NRM Corporation Pty Ltd v Australian Competition and Consumer Commission
[2016] FCAFC 98
•21 July 2016
FEDERAL COURT OF AUSTRALIA
NRM Corporation Pty Ltd v Australian Competition and Consumer Commission [2016] FCAFC 98
Appeal from: Australian Competition and Consumer Commission v
ACN 117 372 915 Pty Limited (in liq) (formerly Advanced Medical Institute Pty Limited) [2015] FCA 368File number: VID 239 of 2015 Judges: FLICK, MURPHY AND GRIFFITHS JJ Date of judgment: 21 July 2016 Catchwords: CONSUMER PROTECTION – unfair contract – unconscionability – undesirability of providing a comprehensive definition – the vulnerability of the consumer
PRACTICE AND PROCEDURE – findings of fact in respect to matters not pleaded – need for amendment – findings made in respect to matters canvassed and put in issue at hearing
PRACTICE AND PROCEDURE – alleged delay in publication of reasons for decision – delay of itself not a ground of appeal
PRACTICE AND PROCEDURE – need for caution before finding a witness has been untruthful – need to explain why evidence has been rejected
Legislation: Competition and Consumer Act 2010 (Cth), Sch 2, ss 21, 24, 25, 250
Trade Practices Act1974 (Cth), ss 51AB, 51AC
Cases cited: Australian Competition and Consumer Commission v ACN 099 814 749 Pty Ltd [2016] FCA 403
Australian Competition and Consumer Commission v ACN 117 372 915 Pty Limited (in liq) [2015] FCA 368
Australian Competition and Consumer Commission v ACN 117 372 915 Pty Ltd (in liq) [2015] FCA 1441
Australian Competition and Consumer Commission v Allphones Retail Pty Ltd (No 2) [2009] FCA 17, (2009) 253 ALR 324
Australian Competition and Consumer Commission v Chrisco Hampers Australia Ltd [2015] FCA 1204
Australian Competition and Consumer Commission v Clinica Internationale Pty Ltd (No 2) [2016] FCA 62
Australian Competition and Consumer Commission v Coles Supermarkets Australia Pty Ltd [2014] FCA 1405
Australian Competition and Consumer Commission v Dukemaster Pty Ltd [2009] FCA 682
Australian Competition and Consumer Commission v Lux Distributors Pty Ltd [2013] FCAFC 90
Australian Competition and Consumer Commission v Multimedia International Services Pty Ltd [2016] FCA 439
Australian Securities and Investments Commission v National Exchange Pty Ltd [2005] FCAFC 226, (2005) 148 FCR 132
Australian Competition and Consumer Commission v Origin Energy Electricity Ltd [2015] FCA 278
Director of Consumer Affairs (Vic) v Scully [2013] VSCA 292, (2013) 303 ALR 168
Expectation Pty Ltd v PRD Realty Pty Ltd [2004] FCAFC 189
JR Consulting & Drafting Pty Ltd v Cummings [2016] FCAFC 20, (2016) 329 ALR 625
Mbuzi v Griffith University [2014] FCA 1323, (2014) 146 ALD 543
MM Constructions (Aust) Pty Ltd v Port Stephens Council (No 7) [2012] NSWCA 417, (2012) 191 LGERA 292
Monie v Commonwealth of Australia [2005] NSWCA 25, (2005) 63 NSWLR 729
NAIS v Minister for Immigration and Multicultural and Indigenous Affairs [2005] HCA 77, (2005) 228 CLR 470
Paciocco v Australia and New Zealand Banking Group Ltd [2015] FCAFC 50, (2015) 236 FCR 199
PT Ltd v Spuds Surf Chatswood Pty Ltd [2013] NSWCA 446
Smith v New South Wales Bar Association (1992) 176 CLR 256
Tonto Home Loans Australia Pty Ltd v Tavares [2011] NSWCA 389
Transerve Pte Ltd v Blue Ridge WA Pty Ltd [2015] FCA 953
Water Board v Moustakas (1988) 180 CLR 491
Date of hearing: 23 and 24 May 2016 Registry: Victoria Division: General Division National Practice Area: Commercial and Corporations Sub-area Regulator and Consumer Protection Category: Catchwords Number of paragraphs: 225 Counsel for the Appellants: Mr D B Studdy SC Solicitor for the Appellants: StevensVuaran Lawyers Counsel for the Respondent: Mr J Burnside AO QC with Ms L Nichols Solicitor for the Respondent: Corrs Chambers Westgarth ORDERS
VID 239 of 2015 BETWEEN: NRM CORPORATION PTY LTD (ACN 151 468 601)
First Appellant
NRM TRADING PTY LTD (ACN 151 469 493)
Second Appellant
DR JACOV VAISMAN
Third Appellant
AND: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
Respondent
JUDGES:
FLICK, MURPHY AND GRIFFITHS JJ
DATE OF ORDER:
21 JULY 2016
THE COURT ORDERS THAT:
1.The appeal is dismissed.
2.The Appellants are to pay the costs of the Respondent.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
THE COURT:
In December 2010 the Australian Competition and Consumer Commission (the “ACCC”) filed in this Court an Originating Application and a Statement of Claim.
There were five Respondents to that proceeding, including ACN 117 372 915 Pty Limited (formerly known as Advanced Medical Institute Pty Limited) and ACN 095 238 645 Pty Limited (formerly known as AMI Holdings Pty Ltd). Together they can be referred to as AMI. Both of the AMI companies were placed into voluntary liquidation the day after the ACCC commenced this proceeding. The Third Respondent was Dr Jacov Vaisman, who was the sole director and Chief Executive Officer of AMI. The Fourth and Fifth Respondents were Drs Brian Lonergan and James Vandeleur, respectively, two doctors engaged by AMI.
In June 2011 the business of AMI was sold to NRM Corporation Pty Ltd and NRM Trading Pty Ltd (both of which can be referred to as NRM).
A Further Amended Application and a Further Amended Statement of Claim were filed in December 2011. The NRM companies were added as the Sixth and Seventh Respondents.
In very summary form, AMI offered treatments for premature ejaculation (“PE”) and erectile dysfunction (“ED”) using nasal sprays and later oral strips. It advertised extensively, claiming that its treatment would result in “longer lasting sex”.
In very summary form, the ACCC alleged that from 2008 to 2010 AMI engaged in unconscionable conduct in contravention of s 51AB of the Trade Practices Act1974 (Cth) (the “Trade Practices Act”). The ACCC further alleged that NRM engaged in unconscionable conduct after its purchase of the business in June 2011. The conduct of NRM was alleged to be unconscionable conduct as prohibited by s 21 of the Australian Consumer Law, being Sch 2 to the Competition and Consumer Act 2010 (Cth) (the “Australian Consumer Law”). The ACCC also alleged that a term of the contract between NRM and its patients providing for refunds was unfair within the meaning of ss 24 and 250 of the Australian Consumer Law. Dr Vaisman, it was alleged, aided, abetted, counselled, procured or was knowingly concerned in or party to the contraventions of AMI and NRM.
The claims as made by the ACCC were heard by the primary Judge over a hearing lasting 33 days between March and December 2013. The transcript comprises almost 3,000 pages. Thirty-two witnesses were called to give evidence. Submissions were heard over two days in May 2014. The primary Judge made orders and published his reasons for decision on 22 April 2015: Australian Competition and Consumer Commission v ACN 117 372 915 Pty Limited (in liq) [2015] FCA 368. The judgment descended to considerable detail as to both the facts and the law and is in excess of 1,000 paragraphs. The primary Judge found that the claims made by the ACCC had been made out and made orders largely in accordance with the form of orders sought.
In May 2015 the two NRM companies and Dr Vaisman filed a Notice of Appeal. An Amended Notice of Appeal was filed in March 2016 and a Further Amended Notice of Appeal was filed on 25 May 2016.
It will, regrettably, be necessary in due course to set forth the Grounds of Appeal in their entirety. For present purposes, however, it is sufficient to note that the form of the Further Amended Notice of Appeal is such that it separately addresses six discrete areas of alleged appellable error, namely:
·the “lack of efficacy of AMI/NRM medications and treatments” (Part A, comprising Ground 1);
·“the NRM period” (Part B, comprising Grounds 2 to 4);
·the conduct of the doctors (Part C, comprising Grounds 5 to 8);
·“other errors of fact-finding” (Part D, comprising Grounds 9 to 18);
·“errors of law” (Part E, comprising Grounds 19 and 20); and
·the relief granted (Part F, comprising Grounds 21 to 24).
As is apparent from the form of the Further Amended Notice of Appeal, Grounds 9, 15, 16, 17, 21(a), 23 and 24 have been abandoned. The challenge to Order 9(a), being Ground 21(a), was also abandoned by Senior Counsel for the Appellants in oral submissions in reply.
Notwithstanding what would otherwise be regarded as a plethora of Grounds of challenge, there were three underlying concerns at the heart of the Appellants’ case which in one way or another permeated many of the otherwise discrete Grounds of Appeal.
The appeal is to be dismissed with costs. None of the Grounds of Appeal, it is concluded, has been made out.
THE THREE UNDERLYING CONCERNS
Although it remains necessary to separately address each of the Grounds of Appeal that remain in contention, it is convenient to identify at the outset the three underlying concerns of the Appellants.
Without wishing to abandon the written submissions which had been filed by the Appellants, and presumably filed in advance of Senior Counsel who ultimately appeared for the Appellants being retained, Senior Counsel helpfully sought to pull together the various underlying threads more specifically pursued in the individual Grounds of Appeal. This more coherent expression of these underlying concerns by Senior Counsel, it should be acknowledged, considerably assisted in the hearing and resolution of what otherwise would have been a potentially messy appeal.
These three underlying concerns of the Appellants can be summarised as follows:
·an assertion that the primary Judge made findings of fact which went so beyond the scope of the pleaded case that they expose, so it was contended, a failure on the part of the primary Judge to either understand the case sought to be made out by the ACCC or the undertaking of a task of fact-finding which impermissibly infected his Honour’s conclusions as to unconscionability.
This was essentially the first Ground of Appeal. It also pervaded Ground 8. If this Ground was made out, it followed according to the Appellants that the appeal in its entirety should be allowed. If necessary to resolve any further issue, Senior Counsel for the Appellants articulated a further underlying concern as being:
·an assertion that there was “no evidence” to support a number of the findings made by the primary Judge, the assertion being that it was only NRM and Dr Vaisman who were appealing and that attention should be focussed upon the facts post-dating the acquisition by NRM of the AMI business in June 2011. If attention was focussed upon that period of time and (for example) the evidence as to the conduct of the doctors employed by NRM for that period of time, particular findings of fact could not be justified and (more importantly) there was a lack of evidential support for the conclusion as to unconscionability.
This second underlying concern pervaded Grounds 2, 3 and 4 of the Further Amended Notice of Appeal. Again, if made out, the appeal in its entirety should be allowed. As a fall-back position, the final underlying concern of the Appellants was that:
·the relief went beyond that which was warranted by the findings of fact that were made and, in particular, Order 9(c). Even if it were to be concluded that the term providing for refunds first offered by NRM was an unfair contract term, as found by the primary Judge, significant reliance was placed upon the fact that the ACCC did not cavil with a later redrafted refund term. Given the other constraints imposed by the Orders made (including Order 9(a)), the revised refund term was said to be more than adequate to address any outstanding concerns as to the future conduct of NRM and that the permanent injunction in terms of Order 9(c) was unwarranted.
The first concern was variously expressed and frequently in terms which did not mirror the findings made by the primary Judge. It was (for example) loosely – but erroneously – expressed in terms of the primary Judge having made findings that the treatments offered by the Appellants were lacking medical efficacy. Notwithstanding the summary manner in which Senior Counsel for the Appellants sought to characterise the findings made by the primary Judge, the findings which were made were more concisely expressed in terms of (for example) there being “no clinical evidence of the efficacy of the AMI and NRM medications” (at para [343]) or medications “delivered in a way for which there was no scientific or clinical evidence of efficacy” (at para [741]). Even so confined, Senior Counsel contended that such findings went beyond the case pleaded by the ACCC. So much may for present purposes be accepted. But the concern lacks any substance because it was the Appellants who put in issue as a factual question in need of resolution the efficacy of the medications; the method of delivery of those medications; and at the dosages prescribed. It was the Appellants who set out to resist the ACCC’s case by establishing the medical efficacy of the treatments offered. Having raised that as a factual matter of relevance, the Appellants should not be permitted to now assert error on the part of the primary Judge in resolving the factual dispute first raised by the Appellants. Indeed, the irony was that had the primary Judge resolved that factual dispute in favour of the Appellants, it would be surprising in the extreme had the Appellants sought to suggest that such findings exposed appellable error by reason of the primary Judge having gone beyond the pleadings.
