Australian Competition and Consumer Commission v Campbell

Introduction 1 By an interlocutory application dated 31 July 2019, the applicant (ACCC) seeks leave pursuant to s 471B of the Corporations Act 2001 (Cth) (Act) to continue proceedings against the first and second respondents, being Jump Loops Pty Ltd (ACN 611 066 589) (in liquidation) (Jump Loops) and Swim Loops Holdings Pty Ltd (ACN 607 815 636) (in liquidation) (Swim Loops) respectively, both of which are being wound up in insolvency. 2 On 6 June 2019, the ACCC filed an urgent application under r 7.01(1)(a) of the Federal Court Rules 2011 (Cth) seeking an ex parte injunction in the nature of freezing orders against the first and second respondents, the third respondent, Ian Michael Campbell, and eight other entities associated with the respondents. That application was heard by me on 6 and 7 June 2019. On 7 June 2019, I made the freezing orders sought by the ACCC for the reasons published at ACCC v Campbell [2019] FCA 886. 3 By an originating application dated 17 June 2019, the ACCC commenced these proceedings against the respondents seeking relief that includes: (a) declarations that the first and second respondents contravened (or were knowingly concerned in contraventions of) ss 18, 29(1)(g), 36(3) and 36(4) of the Australian Consumer Law (ACL); (b) orders directing the respondents to refund moneys and provide other compensation to franchisees under s 239 of the ACL; (c) orders imposing pecuniary penalties under s 224 of the ACL; (d) orders restraining the first and second respondents from making certain representations, entering into agreements and accepting payments for new franchises, or from being knowingly concerned in or party to such conduct; and (e) findings of fact for the purposes of s 137H of the Competition and Consumer Act 2010 (Cth). 4 On 5 July 2019, Registrar Gitsham of this Court made orders to wind up Jump Loops in insolvency and appointed Andrew Reginald Yeo and Michael Gess Rambaldi of Pitcher Partners as liquidators. On 16 July 2019, the ACCC's solicitors, the Australian Government Solicitor (AGS), received a letter from Mr Lindsay Bainbridge of Pitcher Partners confirming that the liquidators of the Jump Loops consented to the ACCC's application seeking leave to continue the proceeding against the first respondent. 5 On 22 July 2019, the Supreme Court of Queensland made orders to wind up Swim Loops in insolvency and appointed Andrew Ward of Worrells Solvency + Forensic Accountants as liquidator. On 26 July 2019, the AGS received a letter from Rebecca Forsyth of Redchip Lawyers, the solicitors for Mr Ward in his capacity as liquidator of Swim Loops, confirming that Mr Ward consented to the ACCC's application seeking leave to continue the proceeding against the second respondent and that he would abide by any orders made by the Court but he did not intend to otherwise participate in the proceeding.

Legal principles 6 Section 471B of the Act relevantly provides that, while a company is being wound up in insolvency, a person cannot proceed with a proceeding in a court against the company except with the leave of the Court and in accordance with such terms (if any) as the Court imposes. The purpose of the requirement for leave under this section is: (a) to ensure that the assets of a company being wound up are administered in accordance with the relevant statutory provisions and no person obtains an advantage to which he or she is not properly entitled under those provisions; (b) to enable the court to supervise claims brought against the company being wound up; and (c) to ensure that a company being wound up is not subject to a multiplicity of legal proceedings: see, for example, Zempilas v JN Taylor Holdings Ltd (in prov liq) (No 3) (1991) 55 SASR 108 at 109-110; South Australian Management Corporation v Sheahan (1995) 16 ACSR 45 at 59; 13 ACLC 328; Hewlett Packard Australia Pty Ltd v Siltek Holdings Pty Ltd [2005] NSWSC 672 at [6]. 7 The principles which govern the grant of leave were recently summarised by Perry J in ACCC v Birubi Art Pty Ltd (No 2) [2018] FCA 1785 at [8]-[9] (Birubi), citing McPherson J's summary of the relevant principles in Re Gordon Grant & Grant Pty Ltd [1983] 2 Qd R 314 at 315-317. Although Birubi concerned an application for leave made under s 500(2) of the Act, which provides that no action or civil proceeding is to be proceeded with against a company after the passing of a resolution for the voluntary winding up of that company except by leave of the Court, that section has been described as a "parallel provision" to s 471B: ACCC v Australian Institute of Professional Education Pty Ltd (in liq) [2017] FCA 521 at [24] per Bromwich J (AIPE). 8 In Birubi, Perry J set out the established principles governing the grant of leave (at [8]): (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 lodgement 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. (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 Her Honour then set out three additional principles of relevance (at [9]): (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 (admins apptd) (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 Ltd (Administrator Appointed) (No 3) [2011] FCA 348 at [5]-[6] (North J). 10 In AIPE, Bromwich J gave particular weight to the public interest considerations relied on by the ACCC in support of its application for leave under s 500(2). His Honour identified the following public interest factors (at [26]) (citations omitted): (1) the purpose of a civil penalty, and thus of such proceedings, is primarily if not wholly protective in promoting the public interest in compliance, by putting a price on contravention that is sufficiently high to deter repetition by the contravener … and by others tempted to contravene; (2) capacity to pay any penalties imposed was not a proper or relevant consideration; (3) 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 in which they are regarded, including for the purposes of general deterrence… it was not suggested that this principle was diminished in a material way by such penalties not ultimately being recoverable by reason of the respondent being in liquidation; (4) the ACCC as the body enforcing the civil penalty provisions in question has a real interest in seeking declaratory relief to vindicate a public right that the ACL has been breached… a point that may be seen to apply equally in respect of the other relief sought; and (5) there is a significant public interest in declarations of contravening conduct and 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 unable to pay the penalties.

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