Australian Competition and Consumer Commission v IMB Group Pty Ltd

Federal Court of Australia|1988-07-16|Before: Drummond J

1 The first to tenth and the twelfth respondents applied by motion for orders that applications number QG 175 of 1993 and QG 77 of 1994 be dismissed as against the first to tenth and the twelfth respondents, or an order that these applications be permanently stayed. The first and third respondents are now in liquidation. The applicants have not obtained leave to continue the action against them. There is no evidence that this matter is brought with the authority of their liquidators. The second respondent has been dissolved. The eleventh respondent some time ago left Australia and has taken no part in the proceedings. I therefore take the application now before me to be made by the fourth to tenth and twelfth respondents. 2 The foundation for the application is the making by these respondents a little while ago of an open offer to give various undertakings not to engage in activities of the kind alleged by the Australian Competition and Consumer Commission in the action to constitute conduct by those respondents that contravene ss 47(6) and 52 the Trade Practices Act 1974 (Cth). The undertakings are, however, offered without any admission that these respondents have ever engaged in any such contraventions in the past. The respondents also say that they have long since ceased to carry out any activities in relation to the Logan Lions project out of which the action has arisen. It is said that the offer to give undertakings made against this background of cesser of activity makes the continued prosecution of the proceedings futile. 3 The ACCC is not prepared to accept the respondents' offer of undertakings, but insists on a determination by the Court of the issues raised by its action and, in particular, the issues whether the respondents engaged in conduct in contravention of the provisions of the Trade Practices Act to which I have referred. 4 Senior counsel for the respondents made it clear that the application is brought under O 20 r 2(1)(b) and (c). No reliance is placed on r 2(1)(a). The general rule is that an application to terminate an action summarily should be brought at an early stage of the proceedings. See Barnes v Ranger Uranium Mines Pty Ltd (1993) 44 FCR 331. But that rule is not absolute and no complaint is made by the applicant in the action about the lateness of the motion. 5 The respondents rely upon a number of authorities. The three most relevant are Mayne Nickless Ltd v Transport Workers Union of Australia (Full Court of the Federal Court, unreported, 16 July 1988); Beitseen v Johnson (1989) 29 IR 336 and Orison Pty Ltd v Strategic Minerals Corporation NL (1988) 81 ALR 183. 6 In Mayne Nickless, the Full Court permanently stayed an appeal after refusing to hear argument by the appellant on the challenges sought to be made to a decision at first instance. The Court's reasons for following this course appear from the following passages in the judgment:

When the appeal came on for hearing before us today it became apparent that the legal issues between the parties no longer had any practical significance. It is common ground that after the orders were made by Ryan J on 24 December 1997 the parties resolved their differences, and indeed that Ryan J, whose orders expressly left further matters to be resolved, has been informed there will be no further steps in the proceedings before him. It is also common ground that the appellant no longer operates its IPEC business and that none of the individual respondents is now engaged by the appellant. It is common ground too that the terms of settlement preclude there being any remaining question as to the imposition of penalties or as to any form of court-ordered compensation.

What has happened here is that there was a serious industrial dispute which led to litigation but which was then settled between the parties.

The courts have an obligation to conduct their proceedings, and to deal with an ever-increasing workload, with as much expedition as the overriding demands that justice permit. No encouragement should be given, therefore, to the use of scarce judicial time to decide appeals that are essentially moot. There are other litigants with cases pending before the Court for hearing or delivery of judgment and their claims involve the determination of substantial legal rights of practical importance. This is not the situation in this appeal. (See and compare Beitseen.)

9 Mayne Nickless is a long way from this case. The parties here have not agreed on how the dispute between them is to be resolved. All that has happened is that the litigants on one side have made an offer for the determination of the case of something less than the relief to which the litigant on the other side claims it is entitled. That offer is not, however, acceptable to the other party. 10 Beitseen is closer to the present case. There, there was an appeal against an order at trial that a union member had been validly elected in November 1988 to an office in the union. His term expired in December 1989. The respondents to the appeal applied in late September 1989 to strike it out on the grounds that new election for this office, which was in progress at the time of hearing of the motion in late November 1989, would render academic any determination that might be made on the appeal. Beitseen was unlike Mayne Nickless, but like the present case, in that the parties to the appeal in Beitseen had not agreed upon a resolution of the dispute out of which the litigation had arisen. The Full Court, nevertheless, permanently stayed the appeal. The Court said at 337 and 338:

In the circumstances revealed by us there is, in the words used by the Full Court of the Supreme Court of Victoria in Hole v Insurance Commissioner [1962] VR 394 at 394, "now no real contest between the parties as to the right" of Mr Johnson to occupy the office of assistant secretary. We do not suggest that the appellants do not genuinely desire to agitate the issues involved in the grounds of their notice of appeal. However such a desire does not satisfy the requirement indicated in Hole v Insurance Commissioner (supra) that "the legal right of the parties" should now be "in actual controversy". On our understanding that requirement entails that any judgment which might be given on the appeal should confirm or modify rights which remain capable in a real and genuine sense of being enjoyed.