The second underlying concern of the Appellants sought to confine attention to the post-acquisition of the AMI business by NRM in June 2011. Senior Counsel for the Appellants sought to quarantine the findings made in respect to AMI so as to attempt to ensure that those findings did not poison the well of decision-making in respect to NRM (and, indeed, the later conduct of Dr Vaisman). There are two short answers to this concern of the Appellants.
First, the reasons for decision, and the findings of fact made by the primary Judge, separately address:
·the findings of fact to be made in respect of AMI (at paras [96] to [741]) and those findings made in respect of NRM (at paras [742] to [869]);
·the difference between the refund term offered by AMI and that offered by NRM (at paras [680] to [730], [840] to [869], [906] to [917] and [936] to [938]); and
·the relief that should be ordered as against AMI, NRM, and Dr Vaisman (at paras [966] to [1018]).
It should also be noted at the outset that a recurring undercurrent to the Appellants’ submissions is the assertion that the primary Judge failed to separately address the earlier practices of AMI and the later practices of NRM. The assertion is without substance as it fails to adequately respond to the simple fact that the primary Judge did segment his reasoning processes and addressed each practice separately. Although the “headings” under which separate findings have been made by the primary Judge are not of themselves conclusive, an analysis of these separate findings exposes separate and meticulous consideration being given to the more recent involvement of NRM.
Second, the conduct of AMI and NRM cannot in any event be so clinically divorced from one another because the primary Judge made findings of fact which (inter alia):
·inextricably linked the former manner in which AMI conducted its practice to the manner of practice subsequently conducted by NRM; and
·addressed the manner in which the doctors conducted their practices at AMI being carried over to their practices at NRM.
This underlying concern of the Appellants which seeks to quarantine the findings made against AMI from later fact-finding as against NRM (and Dr Vaisman) finds resonance in particular in Grounds 2, 3, 4 and 7 of the Further Amended Notice of Appeal.
The attempt on the part of the Appellants to confine attention to the more limited evidence that was available against NRM – as opposed to the far greater volume of evidence available against AMI – failed to adequately come to grips with findings that were made against NRM; the availability of evidence to support those findings; and the fact that any attempt to artificially quarantine the role of AMI from that of NRM was an attempt continually frustrated by the commonality of the practices and services operated by both AMI and NRM.
The third concern also lacks substance. Although that which remained of Ground 21 of the Further Amended Notice of Appeal challenged Orders 9(c) and 9(e) of the Orders made by the primary Judge, attention was focussed upon Order 9(c). Order 9(c) was an order permanently restraining NRM from making “any statement or representation to any patient or prospective patient as to [inter alia] the efficacy of NRM treatments”. Order 9(a) restrained (inter alia) the making of an agreement with a patient “unless the patient for whom the medications or medical services are intended has had a consultation with a duly qualified medical practitioner…”. Given the constraint in Order 9(a), it was said on behalf of the Appellants that the permanent restraint in Order 9(c) became “too wide”. It was presumably in acknowledgment of the oral submissions advanced on behalf of the ACCC that Order 9(a) was also under challenge – and to bolster the prospects of success on the challenge to Order 9(c) – that led Senior Counsel for the Appellants to abandon the challenge to Order 9(a). Whether that was the reason for the change of position matters not. In very summary form, Order 9(c) should not be set aside, given:
·the findings made by the primary Judge that Dr Vaisman continued to want to practice as before; and
·the fact that the advertisements continue to advertise the services offered by NRM under the banner of it being an “advanced medical institute” and unless effectively restrained, vulnerable potential patients remain exposed to conduct which has been found to be unconscionable.
It is no answer to the need to restrain the advertisements to place emphasis upon the manner in which services will now be provided once a patient has initiated contact with NRM. There remains a continuing need, and there remains a factual foundation, for an order restraining the Appellants from advertising in a manner which has the potential to exploit the vulnerable. These summary observations need to be more fully expressed when resolving Ground 21 of the Further Amended Notice of Appeal, including in relation to Order 9(e).
The resolution of the three underlying concerns nevertheless leaves in need of resolution the Grounds of Appeal still relied upon.
THE LACK OF EFFICACY OF AMI/NRM MEDICATIONS & TREATMENTS
Ground 1 of the Further Amended Notice of Appeal (being Part A) provides as follows:
A.Grounds of appeal concerning lack of efficacy of AMI/NRM medications and treatments
1.The trial judge erred in:
(a)treating the case as requiring a highly detailed investigation of the appropriate pharmacological and medical treatment of premature ejaculation (PE) and erectile dysfunction (ED) (paragraph [18] of the Judgment);
(b)finding that there was no clinical evidence of the efficacy of the AMI/NRM medications (paragraphs [343], [602], [741], [920], [1003] of the Judgment);
(c)finding that there was no scientific basis on which it could be concluded that the delivery of AMI/NRM medications through the nasal and buccal routes by nasal sprays, troches or oral strips is effective (paragraphs [327], [602], [741], [920], [1003] of the Judgment);
(d)finding that there was no body of clinical experience of medical opinion based on the scientific foundation which supports the off-label use of small doses of apomorphine or clomipramine in nasal spray or oral strips for the treatment of ED or PE respectively (paragraphs [351], [352], [602], [1003] of the Judgment);
in circumstances where:
(e)none of the matters in (b) – (d) above were pleaded;
(f)there was no pleading to the effect that the AMI/NRM medications and treatments prescribed by the doctors were ineffective;
(g)the respondent (ACCC) had pleaded that statements were made concerning the efficacy of the AMI/NRM treatments (FASOC paragraph 36) but;
i.had not alleged that those statements were incorrect or were misleading or deceptive; and
ii.had positively eschewed a case of misleading or deceptive conduct;
(h)there had been numerous debates about the ACCC’s pleaded case and the ACCC had accepted that it would not be permitted to go beyond its pleaded case.
As is apparent from the manner in which Ground 1 is drafted, each of the arguments sought to be separately advanced in Ground (1)(e) to (f) tend to overlap – especially in respect to Ground 1(e). It was this contention which pervaded much of the Appellants’ submissions.
The absence of pleadings – Ground 1(e)
Given the emphasis placed by the Appellants upon their contention that particular matters were not pleaded, this argument should be addressed at the outset. It, of course, mirrors the first underlying concern of the Appellants.
The Appellants’ contention was that “the findings made by the trial judge in relation to the efficacy of the AMI/NRM medications were not only wrong upon the evidence, but were outside the pleaded case of ACCC”. The contention is then expanded upon by further submissions that:
·the “pleaded case of the ACCC did not advance any allegation that the AMI/NRM medications were not effective”; and
·neither “the pleadings, nor the ACCC’s submissions, ever advanced the case that the lack of evidence derived from clinical studies was relevant to, or was capable of supporting, a finding that the medications were not effective”.
However the contention is expressed, it is rejected for either of two reasons.
First, the fact that findings may be made – and even liability established – upon the basis of evidence which goes beyond a pleaded case is not of itself reason to set aside a decision. To so recognise is not to deny the importance of pleadings; it is simply to recognise that a party must be given, by one means or another, adequate notice of the case it has to meet. Thus, for example, in Water Board v Moustakas (1988) 180 CLR 491 Mason CJ, Wilson, Brennan and Dawson JJ considered whether a new point could be raised on appeal which was not canvassed at first instance. Their Honours went on to observe:
… Ordinarily the pleadings will be of assistance for it is one of their functions to define the issues so that each party knows the case which he is to meet. In cases where the breach of a duty of care is alleged, the particulars should mark out the area of dispute. The particulars may not be decisive if the evidence has been allowed to travel beyond them, although where this happens and fresh issues are raised, the particulars should be amended to reflect the actual conduct of the proceedings. Nevertheless, failure to amend will not necessarily preclude a verdict upon the facts as they have emerged: see Dare v Pulham (1982) 148 CLR 658. In Leotta v Public Transport Commission (NSW) (1976) 50 ALJR 666 at 668, a case having been submitted to the jury which was factually different from that alleged in the pleadings and particulars, Stephen, Mason and Jacobs JJ observed that the pleadings should have been amended in order to make the facts alleged and the particulars of negligence precisely conform to the evidence. The failure to apply for the amendment in that case was held not to be fatal ... (1988) 180 CLR at 497.
On the facts of that case (and considering the manner in which the proceeding had been conducted) the High Court concluded that the case against the employer was not a case which the employer had been required to meet at the trial. Similarly, in JR Consulting & Drafting Pty Ltd v Cummings [2016] FCAFC 20 at [78], (2016) 329 ALR 625 at 643 it was observed that “the primary judge appears to have accepted that abandonment was not pleaded” but “allowed the matter to be raised because of the way in which the case had been conducted”. Justices Bennett, Greenwood and Besanko were not persuaded that they should interfere with that decision.
Second, on the facts of the present case, it can readily be concluded that the findings of fact which go beyond the pleadings (and which are relied upon by the Appellants) are findings which address the manner in which the Appellants conducted the case at first instance. No question arises of the Appellants having been denied any opportunity to advance at first instance all such evidence as they wished to rely upon by reason of the factual matters having not been pleaded. It was the Appellants who initially adduced the evidence as to the medical efficacy of the medications they offered and the Appellants, it is concluded, had an opportunity to meet and challenge such evidence as was relied upon by the ACCC going to those factual issues.
Although the ACCC could have sought to further amend the Further Amended Statement of Claim as filed in December 2011, its failure to do so does not strip the findings of fact as were made by the primary Judge of utility.
The detailed investigation required – Ground 1(a)
Ground 1(a) contends that the primary Judge erred in “treating the case as requiring a highly detailed investigation of the appropriate pharmacological and medical treatment of premature ejaculation (PE) and erectile dysfunction (ED)”.
To the extent that Ground 1(a) can be separated from the remaining contentions sought to be advanced on behalf of the Appellants in relation to Ground 1 as a whole, the central contention advanced on behalf of the Appellants in their written outline of submissions in respect to Ground 1(a) is that “the only ‘investigation’ of medical treatment which was required was the consideration of whether or not it was unconscionable for NRM doctors to recommend the particular treatment which they did recommend (which were recognised pharmaceutical drugs) in preference to other available treatments”.
This Ground should be rejected. It mirrors the first underlying concern expressed by Senior Counsel for the Appellants. It was the Appellants who set out to prove the medical efficacy of the treatments they offered. No appellable error is exposed by the primary Judge making findings of fact as to “the appropriate pharmacological and medical treatment of premature ejaculation (PE) and erectile dysfunction (ED)”.
The absence of clinical evidence – Ground 1(b)
Ground 1(b) of the Further Amended Notice of Appeal refers to paras [343], [602], [741], [920] and [1003] of the reasons for decision of the primary Judge.
The written outline of submissions filed by the Appellants was decidedly unhelpful. Those submissions did little more than contend that this Ground was outside the case as pleaded and “was against the evidence”.
Confined to that submission, the Ground would inevitably fail.
