ACCC v Lux Pty Ltd

Nature of the proceeding 2 In its application filed on 27 July 2000 the applicant applied under ss 51AB, 60, 80, 80A, 84(2) and 87 of the Trade Practices Act 1974 (Cth) and s 21 of the Federal Court of Australia Act 1976 (Cth) for certain declarations in respect of the respondents. These were in connection with the supply of a vacuum cleaner to a complainant who is a person with an intellectual disability. Additionally, injunctions were sought restraining the marketing and other promotion of any of the first respondent's product in respect of any potential customer who may not have capacity to make an informed decision as to the implications and benefits or otherwise of entering into a contract. Injunctive remedies are also sought in respect of what is alleged to be persistent urging of the complainant as a potential customer to purchase a Lux product or maintaining a prolonged close physical presence to the potential customer, in circumstances where the potential customer may not have the capacity previously referred to. Other remedial orders are sought. 3 The statement of claim asserts that at all material times both the complainant and her husband were both illiterate to the extent they were unable to read or write other than simple words in their respective names and were intellectually disabled such that they were unable to understand contracts. The claim alleges that the second respondent was the agent of the first respondent and, in attending at the complainant's residence, acted in a way said to be inappropriate and to which the injunctive orders are directed. It is claimed that, to bring an end to such actions, the complainant signed a contract with the first respondent as a result of the actions of the second respondent. No payments have been made by the complainant to the first respondent pursuant to the contract so concluded.

