Ali v Australian Competition and Consumer Commission

INTRODUCTION 1 The appellants have filed two applications in relation to the conduct of the appeal to the Full Court in this matter. I am appointed to manage the appeal, including to consider these two applications: (a) an interlocutory application filed on 13 March 2020 seeking, relevantly: (i) a stay of enforcement of the decision below pending the outcome of the appeal; (ii) either by a transfer of the file or by other order, orders to the effect that any final oral hearing in this matter take place in Sydney rather than Perth; and (b) an interlocutory application filed on 17 April 2020 in relation to the issues arising from the costs decision in the proceedings below, Australian Competition and Consumer Commission v Geowash (Subject to a Deed Of Company Arrangement) (No 5) [2020] FCA 440 (the Costs Judgment) seeking relevantly: (i) leave to appeal the costs orders; (ii) incorporation of the appeal from the costs orders into the current appeal proceedings; (iii) leave to amend the supplementary notice of appeal filed 23 March 2020 to achieve the incorporation of the appeal from the costs orders into the appeal; and (iv) a stay of the costs orders to be consistent with the stay sought in the interlocutory application filed 13 March 2020. 2 Each of the applications is supported by affidavits of the first appellant, Ms Sanam Ali, the first of 13 March 2020 and the second of 16 April 2020. The Costs Judgment was delivered on 3 April 2020 following the filing of the first interlocutory application. However, the issues arising are common to each. The interlocutory application of 17 April 2020 seeks to bring the costs orders within the existing appeal and within the existing application for a stay of the orders below. The amalgamation is unopposed and will be permitted. 3 The remaining issues then are: (a) a stay of enforcement of the decision below pending the outcome of the appeal, including of the costs orders; (b) the venue of any final oral hearing in this matter; 4 It is convenient to deal with the latter issue first. As the written and oral submissions for the appellants recognize, it is not presently possible to determine whether this appeal will proceed by means of an online video hearing or an in-person court hearing. As things presently stand, generally stated, hearings are conducted by the former means during the COVID-19 outbreak. It is not possible to know whether that will change by the time this appeal is heard. If it does not change, then the potential prejudice ascribed to cost of travel and related matters falls away as the matter can proceed by video. So I would not order a venue change at this time. This should not be taken as a suggestion that I would necessarily do so at a later time should circumstances change. But should the situation with hearings change, I would not preclude the matter being raised once again. 5 The relevant judgments arising for consideration now are : (a) Australian Competition and Consumer Commission v Geowash (Subject to a Deed Of Company Arrangement) (No 3) [2019] FCA 72 (the Liability Judgment); (b) Australian Competition and Consumer Commission v Geowash (Subject to a Deed Of Company Arrangement) (No 4) [2020] FCA 23 (the Penalty Judgment); and (c) the Costs Judgment. In the Liability Judgment, the primary judge found that Ms Ali and the second appellant, Mr Charles Cameron, as sole director and national franchising manager respectively of Geowash (a hand car wash and detailing franchisor), had engaged variously in conduct that was misleading, unconscionable and in breach of good faith obligations under the Competition and Consumer Act 2010 (Cth) (CCA). In the Penalty Judgment, Ms Ali was ordered to pay $1,045,000 in pecuniary penalties and $500,000 in non-party consumer redress orders while Mr Cameron was ordered to pay $656,000 in pecuniary penalties and $500,000 in non-party consumer redress orders. As will be seen below, the appellants seek a stay of the Penalty Judgment and the Costs Judgment pending their appeal of all three decisions primarily on the ground that, if the penalty and costs orders are enforced, they will be financially incapable of pursuing the appeal. 6 In her March affidavit Ms Ali deposes (at paras 35-40): 35. Both [Mr] Cameron and I gave evidence as to our respective financial positions for the purposes of the penalty hearing in the proceedings below. 36. Annexed to this affidavit and marked "SA-D" is a copy of my affidavit of 1 August 2019. 37. Annexed to this affidavit and marked "SA-E" is a copy of [Mr] Cameron's affidavit of 8 July 2019. 38. Based on those affidavits and my own knowledge of my financial circumstances and discussions with [Mr] Cameron I believe that neither [Mr] Cameron nor I have the financial capacity to meet the demands of the orders as to pecuniary penalties, consumer redress or costs in the proceedings below. 39. That also means that, unless there is a stay of those orders, it is highly likely that we will not be able to continue the appeal. This would mean that we both lose the chance to have the questions raised by the appeal determined. 40. I believe that would be a loss that neither [Mr] Cameron nor I could recover from. 7 In the 2019 affidavits so annexed, the appellants disclosed, with little detail, no income, tax liabilities or likely income. Funds held in bank accounts were trivial. Each had incurred at that point $180,000 in legal costs in defending the first instance litigation and each had depended on others for undisclosed financial assistance, presumably also for the payment of legal fees. It would be fair to say that there was not an elaborate exposure of the appellants' financial circumstances, a point stressed by the respondent to these applications and the appeals, the Australian Competition and Consumer Commission (the ACCC).

