Australian Competition and Consumer Commission v Productivity Partners Pty Ltd

BROMWICH J: 1 These are the reasons for orders made on 3 June 2020, and for a declaration hereby made today, in relation to the third respondent, Mr Ian Cook, both of which were deferred pending the determination of liability on the part of the remaining respondents by the docket judge for the contested part of this proceeding, Stewart J. His Honour delivered judgment on liability in relation to the remaining three respondents in this proceeding on 2 July 2021: Australian Competition and Consumer Commission v Productivity Partners Pty Ltd (trading as Captain Cook College) (No 3) [2021] FCA 737. 2 In November 2018, the applicant, the Australian Competition and Consumer Commission (ACCC) commenced this proceeding against the first respondent, Productivity Partners Pty Ltd, trading as Captain Cook College, a supplier of education courses, including online diploma courses, and three other respondents: (1) Site Group International Limited, the parent company of the College; (2) the present third respondent, Mr Cook, the founder and former Chief Executive Officer (CEO) of the College; and (3) Mr Blake Wills, an officer of Site Group. 3 This proceeding concerns the enrolment of consumers as students with the College, which was a registered training organisation, and a vocational education and training provider, under the Higher Education Support Act 2003 (Cth). The College relevantly provided online courses in relation to which enrolled students were entitled to apply for and receive a loan from the Commonwealth to pay the course fees under a scheme known as VET-FEE HELP. The scheme was organised so that the loan moneys were paid directly to the educational institution, and the student was required to pay back 120% of that loan amount to the Commonwealth once employment was obtained producing an income above a certain threshold. This proceeding in substance involves abuse of the VET-FEE HELP loan scheme by the College in adopting unconscionable practices that resulted in the enrolment, or continued enrolment of students who were not suitable. 4 The substance of the ACCC's case is that in the period from 7 September to 18 December 2015, significant changes were made by the College to its enrolment and withdrawal processes that were unconscionable in contravention of s 21 of the Australian Consumer Law (ACL). The unconscionability is said to arise by the way in which these changes were directed, by way of a system of conduct, or pattern of behaviour, improperly to result in, and which did result in, significantly increased enrolments and revenue and thereby profits from consumers who either should not have been enrolled as students, or should not have continued to be enrolled past the census date after which fees were incurred, thus incurring VET-FEE HELP loan debts. This was deliberately done to address the attrition rate of consumers enrolled as students, and the rate at which they remained enrolled as students past the census date so that fees would be payable, VET-FEE HELP loan moneys would be paid by the Commonwealth, and VET-FEE HELP loan debts would be incurred. 5 Some two months before the trial commenced on 9 June 2020, Mr Cook in effect capitulated. On 3 June 2020 I heard from the ACCC and Mr Cook, including by way of a statement of agreed facts and admissions, written joint submissions and oral submissions. This took place so that the docket judge, Stewart J, could still proceed to hear the contested trial unaffected by the admissions that were being made by Mr Cook. The trial commenced against the remaining respondents before his Honour, on 9 June 2020. So that it was clear that the trial against Mr Cook did not need to proceed as well, on 3 June 2020 I made orders: (a) recording my satisfaction as to Mr Cook being knowingly concerned in, or a party to, the contravention of s 21 of the ACL by the College, based upon the statement of agreed facts and admissions and the written joint submissions and the oral submissions; (b) recording my satisfaction that the substance of the orders agreed between the ACCC and Mr Cook were appropriate, and therefore: (i) imposing an agreed penalty of $250,000 to be paid within 28 days; (ii) disqualifying Mr Cook from managing corporations for three years; (iii) ordering Mr Cook to pay the ACCC's costs fixed in the sum of $250,000 within 28 days; and (iv) adjourning the residual application for declaratory relief until after Stewart J has determined the question of liability on the part of Captain Cook College, as the alleged principal contravener in respect of whose conduct Mr Cook is alleged to have been knowingly concerned or a party to. 6 The adjournment of the declaration application followed the course adopted by Jagot J in Australian Competition and Consumer Commission v Colgate-Palmolive (No 2) [2016] FCA 528, as explained by her Honour at [29]. That is, I reserved my reasons for making the abovementioned orders, which were largely drafted before the liability judgment was delivered by Stewart J on 3 July 2021, because of the impracticality of publishing those reasons, which would address the substance of the declarations that have been deferred, while purporting to quarantine them from his Honour prior to conclusions being reached as to liability on the part of the remaining respondents, and the College in particular. 7 It is not necessary or desirable to summarise either the detailed agreed statement of facts or admissions or the joint written submissions, which in combination comprehensively state the common ground as to what took place, what the applicable law is, and what the penalty and other orders should be. Those two documents are instead annexures to these reasons, to be read with what follows. The only qualification of note is that the part of the joint written submissions from [72]-[74] referring to parity are better understood as reflecting the need for consistency in the application of principle to be gleaned from prior cases, which operate only as yardsticks, rather than precedents. Those documents and oral submissions provide an ample basis for the conclusion I reached, as detailed further below, that the agreed penalties and other relief were appropriate. With that foundation, only a brief outline of the facts is necessary in these reasons, together with a brief explanation as to why I was satisfied that the relatively low penalty sought and imposed, and the other orders made, were appropriate. 8 The College is the primary contravener, which is taken to be established for the purpose of Mr Cook's admitted conduct in being knowingly concerned in, or a party to, that conduct, which interestingly does not entail him in terms being a contravener himself on the plain language of s 224(1)(e) of the ACL. It was open to me to accept, as I did, for the purposes of resolving the proceeding as against Mr Cook, that the College engaged in a system of conduct or pattern of behaviour which was, in all the circumstances, unconscionable, in contravention of s 21 of the ACL in relation to the supply of online diploma-level courses to consumers whose enrolment was processed during the relevant period from 7 September to 18 December 2015. 9 The unconscionable system of conduct or pattern of behaviour and the College's awareness, and thus Mr Cook's awareness as its CEO, of its consequences may be briefly stated as follows: (1) Changes to student enrolment and withdrawal processes (process changes) were made and implemented. (2) The process changes led to increased revenue claimed by the College from the Commonwealth Government in respect of VET FEE-HELP debts incurred by consumers. (3) The process changes were material in two particular ways. The first material change was that the prior process of outbound calls being made by College staff to consumers, after having reviewed their enrolment documents to identify any issues concerning their suitability for the course, was replaced with inbound calls made to Captain Cook College staff by course advisers who marketed the courses. Those inbound calls were made in the presence of consumers immediately after electronically submitting their enrolment documents, and those College staff followed a script which consisted principally of closed questions. This may be taken to be a significant contrast to genuine inquiry by open questions designed to identify unsuitable consumers. (4) The second material change was the abolition by the College of its campus-driven withdrawal procedure, by which previously the College had taken steps to withdraw consumers if they were not engaging or not contactable, before incurring the relevant debt on the relevant census date. This change substantially increased the chance that an unsuitable consumer would remain enrolled past the census date and thus increase the likelihood of the payment of the course fee and the incurring of a corresponding debt to the Commonwealth. (5) The substantial purpose of the College in adopting and applying the two material changes was in order to increase its revenue received from the government and maximise profits. (6) The College knew or ought to have known, and therefore Mr Cook as its CEO knew or ought to have known, that there was a real risk that: (a) some consumers recruited and enrolled by course advisers would be unsuitable in terms of their level of skill or technology and/or would have only minimal engagement with the relevant course; (b) some course advisers would engage in misconduct towards the consumers merely in order to lure them to sign up; (c) the change from outbound calls to inbound calls would increase the susceptibility of the enrolment process to misconduct by the course adviser or agents and reduce the College's ability to detect and prevent that misconduct, or to assess prospective students' circumstances or suitability; (d) the abolition of the withdrawal procedure by the College would result in an increase in the number of consumers who were not contactable or not engaged in the course. (7) The College knew or ought to have known, and therefore Mr Cook as its CEO knew or ought to have known, that: (a) the process changes led to a large increase in the number of enrolments from about 1,300 consumers during pre-change period of about 10 months, to about 7,000 consumers in the relevant period over almost three and a half months; and (b) there was also a much higher number and proportion of non-completions of units of study and courses, and a much higher number and proportion of disengaged or uncontactable students; (c) the level of fees that were claimed by the College from the government was about $54 million for consumers whose enrolment was processed in the relevant period, being much higher revenue claimed than in the previous period. 10 On the mitigation side of the ledger, there was no suggestion of dishonesty on the part of Mr Cook, with him having an actual belief that the process changes were lawful. Importantly, he is now engaged in public sector employment and is no longer a director of any company except in relation to the corporate trustee and the corporate beneficiary of his family trust, neither of which trade with consumers. Accordingly, there was little or no need for specific deterrence. The primary purpose of deterrence in fixing a civil penalty was therefore largely, if not entirely, directed to general deterrence. 11 In relation to the size of the penalty agreed upon, and the other orders jointly proposed, a court will generally act upon such an agreement if satisfied it is appropriate. That approach was specifically endorsed by the High Court in Commonwealth of Australia v Director, Fair Work Building Industry Inspectorate [2015] HCA 46; 258 CLR 482, as helpfully summarised by Jagot J in Colgate-Palmolive (No 2) at [13]. See also the summary of the relevant principles in Australian Competition and Consumer Commission v GlaxoSmithKline Consumer Healthcare Australia Pty Ltd (No 2) [2020] FCA 724 at [10]-[13]. In that context, I am satisfied that particular regard should be had to the following features, as urged upon me: (1) the inherent seriousness of the contraventions of the College in respect of which Mr Cook was knowingly concerned or a party to; (2) those contraventions were the product of considered conduct, involving the deliberate removal of, or material changes to, processes that mitigated the dual risks of advisor misconduct and through that, or independently of that, unsuitable consumers being enrolled as students, with the objective of increasing revenue and profits; (3) the conduct over almost three and a half months only ceased because the Commonwealth imposed a new loan cap, leading to the College ceasing to enrol students on 18 December 2015 - the large increase in enrolments, many of whom should not have been enrolled, would have been even greater if the conduct had been able to continue; and (4) while the conduct was serious, it was not in the most serious category by reason of the lack of intent to break the law, the lack of any prior contraventions, the period of unemployment consequent upon leaving employment with the College, and the mitigation of admissions (albeit late and in the shadow of the impending trial) - to which I would add, the duration of the contravening conduct was relatively short, even though that was not due to any mitigating conduct on the part of the College or Mr Cook. 12 The parties' position was that the quantum of penalty of $250,000 struck a balance between the maximum penalty of $220,000 for a single contravention, and the theoretical maximum for the very large number of contraventions beyond precise calculation and therefore providing little in the way of a useful guide or yardstick. I accept each of those submissions, albeit that I consider that a considerably larger penalty would also have been appropriate, especially having regard to Mr Cook's role, the sums involved, and the number of consumers affected. 13 The duration of the disqualification was justified by the parties when regard was had to Mr Cook's role as CEO of the College, and his knowledge of and participation in the contraventions. This included his role in devising the process changes so as to advance their profit-maximising purpose, and the fact that the process changes would remove an important part of the prior mitigation of the risk of advisor misconduct and unsuitable enrolments taking place. I am satisfied that a three year disqualification period is sufficient in all the circumstances. Not much longer periods of disqualification have been imposed for conduct that is considerably more serious, including following criminal convictions: see Australian Competition & Consumer Commission v Renegade Gas Pty Ltd (t/as Supagas NSW) [2014] FCA 1135; ATPR 42-485 at [91]. The primary role of disqualification in this case is general deterrence rather than specific deterrence, protection of the public, or punishment. 14 I have nothing useful to say about the costs agreed upon. There is no evidence as to the actual costs incurred by the ACCC in relation to, or proportionate to, Mr Cook, and thus the degree of compromise involved, or anything to indicate something inappropriate about the quantum agreed upon without knowing the detail of the work done. I therefore consider that there is a very limited role in proceedings of this kind for the Court to depart from such an agreement. 15 For the foregoing reasons, in the context of the annexed agreed facts and admissions, the joint written submissions, and the oral submissions made on 3 June 2020, I was satisfied, and remain satisfied, that the orders made on 3 June 2020 were appropriate, and am now satisfied that the declaration jointly proposed is also appropriate. I therefore make that declaration. I certify that the preceding fifteen (15) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Bromwich.

