Productivity Partners Pty Ltd v Australian Competition and Consumer Commission
[2023] FCAFC 54
•6 April 2023
FEDERAL COURT OF AUSTRALIA
Productivity Partners Pty Ltd (trading as Captain Cook College) v Australian Competition and Consumer Commission [2023] FCAFC 54
Appeal from: Australian Competition and Consumer Commission v Productivity Partners Pty Ltd (trading as Captain Cook College) (No 3) [2021] FCA 737
Australian Competition and Consumer Commission v Productivity Partners Pty Ltd (trading as Captain Cook College (No 5) [2021] FCA 919
File number(s): NSD 887 of 2021
NSD 895 of 2021Judgment of: WIGNEY, O’BRYAN AND DOWNES JJ Date of judgment: 6 April 2023 Catchwords: CONSUMER LAW – unconscionable conduct – statutory unconscionability under s 21 of the Australian Consumer Law (ACL) – registered training organisation provided vocational education and training under Commonwealth’s Vocational Education and Training Fee Higher Education Loan Program (VFH scheme) – whether certain changes made by the registered training organisation to the student enrolment process, and the claiming and retaining of revenue in respect of enrolments under the VFH scheme, constituted unconscionable conduct – whether a senior executive of the registered training organisation was knowingly concerned in, or party to, the alleged contraventions of the registered training organisation for the purpose of ss 224, 246 and 248 of the ACL – whether conduct of sales and marketing agents of the registered training organisation undertaken in contravention of ss 18, 21 or 29 of the ACL can be taken to have been engaged in by the registered training organisation within the meaning of s 139B(2) of the Competition and Consumer Act 2010 (Cth) – whether conduct of registered training organisation was not unconscionable by reason that the organisation promptly remedied harm that was caused by conduct that would otherwise have been characterised as unconscionable Legislation: Australian Securities and Investments Commission Act 2001 (Cth) ss 12CB, 12CC
Competition and Consumer Act 2010 (Cth) ss 139B, 155, Sch 2 (Australian Consumer Law) ss 2, 18, 20, 21, 22, 29, 69, 78, 79, 224, 246, 248
Higher Education Support Act 2003 (Cth)
Trade Practices Act 1974 (Cth) Pt IVB, ss 51AC, 51ACA, 51AD, 52A
Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010 (Cth)
Cases cited: Ainsworth v Criminal Justice Commission (1992) 175 CLR 564
Aldi Foods Pty Ltd v Moroccanoil Israel Ltd (2018) 261 FCR 301
Ashbury v Reid [1961] WAR 49
Attorney General of New South Wales v World Best Holdings Ltd (2005) 63 NSWLR 557
Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union (2017) 254 FCR 68
Australian Competition and Consumer Commission v Australian Institute of Professional Education Pty Ltd (in liq) (No 3) [2019] FCA 1982
Australian Competition and Consumer Commission v BlueScope Limited (No 5) [2022] FCA 1475
Australian Competition and Consumer Commission v Cornerstone Investment Aust Pty Ltd (in liq) (No 4) [2018] FCA 1408
Australian Competition and Consumer Commission v Danoz Direct Pty Ltd [2003] FCA 881; 60 IPR 296
Australian Competition and Consumer Commission v Dataline.Net.Au Pty Ltd [2006] FCA 1427; 236 ALR 665
Australian Competition and Consumer Commission v EnergyAustralia Pty Ltd [2015] FCA 274
Australian Competition and Consumer Commission v Lux Distributors Pty Ltd [2013] FCAFC 90; ATPR 42-447
Australian Competition and Consumer Commission v Mazda Australia Pty Limited [2023] FCAFC 45
Australian Competition and Consumer Commission v Medibank Private Ltd (2018) 267 FCR 544
Australian Competition and Consumer Commission v Productivity Partners Pty Ltd (trading as Captain Cook College) (No 3) [2021] FCA 737; 154 ACSR 472
Australian Competition and Consumer Commission v Productivity Partners Pty Ltd (trading as Captain Cook College) (No 4) [2021] FCA 752
Australian Competition and Consumer Commission v Productivity Partners Pty Ltd (trading as Captain Cook College) (No 5) [2021] FCA 919
Australian Competition and Consumer Commission v Quantum Housing Group Pty Ltd [2021] FCAFC 40; 388 ALR 577
Australian Competition and Consumer Commission v Rural Press Ltd [2001] FCA 116; ATPR 41-804
Australian Competition and Consumer Commission v TF Woollam & Son Pty Ltd (2011) 196 FCR 212
Australian Competition and Consumer Commission v Phoenix Institute of Australia Pty Ltd (Subject to Deed of Company Arrangement) [2021] FCA 956
Australian Competition and Consumer Commission v Quantum Housing Group Pty Ltd (2021) 285 FCR 133
Australian Securities and Investments Commission v Kobelt (2019) 267 CLR 1
Australian Securities and Investments Commission v Maxwell [2006] NSWSC 1052; 59 ACSR 373
Australian Securities and Investments Commission v National Exchange Pty Ltd (2005) 148 FCR 132
Australian Securities and Investments Commission v Westpac Banking Corporation (No 3) [2018] FCA 1701; 131 ACSR 585
Australian Securities and Investments Commission v Westpac Banking Corporation (Omnibus) [2022] FCA 515; 159 ACSR 381
Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd (2001) 117 FCR 424
Coggin v Telstar Finance Company (Q) Pty Ltd [2006] FCA 191; ASAL 55-156
Commonwealth Bank of Australia v Kojic (2016) 249 FCR 421
Fox v Percy (2003) 214 CLR 118
Giorgianni v The Queen (1985) 156 CLR 473
Good Living Company Pty Ltd v Kingsmede Pty Ltd (2021) 284 FCR 424
Jenyns v Public Curator (Qld) (1953) 90 CLR 113
Kakavas v Crown Melbourne Ltd (2013) 250 CLR 392
Keller v LED Technologies Pty Ltd (2010) 185 FCR 449
Leighton Contractors Pty Ltd v Construction, Forestry, Mining and Energy Union (2006) 154 IR 228
McGrath v HNSW Pty Ltd (2014) 219 FCR 489
Medical Benefits Fund of Australia Ltd v Cassidy (2003) 135 FCR 1
Paciocco v Australia and New Zealand Banking Group Ltd (2015) 236 FCR 199
Paciocco v Australia and New Zealand Banking Group Ltd (2016) 258 CLR 525
Perpetual Trustee Company Ltd v Burniston (No 2) [2012] WASC 383; 271 FLR 122
Perpetual Trustees Victoria Limited v Xiao [2015] VSC 21
Quinlivan v Australian Competition and Consumer Commission (2004) 160 FCR 1
R v Nifadopoulos (1988) 36 A Crim R 137
R v Tannous (1987) 10 NSWLR 303
Rafferty v Madgwicks (2012) 203 FCR 1
Rural Press Ltd v Australian Competition and Consumer Commission (2002) 118 FCR 236
Rural Press Ltd v Australian Competition and Consumer Commission (2003) 216 CLR 53
Stefanovski v Digital Central Australia (Assets) Pty Ltd [2018] FCAFC 31; 368 ALR 607
Stubbings v Jams 2 Pty Ltd [2022] HCA 6; 399 ALR 409
Tonto Home Loans Australia Pty Ltd v Tavares [2011] NSWCA 389; 15 BPR 29,699
Unique International College Pty Ltd v Australian Competition and Consumer Commission (2018) 266 FCR 631
Wade v J Daniels and Associates Pty Ltd [2020] FCA 1708
Western Australia v Ward (2002) 213 CLR 1
Yorke v Lucas (1985) 158 CLR 661
Xiamen Huadian Switchgear Co Ltd v Powins Pty Ltd [2022] FCA 1159; 169 IPR 77
The Juliana (1822) 2 Dods 504; 165 ER 1560
Division: General Division Registry: New South Wales National Practice Area: Commercial and Corporations Sub-area: Regulator and Consumer Protection Number of paragraphs: 526 Date of hearing: 4, 5 and 6 May 2022 Counsel for the Appellants in NSD887/2021: Mr J Giles SC and Mr R Davies
Solicitor for the Appellants in NSD887/2021: MinterEllison Counsel for the First Respondent in NSD887/2021: Dr K Stern SC and Ms S Patterson Solicitor for the First Respondent in NSD887/2021: Johnson Winter & Slattery Counsel for the Second Respondent in NSD887/2021: Mr M Hodge KC and Mr C Bannan Solicitor for the Second Respondent in NSD887/2021: HWL Ebsworth Lawyers Counsel for the Appellant in NSD895/2021: Mr M Hodge KC and Mr C Bannan Solicitor for the Appellant in NSD895/2021: HWL Ebsworth Lawyers Counsel for the First Respondent in NSD895/2021: Dr K Stern SC and Ms S Patterson
Solicitor for the First Respondent in NSD895/2021: Johnson Winter & Slattery
Counsel for the Second and Third Respondents in NSD895/2021: Mr J Giles SC and Mr R Davies Solicitor for the Second and Third Respondents in NSD895/2021: MinterEllison ORDERS
NSD 887 of 2021 BETWEEN: PRODUCTIVITY PARTNERS PTY LTD (TRADING AS CAPTAIN COOK COLLEGE) ACN 085 570 547
First Appellant
SITE GROUP INTERNATIONAL LTD ACN 003 201 910
Second Appellant
AND: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
First Respondent
BLAKE WILLS
Second Respondent
ORDER MADE BY:
WIGNEY, O’BRYAN AND DOWNES JJ
DATE OF ORDER:
6 APRIL 2023
THE COURT ORDERS THAT:
1.The First Respondent has leave to rely on the amended notice of contention dated 4 May 2022.
2.Paragraphs 1, 2 and 3 of the orders of the Court made on 4 August 2021 be set aside.
3.The question of what declaratory relief, if any, ought to made in place of paragraphs 1, 2 and 3 of the orders of the Court made on 4 August 2021 be remitted to the primary judge.
4.Paragraphs 8, 11, 14 and 17 of the orders of the Court made on 4 August 2021 be set aside.
5.The question of whether any adjustment should be made to paragraph 19 of the orders of the Court made on 4 August 2021 be remitted to the primary judge.
6.The appeal be otherwise dismissed.
7.The Appellants pay 95% of the First Respondent’s costs of the appeal.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
ORDERS
NSD 895 of 2021 BETWEEN: BLAKE WILLS
Appellant
AND: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
First Respondent
PRODUCTIVITY PARTNERS PTY LTD (TRADING AS CAPTAIN COOK COLLEGE) ACN 085 570 547
Second Respondent
SITE GROUP INTERNATIONAL LTD ACN 003 201 910
Third Respondent
ORDER MADE BY:
WIGNEY, O’BRYAN AND DOWNES JJ
DATE OF ORDER:
6 APRIL 2023
THE COURT ORDERS THAT:
1.The First Respondent has leave to rely on the amended notice of contention dated 4 May 2022.
2.Paragraphs 1, 2 and 3 of the orders of the Court made on 4 August 2021 be set aside.
3.The question of what declaratory relief, if any, ought to made in place of paragraphs 1, 2 and 3 of the orders of the Court made on 4 August 2021 be remitted to the primary judge.
4.Paragraphs 8, 11, 14 and 17 of the orders of the Court made on 4 August 2021 be set aside.
5.The question of whether any adjustment should be made to paragraph 19 of the orders of the Court made on 4 August 2021 be remitted to the primary judge.
6.The appeal be otherwise dismissed.
7.The Appellant pay 95% of the First Respondent’s costs of his appeal.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
WIGNEY AND O’BRYAN JJ:
A. INTRODUCTION
This appeal principally concerns the application of the statutory proscription of unconscionable conduct in s 21 of the Australian Consumer Law (ACL) (Schedule 2 to the Competition and Consumer Act 2010 (Cth) (CCA)) in the context of the enrolment of students in vocational education and training (VET) under the Commonwealth’s Vocational Education and Training Fee Higher Education Loan Program (which is referred to in these reasons as the VET FEE-HELP scheme or VFH scheme).
