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[1996] FCA 1119
Federal Court of Australia
1996-12-20
Branson J
Original judgment source is linked above.
THE COURT DECLARES:
(i) engaged in unconscionable conduct in contravention of s51AA of the Trade Practices Act 1974;
(ii) engaged in misleading and deceptive conduct, in contravention of s52 of the Trade Practices Act 1974; and
(iii) represented that the first respondent had an affiliation that it did not have, contrary to s53(d) of the Trade Practices Act 1974.
THE COURT ORDERS THAT:
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA ) NEW SOUTH WALES DISTRICT REGISTRY ) No NG339 of 1996 GENERAL DIVISION )
BETWEEN: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
CHATS HOUSE INVESTMENTS PTY LIMITED First Respondent
CORAM: Branson J PLACE: Sydney DATE: 20 December 1996
By an application dated 24 April 1996 brought under Part IVA of the Federal Court of Australia Act 1976 (Cth) ("the Federal Court Act"), the applicant claims the following substantive relief: "1. An order that the First Respondent, whether by itself, it's (sic) servants, it's (sic) agents or otherwise howsoever, be restrained in trade or commerce from engaging in foreign exchange margins trading on its own behalf or on behalf of any person. 2. An order that the First Respondent whether by itself, it's (sic) servants, it's (sic) agents or otherwise howsoever, be restrained in trade or commerce from representing that it has an approval or affiliation which it does not have. 3. An order that, in Australia, the Second and Third Respondents, whether by themselves, their servants, agents or otherwise howsoever, be restrained in trade or commerce from aiding or abetting or from being directly or indirectly knowingly concerned in or a party to a corporation engaging in foreign exchange margins trading on its own behalf or on behalf of any person. 4. An order that, in Australia, the Second and Third respondents, whether by themselves, their servants, agents or otherwise howsoever be restrained in trade or commerce from aiding or abetting or being directly or indirectly knowingly concerned in or a party to a corporation representing that it has an approval or affiliation which it does not have. 5. (i) An order that each of the Respondents pay compensation to Group Members for the loss or damage suffered by Group Members as a result of the conduct of the Respondents in contravention of the Trade Practices Act, 1974; (ii)Damages, including exemplary damages, for Group Members for deceit."
By the application the applicant also claimed certain interlocutory relief. That aspect of the applicant's claim has been dealt with by another judge of this Court.
PART IVA OF THE FEDERAL COURT ACT Part IVA of the Federal Court Act authorises the bringing in this Court of representative proceedings. Part IVA of the Federal Court Act is comprised of ss 33A - 33ZJ of the Act.
Section 33C(1) provides as follows: "Subject to this Part, where:
(a) 7 or more persons have claims against the same person; and (b) the claims of all those persons are in respect of, or arise out of, the same, similar or related circumstances; and (c) the claims of all those persons give rise to a substantial common issue of law or fact; a proceeding may be commenced by one or more of those persons as representing some or all of them."
Section 33D(1) is concerned with the standing of a person to
commence representative proceedings. It provides as follows: "A person referred to in paragraph 33C(1)(a) who has a sufficient interest to commence a proceeding on his or her own behalf against another person has a sufficient interest to commence a representative proceeding against that other person on behalf of other persons referred to in that paragraph."
Section 33E provides that, except as to certain limited categories of persons not here relevant, the consent of a person to be a group member in a representative proceeding is not required.
Section 33H imposes requirements as to form on the originating process in representative proceedings. It provides as follows: "(1)An application commencing a representative proceeding, or a document filed in support of such an application, must, in addition to any other matters required to be included: (a) describe or otherwise identify the group members to whom the proceeding relates; and
(b) specify the nature of the claims made on behalf of the group members and the relief claimed; and (c) specify the questions of law or fact common to the claims of the group members. (2) In describing or otherwise identifying group members for the purposes of subsection (1), it is not necessary to name, or specify the number, of the group members."
The Court is required by s33J to fix a date before which a group member may by notice in writing, opt out of a representative proceeding.
Section 33V provides that a representative proceeding may not be settled or discontinued without the approval of the Court.