SCHEDULE OF PARTIES NSD 2059 of 2018 Respondents Fourth Respondent: BLAKE WILLS

ANNEXURE 1 Statement of Agreed Facts and Admissions as between Applicant and Third Respondent 1 For the purposes of this proceeding only, this Statement of Agreed Facts and Admissions is made jointly by the Applicant, the Australian Competition and Consumer Commission (ACCC), and the Third Respondent, Ian Cook (Cook), pursuant to s 191 of the Evidence Act 1995 (Cth) (Evidence Act). It has not been shown to the other Respondents nor to the trial judge in the trial of the proceeding (which is scheduled to begin on 9 June 2020). CCC and Cook 2 The ACCC is a Commonwealth statutory authority established by section 6A of the Competition and Consumer Act 2010 (Cth) (CCA) and entitled to sue in its own name. At all relevant times, the First Respondent (CCC): (a) was a Registered Training Organisation (RTO) within the meaning of cl 1 of Sch 1 to the Higher Education Support Act 2003 (Cth) (HES Act), trading under the name of "Captain Cook College"; (b) carried on a business, in trade or commerce, marketing and supplying vocational education courses to consumers, including courses delivered in an online-based format (Online Courses); (c) between 30 March 2012 and 22 December 2016, was a Vocational Education and Training (VET) provider under Division 3 of Part 1 of Sch 1A to the HES Act (VET Provider); (d) since 22 December 2016, had its approval as a VET Provider suspended pursuant to cl 36(5) of Sch 1A to the HES Act; and (e) since 21 July 2017, had its registration as an RTO cancelled by the Australian Skills Quality Authority (ASQA). 3 Cook: (a) was a director of CCC from around 9 April 2013 to around 1 March 2017; (b) was employed by CCC as its Chief Executive Officer (CEO) from at least March 2013 to February 2017. Cook was on leave for the period 20 November 2015 to 20 January 2016, during which the Fourth Respondent, Blake Wills, acted as CEO of CCC; and (c) in his role as CEO of CCC, had overall responsibility for the management and operations of CCC's business. The Regulatory Framework The VFH Scheme 4 At all relevant times: (a) each of the Online Courses referred to in paragraph 10 below was a "VET course of study", consisting of a number of "VET units of study", within the meaning of those phrases in Sch 1 to the HES Act; (b) a consumer who enrolled in an Online Course, and who satisfied the criteria in Div 7 of Part 2 to the HES Act, was entitled, on application, to a loan from the Commonwealth for a VET unit of study (VFH Loan) under the Commonwealth VET FEE-HELP Assistance Scheme (VFH Scheme); (c) the Commonwealth was required under cl 55 of Sch 1A to the HES Act to make a VFH Loan to such a consumer and to advance the VFH Loan by paying the consumer's tuition fee for a VET Unit of Study directly to the relevant VET provider, in discharge of the consumer's liability to pay the tuition fee to the VET provider. 5 At all relevant times, a consumer who received a VFH Loan from the Commonwealth incurred a debt to the Commonwealth amounting to 120% of the VFH Loan, being the VFH Loan amount, plus a 20% loan fee (VFH Debt). 6 At all relevant times, a lifetime FEE-HELP limit has applied to the total amount of VFH Loans, FEE-HELP assistance (of the kind referred to in Part 3-3 of the HES Act) and (from 1 January 2017) VET Student Loans (of the kind referred to in the VET Students Loans Act 2016 (Cth)). 7 At all relevant times, when a person's income in a financial year exceeded the minimum repayment income for that year (Minimum Repayment Income), if that person had a VFH Debt, the person was required to make repayments to the Commonwealth. The Minimum Repayment Income for the period: (a) 1 July 2014 to 30 June 2015 was $53,345; (b) 1 July 2015 to 30 June 2016 was $54,126; and (c) 1 July 2019 to 30 June 2020 is $45,881. Census dates 8 At all relevant times: (a) a VET Provider was required, pursuant to cl 67 of Sch 1A to the HES Act to determine a census date for each VET unit of study it provided, and pursuant to cl 7.4 of the VET Guidelines made pursuant to cl 99 of Sch 1A to the HES Act (VET Guidelines), could not determine a census date that was less than 20% of the way between the commencement date and the completion date of the VET unit of study; (b) a consumer who enrolled in a VET unit of study was taken, pursuant to s 137-18(3) of the HES Act, to have incurred a VFH Debt in respect of that unit of study immediately after the census date for that unit of study; and (c) pursuant to cl 8.4 of the VET Guidelines, a VET Provider was required to repay any VET tuition fees paid by a student in respect of a VET unit of study if the student withdrew on or before the census date. 9 By reason of the matters set out at paragraph 8 above, at all relevant times, on and before a census date for a VET unit of study, a consumer could withdraw from a VET unit of study in which he or she was enrolled without incurring any financial liability to the VET Provider or to the Commonwealth. CCC's Online Courses 10 During both the period between 1 November 2014 and 6 September 2015 (Earlier Period) and the period from 7 September 2015 to 18 December 2015 (Relevant Period) the Online Courses offered by CCC included: (a) Diploma of Business; (b) Diploma of Project Management; (c) Diploma of Information Technology. 11 The following Online Courses were on CCC's scope of registration during the Earlier Period and the Relevant Period, but were offered during the Earlier Period only: (a) Diploma of Management; and (b) Advanced Diploma of Management. 12 During the Relevant Period, CCC also offered the Diploma of Human Resources Management as an Online Course. 13 The Online Courses were identified by CCC as having at least the following entry requirements: (a) language, literacy and numeracy (LLN) skills; (b) computer skills and access to a computer and the internet; (c) for the Diploma of Project Management, industry experience; and (d) for the Advanced Diploma of Management, a Diploma of Management, a Diploma of Business, or substantial vocational experience in management. 14 CCC charged tuition fees in respect of the Online Courses during both the Earlier Period and the Relevant Period of between $13,000 and $20,000. CCC's use of Course Advisors CCC's external marketing partners 15 During both the Earlier Period and the Relevant Period, CCC entered into agreements (Marketing Partner Contracts) with third parties (Marketing Partners) to undertake marketing of its courses to consumers, and to recruit consumers for enrolment into its courses (including Online Courses) (marketing and recruitment activities). 16 CCC's Marketing Partner Contracts typically contained the following terms: (a) CCC appointed the Marketing Partner to promote or market courses offered by CCC, including Online Courses to consumers and to solicit applications for enrolment (Sales Services); (b) the Marketing Partner was required to perform its functions and obligations through its employees, contractors, sub-contractors or agents; (c) the Marketing Partner was required to ensure that consumers were informed that the Marketing Partner was providing Sales Services as an agent for CCC; and (d) the Marketing Partner would be paid a commission in respect of each consumer recruited by the Marketing Partner if that consumer passed a census date in respect of a unit of study in a course (including an Online Course) in which the consumer was enrolled; (e) carry out its functions under the Marketing Partner Contracts in good faith and in a diligent, efficient, ethical and professional manner consistent with industry best practice; (f) represent CCC and carry out the Sales Services honestly and fairly; (g) provide accurate information about the Online Courses to students and prospective students; (h) ensure that all the employees and agents which it uses to perform sales services possess the necessary information, skills, experience and qualifications to perform their functions in a diligent, efficient and professional manner in accordance with the requirements of the Marketing Partner Contracts; (i) act in a reputable manner and not misrepresent the Online Courses, the fees payable for the Online Courses or the meaning or effect of any document provided to a prospective student; and (j) comply with all applicable legislation, statutory instruments and regulatory obligations, including the CCA. 17 During both the Earlier Period and the Relevant Period, CCC referred to persons engaged by Marketing Partners to undertake marketing and recruitment activities as "Course Advisors" or "CAs". CCC's internal "Learn2Earn" marketing team 18 During both the Earlier Period and the Relevant Period, CCC also operated an internal sales team, which it called "Learn2Earn" or "L2E". 19 The Learn2Earn team was principally comprised of persons whose role was to undertake marketing and recruitment activities, and who were referred to by CCC as Course Advisors or CAs. 20 Course Advisors in the Learn2Earn team: (a) were engaged as contractors by a company called Certica CMO Pty Ltd (Certica), pursuant to an agreement between Certica and CCC; (b) were given "work orders" by Certica (directly or indirectly) requiring them to undertake marketing and recruitment activities in respect of CCC's courses; (c) were remunerated by way of commission paid by CCC (via Certica) in respect of each consumer recruited by the Course Advisor who remained enrolled in a CCC course (including Online Courses) beyond the first census date in the consumer's course; and (d) were managed by CCC's National Sales Manager, Mr Jon Carson (Carson). Course Advisors 21 During both the Earlier Period and the Relevant Period, Course Advisors typically undertook their marketing and recruitment activities through direct sales methods, including by undertaking door­ to-door sales activities at consumers' homes. 22 By reason of the facts outlined in paragraphs 15 to 20 above, the conduct of Course Advisors engaged in while undertaking marketing and recruitment activities in respect of Online Courses is taken to be conduct of CCC by reason of s 139B(2) of the CCA. 23 A significant majority of consumers who became enrolled in an Online Course during both the Earlier Period and the Relevant Period were recruited by Course Advisors. Enrolment Documents 24 During both the Earlier Period and the Relevant Period, in order for a consumer to be enrolled in an Online Course, CCC required the following documents (together, Enrolment Documents): (a) an enrolment form (Enrolment Form); (b) a pre-enrolment quiz (PEQ); and (c) a request for VET FEE-HELP assistance form (VFH Form), if applicable. 25 The information to be completed in the Enrolment Form included: (a) the consumer's personal and contact details; (b) the Online Course in which the consumer was to be enrolled; (c) the consumer's linguistic and cultural background; (d) whether the consumer considered himself or herself to have a disability that would impact the consumer's studies or require provision of support services; (e) the consumer's level of secondary schooling and any qualifications the consumer had; (f) the consumer's employment status: and (g) the consumer's main reason for studying. 26 During the Earlier Period, the PEQ contained basic questions about the Online Course the subject of the consumer's Enrolment Form, the meaning of "Recognition of Prior Learning" and "plagiarism", and asked the consumer to rate his or her own computer skills and English language skills. 27 During the Relevant Period, the PEQ: (a) contained basic questions about the Online Course the subject of the consumer's Enrolment Form; (b) required the selection, from drop-down lists, of the correct descriptions of "Recognition of Prior Learning" and "plagiarism"; (c) contained questions as to why the consumer was interested in the Online Course, the consumer's goals, and the consumer's strengths and weaknesses; and (d) asked the consumer to rate his or her own reading, writing and numeracy ability. 28 During both the Earlier Period and the Relevant Period, when a consumer was recruited for enrolment in an Online Course by a Course Advisor: (a) the consumer's Enrolment Documents were usually completed at the time when the Course Advisor first engaged with the consumer for the purpose of marketing and recruitment; and (b) the Course Advisor usually submitted them to CCC on behalf of the consumer electronically through CCC's online portal or, during the Earlier Period in respect of Enrolment Documents completed in hard format, by SMS or email. CCC's Co-Provider Arrangements Concerning Online Courses 29 From around June 2014 until around the end of 2014, some of CCC's Online Courses were delivered by a third party, Sero Learning Pty Ltd as trustee for the Sero Assets Unit Trust (Sero Learning). 30 The terms on which the Online Courses were to be delivered by Sero Learning were set out in an "Auspice Agreement" between CCC and Sero Learning dated 14 June 2014. The Oversight and Management of CCC's Business and the Delivery of its Online Courses Advisory Board Meetings and Management Meetings 31 During the Earlier Period until around June 2015, senior officers and employees of CCC and of Site Group International Limited (CCC's holding company and the Second Respondent) (Site) attended meetings known as Advisory Board Meetings, which were usually held at monthly intervals. The function of Advisory Board Meetings was to: (a) oversee the operations of CCC; (b) assist with the transition of CCC from a family owned and operated business to a business unit owned by Site following its acquisition by Site; (c) provide advice and recommendations to Cook on strategic decisions; and (d) provide feedback to Cook on the management of CCC. 32 Usually Cook attended Advisory Board Meetings, and in advance of the meetings prepared reports in his capacity as CEO of CCC (Advisory Board CEO Reports) which was tabled and discussed at the meetings. 33 The Advisory Board CEO Reports typically addressed the following matters: (a) CCC's revenue figures for the month preceding the meeting; (b) a description of CCC's interactions with its Marketing Partners; (c) a description of the performance of Marketing Partners and the Learn2Earn team in relation to the number of enrolments generated; (d) a report as to the numbers of consumers enrolled in Online Courses; and (e) a summary of the outcome of any Campus Health Checks (described in paragraphs 42 to 43 below) CCC had conducted. 34 From around July 2015 to at least November 2016, senior officers and employees of CCC and Site attended meetings called Management Meetings which replaced the Advisory Board Meetings and had the same function. Cook usually attended Management Meetings. 35 During Management Meetings, reports provided by the following persons were usually tabled and discussed: (a) a report from Cook, in his capacity as CEO of CCC (Management Meeting CEO Reports); (b) a report from Craig Dawson (Dawson), in his capacity as chief financial officer of Site (Management Meeting CFO Reports); and (c) from August 2015 onwards, a report from Carson in his capacity as National Sales Manager entitled "Monthly Sales Report" (L2E Reports). 36 The Management Meeting CEO Reports typically addressed the same matters addressed in Advisory Board CEO Reports, as set out in paragraph 33 above. 37 The Management Meeting CFO Reports typically set out the financial performance of CCC in the preceding month and compared that performance against a budgeted performance. 38 The L2E Reports typically reported on the enrolment numbers in respect of consumers recruited by Learn2Earn Course Advisors, analysed those enrolment numbers against enrolment number targets, and set out observations as to the activities of the Learn2Earn team. Distance Campus Meetings 39 During at least the period from around March 2015 to November 2015, CCC held - usually once or twice per month - meetings called "Campus Management & Leadership Meetings" in respect of CCC's "Distance Campus" (being the cohort of consumers enrolled at any given time in Online Courses to be delivered by CCC itself, instead of by a co-provider) (Distance Campus Meetings). 40 The attendees at Distance Campus Meetings typically included Cook, and other senior officers and employees of CCC including the manager of CCC's Distance Campus. 41 The topics usually addressed during Distance Campus Meetings included finance, sales and marketing, and compliance issues. Campus Health Checks 42 During both the Earlier Period and the Relevant Period, CCC periodically conducted internal audits, called "Campus Health Checks", of its campuses, including those operated by co providers such as Sero Learning. 