Australian Competition and Consumer Commission v Get Qualified Australia Pty Ltd

BEACH J: 1 The background to the present matter is set out in my reasons for judgment on the freezing order application in Federal Court of Australia proceeding VID896/2016 (the freezing order proceedings), Australian Competition and Consumer Commission v Get Qualified Australia Pty Ltd [2016] FCA 976. I incorporate my discussion and findings therein as part of the present reasons. 2 The Australian Competition and Consumer Commission (ACCC) now seeks an injunction restraining Get Qualified Australia Pty Ltd (GQA) until the determination of this proceeding from: (a) commencing or progressing (directly or indirectly) any debt collection activities against "affected consumers" (as defined in the interlocutory application); (b) reporting any "affected consumer" to any credit reporting agency; or (c) threatening to bring, or bringing, legal proceedings against any "affected consumer". 3 An "affected consumer", as originally defined by the ACCC, was one who: (a) entered an agreement with GQA on or after 1 January 2015 in relation to the attainment of a qualification from a registered training organisation through the recognition of a prior learning process; and (b) had not received the requested qualification. 4 I will return to that definition of "affected consumer" later. In support of its application, the ACCC has relied upon the following affidavits: (a) an affidavit of Elizabeth Holzer sworn on 3 August 2016 and filed in the freezing order proceedings; (b) an affidavit of a consumer, WJ, affirmed on 2 December 2016; (c) an affidavit of John Fogarty affirmed on 12 December 2016; and (d) an affidavit of a consumer, MK, affirmed on 15 December 2016. 5 In opposition, the respondents have relied upon an affidavit of Adam Mazen Wadi affirmed on 15 December 2016 (and also an earlier affidavit of 17 August 2016 filed in the freezing order proceedings). 6 The relevant principles applicable to the present application are not in doubt. 7 The Court has an inherent jurisdiction and power to grant an interlocutory injunction under s 23 of the Federal Court of Australia Act 1976 (Cth) and jurisdiction conferred under ss 232 and 234 of the Australian Consumer Law being Schedule 2 to the Competition and Consumer Act 2010 (Cth). 8 The ACCC must demonstrate that it has a prima facie case and that the balance of convenience favours the grant of an injunction, either because the applicant or third party consumers will suffer an injury for which damages will not be an adequate remedy or because the circumstances otherwise justify the grant of an injunction. As pointed out in Australian Broadcasting Corporation v O'Neill (2006) 227 CLR 57, the expression "prima facie case" is satisfied by showing a sufficient likelihood of success to justify in the circumstances the preservation of the status quo pending trial. Moreover, the requisite sufficiency of such likelihood of success to justify the grant of the injunction is dependent upon the nature of the right being asserted and the practical consequences that are likely to flow if an injunction was granted. 9 Let me also make some brief observations at this point on the balance of convenience. 10 The balance of convenience looks at what the inconvenience, injury or injustice to the applicant or third party consumers would be if the injunction were refused and seeks to weigh that against the inconvenience, injury or injustice to the respondent if the injunction were granted. Only if the balance lies in favour of the applicant or third party consumers, that is, if the inconvenience, injury or injustice to the applicant or third party consumers if the injunction were refused outweighs the respondent's prejudice, would an injunction be granted. Further, it is also necessary to assess the balance of convenience in the context of considering the strength of the prima case (see Samsung Electronics Co Ltd v Apple Inc (2011) 217 FCR 238 at [67]). The stronger the prima facie case, the less strong the balance of convenience has to weigh in favour of the applicant or third party consumers. Putting it slightly differently, if the balance of convenience is more equally poised, but the applicant has a strong prima facie case, then the interaction between the two limbs may tip the balance in favour of granting an injunction. 11 Before turning to the merits of the present application, I would make one other point. 12 In addition to the Court's inherent jurisdiction and s 23 of the Federal Court of Australia Act, the ACCC has relied on ss 232 and 234(1) of the Australian Consumer Law. Section 234(1) of the Australian Consumer Law provides that: If an application is made under section 232, the court may, if it considers it is desirable to do so, grant an interim injunction under this subsection pending the determination of the application. 13 In [10] to [13] of its originating process, the ACCC has sought relief against GQA pursuant to s 232 of the Australian Consumer Law. Whilst those injunctions are in a different form to the interlocutory injunction now sought, the ACCC submits that there is a sufficient connection between the final injunctive relief and the proposed interlocutory injunction to enliven the Court's jurisdiction under s 234. It says that GQA's debt collection activities against affected consumers is a component of the impugned conduct that the ACCC says is unconscionable in contravention of s 21. 14 For present purposes, I would prefer to source, and it is only necessary to source, the Court's power to its inherent jurisdiction and s 23 of the Federal Court of Australia Act in terms of disposing of the present injunction application, without deciding the availability of that separate statutory source of power.

