Australian Competition and Consumer Commission v Henry Kaye and National Investment Institute Pty Ltd

(a) that Henry Kaye would teach 5 volunteers (who are ordinary Australians) to become property millionaires (meaning having net wealth in property investments exceeding one million dollars) in 6 months without using their own money or taking on the risk of debt; when Henry Kaye did not have reasonable grounds for making that representation. (b) that Henry Kaye could turn ordinary Australians into property millionaires; whereas Henry Kaye could not in fact turn ordinary Australians into property millionaires.

2. Henry Kaye engaged in conduct that was misleading or deceptive or likely to mislead or deceive, in contravention of section 52 of the TPA, by making, in advertisements in the form set out in Annexure B to the Amended Statement of Claim, published on the internet site in September 2003, representations:-

(a) that anyone, by following Henry Kaye's property investment strategies, can acquire a million dollar plus property portfolio with no money down, no equity, no debt and a price protection guarantee (meaning that if the market were to go down, they would not lose money); whereas Henry Kaye's property investment strategies do not in fact enable anyone to acquire a million dollar plus property portfolio with no money down, no equity, no debt and without the risk that if the market were to go down they would not lose money. (b) that Henry Kaye would make 5 ordinary Australians into property millionaires (meaning having net wealth in property investments exceeding one million dollars) in just 6 months using no money down, no debt and no equity; when Henry Kaye did not have reasonable grounds for making that representation. (c) that those 5 people to be selected to become property millionaires would be representative of the ordinary Australian; when Henry Kaye did not have reasonable grounds for making that representation. (d) that Henry Kaye would turn a thousand ordinary people into property millionaires (meaning having net wealth in property investments exceeding one million dollars), within 12 months; when Henry Kaye did not have reasonable grounds for making that representation. (e) that at the free seminars it would be proved that Henry Kaye could teach anyone to acquire a million dollar plus property portfolio within 6 months; when Henry Kaye did not have reasonable grounds for making that representation.

(f) that Henry Kaye would teach 5 volunteers to build a million dollar property portfolio in 6 months using no money down, no equity and no debt; when Henry Kaye did not have reasonable grounds for making that representation.

3. Pursuant to section 80 of the TPA, Henry Kaye be permanently restrained, by himself, his servants or agents, or otherwise howsoever:

(a) from causing to be broadcast or published in any form whatsoever the radio advertisements referred to in paragraph 1 or radio advertisements substantially the same as any of them; and (b) from making, or causing to be made, in a radio broadcast, any of the representations referred to in paragraphs 1(a) and (b), or any representation to substantially the same effect as any of them.

4. Pursuant to section 80 of the TPA, Henry Kaye be permanently restrained by himself, his servants or agents, or otherwise howsoever:

(a) from publishing or causing to be published in any form whatsoever the Internet advertisements referred to in paragraph 2, or Internet advertisements substantially the same as any of them; (b) from making, or causing to be made, on the Internet, any of the representations referred to in paragraphs 2 (a) to (f), or any representation to substantially the same effect as any of them. 5. The first respondent pay the applicant's costs of this proceeding, excluding the costs reserved on the motion, notice of which is dated 23 December 2003, on a party-party basis to be taxed in default of agreement.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