Provisions relating to mediation 4 Legislative authority for orders relating to mediation appears in the following terms in s 53A of the Federal Court of Australia Act 1976: "53A Subject to the Rules of Court, the Court may by order refer the proceedings in the Court, or any part of them or any matter arising out of them, to a mediator or an arbitrator for mediation or arbitration, as the case may be, in accordance with the Rules of Court. 53A(1A) Referrals under subsection (1) to a mediator may be made with or without the consent of the parties to the proceedings. However, referrals to an arbitrator may be made only with the consent of the parties." 5 The Federal Court Rules provide in O 10 r 1: "1(1) On a directions hearing the Court shall give such directions with respect to the conduct of the proceeding as it thinks proper." Additionally, FCR O 10 r 1(2)(h) provides: "1(2) Without prejudice to the generality of sub-rule (1) or (1A) the Court may- (h) order that the parties attend before a Registrar for a conference with a view to satisfying the Registrar that all reasonable steps to achieve a negotiated outcome of the proceedings have been taken, or otherwise clarifying the real issues in dispute so that appropriate directions may be made for the disposition of the matter, or otherwise to shorten the time taken in preparation for and at the trial." This is to be read with the provisions of FCR O 72 r 1: "1 If the Court or a Judge orders proceedings, part of proceedings, or any matter arising out of proceedings, to be referred to a mediator or an arbitrator, the mediation or arbitration must proceed in accordance with this Order unless the Court or a Judge orders otherwise." The purpose of mediation is made apparent by FCR O 72 r 7: "7(1) A mediation conference must be conducted: (a) in accordance with any directions given by the Court or a Judge; and (b) as a structured process in which the mediator assists the parties by encouraging and facilitating discussion between the parties so that: (i) they may communicate effectively with each other about the dispute; and (ii) if agreement is reached and if the parties consent, the agreement can be included in a consent order under Order 35, rule 10. 7(2) If part only of proceedings before the Court is the subject of a mediation order, the mediator may, on the conclusion of the mediation, report back to the Court in terms agreed between the parties." It is not disputed that the order for mediation, when made, was within power of the Court. Circumstances in which the mediation order was made 6 No transcript was maintained of the directions hearing at which the order for mediation was made. It is not in dispute that counsel for the applicant handed up a minute of proposed directions which did not include any reference to orders that the parties attend mediation. Fifteen orders were proposed in the minute. The twelfth order read: "12. Conferences: The experts to be called by the parties at trial are to meet and confer before 26 February 2000. The experts are to use their best endeavours to reduce the points at issue between them." The orders as made were fifteen in all (wrongly numbered fourteen) and included the following additional order: "12A. The proceeding be referred to mediation pursuant to O 72 of the Federal Court Rules on the first available date after 26 February 2000." 7 In an affidavit counsel at the directions hearing for the applicant attested that he had strongly opposed the orders that the parties be referred to mediation on the basis that the parties had previously attempted to discuss settlement without success. 8 Counsel for the respondents filed affidavit evidence which recorded that counsel's notes taken at the directions hearing in the following terms: "At the directions hearing I made notes of what transpired. I have consulted my notes and set out hereunder what is said in my notes in relation to the question of mediation: (a) when His Honour asked what was happening with mediation [counsel for the applicant] advised that he had made approaches to the respondents solicitors who were not prepared to talk; (b) the writer advised His Honour that the solicitors for the respondents were not reluctant to talk and had made their own approaches in relation to discussing matters; (c) your [counsel for the applicant] advised that any mediation should only take place after experts had filed their reports on 29 January 2001; (d) His Honour stated that the matter had potential to benefit from the mediation; and (e) Although your [counsel for the applicant] advised that his client wanted the matter to go to trial he did not oppose the referral to mediation." Counsel for the respondents contested evidence that the order for mediation had been strongly opposed. It is not necessary to resolve that factual dispute. 9 From examination of the directions as proposed and the directions as made it is apparent that the direction for mediation was made in order to follow on and tie in with the endeavours by the experts to reduce the points at issue between them. In other words, mediation was ordered because of its apparent potential to further refine the points at issue. 10 At the hearing of the present motion counsel for the respondents advised the Court that no expert meeting as envisaged by direction twelve of 7 December 2000 had taken place. No expert evidence has been filed on behalf of the respondents and the entitlement of the respondent to do so will be in future disputed on behalf of the applicant. 11 It being apparent that the mediation was to benefit from and advance if possible the reduction of points at issue by the experts (being experts in relation to the issues including that of the condition of intellectual disability), the purpose to be served by the order from mediation has not presently come to fruition. In my view that is an important consideration. However, other arguments were made in support of the motion and it is necessary also to turn to them. Reasons why mediation now said to be inappropriate 12 There are three reasons advanced on behalf of the applicant why the order for mediation should be revoked. 13 The first is the type of complaint. It is submitted that where the complaint relates to conduct affecting a vulnerable person, being a person with an intellectual disability, mediation is less likely to be appropriate. In my opinion there is no evidence here that this factor would disfavour the continuance of the order for mediation. In appropriate circumstances mediation may avoid a complainant with an intellectual disability being called as a witness and consequently have the potential to reduce the pressure of court proceedings on that complainant. 14 The second is the nature of the applicant as an entity. It is said that the function and objectives of the Commission pursuant to s 2 of the Trade Practices Act is to ensure compliance with and enforcement of the Act. It is submitted that the applicant cannot fulfil that objective of the Act unless recourse can be had by it to the judicial process to successfully prosecute instances of illegal conduct under the Act where appropriate. It is said that the public interest is best served by allowing the Court to exercise its judicial functions and determine whether the alleged breaches have occurred and where the matter is contested, the respondents having the opportunity to dispute the occurrence of any breach: Truth About Motorways v Macquarie Infrastructure Investment Management Limited (2000) ATPR 41-757 at pars 17, 79 and 141. Here there is evidence that the applicant has received legal advice that the present proceedings have reasonable prospects of success. 15 Thirdly, (and in supplementation of the second point) it is submitted that mediation is singularly inappropriate for matters involving many disputed facts and issues having negligible prospects of a mediated outcome. For example, the Court will be slow to refer a matter to mediation where a party is adamantly opposed to mediation on the basis of a considered view: Kilthistle No 6 Pty Ltd & Others (Receiver and Manager appointed) v Austwide Homes Pty Ltd & Ors (Lehane J, 10 December 1997, unreported). It is said the present proceeding is not suitable for mediation because the respondents have not admitted liability and are not prepared to enter into mediation on the basis they have contravened the Act. Consequently, the mediation has a negligible prospect of success and the order that the proceeding should be referred to mediation will only be an impediment to the timely resolution of this matter and will incur costs unnecessarily.