43 Campus Health Checks included the following steps: (a) CCC collected evidence, including through interviewing employees who worked at the relevant campus; (b) CCC prepared "on site audit notes" assessing the campus's compliance with specified measures in relation to the following areas of the campus's operations: (i) student enrolments and student support (which included measures relating to the enrolment process); (ii) trainers and assessment; (iii) marketing (which included the activities of Course Advisors); (iv) campus operations and admissions; and (c) CCC identified actions the campus was required to take in respect of areas in which CCC had identified non-compliance. CCC'S Enrolment and Withdrawal Processes in the Earlier Period 44 During the Earlier Period, CCC had in place the following system for the enrolment of consumers recruited for enrolment in an Online Course by Course Advisors: (a) upon receipt of the consumer's Enrolment Documents, a CCC employee reviewed the Enrolment Documents including to identify whether the Enrolment Form had been completed correctly; (b) the CCC employee analysed the consumer's Enrolment Form for the purpose of identifying any matter that might affect the consumer's ability to study, such as the consumer's age, whether the consumer had indicated poor English language ability, and whether the consumer was still attending school or did not complete Year 12; (c) the CCC employee analysed the consumer's PEQ, for the purpose of identifying: (i) whether the PEQ questions were answered correctly; (ii) whether the answers on the PEQ identified issues with using or accessing a computer; and (iii) whether the answers on the PEQ indicated the consumer would require a lot of assistance with reading, writing or speaking; (d) after completing the review and analysis referred to in sub-paragraphs (a) to (c) above, the CCC employee made a telephone call to the consumer (Outbound QA Call): (i) for the purpose of checking whether the consumer was "genuine" and understood the commitment they were making; (ii) during which the CCC employee: (A) verified the accuracy of the consumer's enrolment information; (B) checked the consumer's understanding of the course requirements. in order to verify the answers given on the PEQ; (C) if a consumer could not accurately answer questions from the PEQ, explained the matter again, and then requested an acknowledgement from the consumer of his or her understanding of that matter; and (D) based on the employee's observations during the call, added any notes to the consumer's file relevant to the consumer's behaviour, listening and speaking skills; (e) following, and subject to, satisfactory completion of the steps outlined in sub paragraphs (a) to (d) above, CCC processed the consumer's enrolment in an Online Course; (f) if, during the Outbound QA Call a consumer indicated that he or she did not in fact wish to study, or the CCC employee was not able to make contact with a consumer in order to complete an Outbound QA Call, the consumer was not enrolled in an Online Course; (g) an Outbound QA Call: (i) could occur hours or several days after the submission by a Course Advisor of a consumer's Enrolment Documents; and (ii) as a result, generally occurred when the Course Advisor was not present with the consumer; (h) Outbound QA Calls were not conducted in accordance with a written script followed word-for-word by CCC employees, but instead CCC gave the employees conducting the call guidance as to the matters (outlined in paragraph (d) above) to be addressed. 45 During the Earlier Period: (a) CCC implemented a procedure it referred to as "campus driven withdrawals" (CDWDs) whereby, in respect of some consumers, CCC withdrew a consumer from enrolment in an Online Course prior to the census date for the unit of study, without that consumer having requested to be withdrawn. (b) CCC typically withdrew consumers from enrolment under CDWDs in the following circumstances: (i) if CCC had not been able to make contact with the consumer in the period between enrolment and the first census date or between the first census date and the second census date; (ii) if the consumer had not been engaged in the Online Course in the period between enrolment and the first census date or between the first census date and the second census date; or (iii) if CCC otherwise concluded that the consumer was not suitable for the Online Course. Relevant Events During the Earlier Period Sero Distance Campus Health Check 46 In around November 2014, CCC conducted a Campus Health Check (Sero Distance Campus Health Check) of the online campus operated by Sero Learning (Sero Distance Campus). 47 During the Sero Distance Campus Health Check, CCC identified that: (a) Sero Learning had permitted consumers to pass through first census dates where Sero Learning had not been able to make contact with the consumer in the period between enrolment and the first census date; (b) Sero Learning's conduct described in paragraph (a) above was contrary to CCC's process of implementing CDWDs; (c) as a result of Sero Learning not initiating CDWDs in respect of such consumers, consumers enrolled in Online Courses through the Sero Distance Campus: (i) had a rate of progression in the Online Courses in which they were enrolled (measured by the percentage of units of competency completed compared to the total units of competency available for completion by students that had passed their first census date) of 2.4%, compared to a rate of 12.6% for consumers enrolled in CCC's Distance Campus; and (ii) had a rate of non-engagement in their Online Course (measured by the percentage of consumers who had never accessed their online learning management system (LMS)) of 84%, compared to a rate of 21.2% for consumers enrolled in CCC's Distance Campus; (d) Sero Learning needed to monitor Course Advisors in relation to the information Course Advisors were providing to consumers, such as information as to the cost of the Online Courses, and Sero Learning had provided no evidence about this during the audit; and (e) the risks relating to Sero Learning's use of Course Advisors to market Online Courses to consumers was high because CCC didnot monitor the Course Advisors used by Sero Learning. 48 On around 15 December 2014, a meeting was held of senior officers and employees of Site and CCC, including Cook (Sero Meeting). 49 During the Sero Meeting: (a) Cook stated CCC's concerns arising from the Sero Distance Campus Health Check in relation to Sero Learning not performing CDWDs in respect of consumers regardless of whether they were contactable or had engaged with their courses; and (b) there was discussion about the number of consumers that were affected by Sero Learning's failure to perform CDWDs. 50 As a result of the matters set out in paragraphs 46 to 49 above: (a) CCC undertook a process of contacting, or attempting to contact, consumers enrolled by Sero Learning who had passed a first census date in their Online Course but who had not engaged with the Online Course, for the purpose of attempting to encourage such consumers to engage with their Online Course, or to arrange for them to be withdrawn from their Online Course with any VFH Debt reversed; (b) in December 2014 and January 2015, CCC attempted to contact around 287 consumers who had never logged on to the Sero Distance Campus LMS, and of those: (i) around 50 consumers expressed an interest in continuing to be enrolled; (ii) around 58 consumers indicated they wished to withdraw (of whom 41 had incurred VFH Debts that needed to be reversed); and (iii) CCC was unable to make contact with around 178 consumers; and (c) Sero Learning ceased offering CCC's Online Courses, and consumers who remained enrolled in Online Courses delivered by the Sero Distance Campus were transferred to CCC's Distance Campus. January 2015 Advisory Board Meeting 51 On or around 14 January 2015, CCC held an Advisory Board Meeting (January 2015 Advisory Board Meeting). 52 An Advisory Board CEO Report prepared by Cook for the purpose of the January 2015 Advisory Board Meeting reported the matters set out in paragraph 50(b) above. March 2015 Distance Campus Meeting 53 On or around 11 March 2015, CCC held a Distance Campus Meeting (March 2015 Distance Campus Meeting) which was attended by Cook. 54 During the March 2015 Distance Campus Meeting, there was a discussion about an incident where a CCC employee was conducting an Outbound QA Call, and was informed that the Course Advisor had completed the consumer's PEQ. 2015 CCC Distance Campus Health Check 55 In around March or April 2015, CCC conducted a Campus Health Check of the CCC Distance Campus (2015 CCC Distance Campus Health Check). 56 A student progress report summary prepared for the purpose of the 2015 CCC Distance Campus Health Check recorded that, in respect of 1,212 consumers who became enrolled in Online Courses between 1 August 2014 and 3 March 2015: (a) 656 remained enrolled past their first census date (resulting in an attrition rate of 45.9%); and (b) of the 656 consumers who had remained enrolled past their first census date, 516 (being 78.6%) had accessed the LMS. 57 During the 2015 CCC Distance Campus Health Check, CCC identified that: (a) there was evidence that Course Advisors were completing the PEQ for consumers; (b) CCC's head office needed to implement tighter processes to detect Course Advisors completing the PEQ; and (c) the use of Course Advisors for marketing was a major risk area for CCC and CCC's strategy for monitoring the conduct of Course Advisors was not robust enough. 13 May 2015 Advisory Board Meeting 58 On or around 13 May 2015, CCC held an Advisory Board Meeting (May 2015 Advisory Board Meeting) attended by Cook among others. 59 During the May 2015 Advisory Board Meeting: (a) a report from Cook as CEO of CCC (May 2015 CEO Report) was tabled and confirmed as read and this reported that there had been a significant decrease in enrolment numbers at CCC's Distance Campus; and (b) Cook discussed CCC's low revenue numbers. 27 May 2015 Distance Campus Meeting 60 On or around 27 May 2015, CCC held a Distance Campus Meeting (27 May Distance Campus Meeting) attended by Cook among others. 61 The matters discussed at the 27 May Distance Campus Meeting included: (a) the CCC Distance Campus's "attrition rate", referring to the percentage of consumers who withdrew, or were withdrawn pursuant to a CDWD, prior to a census date; (b) the CCC Distance Campus's "conversion rate", referring to the percentage of consumers who were enrolled in an Online Course and who remained enrolled past a census date; (c) the Distance Campus's current trend for conversion rates for first census dates, which was approximately 50%; (d) the Distance Campus's conversion rates for second census dates, which were as follows: (i) 71% for April 2015; (ii) 55% for March 2015; and (iii) 44% for February 2015; (e) based on CCC's target in 2014, that a good conversion rate for first census dates was 70%; and (f) the main reason for the attrition rate was that CCC was unable to make contact with consumers. July 2015 Management Meeting 62 On or around 15 July 2015, CCC held a Management Meeting (July 2015 Management Meeting) attended by Cook among others. 63 During the July 2015 Management Meeting, Dawson tabled a report which was confirmed as read (July 2015 CFO Report). 64 The July 2015 CFO Report reported that for the financial year ending 30 June 2015: (a) CCC's training fee revenue was around $19.55 million, which was around $5.3 million under budget; and (b) CCC's EBITDA was around $4.4 million, which was around $1.17 million under budget. Events in August 2015 65 By around the middle of August 2015, Cook (as well as other senior officers and employees of CCC) had reached the following conclusions about CCC's business: (a) the processes used by CCC in respect of the enrolment of consumers in CCC's Online Courses resulted in a CCC having a high attrition rate and a correspondingly low conversion rate; (b) CCC's low conversion rate led to Course Advisors preferring to refer consumers for enrolment in other RTOs; (c) Course Advisors' referring consumers to other RTOs resulted in a lower volume of enrolments in CCC's Online Courses; (d) a lower volume of enrolments in CCC's Online Courses resulted in CCC's revenue being below expectations; and (e) accordingly, in order to increase the volume of enrolment in its Online Courses (and thereby the revenue obtained from such enrolments), CCC should implement changes to the processes it used in respect of the enrolment of consumers in its Online Courses. 66 On or around 19 August 2015, CCC held a Management Meeting (August 2015 Management Meeting) attended by Cook among others. 67 During the August 2015 Management Meeting, Cook tabled a report (August 2015 CEO Report), which was confirmed as read. 68 The August 2015 CEO Report: (a) stated that in relation to CCC's Distance Campus, enrolment numbers were slow, and the conversion rate was low due to CCC's enrolment process; (b) reported that: (i) CCC had been receiving feedback from Course Advisors about CCC's enrolment process; (ii) Cook and Khaled Akbery (CCC's Partnerships Manager) had met with the marketing team to finalise a new enrolment process; (iii) a flow chart illustrating the new enrolment process was attached; and (iv) the new enrolment process would commence on 4 September 2015. 69 During the August 2015 Management Meeting: (a) Cook stated that July had been a quiet month for CCC; (b) Cook stated that CCC had been getting feedback from its Course Advisors that CCC's enrolment process was too complex and slowing down conversions significantly, and that CCC was currently streamlining the enrolment process with a rollout date of 4 September 2015; (c) Carson stated that numbers were low but that he was confident that once the new enrolment process was streamlined numbers would grow and previous Course Advisors would re-join; and (d) Blake Wills (Site's chief operating officer and the Fourth Respondent) stated that CCC's performance over the last few months had been declining and that this was raising some concerns because CCC's competitors were not struggling. 70 On or around 19 August 2015, CCC held a Distance Campus Meeting (August 2015 Distance Campus Meeting) attended by Cook among others. 71 At the August 2015 Distance Campus Meeting, the following matters were discussed: (a) the Distance Campus's conversion rate was low, with only 30 out of the 67 consumers who had been enrolled in an Online Course remaining enrolled past the first census date in their course; (b) it was necessary to remove the barriers to consumers passing census dates; (c) head office was in the process of streamlining the Distance Campus's enrolment process; and (d) the Distance Campus was not meeting its budget for the month, because, among other things, the enrolment process was slowing things down. Complaints about Course Advisors' conduct received by CCC during the Earlier Period 72 During both the Earlier Period and during the Relevant Period, CCC maintained registers recording complaints it had received in relation to: (a) enrolment in CCC's Online Courses; and/or (b) marketing and promotion of Online Courses. 73 The registers for complaints included the following: (a) a Complaints Register which recorded any complaints which had not been resolved through informal discussion; and (b) an Agent Issues and Complaints Register, which recorded all complaints CCC had received concerning the conduct of Course Advisors. 74 During the Earlier Period, CCC received complaints including about the following kinds of conduct alleged to have been engaged in by Course Advisors: (a) making misleading statements about Online Courses, such as that they were government-funded or free for people on Centrelink; (b) failing to explain the nature of the VFH Debts consumers would incur if they enrolled in an Online Course and remained enrolled past a census date; (c) pressuring consumers to enrol in an Online Course; (d) offering free laptops to consumers; and (e) completing consumers' PEQs for them. The Enrolment and Withdrawal Process Changes 75 From around 7 September 2015, CCC implemented the following changes to its processes for enrolment in and withdrawal from its Online Courses (Process Changes): (a) Outbound QA Calls were replaced by inbound calls to CCC (Inbound QA Call), which: (i) involved a call between a CCC employee and a consumer; (ii) were initiated by a Course Advisor immediately after a consumer's Enrolment Documents were electronically submitted; (iii) thereby generally occurred when the Course Advisor was present with the consumer; and (iv) were conducted by CCC employees following a script which principally consisted of: (A) closed "yes/no" questions; and (B) the CCC employee reading out scripted information; and (b) the CDWD procedure was abolished (subject only to the CCC Distance Campus Manager having limited discretion to cancel a consumer's enrolment for reasons of academic misconduct, behavioural issues or LLN reasons). Events Following the Implementation of the Process Changes October 2015 Management Meeting 76 On or around 21 October 2015, CCC held a Management Meeting (October 2015 Management Meeting) attended by Cook among others. 77 During the October 2015 Management Meeting, Cook tabled a report (October 2015 CEO Report) and Mohammed Akbery (CCC's Operations Manager) tabled a report (October 2015 Operations Report), both of which were confirmed as read. 78 The October 2015 CEO Report stated that after the introduction of an "improved" enrolment process in early September 2015, CCC had begun to see major traction with its Marketing Partners and with Learn2Earn; and that the number of consumers enrolled in Online Courses through CCC's Distance Campus had increased significantly due to the new enrolment process and the on-boarding of new Course Advisors. 79 The October 2015 Operations Report reported that there were at that time over 1,000 consumers enrolled in an Online Course, and it was discussed during the October 2015 Management Meeting that there was generally a lack of student engagement. November 2015 Management Meeting 80 On or around 18 November, CCC held a Management Meeting (November 2015 Management Meeting) attended by Cook among others. 81 During the November 2015 Management Meeting, Cook tabled a report (November 2015 CEO Report), Carson tabled a report (November 2015 Sales Report), and Mohammed Akbery tabled a report (November 2015 Operations Report), all of which were confirmed as read. 82 The November 2015 CEO Report stated that the number of enrolments in Online Courses through CCC's Distance Campus had increased significantly due to the new enrolment process and on­ boarding of new Course Advisors. 83 The November 2015 Sales Report stated that October 2015 had broken all records and was by far CCC's best month in many areas and with the new enrolment system. 