Each of the paragraphs relied upon by the Appellants was said to refer in one way or another to the absence of clinical evidence as to the efficacy of the Appellants’ medications. But the selection of these paragraphs for that purpose seems, with respect, to be somewhat indiscriminate. They seem to have been selected more by reference to a word-processor “word search” than by reference to selecting those specific paragraphs in which findings as to clinical efficacy have been made. Paragraph [741], for instance, is more directed to a finding as to the comparative cost of medications and treatment than to a finding of clinical efficacy. And para [920] is directed to those factors relied upon to reach a conclusion as to unconscionability rather than a finding in its own right as to clinical efficacy. Paragraph [920] thus builds upon the findings previously made. But such observations may be left to one side. Subject to those observations, each of the paragraphs relied upon by the Appellants was further expanded upon by the primary Judge and supported by evidence. It is, accordingly, a mistake to confine attention to the statements made in the paragraphs selected and in isolation from the remaining context. It is that context which gives content to the relevance of the findings made by the primary Judge and to the conclusions his Honour reaches. The context in which the findings relied upon by the Appellants, be it by reference to findings based upon evidence or by reference to findings forming part of the overall conclusions to be reached, can be summarised as follows:
Paragraph
Further exposition in reasons & references to the evidence
[343] Once it is accepted that there was no clinical evidence of the efficacy of the AMI and NRM medications, and that the theoretical claim for efficacy was speculative, there is no basis upon which to justify the prescribing of the AMI and NRM medications off-label …
This conclusion flows from the following paragraphs in the reasons for decision:
Paras [281] to [311] which address and extract the evidence of Drs Rowe and Altman, the two experts relied upon by the Appellants and the efficacy of “alternative drug delivery systems”;
Paras [312] to [320] which address and extract parts of the cross-examination of Drs Rowe and Altman;
Paras [321] to [327] which set forth conclusions following from the evidence; and
Para [343] forms part of Paras [328] to [344], which address the standards applicable to off-label prescribing.
[602] The discussion at [218]–[352] of these reasons for judgment concludes that there is no proper scientific basis which establishes that the apomorphine and clomipramine-based medications offered by AMI and NRM were effective …
This conclusion expressly incorporates the “discussions at [218]-[352]”:
Paras [218] to [220] is an introduction to the discussion as to the offers being limited to AMI medications;
Paras [221] to [227] address the conventional first-line treatment for ED and PE and refer in detail to the evidence of Dr Pattison, his five reports and his oral evidence.
[741] The most significant point is that AMI and NRM were charging patients for medications delivered in a way for which there was no scientific or clinical evidence of efficacy.
This finding is part of the primary Judge’s findings as to the “Cost of Medication” as set forth in Part 4.5.6 of the reasons for decision.
It follows para [737] which sets forth the ACCC submission that the AMI/NRM “treatment and medication for ED and PE by conventional methods which were proven to be effective could be obtained for substantially less cost.”
The primary Judge’s finding is at para [740]: “Using these comparisons, the evidence at least established that the cost of medication and treatment for PE by AMI and NRM was much greater than the cost of medication and treatment for PE by conventional methods.”
[920] However, there was no proper scientific evidence that these forms of medications worked …
Paragraph [920] forms part of Part 7.2 of the reasons for decision, which analyses “each of the instances of unconscionable conduct alleged against AMI and NRM”.
Paragraph [920] also forms part of Part 7.2.6, being that part which addresses “The medications offered.”
[1003] Dr Vaisman … developed medication and delivery systems which had no proven efficacy and sold them as if they did.
Paragraph [1003] forms part of the primary Judge’s consideration as to whether injunctive relief should be granted against Dr Vaisman.
Again, it is a paragraph which builds upon findings previously made as to “efficacy” and is more directed to Dr Vaisman’s responsibility for developing such medications.
This outline of the findings made by the primary Judge and the reasoning in support of each finding repeatedly serves to highlight the relevance of the findings made by the primary Judge, namely that there was an absence of clinical evidence to support the efficacy of the treatment being offered by the Appellants – that treatment including both the dosage at which the medications were offered and the means of delivery of those medications through the nasal and buccal routes by nasal sprays, troches or oral strips. Those findings were principally those set forth in paras [281] to [344].
The written submission advanced on behalf of the Appellants as to an alleged absence of evidence is rejected.
It was left to the Appellants’ written submissions in reply to those filed by the ACCC to more fully understand the case sought to be advanced on behalf of the Appellants. In reply the Appellants sought refuge once again in the submission as to findings being outside the pleadings. The submission in reply reduced to a submission that it “was not open to the trial judge to make a finding of unconscionability by resort to purported grounds of unconscionability which could have been, but which were not, pleaded”.
That is a submission which has been rejected.
Ground 1(b) of the Further Amended Notice of Appeal is rejected.
The effectiveness of nasal and buccal routes – Ground 1(c)
There is perhaps an uneasy tension between Grounds 1(a) and (c) – the former Ground asserts error in the need to undertake “a highly detailed investigation” and in making consequential findings of fact; the latter Ground seems to assert error in the findings made as a result of the “detailed investigation” undertaken by the primary Judge.
The written outline of submissions seems to side-step this tension in the different objectives otherwise advanced in Grounds 1(a) and (c) and simply contends that the findings in the paragraphs identified “should not have been made for the reasons set out in paragraphs 1(e) to (h) of the amended Notice of Appeal and [were] against the evidence”.
To the extent that Ground 1(c) asserts error in making findings “against the evidence”, the written submissions failed to provide any assistance as to the “evidence” which goes against the findings made. It has been assumed that the evidence of present relevance to the findings made is that of the two witnesses called by AMI (Drs Rowe and Altman); the evidence of Dr Vaisman and the evidence of the witness called by the ACCC (Professor Pouton).
But, as is accepted in Ground 1(c), at least one relevant finding made by the primary Judge is that found in para [327]. That paragraph is found within Part 4.5.3.6.6 of the judgment, a Part which relevantly is expressed as follows:
4.5.3.6.6 CONCLUSION
[321] The first reports of Dr Rowe and Dr Altman were written at a fairly high level of generality. At that level, it was possible for them to say that there was a theoretical pharmacological basis to support the efficacy of apomorphine and clomipramine delivered by the nasal route, the buccal route, or sublingually.
[322] Both Dr Rowe and Dr Altman had previously had business relationships with AMI. Where it was possible to support the interests of the respondents in the course of their evidence, they were inclined to do so. It is not suggested that they compromised their professional integrity in the way they gave their evidence …
…
[327] In the end, Professor Pouton’s evidence that there is no scientific basis on which it can be concluded that the delivery of AMI and NRM medications through the nasal and buccal routes by nasal sprays, troches, or oral strips is effective should be accepted. A conclusion that the medications delivered in these ways were effective would be speculative.
As is consistent with the manner in which the judgment of the primary Judge is otherwise drafted, these conclusions follow an analysis of the evidence of Drs Rowe and Altman and that of Professor Pouton and, more immediately, follow an analysis of:
·Dr Rowe’s first report, in which he expressed his views (inter alia) as to the advantages of nasal and oral-strip delivery of medications (at paras [281] to [285]);
·Dr Altman’s first report, in which he (inter alia) expressed his views as to the means of delivery adopted by AMI and NRM (at paras [286] to [289]); and
·Professor Pouton’s report, in which he was (inter alia) critical of the therapeutic effect of alternative delivery systems (at paras [290] to [300]).
The conclusions also contain an analysis of:
·the further reports of Drs Rowe and Altman which had been given in response to the views expressed by Professor Pouton (at paras [301] to [311]); and
·the cross-examination of Drs Rowe and Altman (at paras [312] to [320]).
A review of the evidence as set forth by the primary Judge exposes no reason to question the findings made.
A similar analysis can be undertaken in respect to the findings of the primary Judge at paras [602], [741], [920] and [1003]. To a very large extent these further findings can be traced back to the finding expressed at para [327] and to such further evidence to which his Honour expressly refers.
Ground 1(c) is rejected.
The off-label use of small doses & a question of pleadings – Grounds 1(d), (e), (f) & (g)
Ground 1(d) of the Further Amended Notice of Appeal asserts that the primary Judge erred in “finding that there was no body of clinical experience of medical opinion based on the scientific foundation which supports the off-label use of small doses of apomorphine or clomipramine in nasal spray or oral strips for the treatment of ED or PE respectively…”.
Grounds 1(e), (f) and (g) all raise a challenge founded upon the absence of matters having been pleaded. Ground 1(e) contends that none of the matters set forth in Grounds 1(b) to (d) inclusive had been pleaded.
No written submission was advanced specifically directed to Ground 1(d).
The absence of pleadings, it has been concluded, is not a sufficient basis to impugn the findings of fact made by the primary Judge in respect to factual matters that the Appellants had put in issue.
Grounds 1(d), (e), (f) and (g) are rejected.
Agreement that it would not be permitted to go ahead – Ground 1(h)
Ground 1(h) of the Further Amended Notice of Appeal again refers to the manner in which the case had been pleaded by the ACCC and contends that “the ACCC had accepted that it would not be permitted to go beyond its pleaded case”.
The written outline of submissions filed by the Appellants makes no reference to where this “agreement” was said to be found.
Nor was the Ground further explained in oral submissions.
Ground 1(h) is rejected.
Conclusions
There is no substance in any of the ways in which the first Ground of Appeal is sought to be advanced.
Ground 1 of the Further Amended Notice of Appeal is rejected in its entirety.
THE NRM PERIOD
Grounds 2, 3 and 4 are to be approached in recognition of the fact that it was in June 2011 that NRM acquired the business of AMI. These Grounds seek to focus attention upon – and seek to confine attention to – the facts as they emerged post-June 2011. These Grounds thus mirror the second of the underlying concerns of the Appellants.
Grounds 2, 3 and 4 of the Further Amended Notice of Appeal (within Part B) provide as follows:
B. Grounds of Appeal particular to the NRM period
2.The trial judge erred in finding unconscionability on the part of NRM, finding accessory liability by Dr Vaisman in the NRM period, and in making orders for injunctive relief against them which had the effect of substantially curtailing NRM’s business activities, in circumstances where:
(a)the bulk of the evidence before the Court concerned a predecessor entity (AMI) which had ceased business in June 2011 and its interaction with patients in 2009;
(b)in 2012 there had been 31,158 NRM patient consultations by telephone and 4,291 patients who had attended a clinic (paragraph [761] of the Judgment);
(c)the evidence particular to NRM patients involved evidence from 16 “Annexure C” persons:
(i)the last consultation about which evidence was given occurring on 16 February 2012;
(ii)15 of whom sought treatment for PE and 1 for ED;
(iii)10 of which were telephone consultations and 6 of which constituted consultations at a clinic (and with a doctor over the telephone) (paragraph [786] of the Judgment);
(iv)2 of whom were ACCC employees;
(d)the NRM patient consultations were not put forward by ACCC as being representative of all transactions (paragraph [86] of the Judgment);
(e)the accounts of most of the doctors’ consultations given by NRM patients was generally too truncated to be useful in establishing the detail of what occurred in the consultation with the doctors (paragraph [788] of the Judgment);
(f)Dr Lonergan had ceased consulting for NRM in December 2011 (paragraph [783] of the Judgment);
(g)at least one other medical practitioner (Dr Berry) who continued to consult to NRM had changed her consulting practices (paragraph [832] of the Judgment);
(h)from about December 2011 NRM had offered refund terms (the Second Refund Term) about which the ACCC had no complaints (paragraphs [841], [869] of the Judgment).
3.The trial judge erred in failing to adequately take into account the changes in practice instituted by NRM (in particular, a significantly different refund policy) and the paucity of evidence as to NRM’s general practices based upon the “Annexure C” persons.
4.The trial judge erred in proceeding on the basis that the evidence of the 16 “Annexure C” persons concerning their experience with NRM (paragraph [786] of the Judgment) coupled with evidence in respect of doctors engaged by AMI predominantly in 2009 was adequate to establish:
(a)a business system that was unconscionable;
(b)unconscionability in the case of the 16 “annexure C” persons;
(c)that the Patient Assessment and History forms were generally deficient or unreliable (paragraph [799] of the Judgment);
(d)that the doctors engaged by NRM failed to meet accepted professional standards of medical practice (paragraph [834] of the Judgment).
NRM v AMI – Grounds 2 & 4
Ground 2 of the Further Amended Notice of Appeal seeks to isolate the conduct of NRM from that of AMI. It seeks to contend (inter alia) that “the bulk of the evidence before the Court concerned a predecessor entity (AMI) which ceased business in June 2011 and its interaction with patients in 2009”.
It may readily be accepted that the bulk of the evidence before the primary Judge was evidence as to the conduct of AMI and the conduct of Dr Vaisman during that period. There was, for example, evidence of tape recordings made by AMI of telephone calls with a very large number of patients; there was no such evidence in respect to NRM as NRM did not make recordings.
