Australian Competition and Consumer Commission v Birubi Art Pty Ltd

INTRODUCTION 1 On 23 October 2018, I published reasons for holding that the respondent, Birubi Art Pty Ltd (Birubi), had breached certain provisions of the Australian Consumer Law (the ACL), being Schedule 2 to the Competition and Consumer Act 2010 (Cth) (the CCA). Those breaches occurred by reason of representations made to consumers about certain product lines sold by Birubi to retailers: Australian Competition and Consumer Commission v Birubi Art Pty Ltd [2018] FCA 1595 (Birubi (No 1)). My findings were summarised in the conclusion to those reasons as follows: 163 … in my view Birubi, by representing in trade and commerce during the relevant period to consumers that the loose boomerangs, boxed boomerangs, bullroarers, didgeridoos and message stones were hand painted by Australian Aboriginal persons, engaged in misleading or deceptive conduct in breach of s 18 and subs 29(1)(a) of the ACL. As to the latter, the implied representation that the Products were hand painted by Australian Aboriginal persons was a false or misleading representation that they were of a particular style or had a particular history. I also consider that Birubi engaged in conduct that was "liable" (in the sense of more likely than not) to mislead the public into inferring that the boxed boomerangs, didgeridoos and message stones were hand painted by Australian Aboriginal persons in contravention of s 33 of the ACL, but do not consider that any breach of s 33 with respect to the loose boomerangs and bullroarers has been established. 164 Furthermore, during the relevant period, by representing to consumers that the loose boomerangs, boxed boomerangs, bullroarers, didgeridoos and message stones were made in Australia, Birubi, in trade or commerce, engaged in conduct that was misleading or deceptive, or likely to mislead or deceive, in contravention of s 18 of the ACL; and made false or misleading representations concerning the place of origin of goods in connection with the supply or possible supply of goods, or the promotion of the supply of goods, in contravention of subs 29(1)(k) of the ACL. 2 Birubi subsequently resolved to enter voluntary liquidation as of 29 October 2018 under subs 491(1) of the Corporations Act 2001 (Cth) (the Corporations Act) and a liquidator, Mr David Hambleton, was appointed on the same day. 3 On 7 November 2018, I made declarations giving effect to my reasons in Birubi (No 1) that Birubi had contravened ss 18, 29(1)(a) and (k) and 33 of the ACL. Those declarations were not opposed by the liquidator who on 9 November 2018 filed a submitting appearance in line with the position which he had explained that he would take to the litigation at the case management hearing held on 7 November 2018 and in earlier correspondence with ACCC. 4 In addition to declaratory relief, in its originating application filed on 22 March 2018 the ACCC also sought injunctive relief, civil penalties, a disclosure order, and a compliance program order under the ACL. The question of what relief, aside from the declarations, might be granted has not yet been heard and determined. However, the ACCC informed the Court that, subject to the grant of leave, it intends to seek pecuniary penalties against Birubi, although it has not yet reached a concluded view as to what, if any, other relief might be pressed. Accordingly, while the proceedings are at an advanced stage, they are not yet complete and a hearing is still required on the question of what, if any, civil penalties might be imposed, as well as any other relief that might still be sought. 5 By a notice of motion filed on 14 November 2018, the ACCC sought leave to continue these proceedings against Birubi pursuant to subs 500(2) of the Corporations Act. Birubi did not oppose this order in line with its submitting notice. 6 On 7 December 2018, after hearing submissions by the ACCC, I was satisfied that it was appropriate to grant leave and made orders accordingly. These are my reasons for making those orders.