For many years, the Australian Government has assisted students to fund higher education fees through loans offered by the Government pursuant to the Higher Education Loan Programme (HELP), established under the Higher Education Support Act 2003 (Cth) (HES Act). In 2007, the scheme was expanded to assist students fund VET courses. The scheme allowed eligible students to take out a VET FEE-HELP loan to cover all or part of their tuition fees. When a student took out a VET FEE-HELP loan, the Government would pay the loan amount directly to the relevant registered training organisation (RTO). The student would be required to gradually repay the loan plus a 20% “loan fee” through the tax system once they earned above a specified threshold (which, in the relevant period, was approximately $54,000).
Productivity Partners Pty Ltd trading as Captain Cook College (generally referred to in these reasons as the College) was a registered training organisation that offered VET courses to students. The College was founded in 1998 and was owned and operated by the Cook family. At all relevant times, the Chief Executive Officer (CEO) of the College was Mr Ian Cook. It had four on-site campuses and also provided courses online for distance learning through what was referred to as its distance (or online) campus. The proceeding below and this appeal concerns the online campus only. The College obtained approval to offer courses through the VFH scheme on 30 March 2012. Productivity Partners was acquired from the Cook family by Site Group International Ltd (Site) in mid-2014. Thereafter, the College was conducted under the names Captain Cook College and Site Institute. The Chief Operating Officer (COO) of Site and, between November 2015 and January 2016, acting CEO of Captain Cook College, was Mr Blake Wills.
The Australian Competition and Consumer Commission (ACCC) brought proceedings alleging that the College had engaged in a system of conduct, or a pattern of behaviour, in respect of persons who were enrolled in online courses in the period 7 September 2015 to 18 December 2015, that was, in all the circumstances, unconscionable in contravention of s 21 of the ACL. The ACCC alleged that the unconscionable conduct involved the implementation of certain changes to the College’s enrolment process for the online campus (which changes took effect from 7 September 2015), and also involved the College claiming VET FEE-HELP (VFH) revenue from the Commonwealth up to and including September 2016 in respect of students who had been enrolled in the period 7 September 2015 to 18 December 2015 (collectively, the impugned conduct). Thus, the period of the impugned conduct was between September 2015 and September 2016. To distinguish the two periods that are relevant to the ACCC’s allegations, we will refer to the period of 7 September 2015 to 18 December 2015 as the impugned enrolment period, and we will refer to the period between September 2015 and September 2016 as the impugned conduct period.
The ACCC further alleged that each of Mr Cook, Mr Wills and Site were knowingly concerned in, or party to, the College’s contravention of s 21, within the meaning of s 224(1)(e) of the ACL and also paragraph (c) of the definition of “involved” within s 2 of the ACL. In respect of Site, the ACCC alleged that Mr Wills’s knowledge and conduct were to be attributed to Site pursuant to s 139B of the CCA. Accordingly, the ACCC’s allegations concerning Site were dependent upon its allegations against Mr Wills.
In addition to its case of systemic unconscionable conduct contrary to s 21 of the ACL, the ACCC also alleged contraventions of the ACL with respect to the College’s dealings with five individuals who are referred to in the primary judge’s reasons as Consumers A through to E to maintain their privacy. The ACCC alleged that the conduct of marketing and sales agents acting on behalf of the College (who are also referred to as course advisors or CAs in the primary judgment) in recruiting each of the individuals was unconscionable in contravention of s 21 of the ACL and misleading or deceptive or likely to mislead or deceive in contravention of s 18(1) of the ACL, and/or included false or misleading representations in contravention of ss 29(1)(i) or (m) of the ACL. The ACCC further alleged that the conduct of the agents is taken to be the conduct of the College by reason of s 139B(2) of the CCA such that the College is taken to have contravened ss 18, 21, 29 of the ACL. The ACCC also alleged that the agreements by which the individuals were enrolled in the College constituted unsolicited consumer agreements within the meaning of s 69(1) of the ACL and that, upon the enrolment of the individuals, the College failed to comply with ss 78 and 79 of the ACL in that the College:
(a)did not send the documents evidencing the agreement between the College and the student by a method permitted by s 78(2); and
(b)the documents evidencing the agreement between the College and the student did not contain a notice that conspicuously and prominently informed the student of his or her right to terminate the agreement or a notice that the student could use to terminate the agreement.
Shortly prior to trial, Mr Cook admitted the ACCC’s allegations that the College had engaged in a system of conduct, or a pattern of behaviour, in respect of persons who were enrolled in online courses in the impugned enrolment period that was, in all the circumstances, unconscionable in contravention of s 21 of the ACL and that he was knowingly concerned in that contravening conduct. As the College, Site and Mr Wills continued to defend the proceeding, the proceeding against Mr Cook was referred to a different judge for the purposes of determining relief: see Australian Competition and Consumer Commission v Productivity Partners Pty Ltd (trading as Captain Cook College) (No 4) [2021] FCA 752.
The trial before the primary judge proceeded as against the College, Site and Mr Wills. The primary judge delivered judgment on 2 July 2021: Australian Competition and Consumer Commission v Productivity Partners Pty Ltd (trading as Captain Cook College) (No 3) [2021] FCA 737 (primary judgment or PJ). In a lengthy and careful judgment, the primary judge found in favour of virtually all of the ACCC’s allegations (the limited exception being that the primary judge did not find that the College had contravened s 78 of the ACL in respect of Consumers A, C and D). In light of those findings on liability, the trial judge directed the parties to provide agreed or competing orders as to the future conduct of the proceeding. On 4 August 2021, the primary judge made declarations in respect of the contravening conduct in a form largely proposed by the parties and ordered that the respondents pay the ACCC’s costs of the trial: Australian Competition and Consumer Commission v Productivity Partners Pty Ltd (trading as Captain Cook College) (No 5) [2021] FCA 919 (declaration judgment). The primary judge deferred the further hearing of the ACCC’s application for the imposition of pecuniary penalties and other relief until after the conclusion of the anticipated appeal from the primary judge’s findings on liability, as reflected in the declarations.
By their notice of appeal, the College and Site challenge the primary judge’s findings that:
(a)the College had engaged in a system of conduct, or a pattern of behaviour, in respect of consumers who were enrolled in online courses in the impugned enrolment period that was, in all the circumstances, unconscionable in contravention of s 21 of the ACL (grounds 1 to 5);
(b)Mr Wills, and through him Site, were knowingly concerned in the College’s systemic unconscionable conduct (ground 6);
(c)in respect of Consumers A, B, D and E, the relevant course advisors had engaged in the contravening conduct “on behalf of” the College for the purposes of s 139B(2) of the CCA, rendering the College liable for that conduct (ground 7); and
(d)the College engaged in conduct that was unconscionable in all the circumstances in relation to Consumers B to E in circumstances where, upon learning of the conduct to which Consumers B to E were subjected, the College withdrew Consumers B to E from the courses they had enrolled in and remitted all VFH fees or debt (ground 8).
On the appeal, the College and Site do not challenge the primary judge’s findings of primary fact. The grounds of appeal advanced by the College and Site largely concern questions of law and the application of the relevant statutory provisions to the facts as found. In short, the College and Site submitted that the facts as found do not constitute unconscionable conduct within s 21 of the ACL.
By his amended notice of appeal, Mr Wills challenges the primary judge’s findings that:
(a)the College had engaged in a system of conduct, or a pattern of behaviour, in respect of consumers who were enrolled in online courses in the impugned enrolment period that was, in all the circumstances, unconscionable in contravention of s 21 of the ACL (ground 1); and
(b)Mr Wills was knowingly concerned in the College’s systemic unconscionable conduct (grounds 2 to 10).
With respect to the appeal against the finding of unconscionable conduct, Mr Wills largely relied on the submissions advanced by the College. With respect to the appeal against the finding that Mr Wills was knowingly concerned in the College’s systemic unconscionable conduct, Mr Wills challenged the primary judge’s findings that Mr Wills engaged in conduct that involved or “implicated” him in the contravening conduct, and also challenged the primary judge’s findings with respect to Mr Wills’s knowledge of the contravening conduct, its purpose and its likely effects. It should be noted that Mr Wills chose not to give evidence at the trial (without explanation). The primary judge’s findings with respect to Mr Wills’s knowledge were based on inferences drawn from other evidence, with the primary judge also drawing the inference that Mr Wills’s evidence would not have assisted his case (PJ [142]-[143]).
At the hearing of the appeal, the ACCC sought leave to rely on amended notices of contention in both appeals. Leave was not opposed and we would grant that leave. The contentions advanced by the ACCC related to a limited number of factual findings which the ACCC contended were erroneous.
The principles concerning appellate review in the Federal Court are well-established. An appeal to this Court is not an appeal in the strict sense but is rather an appeal by way of rehearing: Western Australia v Ward (2002) 213 CLR 1 at [71] (Gleeson CJ, Gaudron, Gummow and Hayne JJ). In Fox v Percy (2003) 214 CLR 118 (Fox v Percy), the majority (Gleeson CJ, Gummow and Kirby JJ) affirmed the following principles (at [23] and [25], citations omitted):
23 On the one hand, the appellate court is obliged to “give the judgment which in its opinion ought to have been given in the first instance”. On the other, it must, of necessity, observe the “natural limitations” that exist in the case of any appellate court proceeding wholly or substantially on the record. These limitations include the disadvantage that the appellate court has when compared with the trial judge in respect of the evaluation of witnesses’ credibility and of the “feeling” of a case which an appellate court, reading the transcript, cannot always fully share. Furthermore, the appellate court does not typically get taken to, or read, all of the evidence taken at the trial. Commonly, the trial judge therefore has advantages that derive from the obligation at trial to receive and consider the entirety of the evidence and the opportunity, normally over a longer interval, to reflect upon that evidence and to draw conclusions from it, viewed as a whole.
…
25 Within the constraints marked out by the nature of the appellate process, the appellate court is obliged to conduct a real review of the trial and, in cases where the trial was conducted before a judge sitting alone, of that judge's reasons. Appellate courts are not excused from the task of “weighing conflicting evidence and drawing [their] own inferences and conclusions, though [they] should always bear in mind that [they have] neither seen nor heard the witnesses, and should make due allowance in this respect”. In Warren v Coombes, the majority of this Court reiterated the rule that:
[I]n general an appellate court is in as good a position as the trial judge to decide on the proper inference to be drawn from facts which are undisputed or which, having been disputed, are established by the findings of the trial judge. In deciding what is the proper inference to be drawn, the appellate court will give respect and weight to the conclusion of the trial judge but, once having reached its own conclusion, will not shrink from giving effect to it.
The principles applicable to appellate review in the context of evaluative judgments (such as a finding of statutory unconscionable conduct) have been discussed in a number of cases. In Aldi Foods Pty Ltd v Moroccanoil Israel Ltd (2018) 261 FCR 301 (Aldi Foods), the Full Court affirmed the principles as stated in Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd (2001) 117 FCR 424 (Branir). On such appeals, the Court must first make up its own mind on the facts, observing the “natural limitations” that exist in the case of any appellate court proceeding wholly or substantially on the record, as explained in Fox v Percy. Having determined the facts, the Court must undertake itself the required evaluative assessment. However, error is not demonstrated merely because the appellate court might incline to a different evaluative assessment than the primary judge where the competing views are finely balanced and equally open (Branir at [28] per Allsop J). As Perram J explained in Aldi Foods (at [49]):
When an appellate court comes to review such conclusions it must be guided not by whether it disagrees with the finding (which would be decisive were a question of law involved) but by whether it detects error in the finding. On the one hand, error may appear syllogistically where it is apparent that the conclusion which has been reached has involved some false step; for example, where some relevant matter has been overlooked or some extraneous consideration taken into account which ought not to have been. But error, on the other hand, may also appear without any such explicitly erroneous reasoning. The result may be such as simply to bespeak error. Allsop J said in such cases an error may be manifest where the appellate court has a sufficiently clear difference of opinion: Branir at [29].