84 The November 2015 Operations Report stated that there were now approximately 4,400 consumers enrolled in Online Courses. CC's cessation of new enrolments in December 2015 85 On or around 18 December 2015, CCC ceased enrolling consumers whose tuition fees would be paid by way of a VFH Loan in its Online Courses. The Commonwealth Government had imposed a VFH Loan cap of $16.8m on CCC for the 2016 calendar year, which meant that CCC could not claim any more than $16.8m in tuition fees even though it had enrolled many more students - who would have (notionally) generated tuition fees of approximately $30m during the 2016 year. Course Advisor Investigations 86 In the period from around November 2015 to April 2016, Khaled Akbery: (a) undertook investigations in relation to the conduct of several Course Advisors who had engaged in marketing and recruitment activities in respect of CCC's Online Courses (Course Advisor Investigations); (b) prepared reports - which were presented to Cook among others - describing: (i) the reason for the initiation of the investigation; (ii) the course of the investigation; (iii) the actions CCC had taken following the investigation, which included: (A) disengaging the Marketing Partner and/or Course Advisors the subject of the investigation; and (B) cancelling the enrolments of a number of consumers and reversing any VFH Debts such consumers had incurred; and (iv) CCC's review, at subsequent dates in 2016, of the actions it had taken following the relevant investigations. 87 In relation to the Course Advisor Investigations: (a) Cook's role as CEO included reviewing reports of investigations into the conduct of Course Advisors, including the reports of the Course Advisor Investigations; and (b) Cook had input into what steps CCC would take in respect of one of the investigations. CCC's Contact Strategy 88 As at 17 February 2016: (a) there were 5,561 consumers recorded as being currently enrolled in an Online Course; (b) of these consumers: (i) 15% were classified as Category A (the consumer initiates or responds to contacts from CCC and has completed assessments in the past 2-4 weeks); (ii) 30% were classified as Category B (the consumer responds irregularly to contacts from CCC); and (iii) 54% were classified as Category C (the consumer does not respond to contacts from CCC). 2016 Distance Campus Health Check 89 In around April 2016, CCC conducted a Campus Health Check of its Distance Campus (2016 Distance Campus Health Check). 90 An attrition rate report prepared for the purpose of 2016 Distance Campus Health Check recorded that, in respect of consumers who were due to pass a census date between September and December 2015, the attrition rate averaged around 10.25%. 91 During the 2016 Distance Campus Health Check, CCC identified that: (a) the discretion of the Distance Campus Manager to reject enrolments for LLN reasons should be made clearer; (b) for future enrolments, there should be a second quality assurance (QA) step after the initial Inbound QA Call; (c) of the 5,032 consumers enrolled in Online Courses, only 361 (being 7.2%) were accessing the LMS: and (d) all consumers were deemed to be "at risk" due to lack of engagement with, and submissions in, the Online Courses. Status as at May 2016 92 As at 18 May 2016 it was reported at a Management Meeting which Cook attended that: (a) there were 4,052 consumers enrolled in Online Courses; (b) of these consumers: (i) 513 (12.7%) were classified as Category A (the consumer initiates or responds to contacts from CCC and has completed assessments in the past 2-4 weeks): (ii) 931 (23%) were classified as Category B (the consumer responds irregularly to contacts from CCC); (iii) 2,329 (57.5%) were classified as Category C (the consumer does not respond to contacts from CCC): (iv) 106 (2.6%) were classified as Category D (CCC does not have current contact information for the consumer); and (v) 170 (4.2%) were classified as Category E (CCC has exhausted electronic communication alternatives with the consumer). (c) in respect of the Distance Campus: (i) CCC's revenue from VFH training fees for the year to date was around $55.7 million, which exceeded the budgeted figure of around $13.6 million by around $42.1 million; and (ii) CCC's gross profit for the year to date was around $17.9 million, which exceeded the budgeted figure of around $6.9 million by around $11 million. CCC'S Systemic Unconscionable Conduct The Profit Maximising Purpose of the Process Changes 93 CCC's substantial purpose in implementing the Process Changes was: (a) to increase the number of Course Advisors that referred consumers to CCC for enrolment, and the number of consumers that those Course Advisors referred to CCC; (b) to increase the number of consumers who became enrolled in Online Courses and remained enrolled past their census dates; and (c) thereby to increase the revenue CCC earned from tuition fees paid by the Commonwealth, who in turn made VFH Loans to such consumers (VFH Revenue), (Profit Maximising Purpose). 94 CCC claimed from the Commonwealth VFH Revenue in respect of over 90% of consumers who became enrolled in an Online Course during the Relevant Period and who passed one or more census dates. The CA Misconduct Risk and the Unsuitable Enrolment Risk 95 At all material times, there was a risk that, in the course of engaging with consumers while conducting marketing and recruitment activities, Course Advisors may engage in the following kinds of conduct (CA Misconduct): (a) making false and misleading statements to consumers to the effect that the Online Courses were free; (b) failing to properly inform consumers that they would incur VFH Debts if they enrolled in Online Courses and/or the circumstances in which they would have to be repaid; (c) pressuring consumers to enrol in an Online Course; (d) offering consumers inducements, such as free laptops, to enrol in an Online Course; (e) completing consumers' Enrolment Documents, including the PEQ, for them; and (f) coaching consumers during the course of the Inbound QA Call, and that accordingly, if CCC did not have in place processes by which it could detect CA Misconduct, there was a risk that consumers who had been subjected to CA Misconduct would become enrolled in an Online Course and remain enrolled past the census date or dates in the course, and thereby incur a VFH Debt (CA Misconduct Risk). 96 At all material times, CCC knew, or in the alternative ought to have known, of the CA Misconduct Risk. 97 At all material times, there was a risk that Course Advisors would recruit for enrolment in the Online Courses: (a) consumers who would not be contactable by CCC; (b) consumers who would have no or minimal engagement with their Online Course; (c) consumers who did not in fact wish to enrol in an Online Course; and/or (d) consumers who were otherwise not suitable for enrolment including by reason of lacking sufficient LLN skills, computer skills, or access to technology required to undertake their Online Course, and that accordingly, if CCC did not have in place processes to ensure consumers of the kinds described in sub-paragraphs (a) to (d) were either not enrolled in an Online Course, or were withdrawn prior to passing a census date, such consumers would become enrolled in an Online Course and remain enrolled past the census date or dates in the course, and thereby incur a significant VFH Debt (Unsuitable Enrolment Risk). 98 At all material times CCC knew, or in the alternative ought to have known, of the Unsuitable Enrolment Risk. 99 The Outbound QA Call provided a means by which CCC could mitigate the CA Misconduct Risk and the Unsuitable Enrolment Risk, in that when CCC used the Outbound QA Call process: (a) there was usually a delay of at least several hours or days between a consumer's Enrolment Documents being received by CCC and the Outbound QA Call being made, during which time a CCC employee had the opportunity to conduct the analysis of those documents described in paragraph 44(a) to 44(c) above; (b) if a consumer did not answer the Outbound QA Call or call CCC back after receiving a voicemail in relation to such a call (for example, because they did not want to be enrolled or they were unlikely to be contactable by CCC), the consumer would not be enrolled; (c) by reason of the Course Advisor not being present when a CCC employee made the Outbound QA Call and/or the open nature of the questions asked and inquiries made during the Outbound QA Call, if: (i) the Course Advisor had told the consumer that the Online Course was free, or failed to properly inform the consumer about the VFH Debt they would incur if they enrolled, the consumer would be unlikely to be able to correctly answer questions consumers were required to be able to answer correctly during the Outbound QA Call in order to be enrolled; and/or (ii) a consumer did not in fact wish to enrol in an Online Course but had felt under pressure from the Course Advisor to complete the Enrolment Documents or otherwise felt unable to request the Course Advisor to leave without completing those documents, it was more likely that such a consumer would inform CCC of those matters during the Outbound QA Call if the Course Advisor was not present with them; and/or (d) the Course Advisor had completed a consumer's PEQ for the consumer: (i) the consumer would be unlikely to be able to correctly answer questions consumers were required to be able to answer correctly during the Outbound QA Call in order to be enrolled; and/or (ii) the consumer would be more likely to inform CCC during the Outbound QA Call that the Course Advisor, and not the consumer, had completed the PEQ. 100 At all material times CCC knew, or in the alternative ought to have known, the matters in paragraph 99 above. 101 The CDWD process provided a means by which CCC could mitigate the CA Misconduct Risk and the Unsuitable Enrolment Risk, in that, it was a means by which consumers who, following their enrolment in an Online Course: (a) were not able to be contacted by CCC; (b) were not engaged in their Online Courses; and/or (c) were otherwise not suitable for the Online Course in which they were enrolled, would be protected from incurring VFH Debts. 102 At all material times CCC knew, or in the alternative ought to have known, the matters in paragraph 101 above. 103 The Process Changes reduced CCC's ability to mitigate the CA Misconduct Risk and the Unsuitable Enrolment Risk in that: (a) because the Inbound QA Call occurred immediately after a consumer's Enrolment Documents had been electronically submitted, CCC had no, or alternatively minimal, opportunity to conduct any analysis of the kind described in paragraphs 44(a) to 44(c) above; (b) by reason of the Course Advisor being present with the consumer during the Inbound QA Call: (i) the Course Advisor had the opportunity to prompt the consumer as to the answers to give during the call, such that the fact that a consumer correctly answers the questions asked during the call could not provide assurance to CCC that the Course Advisor had not: (A) told the consumer that the Online Course was free; (B) failed to properly inform the consumer about the VFH Debt they would incur if they enrolled; and/or (C) completed the PEQ for the consumer; (ii) if a Course Advisor had completed the PEQ for a consumer, the consumer would be less likely to inform CCC of that fact during the call; and (iii) if a consumer did not in fact wish to enrol in an Online Course but had felt under pressure from the Course Advisor to complete the Enrolment Documents or otherwise felt unable to request the Course Advisor to leave without completing those documents, it was less likely that such a consumer would inform CCC of those matters during the call; (c) by reason of the Inbound QA Call being conducted according to a script that principally consisted of closed questions and the reading of scripted information the ability of the CCC employee conducting the call to make observations about the consumer's behaviour, listening and speaking skills was reduced; (d) by reason of CCC's abolition of CDWDs, if a consumer did not take the affirmative step of requesting withdrawal, subject to the limited discretion set out at paragraph 75(b) above, the consumer would pass a census date and thereby incur a VFH Debt, regardless of whether: (i) CCC was able to contact the consumer; (ii) the consumer was engaging in the Online Course; and/or (iii) the consumer was otherwise not suitable for enrolment in his or her Online Course. 104 At all material times CCC knew, or in the alternative ought to have known, the matters in paragraph 103 above. 105 By reason of the matters outlined in paragraphs 95 to 100, at all material times CCC knew or ought to have known that the Process Changes would reduce CCC's ability to mitigate the CA Misconduct Risk and the Unsuitable Enrolment Risk, in the ways set out in paragraph 103 above. The results of the Process Changes 106 Primarily as a result of the Process Changes in the Relevant Period, when compared to the Earlier Period, there was: (a) a substantial increase in the number of consumers who became enrolled in an Online Course (1,316 consumers became enrolled during the Earlier Period and 7,324 consumers became enrolled in the Relevant Period); (b) a substantial increase in the number and proportion of consumers who passed at least one census date in their Online Course (approximately 62% of consumers who became enrolled in the Earlier Period and approximately 83% of consumers who became enrolled in the Relevant Period); (c) a substantial increase in the number and proportion of consumers who incurred a VFH Debt but who did not complete any unit of competency or the Online Course as a whole (approximately 81.9% of consumers who became enrolled during the Earlier Period and passed a census date did not complete any unit of competency in their Online Course and approximately 98.9% of consumers who became enrolled during the Relevant Period and passed a census date did not complete any unit competency in their Online Course); (d) a substantial increase in the number and proportion of consumers who incurred a VFH Debt but who did not engage in their Online Course or were not contactable (approximately 27.9% of consumers who became enrolled during the Earlier Period did not log in to the LMS and 1.7% of consumers also did not have two-way communication with CCC at all, or only had such communication regarding the acquisition of a computer and/or withdrawal from their course; approximately 86.5% of consumers who became enrolled during the Relevant Period did not log in to the LMS and 49.8% of consumers also did not have two-way communication with CCC at all, or only had such communication regarding the acquisition of a computer and/or withdrawal from their course). (e) a substantial increase in the VFH revenue claimed by CCC (CCC claimed approximately $7.4 million in VFH Revenue in respect of consumers who became enrolled in Online Courses during the Earlier Period and CCC claimed approximately $54.17 million in VFH Revenue in respect of consumers who became enrolled in Online Courses during the Relevant Period); (f) an increase in the proportion of consumers who made a complaint to CCC, or on whose behalf complaints were made to CCC, in respect of the conduct of Course Advisors. (together, the Process Changes Results) 107 By no later than around May 2016, CCC knew, or ought to have known, of the Process Changes Results. CCC's unconscionable conduct 108 By implementing the Process Changes in circumstances where: (a) CCC had the Profit Maximising Purpose; (b) CCC was aware, or ought to have been aware, of: (i) the CA Misconduct Risk; (ii) the Unsuitable Enrolment Risk; and (iii) the fact that the Process Changes would reduce its ability to mitigate the CA Misconduct Risk and the Unsuitable Enrolment Risk, when compared to its prior processes being the Outbound QA Call and CDWDs; (c) the implementation of the Process Changes resulted in the Process Changes Results; (d) by no later than around May 2016, CCC knew, or alternatively ought to have known, of the Process Changes Results; and (e) notwithstanding the Process Changes Results and the fact that CCC knew of them (or alternatively ought to have known of them) by no later than around May 2016, CCC claimed VFH Revenue in respect of over 90% of the consumers who became enrolled in an Online Course during the Relevant Period and passed one or more census dates, CCC engaged in a system of conduct, or a pattern of behaviour that was, in all the circumstances, unconscionable in contravention of s 21 of the Australian Consumer Law (ACL). Admissions 109 At all material times, Cook was employed as the CEO of CCC, and was in charge of CCC's business and strategy. 110 From around August 2015, Cook was involved in devising and implementing the Process Changes. He supervised the implementation of the Process Changes by the other employees of CCC. 111 From at least August 2015, Cook knew of CCC's Profit Maximising Purpose in respect of the Process Changes. 112 At all material times, Cook knew of facts that gave rise to the CA Misconduct Risk. 113 At all material times, Cook knew of facts that gave rise to the Unsuitable Enrolment Risk. 114 At all material times, Cook knew of the matters set out in paragraphs 99, 101 and 103 above. 115 By no later than around May 2016, Cook knew about the Process Changes Results. 116 By reason of: (a) his role as director and CEO of CCC; (b) his participation in Advisory Board Meetings and Management Meetings; (c) his participation in the Sero Meeting; (d) his participation in Distance Campus Meetings; (e) his involvement in devising the Process Changes; (f) his participation in the August 2015 Management Meeting, where the Process Changes were the subject of discussion; and (g) his knowledge and state of mind, as set out in paragraphs 65 and 111 to 115, Cook was: (h) involved in devising the Process Changes; (i) involved in the management and oversight of CCC at all material times, including when CCC devised and implemented the Process Changes; and (j) associated with, or had a practical connection with, CCC's unconscionable conduct, as outlined in paragraph 108. 