Prima facie case 15 The ACCC alleges that GQA has contravened ss 18, 21 and 29 of the Australian Consumer Law and that one or more terms of the agreements between GQA and its consumers contain unfair contract terms within the meaning of ss 23 and 24 of the Australian Consumer Law. 16 I have already determined, albeit in the context of the freezing order proceedings, that there is evidence supporting a good arguable case that: (a) GQA has contravened ss 18 and 29 of the Australian Consumer Law and that it may become liable to pay money by way of penalty, compensation, refund or otherwise; (b) GQA has engaged in unconscionable conduct in contravention of s 21 of the Australian Consumer Law; and (c) one or more terms of the agreements between GQA and consumers contain unfair contract terms within the meaning of ss 23 and 24 of the Australian Consumer Law. 17 In addition to the evidence filed in the freezing order proceedings, there is clear evidence before me that GQA has taken debt collection activities against WJ (a particular affected consumer) in the following circumstances: (a) WJ entered into an agreement with GQA under which GQA promised to assist him to obtain a qualification from a registered training organisation in return for a fee; (b) WJ entered that agreement on the basis of GQA's representations that he was eligible to obtain the promised qualification and that if he was unable to obtain that qualification it would provide him with a 100% refund; (c) WJ was not eligible for the promised qualification, has not obtained the qualification that GQA promised him and has not received any services of value from GQA; and (d) WJ and his father have made numerous requests for a refund of monies WJ has paid to GQA, but GQA has refused those requests. 18 GQA has taken debt collection activities against WJ. The ACCC has asked GQA to cease its debt recovery activities against consumers like WJ pending the determination of the present proceedings. GQA has refused that request. 19 Moreover, there is similar evidence before me concerning another affected consumer, MK (see his affidavit of 15 December 2016). There is also evidence before me that GQA's debt collection activities are not limited to WJ and MK and that GQA generally has engaged at least two debt collection agencies to pursue action against affected consumers. 20 In my view, the "prima facie case" limb is satisfied. Indeed, on the material before me, the ACCC would appear to have a good prima facie case in relation to the claims of specific consumers that have been detailed before me. The respondents have made submissions concerning the weakness of the ACCC's prima facie case (see [24] to [26] of their written submissions), but I do not find them persuasive.