We have been persuaded to exercise that power in this case primarily because the passage of time has, in the circumstances, deprived the issues in controversy of real practical significance. However the Court has been influenced as well by an indication that the costs of at least some parties to this appeal may fall on the public purse by virtue of Part XII of the Industrial Relations Act 1988. Any course which minimises those costs without doing violence to genuine and substantial rights of the parties is to be favoured.

12 A decision on appeal in Beitseen would not settle any live question of law or fact that might govern the relationship of the parties to the appeal for the future. Even though it appears that the appeal involved a question as to the proper construction of the union rules, a matter which might be thought to be of enduring significance for the union and its members, the Court did not consider that this was sufficient to justify it dealing with the appeal. The reason appears at 337:

… any conclusion which [the Court] might reach would bind only the immediate parties to the appeal, and not the union itself.

13 In Orison, French J applied a principle similar to that discussed in Mayne Nickless and Beitseen in order to summarily terminate an action. There, a shareholder of Strategic complained that a resolution by the company in general meeting to enter into a particular agreement was procured by the directors of Strategic giving information to the meeting that was misleading. The complainant applied to the court for an order under s 80 the Trade Practices Act directing the company to call an extraordinary general meeting to consider a resolution ratifying the acquisition decision said to have been procured in contravention of s 52 the Trade Practices Act. The complainant contended that if the general meeting it sought were held, the shareholders of Strategic, on accurate information, might refuse to ratify the earlier acquisition decision. The complainant also sued the directors of Strategic for damages for failing to properly inform the shareholders with respect to the acquisition. The other party to the acquisition agreement was not, however, a party to the litigation. French J's decision to summarily terminate the action against Strategic is entirely understandable once this is appreciated: as his Honour pointed out at 185 to 186 and 189 of the report, even if the complainant shareholder could procure the defeat of the proposed ratification resolution, and thus the disapproval by Strategic shareholders of the acquisition decision, any relief the complainant might be entitled to could not have any impact on the acquisition agreement which would remain binding on Strategic and the other party to it. 14 An important feature of both Beitseen and Mayne Nickless which I consider to be of critical importance to the present case is that both were concerned with litigation involving purely private rights, that is litigation which had no public interest element. Proceedings brought by the ACCC, as well as by private litigants alleging contraventions of the provisions of the Trade Practices Act here in question, do not involve matters concerned only with the private rights of the parties to the particular litigation:

Proceedings under the Trade Practices Act have a special character in that the Act deals with the protection of the public interests …

World Series Cricket Pty Ltd v Parish (1977) 16 ALR 181 at 186. 15 The consequences of this for the respondents' motion are spelled out in a recent House of Lords decision, R v Secretary of State for the Home Department, Ex parte Salem [1999] 2 WLR 483. As appears from the authorities cited at 486-487, the practice of the House of Lords is much the same as that followed by the Full Court of this Court in refusing, irrespective of the merits of the points raised by the appeal, to entertain the matter where a decision on the appeal can be seen to be academic in the sense that it will not be capable of affecting rights of the parties which remain capable of being enjoyed. Of the authorities on which the House relied for this principle, it however added, by way of qualification of present relevance:

These cases, however, concern disputes between parties to private rights.

16 After referring to other authorities involving appeals in which issues were raised which were no longer live ones as between the parties, but which involved the public interest, the House said at 487 - 488:

… in a cause where there is an issue involving a public authority as to a question of public law, your Lordships have a discretion to hear the appeal, even if by the time the appeal reaches the House there is no longer a lis to be decided which will directly affect the rights and obligations of the parties inter se. The decision in the Sun Life case, and Ainsbury v Millington … must be read accordingly as limited to disputes concerning private law rights between the parties to the case.