The powers of the Court in a representative proceeding are specified by s33Z. It provides as follows:- "(1)The Court may, in determining a matter in a representative proceeding, do any one or more of the following: (a) determine an issue of law; (b) determine an issue of fact; (c) make a declaration of liability; (d) grant any equitable relief; (e) make an award of damages for group members, sub-group members or individual group members, being damages consisting of specified amounts or amounts worked out in such manner as the Court specifies; (f) award damages in an aggregate amount without specifying amounts awarded in respect of individual group members;
(g) make such other order as the Court thinks just. (2) In making an order for an award of damages, the Court must make provision for the payment or distribution of the money to the group members entitled. (3) Subject to section 33V, the Court is not to make an award of damages under paragraph (1)(f) unless a reasonably accurate assessment can be made of the total amount to which group members will be entitled under the judgment. (4) Where the Court has made an order for the award of damages, the Court may give such directions (if any) as it thinks just in relation to: (a) the manner in which a group member is to establish his or her entitlement to share in the damages; and (b) the manner in which any dispute regarding the entitlement of a group member to share in the damages is to be determined." Section 33ZB deals with the effect of a judgment in a representative proceeding. It provides as follows: "A judgment given in a representative proceeding: (a) must describe or otherwise identify the group members who will be affected by it; and (b) binds all such persons other than any person who has opted out of the proceeding under section 33J."
THE ORIGINATING PROCESS The application described the group members to whom the proceeding relates ("the group members") as "clients of the First Respondent including those listed in Schedule 1 hereto." The group must be understood to include also the applicant (s33C (1)). This description is, in my view, undesirably wide in its terms. If it were limited to the persons listed in Schedule 1 to the application no complaint could fairly be made. However, it is not so limited. The description is not explicit as to whether all persons who have at any time been clients of the first respondent, whether in Australia or elsewhere, are intended to comprise the group or whether some less extensive group of clients of the first respondent is intended. An examination of the statement of claim indicates that it is the applicant plus all persons who were clients of the first respondent in Australia between 1 November 1995 and 5 March 1996 who are intended to comprise the group. It seems likely on the material before the Court that the first respondent had no clients who would fall outside a group so described. I am satisfied that the deficiency in the description of the group is a formal defect and that no injustice has been caused thereby. The matter thus comes within s51 of the Federal Court Act and the proceeding is not thereby invalidated. I consider it appropriate, however, for the description of the class to be clarified by an appropriate amendment to the application. Leave will be granted to the applicant to make such an amendment.
The application in this matter specified the relief claimed and the statement of claim specified the nature of the claims made on behalf of the group members. I accept the submission of Mr Faulkner, counsel for the applicant, that the statement of claim is a document filed in support of the application within the meaning of s33H. I am therefore satisfied that the requirements of s33H(1)(b) have been complied with. ENTITLEMENT OF THE APPLICANT TO BRING THE PROCEEDINGS These proceedings have been brought by the applicant to achieve two broad ends: injunctive relief against the respondents and the payment of damages to the group members other than the applicant. The interests of the applicant are public interests in the enforcement of the Trade Practices Act 1974 (Cth) (the "Trade Practices Act"), the protection of Australian consumers, and the provision of compensation for consumers who have suffered loss or damage by conduct in contravention of the Trade Practices Act. The interests of the other members of the group are private interests: they seek awards of damages in compensation for financial harm suffered by them.
It was contended on behalf of the applicant that the difference between its interests in this proceeding and the interests of the other members of the group did not disentitle it from commencing this proceeding representing all of the group. Section 33C of the Federal Court Act specifies the circumstances in which a representative proceeding may be brought. It does not explicitly require that all group members should have a common interest in the proceedings. Section 33C(1) requires that the claims of all members of the group should be in respect of, or arise out of, the same or similar or related circumstances. I accept that this is the case here. It further requires that the claims of all members of the group give rise to a substantial common issue of law or fact. I accept that this is the case here.
Section 33D, which is set out above, deals with the issue of standing to commence a representative proceeding. It is plain that the applicant has a sufficient interest to commence a proceeding on its own behalf against the respondents (Trade Practices Act s80). In such circumstance s33D(1) provides that it has a sufficient interest to commence a representative proceeding against the respondent on behalf of the other group members.