Building upon the discrepancy as to the bulk of the evidence, the Appellants’ written outline of submissions contend in part that it was not “permissible to visit the sins of AMI upon NRM for the purposes of determining whether or not the NRM companies had engaged in unconscionable conduct…”.
Particular reliance is also placed in Ground 2 upon what were referred to as “the Annexure C patients”, namely a list of 16 patients of NRM. Of these 16 patients, two were employees of the ACCC. These 16 patients were not relied upon by the ACCC as “representative of all transactions”. Ground 2 seeks to contrast the “paucity” of such evidence by contrasting the number of 16 with the fact that there had been 31,158 NRM patient consultations by phone and the attendance of 4,291 patients at a clinic.
At least three points need to be made in respect to Ground 2.
First, it is a mistake to contend – as the Appellants did – that the primary Judge was not acutely aware of the evidence as to the conduct by AMI and the evidence as to the conduct of NRM. So much clearly emerges from the structure of his Honour’s reasons for decision. Part 4 of those reasons is headed “FACT FINDINGS IN RESPECT OF AMI”; Part 5 is headed “FACT FINDINGS IN RESPECT OF NRM”. Within each of those two parts the primary Judge makes separate findings of fact directed to the conduct of AMI and NRM respectively.
Second, and contrary to the submissions of the Appellants, the primary Judge did not “transpose … the findings against the AMI companies” and did not impermissibly “visit the sins of AMI upon NRM…”. So much is self-evident from both:
·the findings of fact that were made by the primary Judge in respect to those matters concerning AMI and NRM – and which are individually set forth when addressing Ground 3; and
·the finding of fact by the primary Judge as to there being a “significant change” in the practice of NRM from that of AMI by reference to the contractual terms relating to termination and refunds (at para [840]).
The latter finding cannot expose more clearly the reasoning process of the primary Judge whereby he was constantly testing whether findings should be made solely as against AMI; whether findings as against AMI remained apposite to his analysis of the NRM conduct; and testing the differences between the two periods of practice.
Nor did the primary Judge fail to separately consider the conduct of Dr Vaisman both before and after the commencement of services by NRM.
Third, the Appellants are correct in both their contention that the ACCC did not rely upon the 16 Annexure C patients as “representative” of the conduct of NRM and their contention that the number of these patients was small when compared to the overall number of NRM patients. But such contentions matter not. Of present relevance is:
·whether such findings as were made by the primary Judge were findings open to his Honour on the evidence; and
·the manner in which his Honour employed those findings for the purposes of reaching his final conclusions in respect to unconscionable conduct.
In both respects his Honour did not err. In reaching his ultimate conclusion as to unconscionability, his Honour correctly:
·noted the ACCC’s allegation that “certain elements” of its case were not specific to the Annexure C patients;
·addressed the conduct of the doctors and their failure to diagnose underlying causes of premature ejaculation and erectile dysfunction and noted that these failures applied equally to the Annexure C patients; and
·addressed the failure of the doctors to warn patients of the common side effects of the medication prescribed in consultations with 14 of the 16 Annexure C patients.
Of the 16 Annexure C patients, 7 were cross-examined.
The short point is that the primary Judge was well-aware of the limited number of Annexure C patients and reached his ultimate conclusions as to unconscionability both by reference to the other findings of fact that had been made in respect to NRM and by reference to such evidence as could be gleaned from these 16 patients.
Ground 2 of the Further Amended Notice of Appeal is rejected.
Ground 4 of the Further Amended Notice of Appeal seeks to contend that the evidence of the Annexure C patients “coupled with evidence in respect of doctors engaged by AMI predominantly in 2009 was [not] adequate to establish” (inter alia) unconscionability.
Ground 4 of the Further Amended Notice of Appeal adds nothing to Ground 2. Ground 4 is also rejected.
Changes in practice – Ground 3
This Ground asserts “changes in practice” and overlaps with Ground 2 to the extent that:
·Grounds 2(f) and (g) assert a change in practice by reason of Dr Lonergan ceasing to consult for NRM in December 2011 and Dr Berry changing her consulting practices; and
·Ground 2(h) asserting the change in the refund term being offered by NRM – the second refund term being introduced in December 2011.
Ground 3 by its terms only adds to the pleaded “changes in practice” relied upon:
·the “paucity of evidence as to NRM’s general practices…”.
As is self-evident from the manner in which the Further Amended Notice of Appeal is drafted, including of present relevance the express references in Ground 2 to those paragraphs of the reasons for decision of the primary Judge where each particular matter is addressed, the primary Judge did advert to each of these matters.
No conclusion is open that his Honour did not “adequately take into account the changes in practice”.
In addition to adverting to each of the matters relied upon by the Appellants, the primary Judge also found as facts that:
·the way in which patients interacted with NRM was a continuation of the business system operated by AMI (at paras [759] to [761]);
·NRM continued the practice of advertising previously pursued by AMI (at para [765]);
·all but one of NRM’s sale staff were paid by commission (at paras [766] to [770]);
·the continuation by the sales staff of the practice of telling patients that the medications prescribed by NRM doctors were effective (at paras [771] to [781]);
·the continuation of offering lengthy fixed term contracts (at paras [838] to [839]); and
·the core personnel of NRM were the same as those of AMI with Dr Vaisman being the Chief Executive Officer and Mr Shrestha being the Chief Financial Officer (at para [762]). Seventeen of the salespeople from AMI continued to be employed by NRM (at para [764]).
There was also the evidence of NRM’s refund manager (Mr Kyle) that nothing of significance changed after the purchase of the AMI business.
Left unexplained by the Appellants was why it was not open to the primary Judge to make each of these findings and why it was not open to his Honour to feed that analysis of the facts into his ultimate conclusion as to unconscionability.
Ground 3 is rejected.
Conclusions
Each of Grounds 2, 3 and 4 should be rejected.
THE CONDUCT OF THE DOCTORS
Grounds 5 to 8 of the Further Amended Notice of Appeal (being Part C) state as follows:
C. Grounds of Appeal relating to doctors
5.The trial judge erred in finding that the prescription by doctors of the AMI/NRM medications and treatments was of itself, or in combination with other factors, unconscionable.
6.The trial judge erred in assessing the treatment prescribed and advice given by the doctors on the basis that the doctors engaged by AMI and NRM owed the same duties and ought to have performed the same role as a general practitioner and in particular owed duties to:
(a) Diagnose an underlying cause;
(b) Conduct a face-to-face consultation;
(c) Prescribe medications other than AMI/NRM medications.
7.The trial judge erred in transposing any deficiencies in the practices of individual doctors engaged by AMI/NRM constituting unconscionable conduct by AMI/NRM.
8.The trial judge erred in his assessment of the conduct of the doctors by reasons of his findings as to the unpleaded allegations of lack of efficacy referred to in paragraph 1 above.
The prescription of the AMI/NRM medications – Ground 5
Ground 5 of the Further Amended Notice of Appeal asserts error on the part of the primary Judge “in finding that the prescription by doctors of the AMI/NRM medications and treatments was of itself, or in combination with other factors, unconscionable”.
In support of this Ground the Appellants’ written submissions contend that “the case appears to have been determined on the basis that the medications were prescribed without any clinical evidence of their efficacy” and that the findings of the primary Judge ignore “the fact that the doctors who were prescribing the medications were exercising their independent judgment in relation to what they prescribed”. The former written submission overlaps with Ground 1(b). The Appellants’ challenge founded upon a lack of “clinical efficacy” has been addressed and rejected. That leaves for resolution the latter written submission.
So understood, the Ground is without substance.
That which the Appellants’ written submissions fail to address, and that which defeats Ground 5, are the findings made by the primary Judge that:
·the prescriptions written by the doctors were “computer-generated” and “governed by a drop-down menu which allowed only for the prescription of the medications compounded for AMI” (at para [229]);
·pressure was exerted on the doctors to only prescribe the AMI medications (at paras [231], [232], and [929]);
·the doctors did not act in accordance with accepted professional standards of medical practice (at para [927]);
·the doctors were “in effect … directed to recommend treatment for 12 to 18 months” and that this “denied them professional independence…” (at para [930]); and
·patients trusted the integrity of the doctors and “AMI and NRM took advantage of that superior bargaining position by having the doctors prescribe only AMI and NRM medications and having them recommend long-term treatment programs” (at para [935]. See also: paras [899] and [921]).
Construed by reference to the findings of the primary Judge in respect to the manner in which doctors prescribed medications for patients, the Appellants’ written submissions (with respect) seem to be directed at a different target and not aimed at those findings which (in part) led to his Honour’s ultimate conclusions as to unconscionability.
Ground 5 of the Further Amended Notice of Appeal is rejected.
The assessment of the treatment prescribed – Ground 6
Ground 6 asserts (in part) an error on the part of the primary Judge “in assessing the treatment prescribed and advice given by the doctors on the basis that the doctors engaged by AMI and NRM owed the same duties and ought to have performed the same role as a general practitioner and in particular” owed the three duties thereafter set forth.
The Ground assumes relevance because the primary Judge:
·made findings that the doctors “did not act in accordance with accepted professional standards of medical practice” (at para [927]); that they were “a cog in a commercial machine” (at para [932]); and that their conduct was “unconscionable” (at para [934]); and
·relied upon these findings as part of the overall conclusion (at paras [939] to [942]) as to unconscionability.
It was presumably in an attempt to undermine the findings made in respect to the doctors and thereby undermine the more general conclusion as to unconscionability, that Ground 6 was directed.
The ground of challenge, generally expressed, was that the primary Judge erred in finding that “the patients who consulted the Appellants regarded the doctors whom they were consulting as being equivalent to their own general practitioners”. The Appellants’ submission was that patients sought out the assistance of AMI (and later NRM) not as general practitioners but as those who could assist in a very specific manner, namely with treating a perceived sexual dysfunction.
Whether or not such a clear distinction may be made between the responsibilities of a general practitioner and the doctors employed by AMI may be queried. It may also be queried whether the primary Judge proceeded from any assumption that the responsibilities owed by the doctors were the same as those of general practitioners. But such subtleties may be left to one side. Of central relevance to the conclusion reached by the primary Judge was the following finding, which comes after his conclusion as to the doctors not acting in accordance with the “Good Medical Practice: A Code of Conduct for Doctors in Australia”, namely:
[932] The Code provided a normative standard for professional medical practice accepted by the community. It required doctors to make the welfare of the patient their primary concern. By not consulting face-to-face, by limiting the medications they would prescribe, by recommending long-term treatment programs, by failing to diagnose the cause of the condition, by failing to refer patients to a GP or specialist for underlying causes or presenting conditions, and by failing to advise or advise adequately about common side effects, the doctors failed to meet the standard of practice established by the Code. Instead, doctors were a cog in a commercial machine. In practice, and when taking into account the way in which the consultations were conducted, it was clear that the role of the doctors engaged by AMI and NRM was simply to produce a prescription for the AMI and NRM medications. They did this by conducting phone consultations for the purpose only of determining whether there was any reason why the AMI or NRM medications should not be prescribed. This was a limited and unusual function which did not conform to the conventional model of medical practice.
The primary Judge in his reasons for decision describes the origins of the Code and its relevant contents (at paras [434] to [437]). The conclusions set out at para [932] are a sufficient basis in themselves for rejecting Ground 6. The conclusions expressed at para [932], however, are not the entirety of the primary Judge’s consideration of the manner in which the AMI/NRM doctors fell short. Earlier in his Honour’s reasons, and immediately after discussing the Code, his Honour had (for example) previously summarised the ACCC submission and found as follows:
[462] Relying on these views, the ACCC contended that the AMI and NRM doctors were bound by a professional standard to diagnose and treat the underlying causes of ED or PE for which they were consulted. The ACCC contended that even if this were not so, the doctors were bound to determine whether to refer patients to a specialist or to another doctor for those causes or other presenting conditions of which they became aware.
[463] The need to diagnose the underlying cause of the condition is especially important in the treatment of ED because, as was accepted by all parties, ED is often associated with cardiovascular disease and diabetes.