For the reasons that follow, we would dismiss both appeals save in the following three respects:
(a)First, paragraph 1 of the declarations made by the primary judge on 4 August 2021 was the subject of challenge on the appeal. As explained below, it suffers from significant ambiguity which should be corrected. We consider that paragraph 1 should be set aside and the question of whether a declaratory order should be made and the form of that order should be remitted to the primary judge for consideration. A necessary consequence of setting aside paragraph 1 is that paragraphs 2 and 3 must also be set aside and the question of whether a declaratory order should be made in respect of Mr Wills and Site and the form of that order should also be remitted to the primary judge for consideration. However, the setting aside of paragraph 1 (and the consequential setting aside of paragraphs 2 and 3) does not involve any change to the primary judge’s overall findings and conclusions and does not mark any success on the part of the appellants in respect of the systemic unconscionable conduct case.
(b)Second, we would allow ground 8 of the appeal by the College and Site and find that the College did not engage in unconscionable conduct with respect to Consumers B to E (which requires that paragraphs 8, 11, 14 and 17 of the declarations made on 4 August 2021 be set aside).
(c)Third, we would allow ground 10 of the appeal by Mr Wills in part. We would replace the primary judge’s implicit finding that Mr Wills was knowingly concerned in the College’s unconscionable conduct from the date of implementation of the enrolment process changes, to a finding that Mr Wills was knowingly concerned in the College’s unconscionable conduct from the date he became acting CEO of the College on 20 November 2015.
Otherwise, having conducted a close review of the evidence and the reasons of the primary judge, we find no error in the primary judge’s reasoning and conclusions. In our view, the College’s conduct should be condemned as unconscionable. The College knew of the risk and prevalence of misconduct by recruitment agents and the enrolment at the College’s online campus of unwitting or unsuitable students. Despite that knowledge, at the behest of agents and in the pursuit of increased enrolments (and the resulting VFH revenue), the College altered its enrolment processes in a manner that weakened its existing safeguards against the occurrence of agent misconduct and against the enrolment of unwitting or unsuitable students. It was entirely foreseeable that the College’s conduct would result in large numbers of students being enrolled in the online campus in circumstances where the student did not do so willingly and with full knowledge of the obligation being incurred (the VFH debt) or where the student was unsuitable for enrolment because they lacked sufficient language, literacy or numeracy skills or technology skills or access. What was entirely foreseeable came to pass, to the enrichment of the College and the harm to thousands of persons who should never have been enrolled at the College’s online campus. In respect of Consumers A to E, the College is required to be held responsible for the misleading conduct of its agents.
Mr Blake Wills held a position of senior authority over the activities and decisions of the College. He was involved in all of the key decisions that resulted in the College’s unconscionable conduct and he was knowingly involved by the time he assumed the position of acting CEO on 20 November 2015. His attempts to avoid personal responsibility for the decisions that he was intimately involved in should be rejected. Under s 139B of the CCA, the conduct of Mr Wills is taken to be the conduct of Site.
In these reasons, we will depart from one aspect of the terminology adopted by the primary judge. In the primary judgment, his Honour generally referred to persons enrolling in courses provided by the College as “consumers”. In the context of the prohibition of unconscionable conduct in s 21 of the ACL, the word “consumer” is not a term of art. Indeed, the word does not appear in the statutory provision and, in the allied provision s 22(1), the word “customer” is used rather than “consumer” to refer to persons who are supplied goods and services. The present proceeding concerns the supply of VET courses to members of the public. In these reasons, we will generally refer to persons who enrolled at the College to undertake a VET course as students. They are “customers” within the meaning of s 22(1).
B. RELEVANT FINDINGS OF THE PRIMARY JUDGE
Introduction
As recognised by the primary judge (PJ [70]), assessing statutory unconscionability, like unconscionability in equity, “calls for a precise examination of the particular facts, a scrutiny of the exact relations established between the parties”, citing Jenyns v Public Curator (Qld) (1953) 90 CLR 113 at 118-119. The need for a precise examination of the facts is mandated by the statutory proscription against conduct that is unconscionable “in all the circumstances”.
The primary judge undertook a detailed examination of the relevant facts and circumstances, and made extensive findings of fact. Before considering the grounds of appeal, it is helpful to summarise the key factual findings made by the primary judge, which place the impugned conduct in context. Those findings concern: the business operated by the College, the education services offered by it through the online campus and the methods by which the College “recruited” students to enrol; the regulation of the VFH scheme by the Commonwealth government, the known problems under the VFH scheme with respect to the “recruitment” of students and the guidance given by the Commonwealth government to RTO’s enrolling students under the VFH scheme in order to protect them from misleading and unfair practices; the specific decisions of the College with respect to enrolment practices which were in effect during the impugned enrolment period; and the consequences of the College’s decisions.
The following summary is drawn from the findings of fact made by the primary judge. The findings set out below were not challenged in the notices of appeal. Aspects of the primary judge’s findings that are challenged in the notices of appeal will be addressed in connection with the relevant grounds of appeal and the ACCC’s contentions.
In the course of submissions, the Court was taken to some of the underlying evidence to gain a better understanding of the basis of the findings that were made by the primary judge. In the summary that follows, reference is made to certain underlying testimony or documents for that purpose. In the course of submissions, the appellants also criticised certain factual findings, suggesting that the finding did not fully reflect the evidence on which it was based. The criticisms were made in circumstances where the relevant finding was not the subject of challenge as a ground of appeal. Submissions of that kind are procedurally unfair as the respondent is not given due notice of the asserted factual error and has limited opportunity in the hearing of an appeal to respond. We have given such submissions little weight in the consideration of the appeal.
The VFH scheme
The backdrop to the alleged unconscionable conduct on the part of the College is the VFH scheme which was administered by the Commonwealth Department of Education and Training (Department). The key aspects of that scheme were summarised by the primary judge at PJ [9]-[26]. These reasons assume familiarity with that summary, but the following aspects of the scheme that are important to the disposition of the appeal are noted.
First, the scheme provided for the Commonwealth to pay, in full, tuition fees for any approved course, on the basis that the amounts paid would be treated as a loan to the student, such loan to be repayable through the taxation system once a student earned above a specified income threshold. In the applicable period, that income threshold was approximately $54,000. The scheme was designed to be a pathway into further higher education.
Second, amendments were made to the scheme in 2012 with the aim of broadening the demographic of students who qualified for assistance through the scheme. This was for the express purpose of addressing low participation rates from identified demographic groups including Indigenous Australians, people from non-English speaking backgrounds, with disability, from regional and remote areas, from low socio-economic backgrounds, and people not currently engaged in employment.
Third, under the scheme, a student’s entitlement to VFH assistance was conditional on (amongst other things):
(a)being enrolled in a VET unit of study and remaining enrolled at the end of the relevant census date; and
(b)completing a request for Commonwealth assistance form on or before the census date.
VET providers were required to determine a “census date” for each unit of study in accordance with the VET Guidelines made by the Minister. At the relevant time, the VET Guidelines provided that the census date must not occur less than 20% of the way between the VET unit of study commencement date and the completion date.
Fourth, the scheme provided for the Commonwealth to lend to the student the amount of the VFH assistance and pay the amount lent to the education provider in discharge of the student’s liability to pay their VET tuition fee for the unit of study. If the Commonwealth made such a payment, the amount of the student’s VFH debt was 120% of the loan; i.e., there was a 20% “loan fee”. The VFH debt was incurred immediately after the census date for the unit.
Fifth, a VET provider was required to repay any VET tuition fees paid by a student in respect of a VET unit of study if the student withdrew on or before the census date. Thus, a student could withdraw from a VET unit of study on or before the census date without incurring any financial liability to the VET provider or to the Commonwealth.
Sixth, a VET provider was required to give students seeking Commonwealth assistance such notices as were required by the VET Guidelines, specifically a Commonwealth Assistance Notice (or CAN). A CAN was required to include, amongst other things, the census date(s) of the VET unit(s) of study, the VET tuition fee amount(s) of the units(s) of study and the amount(s) of the VFH loan fee. The CAN was required to be given within 28 days of the census date indicated in the notice. The primary judge found (at PJ [21]) that, typically, the College would send a student a Confirmation of Enrolment (COE) letter at the same time that it sent the CAN, which was after the first census date, to confirm that the student was enrolled with the College and had incurred the first part of their VFH debt.
The business operated by the College
Ownership and governance
The College is an RTO that offered VET courses to students. It was founded in 1998 and, until mid-2014, it was owned and operated by the Cook family. It had four on-site campuses and also provided distance learning through its “distance” or “online” campus. The College obtained approval to offer courses through the VFH scheme on 30 March 2012 (PJ [145]).
The shares in the College were acquired from the Cook family by Site in mid-2014. Thereafter, the College operated under the names Captain Cook College and Site Institute. As noted earlier, Mr Cook was the CEO of the College and continued in that role following the acquisition of the College by Site (PJ [120]).
Vernon Wills was the CEO and Managing Director of Site (PJ [117]). Blake Wills was the COO of Site and became involved in the governance of the College through his role on the Advisory Board (referred to below) (PJ [118] and [131]). Blake Wills assumed the position of acting CEO of the College between November 2015 and January 2016 when Mr Cook was on leave. References in these reasons to Mr Wills are to Blake Wills unless otherwise indicated. Craig Dawson was Site’s Chief Financial Officer and he also became involved in the governance of the College through his role on the Advisory Board (PJ [119] and [131]). Messrs Wills and Dawson conducted the due diligence investigation of the College prior to its acquisition by Site (PJ [148] and [547]). The executive group of Site included Vernon Wills, Craig Dawson, Blake Wills and Ian Cook (PJ [121]). None gave evidence in the proceeding.
A Site Group strategy document, apparently authored by Mr Wills in January 2015, set out descriptions of the roles of each of the executive officers (PJ [545], with reference to the strategy document). The document depicted lines of reporting, with Mr Cook (as CEO of the College) reporting directly to Mr Wills (as COO of Site) and described Mr Wills’s COO role as “to establish business unit objectives (plan), allocate resources (implement) & hold individuals accountable (evaluate)”.
As at mid-2015, the College represented a substantial proportion of Site’s consolidated revenue and profits. A budget for the 2016 financial year prepared at that time showed that the College’s budgeted revenue and EBITDA (that is, earnings before interest, taxes, depreciation and amortization) were 39% and 61% respectively for the consolidated group (PJ [225]). The primary judge found that the (financial) performance of the College was very significant to the performance of Site overall, and that the performance of the College would have been of key concern to Mr Wills (PJ [228]).
A Captain Cook College and Site Institute Advisory Board was established in May 2014 with the stated intention that it would meet monthly. A charter was adopted to govern its operation (PJ [146]). Mr Wills was a member of the Advisory Board and the primary judge’s findings with respect to Mr Wills’s knowing involvement in the impugned conduct are based, in part, on his role on the Advisory Board. The primary judge summarised the terms of the Advisory Board charter at PJ [146] and [543]-[544]. It is convenient to quote the relevant aspects of the charter which demonstrates the degree of control exercised by the Advisory Board over the operations of the College:
(a)Under the heading “Mission”, the charter states:
It is the mission of the advisory board to:
• Establish Vision & Brand
• Motivate Key Employees to ensure the vision is shared
• Plan Strategic Initiatives
• Create a reporting framework
• Mitigate Regulatory and Business Risk
• Be abreast of market developments and information
• Identify & Analyse Growth Opportunities
• Agree on opportunities to be pursued
• Provide monthly reports to Site Group International Executive
(b)Under the heading “Key Areas of Reporting & Responsibility”, the charter referred to:
(i)financial performance, including the College’s profit and loss and projected performance against budget;
(ii)operational performance, including “Total Students by Course and Location”, VET FEE-HELP Reporting and “Student Grievances”;
(iii)compliance, including VFH compliance and “Relevant Metrics (Completion Rates/Quality Indicators/Feedback)”;
(iv)sales and marketing, including “External Student Recruitment Performance” and “Sales Funnel – (Client Contracts & Student Enrolments)”.
(c)Under the heading “Role of the Board”, the charter stated:
The Board Charter sets out the principles for the operation of the Advisory Board ("Board") of Captain Cook College & Site Institute ("Business") and to describe the functions of the Board and those functions delegated to management.