Balance of convenience 21 As is more usually the position, the difficult issue in the present case relates to the balance of convenience limb. 22 Let me deal first with three matters. 23 First, the ACCC has not given and I will not require it to give an undertaking as to damages. I have discussed the reasons for this in my earlier ruling in the freezing order proceedings. But the absence of an undertaking places GQA at a disadvantage because any prejudice to it flowing from the orders cannot be cured by the undertaking. This is a significant matter in my deliberations and I have given this significant weight. 24 Second, GQA asserts that there is no utility in the proposed injunction on the basis that the relevant debt recovery actions are undertaken by a third party that conducts its debt recovery activities at the request of but autonomously from GQA. But in my view, GQA is capable of instructing its agents to cease making demands on affected consumers. The assertion of GQA lacks substance. 25 Third, GQA asserts that I do not have the power to grant the proposed injunction, on the basis that this Court does not have jurisdiction to "impose a stay of proceedings in any other court in Australia". The submission is misconceived. The interlocutory injunction sought by the ACCC is not intended to restrain a relevant court or tribunal from exercising its jurisdiction to determine a proceeding before it relating to the recovery of any money owing under an agreement between GQA and any affected consumer. Rather, the interlocutory injunction seeks to restrain GQA, a party to the present proceeding, from commencing or maintaining debt recovery activities or threatening to bring or bringing legal proceedings against any affected consumer. It is not in doubt that this Court has the power to make such an in personam order. In any event, debt collection activities can include non-legal proceedings. Moreover, in the present case there is little, if any, evidence before me of specific other court proceedings involving debt recovery action taken by GQA against any affected consumers in any event. 26 Let me now turn to the other main considerations concerning the balance of convenience question. 27 In my view, the following factors weigh in favour of an interlocutory injunction being granted, but in a narrower form than that sought by the ACCC against GQA in its interlocutory application: (a) Principal final orders are sought by the ACCC for non-party consumer redress under s 239 of the Australian Consumer Law. The relief sought includes a determination that the agreements between GQA and any affected consumers are void ab initio. The ACCC seeks a refund to consumers of all monies paid under contracts that are declared void ab initio. (b) But GQA has limited assets and there is potentially a large number of affected consumers. I have previously found, on an interim basis, that GQA has tangible assets of somewhere between $1 million to $2 million at most. Further, GQA provided the ACCC with a USB of materials on 22 November 2016, which included a "Monthly Financial Report - June 2016" that appears to record that GQA generated sales of [CONFIDENTIAL] in that financial year and experienced a "completion rate average of 43% YTD - excluding cancelled/refunds". The ACCC says that at least 60% of consumers who paid money to GQA after 1 January 2015 did not receive the qualification that GQA had promised them. In these circumstances, GQA may not be in a position to refund affected customers if the ACCC ultimately succeeds in its principal proceeding and the Court orders the non-party consumer redress sought. That risk applies to those consumers who have already paid GQA. But the risk will be exacerbated if GQA manages to extract further money from affected consumers through its current debt collection activities. (c) In addition, if GQA is not restrained from its debt collection activities in relation to the affected class of consumers, it is likely that this activity will have an adverse impact on the credit ratings of such affected consumers. As the ACCC rightly contends, it is unclear how those consumers could rectify the damage to their credit rating in the event that the ACCC prevailed in the present proceeding and obtained non-party consumer redress. (d) An additional factor that in my view weighs in favour of the grant of a narrower form of the injunction sought is the fact that the debt recovery activities (and ancillary activities) currently engaged in by GQA has the potential to harass witnesses who are currently assisting the ACCC. But I must say, I have given that factor less weight than the other factors on the balance of convenience. 28 The ACCC has contended that there is no significant detriment to GQA if the proposed orders are made. It says that if GQA ultimately prevails in the substantive proceeding and it is now restrained from taking debt collection activities against affected consumers until the determination of the proceeding, GQA will be able to take action to enforce the purported debts after judgment. It is said that this is unlikely to be a protracted period as the proceeding is listed for trial on 28 March 2017. I reject the ACCC's position on this aspect. In my view it is unrealistic. GQA is likely to be significantly adversely affected by the orders sought, although perhaps not to the extent that it has asserted. 