The conduct of the doctors fell short of the standard imposed by the Code and was rightly taken into account by the primary Judge in his more general conclusion as to unconscionability.
Ground 6 of the Further Amended Notice of Appeal is rejected.
The transposition of deficiencies – Ground 7
Ground 7 of the Further Amended Notice of Appeal contends that the primary Judge “erred in transposing any deficiencies in the practices of individual doctors engaged by AMI/NRM to a deficiency of AMI/NRM constituting unconscionable conduct by AMI/NRM”.
The written submissions filed on behalf of the Appellants contend that the doctors were “independent consultants” and “retained at all times their independent clinical judgment”.
The submission is rejected.
Even though the doctors may have been employed as “independent consultants”, Ground 7 and the Appellants’ written submissions fail to address the findings made by the primary Judge as to such matters as:
·the finding that the “doctors acted on behalf of AMI and NRM, and AMI and NRM were responsible for the deficiencies in their conduct” (at para [927]);
·the finding that the doctors were “in practice, limited by AMI and NRM” to prescribing AMI/NRM medications (at para [929]) and “only prescribed medications available from AMI and NRM” (at para [931]);
·the finding that “doctors were a cog in a commercial machine” (at para [932]); and
·the finding that the “doctors’ conduct had a commercial benefit for AMI and NRM” (at para [934]).
The attempt to quarantine such findings as were made against the doctors from the conclusions reached in respect to AMI/NRM is, with respect, illusory. The Appellants’ submissions ignore the extent to which the doctors were an indispensable part of the practices of NRM.
The Appellants’ written submissions also seek to focus specific attention upon the evidence of Dr Vandeleur. Dr Vandeleur was at the outset of the litigation named by the ACCC as the Fifth Respondent. The ACCC discontinued the proceeding against Dr Vandeleur in July 2011.
The Appellants’ written submission in respect to Dr Vandeleur contends that the primary Judge erred in giving “preference for Dr Vandeleur’s evidence over the evidence of Dr Vaisman”. The submission is that error emerges by reason of the fact that there was said to be “a sharp discrepancy between Dr Vandeleur’s affidavit evidence (which was given at a time when Dr Vandeleur was defending the claims made against him) and Dr Vandeleur’s oral evidence (which was given after he had reached an agreement with the ACCC to resolve the claims against him)”.
Reliance is placed by the Appellants upon the following finding made by the primary Judge:
[397] … It might reasonably be supposed that [Dr Vandeleur] then felt freer to emphasise the extent of control exercised by AMI over his prescribing conduct …
Presumably the course sought to be plotted by the Appellants was to place greater emphasis upon the earlier account given by Dr Vaisman as to the degree of freedom doctors exercised when prescribing medications compared with the weight given by the primary Judge to his later account.
But this submission fails to take account of (inter alia):
·the primary Judge’s recognition of the different circumstances in which Dr Vandeleur had been called upon to give evidence; and
·the consistency between the later account given by Dr Vaisman with such other evidence as was before the Court.
The following paragraphs of his Honour’s reasons place in context more accurately the finding relied upon by the Appellants:
[396] There was a shift in Dr Vandeleur’s evidence from the position which he took in his response to the s 155 notice to the position that he took in cross-examination. The position in his response to the s 155 notice was closer to the evidence given by Dr Vaisman that the doctors had a free hand to decide the length of treatment and the medications to be prescribed.
[397] However, when carefully examined, Dr Vandeleur’s evidence was in each instance consistent. The differences were a result of emphasising different aspects of the issue. Dr Vandeleur’s oral evidence of the practical pressure placed on him by Dr Vaisman and the management of AMI was persuasive. In some aspects it was supported by the evidence of other doctors. Whilst Dr Vaisman denied that, in practical terms, he directed the doctors to use apomorphine and clomipramine as first-line treatments for ED and PE respectively, and to recommend a 12-to-18 month treatment period, he did hold the view that those medications should be used as the first-line treatment and that they should be prescribed for 12-to-18 month periods. Dr Vaisman presented as a CEO who would enforce his views vigorously. When Dr Vandeleur provided his response to the s 155 notice, it was in his interest to emphasise to the ACCC that he had acted professionally and independently. Both his response to the s 155 notice and his affidavits were drafted by others. His oral evidence was his own authentic explanation. Furthermore, by the time he came to give evidence he had arrived at an agreement to settle the proceeding with the ACCC. It might reasonably be supposed that he then felt freer to emphasise the extent of control exercised by AMI over his prescribing conduct. I do not accept the suggestion made by the respondents that Dr Vandeleur’s oral evidence was inconsistent on these matters and that the earlier evidence was modified in his oral evidence as a result of the agreement reached between the ACCC and himself. Whilst the emphasis in the oral evidence was different, that evidence was credible and should be preferred over the contrary evidence of Dr Vaisman and Mr Shrestha on these issues.
[398] In his response to the s 155 notice, Dr Vandeleur explained his process of conducting consultations with AMI patients. The explanation reflected proper professional standards in line with the requirements articulated by the expert medical evidence led by the ACCC. In his first affidavit Dr Vandeleur acknowledged that, on reflection, his consultations with Annexure B patients did not comply with those standards. Again, that acknowledgement, repeated in cross-examination, should be accepted as a truthful concession rather than a result of any agreement with the ACCC as a condition of resolving the proceeding with Dr Vandeleur.
Ground 7 of the Further Amended Notice of Appeal is rejected.
An assessment by reference to unpleaded allegations – Ground 8
Ground 8 of the Further Amended Notice of Appeal contends that the “trial judge erred in his assessment of the conduct of the doctors by reason of his findings as to the unpleaded allegations of lack of efficacy referred to in paragraph 1 above”.
This Ground repeats to a large extent the challenge mounted in Ground 1 of the Further Amended Notice of Appeal. It also mirrors the first of the underlying concerns outlined by Senior Counsel appearing for the Appellants at the outset of his oral submissions. Those submissions have been addressed and resolved adversely to the Appellants.
The Appellants’ written submissions also expressly contend in furtherance of Ground 8 (without alteration) that:
·the finding that the medications “were not effective would, if there was a proper basis for it, have been devastating to the credibility … of the doctors”; and
·“[i]n light of the seriousness of this finding should not have been made, it would be impossible for this Court to disentangle this finding from the other views expressed by the trial judge about the doctors”.
Neither of these more specific submissions exposes appellable error.
As to the former of these submissions, it may readily be accepted that an adverse finding as to the efficacy of the medications prescribed by the doctors retained by AMI/NRM could have an effect on the “credibility of the doctors”. But it was the Appellants who put in issue the efficacy of those medications. And the fact that that issue was not the subject of pleadings has not been accepted as exposing appellable error. More relevantly, a challenge to such findings as were made by the primary Judge as to the efficacy of those medications has also been resolved adversely to the Appellants. No appellable error thus emerges from the impact that such findings may have had upon the findings made against the doctors.
The latter submission is adequately answered by reference to the reasons for decision of the primary Judge which separately address each aspect of the conduct of the doctors. The primary Judge did not have difficulty in “disentangling” the findings; nor has this Court.
Ground 8 of the Further Amended Notice of Appeal is rejected.
Conclusions
Each of Grounds 5, 6, 7 and 8 of the Further Amended Notice of Appeal is without substance and is rejected.
OTHER ERRORS OF FACT FINDING
Grounds 9 to 18 of the Further Amended Notice of Appeal (being Part D) provide as follows (without alteration):
D. Grounds of Appeal in relation to other errors of fact-finding
9.The trial judge erred in finding that unqualified salespeople presented as being medically qualified, as the finding was:(a) based upon an analysis of only 3 consultations;(b) not justified as a general finding as to the business practices of AMI/NRM.10.The trial judge erred in finding that the failure of AMI/NRM salespeople to disclose their remuneration by commission was dishonest, exploitative, sharp practice and deceptive and unfair and thus was unconscionable conduct (paragraph [905] of the Judgment).
11.The trial judge erred in finding that high-pressure sales techniques were used by sales people of AMI/NRM, (paragraph [893] of the Judgment) as the finding was:
(a) not supported by the evidence as a whole;
(b)not justified as a general finding as to the business practices of AMI/NRM
12.As a result of the error in ground 11, the trial judge erred in finding that high-pressure sales techniques resulted in undue pressure on the consumer and thus was unconscionable conduct.
13.The trial judge erred in finding that persons who contacted AMI/NRM were vulnerable consumers (paragraphs [170], [891] of the Judgment) as the finding was:
(a) not supported by the evidence as a whole;
(b)not justified as a general finding as to the persons who contacted AMI/NRM in respect of treatment for ED or PE.
14.The trial judge erred in finding that AMI/NRM and Dr Vaisman targeted the vulnerable characteristics of consumers as a method of pressuring the consumers to agree to treatment programs (paragraph [891] of the Judgment) as the finding was:
(a) not supported by the evidence as a whole;
(b) not justified as a general finding as to the business practices of AMI/NRM.
15.
The trial judge erred in finding that the 12 to 18 month treatment period recommended and offered by AMI/NRM to some patients for both ED and PE was not supported by the scientific evidence as the finding was not justified in light of the medical evidence, particularly the evidence of Dr Pattison referred to in [623], [677] and [678].16.As a result of the error in ground 15, the trial judge erred in finding that:(a)AMI and NRM had no legitimate interest in having patients agree to long-term contracts (paragraph [925] of the Judgment);(b)by offering and recommending a 12 to 18 month treatment period AMI and NRM engaged in unconscionable conduct.17.The trial judge’s process of fact finding so substantially miscarried that the ultimate finding of unconscionability which resulted from that fact finding process is unsafe and ought be set aside.18.The errors in the trial judge’s fact-finding process render the ultimate conclusion unsafe by reason of the lengthy delay in the proceedings, in circumstances in which:
(a)The judgment was delivered:
(i)more than 6 years after the relevant AMI conduct;
(ii)approximately 3 years after the relevant NRM conduct;
(iii)more than 11 months after the conclusion of the submissions; and
(iv)more than 16 months after the conclusion of the evidence; and
(v)more than 2 years after the commencement of the hearing;
(b)The trial judge failed to advert in the judgment to:
(i)the fact of the delay; or
(ii)any measure taken by the trial judge to ensure that the delay did not adversely affect the fact-finding process.
Grounds 9, 15, 16 and 17 have been abandoned. Those four Grounds can thus be left aside.
The disclosure of remuneration – Ground 10
Ground 10 contends that the primary Judge “erred in finding that the failure of AMI/NRM salespeople to disclose their remuneration by commission was dishonest, exploitative, sharp practice and deceptive and unfair and thus unconscionable conduct”.
Ground 10 makes reference to para [905] of the reasons for decision of the primary Judge, which states as follows:
[905] The failure to disclose the basis of the remuneration of salespeople was dishonest and exploitative, it was sharp practice and deceptive, particularly in the circumstances when men believed they were consulting a medical practice which characteristically make patient welfare a primary concern. It was an unfair tactic, which is a possible marker of unconscionable conduct referred to in s 51AB(2)(d) of the TPA, s 21(2)(d) of the ACL operating between 1 January 2011 and 1 January 2012, and s 22(1)(d) of the ACL in operation after 1 January 2012.
This conclusion follows para [903], which states as follows:
7.2.3 Remuneration of salespeople by commission
[903] The salespeople were told by AMI and NRM in scripts and training materials not to disclose to patients that they were paid by commission. Payment by commission meant that the salespeople had an interest in selling higher priced programs. Had they disclosed that they were paid on commission, patients may have been alerted to the interest of the salespeople in selling higher priced programs. It may also have alerted patients to the fact that they were not consulting a traditional medical practice.
The written submissions filed on behalf of the Appellants contend that the “implicit finding” in para [903], that patients were unaware that they were not consulting a “traditional medical practice”, was speculative. The submissions further state that none of the lay witnesses called by the ACCC gave evidence that they understood NRM to be “a traditional medical practice”.
The difficulty confronted by this Ground is that it matters not what the expectations of the patients were when they consulted AMI or NRM. That which is of relevance is not their expectations but rather the fact that the salespeople failed to disclose the basis of their remuneration. There was no error in the finding of fact that the salespersons failed to disclose the basis of their remuneration. It was that failure to disclose which was central to the reasoning of the primary Judge at para [905] that patients were otherwise to assume that their welfare was the primary concern of the AMI and NRM practices.