117 By reason of the matters outlined at paragraphs 109 to 116, Cook admits that he was knowingly concerned in, or party to, and therefore involved (within the meaning of s 2 of the ACL) in CCC's contravention of s 21 of the ACL referred to in paragraph 108 above. Cook's previous compliance with the Act and personal circumstances 118 Cook has not previously been found by a Court in proceedings under Chapter 4 or Part 5-2 of the ACL to have engaged in similar contravening conduct to the conduct outlined above. 119 Cook did not make any financial gain attributable to his contravening conduct (or the contravening conduct of CCC), outside of his ordinary salary and employment benefits. 120 At the time they were implemented, Cook believed the Process Changes were lawful and believed the Process Changes brought CCC's processes into line with those of its competitors. 121 Since he resigned from CCC in March 2017, Cook has not been employed in the private sector. He was unemployed for the period March 2017 to May 2018 and since that time has worked in the public service. He is not a director of any companies other than Ryden Enterprises Pty Ltd (the corporate trustee of his family trust) and Ryden Investments Pty Ltd (the corporate beneficiary of his family trust). Neither of those entities trade or deal with consumers. 122 Both consumers and the Commonwealth were harmed by the contravening conduct. Consumers suffered harm by incurring debts in relation to their courses, though those debts have since been waived by the Commonwealth. The Commonwealth suffered harm by paying moneys to CCC for some consumers who were enrolled as a result of the contravening conduct, although the Commonwealth ultimately did not pay moneys to CCC in respect of many of the consumers enrolled as a result of the contravening conduct. 123 Cook proposed a settlement of the claims against him in the proceeding on 6 April 2020, after evidence had been served by the ACCC but 2 months before the date the proceedings were listed for hearing. The settlement saves the ACCC some time and expense in litigating the claims against him both at the liability trial and any subsequent trial on relief. The settlement reflects contrition on the part of Cook. ANNEXURE 2 Joint Submissions of the Applicant and Third Respondent (footnotes omitted) A. INTRODUCTION 1 These submissions are made jointly on behalf of the Applicant, the Australian Competition and Consumer Commission (ACCC) and the Third Respondent, Ian Cook (Cook). 2 The ACCC and Cook have reached agreement as to the terms on which they seek the resolution of this proceeding as between them and, together with these joint submissions, have jointly filed the following documents: (a) a Statement of Agreed Facts and Admissions dated 2 June 2020 (SoAFA) setting out the facts agreed between the parties and admissions made by Cook pursuant to s 191(3)(a) of the Evidence Act 1995 (Cth); and (b) the parties' agreed minute of proposed orders (proposed order), setting out the relief (including as to penalty) which, for the reasons outlined below, the parties respectfully submit is appropriate and should be granted in this proceeding as between them, recognising that the grant of such relief is a matter for the Court. 3 On the basis set out in the SoAFA, Cook has admitted for the purposes of this proceeding that he was knowingly concerned in, or party to, a contravention of s 21 of the Australian Consumer Law (ACL) by the first respondent, Productivity Partners Pty Ltd trading as Captain Cook College (CCC), in connection with the supply or possible supply of online diploma level courses to consumers whose enrolment was processed during the period 7 September 2015 to 18 December 2015 (Relevant Period), constituted by CCC's engaging in an unconscionable system of conduct or pattern of behaviour. 4 As against the first, second and fourth respondents, the proceeding is listed for trial beginning on 9 June 2020, before Stewart J. Given the close connection between the facts relevant to Cook's liability and the claims the subject of the trial, it is proposed not to inform Stewart J about the agreed facts or admissions or proposed orders, lest it affect his Honour's ability to hear the trial. 5 The proposed order provides for: (a) a declaration to be made pursuant to s 21 of the Federal Court of Australia Act 1976 (Cth) (FCA Act) in relation to the admitted conduct. It is proposed to defer the making of the declaration until after the determination of the claims against the other respondents following the trial, consistently with the Court's practice in cases where the ACCC has reached a resolution with some respondents and not others. In due course the parties will provide a supplementary joint submission on the proposed declaration; (b) Cook to pay a total pecuniary penalty of $250,000 pursuant to s 224 of the ACL, in respect of his knowing involvement in CCC's contravention of s 21 of the ACL as described in paragraph 3 above; (c) Cook to be disqualified from managing corporations pursuant to s 248 of the ACL for a period of 3 years; and (d) Cook to pay the ACCC's costs of the proceeding as against him, fixed in the sum of $250,000 pursuant to s 43 of the FCA Act. 6 These joint submissions are to be read with the SoAFA. Where a term is defined in the SoAFA and used in this document, that term has the meaning defined in the SoAFA. 7 The Court may rely upon Cook's admissions, and the facts agreed in the SoAFA, to pronounce judgment and make orders. The SoAFA and these joint submissions provide the factual and legal basis for the relief contained in the proposed order. B. APPLICABLE LEGISLATION AND PRINCIPLES 8 Section 21(1) of the ACL provides that a person must not, in trade or commerce, in connection with the supply or possible supply of goods or services, "engage in conduct that is, in all the circumstances, unconscionable." 9 Section 224 of the ACL provides that if the Court is satisfied that a person has been in any way, directly or indirectly, knowingly concerned in, or party to, a contravention by another person of certain provisions of the ACL (including s 21), the court may order the person to pay to the Commonwealth a pecuniary penalty in respect of each applicable act or omission by the person, as the court determines to be appropriate. 10 Section 21(1) proscribes conduct which objectively answers the description of being "against conscience": ASIC v Kobelt (2019) 368 ALR 1 at [14] per Kiefel CJ and Bell J. In Paciocco v Australia and New Zealand Banking Group Ltd (2015) FCR 199, Allsop CJ explained at [296]-[299] that what conscience requires, in both business and consumer contexts, will take inspiration from Australia's legal heritage in equity and common law, and from "modern social and commercial legal values" identified by Parliament and the courts. The norms of society against which conduct (including a system or pattern) is to be evaluated include the other proscriptions and regulation of conduct contained in the ACL: see ACCC v Lux Distributors Pty Ltd [2013] FCAFC 90 at [41]-[44] per Allsop CJ, Jacobson and Gordon JJ and Unique International College Pty Ltd v ACCC (2018) 266 FCR 631 (Unique Appeal) at [104] per Allsop CJ, Middleton and Mortimer JJ. In Paciocco, Allsop CJ identified (at [296]) that the evaluation of conduct alleged to be unconscionable must be made against an assessment of all connected circumstances, and observed that "the variety of considerations that may affect the assessment of unconscionability only reflects the variety and richness of commercial life". Put another way, the notion of unconscionability "is a fact-specific and context-driven application of relevant values by reference to the concept of conscience": Unique at [104]. 11 In the context of statutory unconscionability, motive or purpose may be a "powerful means of explaining and characterising" conduct, which may contribute to inferences as to intention and responsibility for conduct, elucidating why conduct or practices were carried out in a particular way or persisted with in the face of known problems, as found by Bromwich J in AIPE at [161]. Further, the character of a regime which produces a particular outcome may be shown to be unconscionable even without proof of an intention to achieve that outcome: AIPE at [167]. Further, as in ACCC v Cornerstone Investment Aust Pty Ltd (in liq) (No 4) [2018] FCA 1408 (Empower) at [272], the purpose of a system may be found without identifying that purpose as being held by any one individual. 12 In Kobelt (considering s 12CB of the Australian Securities and Investments Commission Act 2001 (Cth)), four justices (Gageler J at [83] - [89], Nettle and Gordon JJ at [232], and Edelman J at [295]) expressly found that taking advantage of special disadvantage is not a necessary element for statutory unconscionability (at least in a system or pattern of conduct case), and two justices (Kiefel CJ and Bell J at [48]) expressly declined to decide the issue. Justice Gageler stated at [89] that "the requirement to administer the standard of unconscionability in the totality of circumstances is a further indication that the standard has application within a range of factual scenarios not all of which would be recognised in equity as giving rise to unconscionable conduct". Justice Edelman at [295] observed that the statutory proscription had been "shorn from either of the equitable preconditions imposed in the 20th century" and that "there is no clear baseline moral standard for what constitutes "unconscionable" conduct" within the statutory regime (see also Gageler J at [89] identifying that the statutory provision is "shorn of the constraints of the unwritten law"). 13 Section 21(4)(b) of the ACL provides that "it is the intention of Parliament" that s 21 "is capable of applying to a system of conduct or pattern of behaviour, whether or not a particular individual is identified as having been disadvantaged by the conduct or behaviour" albeit that, as observed by Gleeson J in Empower at [726] even prior to the inclusion of s 21(4)(b) in the ACL a system or pattern of behaviour could constitute unconscionable conduct. As the Full Court explained in the Unique Appeal at [104], s 21(4)(b) removes any necessity to prove disadvantage having been suffered by any particular individual. Their Honours also explained (at [104]) that "system" connotes an internal method of working, and "pattern" connotes the external observations of events, and that these words should not be glossed. What must be proved is that the system is unconscionable according to the principles outlined above. 14 In order to be knowingly concerned in, or a party to, a contravention, first, the person must have had knowledge of all the essential matters that make up the contravention: Yorke v Lucas (1985) 158 CLR 661 at 667, 669-670 per Mason ACJ, Wilson, Deane and Dawson JJ. However, it is not necessary that the person knew that those matters constituted a contravention: Rafferty v Madgwicks (2012) 203 FCR 1 at [254] per Kenny, Stone and Logan JJ. Second, the person must have engaged in conduct (by act or omission) which can be properly be said to "implicate" them in the contravention or which shows a "practical connection" between them and the contravention: ASIC v ActiveSuper Pty Ltd (in liq) (2015) 235 FCR 181 at [407]-[410] per White J. While a positive act is necessary, to establish the requisite practical connection it is not necessary that the person physically do anything to further the contravention: Leighton Contractors Pty Ltd v Construction, Forestry, Mining and Energy Union [2006] WASC 144; R v Tannous (1988) 10 NSWLR 303 (CA). It is sufficient if the person, by what they said and agreed to do, became associated with the conduct constituting the contravention. The association "includes all that is incidental or proximate" to the contravening conduct: R v Phil Kim Phieu Lam (1990) 46 A Crim R 402 per Gleeson CJ. C. SUMMARY OF AGREED FACTS 15 The following is a summary of the agreed facts as set out in the SoAFA. 16 At all relevant times, CCC carried on a business, in trade or commerce, of marketing and supplying vocational education courses to consumers, including courses in an online-based format (Online Courses) through what it called its Distance Campus, and for a time also through Sero Learning Pty Ltd (Sero) at its online campus (Sero Distance Campus) under the terms of an "Auspice Agreement" between CCC and Sero. Between 30 March 2012 and 22 December 2016, CCC was a "VET Provider". The relevant Online Courses were a "VET course of study" consisting of "VET units of study". 17 Cook was a director of CCC from around 9 April 2013 to around 1 March 2017 and was employed as its CEO from at least March 2013 to February 2017. In his role as CEO of CCC, Cook had overall responsibility for the management and operations of CCC's business. 18 At all relevant times, a consumer who enrolled in CCC's Online Courses and who satisfied certain legislative criteria was entitled, on application, to a loan from the Commonwealth for a VET unit of study (VFH Loan) under the VET FEE-HELP Assistance scheme (VFH Scheme). 19 Under the VFH Scheme, the Commonwealth was required to loan the tuition fees and to advance the VFH Loan by paying the consumer's tuition fee directly to the relevant VET Provider in discharge of the consumer's liability to pay the fee to the VET provider. A consumer who received a VFH Loan incurred a debt to the Commonwealth amounting to 120% of the VFH Loan, being the VFH Loan amount, plus a 20% loan fee (VFH Debt). 20 When a person with a VFH Debt earned income above a certain threshold in a financial year (for example, $53,345 in FY2015, and $54,126 in FY2016), the consumer was required to repay the VFH Debt to the Commonwealth. 21 A VET provider was required to set a "census date" for each VET unit of study it provided, being a date not less than 20% of the way between the commencement date and the completion date for the unit of study. A consumer incurred a VFH Debt immediately after the census date for a VET unit of study in which they were enrolled. A consumer could withdraw from a VET unit of study in which they were enrolled without incurring any financial liability to the VET provider or to the Commonwealth. 22 CCC offered Online Courses during the Earlier Period and the Relevant Period, which included: Diplomas of Business, Project Management, Information Technology, and the Diploma of Human Resources Management was offered in the Relevant Period only. The Diploma of Management and the Advanced Diploma of Management were offered during the Earlier Period only. CCC charged tuition fees in respect of the Online Courses offered during the Earlier Period and the Relevant Period of between $13,000 and $20,000. 23 A significant majority of consumers who became enrolled in Online Courses during both the Earlier Period and the Relevant Period were recruited by sales agents, whom CCC referred to as "Course Advisors" or "CAs", some of which were engaged by third parties, with which CCC had entered into agreements (Marketing Partners) to undertake marketing and recruitment activities. Course Advisors typically undertook their marketing and recruitment activities through direct sales methods, including door-to-door sales activities at consumers' homes. CCC paid commission to Marketing Partners in respect of each consumer recruited by the Marketing Partner if that consumer passed a census date in respect of a unit of study in a course in which they were enrolled. Course Advisors within CCC's internal sales team, called "Learn2Earn" or "L2E", were engaged by a company called Certica CMO Pty Ltd (pursuant to an agreement with CCC), and they were remunerated by way of a commission paid by CCC (via Certica) for each consumer recruited by a Course Advisor and who remained enrolled in a CCC course beyond the first census date. 24 During the Earlier Period and the Relevant Period, for a consumer to be enrolled in Online Courses, CCC required an Enrolment Form, a pre-enrolment quiz (PEQ) and a request for VFH assistance (if applicable) to be completed for each consumer (together, Enrolment Documents). If a Course Advisor had recruited the consumer, the Course Advisor usually submitted the completed forms to CCC by email or submitted them online through CCC's online portal. When CCC received Enrolment Documents, a CCC employee reviewed them and analysed the Enrolment Form to identify any matter that might affect the consumer's ability to study, such as their age; whether they indicated poor English language ability; whether they had completed Year 12; and whether there were any disabilities that may affect their ability to study, and the PEQ to identify whether they had identified issues with using or accessing a computer; and whether they would require lots of help with reading, writing or speaking. After completing that review and analysis, the CCC employee called the consumer (Outbound QA Call) for the purpose of checking whether they were a "genuine" student, understood the commitment they were making and the course requirements, and to verify the answers given on the PEQ. If the consumer did not wish to study, or if the CCC employee was not able to make contact with a consumer to complete an Outbound QA Call, the consumer was not enrolled in an Online Course. Only if these steps were satisfactorily completed would CCC process the consumer's enrolment in an Online Course. 25 The Outbound Call could occur hours or several days after the Course Advisor had submitted the consumer's Enrolment Documents, so the Course Advisor was generally not present when the consumer answered the call. The Outbound QA Call was not conducted in accordance with a script that was followed word for word, but instead, CCC gave the employees guidance as to the matters to be addressed. 26 During the Earlier Period, CCC implemented a procedure known as "campus driven withdrawals" (CDWDs), where CCC withdrew some consumers from enrolment in an Online Course prior to the census date without the consumer having requested to be withdrawn. CCC typically implemented CDWDs if it was unable to contact the consumer between enrolment and the first census date or between the first and second census date, or if the consumer had not been engaged in their Online Course in those periods, or if CCC otherwise determined that the consumer was not suitable for the Online Course. 