BETWEEN: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION

REASONS FOR JUDGMENT introduction 1 On 22 October 2004, I directed that the applicant file a minute of order in accordance with the reasons for judgment delivered that day. I also directed that the parties file and serve short submissions as to costs. The question of costs now falls for determination. background 2 In this proceeding, the applicant sought declaratory, injunctive and other relief against the first respondent in respect of statements made on the radio, the Internet and in newspapers in September 2003, upon the basis that these statements were misleading or deceptive, or likely to mislead or deceive, in contravention of s 52 of the Trade Practices Act 1974 (Cth) ("the TPA"). The applicant was substantially successful at trial, although it did not succeed on its claim in respect of the newspaper representations, because there was insufficient evidence that the first respondent knew that his strategies were not reasonably capable of achieving the represented results or that the representations were misleading or deceptive. Accordingly, the applicant failed to establish that the first respondent was liable as an accessory under s 75B of the TPA in respect of the newspaper advertisements. 3 Whilst I indicated in my reasons for judgment of 22 October 2004 that I would give declaratory and injunctive relief, I also stated that, for the reasons there given, I would not make the order for corrective advertising as proposed by the applicant. the parties' submissions as to costs 4 The parties filed written submissions as to costs on 8 November 2004. The applicant filed submissions in reply, without leave, on 15 November 2004: compare Carr v Finance Corporation of Australia Ltd (No 1) (1981) 147 CLR 246 at 251 per Mason J. 5 The applicant submits that, since it has succeeded substantially on its application, the appropriate order is that the first respondent pay its costs of the proceeding, including any reserved costs, on a party-party basis, to be taxed in default of agreement. The first respondent submits that, since he has successfully defended the claim in relation to the newspaper advertisements and the application for corrective advertising, then he should be awarded the costs in relation to these matters. He submits, in the alternative, that any costs order in favour of the applicant should be reduced by one-third, reflecting the fact that the applicant succeeded only in two of its three claims. Further, the first respondent seeks the costs arising from a motion, notice of which was dated 23 December 2003. (The reference in his submissions to "22 December 2003" is apparently erroneous.) He submits that he was successful on this motion and that he should be awarded costs upon the usual basis, alternatively, the costs of the motion should lie where they fall. consideration 6 The power of the Court to make orders for costs derives from s 43 of the Federal Court of Australia Act 1976 (Cth). The power, which is discretionary, "must be exercised judicially and not against the successful party except for some reason connected with the case": see Ruddock v Vadarlis (No 2) (2001) 115 FCR 229 at 234 per Black CJ and French JJ. As their Honours said in that case, at 234-235: Within the general discretion of the courts to award costs it is accepted by decisions in both Australian and English jurisdictions that: · Ordinarily costs follow the event and a successful litigant receives costs in the absence of special circumstances justifying some other order. · Where a litigant has succeeded only upon a portion of the claim, the circumstances may make it reasonable that the litigant bear the expense of litigating that portion upon which he or she has failed. · A successful party who has failed on certain issues may not only be deprived of the costs of those issues but may be ordered as well to pay the other party's costs of them. In this sense 'issue' does not mean a precise issue in the technical pleading sense but any disputed question of fact or law. See Hughes v Western Australian Cricket Association (Inc) and Ors (1986) ATPR 40-748 at 48,136; approved by the Full Court in Queensland Wire Industries Pty Ltd v Broken Hill Co Ltd (1987)17 FCR 211 at 222. At 236, their Honours continued: Usually the circumstances in which a successful party is denied all or part of its costs have to do with its conduct of the proceedings. The Federal Court Rules 1979 (Cth) make specific provision for the case in which a judgment is obtained which is not more favourable than terms previously offered by a respondent: O 23, r 11. Within the general discretion to award costs, costs may be refused where, for example, the applicant has made an exaggerated claim which has occupied a significant proportion of the proceedings and has succeeded only on a minor aspect of its original claim. Costs may be apportioned according to success or failure on particular distinct or severable issues … . And a trial judge may award only a proportion of the successful party's costs if the conduct of that party at trial was such as to unreasonably prolong the proceedings …. (Citations omitted) 7 As their Honours acknowledge in the above passage, whilst an order for costs in ordinary circumstances will be made in favour of a successful party, there are cases in which an order to this effect would not be just and reasonable as, for example, in a case where the conduct of a successful party has prolonged the proceeding unreasonably: see, e.g., Latoudis v Casey (1990) 170 CLR 534 at 544 per Mason CJ and Cummings v Lewis (1993) 41 FCR 599 ("Cummings v Lewis") at 603 per Cooper J (with whom Sheppard and Neaves JJ generally agreed). 8 In considering whether a successful defendant should be deprived of an order for costs, Goldberg J observed in Dr Martens Pty Ltd v Figgins Holdings Pty Ltd (No 2) [2000] FCA 602 ("Dr Martens") at [54]: The observations … in Hughes v Western Australia Cricket Association (Inc) (supra) and Cummings v Lewis (supra) show that in appropriate circumstances a successful defendant might be disentitled to an order for costs in respect of discrete and separate issues. Nevertheless, a court should be reluctant to embrace the proposition that, as a general rule, it is appropriate to undertake an enquiry as to who was successful in relation to particular issues in a case to determine whether there should be an apportionment of costs against a successful party. A court should not be too ready to disallow costs simply because a party has failed upon an issue, unless it be quite a separate and distinct issue from the issues in respect of which it succeeded or unless there be some element of unreasonableness or inappropriate conduct in relation to that issue: cf Verna Trading Pty Ltd v New India Assurance Pty Ltd [1991]1 VR129 at 152-154. 