Ground 10 of the Further Amended Notice of Appeal is rejected.
To the extent that Ground 10 seeks to challenge the findings of the primary Judge that the failure to disclose was “dishonest and exploitative”, and hence a step in the primary Judge’s reasoning to an ultimate finding of unconscionability, Ground 10 cannot be divorced from Grounds 11 and 12.
High pressure sales techniques – Grounds 11 & 12
Grounds 11 and 12 of the Further Amended Notice of Appeal challenge the findings of the primary Judge in respect to the “high-pressure sales techniques” used by the salespeople.
The findings made included the following:
7.2.2 High-pressure sales techniques
[893] AMI and NRM salespeople were trained to use high-pressure sales techniques to sell the treatment programs. They were instructed in methods which were likely to frighten men into agreeing to the treatments offered by AMI and NRM.
[894] The salespeople were trained to tell men that if they did not agree to treatment, they would suffer adverse medical consequences, including shrinkage of the penis and psychological impotence. There was no scientific basis established before the court for these claims. The salespeople were instructed to say that the treatment for ED would reduce the chance of heart attack or stroke. They were also instructed to inform patients that their partners may suffer from depression if they did not take the treatments. The threat of dire medical and social consequences placed pressure on men to accept the treatments.
[895] The salespeople also told men that the medications would be effective not just to treat, but to cure their problems. This offered a further inducement to agree to treatment. And the men were reassured that if the treatment did not work they would be entitled to a refund.
[896] This technique of selling was prone to rob men of independent judgement of the need for, and value of, the treatment, and induce them to enter into agreements which they would not otherwise have accepted if the pressure had not been applied.
[897] The technique of frightening men by telling them of the dire adverse consequences of not agreeing to treatment and assuring them that the treatment was effective was part of the business system of AMI and NRM. It was formulated by management and imparted in an organised fashion through scripts and training sessions.
The importance of these findings is that they form part of the reasoning later embraced by the primary Judge in reaching his conclusion as to unconscionability in para [939] of his reasons for decision. It is the finding at para [893] which is expressly the subject of challenge in Ground 11 of the Further Amended Notice of Appeal.
The written submissions relied upon by the Appellants contend that the reasoning of the primary Judge is a “paradigm example of ‘cart before the horse’ reasoning” that seeks to “elevate the well-known phenomenon of ‘buyer’s remorse’ into evidence of unconscionable conduct”. It was necessary, according to the Appellants, for evidence to have been led from “a reasonable cross-section of the customers of the Appellants rather than simply the Annexure C patients who were in effect self-selecting”. The Annexure C patients were 16 patients of NRM.
These submissions are rejected because the Appellants fail to grapple with the facts as found by the primary Judge, including the findings that the salespeople were trained and instructed:
·in methods “likely to frighten men” (at paras [893]) and [897]) and to tell them of “adverse medical consequences”; and
·to employ techniques “prone to rob men of independent judgement” (at para [896]).
The submission that patients who rang the AMI services always had the option to hang up, with respect, fails to grapple with:
·the fact that these methods and techniques were employed; and
·the fact that the methods and techniques were designed to manipulate the fears and insecurities of those who telephoned AMI seeking assistance and to render the simple task of hanging up more difficult.
These findings stood separate from whatever number of patients may have been those who had in fact attended the NRM practices. These findings did not require or depend upon the ACCC calling “a reasonable cross-section of the customers”.
Grounds 11 and 12 of the Further Amended Notice of Appeal are rejected.
Vulnerable consumers – Grounds 13 & 14
The case advanced in submissions on behalf of the ACCC was that the persons who contacted the Appellants were “vulnerable” by reason of three matters, namely:
·embarrassment and a lack of self-esteem;
·not seeing their usual general practitioners about their condition; and
·the trust placed in the doctors employed by the Appellants.
The written submissions filed on behalf of the Appellants again sought refuge in the fact that there was “no direct evidence given in respect of these supposed aspects of vulnerability in relation to any of the Annexure C patients (that is, those who are relevant to the Appellants)”. The submissions go on to contend that it “cannot be the case that any consumer who is embarrassed or lacking in self-esteem is thereby a vulnerable consumer who will require special treatment by any business which happens to come in contact with the consumer”.
In advancing these submissions, a contrast is sought to be made on behalf of the Appellants between the patients in the present case with those consumers in Australian Securities and Investments Commission v National Exchange Pty Ltd [2005] FCAFC 226, (2005) 148 FCR 132 (“National Exchange”). Proceedings had there been commenced against National Exchange in respect to an unsolicited offer to purchase shares. Many of the persons to whom offers had been made were over 70 years of age and it was accepted that some may not have properly understood the offer. It was concluded by the Full Court that the offer material itself did not contain any misleading or deceptive representations. Justices Tamberlin, Finn and Conti observed:
[23] In determining whether conduct or representations are misleading to a class of persons, the High Court has said that it is necessary to isolate a representative member of the class of persons to whom the conduct is directed with a view to ascertaining the likely understanding of an ordinary or reasonable member of the class and to disregard assumptions by persons which are extreme or fanciful. In Campomar Sociedad Limitada v Nike International Ltd (2000) 202 CLR 45 at 85–87, the Court said:
The initial question which must be determined is whether the misconceptions, or deceptions alleged to arise or to be likely to arise, are properly to be attributed to the ordinary or reasonable members of the classes of prospective purchasers.
[24] In this case, the only conduct relied on is the offer material and, having examined that material, we are not satisfied that, in itself, it contains any misleading or deceptive representations or evidences misleading or deceptive conduct.
When addressing the separate question of whether National Exchange had engaged in unconscionable conduct for the purposes of s 12CC of the Australian Securities and Investments Commission Act2001 (Cth), their Honours further observed:
[45] For these reasons, we consider that the trial judge erred in finding that National Exchange did not engage in unconscionable conduct for the purposes of s 12CC. It is unnecessary to consider whether His Honour was correct in concluding that this conduct was not unconscionable for the purposes of the unwritten law. We should not be taken as concluding that where a person targets a class of persons on the assumption that there are likely to be vulnerable persons within that class who cannot protect their own interests, that person cannot be found in appropriate circumstances to have engaged in unconscionable conduct in dealing with individual members of that class …
Just how the facts in National Exchange provide any assistance in the present case was left unexplained. Presumably, the Appellants’ submission founded itself upon a perceived difference in vulnerability between the aged consumers in that case and the category of patients involved in the present case.
In Australian Competition and Consumer Commission v Lux Distributors Pty Ltd [2013] FCAFC 90 the ACCC had sought declarations that the conduct of certain door-to-door vacuum cleaner salespeople was unconscionable in contravention of s 51AB of the Trade Practices Act and s 21 of the Australian Consumer Law. In placing emphasis upon the vulnerability of the consumer, Allsop CJ, Jacobson and Gordon JJ observed:
[10] … The objective of regulation was to promote the operation of fair and efficient markets, by providing appropriate consumer protection, where the consumer is subject to vulnerability or disadvantage due to the nature of the sales process. The vulnerability of the consumer to the salesperson in her or his own home arises from the difficulty in putting an end to the sales process once the salesperson is in the home, especially after that person has spent time and undertaken persuasive effort in a sales process or “pitch” …
See also: Australian Competition and Consumer Commission v ACN 099 814 749 Pty Ltd [2016] FCA 403 at [121] per Reeves J.
Vulnerability, of course, may be exposed by any one of a number of factors – including age, mental capacity, emotional stability and the like. The vulnerability of the consumers in National Exchange and Lux Distributors were but examples of vulnerable consumers.
The vulnerability of the present class of persons to whom the services of AMI and NRM were offered was, with respect, just as real as vulnerability for any other reason. That vulnerability was related to the particularly sensitive and personal nature of the services supplied by the Appellants and the sales techniques employed by the salespeople. Ground 13 of the Further Amended Notice of Appeal is rejected. The vulnerability of the category of persons to whom AMI and NRM offered and advertised its services was a finding well supported by the evidence.
Ground 14 is also rejected. A contention that NRM and Dr Vaisman did not “target the vulnerable characteristics of consumers” is a contention contrary to the facts as found by the primary Judge and (in particular) contrary to the advertising of the services offered and to the training of salespersons retained by both AMI and NRM.
Grounds 13 and 14 are both rejected.
Grounds 15, 16 and 17 have been abandoned.
Delay – Ground 18
Ground 18 of the Further Amended Notice of Appeal contends that errors in the fact finding processes of the primary Judge “render the ultimate conclusion unsafe by reason of the lengthy delay in the proceedings…”.
This Ground is to be approached with a considerable degree of caution.
Delay of itself, it must be acknowledged, does not constitute appellable error. Ground 18 is not to be understood as cavilling with that basic proposition. But delay can give rise to appellable error where the delay has (for example) prejudiced the fact-finding process. It is in this confined context that Ground 18 is to be resolved. Within that context, it has been concluded that:
·the passage of time between the hearing (or the date of last submissions) and the publication of reasons for decision does not constitute “delay”; and/or
·the passage of time has not prejudiced the fact-finding processes of the primary Judge.
The need to establish appellable error – the relevance of delay
Paragraphs [939] and [940] exposed but limited ambiguity – the “general elements” to which his Honour made express reference did not include all of the matters to which reference had been made in Parts 7.2.1 to 7.2.9 of his reasons for decision. There was, for example, no reference in para [939] to the earlier finding that “[c]oncealing the full story about the limitations of the AMI and NRM medication was also an unfair tactic” and that “the use of unfair tactics is a marker of possible unconscionable conduct” (at para [922]). But to construe the conclusions reached by the primary Judge in paras [939] to [940] as divorced from each of the findings previously made in that Part of his Honour’s judgment – as the Appellants urged upon the Court – is, with respect, an unreal exercise. The conclusion follows the analysis, and each part of the analysis, previously set forth.
So construed, any suggestion that the primary Judge made a finding of unconscionable conduct “in circumstances where there was no evidence of any intentional acts on the part of NRM which satisfied the description of ‘moral taint’” should be rejected.
Ground 19(a) of the Further Amended Notice of Appeal is rejected.
Unfair/unreasonable pressure as unconscionable – Ground 19(b)
Ground 19(b) of the Further Amended Notice of Appeal asserts that the “trial judge erred in characterising alleged unfair/unreasonable pressure as unconscionable”.
The Appellants’ written submissions contend that “the trial judge erred in law in characterising persuasive sales techniques utilised by the Appellants as being unfair and thus unconscionable and that in doing so misconstrued the test in Australian Competition and Consumer Commission v Lux Distributors Pty Ltd [2013] FCAFC 90…”.
Section 22(1)(d) of the Australian Consumer Law, it is to be recalled, expressly provides that one of the matters to which a Court may have regard when considering whether there has been a contravention of s 21 is “whether any undue influence or pressure was exerted on … the customer … in relation to the supply of … services…”.
With reference to the facts of the present case, it is concluded that:
·the primary Judge quite properly had regard to the “high-pressure sales techniques” employed by AMI and NRM salespeople; and that
·the findings set forth at paras [893] to [902] of the reasons for decision provide the basis upon which his Honour reached his conclusion that “high-pressure sales techniques” had been employed.
The manner in which the Appellants sought to contend that the primary Judge had “misconstrued the test” in Lux Distributors was not further explained. Section 51AB(2)(d) of the former Trade Practices Act was the counterpart provision to the current s 22(1)(d) of the Australian Consumer Law and permitted the Court to have regard to “whether any undue influence or pressure was exerted on … the consumer…”. With reference to the former provisions, the Court in Lux Distributors variously observed:
[10] … They concern the basic psychology of salesmanship, taught by life experience and common sense, once entry has been gained to the privacy of a person’s home. Ingratiating solicitude, just as much as high-pressure bullying sales tactics, may lead to a feeling of necessitous acceptance, especially by a polite and accepting person. In other words, special or particular care and attention to a customer can be just as effective as a sales tactic as high-pressure bullying ….