I accept the contention made on behalf of the applicant that nothing in Part IV of the Federal Court Act has the effect of disentitling it from commencing this representative proceeding.
Section 87(1B) of the Trade Practices Act authorises the applicant, in circumstances in which a person has suffered loss or damage by conduct of another person that was engaged in in contravention of Part IVA or V of the Trade Practices Act, to make an application on behalf of one or more persons who has or have suffered such loss or damage for compensation. Do the terms of s87 of the Trade Practices Act compel the reading down of Part IVA of the Federal Court Act so as to require a proceeding by the applicant for the recovery of loss or damage suffered by a person or persons as a result of conduct engaged in contravention of a provision of Part IVA or V of the Trade Practices Act to be brought pursuant to s87(1B) of the Trade Practices Act? It is to be noted that s87(1B) provides that the applicant shall not make an application under that subsection - "except with the consent in writing given before the application is made by the person, or by each of the persons, on whose behalf the application is made." It is conceded on behalf of the applicant that it did not, at the time when this proceeding was instituted, have the consent in writing of each of the members of the group to the institution of the proceeding.
Section 87(1B) of the Trade Practices Act is capable of being seen as a special power, subject to a limitation, to initiate a proceeding of a kind which falls within the ambit of Part IVA of the Federal Court Act. Where both a general power and a special power, subject to a limitation, is conferred by the one statute the general rule is that the general power cannot be exercised to do that which is the subject of the special power (Anthony Hordern and Sons Ltd v Amalgamated Clothing and Allied Trades Union of Australia (1932) 47 CLR 1 per Gavan Duffy CJ and Dixon J at 7; Leon Fink Holdings Pty Ltd v Australian Film Commission (1979) 24 ALR 513 per Mason J at 518). Here the two provisions are not part of the same statute. Section 87(1B) was inserted into the Trade Practices Act at a time when Part IVA of the Federal Court Act had not been enacted.
The question to be determined is whether the legislature intended that the applicant, in respect of a case of this kind, should not be entitled to proceed under Part IVA of the Federal Court Act notwithstanding that it was able to satisfy its literal requirements.
Nothing, in my view, suggests that the legislature intended Part IVA of the Federal Court Act to be read down by reason of an existing provision such as s87(1B) of the Trade Practices Act. Although Part IVA of the Federal Court Act has a wider application than s87(1B) of the Trade Practices Act, it should not, in my view, be regarded as the sort of "general" provision to which should be applied the rule of construction that where there is a conflict between a "general" and a "specific" provision, the "specific" provision should prevail on the ground of repugnancy (Lyons & Anor v Registrar of Trade Marks and Anor (1983) 50 ALR 496 at 507-508 per Beaumont J). Here, the later enactment, namely Part IVA of the Federal Court Act, ought, in my view, to be construed as being applicable according to its terms, notwithstanding the provision of s87(1B) of the Trade Practices Act which specifically authorises the institution of proceedings of this nature by the applicant.
I conclude that the applicant was entitled to commence this proceeding under Part IVA of the Federal Court Act.
THE COURSE OF THE PROCEEDINGS The application, the statement of claim, a notice of motion and certain supporting affidavits were filed on 24 April 1996. On that day a judge of this Court gave the applicant leave to serve the above documents returnable before the duty judge on 26 April 1996. The notice of motion sought orders as to service on the second respondent in Singapore and certain interlocutory injunctions.
The legal firm Allen Allen & Hemsley filed a notice of appearance on behalf of each of the respondents on 29 April 1996.
On 3 May 1996 an order was made fixing 3 July 1996 as the date before which group members were able to opt out of the representative proceeding.
On 14 June 1996 Allen Allen & Hemsley filed a notice of ceasing to act as solicitor for the third respondent.
By an interlocutory order dated 20 June 1996 the first and second respondents were restrained until further order of the Court, from dealing with any moneys in certain Australian bank accounts or removing out of Australia any money or other property owned by them without the consent of the applicant. Such order also restrained the first and second respondents until further order from engaging in foreign exchange margins trading in Australia.