27 During the Earlier Period and in around November 2014, CCC conducted a "Campus Health Check" (CHC) of the Sero Distance Campus. During the CHC, CCC identified that Sero had not been initiating CDWDs, and Sero had permitted consumers to pass through first census dates where Sero had been unable to contact the consumer in the period between enrolment and the first census date. As a result, the consumers at that campus had a lower rate of progression than consumers enrolled in CCC's Distance Campus, and 84% had never logged accessed their online learning management system (LMS), compared to a rate of 21.2% for consumers enrolled in CCC's Distance Campus. 28 At a meeting of senior officers and employees of Site and CCC on 15 December 2014, Cook stated CCC's concerns arising from the CHC regarding Sero not performing CDWDs regardless of whether they were contactable or had engaged with their courses. As a result, CCC then undertook a process of attempting to contact around 287 consumers enrolled by Sero who had passed a first census date: 50 wished to continue to be enrolled; around 58 consumers wished to withdraw (41 of whom had incurred VFH Debts which had to be reversed); and CCC was unable to make contact with around 178 consumers. By early 2015, Sero Learning had ceased offering CCC's Online Courses and the "non-contactable students" had been withdrawn. The remaining consumers enrolled in Online Courses delivered by the Sero Distance Campus were transferred to CCC's Distance Campus. 29 CCC received reports about conduct alleged to have been engaged in by Course Advisors, such as: making misleading statements about Online Courses (including that they were government-funded or "free" for people on Centrelink), failing to explain the nature of the VFH Debts to consumers, pressuring consumers to enrol in an Online Course, offering free laptops, and completing consumers' PEQs for them (CA Misconduct). These reports were recorded in CCC's Complaints Register and Agent Issues and Complaints Register. Reports of CAs having completed consumers' PEQs were also made during meetings of Distance Campus staff in March 2015 (attended by Cook) and in May 2015, and in March 2015 were reported to Cook during the course of a CHC, which identified that Head Office needs to implement tighter processes to detect Agents completing the PEQ. 30 During a Distance Campus leadership team meeting attended by Cook on 27 May 2015, there was a discussion about CCC's current trend of a 50% "conversion rate" (i.e. those consumers who remained enrolled past a census date) for first census dates. The main reason given for withdrawal, including CDWD, was that CCC was unable to make contact with the consumers. 31 By around mid-August 2015, at a Management Meeting attended by Cook, CCC's performance in July 2015 vis-à-vis competitors was noted, and it was recorded that Course Advisors said CCC's enrolment process was too complex and was slowing down conversions significantly, and that CCC was reviewing the enrolment process with a view to streamlining it, with a rollout date of 4 September 2015. It was reported that once the new enrolment processes were streamlined, numbers would grow and previous Course Advisors would re-join. At a Distance Campus Meeting on the same day, attended by Cook, it was reported that it was necessary for CCC to remove the barriers to consumers passing through census dates and that Head Office was in the process of streamlining the Distance Campus's enrolment process. 32 In the Management Meeting on 19 August 2015, the process changes were identified as being directed to "streamline" the enrolment process and to increase "conversions" and the number of Course Advisors that referred consumers to CCC and increasing the number of consumers enrolled in Online Courses and passing census dates and increasing CCC's revenue (Profit Maximising Purpose). 33 From around 7 September 2015, CCC implemented changes to its processes for enrolment in and withdrawal from its Online Courses (Process Changes). First, the Outbound Calls were replaced with an inbound call to CCC (Inbound Call) generally made by the CA in the presence of the consumer immediately after the CA submitted the consumer's Enrolment Documents electronically to CCC via an online portal. The CCC employee who answered the call followed a script that consisted of closed questions and read out scripted information. CCC also abolished CDWDs (subject only to the CCC Distance Campus manager retaining a limited discretion to cancel a consumer's enrolment for academic misconduct, behavioural issues or LLN unsuitability). 34 The Process Changes reduced CCC's ability to mitigate the risk of Course Advisor Misconduct (CA Misconduct Risk) and the risk that Course Advisors would recruit for enrolment in Online Courses students who: would not be contactable by CCC; would have no or minimal engagement with their course; who did not in fact wish to enrol; and/or who were otherwise unsuitable for enrolment including by reason of a lack of LLN skills, computer skills or access to technology required to undertake their Online Course, and that such consumers would become enrolled and remain enrolled past the census date or dates in their course, and incur a significant VFH Debt (Unsuitable Enrolment Risk). By the time the Process Changes were introduced and during the period of implementation, CCC knew, or alternatively ought to have known, of both of these risks and that the Process Changes would reduce its ability to mitigate either of these risks. The CDWDs process provided a means by which CCC could mitigate the CA Misconduct Risk and the Unsuitable Enrolment Risk, in that, it was a means by which consumers who, following their enrolment in an Online Course: were not suitable for the Online Course in which they were enrolled, would be protected from incurring a VFH Debt. 35 At a Management Meeting held in October 2015, Cook reported that after the introduction of an "improved" enrolment process in early September, CCC had begun to see "major traction" with its Marketing Partners and with Learn2Earn and that enrolment numbers had increased significantly due to the new enrolment process and new Course Advisors. In reports for the November 2015 Management Meeting, it was stated that the number of enrolments in Online Courses through CCC's Distance Campus had increased significantly due to the new enrolment process and on-boarding of new Course Advisors, and that October 2015 sales with the new enrolment system had "broken all records". The October 2015 Operations Report reported that there were at that time over 1,000 consumers enrolled in an Online Course, and at it was discussed during that meeting that there was generally a lack of student engagement. 36 The Process Changes led to a substantial increase in the number and proportion of consumers who incurred a VFH Debt but who did not complete any unit of competency or the Online Course as a whole; a substantial increase in the number and proportion of consumers who incurred a VFH Debt but who did not engage in their Online Course or were not contactable; and an increase in the proportion of consumers who made a complaint to CCC concerning the conduct of Course Advisors (together, Process Changes Results). 37 In February 2016, a "contact strategy" was implemented by CCC, which categorised consumers according to their level of contact-ability. CCC identified that 54% (being 3023 consumers) of consumers did not respond to contact from CCC. As at May 2016, 2,605 of 4,052 consumers (64.3%) were categorised as non-contactable. A CHC of CCC's Distance Campus in April 2016 identified that only 361 of 5,032 (7.2%) consumers were accessing the LMS, and all consumers were deemed to be "at risk" due to lack of engagement with the Online Courses. 38 CCC knew, or alternatively ought to have known, of the Process Changes Results by no later than May 2016. D. ADMITTED CONTRAVENTIONS 39 Cook has made admissions by way of agreed facts pursuant to s 191 of the Evidence Act as follows. 40 At all material times, as CEO of CCC, Cook was in charge of CCC's business and strategy. 41 From around August 2015, Cook was involved in devising and implementing the Process Changes, and supervised the implementation of the Process Changes by the other employees of CCC. 42 From at least August 2015, Cook knew of CCC's Profit Maximising Purpose in respect of the Process Changes. 43 At all material times, Cook: (a) knew of facts that gave rise to the CA Misconduct Risk; (b) knew of facts that gave rise to the Unsuitable Enrolment Risk; and (c) knew of the matters referred to in paragraphs 99, 101 and 103 of the SoAFA by which: (i) the Outbound QA Call process and the CDWD process operated to mitigate the CA Misconduct Risk and the Unsuitable Enrolment Risk; and (ii) the Process Changes operated to reduce CCC's ability to mitigate the CA Misconduct Risk and the Unsuitable Enrolment Risk. 44 By no later than around May 2016, Cook knew about the Process Changes Results. 45 By reason of: (a) his role as director and CEO of CCC; (b) his participation in Advisory Board Meetings and Management Meetings; (c) his participation in the Sero Meeting; (d) his participation in Distance Campus Meetings; (e) his involvement in devising the Process Changes; (f) his participation in the August 2015 Management Meeting, where the Process Changes were the subject of discussion; and (g) his knowledge and state of mind; Cook was: (h) involved in devising the Process Changes; (i) involved in the management and oversight of CCC at all material times, including when CCC devised and implemented the Process Changes; and (j) associated with, or had a practical connection with, CCC's unconscionable conduct. 46 Cook thereby admits that he was knowingly concerned in, or party to, and therefore involved (within the meaning of s 2 of the ACL) in, CCC's contravention of s 21 of the ACL for its unconscionable system of conduct (System Contravention). Cook had knowledge of all the essential matters that made up the System Contravention, and engaged in conduct (by his acts or omissions) which can properly be said to have implicated him in the System Contravention or which showed a practical connection between him and the System Contravention. E. DECLARATORY RELIEF 47 The parties jointly propose a declaration as set out in paragraph 1 of the proposed order. It is proposed to defer the making of the declaration until after the determination of the claims against the other respondents following the trial, consistently with the Court's practice in cases where the ACCC has reached a resolution with some respondents and not others. In due course the parties will provide a supplementary joint submission on the proposed declaration. F. PRINCIPLES AND LEGISLATION REGARDING PENALTIES Principles as to agreed penalties 48 Recently, in ACCC v GlaxoSmithKline Consumer Healthcare Australia Pty Ltd (No 2) [2020] FCA 724, [10]-[13] Bromwich J summarised the relevant principles as to agreed penalties: "10. This Court may make orders in accordance with an agreement between the parties as to a specific penalty, or within a range of penalties, if satisfied that it is appropriate in all the circumstances to do so: Minister for Industry, Tourism and Resources v Mobil Oil Australia Pty Ltd [2004] FCAFC 72; 54 ACSR 395 at [51], endorsing and applying the Full Court decision in NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission [1996] FCA 1134; 71 FCR 285. Both Mobil Oil and NW Frozen Foods were approved by the High Court in Commonwealth v Director, Fair Work Building Industry Inspectorate [2015] HCA 46; 258 CLR 482. 11. The Full Court in Mobil Oil summarised the principles to emerge from NW Frozen Foods in relation to a proposed agreed penalty as follows in the balance of [51]: (i) It is the responsibility of the Court to determine the appropriate penalty to be imposed under s 76 of the [Trade Practices] Act in respect of a contravention of the [Trade Practices] Act. (ii) Determining the quantum of a penalty is not an exact science. Within a permissible range, the courts have acknowledged that a particular figure cannot necessarily be said to be more appropriate than another. (iii) There is a public interest in promoting settlement of litigation, particularly where it is likely to be lengthy. Accordingly, when the regulator and contravener have reached agreement, they may present to the Court a statement of facts and opinions as to the effect of those facts, together with joint submissions as to the appropriate penalty to be imposed. (iv) The view of the regulator, as a specialist body, is a relevant, but not determinative consideration on the question of penalty. In particular, the views of the regulator on matters within its expertise (such as the ACCC's views as to the deterrent effect of a proposed penalty in a given market) will usually be given greater weight than its views on more "subjective" matters. (v) In determining whether the proposed penalty is appropriate, the Court examines all the circumstances of the case. Where the parties have put forward an agreed statement of facts, the Court may act on that statement if it is appropriate to do so. (vi) Where the parties have jointly proposed a penalty, it will not be useful to investigate whether the Court would have arrived at that precise figure in the absence of agreement. The question is whether that figure is, in the Court's view, appropriate in the circumstances of the case. In answering that question, the Court will not reject the agreed figure simply because it would have been disposed to select some other figure. It will be appropriate if within the permissible range. 12. The High Court plurality in Commonwealth v Director, Fair Work Building Industry Inspectorate summarised (at [31]) the observations in Mobil Oil that there is little advantage in limiting parties to an agreed range rather than an agreed figure and that a better way of reinforcing the court's responsibility to determine an appropriate penalty was to scrutinise the material presented carefully and be satisfied that it was sufficient to determine whether the agreed penalty was appropriate. This approach is sufficient to remove any realistic danger of the court being perceived as a mere "rubber stamp" in relation to the penalty agreed upon. Their Honours then (at [32]) summarised five observations made in Mobile Oil as follows (omitting footnotes): (1) As noted in Allied Mills and NW Frozen Foods, the rationale for giving weight to a joint submission on penalty rests on the saving in resources for the regulator and the court, the likelihood that a negotiated resolution will include measures designed to promote competition and the ability of the regulator to use the savings to increase the likelihood of other contraveners being detected and brought before the courts. (2) NW Frozen Foods does not mean that a court must commence its reasoning with the penalty proposed by the parties and then limit itself to a consideration of whether the penalty proposed is within the range of permissible penalties. That is one option, but another is to begin with an independent assessment of the appropriate range of penalties and then compare it with the proposed penalty. (3) The decision in NW Frozen Foods represented a correct application of the approach enunciated by Sheppard J in Allied Mills. As Sheppard J stated, the court is not bound by the figure suggested by the parties. Rather, the court has to satisfy itself that the submitted penalty is appropriate while acknowledging that, uninformed by the agreed penalty submission, the court might have selected a slightly different figure. That approach is correct in principle and it has been cited with approval by the High Court of New Zealand in Commerce Commission v New Zealand Milk Corporation Ltd. (4) The decision in NW Frozen Foods is consistent with the imperative recognised in Australian Competition and Consumer Commission v Ithaca Ice Works Pty Ltd that the regulator should explain to the court the process of reasoning that justifies a discounted penalty. (5) The decision in NW Frozen Foods allows for the following possibilities: (a) if the court is not satisfied that the evidence or information offered in support of an agreed penalty submission is adequate, it may require the provision of additional evidence, information or verification and, if that is not forthcoming, may decline to accept the agreed penalty; (b) if the absence of a contradictor inhibits the court in the performance of its task of imposing an appropriate penalty, the court may seek the assistance of an amicus curiae or an individual or body prepared to act as an intervener; (c) if the court is not prepared to impose the penalty proposed by the parties, it may be appropriate to allow the parties to withdraw their consent and for the matter to proceed on a contested basis. 13. The approach of the Full Court in Mobil Oil and NW Frozen Foods was then endorsed by the plurality at [47] and [48]." Section 224 of the ACL 49 Under s 224 of the ACL, the Court may, in respect of contraventions of provisions of Part 2-2 of the ACL (which relevantly includes s 21) and persons who are knowingly concerned in or a party to such contraventions, order the contravener to pay such pecuniary penalties in respect of "each act or omission" as the Court determines to be appropriate. 50 Under s 224(3) of the ACL, as it was at the time of the relevant conduct, the maximum civil pecuniary penalty for a person for each act or omission to which s 224 applies was $220,000. 