Evidence of respondents' intentions 16 The affidavit evidence brought in support of the application discloses that on 14 June 2001 the first respondent denied that either they or the second respondent had acted in breach of the Act. Further, that between 14 June 2001 and the present date the parties have engaged in a number of without prejudice discussions regarding settlement and none of these attempts have been successful. The result was that the applicant's solicitors advised the respondents' solicitors they did not see any point in mediation if the respondents wished to discuss whether or not there had been a breach of the Act; if discussions were going to be on any topic other than the types of remedial orders that ought to be made; and if the respondents were not prepared to agree to orders requiring declarations, injunctions, compliance programs and corrective notices. These conditions were not acceptable to the respondents' solicitors who advised that a considerable amount of time and effort had been spent on arranging the mediation and that it was not for the applicant to determine how the mediation was to be conducted or what matters were to be dealt with at it. 17 As I read this evidence, it is not evidence from which it can be inferred that the respondents have refused to approach the mediation on the basis that they would not communicate effectively nor have in mind the possibility of reaching an agreement on the subject matter of the proceeding. The evidence is confined to the attitude of the respondents prior to mediation. 18 Furthermore, it seems to me that the preconditions to the approach to the mediation are those which have been set on behalf of the applicant. It is the applicant who considers that the nature of this matter and its public interest functions require it to take the issue to court. It is clear that if the matter was arising now for the first time the applicant would be opposing an order for mediation because of those considerations. It is the applicant who does not wish to enter the mediation and communicate effectively other than on the precondition that the respondents are prepared to admit liability and breach and do so publicly. Having regard to the public interest functions of the applicant that may arguably not be an inappropriate attitude for the applicant to form. Furthermore, it is a factor of substance to be weighed by the Court if it were at this time considering the making of an order for mediation. It is, likewise, a factor to be weighed by the Court in considering whether to revoke the order for mediation previously made where that factor was not so articulated.

Respondents' submissions 19 The respondents oppose the motion to set aside the order for mediation. It is said it was not until 5 April 2001 that the applicant gave any indication it was not prepared to mediate or alternatively was only prepared to mediate on the conditions stated by it. It is submitted that the onus is on the applicant, as the party seeking to set aside the order, to establish there has been a change of circumstances since the making of the order making it appropriate to vary or set it aside. It is said this onus has not been discharged. I disagree that there has been no relevant change of circumstances. The applicant has since articulated what it expects of the litigation based on its perception of its public interest role in the light of the legal advice it has received on the strength of its case. There is also the non-clarification of issues arising from non-compliance by the respondents with the direction made on that behalf. 20 Principally it is submitted for the respondents that there is no reason why the mediation process should not continue because it could be beneficial and meaningful. It is submitted that it cannot be said that mediation will not achieve the objectives of the applicant until the process has been gone through. 21 It is also submitted for the respondents that the requirement to mediate is not contrary to the objective of the applicant and the Trade Practices Act because a mediation will not necessarily exclude the applicant from fulfilling its obligation under the Act. Additionally, it is said a mediation may serve the purpose of resolving some if not most of the issues between the parties. It is said that even if the mediation process does not result in a resolution of the matter, it may narrow or reduce the areas in dispute. 22 It is further said for the respondents that as the subject matter of the application involves the sale of a vacuum cleaner to a person with an intellectual disability, who is not a party to the proceeding, the interests of justice may be better served by not having to proceed through the trial process. On 6 September 2000 the mother of the complainant swore that her daughter would be extremely distressed at the prospect of having to travel to another state without her assistance and that the complainant and her husband would be confused if required to give evidence by video link rather than in person. It is said for the respondents it is therefore not in the interests of the well being of them to be involved in court proceedings. 23 The submissions for the respondents also refer to the "Directions on the Commonwealth's Obligation to Act as a Model Litigant" issued by the Attorney General of the Commonwealth of Australia. Reference is made to the inclusion there of an objective requiring the Commonwealth and its agencies to act as model litigants and, inter alia, to endeavour to avoid litigation wherever possible and deal with claims promptly and not cause unnecessarily delay in the handling of them. In a note to the "Directions" it is stated that "the obligation does not prevent the Commonwealth and its agencies from acting firmly and properly to protect their interests. It does not therefore preclude all legitimate steps being taken to pursue claims by the Commonwealth and its agencies and testing or defending claims against them." Reference was made (without objection) to an address by the Attorney General to the Government Law Group on Justice and Accountability in September 2000. The Attorney there said that the obligation to avoid litigation as an aspect of the model litigation obligation was "designed to ensure that the Commonwealth considers alternatives to litigation, including settlement and alternative dispute resolution, and that in general it does not pursue litigation unless it has reasonable prospects of success." He continued by stating that "there are some agencies such as regulatory agencies that need, in many cases, to institute litigation in order to discharge their statutory functions" and that "the prosecution of these proceedings will form a substantial part of the role of the agencies." In those circumstances he considered "the model litigant obligation to avoid litigation wherever possible means that a proper assessment must be made in each case of whether there are reasonable grounds for bringing the proceedings." Additionally, he said "an agency will have reasonable grounds for pursuing litigation where the institution or continuation of the litigation is justified in the public interest, including where pursuit of the litigation is a legitimate means of clarifying the law on a particular topic." 24 Accordingly, it is submitted for the respondents that the applicant has taken a view about the prospects of success of a mediation which are not shared by the respondents. Further, that even if it is correct that mediation will not settle the dispute, it has the potential to result in a resolution of some or all of the issues and lead to a reduction of costs of the litigation.