The Board has primary responsibility to shareholders of Site Group International Ltd and for the welfare of the Business by guiding and monitoring its activities. The Board is required to ensure that the Business is properly managed and constantly improved to protect and enhance shareholder value within a framework of effective accountability.
(d)Under the heading “Responsibilities of the Board”, the charter stated:
2.1 The Board is responsible for the affairs of the Company, including:
• Setting strategic objectives
• Evaluating, approving and monitoring the strategic plans of the company
• Evaluating, approving and monitoring the annual budgets and ensuring appropriate resources are available, including resources required to meet environmental and work place health and safety management plans
…
2.3 Risk management
• Reviewing with management how the strategic environment is changing, what key business risks and opportunities are appearing, how they are being managed and what, if any, modifications in strategic direction should be adopted
• Considering the extent and types of risk that are acceptable for the Business to bear
• Monitoring the Business's operations in relation to, and compliance with, relevant regulatory and contractual requirements
2.4 Reporting
• Review & Approve all relevant management reports
(e)Under the heading “Statement of the Division of Authority between the Chairman and Chief Executive Officer”, the charter stated:
4.4 Role and responsibilities of the Chief Executive Officer
The Chief Executive Officer has primary responsibility to the Board for the affairs of the Business.
The Board appoints the Chief Executive Officer to manage the business on behalf of it and shareholders and must delegate sufficient powers to allow him to manage effectively. The Chief Executive Officer must carry out the objectives of the Board in accordance with its instructions, and report to the Board all matters the Chief Executive Officer considers to be material to the affairs of the Company.
From July 2015, the primary judgment makes reference to “Management Meetings” that then occurred monthly. The minutes of the Management Meetings disclose that they were typically chaired and “facilitated” by Mr Wills, and were attended by the senior management of the College together with Mr Wills and Mr Dawson.
The senior management of the College during the relevant period, who are referred to below, included: Mr Cook (CEO); Khaled Akbery (the College’s Partnership Manager from 1 July 2014, having responsibility for the College’s relationship with partner organisations such as the student recruitment agents); Mohammed Akbery (the College’s Operations Manager between March 2014 and June 2017); Elizabeth (Liby) Edwards (the College’s Corporate Services Manager between late 2013 and March 2017) (PJ [120], [123], [125], [126] and [128]). Mohammed Akbery and Ms Edwards have evidence in the proceeding. In these reasons Khaled Akbery and Mohammed Akbery are referred to by their full names to distinguish them.
Student recruitment by marketing and sales agents (also called course advisors)
An important aspect of the surrounding circumstances was the manner in which the College “recruited” students for its VET courses, including its online campus. The word “recruit” is a word used by the College and Site in contractual agreements and internal business documents. At all relevant times, the College contracted third parties, referred to as course advisors or CAs, to undertake marketing of its courses (including online courses) and to recruit persons for enrolment into its courses as students (PJ [31]).
Prior to Site acquiring the College, the College’s primary method of recruiting students was through National Training and Development Pty Ltd (NTD) pursuant to a contract dated 23 May 2012 and titled Marketing and Sales Agreement. Approximately 80% of the College’s students were recruited by NTD (PJ [148]). Under the agreement, the College appointed NTD as its sole agent to market and promote the College’s courses to prospective students and solicit applications for the courses. In consideration for recruiting students, the College agreed to pay NTD a commission equal to 20% of total course fees where a student is enrolled and passes the census date (which is explained further below), with 62.5% of the commission payable at the first census date and the remainder at the second census date.
In July 2014 (following the acquisition of the College by Site), the College reviewed its relationship with NTD. The review noted that after September 2013 the number of NTD referrals started to decline and struggled to recover. External factors affecting all VFH marketing were said to include the changes in Centrelink reporting, which had moved online. This had reduced NTD’s effectiveness because it had relied on street sales outside Centrelink offices. NTD was also being affected by market saturation with an increased number of training providers available for students (PJ [149]). The outcomes of the review were that the College continued to build an internal sales capability (a business division called Learn2Earn or L2E) and negotiated the removal of exclusivity conditions in the agreement with NTD. The College entered a new agreement with NTD and also entered into agreements with a number of other external marketing agencies. In each case, remuneration for recruitment services was by commission upon the recruited student remaining enrolled past a census date. As found by the primary judge, the commission structures were such as to strongly incentivise the agents to recruit students and ensure that they passed at least their first census date and incurred VFH debts (PJ [149]-[151]).
Courses offered by the College’s online campus
There was evidence before the primary judge concerning the courses offered by the College’s online campus, course fees and relevant census dates. In that regard, the primary judge noted that, during the relevant period, the College offered the following courses: Diploma of Business, Diploma of Project Management, Diploma of Information Technology and Diploma of Human Resources Management (PJ [32]). The primary judge did not provide details of the course fees and relevant census dates in his reasons. On the appeal, the Court asked whether those matters were the subject of evidence and whether the parties could provide the Court with appropriate references or a summary. Following the hearing of the appeal, the parties provided the Court with an agreed document, based on the evidence at trial, which stated as follows (noting that the “Relevant Period” as referred to in the document is the period that we have defined as the impugned enrolment period, and further noting that Mohammed Akbery was a witness in the proceeding):
1. This summary has been prepared by the parties in response to the Full Court's request for a note on courses offered by Capital Cook College (the College) in the Relevant Period, the duration of those courses and census dates.
2. During the Relevant Period, the College offered the following online courses:
(a) Diploma of Business;
(b) Diploma of Project Management;
(c) Diploma of Information Technology; and
(d) Diploma of Human Resources Management.
3. Each course offered by the College had between two and four units of study and a corresponding number of census dates (i.e. one census date per unit of study). A unit of study was a time period over which study was to occur. A census date was the deadline for the student to withdraw from their course without incurring a debt.
4. The duration of each course for a person studying full time was as follows:
(a) for the Diplomas of Business, Project Management and Human Resources Management, there were two units of study as follows:
(i) the first unit of study consisted of a 10 week period; and
(ii) the second unit of study consisted of an 18 week period,
with a total course length of 28 weeks;
(b) for the Diploma of Information Technology, there were four units of study as follows:
(i) the first, third and fourth units of study were 14 weeks; and
(ii) the second unit of study was 10 weeks,
with a total course length of 52 weeks.
5. A student would pass their census date and incur a debt for a unit of study two weeks after the commencement of that unit of study.
6. Mr Akbery gives the following example of how this operated in practice:
[36] … the course fee was divided over the number of census dates, so that for a course that cost $13,000 and had two census dates, a $6,500 debt was incurred on the first census date and a further $6,500 debt was incurred on the second census date …
[37] … Continuing from the example at the end of paragraph 36 above:
(a) students who remained enrolled after two weeks were charged $6,500 for the first ten weeks of access to the course; and
(b) if the student remained enrolled after 12 weeks, were charged a further $6,500 for a further ten to 18 weeks of access to the course.
With respect to course fees, the Court was taken to a copy of the pre-enrolment quiz (PEQ) used by the College which records the following fees payable for each course offered at the online campus:
Course
Unit of study 1
Unit of study 2
Unit of study 3
Unit of study 4
Total
Dip of Business
$6,500
$6,500
N/A
N/A
$13,000
Dip of Project Mgmt
$7,500
$7,500
N/A
N/A
$15,000
Dip of IT
$5,000
$5,000
$5,000
$5,000
$20,000
Dip of Human Resources Mgmt
$6,500
$6,500
N/A
N/A
$13,000
The fees may not have been at those rates throughout the relevant period. However, the above figures demonstrate that the obligation that would be assumed by a student by enrolling in one of the above courses and incurring a VFH debt is substantial.
The College’s enrolment and withdrawal processes prior to the impugned enrolment period
The impugned conduct concerns changes that were made by the College to its enrolment and withdrawal processes which took effect at the commencement of the impugned enrolment period. It is relevant in that context to understand the College’s enrolment and withdrawal processes immediately prior to the changes.
Prior to the impugned enrolment period, the College’s enrolment processes involved the following steps:
(a)First, the recruiting agent would give the potential student access to an “enrolment kit” which was made up of enrolment information, a PEQ and an enrolment application form. Access was either in the form of hard copy documents or online through the agent’s portal (PJ [155]).
(b)Second, the prospective student completed the enrolment form and the PEQ, either in hard copy or online through the portal. The documents could be completed by the prospective student or by the agent on their instruction (PJ [156]).
(c)Third, an admissions officer at the College reviewed the documents that had been submitted to assess whether there were any factors that may affect the student’s ability to study such as any disabilities, employment status, access to a computer or language, literacy or numeracy issues (PJ [157]).
(d)Fourth, the admissions officer at the College made an outbound quality assurance (QA) call which would generally occur 48 hours after the submission of the documents (such that the recruiting agent would not be present at the time). The content and purpose of the call was to ensure that the student understood the commitment they were making under the VFH scheme and to identify any reasons that suggested the student may not have the ability to undertake the course (PJ [158]).
(e)Fifth, following the acceptance of the prospective student for enrolment, a student support officer would contact the student to provide them with orientation, access to the online learning portal and send them a training plan and offer letter. The student was also assigned to a trainer who monitored their progress and flagged if any language, literacy or numeracy issues were identified prior to census. If such issues were flagged, the enrolment offer would be withdrawn with a pathway program recommended or other appropriate actions taken. The effect was that the student would be withdrawn from enrolment prior to first census and thus prior to incurring a VFH debt (PJ [162]).
(f)Once the student had progressed through census they would be sent a COE and CAN (PJ [163]).
Students who enrolled in a College course were able to withdraw from the course prior to the first census date and thereby avoid incurring fees (and a VFH debt). Students could withdraw by submitting a withdrawal form or by verbally communicating an intention to withdraw to the College (PJ [164]). The College also had a process of withdrawing students who were not contactable after enrolment, which was referred to as a “campus driven withdrawal”. The process included the following elements (PJ [164]):
(a)The student’s lack of (online) attendance in the first week of study would be brought to the attention of the campus administration. The student support officer or campus administrator would attempt to contact the student at least three times in the first week and at the end of the week send an email to the agent who had recruited the student to seek assistance from the agent to re-engage the student.
(b)In the second week, the student support officer or campus administrator would continue to attempt to contact the student at least three times and thereafter place a note on the weekly census reports saying “HOLD may withdraw”.
(c)In the third week, the student support officer or campus administrator or recruiting agent would continue to attempt to contact the student at least three times, failing which they would complete a campus driven withdrawal email template to withdraw the student.
(d)If the student was re-engaged in week 2 or week 3, they would be moved into the next available intake date which would have the effect of enabling them to re-engage in the course with a later first census date.
With effect from June 2015, the College’s policy was revised to make clear that campus driven withdrawals must be done before the first census date (PJ [166]-[167]). After the first census date, a student could only withdraw from the course and have their fees reversed if they satisfied “special circumstance” criteria (PJ [168]-[169]).
As at May 2015, about 50% of the students enrolled at the College’s online campus withdrew before the first census date, and a significant reason was campus driven withdrawals (ie, the student was uncontactable) (PJ [170] and [221], read with the transcript of Mohammed Akbery’s evidence). This is a very significant factual finding to which it will be necessary to return.
Known risks and problems under the VFH scheme
The findings of fact made by the primary judge demonstrate that, at the relevant time, there were risks and problems under the VFH scheme that were known publicly through Senate enquiries and media reports and also known privately by the College and Site. By way of summary, the primary judge observed (at PJ [22]) that:
The scheme gave rise to an obvious risk, being the risk of unsuitable or otherwise insufficiently interested or committed consumers being too easily or casually, or unconscionably or deceptively, signed up as students, progressing through their census dates thereby incurring debts to the Commonwealth and the VET provider being paid its tuition fees, and the students not otherwise engaging with the course in any meaningful way or receiving any meaningful benefit.
The risks inherent in the VFH scheme were also described in similar terms by Bromwich J in Australian Competition and Consumer Commission v Australian Institute of Professional Education Pty Ltd (in liq) (No 3) [2019] FCA 1982 in a passage cited by the primary judge at PJ [22].