On 1 August 1996 notices of opting out were filed on behalf of seven group members. As mentioned above the, date fixed by order of the Court as the date before which Group Members could opt out of the proceeding was 3 July 1996. Each of the notices was signed on a date earlier than 3 July 1996.
Section 33J of the Federal Court Act, so far as is here relevant, provides as follows: "(1)The Court must fix a date before which a group member may opt out of a representative proceeding. (2) A group member may opt out of the representative proceeding by written notice given under the Rules of Court before the date so fixed. (3) The Court, on the application of a group member, the representative party or the respondent in the proceeding, may fix another date so as to extend the period during which a group member may opt out of the representative proceeding. I note that O73 r6 of the Federal Court Rules assumes that a notice given under s33J(2) of the Federal Court Act must be filed in the Court. In my view this assumption accurately reflects the intention of s33J(2). The date fixed pursuant to s33J(1) is a date before which a group member may opt out of the representative proceeding by filing at the Court an appropriate notice in writing.
The notices of opting out in this case have not, in my view, been given in accordance with the requirements of Part IVA of the Federal Court Act. The defect of timing is, however, entirely of a formal nature. It is, in my view, capable of being rectified by an order under s33J(3) following an appropriate application. I am willing to entertain an oral application in this regard.
On 2 August 1996 the firm Allen Allen & Hemsley filed a notice of ceasing to act as solicitor for the first and second respondents.
On 26 August 1996 the Court by order confirmed the service of certain documents on the first and second respondents and granted leave to serve documents on the first and second respondents by sending the same by pre-paid airmail post addressed to "c/- Albert Chan, Block 301, Clementi Avenue, #09-547, Singapore 512."
On 26 September 1996 orders were made by consent against the third respondent as follows: "1. That, in Australia, the Third Respondent Donald William Aylett, whether by himself, his servant, agents or otherwise howsoever, be, restrained in trade or commerce from aiding or abetting or being directly or indirectly knowingly concerned in or a party to a corporation; (i) engaging in foreign exchange margins trading on its own behalf or on behalf of any person; and (ii)representing that it has an approval or affiliation which it does not have.
On 11 November 1996 this matter was called on for trial. There was no appearance of any of the respondents. I made the following orders on that day. "1. The Applicant is to serve on the First and Second Respondent, in accordance with paragraph 2 of the order made by Justice Moore of 26 August 1996, the orders and directions made by him on that day. 2. The Applicant is to notify the First and Second Respondent, by utilising the method of service authorised by paragraph 2 of the order made by Justice Moore of 26 August 1996: (i) that this matter is set down for hearing in so far as orders are sought against the First and Second Respondent at 10.15am Friday 6 December 1996; (ii) which affidavits upon which it intends to rely on for the hearing; (iii) that orders sought on the hearing are those set out in the Application and Statement of Claim of 24 April 1996. 3. Service is to be made on the First and Second Respondents in accordance with paragraph 2 of the order made by Justice Moore of 26 August 1996 of all affidavits filed in Court today. 4. This matter is listed for hearing at 10.15am Friday 6 December 1996. 5. The Applicant is to notify the First and Second Respondent in accordance with paragraph 2 of the order made by Justice Moore of 26 August 1996 of the orders made today. 6. The parties have liberty to apply. 7. Question of costs reserved."
This matter was called on for trial again at 10.15 am on Friday 6 December 1996. There was again no appearance by any of the respondents. Proof of compliance with my order of 11 November 1996 was provided to the Court.
Pursuant to O32 r2 of the Federal Court Rules, I allowed the trial to proceed so far as claims for relief were made against the first and second respondents.
THE CLAIMS AGAINST THE THIRD RESPONDENT In 26 September 1996 the Court made certain orders against the third respondent by consent. The terms of such orders are set out above. Such orders, read alone, did not, in my view, amount to a settlement of the proceedings within the meaning of s33V of the Federal Court Act: they ordered, against the third respondent, the precise relief sought against him by paragraphs 2 and 3 of the application.