Stay of the orders below, including the Costs Judgment 8 The application is made pursuant to r 36.08(2) of the Federal Court Rules 2011 (Cth). Rule 36.08 provides: 36.08 Stay of execution or proceedings under judgment appealed from (1) An appeal does not: (a) operate as a stay of execution or a stay of any proceedings under the judgment subject to the appeal; or (b) invalidate any proceedings already taken. (2) However, an appellant or interested person may apply to the Court for an order to stay the execution of the proceeding until the appeal is heard and determined. (3) An application may be made under subrule (2) even though the court from which the appeal is brought has previously refused an application of a similar kind. Note: Interested person is defined in the Dictionary. 9 The appellants stress and I accept that it is not necessary for the grant of a stay pending an appeal that 'special' or 'exceptional' circumstances be made out. Rather it is 'sufficient that the applicant for the stay demonstrates a reason or an appropriate case to warrant the exercise of the discretion in his favour': Powerflex Services Pty Ltd v Data Access Corp (1996) 67 FCR 65 per Burchett, Heerey and Whitlam JJ (at 66) and Alexander v Cambridge Credit Corporation Ltd (1985) 2 NSWLR 685 (at 694). The appellants, as the party seeking the stay, need to show some reason that the stay should be granted: Henderson v Amadio Pty Ltd (No 3) (1996) 65 FCR 66 per Heerey J at 69. 10 In Powerflex, the Court said by reference to the earlier rules of the court (at 66B-66F): The principles applicable depend on the terms of order 52, r 17 of the Federal Court Rules 1979(Cth). Rule 17(1) provides: "An appeal to the Court shall not: (a) operate as a stay of execution or of proceedings under the judgment appealed from; or - ... except so far as the Court or a Judge or the court below may direct." The language of that rule suggests no limitation upon a broad discretion inhering in the Court. Several judges of the Court, most recently Heerey J in Russell Fraser Henderson v Amadio Pty Ltd (No 3) (1996) 65 FCR 66 have followed the decision of the Court of Appeal of New South Wales in Alexander v Cambridge Credit Corporation Ltd (Receivers Appointed) (1985) 2 NSWLR 685, where, at 694, that Court said it was "sufficient that the applicant for the stay demonstrates a reason or an appropriate case to warrant the exercise of discretion in his favour". The Court of Appeal also referred with approval to a statement of Mahoney JA in Re Middle Harbour Investments Limited (in liq) (unreported, Court of Appeal, NSW, 15 December 1976) where, with the concurrence of the other members of the Court, Mahoney JA said: "Where an application is made for a stay of proceedings, it is necessary that the applicant demonstrate an appropriate case. Prima facie, a successful party is entitled to the benefit of the judgment obtained by him and is entitled to commence with the presumption that the judgment is correct. These are not matters of rigid principle and a court asked to grant a stay will consider each case upon its merits, but where an applicant for a stay has not demonstrated an appropriate case but has left the situation in the state of speculation or of mere argument, weight must be given to the fact that the judgment below has been in favour of the other party." Notwithstanding that in the Supreme Court of Victoria a more stringent test has generally been applied (see Cellante v G Kallis Industries Pty Ltd [1991] 2 VR 653; Lagarna Pty Ltd v Bridge Wholesale Acceptance Corporation (Australia) Ltd [1995] 1 VR 150), we think we should follow the decision in Alexander v Cambridge Credit. "Special" circumstances do not have to be shown. In any case, in this Court the word "special", in a comparable context, has not been thought to raise a significant barrier to the exercise of a broad general discretion: Jess v Scott (1986) 12 FCR 187. There, the rule itself dealing with leave to appeal out of time used the expression "special reasons". (Emphasis added.) 11 The appellants appropriately rely upon the general principles for granting a stay considered by Finkelstein J in Australian Competition and Consumer Commission v BMW (Australia) Limited (No 2) [2003] FCA 864, where his Honour said (at [5]): The principles which govern a court's discretion in granting a stay pending the determination of an appeal are well known: see generally Alexander v Cambridge Credit Corporation Ltd (Receivers Appointed) (1985) 2 NSWLR 685. Although it is not possible to state exhaustively the considerations that may be taken into account in the exercise of this discretion, it is appropriate that I mention those that bear on this application. The general rule is that a stay will be granted where there is a likelihood that a successful appeal will be rendered nugatory: Wilson v Church (No.2) (1879) 12 Ch D 454, 458. A court will also consider the balance of convenience and the competing rights of the parties as well as whether either party will be prejudiced by the stay: The Marconi's Wireless Telegraph Company Limited v The Commonwealth [No.3] (1913) 16 CLR 384, 386; Philip Morris (Australia) Ltd v Nixon [1999] FCA 1281 at [17]. Even though a judge will generally not be required to speculate about the appellants prospects of success, it is well established that a stay will not be granted in the absence of arguable grounds of appeal, or if the appeal is not bona fide: J C Scott Constructions v Mermaid Waters Tavern Pty Ltd (No. 1) [1983] 2 Qd R 243, 248; Alexander v Cambridge Credit Corporation Ltd (Receivers Appointed) (1985) 2 NSWLR 685, 695. It necessarily follows that a stay will not be granted if an appeal has no prospect of success: Australian Workers' Union v Pilkington (Aust) Ltd (2000) 101 FCR 35, 43. 