The discretion to hear disputes, even in the area of public law, must, however, be exercised with caution and appeals which are academic between the parties should not be heard unless there is a good reason in the public interest for doing so …

18 I consider that because of the public character this litigation bears, the principle in cases such as Beitseen cannot govern the fate of the respondents' motion. French J in Orison did not mention the public character of the litigation constituted by the complainant shareholder's reliance on s 52 the Trade Practices Act. But as Salem makes clear, the fact that litigation has a public character does not mean it must always be allowed to proceed to judgment. The Court still retains a discretion to terminate summarily such litigation where there is no useful purpose and, in particular, no public interest to be served by allowing it to continue. Orison was just such as case: the action was aimed at the agreement but no order that could be made in the action could affect it in any way. Moreover, the conduct said to contravene s 52 was engaged in in the privacy of a meeting of the shareholders of Strategic and it had an impact on a limited range of persons. 19 The ACCC is seeking injunctions in respect of conduct alleged to contravene the Trade Practices Act, corrective publications and order that the respondents implement a compliance program. In addition, it seeks a penalty under s 76 in respect of the respondents' conduct said to contravene s 47(6). It cannot, in my opinion, be said that a determination in the present proceedings is rendered academic or of no practical significance by the combination of the cesser of relevant activity by the respondents, and the making of their offer of settlement. 20 The ACCC has led evidence that is capable of supporting findings that the respondents at various times were involved in conduct contravening s 47(6) and s 52 at least in some respects and at some points in time. This evidence includes the dissemination by the respondents of certain written material at seminars, and by the making by various respondents and persons associated with them of oral representations at various of these seminars. Whether such findings should be made depends in part on an evaluation of the ACCC's evidence and the contradictory evidence called by the respondents from a large number of witnesses. Whether a finding of conduct contravening s 47(6) should be made also depends in part upon what I consider to be a rather complex question of law which the respondents by relying only on O 20 r 2(1)(b) and (c), expressly do not ask me to determine on the hearing of the motion in the present proceedings, even if it were otherwise appropriate to do so. 21 It may be, depending on the view of the case ultimately formed by the Court, that the ACCC will be denied relief by way of injunctions, corrective advertising orders and orders for compliance programs, even though it may be able to establish that the respondents in various respects did contravene either or both s 47(6) and s 52. But even if the Court comes to that view, it would still be open to the Court, given the public interest nature of the proceedings brought by the ACCC, to make declarations that conduct in which the respondents were involved in the past did contravene one or other of the provisions of the Trade Practices Act relied on: the respondents' activities were directed to a large number of members of the public and were carried on over a significant period of time. They attracted (and still appear to attract) widespread public support. If those activities do involve contraventions of the Trade Practices Act, there is in my opinion a legitimate public interest to be vindicated by the ACCC pursuing the case to judgment with a view to obtaining a judicial pronouncement that the respondents' activities did infringe the Act whether or not the circumstances are such as to require anything more than the making of declarations to that effect. Cf Tobacco Institute of Australia Limited v Australian Federation of Consumer Organisations Inc (No 2) (1993) 41 FCR 89 at 100. 22 For these reasons, the making by the respondents of their offer, against a background of the cessation of relevant business activities, does not, in my opinion, provide any basis for concluding that the further prosecution of the action by the ACCC is futile in the sense referred to in the decisions relied on by the respondents. 23 I should mention that the applicant does not concede that all of the respondents have ceased to engage in conduct of the kind that is the subject of its complaint in the action. The applicant points to the Logan Lions Marketing Business Plan dated December 1994, ie, over a year after the applicant had moved to put a stop to the respondents' activities, in which there is a statement said to be capable of being understood as a misleading representation that there was then in existence an approval by Logan City Council of the Logan Lions' application to build a club facility. The applicant also points to statements in the script prepared by some of the respondents for use at seminars held in mid-1997 to procure testimony from persons who had attended the respondents' sales seminars back in 1991 to 1993, which are said also to be misleading in so far as they misrepresent what video evidence shows the eleventh respondent said about project funding being in place at a marketing seminar held in September 1993. The applicant points also to evidence that in late 1993, the fifth respondent, in his capacity as managing director of the third respondent, then may have had in mind promoting insurance products of a kind used by the respondents in connection with the Logan Lions project to fund a certain real estate projects unconnected with that project. 