Another way of expressing the same point is to observe that the scheme increased moral hazard. Moral hazard is a situation where a commercial actor has an incentive to increase its exposure to risk because it does not bear the full costs of that risk. In the absence of the VFH scheme, an RTO would have a strong incentive to ensure that a student enrolling in one of its courses will pay the relevant course fee because the RTO would bear the full cost of failing to secure payment of its fees. To ensure its course fees are paid, the RTO would either require payment up front or seek to ensure that a contractual promise to pay the course fee is enforceable. In turn, the RTO would have a strong incentive to ensure that a student who enrols does so voluntarily, with a proper understanding of the obligation to pay the course fees and without being misled.
The VFH scheme reduced the RTO’s exposure to risk with respect to the payment of course fees. Provided certain enrolment paperwork was completed by or on behalf of a student, the RTO received payment of its course fees from the Commonwealth. The enrolled student would incur a debt to the Commonwealth which was repayable through the taxation system (once the student earned above the applicable income threshold). Students might be enrolled in circumstances where they had no or limited understanding of the obligations they were incurring because there was no immediate financial impact for them, and in circumstances where they were not capable of undertaking the course for which they were enrolled.
The inherent risks that arose from the VFH scheme were compounded by two other features of the business conducted by the College.
First, to a large extent the College outsourced the recruitment of students to marketing and sales agents, which called themselves “course advisors”. The agents were remunerated on a commission basis, being paid 20% of the applicable course fee upon the student passing the first and second census dates (at which time the College would receive its course fee from the Commonwealth under the VFH scheme). The College was vulnerable to an obvious risk that its agents might pursue commission revenue in an unethical manner: agents might seek to recruit persons who were unsuitable to undertake the online courses of study offered by the College (for example, having insufficient language, literacy or numeracy skills or no access to a computer) or might engage in misleading conduct about the financial obligations that would be incurred by the student.
The second feature of the College’s business that compounded the risk of students being enrolled in circumstances where they had no or limited understanding of the obligations they were incurring, or in circumstances where they were not capable of undertaking the course, is that the College provided its courses through an online campus. This meant that the College had no face to face contact with students and only dealt with students online or via telephone. Dealing with students in that manner increased the difficulty of guarding against the risk of students being misled or unsuitable students being enrolled. That problem was known to the College and its senior managers. In an email sent by Ms Edwards to Mr Cook on 18 August 2015, immediately prior to the implementation of changes to the College’s enrolment process for the online campus, Ms Edwards referred to the fact that the campus driven withdrawal policy “has always been our policy and is most critical for distance because the campus can’t build a relationship with the student to determine they are suitable for the course” (PJ [245]).
In its pleading, the ACCC referred to the above circumstances as the “CA misconduct risk” and the “unsuitable enrolment risk”. The use of such labels or defined terms is often a convenient shorthand method of expression. In using such labels or defined terms, however, it is important to keep in mind the matters being described. The expression “CA misconduct risk” is used in the pleading to describe the risk of agents acting unethically when recruiting persons to enrol, including by making false or misleading statements, offering inducements (such as free laptops), pressuring persons to enrol and completing documents and answering questions on behalf of the person. The expression “unsuitable enrolment risk” is used in the pleading to describe the risk of persons being recruited for enrolment who do not in fact want to study, or who are unsuitable for the course of study by reason of lacking sufficient language, literacy or numeracy skills or technology skills or access that would enable them to undertake a course of study online. There is obvious overlap in the two categories of risk. Essentially, they both describe the risk, arising from unethical or careless conduct of recruitment agents, of persons being enrolled in the online campus in circumstances where the person does not do so willingly and with full knowledge of the obligation being incurred (the VFH debt) or where the person is unsuitable for enrolment because they lack sufficient language, literacy or numeracy skills, technology skills or access. They are the risks and problems summarised by the primary judge at PJ [22]. In these reasons, we will generally refer to those two categories of students as unwitting or unsuitable students by way of shorthand. The description “unsuitable students” is not intended to include students who willingly (and with knowledge of the obligations being incurred) enrolled in a course, engaged with the course material on the learning management system but were unsuccessful in their studies. It is only intended to include students who were unsuitable for enrolment because they lacked sufficient language, literacy or numeracy skills or technology skills or access to undertake the course of studies.
The findings of fact made by the primary judge demonstrate that, at the relevant time, these risks and problems were known publicly through Senate inquiries and media reports and also known privately by the College and Site. If nothing else, the online campus had very large numbers of disengaged students – as at May 2015, about 50% of the students enrolled at the College’s online campus withdrew or were withdrawn (under the campus driven withdrawal policy when the student was uncontactable). That figure highlights the extent of the problem arising from agent recruitment of students to the online campus under the VFH scheme. But there were a number of other events and reports that highlighted the risks and problems. The following is a summary of the key findings of the primary judge in that regard.
Sero campus audit
In November 2014, the College audited its “Sero campus”. The Sero campus was conducted by Sero Learning Pty Ltd which provided the College’s online courses as a “co-provider” pursuant to an agreement with the College. Amongst other things, the audit indicated that 260 out of Sero’s 307 enrolled students (ie, about 85%) had passed their first census date (and therefore incurred a VFH debt) but had never accessed their online learning management system. In contrast, only 52 of the College’s 245 students (ie, about 21%) had passed their first census date but never accessed their online learning management system (PJ [182]). The Sero audit report rated the risk as “high” and stated that the “campus withdrawal process must be acted on” (PJ [183]). The minutes of a meeting held on 15 December 2014 attended by, amongst others, Mr Cook and Mr Wills, record that Mr Cook provided the meeting with the background to Sero learning and the audit and specifically the problem that Sero was “not doing campus driven withdrawal and just processing through census regardless” and that, of the 340 students, 65 are engaged, 35 want to engage, 36 want to withdraw and “200 yet to be in contact with” (PJ [184], with reference to the minute). The same issue was discussed at Advisory Board meetings held on 17 December 2014 and 18 February 2015, of which Mr Wills was the meeting facilitator and in attendance (PJ [185]-[187]).
The College’s complaints registers
The College maintained a Complaints Register which was intended to record every complaint that was made to the College by a student and an Agent Issues and Complaints Register. The Complaints Register included complaints, prior to the impugned enrolment period, concerning misleading conduct by recruitment agents including representations as to the provision of laptops and that a potential student would pay nothing because she was on Centrelink and not earning $53,000 per annum, as well as an agent assisting a potential student to complete the PEQ. The Agent Issues and Complaints Register included complaints, prior to the impugned enrolment period, concerning the potential completion by agents of PEQs, an agent being “pushy” throughout the enrolment process, an agent claiming that the online courses were all funded by the NSW Government including provision of a free laptop and iPad upon completion of the course, an agent recruiting customers outside a Centrelink office and promising an increase in the student’s Centrelink payments and a free laptop and failing to disclose the cost of the course or that a VFH debt would be incurred. Details of the latter complaint were circulated by email in February 2015 to Mr Cook and Mr Wills, amongst others (PJ [189]-[191]).
Media reports
The primary judge’s findings refer to a number of internal emails and reports of the College which reference media reporting on problems in the VFH scheme associated with unethical behaviour by recruitment agents, including an article from an ABC News 24 television program which drew attention to poor practices in RTOs with regard to the VFH scheme and a report about a VET provider referred to as “CAG” on the 7.30 Report, a regular ABC television program (PJ [196]-[197]). In a report by Mr Cook that he sent on 20 August 2015 to, among others, Mr Wills, Mr Cook recounted that in late 2014 and early 2015 there had been “intense media scrutiny of the sector” and that “unscrupulous behaviour” by co-providers and sales agents had required a focus on “consumer protection, quality control and identity verification” (PJ [200]). Internal email correspondence in September 2015 referred to “growing media intensity around a VET provider referred to as Phoenix because of a police investigation into some of its agents” and Mr Cook stated that there was “significant commercial risk” from “unethical agents” (PJ [202]).
Senate Education and Employment References Committee inquiry
In June 2015, the Senate Education and Employment References Committee published its second interim report with respect to the “Operation, regulation and funding of private vocational education and training (VET) providers in Australia”. The report documented aggressive marketing techniques used by VET providers and their brokers, including promises of free equipment such as laptops and tablets upon signing up for courses, and a failure to disclose costs. There were suggestions that some providers had indicated that courses were free, and had not disclosed the VFH debt that would be incurred (PJ [198]). It is relevant to reproduce the following matters recorded in the second interim report (summarised at PJ [209]):
While the committee is yet to fully examine all submissions, a number of issues have been raised repeatedly, including:
(a) aggressive marketing techniques that include promises of free tuition or free equipment;
(b) insufficient information provided to allow students to make a fully informed decision prior to signing up for a course;
(c) language and/or literacy barriers that lead to students either signing up for courses without properly understanding the terms and conditions, and/or courses not being appropriate for their language/literacy level;
(d) inadequate screening processes for students; and
(e) difficulties in dealing with providers by students who wish to withdraw from courses, or express other concerns about courses or fees.
The Senate inquiry had been a topic of discussion at Advisory Board meetings prior to circulation of the second interim report (PJ [199]). On 16 June 2015, Mr Wills circulated a copy of the second interim report to the Advisory Board in advance of its meeting the following day (PJ [198]).
Regulatory changes to the VFH scheme to address known risks and problems
On 19 March 2015, Mr Cook received a pro-forma circular email from the Assistant Minister for Education and Training with the subject line “VET FEE-HELP Update”. The purpose of the circular was to advise VFH providers of changes that the government was making to the VFH scheme over the course of 2015. It was stated that the “changes have proven necessary as a result of unethical behaviour by a small group of approved registered training providers, along with agents and brokers who have been engaged to recruit potential students under the scheme”. It was also said that the “new arrangements will be critical in protecting students and taxpayers as well as the reputation of the entire national vocational education and training sector” (PJ [193]).
In July 2015, the Department published further documents concerning the reforms, including in the Addendum to the booklet titled VET Administrative Information for Providers. The Addendum recorded that: with effect from 1 April 2015, VET providers were not permitted to offer inducements to persons to enrol in a course of study (such as free laptops); and with effect from 1 July 2015, VET providers and their agents must not market a VET course of study as free or without obligation to repay or in any other way which would mislead a person into believing that VFH assistance is not a loan to be repaid. Mr Cook sent the July version of the Addendum to Mr Wills saying that it “has some significant implications for our business, our marketing partners, and the business of our competitors” (PJ [201]).
In August 2015, the Department published a further update to the Addendum to the booklet titled VET Administrative Information for Providers. Relevantly, the update included frequently asked questions about student withdrawals. It included the following question and answer (summarised at PJ [214], emphasis added):
Q Can we cancel students’ enrolments in VET courses or VET units of study if we cannot contact the student?
A Yes. There are no barriers in HESA to VET providers cancelling enrolments. VET providers should advise students of the circumstances that will lead to cancellations. It would be expected that if students could not be contacted and/or they had not participated in the unit before the census date, a provider would cancel the enrolment to avoid the student incurring the debt.
The update was emailed to Mr Cook on 3 August 2015 and circulated within the College and Site (PJ [214]-[215]).
The College’s internal reporting
The College’s internal reports frequently commented on the importance of ensuring that enrolled students understood the VFH obligations and the course was suitable for the student having regard to factors such as language, literacy and numeracy skills. In that regard, the internal reporting referred to the importance of the College’s enrolment processes in testing those matters without the involvement of the recruiting agents (see generally PJ [192], [195], [205]-[208] and [210]-[213]).
Primary judge’s conclusions
The primary judge found that the evidence established that all the key personnel at the College, and Mr Wills at Site, were well aware that there was an ongoing risk of agent misconduct and that that misconduct could significantly harm the interests of substantial numbers of persons. The harm included that persons might be enrolled as students even though they were unsuitable or not genuinely interested in doing the course for which they were enrolled, or had in some way been tricked, deceived or confused into enrolling (PJ [204]). The primary judge also found that the evidence demonstrated that, prior to the impugned enrolment period, the College and Mr Wills were well aware of the risk of unwitting or unsuitable students being enrolled in their courses, and the need to take steps to mitigate that risk (PJ [220]).
