Australian Competition and Consumer Commission v Mosaic Brands Limited

WIGNEY J 1 The applicant in this matter, the Australian Competition and Consumer Commission (ACCC), seeks leave to proceed, pursuant to s 440D of the Corporations Act 2001 (Cth), against the respondent, Mosaic Brands Limited (Administrators Appointed) (Receivers and Managers Appointed), a company to which administrators have been appointed. The administrators do not oppose the ACCC being granted leave to proceed. 2 For the reasons that follow, it is appropriate to grant the ACCC leave to proceed against Mosaic. 3 The ACCC commenced this proceeding against Mosaic in March 2024. The ACCC alleges, in very short summary, that Mosaic: contravened ss 18 and 29(1)(m) of the Australian Consumer Law (ACL) (being schedule 2 of the Competition and Consumer Act 2010 (Cth)) by making false, misleading or deceptive representations to Australian consumers about delivery times in respect of goods purchased online from Mosaic and consumer rights under the ACL consumer guarantee regime; contravened s 36(4) of the ACL by accepting payment from consumers for goods purchased online from Mosaic and failing to deliver those goods within the specified delivery period, or within a reasonable time, or at all; and contravened s 102(2) of the ACL by giving consumers warranty documents that did not comply with the prescribed requirements in respect of warranties against defects. 4 Mosaic filed defences in relation to ACCC's claim. On 28 October 2024, however, Mosaic went into administration pursuant to Part 5.3A of the Corporations Act 2001 (Cth). 5 Section 440D of the Corporations Act relevantly provides that, if a company goes into administration, a proceeding in a Court against the company cannot be proceeded with except with the administrator's written consent, or with the leave of the Court in accordance with such terms, if any, as the Court imposes. 6 The grant of leave to proceed under s 440D is discretionary. The applicable principles in relation to such an application are well settled. The considerations that are likely to be relevant to the grant of leave pursuant to s 440D or cognate provisions in the Corporations Act were recently summarised by Derrington J in Clean Energy Regulator v E Connect Solar & Electrical Pty Ltd [2023] FCA 1082 at [17]. In short summary, in considering whether the grant leave to proceed, the Court would ordinarily have regard to the following considerations. 7 First, whether the applicant has established that there is a serious question to be tried. An applicant must generally establish that it has a good claim with a solid foundation, though it is perhaps unnecessary to establish a prima facie case. 8 Second, whether the relief that is sought is not otherwise available in the administration process, particularly by the lodging of a proof of debt. Leave will more readily be granted where the relief sought in the proceeding is not available in the administration process. 9 Third, whether there is a public interest in enforcing compliance with and preventing conduct that contravenes a statutory scheme. Leave will more readily be granted where there is a public interest in allowing a regulator to fulfill a statutory duty, particularly for the purposes of obtaining orders that give effect to the objective of general deterrence. 10 Fourth, it is relevant to have regard to the stage to which the proceedings have progressed and the extent to which the applicant has expended time, effort and money in prosecuting the claim. In general terms, leave will more readily be granted where the proceedings are at a relatively advanced stage and time and money has been expended in pursuing the proceedings to that stage. 11 Fifth, it is relevant to have regard to the nature and complexity of the proceedings. Leave will more readily be granted where the proceedings raise complex questions of fact or law that are more appropriately determined by the Court, rather than pursuant to a procedure available under the administration. 12 Sixth, whether there is any potential for creditors of the company to suffer prejudice. Leave will more readily be granted where there is little or no potential of prejudice to the company's creditors, or where any such prejudice can be alleviated by, for an example, an undertaking by the applicant not to enforce any relief without the Court's leave. 13 Finally, the fact that the company has no ability to pay a penalty sought in the proceedings generally does not weigh against the grant of leave.

LEAVE TO PROCEED IS APPROPRIATE 14 I am satisfied that it is appropriate to grant the ACCC leave to proceed against Mosaic in this proceeding. The evidence adduced by the ACCC in support of its application establishes the following facts, matters or circumstances. 15 First, the evidence indicates that there is a serious question to be tried in this proceeding and that the ACCC has an apparently arguable case with an apparently solid foundation. It is for present purposes unnecessary to delve into the details of the ACCC's claim or the evidence that it has or may have available to it to make good its case. 16 Second, the relief sought by the ACCC against Mosaic, which includes pecuniary penalties pursuant to s 224 of the ACL, as well as declarations and injunctions, is not otherwise available in the external administration process. 17 Third, there is a clear public interest in the ACCC, the national regulator responsible for the enforcement of the ACL, in pursuing proceedings to enforce the ACL. That is particularly the case here given the seriousness and the scale of the alleged offending conduct by Mosaic. There is, in my view, a clear public interest in permitting the ACCC to fulfil its statutory duty in enforcing the ACL, particularly for the purpose of deterring others who may be tempted to engage in such conduct in the future. 18 Fourth, the proceeding has been on foot for over nine months. It is at the stage where the ACCC will shortly file its evidence in support of its claims. It is not anticipated that any evidence will be filed for or on behalf of Mosaic. Once the ACCC files its evidence, the matter can be listed for trial. The ACCC has undoubtedly expended considerable time and money in investigating and pursuing the proceeding to this stage. 19 Fifth, if the proceeding raises questions of fact that are unquestionably more appropriately dealt with by the Court, rather than pursuant to any procedure that may be available under the external administration. 20 Sixth, I do not consider that the grant of leave will or is likely to cause any material prejudice to the creditors of Mosaic. The ACCC has indicated that it will agree to the grant of leave being conditional on it not seeking to enforce any relief it may obtain without further leave of the Court. As already indicated, the administrators do not oppose the grant of leave. It appears to be highly unlikely that the administrators will expend any money in defending the proceeding. The administrators have indicated that it is likely that Mosaic will be placed into liquidation at the end of the administration period. 21 Finally, while Mosaic is unlikely to be able to pay any pecuniary penalties that the Court might order it to pay, as discussed earlier that consideration does not weigh against the grant of leave. 22 Each of facts, matters or circumstances to which reference has just been made weigh in favour of the grant of leave to ACCC to proceed with the proceeding. There are no countervailing considerations. I accordingly propose to grant the ACCC leave to proceed against Mosaic and will make procedural orders to progress the matter to trial. I certify that the preceding twenty-two (22) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Wigney.

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