29 Mr Wadi has deposed to substantial prejudice, if the orders were to be made, in his affidavit of 15 December 2016 at [34] and [35] which states the following: 34. The amount currently outstanding from customers of GQA who entered into an agreement or arrangement with GQA on or after 1 January 2015 in relation to the attainment of a qualification from a registered training organisation through the recognition of prior learning process and who have not received the requested qualification is currently approximately [CONFIDENTIAL]. If GQA is restrained from demanding payment of this amount or commencing proceedings to recover it, I believe that it will have a very serious adverse impact on GQA's cashflow… 35. GQA's practice is that it will only provide a qualification to a customer where a Registered Training Organisation has indicated that the applicant is eligible for and will provide a qualification and the customer has provided payment for the qualification in full. This is because in my experience and belief, once customers obtain the qualification they are seeking, they are more likely to be slow to pay or not pay at all. I believe that the proposed injunction would restrain GQA from undertaking debt recovery actions or proceedings against customers who: (a) had the experience necessary to obtain a qualification through RPL but failed to provide the evidence necessary to obtain the qualification because, for example, they changed their minds about the utility of the qualification and sought a refund instead; (b) represented to GQA that they had [a] certain level of prior learning but were unable or unwilling to prove it, such as WJ; (c) had been approved by an RTO as eligible for a qualification but no longer desired it and therefore declined to make full payment. 30 Whilst there is considerable force in this point, the position appears to have been over-stated. 31 First, on the current figures before me, it would seem that the amount outstanding is approximately only 10% of annual revenue. In other words, the injunction at most would only impact on 10% of cash flow or at least in that order of magnitude. 32 Second, I intend only to grant an injunction which applies to a narrower sub-set of consumers who have amounts outstanding, but not all affected consumers who have amounts outstanding. Accordingly, only around 5% or so of cash flow is likely to be affected by the narrower form of injunction that I propose to make. 33 Third, I appreciate that GQA has the right to pursue legitimate debt recovery mechanisms. But the class of consumers that the injunction in my proposed narrower form is intended to cover are equally entitled to protection. I accept though that some prejudice will be caused to GQA even by the narrower form of injunction that I propose to make. 34 Let me address another issue concerning the status quo. The ACCC has contended that the orders are designed to preserve the status quo. In one sense that is an accurate description, but in another sense it is not. 35 It is an accurate description in relation to those consumers that have sought a refund. The status quo is that, for the moment, GQA retains such consumers' money. But equally, the status quo is that GQA has not recovered further money from such consumers. A grant of the injunction in relation to such consumers will preserve that current position. 36 But at a broader level, I agree with GQA that the status quo is that GQA is currently pursuing debt recovery mechanisms against non-paying consumers. I am being asked to restrict that activity and so, in that broader sense, altering the status quo. But in my view, the alteration to the status quo in that broader sense is justified in relation to a particular class of consumer for the reasons identified. 37 Finally, the respondents have asserted that the ACCC has engaged in relevant delay in its investigation and in commencing proceedings. I disagree. I also do not accept that the ACCC has delayed in bringing the present interlocutory application. But in any event, the respondents have not pointed to any significant prejudice flowing from any such delay.

Conclusion 38 The respondents have contended that the injunction sought by the ACCC goes far beyond what might reasonably be required. It would restrain GQA from asserting that it has any right to payment against any consumer with whom it has done business since 1 January 2015 who did not receive a qualification, even where that was through no fault of GQA. That contention is good in relation to the breadth of the injunction originally sought by the ACCC. But that contention now has diminished force given that I propose to limit the injunction to a subset of the relevant consumers who are likely to have claims against GQA of the type identified by the ACCC in its originating process. 39 Given: (a) the breadth of the injunction initially sought that would restrain GQA from pursuing legitimate debt recovery mechanisms; (b) the substantial prejudice that would be caused to GQA if I made the broader injunction; and (c) the fact that the ACCC has not given an undertaking as to damages; on the balance of convenience question, such factors justify my refusal of the broader injunction initially sought by the ACCC. 40 But I will grant an order on a narrower basis in the terms provided to me this morning by the ACCC and discussed with counsel, which limits the injunction to the pursuit of debt recovery proceedings against a narrower class of affected consumers being those who have complained to GQA or the ACCC or who have sought refunds from GQA. In a sense, they are a reasonable proxy class for those who are likely to have claims against GQA of the type identified by the ACCC in the present proceedings. 41 I will make orders accordingly. I certify that the preceding forty-one (41) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Beach.