[13] Thus, s 74 of the ACL was directed to a dealer, as soon as possible, and, in any event, before starting to negotiate, telling the person of his or her (true) purpose of supplying goods or services … Clearly the provision is designed to require the truthful disclosure of purpose effectively at or about the point of entry into the home, and before the passage of any time. This can be seen to be directed to the fairness of any subsequent bargaining process and the avoidance of pressure upon the householder by the presence of the person in the home ....
[23] … These laws of the States and the operative provisions of the ACL reinforce the recognised societal values and expectations that consumers will be dealt with honestly, fairly and without deception or unfair pressure. These considerations are central to the evaluation of the facts by reference to the operative norm of required conscionable conduct ….
[33] … To a degree, the events in the home were unremarkable. Mr Farquhar did not exert any form of overt pressure, rather, he undertook the maintenance test and offered a comparative efficiency test which required him to get a vacuum cleaner from his car …
[64] … Rather, the passage of time and the apparent effort in solicitous assistance by the representative creates the subtle pressure upon the householder which, it can be inferred from the findings, each woman felt. Mrs Baird was perhaps the best exemplification of this. The subtle inequality of bargaining power is gained by the representative through the householder being unwilling to ask the person to leave, especially as he is being so “helpful”. The process reaches the point where, like Mrs Baird, the householder feels pressured or obligated to buy. In some circumstances, this may not be unconscionable. Here, these representatives gained entry by deception. Two of them compounded that by contravening provisions requiring them to either state their purpose or state that they could not stay for longer than one hour ….
[71] Breaches of statutes regulating direct selling must be seen as important: see [23] above. The vulnerability of people to pressure by skilled sales persons who gain entry into their homes is sought to be regulated in furtherance of fairness and the elimination of aspects of vulnerability. In assessing the conscionability or not of a particular instance of such selling, the compliance with public regulations will be centrally important.
Each of these observations, with respect, is but an observation or a conclusion as to the “pressure” exerted by the salespeople in that case once they had gained access to the consumer’s house.
What the “test” was that was said to have been established by the Lux Distributors case and the manner in which it was said to have been “misconstrued” by the primary Judge in the present case remained an elusive submission. The case, with respect, is more an example of conduct that can be aimed at a vulnerable category of persons, in that case those persons whose homes have been entered by “skilled sales persons.”
No appellable error is exposed in the primary Judge’s reliance upon the sales techniques utilised by the NRM salespeople in reaching his ultimate conclusion as to unconscionability.
Ground 19(b) of the Further Amended Notice of Appeal is rejected.
The aggregation of integers – Ground 19(c)
Ground 19(c) of the Further Amended Notice of Appeal contends that the “trial judge erred in finding that a series of integers none of which, of themselves, was capable of supporting a finding of unconscionable conduct, could be aggregated to produce a finding of unconscionable conduct”.
In expansion of this Ground, the Appellants’ written outline of submissions contends that this was “an error of principle” and that “amongst other reasons why this approach was erroneous in principle is the fact that the approach does not provide any guidance to other businesses…”. The submission is that the primary Judge did not “focus on any aspect that was particularly determinative of the case”.
The submission is rejected.
An assessment or conclusion whether conduct is “unconscionable” is a conclusion founded upon “all the circumstances”: Australian Competition and Consumer Commission v Allphones Retail Pty Ltd (No 2) [2009] FCA 17, (2009) 253 ALR 324 at 347. Justice Foster there reviewed the authorities and, in formulating a number of propositions, his Honour observed:
[114] … Of necessity, the authorities to which I have referred do not prescribe a precise definition which would be able to be applied to every set of circumstances presented to the Court for consideration. The application of the meaning accorded to the concept will always be a matter of judgment in every case and will depend upon a careful consideration of the circumstances of each case.
These propositions were approved by Gordon J in Australian Competition and Consumer Commission v Dukemaster Pty Ltd [2009] FCA 682 at [17].
Contrary to the submissions advanced on behalf of the Appellants, it would be an error for a primary judge to search for any one particular factor which was “determinative”. Depending upon the facts of any given case, one factor may be “determinative”; in many other cases a conclusion as to whether conduct is “unconscionable” must indeed be a conclusion founded upon “all the circumstances”. Such was the approach of the primary Judge in the present case.
To the extent that it is relevant to consider the “guidance” which the primary Judge’s decision will give to other “businesses”, the “guidance” is that a series of “integers” may be relied upon when reaching an ultimate conclusion as to unconscionability.
Ground 19(c) is rejected.
The refund term as an unfair contract – Ground 20
Following the voluntary administration of AMI, the administrators utilised a new refund term. NRM continued to use that new term from the date it purchased the AMI business in June 2011 until December 2011 or possibly later. It became known as the “first NRM refund term”.
The first NRM refund term remained in force until a second NRM refund term became operative. No challenge was made by the ACCC in respect to the second NRM refund term.
The first NRM refund term provided as follows:
Sexual dysfunction is a chronic condition and treatment can take some time. For this reason, we stipulate that your contract with us [is] for the period decided in the first consultation with the AMI doctor.
You may cancel your treatment program with AMI at any time by giving AMI not less than 30 days notice. Cancelling your treatment program you will be entitled to a refund for the unexpired period of your treatment program less an administration fee of 15% and less the cost of any medication already provided to or prepared for you. No refund will be provided for the expired period of the treatment program or the 30 day notice period. All cancellation must be communicated to AMI in writing signed by you. Oral cancellation will not be accepted in any circumstances.
This term was found by the primary Judge to be both:
·unconscionable (at paras [936] to [938]); and
·an unfair contract term (at paras [945] to [954]).
Ground 20 challenges the conclusion of the primary Judge that this term was “an unfair contract term within the meaning of the ACL”.
Unfair terms – s 24
Section 24 of the Australian Consumer Law provides as follows:
Meaning of unfair
(1) A term of a consumer contract is unfair if:
(a)it would cause a significant imbalance in the parties' rights and obligations arising under the contract; and
(b)it is not reasonably necessary in order to protect the legitimate interests of the party who would be advantaged by the term; and
(c)it would cause detriment (whether financial or otherwise) to a party if it were to be applied or relied on.
(2)In determining whether a term of a consumer contract is unfair under subsection (1), a court may take into account such matters as it thinks relevant, but must take into account the following:
(a) the extent to which the term is transparent;
(b) the contract as a whole.
(3) A term is transparent if the term is:
(a) expressed in reasonably plain language; and
(b) legible; and
(c) presented clearly; and
(d) readily available to any party affected by the term.
(4)For the purposes of subsection (1)(b), a term of a consumer contract is presumed not to be reasonably necessary in order to protect the legitimate interests of the party who would be advantaged by the term, unless that party proves otherwise.
Section 25 provides as follows:
Examples of unfair terms
(1)Without limiting section 24, the following are examples of the kinds of terms of a consumer contract that may be unfair:
(a)a term that permits, or has the effect of permitting, one party (but not another party) to avoid or limit performance of the contract;
(b)a term that permits, or has the effect of permitting, one party (but not another party) to terminate the contract;
(c)a term that penalises, or has the effect of penalising, one party (but not another party) for a breach or termination of the contract;
(d)a term that permits, or has the effect of permitting, one party (but not another party) to vary the terms of the contract;
(e)a term that permits, or has the effect of permitting, one party (but not another party) to renew or not renew the contract;
(f)a term that permits, or has the effect of permitting, one party to vary the upfront price payable under the contract without the right of another party to terminate the contract;
(g)a term that permits, or has the effect of permitting, one party unilaterally to vary the characteristics of the goods or services to be supplied, or the interest in land to be sold or granted, under the contract;
(h)a term that permits, or has the effect of permitting, one party unilaterally to determine whether the contract has been breached or to interpret its meaning;
(i)a term that limits, or has the effect of limiting, one party's vicarious liability for its agents;
(j)a term that permits, or has the effect of permitting, one party to assign the contract to the detriment of another party without that other party's consent;
(k)a term that limits, or has the effect of limiting, one party's right to sue another party;
(l)a term that limits, or has the effect of limiting, the evidence one party can adduce in proceedings relating to the contract;
(m)a term that imposes, or has the effect of imposing, the evidential burden on one party in proceedings relating to the contract;
(n)a term of a kind, or a term that has an effect of a kind, prescribed by the regulations.
(2)Before the Governor-General makes a regulation for the purposes of subsection (1)(n) prescribing a kind of term, or a kind of effect that a term has, the Minister must take into consideration:
(a)the detriment that a term of that kind would cause to consumers; and
(b)the impact on business generally of prescribing that kind of term or effect; and
(c)the public interest.
In Australian Competition and Consumer Commission v Chrisco Hampers Australia Ltd [2015] FCA 1204 Edelman J reviewed the origins of s 24 and concluded in part as follows:
[43] In his eloquent submissions, senior counsel for Chrisco emphasised a number of matters concerning the construction of s 24, all of which I accept:
(1)for a term to be unfair it must satisfy the requirements of all of s 24(1)(a) to (c);
(2)the onus is upon the applicant to prove the matters in ss 24(1)(a) and 24(1)(c) but it is upon the respondent in relation to s 24(1)(b);
(3)Section 24(2)(a) only requires the Court to consider transparency in relation to the particular term that is said to be unfair and only in relation to the matters concerning that term in s 24(1)(a) to (c);
(4)similarly, the assessment of the contract as a whole in s 24(1)(c) only requires the Court to consider the contract as a whole in relation to the particular term that is said to be unfair and only in relation to the matters concerning that term in s 24(1)(a) to (c);
(5)as the Explanatory Memorandum to the Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010 (Cth) provided at [5.39], “if a term is not transparent it does not mean that it is unfair and if a term is transparent it does not mean that it is not unfair“; and
(6)guidance can be had to s 25 which provides examples of unfair terms.
[44] Although there was some dispute about (5), a contextual approach to statutory interpretation cannot ignore the matters provided in s 25 which are specifically provided for the purpose of giving examples of potentially unfair terms …
The contentions advanced by the ACCC
Unlike the position with AMI, the first NRM refund term did not provide for a 48-hour cooling off period.
In addition to making findings as to the manner in which some patients wished to terminate the contract shortly after it was entered into (at paras [845] to [855]), the primary Judge went on to summarise the ACCC’s criticisms of the first NRM refund term upon the bases that:
·the patient was charged for the expired portion of the contract even where the medication was ineffective (at para [852]);
·the 15% administration fee was calculated on the entire program cost and the basis of calculation was not disclosed to patients (at para [853]); and
·the staff of NRM always tried to persuade patients who wished to cancel their contracts to continue with the program (at para [855]).
The ACCC was also critical of the fact that the NRM refund term was not brought to the attention of patients in a way which practically informed them of its contents and the fact that patients were informed of the contract terms by way of a lengthy recorded message where “the terms were read out so fact and softly as to be practically inaudible” and “the tone was monotonous and the pace fast” (at para [858]). And in some cases the recording was not always played.
The conclusion of the primary Judge & the submissions on appeal
The primary Judge concluded that the first NRM refund term was an “unfair contract term” (at paras [945] to [954]).
His Honour started his analysis by stating that a “term of a consumer contract is void if two characteristics are established, namely, that the term is unfair and the contract is a standard form contract (s 23(1) of the ACL)” (at para [945]).
His Honour concluded that NRM had failed to establish that the NRM contract was not a standard form contract (at paras [946] to [947]). In considering whether the term was unfair, his Honour proceeded “to examine three factors”, namely:
·whether the term was reasonably necessary in order to protect the legitimate interests of NRM – noting the presumption that the term is not reasonably necessary unless NRM proved otherwise (s 24(4));
·whether the term would cause a significant imbalance in the parties’ rights and obligations under the contract (s 24(1)(a)) and would cause detriment, whether financial or otherwise, to the patient if it were to be applied or relied upon (s 24(1)(c)); and
·the extent to which the term is transparent.
As to the second of these factors, the primary Judge found:
[951] The NRM refund term required the patient to pay a 15% administration fee, a pro-rata fee for the expired portion of the treatment, a pro-rata fee for the 30-day notice period, and the cost of medication supplied or prepared for the patient. The term operated whether the reason for the termination was a change of mind very soon after the phone consultation, a severe adverse side effect, or where the medication proved ineffective. The term thus caused detriment to the patient, if relied upon, within the meaning of s 24(1)(c). It also caused a significant imbalance in the parties’ rights and obligations because it had the effect of binding patients to continue treatment in disadvantageous circumstances, or alternatively suffer a financial penalty.