51 Section 224(2) of the ACL requires the Court, in determining the appropriate pecuniary penalty, to have regard to all relevant matters including: (a) the nature and extent of the act or omission and of any loss or damage suffered as a result of the act or omission; (b) the circumstances in which the act or omission took place; and (c) whether the person has previously been found by a court in proceedings under Chapter 4 or Part 5.2 to have engaged in similar conduct. Section 248 of the ACL 52 Under s 248 of the ACL, the Court may make an order disqualifying a person from managing corporations for a period that the Court considers appropriate if the Court is satisfied that the person has been involved in the contravention of a provision of Part 2-2 of the ACL (which relevantly includes s 21). 53 Section 248(2) states that in determining whether the disqualification order is justified, the Court may have regard to: (a) the person's conduct in relation to the management, business or property of any corporation; and (b) any other matters that the Court considers appropriate. Deterrence 54 It is well established that "[d]eterrence is the primary objective for the imposition of civil penalties". In Commonwealth v Director, Fair Work Building Industry Inspectorate (Fair Work) [2015] HCA 46; (2015) 258 CLR 482 (FWBII), the High Court approved the following statement by French J in Trade Practices Commission v CSR Ltd [1990] FCA 521; (1991) ATPR ¶41-076: The principal, and I think probably the only, object of the penalties imposed by s 76 is to attempt to put a price on contravention that is sufficiently high to deter repetition by the contravenor and by others who might be tempted to contravene the Act. 55 Deterrence encompasses the need to deter repetition of the conduct by the contravener (specific deterrence) and to deter others who might be tempted to engage in similar contraventions (general deterrence). This informs the assessment of the appropriate penalty. 56 The penalty must not be "such as to be regarded by that offender or others as an acceptable cost of doing business". Rather, "those engaged in trade and commerce must be deterred from the cynical calculation involved in weighing up the risk of penalty against the profits to be made from contravention". 57 While a penalty must not be so high as to be oppressive, unless it is sufficiently high it may not have the appropriate deterrent effect. Indeed, as was recently observed by the High Court, "if a penalty is devoid of sting or burden, it may not have much, if any, specific or general deterrent effect, and so it will be unlikely, or at least less likely, to achieve the specific and general deterrent effects that are the raison d'être of its imposition". 58 In considering the extent to which the penalty achieves deterrence, it is relevant for the Court to have regard to a contravener's size and financial position. As Goldberg J observed in ACCC v Leahy Petroleum Pty Ltd (No 3), "[o]bviously the sum required to achieve this object [of deterrence] will be larger where the Court is setting a penalty for a company with vast resources". The level of assets is also relevant in the case of an individual respondent. Whilst the contravener's financial resources are relevant to the determination of penalty, they do not alone justify a higher penalty than might have otherwise be imposed. Other relevant factors 59 In addition to the "mandatory" factors identified in s 224(2) of the ACL, and the important consideration of deterrence, other relevant factors relevant to the assessment of a pecuniary penalty for contraveners that have been identified by the Courts. To the extent they are relevant to an individual contravener, they include: (a) the deliberateness of the contravention and the period of which it extended; (b) whether the contravention arose out of the conduct of senior management or at a lower level; (c) whether the contravener has shown a disposition to cooperate with the authorities responsible for the enforcement of the CCA in relation to the contravention; (d) whether the contravener has engaged in similar conduct in the past; (e) the effect on the functioning of the market and other economic effects of the contravening conduct; (f) the financial position of the contravener; and (g) whether the contravening conduct was systematic, deliberate or covert. 60 These additional factors are not a 'checklist'. They are matters to which the Court may have regard to as a method for determining the appropriate penalty. It is also apparent that some of the factors are only applicable to companies rather than individuals. Determining the appropriate penalty 61 The process of "instinctive synthesis", as explained by the High Court in the context of criminal sentencing in Markarian v The Queen, is well-known to the Court. In Markarian, Gleeson CJ, Gummow, Hayne and Callinan JJ held that: (a) assessment of the appropriate penalty is a discretionary judgment based on all relevant factors; (b) "…careful attention to maximum penalties will almost always be required, first because the legislature has legislated for them; secondly, because they invite comparison between the worst possible case and the case before the court at the time; and thirdly, because in that regard they do provide, taken and balanced with all of the other relevant factors, a yardstick"; (c) it will rarely be appropriate for a Court to start with the maximum penalty and proceed by making a proportional deduction from that maximum; (d) the Court should not adopt a mathematical approach of increments or decrements from a predetermined range, or assign specific numerical or proportionate value to the various relevant factors; (e) it is not appropriate to determine an objective sentence and then adjust it by some mathematical value given to one or more factors such as a plea of guilty or assistance to authorities; (f) the Court "may not add and subtract item by item from some apparently subliminally derived figure" to determine the penalty to be imposed; and (g) since the law strongly favours transparency, accessible reasoning is necessary in the interests of all, and, while there may be occasions where some indulgence in an arithmetic process will better serve the end, it does not apply where there are numerous and complex considerations that must be weighed. 62 In ACCC v Coles Supermarkets Australia Pty Ltd (2015) 327 ALR 540, Allsop CJ observed that the process of arriving at the appropriate penalty under s 224 of the ACL involves "intuitive" or "instinctive synthesis" of all relevant factors, similar in nature to the judicial process involved in determining a sentence for a criminal offence as explained by the High Court in Markarian. His Honour observed: The setting of the penalty is a discretionary judgment that does not involve assessing with any precision the "range" within which the conduct falls or by applying incremental deductions from the maximum penalty. Nonetheless, the maximum penalty must be given due regard because it is an expression of the legislature's policy concerning the seriousness of the proscribed conduct. It also permits comparison between the worst possible case and the case the court is being asked to address and this provides a yardstick: Markarian at 372 [31]. Course of conduct principle 63 The ACL does not contain any express provision requiring a course of conduct involving multiple acts or omissions to be treated as a single contravention or to otherwise limit the penalty payable in relation to the contraventions. 64 Where there is a sufficient interrelationship between the legal and factual elements of multiple contraventions, the Court may, in its discretion, apply the "course of conduct" or "one transaction" principle, rather than imposing separate penalties for each contravention. Importantly, it is not a rule but a principle or tool that may assist the Court in arriving at an appropriate penalty. 65 The principle was explained by Middleton and Gordon JJ in Construction, Forestry, Mining and Energy Union v Cahill as follows: …The principle recognises that where there is an interrelationship between the legal and factual elements of two or more offences for which an offender has been charged, care must be taken to ensure that the offender is not punished twice for what is essentially the same criminality. That requires careful identification of what is "the same criminality" and that is necessarily a factual specific enquiry. 66 Their Honours also explained that, even if the contraventions are properly characterised as arising from a single course of conduct, a judge is not obliged to apply the principle if the resulting penalty fails to reflect the seriousness of the contravention. 67 As Beach J observed in ACCC v Hillside (Australia New Media) Pty Ltd trading as Bet365 (No 2) [2016] FCA 698: ... the "course of conduct" principle does not have paramountcy in the process of assessing an appropriate penalty. It cannot of itself operate as a de facto limit on the penalty to be imposed for contraventions of the ACL. Further, its application and utility must be tailored to the circumstances. In some cases, the contravening conduct may involve many acts of contravention that affect a very large number of consumers and a large monetary value of commerce, but the conduct might be characterised as involving a single course of conduct. Contrastingly, in other cases, there may be a small number of contraventions, affecting few consumers and having small commercial significance, but the conduct might be characterised as involving several separate courses of conduct. It might be anomalous to apply the concept to the former scenario, yet be precluded from applying it to the latter scenario. The "course of conduct" principle cannot unduly fetter the proper application of s 224. 68 The above statement of Beach J has been cited with approval by the Full Court in ACCC v Reckitt-Benckiser (Australia) Pty Ltd, ACCC v Cement Australia Pty Ltd and ACCC v Yazaki Corporation. 69 The principle does not restrict the Court's discretion as to the amount of penalty to be imposed for a course of conduct, and specifically the maximum penalty for a course of conduct is not restricted to the prescribed statutory maximum penalty for a single contravening act or omission. In this respect, in applying the principle, it is not appropriate or permissible to treat multiple contraventions as just one contravention for the purposes of determining the maximum penalty or otherwise subject to just one maximum penalty. Indeed, where a company engages in a multitude of contraventions, there may be no meaningful maximum penalty (or limit) to guide the penalty discretion. 70 As to the application of the course of conduct principle to a 'system case' of unconscionable conduct: (a) In Australian Securities and Investments Commission v Kobelt [2017] FCA 387, ASIC claimed that the respondent had engaged in a system of unconscionable conduct in relation to the supply of financial services to at least 117 customers but contended that that part of its case did not turn on any identified individual consumer. ASIC also claimed that the respondent had engaged in unconscionable conduct in dealings with five identified consumers. ASIC did not ultimately press its allegations in relation to the five individual instances of unconscionable conduct but succeeded in its claim that the respondent had engaged in a system of unconscionable conduct. On the question of penalty ASIC contended that the systemic conduct had involved 59 separate contravening acts. The trial judge rejected this submission and held that the "system" amounted to a single contravention, stating at [33]: 'ASIC pursued its "system" case on the basis that it could succeed without proving the circumstances of any particular individual'. (b) In ACCC v Get Qualified Australia Pty Ltd (in liq) (No 3) [2017] FCA 1018, Beach J said that strictly there is nothing arising from the interaction between s 21(4)(b) and s 224(1) which limits the Court's discretion to impose a penalty of more than $1.1 million in relation to a system that has involved multiple contravening acts or omissions by the respondent directed at a very large number of consumers. Section 224(1) provides that a person can be ordered to pay a pecuniary penalty "in respect of each act or omission by the person to which [the] section applies". It would be a strange result if the maximum penalty that could be imposed in respect of a system that has affected at least hundreds of consumers could not exceed the maximum penalty that could be imposed for one of the four individual instances of unconscionable conduct that I have found to have been established. This approach was followed by Middleton J in ACCC v Ford Motor Company of Australia Ltd (2018) 360 ALR 124 at [54], and also by Gleeson J in Empower (No. 5) [2019] FCA 1544 at [46]-[48]. Totality 71 Where multiple penalties are to be imposed upon a particular wrongdoer, the totality principle should also be considered. The totality principle means that the total penalty for related offences ought not to exceed what is proper for the entire contravening conduct involved. The totality principle operates as a "final check" to ensure that the penalties to be imposed on a wrongdoer, considered as a whole, are "just and appropriate". In determining whether the final penalties are "just and appropriate", the correct approach is to start by ascertaining the penalty that would be appropriate for each individual contravention and then to adjust those amounts for reasons of totality. Parity 72 As was noted by the Full Court in NW Frozen Foods (at 295), and adopted in the ACL context by Edelman J in ACCC v Woolworths Ltd, while a hallmark of justice is equality before the law, and all things being equal, "corporations guilty of similar contraventions should incur similar penalties", things are rarely "equal" in ACL cases and comparison across cases may be difficult and of limited utility. 73 The difficulty in applying previous cases was referred to by Beach J in Hillside: I was not assisted by the respondents' review of the penalties in other cases for the purposes of applying the so-called parity principle. In one sense it is conceptually incoherent to look at penalties fixed in other cases to calibrate a figure in the present case when all that one has from the other cases are single point determinations produced by opaque intuitive synthesis (where there has been a contest) or single point determinations substantially influenced by the parties' identification of and then consensus to the relevant figure or range (see Singtel Optus Pty Ltd v Australian Competition and Consumer Commission [2012] FCAFC 20; (2012) 287 ALR 249 at [60] per Keane CJ, Finn and Gilmour JJ and Director of Consumer Affairs Victoria v Alpha Flight Services Pty Ltd [2015] FCAFC 118 at [76] per Barker, Katzmann and Beach JJ). Deconvolution analysis of the single point determinations in order to work out the causative contribution of any particular factor is unrealistic. But unless that can be done, comparisons outside the co-offender scenario have little value. 74 In Singtel (at 264), the Full Court in approving a statement by Middleton J in ACCC v Telstra Corporation Ltd, stated that "the Court is not assisted by Optus's citations of penalties imposed in other cases, where the combination of circumstances were different from the present, as if that citation is apt to establish a "range" of penalties appropriate in this case". Further, in Woolworths, Edelman J also observed that there is little utility in comparisons between cases where there are "unarticulated, but intuitive, assumptions involved in the process of comparison between incommensurables". Disqualification Factors 75 In addition to penalties, disqualification orders may also be imposed on a contravener by way of punishment and deterrence (both personal and general): Australian Securities & Investments Commission v Vizard (2005) 145 FCR 57 at [35] and Gillfillan v Australian Securities & Investment Commission [2012] NSWCA 370 at [182]-[183]. 76 It has been held that the question of any disqualification order is to be decided before deciding on the imposition of a pecuniary penalty: ACCC v South East Melbourne Cleaning Pty Ltd (in liq) (No 2) [2015] FCA 25 at [146] per Murphy J. 77 In determining whether to make a disqualification order under s 248 of the ACL, and if so, for how long, the approach of the Federal Court has been to adopt the principles developed in relation to disqualification orders under the Corporations Act 2001 (Cth). In ACCC v Renegade Gas Pty Ltd (t/as Supagas NSW) [2014] FCA 1135, Gordon J set out the relevant principles as follows (at [90]-[97], citations omitted): 90. Disqualification orders may be imposed by way of deterrence (both personal and general). 91. Disqualification orders may also be imposed by way of punishment. Longer periods of disqualification are reserved for cases where contraventions have been of a serious nature such as those involving dishonesty. In assessing an appropriate length of prohibition, the degree of seriousness of the contraventions, the propensity that the defendant may engage in similar conduct in the future and the likely harm that may be caused to the public may be relevant considerations. A mitigating factor in considering a period of disqualification is the likelihood of the defendant reforming. 92. Disqualification orders are also designed to protect the public from the harmful use of a corporate structure or from use that is contrary to proper commercial standards. 93. The banning order is designed to protect the public by seeking to safeguard the public interest in the transparency and accountability of companies and in the suitability of directors to hold office. 94. Protection of the public also envisages protection of individuals that deal with companies, including consumers, creditors, shareholders and investors. 95. It is therefore necessary to balance the personal hardship to the defendant against the public interest and the need for protection of the public from any repeat of the conduct. 96. In Commissioner for Corporate Affairs (WA) v Ekamper (1987) 12 ACLR 519 at 525 the Court stated that the following matters have relevance (although it is not an exhaustive list):