Resolution of contentions 25 The word "mediation" is defined as "action in mediating between parties, as to effect and agreement or reconciliation": The Macquarie Dictionary 2nd ed. at p 1105. The word "mediate" means "to bring about (an agreement …) between parties by acting as mediator" and "to settle (disputes, etc.) by mediation; reconcile" and "to act between parties to effect an agreement, compromise or reconciliation": The Macquarie Dictionary at p 1105. 26 The objectives of mediation as provided for in this Court are made patent by the content of FCR O 72 r 7. What is required, is that there be "a structured process" involving the mediator in assisting the parties. That is done "by encouraging and facilitating discussion between the parties". The object of that is that they should "communicate effectively with each other about the dispute". There is the possibility that they might reach agreement and consent to an order. Those objectives are important curial objectives in the court process. 27 It has been recognised by Lehane J in Kilthistle that ordinarily mediation is a consensual procedure and that there can be little doubt it is most likely to achieve results if all parties are willing participants. However, as acknowledged by his Honour, the amendment of the Federal Court Act to empower the Court to refer a proceeding to mediation even if all parties do not agree and consequential amendment of the rules to take account of that provision, reflect a view that mediation may be productive even if a party is initially a reluctant participant. 28 It is not the case that mediation can only be ordered where respondents admit the whole or part of the case against them or that it should not be held even where an applicant has a reasonable prospect of success. The point of mediation, as the nature of the word implies, is that there is give and take on both sides and that neither party enters a mediation session with any prescriptions. All parties ordered or directed to attend a mediation pursuant to the rules of the Court in this Registry are advised: "the mediator will encourage free and frank discussion about the matters in dispute. The parties are the negotiators. They negotiate with each other in an endeavour to resolve their differences. The mediator may facilitate the process by suggesting options and possible solutions to resolve the whole or part of the differences between the parties." 29 Order 72 is to be read in the context of the provision made in FCR O 10 r 1(2)(h) which discloses that a direction made pursuant to that paragraph may have the dual objective of achieving either a negotiated outcome or of clarifying the issues in dispute. 30 The view of the applicant that its public interest functions make it inappropriate for it to negotiate a settlement of the litigation and therefore to participate in mediation do not seem to me in the circumstances of this matter to make mediation inappropriate. That is because mediation would potentially have the following purposes: (1) Ascertainment of whether or not, at mediation, the respondent is prepared to meet any of the matters sought on behalf of the applicant including admission of and public declaration by the respondents of their liability or the liability of any of them. (2) Consideration of the issues defined by the experts as a result of a conference held pursuant to direction 12 when that conference has taken place. (3) Consideration of whether the issues at trial can be so agreed as to make it unnecessary for the complainant, as a person with an intellectual disability, to be called to give evidence at trial. 31 To conclude that the formation by the applicant of the view that the matter requires curial resolution in a manner thought by the applicant to meet its public interest obligations would fail to recognise the competing public and curial interest in the mediation process as an important (if not vital) part of curial requirements. There is no necessary reason why the former public interest objective could not be met in the give and take of true mediation. Whether or not that is the case, it is apparent there are other objectives open to be achieved by mediation in the particular circumstances of this proceeding. 32 However, the strength of those considerations is materially effected by the fact that the respondents have not presently complied with direction 12. In my view it follows that the opportunity should be given to the respondents to comply with that direction and that, following such compliance, the order for mediation should then take effect. It is apparent from a reading of orders 12 and 12A together that it was intended the mediation would follow upon the compliance with order 12.

Conclusion 33 For these reasons I consider that the motion for discharge of the order for mediation should be refused; the date set for the mediation should be vacated; the respondents should be given time to comply with order 12; following such compliance the matter should then be set down for mediation; and the parties be heard as to the appropriate costs order. I certify that the preceding thirty-three (33) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice RD Nicholson.

Counsel for the Applicant: Mrs N Johnson QC

Solicitor for the Applicant: Phillips Fox Lawyers

Counsel for the First and Second Respondents: Mr AP Hershowitz

Solicitor for the First and Second Respondents: Mills Oakley Lawyers

Date of Hearing: 18 May 2001

Date of Judgment: 24 May 2001