12 As to those principles the appellants contend that: (a) a successful appeal would be rendered nugatory in the sense that the appellants: (i) may lose the financial ability to progress the appeal, stifling an arguable claim; (ii) would lose the assets that at this stage are being preserved pending the outcome of the case; (b) the balance of convenience favours the granting of the stay in order to preserve the position of the appellants because: (i) the appellants will suffer an irremediable harm if the stay is not granted; (ii) the ACCC will not suffer an irremediable harm if the stay is granted. Any risk to the ACCC is addressed by the undertakings to preserve assets to satisfy penalty and redress orders that have been in place since the commencement of the proceedings below; (c) the appeal is bona fide and features arguable grounds; and (d) the appeal has reasonable prospects of success. 13 The appellants argue that there are also no other aspects of public interest that would weigh against the stay being granted. There is no allegation that the appellants are delaying their prosecution of the appeal, despite difficult circumstances in the current COVID-19 situation. 14 As to the evidence, it is contended that the affidavit of Ms Ali of 13 March 2020 establishes the following: (a) the appellants gave early notice that they sought a stay, evidenced by the fact that: (i) the appellants' intention to seek a stay of the orders below was first notified to the ACCC in the letter accompanying service of the notice of appeal in this matter on 24 February 2020; (ii) on 27 February 2020 the ACCC advised that a formal application for a stay was required and stated that the appellants were in default of orders 7 and 8 of the Penalty Judgment; (iii) the next day, on 28 February 2020, the appellants notified the Court that an application for a stay would be filed shortly; (b) the combined effect of the financial penalties are high for individuals to be compelled to pay when regard is had to the fact that: (i) the combined effect of orders 7 and 11 of the Penalty Judgment require that Ms Ali personally pay $1,545,000 by way of pecuniary penalties and consumer redress; (ii) the combined effect of orders 8 and 11 of the Penalty Judgment require that the second appellant, Mr Cameron, pay $1,156,000 by way of pecuniary penalties and consumer redress; (c) The appellants had indicated that orders as to costs flowing from the orders of 24 January 2020 would adversely impact their ability to conduct the appeal from an early stage, evidenced by the fact that: (i) the original notice of appeal filed on 21 February 2020 seeks costs of the proceedings below; (ii) the potential for costs orders against the appellants was contemplated at the time of the original interlocutory application filed on 13 March 2020 seeking a stay of the orders below; (iii) as the appellants had notified the Court and the ACCC that they sought a stay as per the application before the Court, the appellants stated in evidence that they had not instructed their legal team to prepare submissions on costs in the proceedings below; (iv) the appellants anticipated that the ACCC's costs would likely be high, being the costs of senior counsel, junior counsel and a legal team from an international law firm. Those costs were thought to likely be several hundred thousand dollars in their own right; (d) The appeal goes to whether the penalty orders should have been be made; (e) The appellants do not have the financial capacity to pay the penalties below and conduct the appeal as evidenced by the fact that: (i) the appellants have been in evidence for some time to the effect that they do not have financial capacity to pay approximately $2.6 million dollars, plus costs; (ii) unless a stay of these orders is granted, the appellants will likely be unable to continue the appeal; (f) undertakings given in the proceedings below continue to operate to preserve the appellants' assets and protect any eventual rights of recovery for the ACCC as evidenced by: (i) subsequent correspondence between the appellants and the ACCC that establishes that those undertakings continue to bind the appellants and remain in effect. 15 The appellants argue that the Court should be satisfied that there is an arguable ground of appeal: Maher v Commonwealth Bank of Australia [2008] VSCA 122 (at [27]). The supplementary notice of appeal raises, at grounds 2-8, the issue of unconscionability which the appellants assert remains contestable, as per the division in the High Court in the recent decision of Australian Securities and Investments Commission v Kobelt [2019] HCA 18. Further, the appellants say that the form of the redress orders made at orders 11-31 of the Penalty Judgment (raised at grounds 11-12) is novel and outside of the recognised forms of redress envisaged in s 243 of the Australian Consumer Law (the ACL). The appeal also raises the issue, at ground 11(a), whether 'non-party consumer redress orders' can be made under s 239 of the ACL for the benefit of franchisees that do not meet the definition of 'consumers' under s 3(3) of the ACL. The ACCC has not suggested that these are not arguable grounds of appeal. 