Changes to the College’s enrolment and withdrawal processes
The College began to report declining enrolments from April 2015 (PJ [224]). The College was losing the support of external recruitment agents, with the College receiving feedback from agents that its enrolment processes were convoluted and difficult (PJ [230], [234], [236]). From August 2015, the College developed and implemented a new enrolment and withdrawal process.
Early on 18 August 2015, an agenda and papers were circulated for a Management Meeting for the College to be held at 8.00 am the next day (PJ [236]). Despite the meeting being called a Management Meeting, the papers were sent to, and the agenda indicated that the attendees were expected to be, Mr Wills and Mr Dawson. The papers included Mr Cook’s CEO report which stated:
Please note we have been receiving feedback from our agents regarding our enrolment process. Khaled and I met with marketing to finalise a new enrolment process, see attached flowchart. Rollout of the new enrolment process will commence 4th September.
The flowchart attached with the report showed two significant changes to the pre-existing enrolment process (PJ [239]). First, the QA call would be initiated by the recruitment agent to the College’s admissions office rather than being initiated by the admissions office to the student (48 hours after submission of the student’s documents) as had previously been the position. Secondly, once the QA call had been completed, the student would pass through census unless the student requested to withdraw. That is to say, campus driven withdrawals would be abolished.
In the late afternoon on 18 August 2015, Mr Cook sent the College’s monthly report for July to Mr Wills (PJ [241]). In respect of revenue, the report stated:
Revenue continues below expectations due to lack of volume from agent channels. L2E maintained volume during July, but external agents are not performing to expectations. Agents have provided feedback regarding our current enrolment process, and that feedback is being fed into a revised enrolment process scheduled to go live on 4th September 2015 in conjunction with the new enrolment page.
The primary judge found that, by 18 August 2015, the key officers of the College understood that declining enrolments, which was negatively affecting revenue and EBITDA, and feedback from agents that the College’s enrolment process was too cumbersome, were key drivers for the revised enrolment process that was being developed. The primary judge summarised the changes as enabling prospective students to be enrolled more quickly and easily at the time that they were recruited by agents, and to ensure that they passed through census in greater numbers by abolishing campus driven withdrawals (PJ [242]).
It is apparent from the management statements recorded above that the College’s revenue had declined because recruitment agents were dissatisfied with the College’s enrolment process and wanted the enrolment process to change. The obvious inference, drawn by the primary judge at PJ [242], is that the College’s enrolment process was adversely affecting the agents’ commission revenue – the agents would not receive any commission unless the student passed the first census date and would not receive their whole commission unless the student passed the second census date. The management documents recorded that the proposed changes to the enrolment process arose from the feedback given by agents about the process, and had also been developed in consultation with the College’s marketing department. The changes to the enrolment process were thus driven by sales and marketing objectives. The changes were to remove two impediments to a prospective student being enrolled and passing first census – those impediments were the College initiating a QA call with the student in the absence of the agent and campus driven withdrawals if a student was uncontactable before the first census date. Removing those impediments would increase the likelihood of prospective students being enrolled and passing first census, and would therefore increase the likelihood of agents receiving their commission. In turn, this would increase the attractiveness of the College to recruitment agents, leading to an increase in prospective students being recruited for the College by agents. Conversely, by removing two important safeguards against the known risks and problems in the VFH scheme, the changes were also likely to increase the number of students being enrolled in courses for which they were not suited and students being enrolled without a full understanding of the financial obligation they were incurring.
The implications of the changes resulted in immediate pushback from one of the College’s senior managers, Elizabeth Edwards. As noted earlier, Ms Edwards was Corporate Services Manager for the College whose job description included “improving processes and systems to ensure a smooth and easy flow for the student from pre-enrolment through to graduation”. Ms Edwards reported to the College’s Operations Manager, Mohammed Akbery. The primary judge recorded an email exchange between Ms Edwards and Mr Cook on 18 August 2015 in relation to the proposed enrolment and withdrawal changes (PJ [244]-[248]). The email exchange also refers to a telephone conversation that day which appears to have been heated. In her email, Ms Edwards reiterated the importance of having a rigorous QA process “to support the onboarding of students who are ABLE and WILLING to do the course” (emphasis in original) and retaining campus driven withdrawals for students unable to be contacted by the College. In contrast, Mr Cook’s email emphasised the College’s need to have “a compliant enrolment process that is competitive with others in my industry so I can regain market share”.
The minutes of the Management Meeting held at 8.00 am on 19 August 2015 were in evidence. The minutes showed that Mr Wills chaired the meeting and was its “facilitator” and that the meeting was attended by, amongst others, Mr Cook, Mohammed Akbery, Ms Edwards (by phone) and Mr Dawson (PJ [249]). The minutes recorded that (PJ [249]-[252]):
(a)Mr Cook’s CEO’s report was tabled and “confirmed as read”.
(b)In respect of discussion on Mr Cook’s report, it was recorded that Mr Cook “advised we are getting feedback from agents that our enrolment process is too complex and slowing down conversions significantly. Currently in the process to streamline the process with a rollout date of 4th September”.
(c)In respect of Mr Wills’s COO’s report, it was recorded that Mr Wills discussed that the College’s competitors had “larger range of courses available, strong brand and marketing, strong sales culture, better admissions process, better delivering platforms”. The following “action” was also recorded: “Project Plan in place by end of the week.”
The primary judge concluded that, as the enrolment process flowchart was not referred to in the minutes, it was probably not discussed at the meeting (PJ [253]).
The primary judge also concluded that no decision was made at the Management Meeting to adopt the details of the enrolment process changes (PJ [259]). However, his Honour found:
In broad terms, the proposed changes were reported to the meeting and some discussion took place as reflected in the minutes. In particular, it was reported, and presumably accepted, that the process changes were expected to play an important role in alleviating the straitened financial position of the college. There is also no reason to suppose that attendees at the meeting did not expect that the proposed enrolment changes would be implemented as that was the implication of Mr Cook’s report. I find that there was a common understanding, or expectation, of the attendees at the meeting that subject to further details still to be worked on the enrolment changes would be implemented, but not that they consciously decided or resolved to implement those changes.
By its notice of contention, the ACCC challenges that finding and contends that the evidence supports a finding that a decision was made at the Management Meeting to adopt the enrolment process changes.
A subsequent meeting occurred on 19 August 2015. In evidence was an electronic meeting invitation for a meeting scheduled for 10.00 am with the subject “Enrolment/Admissions process” and the following message: “Discussion to finalise revised enrolment/admissions process”. The addressees of the invitation included Mr Cook, Mohammed Akbery and Ms Edwards, but not Mr Wills (PJ [261]). The primary judge concluded that the evidence did not support a finding that Mr Wills attended the meeting (PJ [274]). At the meeting, Khaled Akbery (the College’s Partnership Manager, responsible for the relationship with partner organisations such as the recruitment agents) gave a presentation to the meeting in the form of PowerPoint slides (PJ [262]). The slides included the following statements (PJ [263]-[268], with reference to the document):
(a)At the College, more than 90% of students were sourced via agents.
(b)The College’s course selection was being addressed by “Project Nitro” and the College’s commission rate was competitive, but the College’s enrolment process was “behind competitors”. Because of this, third party agencies were directing volume towards other RTOs.
(c)The College required a “streamlined enrolment process that is competitive enough to regain market share”.
(d)With respect to the timing of the QA call, the presentation stated that the delay between the receipt of documentation and the QA call was problematic because: “Generally at the time of application the student has free time” whereas a call after receipt of the application “creates difficulty having to find further free time”.
(e)With respect to the content of the QA call, the presentation stated that the QA call involved “Further quizzing of pre-enrolment information rather than provision of pre‑enrolment information (The quiz is the LLN indicator not the QA call itself)”, that “Due to the delay between application and the QA call students often forget aspects of the pre-enrolment information”, that “Because of this these students are flagged and are therefore required to complete the LLN prior to census”, and “When students have computer/access issues it makes it difficult to complete the LLN prior to census”. The initialism “LLN” was commonly used by the College as an abbreviation for “language, literacy and numeracy”. In context, the reference to completing the “LLN” prior to census is a reference to completing some form of assessment of “LLN” ability. The primary judge observed that, although the QA call was being used as a quality assurance mechanism, as its name implies, this was regarded as a problem because if the call revealed that for one reason or another the student was not (yet) appropriate for enrolment that might result in them not passing through census.
(f)On a slide titled “Barriers”, the presentation stated:
• At the moment there are a number of unnecessary barriers to pass through Census
• These barriers cause significant attrition between application to CAN
• This causes dissatisfaction amongst Sales Agents
• As mentioned in slide 5, Agents have a choice
(g)The presentation identified required changes including that: the pre-enrolment information and quiz are merged; an ability for the agent to call the admissions office as soon as the application is complete; an ability for the agent to “close out the sale before walking out the door”, and that there be “a policy update to remove the number of barriers to CAN”. The primary judge inferred that the reference to “a policy update to remove the number of barriers to CAN” was a reference to the abolition of the campus driven withdrawal process.
The ACCC relied upon the statement of Gordon J in Stubbings at [77] to support the proposition that “the fact that a step was taken to diminish protection against risk can be relevant to a court’s evaluation of conduct as unconscionable.” However, the relevant passage in Stubbings stated:
What can be significant is that the conduct targeted a group to take advantage of their likely, although not certain, vulnerability or, as in this case, that the lenders recognised a likely, although not certain, vulnerability and yet designed a system of lending against a guarantor’s property, suspecting that they had no income or capacity to service the loan, and deliberately avoiding information as to the guarantor’s financial or personal circumstances in order to “immunise” themselves from knowledge of the vulnerability.
(emphasis added)
The circumstances identified by Gordon J in Stubbings differ from the circumstances in this case. This was not a case in which there was conduct which targeted a group to take advantage of their likely, although not certain, vulnerability, and senior counsel for the ACCC accepted this, as referred to earlier in these reasons.
It follows from the reasoning in Tonto, Xiao and Burniston, with which I respectfully agree, that a finding that there is a risk of undue influence, pressure or unfair tactics, or that there has been conduct which reduces protection against such a risk, does not support a conclusion of statutory unconscionability where few of the legislative indicia of unconscionable conduct in s 22 have been met or considered.
A similar approach to that taken in [513] J is taken by the primary judge elsewhere in the reasons, which infects the ultimate conclusion with error, namely when the primary judge found that the College knew of the risks of CA misconduct: [494] J; that the outbound call process and campus driven withdrawal process provided important safeguards against that risk: [496] J; that the inbound call process increased the CA misconduct risk: [497] J; which resulted in the conclusion that, amongst other things, the “dramatic increase in revenue and turnaround in profits” was “substantially” built on VFH revenue in respect of students who “may have been” the victims of CA misconduct: [499] J.
Yet, no matter how many safeguards were put in place by the College, there was always going to be some risk of CA misconduct. That there were students who “may have been” victims of CA misconduct because of the changes in its systems as made by the College and which increased the risk of that misconduct is not sufficient to attract significant moral censure, without more.
Further, the failure to properly consider the factor listed in s 22(1)(d), as part of his analysis as to whether s 21(1) had been contravened, was an error by the primary judge.
Section 22(1)(e) – the amount for which, and the circumstances under which, the customer could have acquired identical or equivalent services from a different supplier
Section 22(1)(e) refers to the amount for which, and the circumstances under which, the customer could have acquired identical or equivalent goods or services from a person other than the supplier.
What other suppliers of the same services as the College were doing by way of their enrolment and withdrawal processes form part of the totality of the circumstances which ought to have been considered by the primary judge as part of a determination of the normative standard of conduct against which the conduct was to be assessed: see Medibank at [248]–[249]; see also Westpac (Omnibus) at [29].
In Kobelt at [123], Keane J stated (by reference to similar provisions in the ASIC Act) that:
Significantly in this regard, s 12CC(1)(e) expressly contemplates that, for the purpose of determining whether a supplier of financial services has contravened s 12CB, the court may have regard to “the amount for which, and the circumstances under which, the service recipient could have acquired identical or equivalent financial services from a person other than the supplier”. Attention is thereby directed to the prospective financial disadvantage to the customer. Accordingly, although the absence of proof that actual disadvantage has been suffered by an individual consumer or individual consumers may not be a fatal deficit in a case alleging a contravention of s 12CB, the circumstance that it is not apparent that a consumer could have acquired identical or equivalent financial services from a person other than the supplier on terms more advantageous to the recipient points to the conclusion that the supplier has not contravened s 12CB.