However, the formal order of the Court of 26 September 1996 contains the following paragraphs: "THE COURT NOTES THE AGREEMENT BETWEEN THE APPLICANT AND THE THIRD RESPONDENT: 3. That the applicant will not enforce any judgment for damages or costs against the Third Respondent. 4. That, upon the Court making the orders in paragraphs1 and 2 above, the Applicant will not prosecute any further proceedings, arising from the matters in the Application and Statement of Claim, against the Third Respondent."
The agreement so noted by the Court does amount to a purported settlement of this proceeding so far as it involves claim for relief against the third respondent.
Section 33V(1) of the Federal Court Act provides as follows: "A representative proceeding may not be settled or discontinued without the approval of the Court."
The purpose intended to be served by s33V(1) is obvious. It is appropriate for the Court to be satisfied that any settlement or discontinuance of representative proceedings has been undertaken in the interests of the group members as a whole, and not just in the interests of the applicant and the respondent. In my view, s33V proscribes not only complete settlement of proceedings without the approval of the Court, but also settlement of claims against a joint respondent, or settlement of any substantive claim against a respondent.
It was contended on behalf of the applicant that by approving the making of the consent order of 26 September 1996 in terms which included the above paragraphs, the Court impliedly gave its approval to the settlement purported to be achieved by the consent orders and the agreement which it noted. Nothing in the Court record suggests that the terms of s33V of the Federal Court Act were drawn to the attention of the judge who made the order of 26 September 1996, or that it was otherwise drawn to his attention that his approval of a settlement in terms of the agreement which he noted was required. In my view no approval can be implied from the terms of the order of 26 September 1996.
Unless and until the approval of the Court is sought and obtained in respect of the settlement agreement reached between the applicant and the third respondent, such agreement will, in my view, be without legal effect in these proceedings.
THE EVIDENCE The case of the applicant was that the first and second respondents engaged in fraudulent activity, causing harm to the group members other than the applicant, between about November 1995 and March 1996.
The applicant placed reliance on affidavit evidence from, amongst others, the following classes of persons: (a) solicitors for the applicant; (b) an officer of the applicant; (c) officers of the Australian Securities Commission; (d) former clients of the first respondent; (e) persons who formerly worked for the first respondent; (f) an officer of Bankers Trust Australia Limited;
(g) an immigration officer of the Department of Immigration and Multicultural Affairs; and (h) financial and foreign exchange experts.
An affidavit sworn by an officer of the Australian Securities Commission exhibits a transcript of a private examination of the second respondent conducted under s19 of the Australian Securities Commission Act 1989 ("the ASC Act"). Section 19 of the ASC Act appears in Part 3 of the Act. Section 68 also appears in Part 3 of the ASC Act. It relevantly provides as follows: "68(1) For the purposes of the Part .... it is not a reasonable excuse for a person to refuse or fail: (a) to give information; in accordance with a requirement made of the person, that the information, ... might tend to incriminate the person or make the person liable to a penalty. (2) Subsection (3) applies where: (a) before: (i) making an oral statement giving information; or (ii) ................. pursuant to a requirement made under this Part ...... a person ... claims that the statement ... might tend to incriminate the person or make the person liable to a penalty; and (b) the statement ... might in fact tend to incriminate the person or make the person so liable.
(3) The statement ... is not admissible in evidence against the person in: (a) a criminal proceeding; or (b) a proceeding for the imposition of a penalty; other than a proceeding in respect of: (c) in the case of the making of a statement - the falsity of the statement; or (d) .................."
Before making many of the oral statements recorded in the transcript of the second respondent's examination, the second respondent did claim, using a shorthand procedure proposed by the ASC, that the statements might tend to incriminate him or make him liable to a penalty. As to at least some such statements, I accept that they might in fact tend to incriminate him or make him liable to a penalty. The question therefore arises of whether such statements are admissible as evidence against the second respondent in this proceeding. The answer to this question depends upon whether this proceeding, which is plainly not a criminal proceeding, is to be regarded as a proceeding for the imposition of a penalty within the meaning of s68(3) of the ASC Act.