RELEVANT PRINCIPLES 7 Subsection 500(2) of the Corporations Act provides that: After the passing of the resolution for voluntary winding up, no action or other civil proceeding is to be proceeded with or commenced against the company except by leave of the Court and subject to such terms as the Court imposes. 8 The principles governing the grant of leave under subs 500(2) were conveniently summarised by Foster J in Rushleigh Services Pty Ltd (In Liq) (Receivers and Managers Appointed) v Forge Group Ltd (In Liq) (Receivers and Managers Appointed) [2016] FCA 1471 at [15] (referring to the decision of McPherson J in Re Gordon Grant & Grant Pty Ltd [1983] 2 Qd R 314 at 315-317 which was approved in Vagrand Pty Ltd (In Liq) v Fielding (1993) 41 FCR 550 at 554-555 (the Court)): (a) A decision granting or refusing leave to proceed against a corporation in liquidation involves the exercise of a judicial discretion; (b) The prohibition against commencing or proceeding with an action or other proceeding against a company once a winding up order is made or the company is placed into liquidation is a feature of companies legislation of long standing; (c) Without the relevant restriction, a corporation in liquidation would be subjected to a multiplicity of actions which would be both expensive and time-consuming, as well as in some cases completely unnecessary… (d) Generally, what is substituted for litigation in the ordinary form is a procedure by which a claimant lodges a verified proof of debt with the liquidator, who admits or rejects it wholly or in part, and from whom an appeal lies to a judge who determines that appeal de novo; (e) A claimant should proceed by way of lodgment of a proof of debt unless he or she can demonstrate that there is some good reason why a departure from that procedure is justified in the case of the particular claim in dispute; and (f) It is impossible to state in an exhaustive manner all of the circumstances in which leave to proceed may be appropriate. However, in the past, those circumstances have been said to include factors such as the amount and seriousness of the claim, the degree of complexity of the legal and factual issues involved and the stage to which the proceedings, if already commenced, may be progressed. 9 In addition, as I explained by analogy in Australian Competition and Consumer Commission v Phoenix Institute of Australia Pty Ltd (subject to Deed of Company Arrangement) [2016] FCA 1246; (2016) 116 ACSR 353 (Phoenix) with respect to the exercise of the discretion to grant leave to proceed against a company in a deed of company arrangement under subs 444E(3) of the Corporations Act: (1) The question of whether leave should be granted turns upon the exercise of discretion. In this regard, each application must turn upon its own particular facts and the question cannot be approached as a "shopping list" of factors: Australian Competition and Consumer Commission v ACN 135 183 372 (Administrators Appointed) (formerly known as Energy Watch Pty Ltd) [2012] FCA 586 at [5] (Marshall J); Larkden Pty Ltd v Lloyd Energy Systems Pty Ltd [2011] NSWSC 1305; (2011) 285 ALR 207 at [40] (Hammerschlag J). (2) The Court should not assist creditors to improve their position vis a vis other creditors: Commercial Banking Co of Sydney Ltd v George Hudson Pty Ltd (In Liq) (1973) 131 CLR 605 at 613 (Menzies J). (3) The public interest in enforcing contraventions of the ACL is a relevant consideration and the weight to be afforded to that factor will turn upon a consideration of all of the circumstances of the particular case: Australian Competition and Consumer Commission v Advanced Medical Institute Pty Limited (Administrator Appointed) (No 3) [2011] FCA 348 at [5] - [6] (North J). (Phoenix at [86], [88] and [89] respectively; approved on appeal in Phoenix Institute of Australia Pty Ltd v Australian Competition and Consumer Commission [2017] FCAFC 155 at [15]-[16] (the Court)) 10 With respect to the last of these matters, in Australian Competition and Consumer Commission v Australian Institute of Professional Education Pty Ltd (in liq) [2017] FCA 521 (AIPE) at [26], Bromwich J gave particular weight to the public interest factors relied on by the ACCC, as the relevant regulator, in support of the grant of leave to proceed. The factors identified by his Honour were as follows: (1) the purpose of a civil penalty, and thus of such proceedings, being to primarily, if not wholly, protect the public interest in corporations complying with the ACL by putting a price on contraventions that is sufficiently high to deter repetition by the contravener and by others tempted to contravene; (2) the fact that even if a company is in liquidation, it may still be appropriate to order that it pay penalties as a measure of the Court's disapproval of the contraventions and as a measure of the seriousness with which they are regarded, including for the purposes of general deterrence; (3) the fact that, in seeking declaratory and other relief, the ACCC's real interest is to vindicate a public right that has been breached; and (4) the significant public interest in declarations of contravening conduct and the imposition of penalties being on the public record in aid of deterrence, which is not defeated by the fact that the company is in liquidation and may be unable to pay the penalties. 11 However, as his Honour also explained, the capacity to pay any penalties imposed is not a proper or relevant consideration.

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