24 I doubt, however, whether any of this evidence to which I have been taken by the applicant provides a sufficient foundation for a finding that any of the respondents are now or are likely in the future to engage in conduct of the kind complained of by the applicant as conduct contravening ss 52 and 47(6) the Trade Practices Act. I prefer to base my decision to dismiss the motion on the public interest element of the litigation, and the considerations flowing from that to which I have referred which show that it cannot be said to be lacking entirely in utility to allow the present proceedings to continue to judgment. 25 I should also record that I do not accept the respondents' argument that the litigation should be categorised as an abuse of process because of the proposition advanced by the applicant in the course of the hearing of the motion that the continuance of the proceedings will serve a useful purpose in so far as there is evidence indicating that at least some of the respondents may intend bringing proceedings against the applicant itself, which will involve proof that the respondents did not contravene the Trade Practices Act as is alleged in this action by the applicant. The applicant's submission is that since these issues are going to have to be determined at some stage, there is good reason for the present proceedings to serve that purpose, among other purposes. Even if this is given full weight, the material before me falls a long way short of showing that the applicant's motive for continuing to prosecute the present proceedings is to protect itself by a pre-emptive strike, as it were, against threatened litigation, something which might amount to an abuse of process. 26 There is one final matter: in accordance with directions given during the course of the hearing, the applicant has formulated amendments to its application and statement of claim which it seeks leave to make. The amendments to the application include claims to declarations that the respondents have contravened the Trade Practices Act in the respects alleged in the existing statement of claim. Although full argument on whether these amendments should be allowed has been deferred until the present motion is disposed of, the respondents have indicated their objection to the applicant being allowed to amend to claim declaratory relief not presently claimed. The basis for the respondents' opposition to the amendment was, as I understand it, that the action should be stopped summarily now because it would be futile for the Court to grant any of the injunctive or other relief presently sought and the respondent should not be permitted to save the case at the eleventh hour by the expediency of amending the originating application to claim declarations. If that was the only issue raised by the application to amend, I would refuse leave. But there are good reasons in my opinion to which I have already referred why this action should proceed. 27 In Tobacco Institute (No 2), the Full Court, which had given judgment allowing an appeal in part and setting aside certain injunctions made at first instance, permitted the respondent over opposition by the appellant to amend its originating application to claim declarations that the conduct of the appellant which had attracted the injunctions at trial did contravene s 52 the Trade Practices Act. The Full Court proceeded to grant that declaratory relief. Sheppard J at 94, with whom Foster J at 106 agreed, justified the grant of leave to amend and the grant of declaratory relief in part on the ground that the litigation involved the public interest, and that it was appropriate for the Court to record its view by a formal order, that the appellant had engaged in a contravention of s 52, ie, by making a declaration to that effect, even though an injunction was not considered appropriate in the circumstances of the case. Hill J at 107 expressed the same opinion. 28 For much the same reasons, I think the applicant should be permitted to amend the application to claim declaratory relief, if that should be necessary to entitle the Court to grant a declaration in this case. 29 The question whether it was necessary for the respondent in the Tobacco Institute case to obtain leave to amend its originating application before it could claim a declaration was not considered. The better view may be that provisions such as s 21, in combination with s 22, the Federal Court of Australia Act 1976 (Cth), confer on the Court power to make a declaration in favour of an applicant where it is appropriate to do so and where the defendant has been given an opportunity to deal with whether a declaration should be made, even though declaratory relief may not have been claimed in the application or the pleadings. See Harrison-Broadley v Smith [1964] 1 All ER 867 at 873, Zamir & Woolf The Declaratory Judgment, 2nd ed, at pp 254 to 255 and the instances (not in fact confined to consequential declarations for defendants) given in Young P, Declaratory Orders, 2nd ed, para 606, of declarations being made although not claimed in the proceedings. 30 It is unnecessary, however, to resolve this question since I think the applicant should be permitted to amend its originating application to claim declaratory relief, unless the respondents can raise some substantial objection to the grant of leave additional to that which they have raised so far. 31 The motion is dismissed. I think the proper order as to costs is that the costs of and incidental to the motion should be the applicant's costs in the proceeding.

I certify that the preceding thirty-one (31) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Drummond.

Counsel for the Applicant: Mr Thompson SC Mr Deane

Solicitor for the Applicant: Australian Government Solicitor

Counsel for the First to Tenth Respondents: Mr Vasta QC Mr Davidson

Counsel for the Twelfth Respondent: Mr Vasta QC Mr Davidson

Date of Hearing: 22 March 1999

Date of Judgment: 23 March 1999

Trade Practices Act 1974(Cth)s 47(6)

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