In David v Britannic Merthyr Coal Company [1909] 2 KB 146 at 160 and 161 Fletcher Moulton L.J. drew a clear distinction between civil liability to pay damages and a penalty for breach of a statutory duty. His Lordship said:
"The civil liability arising from the breach of a statutory duty is of a wholly different nature from a penalty for such breach. The former gives no cause of action unless damage to a third party follows from it, and then it, in general, gives ground for an action for the amount of such damage at the suit of such third party. But penalties for breaches of statutory duties apply whether damage has been caused or not. Their very object is to punish the act itself and thus prevent its commission, whether damage follows or not, so that the public and the workman may not be exposed to the risk arising from such forbidden acts." A similar view of the distinction between a penalty and an allegation to pay damages was taken by Bankes L.J. in Simmonds v Newport Abercarn Black Vein Steam Coal Company Limited [1921] 1 KB 616 at 624-625. See also Colne Valley Water Company v Watford and St Albans Gas Company [1948] 1 KB 500 per Lord Goddard C.J. at 504.
Nothing in s68 of the ASC Act suggests that the word "penalty" is not used therein in accordance with its usual meaning.
I am satisfied that this proceeding is not "a proceeding for the imposition of a penalty" within the meaning of s68(3) of the ASC Act. I conclude that the statements of the second respondent made during the course of his examination under s19 of the ASC Act are admissible in evidence in this proceeding.
The evidence in this matter establishes, on the balance of probabilities, the following: (a) The first respondent is a company registered under the Corporations Law of New South Wales,
(b) the second respondent, a citizen of Singapore and apparently normally a resident of Singapore, is a director and the secretary of the first respondent; (c) the second respondent was the only person in Australia with a significant involvement in the management of the first respondent; (d) the first respondent held itself out to the public as being willing and able to act as agent for members of the public in respect of foreign exchange trading; (e) the first respondent held itself out to the public as having an affiliation with Bankers Trust Australia Limited when it had no such affiliation and no authority from Bankers Trust Australia Limited to assert that it did; (f) the first respondent recruited certain individuals as "brokers" to recruit clients for the first respondent; (g) the members of the group (other than the applicant) were recruited as clients of the first respondent; (h) the first respondent purported to enter into foreign exchange trading on behalf of its clients but, in fact, it did not do so, or only rarely did so; (i) on almost every occasion on which the first respondent placed a foreign exchange order on behalf of a client, it placed at virtually the same time an equal and opposite order such that no "open" foreign exchange positions were in fact held by it; (j) the first respondent charged to its clients amounts, described as interest and other charges, said to be disbursements of the first respondent incurred on behalf of its clients when such amounts were not required to be paid, and were not paid, by the first respondent; (k) the first respondent maintained an elaborate "charade" designed to convince its clients that through their agent, the first respondent, they were engaging in genuine foreign exchange margin trading, when in fact, by reason of the first respondent placing equal and opposite orders in respect of virtually all orders placed by it, virtually no open positions were in fact ever held by the first respondent on behalf of any of its clients; (l) as part of such "charade", clients of the first respondent were required to lodge a deposit of at least $20,000 to commence "trading" and in most cases were subsequently required to pay additional monies to the first respondent as "margin calls"; (m) certain of the monies deposited by clients of the first respondent with the first respondent, or alternatively paid by clients of the first respondent as "interest" or "charges", were remitted by the first respondent to an individual, apparently associated with the second respondent, in Singapore; and
(n) to the knowledge of the first and second respondents, none of the clients of the first respondent had any proper understanding of foreign exchange margin dealing.
On behalf of the applicant it is contended that the evidence establishes breaches by the first respondent of ss51AA, 52 and 53(d) of the Trade Practices Act. Those sections, so far as is here relevant, provide as follows: "51AA(1) A corporation must not, in trade or commerce, engage in conduct that is unconscionable within the meaning of the unwritten law, from time to time, of the States and Territories." "52.(1) A corporation shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive." "53. A corporation shall not, in trade or commerce, in connexion with the supply or possible supply of goods or services or in connexion with the promotion by any means of the supply or use of goods or services - (d) represent that the corporation has a sponsorship, approval or affiliation it does not have; ........"