(emphasis added)
In this case, it was not established by the evidence adduced by the ACCC that any consumer could have acquired services from a different supplier in circumstances where the enrolment processes undertaken by that alternative supplier would have included the outbound call process and the campus driven withdrawal process, or other processes which contained equivalent safeguards to the ones that the primary judge found that the College should have maintained.
The absence of such evidence was a serious deficit in the ACCC’s case and tells against a finding of unconscionable conduct within the meaning of s 21 of the ACL.
Indeed, the evidence which was adduced below demonstrated that the change from the outbound call process to the inbound call process was done to align the College’s processes with that of its competitors, so as to make the College more attractive to the CAs. This provides some evidence that consumers were likely to be able to acquire services from suppliers other than the College in circumstances where that supplier did not undertake the outbound call process. This is a relevant consideration which tells against a finding of unconscionable conduct.
It is no answer for the ACCC to say, which the primary judge appeared to accept at [517] J, that a comparison of the systems used at other colleges was unhelpful because “it may be that other such colleges also had unconscionable systems”. That is because, on this reasoning, s 22(1)(e) would have no work to do because it would always be possible that other suppliers might have unconscionable systems. Such an approach has the further flaw of being hypothetical: it was not proved by the ACCC that the industry as a whole behaved unconscionably.
In Paciocco (HC), Keane J (with whom French CJ and Kiefel J (as her Honour then was) agreed) stated at [290] that:
The appellants seek to stigmatise as unconscionable or unfair or unjust an activity in the marketplace in which nothing materially distinguishes the situation and conduct of either Mr Paciocco or ANZ from any of the other participants in that activity. It may be said that ANZ and its competitors have dealt “unconscionably” or “unfairly” or “unjustly” with all of their customers in that, in a careless or partisan use of language, all banks may be said to do so as a matter of course. But to argue that conduct by one participant in a market, which is an unremarkable example of conduct engaged in by all participants in that market, is unconscionable, or unjust or unfair, in breach of the statutory norms, without any suggestion that the market itself is unlawfully skewed, is something of a stretch. ….
(emphasis added)
That the ACCC failed to adduce evidence about the amount for which, and the circumstances under which, the consumers could have acquired identical or equivalent services from other suppliers, was a significant deficiency in its case. The failure to consider this as part of the analysis was an error by the primary judge.
Section 22(1)(g) – the requirements of any applicable industry code
It was not part of the ACCC’s case that the College had failed to comply with the VET Guidelines and the Higher Education Support Act 2003 (Cth) (HES Act), which did not require the College to include the outbound call process or the campus driven withdrawal process in its enrolment and withdrawal systems.
Section 22(1)(g) of the ACL refers to the requirements of any applicable industry code as being a relevant matter. While the VET Guidelines and the HES Act cannot be regarded as an industry code, the requirements are, by analogy, a relevant consideration when determining the statutory norm of conduct required by s 21.
As observed in Medibank at [250], the boundaries and content of the relevant statutory regime applying to the industry is also important context within which to assess statutory unconscionability: see also Westpac (Omnibus) at [30].
Although the primary judge found that the Department of Education never required Registered Training Organisations to have a campus driven withdrawal process (at [171] J), no weight was then placed by the primary judge on this fact, and it was not described as a key finding when reaching the conclusion of unconscionable conduct.
Further, the VFH scheme did not require that the College have the outbound call process, but no weight was placed on this fact by the primary judge, and it was not otherwise addressed in the reasons.
In the circumstances of this case, it was of particular significance that the applicable regulatory regime did not require the College to have a campus driven withdrawal process or an outbound call process. This fact provided a strong argument against a conclusion of unconscionable conduct insofar as it related to these processes. The failure by the primary judge to take this into account was an error.
To hold the College to a different standard than the regulatory scheme in respect of the management of known risks stretches the concept of statutory unconscionability too far, and creates commercial uncertainty. Such an approach is not supported by the text of the legislation or the authorities.
As submitted by the College and Site, “That approach is close to converting the [concept of statutory unconscionability] into retrospective court made regulation, an outcome which is particularly problematic where there is no evidence that any other [supplier], operating in the same market, had equivalent policies in place”.
Section 22(1)(i) – the extent to which the supplier unreasonably failed to make disclosure
Section 22(1)(i) refers to the extent to which the supplier unreasonably failed to disclose to the customer any intended conduct of the supplier that might affect the interests of the customer and any risks to the customer arising from the supplier’s intended conduct.
There was no allegation made by the ACCC or finding by the primary judge that the College had failed to disclose any intended conduct that might affect the interests of the consumers. In particular, it was not alleged that the College had failed to disclose to the consumers that, if the consumer did not take steps to withdraw themselves from the course before the census date, then they would be liable for the loan debt because the College would not itself take any steps to withdraw them.
Instead, the disclosure to the consumers made plain that the onus was on the consumer to withdraw from the course before the census date if they wished to avoid incurring a debt. The fact that there was disclosure to the consumers, with no finding that the information could not be understood by them, is a further factor against a finding of unconscionable conduct. The primary judge failed to consider this, which was an error.
Section 22(1)(l) – the extent to which the supplier and the customer acted in good faith
Consideration of what it means to act in good faith was addressed in relation to equivalent provisions in the ASIC Act in Paciocco (FC). In that case, Allsop CJ stated at [288]–[290] that:
The usual content of the obligation of good faith … is an obligation to act honestly and with a fidelity to the bargain; an obligation not to act dishonestly and not to act to undermine the bargain entered or the substance of the contractual benefit bargained for; and an obligation to act reasonably and with fair dealing having regard to the interests of the parties (which will, inevitably, at times conflict) and to the provisions, aims and purposes of the contract, objectively ascertained.
None of these obligations requires the interests of a contracting party to be subordinated to those of the other. It is good faith or fair dealing between the parties by reference to the bargain and its terms that is called for, be they both commercial parties or business dealing with consumers. As Posner J said in Market Street Associates Ltd Partnership v Frey 941 F (2d) 588 (1991) the contractual notion of good faith varies in what is required for its satisfaction by reference to the nature of the contract. But the notion is rooted in the bargain and requires behaviour to support it, not undermine it, and not to take advantage of oversight, slips and the like in it. To do so is akin to theft, and if permitted by the law led to over-elaborate contracts, and defensive and mistrustful attitudes among contracting parties. …
The standard of fair dealing or reasonableness that is to be expected in any given case must recognise the nature of the contract or relationship, the different interests of the parties and the lack of necessity for parties to subordinate their own interests to those of the counterparty. …
The absence of dishonesty or moral taint is material in determining whether conduct involves such a departure from community standards as to warrant the characterisation that it is unconscionable: see Kobelt per Kiefel CJ and Bell J at [58]–[59].
In this case, the fact that the College complied (and sought to comply) with the requirements of the VET Guidelines and the HES Act (and the circumstances surrounding the manner of its compliance) supported a finding that the College acted in good faith when it made the changes to its systems.
This is especially so having regard to the following unchallenged findings of the primary judge:
(1)dishonesty had not been established or alleged: see [512] J;
(2)the risks which formed the premise of the key findings by the primary judge were known to and were sought to be addressed by the Commonwealth government through the changes which it had made to the VFH scheme following a Senate inquiry: see, eg, [172], [193], [201] J;
(3)Mr Cook, the director of the College, was advised of certain changes being made to the scheme in March 2015 which the Commonwealth regarded as “critical in protecting students and taxpayers as well as the reputation of the entire national vocational education and training sector”. The primary judge found that “Mr Cook might also reasonably have concluded that the changes that the government was introducing to the scheme would alleviate [the risk that unscrupulous agents and brokers might engage in unethical behaviour], at least to a significant extent”: [194] J;
(4)the College kept itself informed of the manner in which the Commonwealth was considering and addressing the risks, and took active steps to comply with the VFH scheme including any changes as they came through: see, eg, [166]–[168], [176], [198]–[199], [201], [202], [214]–[215], [230] and [233] J.
In addition, the College’s own internal documents and communications demonstrated that it had no intention of taking advantage of any misconduct by the CAs, that it wanted to implement (and believed that it had implemented) a system which complied with the requirements of the VFH scheme and that it was “taking what we believe are the necessary precautions”: [193]–[194], [196], [197], [200], [212]–[213], [244], [245], [332], [333], [335] and [346(1)] J.
The precautions taken by the College included the following:
(1)including contractual obligations in its contracts that required CAs to carry out sales honestly and fairly, to provide accurate information to consumers and to comply with all applicable legislation and regulatory obligations: [525(1)] J;
(2)an agent induction and on-boarding process aimed at training agents to act appropriately: [525(2)], [527] J;
(3)speaking directly to consumers during the inbound call to confirm the consumer’s contact details and provide information, including withdrawal information, and ascertaining whether consumers completed the PEQ: [292] and [296] J. And although the primary judge was critical of the inbound call process, it was also found by the primary judge at [515] J that a system of enrolment that has an inbound call in materially the same form and circumstances as that adopted by the College in the relevant period would not on its own be unconscionable;
(4)terminating relationships with marketing partners or individual agents when misconduct had been established: [426] J;
(5)implementing a campus driven withdrawal in respect of students enrolled by a CA who had engaged in misconduct: [427], [428] J.
Although the primary judge was critical of the College’s motives and purposes in making the changes to its enrolment processes, a determination as to whether the College acted in good faith in making these changes and in light of the evidence and findings referred to above did not form part of the primary judge’s analysis which culminated in the critical finding of unconscionable conduct, which was an error.
Further, the primary judge erred at [526] J when finding that there was no evidence from the corporate appellants to support a finding that any of their officers believed that the components of the overall system operated effectively to protect consumers. The same error is made at [528] J. Not only was there evidence below, but the primary judge referred to it at [333] J.
Conclusion
To focus on one or more particular factors within s 22 of the ACL without addressing other relevant factors (or the absence of evidence about such factors) can result in a failure to consider the totality of the circumstances when deciding whether there has been unconscionable conduct within the meaning of s 21(1) of the ACL. That is what occurred in this case, which was the wrong approach.
GROUND 7
Ground 7 of the Notice of Appeal asserts an error by the primary judge in finding that the conduct of the CAs who enrolled Consumers A, B, D and E was conduct engaged in “on behalf of” the College in circumstances where:
(1)the identified conduct was in breach of each CA’s actual authority (as found by the primary judge);
(2)the identified conduct was found to be within the apparent authority of each CA in circumstances where the information provided to Consumers A, B, D and E during their inbound call; and the conduct of each CA in advising Consumers A, B, D and E to subvert the College’s enrolment process by not listening to questions, or not answering questions honestly and just saying yes or what the CA said to say, was in each case a sufficient circumstance to alert Consumers A, B, D and E that the CA was not acting with the authority of the College with respect to information provided by the CA which was inconsistent with the information provided by the College.
This was in circumstances where, for the College to be liable for the conduct of the CAs in relation to these consumers, the ACCC relied upon s 139B(2) of the Competition and Consumer Act which relevantly provided that any conduct engaged in on behalf of a body corporate by an agent within the scope of their actual or apparent authority is taken, for the purposes of the ACL, to have been engaged in also by the body corporate.
The question raised by ground 7 is not whether the CAs had apparent authority, but whether the CA in each instance acted within the scope of their apparent authority within the meaning of s 139B(2) in relation to the circumstances surrounding the enrolment of each of Consumers A, B, D and E.
Contrary to the submissions of the ACCC, the notion that the wrongful conduct of an agent (including conduct in breach of provisions of the ACL) can be attributable to the principal was not in dispute. However, the fact that the wrongful conduct of an agent can be attributed to the principal does not mean that any such wrongful conduct, including a breach of provisions of the ACL, will be attributed to the principal by reason of s 139B(2).