16 As noted above, the appellants are already subject to undertakings to preserve property for the purposes of satisfying orders of the Court. The ACCC's current position, if it succeeds on appeal, is protected. However the appellants say that the absence of a stay would force the appellants to liquidate the assets that are the subject of those undertakings in order to attempt to meet the obligations of the orders that have been made and to attempt to continue to fund the appeal. That, the appellants say, is an irremediable harm if they are successful on appeal in the absence of a stay. Moreover, if access to those assets were to be permitted to fund appeal costs, the ACCC would lose the benefit of the security provided by the undertakings. No such application is made at present. 17 The appellants seek that the stay be effective from either the date of filing of the notice of appeal being 21 February 2020, or the date of service on the ACCC being 24 February 2020, at which time the intention to seek a stay was first conveyed to the ACCC. The date of effect of the stay is important to the question of whether the appellants have continued in default of the orders in the Penalty Judgment. In my view the stays should operate from the date of filing to avoid risk of default. There is no doubt that prompt and adequate notice of intention to seek stays was given. Nor has that issue been challenged. 18 The ACCC relies upon an open offer that it provided to the appellants on 29 April 2020 to consider its position if provided with adequate financial evidence as to the appellants' inability to satisfy the monetary orders made at first instance. 19 It contends that a 'highly relevant' matter on the application is evidence about who is funding the appeal and who funded the trial at first instance. 20 Absent the evidence in the previous paragraph, and particularly having regard to the state of the evidence generally, the ACCC submits the application ought be dismissed summarily, in so far as the monetary orders are concerned. 21 The ACCC argues that insofar as the non-monetary orders are concerned, no evidence at all has been adduced in support of staying those orders. There being no evidence and the orders being self-evidently important in the public interest, the application in respect of those orders ought also be dismissed, it suggests. 22 The ACCC also suggests that the costs order stay can be dealt with by the ACCC undertaking not to enforce any costs order until determination of the appeal without giving 14 days' prior notice of an intention to do so.

CONSIDERATION 23 For reasons set out (at [9]-[11] above), the appellants do not need to establish special circumstances or a special reason to justify the grant of a stay. 24 The ACCC does not identify prejudice in a stay. It does emphasize the inadequacy of the financial information and that the appellants still bear the onus of justifying any reason for a stay with sufficient evidence. It does so when the affidavits of the appellants through Ms Ali were admitted without objection and the deponents were not required for cross-examination on the current affidavits or their July and August 2019 affidavits. It is true that the ACCC's point was made in the correspondence as to the alleged inadequacy of the information. It is also the case that the ACCC commendably as senior counsel notes, did not over complicate a fairly simple interlocutory application with objections and cross examination. Nonetheless, the submissions made were more in the nature of a credit attack on Ms Ali without Ms Ali having an opportunity to respond to the complaints. Of course this is against a background where Ms Ali's credit was very much under attack by the ACCC at trial. 25 It is of concern that the redress orders constitute about $1 million and that, absent a stay, will be allocated, potentially, to consumers while an appeal of the matter is pending. No concrete suggestion was raised by the ACCC as to how that would be managed in the event the Court finds there is no power for such an order or that the form was inappropriate. Senior counsel did postulate a theory that the ACCC might hold those funds pending resolution of the appeal but no clear or apparently binding undertaking was given at the hearing and certainly not in advance of this application. 26 In the meantime the ACCC is protected by the asset undertaking. 27 Given the combined effect of the penalties imposed by orders 7, 8, and 11 is approximately $2.6 million, the question of who will fund the litigation is not a powerful factor relevant to granting or refusing a stay in light of the evidence in paras 35-40 of Ms Ali's Affidavit of 13 March 2020 (see [6] above). Having regard to the content of the July and August 2019 affidavits, if payment of those amounts and substantial costs (which will undoubtedly run well into six figures) were not stayed, it would clearly be 'highly unlikely' as a matter of common sense that the appeals could proceed. 