I am satisfied that the conduct of the first respondent with which this proceeding is concerned, was conduct "in trade or commerce" within the meaning of the Trade Practices Act.
Section 51AA of the Trade Practices Act extends the remedies available under the Trade Practices Act to unconscionable conduct to the extent that such concept is already part of the general law. The section does not expand equitable concepts of unconscionable conduct.
In Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 at 461 Mason J stated: "It goes almost without saying that it is impossible to describe definitively all the situations in which relief will be granted on the ground of unconscionable conduct."
After referring to the passages in the judgments of Fullagar and Kitto JJ respectively in Blomley v Ryan (1956) 99 CLR 362, Mason J went on at 462: "It is not to be thought that relief will be granted only in the particular situations mentioned by their Honours. It is made plain enough, especially by Fullagar J, that the situations mentioned are no more than particular exemplifications of an underlying general principle which may be invoked whenever one party be reason of some condition of circumstance is placed at a special disadvantage vis-a-vis another and unfair or unconscientious advantage is then taken of the opportunity thereby created."
In my view, the group members, other than the applicant, were at a special disadvantage vis-a-vis the first respondent in the circumstances with which this proceeding is concerned. They did not understand the nature of the transactions which they respectively instructed the first respondent to enter into as their agent. Only the first and second respondents had access to accurate information as to the manner in which the first respondent purported to carry out such instructions. I find that the first respondent deliberately and unconscientiously took advantage of its superior position of understanding and knowledge in circumstances in which its clients were in a position of special disadvantage, and without the ability to make judgments in their own best interests.
I am satisfied that conduct of the first respondent in contravention of s51AA of the Trade Practices Act has been established.
I am further satisfied that the first respondent engaged in conduct that was misleading and deceptive within the meaning of s52 of the Trade Practices Act. In particular I am satisfied that the first respondent engaged in misleading and deceptive conduct in - (a) advising its clients respectively that it was engaged in foreign currency trading on their behalf; (b) advising its clients respectively that the amount charged to them as interest was charged to the first respondent by a bank; (c) advising many of its clients that a bank required them to pay margin calls; (d) advising its clients that the first respondent would act in their respective interests.
In addition I am satisfied that the first respondent, in connection with the supply or possible supply and promotion of services, namely financial services and foreign exchange trading services, represented that it had an affiliation with Bankers Trust Australia Limited that it did not have. By so doing the first respondent acted in contravention of s53(d) of the Trade Practices Act.
Section 80 of the Trade Practices Act authorises the Court to grant an injunction where the Court is satisfied that a person has engaged in conduct that constitutes a contravention of Part IVA or V of the Trade Practices Act. Each of ss51AA, 52 and 53(d) is to be found in Part IVA or V of the Trade Practices Act. Section 75B of the Trade Practices Act has the effect that a person who has aided, abetted, counselled or procured or in any way been knowingly concerned in a contravention of a provision of Part IVA or V of the Trade Practices Act is a person involved in contravention of Part IVA or V of the Trade Practices Act for the purposes of s80 of the Trade Practices Act.
It is contended on behalf of the applicants that it is appropriate in the circumstances for the Court to make the injunctions claimed by paragraphs 1-4 of the application in respect of the first and second respondents.
There is no evidence before me on which I could positively conclude that the conduct sought to be restrained by the injunctions claimed by such paragraphs is conduct likely to re-occur. I note, however, that section 80(4) of the Trade Practices Act provides that the power of the Court to grant an injunction restraining a person from engaging in conduct may be exercised "whether or not it appears to the Court that the person intends to engage again, or to continue to engage, in conduct of that kind."
