respondents ought to have known they were hopeless, at least from 19 November 2014 when Mr Le’s solicitor informed Mr Andrews of the reasons she considered the claims were hopeless. The respondents not only did not respond to Mr Le’s solicitor’s email of 19 November 2014; they did not respond to an earlier email Mr Le’s solicitor sent on 31 October 2014 requesting the respondents articulate the grounds on which they sought to have the proceeding dismissed, and putting the respondents on notice that Mr Le would apply for an order for indemnity costs.[182] Further, Mr Le’s solicitor made a reasonable offer to settle the application which the respondents unreasonably did not accept.
[182] Affidavit of K L Hunter, 24.11.2014, [3]; Annexure A
Whether or not the respondents, as they submit, genuinely believed they had valid grounds for an order that the proceeding be summarily dismissed, and that the failure of Mr Andrews to attend the hearing on 26 November 2014 was due to illness, they have put nothing before the Court that would indicate their belief was reasonably based. In the face of their not having responded to correspondence which clearly stated why the respondents’ claims for summary dismissal were bound to fail, the respondents’ persistence with those claims was unreasonable. In those circumstances, Mr Andrews ought not escape the consequences of his unreasonable conduct, even though he is an unrepresented litigant.
Disposition
I propose, therefore, to order that:
a)judgment be entered against the first and second respondents for $86,244.15 on Mr Le’s claims based on Resultsmart’s contravention of s.18(1) of the ACL, and Mr Andrews’ involvement in that contravention;
b)the application, to the extent it claims relief under the FW Act and for restitution, be dismissed;
c)the first and second respondents pay Mr Le’s costs of his application to strike out grounds 2, 3, 4, and 5 of the response on an indemnity basis;
d)subject to (e), the first and second respondents pay all other costs of Mr Le of the proceedings; and
e)within twenty one days of the making of these orders, the parties apply for an order to vary or discharge the proposed order for costs referred to in (d).
I certify that the preceding one hundred and thirty-six (136) paragraphs are a true copy of the reasons for judgment of Judge Manousaridis
Date: 6 September 2016
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