As to the last of the “three factors”, the primary Judge found the term lacked transparency, noting (in part) that the basis on which the administration fee was calculated was not disclosed and that a patient was told about the refund term in a recorded message which suffered from a number of deficiencies – including the speed with which it was played and the monotonous tone in which it was delivered.
The challenge to the ultimate conclusion of the primary Judge as outlined in the Appellants’ written submissions on appeal contended (in summary form) that:
·the first NRM refund term “cannot be described in terms of any of the examples of unfair contract terms set out in s 25”;
·the term did not have “the effect of causing a significant imbalance between NRM and its patients or causing detriment (financial or otherwise) to NRM’s patients”; and
·“the finding in relation to the first NRM refund term cannot stand” when the finding that the NRM medications were not effective is set aside.
The Appellants’ written submissions in reply seek to cast the net of challenge wider when it is there contended that:
·NRM did contend – and contrary to the finding of the primary Judge (at para [949]) – that the term “was reasonably necessary to protect its legitimate interests”; and
·“it is not possible to look at the contract ‘as a whole’ and at the same time assert that the provision of a refund term where no refund term would otherwise be legally required is not a benefit to the consumer.”
None of these contentions prevail.
No error, with respect, is exposed in the conclusion of the primary Judge that the first NRM term occasioned a “significant imbalance in the parties’ rights and obligations arising under the contract (s 24(1)(a)), and would cause detriment, whether financial or otherwise, to the patient if it were to be applied or relied upon (s 24(1)(c))” (at para [950]). Nor is any appellable error exposed in his Honour’s further conclusion that these “two factors may be considered together and in light of one of the examples of an unfair term provided by s 25(1)(c)”. But it should be further noted that it matters not whether the first NRM refund term could be “described in terms of any of the examples of unfair contract terms set out in s 24”. As is made express by the terms of s 25(1), that section simply provides “examples of the kinds of terms of a consumer contract that may be unfair…”. So much was also referred to by Edelman J in Chrisco Hampers [2015] FCA 1204 at [43] to [44].
The “significant imbalance in the parties’ rights and obligations” in the present case, as that phrase is employed in s 24(1)(a) of the Australian Consumer Law, is self-evident from the manner in which the term operated and was enforced. These features included the requirement to pay a 15% administration fee and its operation irrespective of whether the reason for termination was a change of mind, a severe adverse side effect or where the medication proved ineffective.
When the contract is viewed “as a whole”, as required by s 24(2)(b), the same conclusion is reached. It matters not whether the contract need not have provided for any refund. When the first NRM refund term is considered in the context of the patients who entered into the agreements and the manner in which medications were prescribed, it is respectfully concluded that the first NRM refund term remains an unfair term.
However the submissions advanced on behalf of the Appellants have been cast, they are – with respect – unpersuasive.
Conclusions – an unfair term
No appellable error is disclosed in the conclusion of the primary Judge that the first NRM refund term was an unfair term.
Ground 20 of the Further Amended Notice of Appeal is rejected.
RELIEF
Grounds 21 and 22 of the Further Amended Notice of Appeal (being Part F) state as follows (without alteration):
F. Appeal Grounds relating to relief
21. The declarations and orders made by the trial judge went beyond that which was necessary and appropriate to vindicate such findings of unconscionability which were made or ought to have been made and in particular:
(a) Order 9(a) went beyond that which was necessary and appropriate in that the trial judge erroneously substituted his own views as to what was “substandard” for the proper test of what was necessary to vindicate any finding of unconscionability which was made [paragraphs [588], [598] of the Judgment;(b) Order 9(c) went beyond that which was necessary and appropriate in that it permanently restrained the first and second appellants from making statements about the NRM treatments to the public at large in circumstances which do not involve, and are not connected with, any so-called high-pressure sales techniques; and
(c) Order 9(e) went beyond that which was necessary and appropriate in that, in light of the orders concerning patients’ termination rights and Cooling Off Period, it did not provide any additional protection to consumers but had the potential to work a substantial hardship in relation to the business of the first and second appellants.
22. The orders made against Dr Vaisman were excessive and inappropriate in light of the findings of unconscionability which were made or ought to have been made.
Ground 21(a) was abandoned by the Appellants during oral submissions in reply on the hearing of the appeal such that the challenge to Order 9(a) was not sought to be pursued. Grounds 23 and 24 have also been abandoned.
Verbatim copying
In the written outline of submissions filed on behalf of the Appellants it was contended that the declarations and orders made by the primary Judge “went beyond that which was necessary and appropriate” by reason of their being made largely by reference to the form proposed by the ACCC.
The written outline of submissions contended that the “verbatim copying of orders” gave rise to an “apprehension that the trial judge did not properly consider the terms of the orders being made but instead looked for the decision which was ‘the easiest to make’; in the sense discussed by Monie”. The reference to Monie was understood to be a reference to the following observations of Hunt A-JA in that case, namely:
[43] In a series of cases, stemming largely from a decision of the English Court of Appeal in Goose v Wilson Sandford & Co (1998) 142 SJLB 92, the Australian Courts have dealt with the consequences of a judge’s delay in giving judgment. In particular, there has been one decision of the Court of Criminal Appeal (R v Maxwell (1998) 217 ALR 452), one of this Court (Hadid v Redpath (2001) 35 MVR 152), and one of the Full Court of the Federal Court (Expectation Pty Ltd v PRD Realty Pty Ltd (2004) 140 FCR 17) which have developed the approach to be taken on appeal. That approach may be stated as follows:
…
(9)And, finally, the long delay may give rise to a reasonable apprehension by the losing party that the judge delayed giving judgment because he or she had been unable to grapple adequately with the issues and, in the end, had become attracted to the decision which was the easiest to make. The possibility that such an apprehension may be held by the losing party requires the judge to deal with that party’s arguments in such a way as to demonstrate that those arguments have been understood and that their rejection has been based on a clear and rational process of reasoning.
The submission made in writing is without substance.
The detailed findings and reasons provided by the primary Judge deny any suggestion that his Honour gave anything other than detailed consideration to the evidence and legal issues involved. Nor is there anything to suggest that his Honour’s detailed consideration of the issues in need of resolution stopped short of also giving detailed consideration to the form of orders to be made. Indeed, it is highly unlikely that the primary Judge having come so far in his detailed analysis of the case, stopped short when it came to making orders to give effect to his findings and reasons.
Provided a judge gives appropriate consideration to the form of orders to be made, there is nothing wrong with a judge substantially adopting as appropriate the form of orders properly drafted and prepared by a regulator such as the ACCC.
Order 9 – Ground 21
The challenge to Order 9(a) was abandoned.
The primary challenge became that focussed upon Order 9(c). That Order permanently restrains NRM from making “any statement or representation to any patient or prospective patient as to [inter alia] the efficacy of NRM treatments”. Order 9(a) (which as noted above is no longer under challenge), restrained (inter alia) the making of an agreement with a patient “unless the patient for whom the medications or medical services are intended has had a consultation with a duly qualified medical practitioner…”.
The written submissions filed on behalf of the Appellants advanced a number of diverse challenges to Order 9(c) variously contending that it went “beyond that which was necessary and appropriate”, to a submission that there could be found in the reasons for decision of the primary Judge “no justification for this order”, to a submission that seemed to contend that the order lacked certainty. Another submission was that it was not necessary to restrain the making of “statements about the NRM treatments to the public at large in circumstances which do not involve, and are not connected with, any so-called high-pressure sales techniques”. Further to the submission that the Order went “beyond that which was necessary and appropriate”, the oral submissions of Senior Counsel for the Appellants contended that:
·Order 9(a) was a sufficient safeguard; and
·the absence of any challenge by the ACCC to the second refund term of NRM carried with it an acceptance that that refund term was a satisfactory safeguard to the interests of patients.
None of these submissions occasion any reason to interfere with Order 9(c).
The Orders made, it should be recalled, were made in a factual context which included the findings of the primary Judge (inter alia) that:
·the advertising in fact undertaken by NRM (and AMI) was “extensive” and carried on by way of radio, television and billboards (at para [765]);
·the “focus in the advertising” was on the provision of medical treatment in a manner which had “remained unchanged” and involved salespeople who were paid by commission and by people who “put pressure on patients to enter into treatment programs” (at para [771]); and
·the doctors who were employed had failed “to act in accordance with accepted professional standards of medical practice” and were a “cog in a commercial machine” (at paras [927] and [932]).
There was also the finding of the primary Judge that:
·“Dr Vaisman’s attitude in the witness box demonstrated that unless he was restrained by orders of the Court, he would continue the business model he had designed…” (at para [1005]).
The submission that the Order was not warranted because the advertising was “not connected with any so-called high-pressure sales techniques” does not survive scrutiny. Nor can it be accepted that the primary Judge failed to properly take into account such changes as had been implemented by NRM, including the change in the refund term. The other criticisms of the practice of NRM set forth in his Honour’s reasons and findings, it is respectfully considered, provide a more than adequate foundation for the Orders made.
Nor is there any lack of certainty in the Order as framed. The subsequent application brought by the ACCC for an alleged contempt of the Orders as made provides no reason to question the form in which the Orders have been drafted: cf. Australian Competition and Consumer Commission v ACN 117 372 915 Pty Ltd (in liq) [2015] FCA 1441.
Ground 21 of the Further Amended Notice of Appeal, to the extent that it remains a live issue in the appeal, is rejected.
Ground 22
Ground 22 of the Further Amended Notice of Appeal contends that the orders made against Dr Vaisman were “excessive and inappropriate”.
The written submissions advanced on his behalf principally focus upon two “vices”, namely:
·“insufficiently explained credit findings”; and
·a failure “to distinguish between the conduct of Dr Vaisman as the controlling mind of AMI and the controlling mind of NRM.”
Neither submission survives scrutiny.
As to the former submission, Ground 22 echoes to some extent Ground 18(a) and the challenge founded upon “insufficiently explained credit findings” being affected by the alleged delay in decision-making. That challenge has been rejected. So, too, should the present challenge. The submission that there have been “insufficiently explained credit findings” is again answered by making reference to the balance of the findings and reasoning set forth by the primary Judge at para [123] of his reasons for decision. The challenge takes the findings made by the primary Judge out of context.
As to the latter submission, two comments may be made. First, the reasons for decision of the primary Judge separately address the findings of fact to be made in respect to Dr Vaisman (at paras [870] to [888]); separately address the question whether Dr Vaisman should be held liable for the conduct of AMI and NRM (at paras [943] to [944]) and separately address the orders to be made against Dr Vasiman as opposed to the relief against NRM (at paras [1001] to [1007]). And within those paragraphs it is evident that the primary Judge was focussing attention upon the conduct of Dr Vaisman as an individual and the responsibility he should bear for AMI and (of present relevance) for NRM. A submission that there was a failure to distinguish between the conduct of Dr Vaisman “as the controlling mind of AMI and the controlling mind of NRM” is, with respect, without substance. Second, the submission ignores the fact that Dr Vaisman was the controlling mind of NRM and was the Chief Executive Officer of both AMI and NRM. It also ignores the evidence before the primary Judge that Dr Vaisman “made all the critical decisions in the organisation”.
Ground 22 of the Further Amended Notice of Appeal is rejected.
CONCLUSIONS
The appeal should be dismissed.
It was common ground between the parties at the hearing that costs should follow the event if the appeal were either allowed in its entirety or dismissed in its entirety. Potential difficulties would only arise, so it was agreed, in the event that NRM was successful only in respect to some of its grounds of challenge to the reasoning of the primary Judge. That eventuality has not arisen. The Appellants have been wholly unsuccessful.
The appeal should be dismissed with costs.
THE ORDERS OF THE COURT ARE:
1.The appeal is dismissed.
2.The Appellants are to pay the costs of the Respondent.
I certify that the preceding two hundred and twenty-five (225) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Flick, Murphy and Griffiths. Associate:
Dated: 21 July 2016
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