28 The appellants are proceeding with their appeals with appropriate diligence. The contrary has not been suggested. Nor has it been suggested that the appeals are unarguable. Nor has there been any suggestion of delay in pursuing the stay. 29 Almost all of the ACCC's focus has been on the inadequacy of the financial information supporting the assertion that absent a stay, the appeals would be unlikely to proceed. The ACCC says that given there are no accessible assets, others must be funding the litigation which is something that should be explained if the appellants contend that absent a stay it is unlikely the appeals will proceed. 30 I accept that the very small amounts showing as balances in the accounts of the appellants could not be sufficient to pay for the appeal and how the appeal is presently proposed to be paid for has not been explained. I also accept that other information as to the appellants' access to funds is not explained and that the ACCC informed the appellants some time ago that absent a clearer indication to support the assertions raised, the ACCC would continue to oppose a stay and that it might change its attitude if more fulsome information were supplied. 31 However, all that said, it seems to me very clear that the considerable cost of preparing for the appeal would be well beyond the reach of these appellants' personal capacity if the millions of dollars involved in the totality of the orders against them were required to be paid (assuming payment were possible). Any other conclusion would be unrealistic. The ACCC argues that it might be inferred that others may fund the appeals. I have no evidence on which such a prospect could be substantiated beyond speculation. The financial detail has not been reduced to microscopic detail but a common sense approach is required by the Court and was, I think, reasonably anticipated by the appellants. 32 I am satisfied on the state of the evidence, and consistent with the authorities set out above, that all the financial orders including costs should be stayed. 33 As to the non-monetary orders in respect of which there is a public interest, the appellants point out that r 36.08(2) provides for an order to stay the execution of the proceeding until the appeal is heard. As expressed, the Federal Court Rules do not distinguish between only those specific orders that create an ongoing prejudice that needs to be addressed by the Court. The stay that is sought is the form of stay that is suggested by r 36.08. Nevertheless: (a) the declarations at para 2 of the orders made on 24 January 2020 in the Penalty Judgment are directly called into question by the subject matter of the appeal; (b) the declarations at paras 3 and 4 would risk being incorrect to the extent that they rely on para 2; (c) order 5 is already subject to a stay by operation of order 6; (d) the injunctions at orders 9 and 10 would be inappropriate to the extent that they apply to the conduct described in the declarations at para 2; (e) the notice of appeal directly questions whether any of the orders 11 to 31 are within power. In any event, they are inoperative without funds paid under order 11; (f) orders 32 and 33 are sought to be revoked by the appeal on the basis that they would likely be inappropriate if the appellants are found only to have been knowingly concerned in the conduct described in the declaration at paragraph 1 rather than the declaration at paragraph 2; (g) similarly, the preservation of findings of fact under s 83 and s 137H of the CCA would be inappropriate if the appeal against the conduct described in the declaration at paragraph 2 is upheld; (h) orders 37 to 39 are now subsumed into the orders made as to costs of 3 April 2020. The orders of 3 April 2020 should be stayed for the same practical reasons in relation to the orders 7, 8 and 11 as addressed previously; and (i) no prejudice arises against the ACCC if these orders are stayed until the appeal is determined. 34 I accept that the Federal Court Rules speak in terms of a proceeding rather than individual orders. Nonetheless, in my view, it is less appropriate to stay the non-financial orders. The appellants contend that these are in the traditional nature of orders that one would be seeking a stay because if successful on the appeal, they would have been subjected to the risk of contempt of court in relation to the injunction, and the very heavy burden of disqualification. I accept there is a lack of prejudice to the ACCC in these orders being stayed but I am not persuaded that there is obvious prejudice to the appellants if they are not stayed. On the evidence, there is no practical need for a stay of the non-financial orders, noting for example, that there is nothing the disqualification orders would be likely to prevent. On balance, I consider only the financial orders should be stayed. 35 The procedural aspects of the appellants' application were not opposed.

CONCLUSION 36 The financial orders only will be stayed. The appellants should file within 7 days a minute of proposed orders to reflect the slightly mixed outcome of these reasons. As well as determining these interlocutory matters, I am also to manage this appeal through to a hearing. A directions hearing will be listed accordingly to settle any dispute regarding the final form of orders to reflect these reasons as well as further programming orders. I certify that the preceding thirty-six (36) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice McKerracher.