9 As Toohey J observed in Hughes v Western Australia Cricket Association (Inc) (1986) ATPR 40 -748 at 48,136, in Cretazzo v Lombardi (1975) 13 SASR 4 at 16 Jacobs J: sounded what he described as "a note of cautious disapproval" of applications to apportion costs according to the success or failure of one party or the other on the various issues of fact or law which arise in the course of a trial. 10 The conduct of the applicant in this proceeding was not such as to deprive it of the benefit of an order for costs. Referring to the evidence in the case, especially concerning the newspaper representations, however, the first respondent submits: The claim relating to the newspaper advertisements raised discrete issues of law and fact which occupied a significant amount of time in preparation and at trial. A substantial part of the applicant's evidence was directed solely to this part of the claim. 11 I reject the first respondent's submissions in this regard. The applicant relied on numerous short affidavits in support of its claim concerning the newspaper representations, but none of the relevant deponents was required for cross-examination. The first respondent relied on an answering affidavit, but it too was comparatively short. The applicant's cross-examination relevant to the newspaper representations was confined. The matter of objections was not substantial. The applicant would, moreover, have succeeded on the newspaper representations claim but for the fact that the evidence regarding the first respondent's knowledge was insufficient. The first respondent did not give any evidence at trial. 12 Bearing in mind the statements in the authorities to which I have referred, in the circumstances of the case, it would not be appropriate to apportion costs in the manner for which the first respondent contends. Further, it would not be appropriate to deprive the applicant of the benefit of an award of costs on account of its failure to satisfy me that I should make an order for corrective advertising. Apart from the matter of corrective advertising, the applicant succeeded in obtaining relief of the relevant kind. 13 The matter of the motion, notice of which was dated 23 December 2003, raises different considerations. By this motion, the first respondent sought, amongst other things, to have certain paragraphs of the statement of claim struck out, alternatively, further and better particulars of the allegations contained in these paragraphs. The first respondent drew my attention to the fact that: Prior to making the application Mr Kaye's then solicitors, Maddocks, sent a lengthy letter to the applicant's solicitors requesting further and better particulars to the Statement of Claim before 9 January 2004. Counsel for the first respondent went on: Justice Goldberg heard the application on 24 December 2003. His Honour ordered the applicant to file and serve an Amended Statement of Claim incorporating proper particulars of paragraphs 4, 8, 9, 13, 14, 15, 21, 22, and 27 of the existing Statement of Claim and Amended Application, the amendments made by the applicant following the hearing of [the first respondent's] Notice of Motion were substantial. Because the application did not finish until late on Christmas Eve Justice Goldberg reserved costs to "preserve" [the first respondent's] position … . His Honour was plainly not contemplating an award of costs in favour of the applicant. [The first respondent's] Notice of Motion was successful and he should be awarded costs on the usual basis that costs follow the event. Alternatively, if the Court is not minded to make an order for costs in favour of [the first respondent], it is submitted that the costs of the Notice of Motion should lie where they fall and the Court should order that the costs of the Notice of Motion are to be excluded from reserved costs, so as to avoid the consequence under O 62 r 15 of the Federal Court Rules that reserved costs follow the event. 14 I accept that, on the hearing of the motion on 24 December 2004, the first respondent substantially succeeded on its claim for further and better particulars. Also on 24 December 2003, the first respondent made an application for the adjournment of the trial, which application failed. On that day, Goldberg J explained why he proposed to reserve the costs of the hearing on 24 December 2004 in the following terms: … I would propose to reserve the costs of the hearing today, firstly because of the issue in relation to the adjournment which was your application and, although you've been successful in relation to the particulars, I'm conscious of the fact that the issues in relation to the particulars should have been raised at an earlier occasion on at least two occasions when they weren't, which might have mitigated the effects of the costs of the hearing today. It seems to me that if I reserve the question of costs, that preserves your position. I particularly note that, amongst other things, his Honour found that the application for particulars should have been made earlier in the proceeding; and that a timely application "might have mitigated the effects of the costs of the hearing" on 24 December 2003. 15 Pursuant to O 62, r 15 of the Federal Court Rules, where the costs of a motion, application or other proceeding are reserved by the Court, the costs so reserved shall follow the event unless the Court otherwise orders. Bearing in mind his Honour's observations, it does not seem to me appropriate that the first respondent should have the costs of his motion. Having regard to the outcome of the motion and his Honour's comments, it would be appropriate to let the costs of that motion lie where they fall. 16 Accordingly, for the reasons stated above, I would order that the first respondent pay the applicant's costs of the proceeding, excluding the costs reserved on the motion, notice of which is dated 23 December 2003, on a party-party basis to be taxed in default of agreement. In accordance with the reasons for judgment delivered on 22 October 2004, I would also make the declarations and orders in the form appearing at the commencement of these reasons. I certify that the preceding sixteen (16) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Kenny.

Counsel for the Applicant: D G Collins SC with M P Barrett

Solicitor for the Respondent: Lewis Allen Janover from 23 August 2004