The Full Court of this Court examined the jurisdiction of the Court under s80 of the Trade Practices Act in ICI Australia Operations Pty Limited v Trade Practices Commission (1992) 38 FCR 248. Lockhart J, with whom French J agreed, at 255 stressed the public nature of the injunctive powers conferred on the Court by s80. At 256 his Honour stated: "Subsections (4) and (5) of s80 are novel because they empower the Court to grant injunctive relief notwithstanding that the defendant has not previously engaged in the prohibited conduct or does not intend to engage in it again or to continue to engage in it or there is no imminent danger of substantial damage. Yet these are the traditional requirements for equitable injunctive relief. ........ In my opinion subss(4) and (5) are designed to ensure that once the condition precedent to the exercise of injunctive relief has been satisfied (i.e. contraventions or proposed contraventions of Pt IV or V of the Act), the court should be given the widest possible injunctive powers, devoid of traditional constraints, though the power must be exercised judicially and sensibly."
The circumstances of this case include the fact that neither the first nor the second respondents appeared at trial or placed evidence before the Court. No assumptions as to their respective future intentions can safely be made. There is no evidence to suggest that the first respondent will not continue to be registered under the Corporations Law. Its asserted principal activities are "Currency Trading and Market Research Services." Although the second respondent is apparently not now in Australia, I have no reason to conclude that he is not free to return at any time. He has stated that his employment history for 15 years has been in the area of foreign currency trading. The conduct of the first and second respondents, which I have found to be in contravention of Part IVA and V of the Trade Practices Act, was, in my view, plainly deliberate and calculated to cause financial harm to clients of the first respondent.
I accept the contention made on behalf of the applicants that it would be appropriate in the circumstances of the case for injunctive relief to issue against the first and second respondents.
I turn to consider the issue of loss and damage suffered by group members other than the applicant.
Section 87 of the Trade Practices Act provides, so far as is here relevant, as follows: "(1A) Without limiting the generality of section 80, the Court may, on the application of a person who has suffered ... loss or damage by conduct of another person that was engaged in ... in contravention of a provision of Part IVA or V ... make such order or orders as the Court thinks appropriate against the person who engaged in the conduct or a person who was involved in the contravention ... if the Court considers that the order or orders concerned will compensate the person who made the application ... in whole or in part for the loss or damage ..."
Evidence was placed before the Court from 28 group members who suffered financial loss as a consequence of their dealings with the first respondent. The aggregate amount of their losses as established by the evidence is $822,803.84.
At least one group member signed a standard form letter provided to him by the first respondent apparently intended to release the first respondent from liability to the group member. The letter signed by the group members includes the following passage: "I acknowledge that all trading transactions hitherto have been verified correct by me and the balance of my trading deposit as at date ... is US$ ... only. I hereby release and agree to hold your Company harmless and indemnify your Company from all manner of claims, actions, suits, damages and expenses arising out or which may in future arise out of such transactions." I accept the submission made on behalf of the applicant that the above release is unenforceable as being unsupported by consideration.
There will be an order that the first and second respondents pay the sum of $822,803.84 to compensate the group members, other than the applicant, for their loss and damage suffered by the conduct of the first and second respondents that was engaged in in contravention of Part IVA and V of the Trade Practices Act. There will be an order pursuant to s51A of the Federal Court Act that there be included in the sum for which judgment is given an amount in lieu of interest on the whole of the sum of $822,803.84 for the period from 31 March 1996 to the date of judgment. There will also be an order that the applicant is to cause the amount of the judgment sum recovered pursuant to the Court's order to be distributed to the group members entitled in the respective proportions that the loss and damage proved to have been suffered by each of them bears to the sum of $822,803.84.
Interlocutory orders were made in this proceeding on 20 June 1996. They are expressed to be operative "until further order." Certain of the orders are directed to persons who are not parties to these proceedings. It is appropriate that the interlocutory orders be brought promptly before the Court for further consideration. I will hear counsel as to the appropriate direction to be made in this regard.
I will also hear counsel on the question of costs including reserved costs. I certify that this and the preceding 29 pages are a true copy of the reasons for judgment of the Honourable Justice Branson.
Solicitors for the Applicant: Australian Government Solicitor
Anthony Hordern and Sons Ltd
Amalgamated Clothing and Allied Trades Union of Australia
(1932) 47 CLR 1
(1979) 24 ALR 513
(1983) 50 ALR 496
(1983) 151 CLR 447
(1956) 99 CLR 362
(1992) 38 FCR 248