Whether any attribution is made under s 139B(2) is dependent on the relevant circumstances of the case.
In Australian Competition and Consumer Commission v Cornerstone Investment Aust Pty Ltd (in liq) (No 4) [2018] FCA 1408, Gleeson J stated at [302]–[304]:
In the law of agency, the liability of the principal for an agent’s defaults can be explained by the principal’s ability to stipulate an agent’s authority: Dal Pont, Law of Agency [22.15].
The expressions “actual authority” and “apparent authority” are not defined in the Act or ACL. It is therefore useful to have regard to the general law in determining their meaning.
At common law, the principal is civilly liable for an agent’s torts committed by the agent while acting within the scope of his or her actual or apparent (also called “ostensible”) authority: Ex parte Colonial Petroleum Oil Pty Ltd (1944) 44 SR (NSW) 306 at 308. As to the latter, Jordan CJ repeated the following statement from his decision in Bonette v Woolworths Ltd (1937) 37 SR (NSW) 142 at 151:
If an agent is authorised to do a particular class of acts, the principle [sic] is liable if the agent does an act of the class authorised notwithstanding that it is done mistakenly, negligently or wrongfully; and a principle [sic] cannot escape liability by expressly prohibiting his agent from making mistakes or being careless in carrying out his duties …
Concluding:
A principal is not, of course, responsible, either civilly or criminally, for anything done by a person who is in fact his agent, if it is done by that person on his own behalf and not in the course of the performance of his duties as agent or within the scope of his general authority as agent.
This passage was cited with approval by Bromwich J in Australian Competition and Consumer Commission v Australian Institute of Professional Education Pty Ltd (in liq) (No 3) [2019] FCA 1982 (AIPE) at [31]. When dealing with the facts of that case, Bromwich J observed at [32]:
I am satisfied, as was Gleeson J in Empower that, generally speaking, the activities of the agents and recruiters were agents of AIPE within the meaning of that term in s 139B, extending to the conduct of the recruiters in selling and promoting education services by AIPE. This conduct plainly occurred in the course of the agency relationship between the agents and AIPE, including the conduct of the recruiters. The agents and recruiters were generally acting as representatives of AIPE and were doing so for the benefit of AIPE, building its business by the recruitment of consumers to become enrolled as students. Except for extreme or aberrant behaviour, such as making overtly false statements, which would likely fall outside their authority, I accept that the recruiters were ordinarily acting within the scope of their actual or apparent authority on behalf of AIPE.
(emphasis added)
The proposition that extreme or aberrant behaviour would likely fall outside an agent’s authority is consistent with the following statement in Dal Pont, Law of Agency (4th ed, LexisNexis Butterworths, 2020) at [20.45]:
The nature of the transaction (to be) effected by an agent is relevant to an inquiry into whether the third party reasonably relied on a principal’s holding out of an agent as authorised to effect that transaction. Where, in facilitating the transaction, an agent acts within the usual authority of a person in that position, a third party is normally not expected to inquire as to the details of the agent’s authority unless something in the nature of the transaction raises suspicion. A transaction prima facie contrary to the principal’s interests, that otherwise lacks an evident connection to the principal’s interests or that without explanation involves the payment of money due to the principal to someone else, is one that a reasonable third party cannot assume to be authorised, and so usually falls outside ostensible authority. The same may be said of an illegal transaction.
Beyond the foregoing, the significance of the transaction to the principal, or its novelty, impacts on the reasonableness of a third party’s reliance. References to ‘extraordinary’ or ‘novel’ transactions in this context reflect, it has been said, ‘an excessive distance between the transaction and what reasonably appears to be the agent’s authority to bind the principal unilaterally’. The relevant inquiry may be ‘whether the transaction is so fundamental or unusual for the type of principal that a reasonable third party would question the agent’s broad discretion’, even if the transaction appears to serve the principal’s interests.
(citations omitted)
As to whether the CA had apparent authority in relation to their conduct concerning Consumer A, the primary judge made the following findings at [619] J:
… While I accept that the CA did not solicit consumer A’s enrolment in the college’s prescribed way, and in that sense it may be said to be in breach of or beyond the CA’s actual express authority, the conduct was nonetheless for the purpose of signing up consumer A to a college course for the college’s benefit (being conduct in an authorised class) and therefore within the CAs apparent authority. Importantly also, by styling the CA as a “Course Advisor” for the college and sending the CA into the field as such, the college held out to the world that the CA would have the usual or expected authority of a course advisor. That gave the CA the apparent authority to make representations on behalf of the college with regard to recruitment. It is these representations about which the ACCC complains. The conduct is therefore taken to be on behalf of the college …
The reasons at [619] J regarding apparent authority were referred to and relied upon in respect of Consumer B (at [657] J), Consumer D (at [724] J) and Consumer E (at [754] J).
The primary judge was correct to find that the College held out to the world that the CA would have the usual or expected authority of a CA. However, the “usual or expected authority” of a CA does not include assisting a consumer to make false statements to the College. That is because it is or ought to be obvious that such conduct is contrary to the interests of the College and, for this reason, it would or ought to cause a consumer to suspect that the CA was not acting within the scope of their authority. Such conduct is the kind of “extreme or aberrant behaviour” referred to by Bromwich J in AIPE.
For example, the conduct of the CA described in [602] J of nodding and shaking his head during the inbound call and gesturing to an answer sheet indicated, or ought to have indicated to Consumer A, that the CA was subverting the College’s processes by encouraging Consumer A to tell lies to the College. These facts ought to have caused Consumer A to be concerned as to whether the CA was acting within the scope of their authority.
Similarly, the respective CA’s conduct when dealing with each of Consumers B, D and E was outside the “usual or expected authority” of a CA because it encouraged these consumers to lie to the College in order to become enrolled as students. In particular:
(1)the CA prompted Consumer B’s answers during the inbound call, including by pointing to the answer in an exercise book which contained a list of questions and answers. Consumer B said he did not feel like he could get out of it but was nonetheless suspicious and questioned it in his head at the time: [641] J;
(2)the CA said to Consumer D before the inbound call that “when you are asked any questions you just need to say ‘yes, yes, yes’”: [708] J. Consumer D said she was “uncomfortable” saying “yes” while speaking to the college admissions officer; she had not actually filled out the loan application form but said “yes” because the CA was prompting her to do so; and said she filled out a PEQ but had not actually done so: [711] J;
(3)the CA told Consumer E before the inbound call to “just say ‘yes’ to everything” and prompted Consumer E during the call: [743] J. Although Consumer E did not do any paper work, he told the college admissions officer that he had completed the PEQ on his own as well as the loan equipment forms, which answers were prompted by the CA: [742] and [746] J.
For these reasons, the conduct engaged in by the CAs in relation to each of Consumers A, B, D and E was not within the scope of their apparent authority, and, as it was also not within their actual authority, it was not conduct which was engaged in by the College within the meaning of s 139B(2) of the Competition and Consumer Act.
It follows that, in my view, the declarations made by the Court on 4 August 2021 in relation to Consumers A, B, D and E to the effect that each CA was acting within the scope of their authority within s 139B(2)(a) of the Competition and Consumer Act should be set aside, namely 4(b), 5(b), 7(b), 8(b), 13(b), 14(b), 16(b) and 17(b). The declarations in 4(c), 5(c), 7(c), 8(c), 13(c), 14(c), 16(c) and 17(c) should also be set aside as they are premised on the declarations in 4(b), 5(b), 7(b), 8(b), 13(b), 14(b), 16(b) and 17(b) having been made.
GROUND 8
Ground 8 of the Notice of Appeal filed by the College and Site relevantly complains that the primary judge erred in finding that the College engaged in conduct that was unconscionable “in all the circumstances” in relation to Consumers B to E in circumstances where, upon learning of the conduct to which Consumers B to E had been subjected, the College withdrew those consumers from the courses they had enrolled in and remitted all VFH fees or debt.
Reliance was placed on s 22(1)(j)(iv) of the ACL, which refers to any conduct that the supplier or the customer engaged in, in connection with their commercial relationship, after they entered the contract.
The College and Site submit that the primary judge correctly held in relation to the system case that “the unconscionability of the conduct could have been cured, or at least ameliorated, by not claiming or retaining the revenue derived from the conduct and thereby reverse the consumers’ debts” (at [507] J).
They also submit that, in relation to Consumers B to E, once the College became aware of the agent’s conduct, it cancelled their enrolments and reversed their VFH debts (B:[654] J, C:[690] J, D:[719]–[720] J, E:[751] J) and that post-contract conduct is a relevant consideration by reason of s 22(1)(j)(iv) of the ACL. They submit that, in those circumstances, the primary judge should have held that the College did not act unconscionably.
The primary judge relevantly stated at [663] J in relation to Consumer B:
There is also a submission that because consumer B’s enrolment was reversed that this should count against a finding of unconscionable conduct in all the circumstances. I find this submission unpersuasive because the fact that the college cancelled his enrolment and reversed his VFH debt does not do away with conclusion that there was unconscionable conduct, nor does it take back the distress caused to consumer B.
The primary judge took this matter into account in relation to Consumer B but, taking into account other factors, was not persuaded that the College’s conduct had not been unconscionable (leaving aside the issue of whether the College was liable for the conduct of the CA by reason of s 139B(2) of the Competition and Consumer Act).
That one factor tells against a finding of unconscionable conduct is not necessarily determinative and does not mean that a finding of unconscionable conduct should not have been made: Westpac (Omnibus) at [19].
No error has been shown in relation to Consumer B.
However, the same cannot be said for Consumers C, D and E. For each of these consumers, factual findings were made by the primary judge as follows:
(1)in relation to Consumer C – that the College’s communications log records that Consumer C was withdrawn from her course after her support worker called the College on 5 February 2016. On the same day, the VFH debt Consumer C had incurred was reversed and she was sent a letter and a new Commonwealth Assistance Notice or CAN recording the cancellation of her enrolment and the re-credit of the debt: [690] J;
(2)in relation to Consumer D – that Consumer D received a letter, dated 11 July 2016, advising her that “upon review” the College had elected to reverse the CAN issued on 23 December 2015 meaning that Consumer D had not incurred a VFH debt: [720] J;
(3)in relation to Consumer E – that, on 9 December 2015, Consumer E told the College that he wished to withdraw from the course. The College subsequently received information confirming Consumer E’s unsuitability for a diploma-level course. The College then re-credited Consumer E’s VFH debt: [751] J.
However, when consideration was given by the primary judge as to whether the conduct of the College was unconscionable in all of the circumstances, no consideration was given by the primary judge to these facts. I refer in particular to [696]–[697] J (Consumer C), [728]–[729] J (Consumer D) and [757]–[758] J (Consumer E).
For the reasons given above, this post-contractual conduct by the College was required to be considered by dint of s 22(1)(j)(iv) of the ACL. It cannot be assumed, as the ACCC appears to submit, that the primary judge would have applied the same reasoning to these consumers had this matter been considered, especially as the facts relating to the enrolment of these consumers were different to those concerning Consumer B.
In my view and for these reasons, ground 8 should succeed in relation to Consumers C, D and E, and the declarations made by the primary judge on 4 August 2021 in 11(c), 14(c) and 17(c) set aside.
DISPOSITION
In the appeal brought by the College and Site, I would make the following orders:
(1)The appeal is allowed.
(2)Orders 1, 2, 3, 4(b), 4(c), 5(b), 5(c), 7(b), 7(c), 8(b), 8(c), 11(c), 13(b), 13(c), 14(b), 14(c), 16(b), 16(c), 17(b), 17(c) and 19 made by the Court on 4 August 2021 are set aside.
(3)The first respondent pay the costs of the first appellant and second appellant of the appeal.
(4)The matter be remitted for hearing on remedies and costs of the liability hearing.
In the appeal brought by Mr Wills, I would make the following orders:
(1)The appeal is allowed.
(2)Order 2 made by the Court on 4 August 2021 is set aside.
(3)The proceedings against the appellant are dismissed.
(4)The first respondent pay the appellant’s costs of the appeal, and of the proceedings below.
I certify that the preceding one hundred and forty-two (142) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Downes. Associate:
Dated: 6 April 2023
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