1. The character of the defendant;
2. The nature of the breach(es);
3. The structure of the companies and the nature of their business;
4. The interests of shareholders, creditors and employees;
5. The risk to others from the defendant continuing as a company director;
6. The honesty and competence of the defendant;
7. Hardship to the defendant and their personal and family business interests; and
8. The defendant's appreciation that future breaches could result in fresh proceedings.
9. Where it is proposed that both a pecuniary penalty and a disqualification period be imposed upon an individual the Court is required to consider both the pecuniary penalty and the disqualification order as part of the proposed penalty as a whole in deciding whether each order is appropriate. G. APPLICATION OF DISQUALIFICATION AND PENALTY FACTORS TO THE CONDUCT IN THIS PROCEEDING 78 The parties submit that, in respect of the admitted conduct engaged in by Cook, it is appropriate that orders be made to the effect that he be disqualified from managing corporations for a period of 3 years pursuant to s 248 of the ACL and receive a penalty of $250,000 pursuant to s 224 of the ACL. Disqualification factors 79 Cook was knowingly concerned in CCC's System Contravention and was the CEO of CCC. He was involved in devising the Process Changes and he knew of CCC's Profit Maximising Purpose. He knew of the facts giving rise to the CA Misconduct Risk and the Unsuitable Enrolments Risk. 80 He knew of the benefits of the Outbound QA Call process and the CDWD process in mitigating these risks and that the implementation of the Process Changes would reduce CCC's ability to mitigate these risks. By no later than around May 2016, he knew of the Process Changes Results. 81 There is no allegation of dishonesty on the part of Cook. Cook made no personal financial gain from the conduct. At the time of the conduct, Cook believed the Process Changes were lawful and believed the Process Changes brought CCC's processes into line with those of its competitors. 82 Since he resigned from CCC in March 2017, Cook has not been employed in the private sector. He was unemployed for the period March 2017 to May 2018 and since that time has worked in the public service. He is not a director of any companies other than Ryden Enterprises Pty Ltd (the corporate trustee of his family trust) and Ryden Investments Pty Ltd (the corporate beneficiary of his family trust). Neither of those entities trade or deal with consumers. 83 Having regard to all of these considerations, the parties consider it would be reasonable for the Court to order a disqualification period of 3 years. Penalty - Mandatory s 224(2) factors Nature and extent of the act or omission, any loss or damage suffered as result of the act or omission, and the circumstances in which the act or omission took place 84 By its very nature, a contravention of the prohibition on unconscionable conduct is significant and serious in the sense that unconscionable conduct is "conduct that is clearly unfair or unreasonable, or serious misconduct", and which is "something not done in good conscience or conduct against conscience by reference to the norms of society". 85 The conduct admitted by Cook is serious for the following reasons. 86 First, the System Contravention resulted from deliberate conduct, in that it was the result of deliberate decisions, involving the removal of two safeguards which went to mitigating the various risks identified above, made by CCC to make the Process Changes for the purpose of increasing CCC's enrolments and therefore revenue. 87 Second, CCC engaged in the contravening conduct for a relatively sustained period. The System Contravention occurred over three and a half months. Moreover, CCC only ceased enrolling new consumers in the Online Courses on 18 December 2015 because the Commonwealth Government imposed a new VFH loan cap for the 2016 calendar year, which meant that CCC would use up all of its loan cap from existing enrolled consumers who would pass a census date in 2016. That is, CCC did not voluntarily choose to cease operating enrolment and withdrawals processes that included the Process Changes. CCC continued to progress students who became enrolled during the Relevant Period through their census dates throughout 2016, and claimed revenue in respect of those census dates. 88 Third, a large number of consumers were affected or potentially affected by the conduct of CCC in which Cook was involved. The Process Changes resulted in outcomes including: (a) a very significant increase in the number of enrolments in Online Courses (1,316 consumers became enrolled during the Earlier Period and 7,324 consumers became enrolled in the Relevant Period); (b) a substantial increase in the number and proportion of consumers who incurred a VFH Debt but who did not complete any unit of competency or the Online Course as a whole (approximately 81.9% of consumers who became enrolled during the Earlier Period and passed a census date did not complete any unit of competency in their Online Course and approximately 98.9% of consumers who became enrolled during the Relevant Period and passed a census date did not complete any unit competency in their Online Course); (c) a substantial increase in the number and proportion of consumers who incurred a VFH Debt but who did not engage in their Online Course or were not contactable (approximately 27.9% of consumers who became enrolled during the Earlier Period did not log in to the LMS and approximately 86.5% of consumers who became enrolled during the Relevant Period did not log in to the LMS); and (d) an increase in the proportion of consumers who, once enrolled, passed through at least a relevant census date (thus incurring a VFH debt and generating revenue for CCC) and had no engagement in their relevant course. 89 Fourth, in respect of the amount of tuition fees charged by CCC for consumers who passed through at least one census date and who thus incurred a VFH debt (and in respect of whom there was no subsequent re-crediting, reversing or refunding of that debt by CCC), CCC charged around $54.17 million in respect of course enrolments in Online Courses in the Relevant Period in which the student progressed through the first census date (as against $7.4 million in the Earlier Period). 90 The figures set out above include expected receivables from Commonwealth Department of Education and Training by way of final reconciliation payment expected to be paid. However, according to the decision of the court in Productivity Partners Pty Ltd v Commonwealth, the Commonwealth did not in fact pay CCC the full amount claimed by CCC. That decision states that the Commonwealth decided (in late 2017, and again in March 2018) not to pay CCC around $29 million, on the basis that students who had never logged in to their course and who had never had two-way communication with CCC except in relation to a laptop or their withdrawal were not "bona fide" students entitled to VFH assistance: at [23]-[24]. The $29 million withheld by the Commonwealth does not solely relate to consumers who became enrolled during the Relevant Period as the Commonwealth's decision concerned claims made by CCC across its business (i.e. not limited to Online Courses) in respect of all of 2015 (totalling around $51m) and 2016 (totalling around $16 million): see [19]. 91 In 2019, an amendment to the HESA commenced which allowed the removal of VFH Debt for students affected by inappropriate conduct by a VET FEE-HELP provider or their agent. During 2019, a delegate of the Secretary of the Department of Education made a decision under cl 46AA of Sch 1 of the HESA to remove debts of consumers enrolled by CCC between 1 January 2015 and 31 December 2016 that had a VFH debt for incomplete units of study because it is considered reasonably likely that CCC engaged in inappropriate conduct in relation to the consumer's unit of study or course. Given that 98.9% of consumers enrolled during the Relevant Period did not complete a unit of competency (in circumstances where a unit of study is comprised of multiple units of competency), the vast majority of consumers enrolled by CCC during the Relevant Period have had their VFH Debt removed by the Commonwealth. While the consumer harm of the conduct has been largely ameliorated, this was pursuant to action by the Commonwealth, and does not diminish the need for specific and general deterrence. 92 While the conduct was serious (for the reasons above), it was not in the most serious category in circumstances where: (a) there is no allegation of dishonesty on the part of Cook; (b) Cook made no personal financial gain from the conduct; and (c) at the time of the conduct, Cook believed the Process Changes were lawful and believed the Process Changes brought CCC's processes into line with those of its competitors. Whether the person has previously been found by a court to have engaged in similar conduct 93 Cook has not previously been found to have engaged in any conduct in contravention of the ACL, the CCA or its predecessor Trade Practices Act 1974 (Cth) similar to the conduct the subject of this proceeding. 94 The nature and seriousness of the conduct warrant the imposition of a substantial civil penalty in order to ensure that the goals of specific and general deterrence are achieved. The agreed penalty sum of $250,000 achieves that. Penalty - Other Factors Co-operation 95 Cook is entitled to some reduction on the penalty for having admitted liability before trial, albeit this admission has occurred shortly (around 2 months) before trial, after many steps had been taken by the ACCC in preparing the proceeding for trial. The discount that Cook is entitled to has been applied in reaching the agreed penalty. Employment 96 Since he resigned from CCC in March 2017, Cook has not been employed in the private sector. He was unemployed for the period March 2017 to May 2018 and since that time has worked in the public service. He is not a director of any companies other than Ryden Enterprises Pty Ltd (the corporate trustee of his family trust) and Ryden Investments Pty Ltd (the corporate beneficiary of his family trust). Neither of those entities trade or deal with consumers. General and specific deterrence 97 The parties jointly submit that the penalty sum of $250,000 (together with the proposed disqualification orders) is a necessary and appropriate amount in order to achieve the statutory objects of specific and general deterrence. 98 A substantial penalty is warranted in these circumstances to ensure that Cook does not repeat this conduct. 99 As to general deterrence, the civil penalty should be assessed in this case at an amount that makes it clear to persons in the education industry that it is not acceptable to contravene the ACL. Maximum penalty 100 In Get Qualified, Beach J, in considering a penalty to be imposed on the primary offender in a system case, noted that strictly there is nothing arising from the interaction between s 21(4)(b) and s 224(1) which limits the Court's discretion to impose a penalty of more than the statutory maximum in relation to a system that has involved multiple contravening acts or omissions by the respondent directed at a very large number of consumers: at [47]; see also Empower (No 5) [2019] FCA 1544 at [46]-[48]. 101 At [58(f)], Beach J appears to have applied the same reasoning to accessorial liability for involvement in a systems contravention. Given the wording of s 224(1), that should be understood as an acceptance that involvement by an accessory in a systems contravention may involve more than one "act or omission" of the accessory that may attract a penalty under s 224. 102 It is common ground that there were multiple acts or omissions by Cook that constituted his being knowingly concerned in CCC's contravention, such that the maximum penalty is greater than $220,000. It is also common ground that an attempt to identify each such act or omission separately would produce a theoretical maximum that would not provide a useful guide. Totality 103 The parties submit that, given the seniority and role of Cook with CCC, the nature and extent of the System Contravention by CCC, Cook's involvement with that contravention and having regard to the proposed disqualification order, the overall penalty of $250,000 proposed for the contravention of s 21 of the ACL does not exceed what is proper for the entire conduct. 104 Applying the totality principle, the parties submit that the agreed penalty is appropriate because it reflects both the extent and nature of the conduct. The jointly proposed penalty strikes the right balance and reflects the need for deterrence and the particular circumstances of Cook. Deliberateness of the contraventions and compliance culture 105 The parties submit that while Cook did not deliberately set out to cause CCC to contravene the ACL, the conduct was nevertheless the result of deliberate decisions, involving the removal of two safeguards which went to mitigating the significant risks for consumers, made by CCC to make the Process Changes for the purpose of increasing CCC's enrolments and therefore revenue. Parity 106 Finally, for the reasons outlined in paragraphs 72 to 74 above, the parties submit that other decisions are rarely a useful aid to the determination of penalty. The facts of this case are particular and do not lend themselves to direct comparison with other decisions. H. COSTS 107 The Court has a general discretion to award costs under s 43 of the FCA Act. Cook has agreed to make a contribution of $250,000 towards the ACCC's costs of and incidental to this proceeding, and no other order as to costs should be made.